FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

         (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

                                    Or

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

              For the transition period from ______________ to _________________
              Commission file number 1-2199

                           ALLIS-CHALMERS CORPORATION
             (Exact name of registrant as specified in its charter)

          Delaware                                            39-0126090
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                            Identification No.)

   4180 Cherokee Drive, Brookfield, Wisconsin                          53045
    (Address of principal executive offices)                        (Zip code)

Registrant's telephone number, including area code        (414)781-7155

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


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

                               Title of each class

                          Common Stock - $.15 Par Value


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

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

         Indicate by check mark whether the  registrant  has filed all documents
and reports  required to be filed by Sections 12, 13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes X No

         At  March  6,  2000,  there  were  1,588,128  shares  of  Common  Stock
outstanding.

<PAGE>
2

                             1999 FORM 10-K CONTENTS

PART I

     Item                                                                Page
       1.   Business.                                                      3
       2.   Properties.                                                    5
       3.   Legal Proceedings.                                             5
       4.   Submission of Matters to a Vote of
              Security Holders.                                            7

PART II
       5.   Market for Registrant's Common Equity
              and Related Stockholder Matters.                             8
       6.   Selected Financial Data.                                       9
       7.   Management's Discussion and Analysis of Financial
              Condition and Results of Operations.                        10
       7A.  Quantitative and Qualitative Disclosures about
              Market Risk.                                                16
       8.   Financial Statements and Supplementary Data.                  17
       9.   Changes in and Disagreements with Accountants on
              Accounting and Financial Disclosure.                        33

PART III
       10.    Directors and Executive Officers
                of the Registrant.                                        34
       11.    Executive Compensation.                                     37
       12.    Security Ownership of Certain Beneficial
                Owners and Management.                                    38
       13.    Certain Relationships and Related Transactions.             40

PART IV
       14.    Exhibits, Financial Statement Schedules and Reports on
                Form 8-K.                                                 41

Signatures.                                                               45
<PAGE>

                                                                               3

                                     PART I


ITEM 1.  BUSINESS.

(a)  Development of the Business

GENERAL

Allis-Chalmers  Corporation  (Allis-Chalmers or the Company) was incorporated in
1913 under Delaware law. The Company sold its major operating businesses in 1988
in accordance  with its First Amended and Restated Joint Plan of  Reorganization
(Plan of Reorganization)  under Chapter 11 of the United States Bankruptcy Code.
The Plan of Reorganization  was confirmed by the Bankruptcy Court on October 31,
1988 after  acceptance  by creditors and  shareholders  and was  consummated  on
December  2,  1988.  See Item 3.  LEGAL  PROCEEDINGS  for a  discussion  of such
proceedings.

The Company consists of three wholly-owned subsidiaries. One subsidiary, Houston
Dynamic Service, Inc., operates a machine repair business in Houston, Texas; the
other two  subsidiaries,  KILnGAS  R&D,  Inc.  and U.S.  Fluidcarbon  Inc.,  are
inactive.

(b)  Financial Information About Industry Segments

The Company  operates in a single industry  segment -- the repair and service of
mechanical  rotating  equipment  for the  industrial,  utility and  governmental
aftermarkets.

(c)  Narrative Description of Business

The principal business activities of the Company are as follows:


MACHINE REPAIR

Sales of the machine repair business  operated by Houston Dynamic Service,  Inc.
(HDS),  a  wholly-owned  subsidiary  of the Company,  were  $4,370,000  in 1999,
$5,021,000 in 1998 and  $4,062,000 in 1997. The decrease in 1999 sales from 1998
was due to continued  soft  conditions  as a backlash to the very low oil prices
during  the  second  half of 1998  which  resulted  in lower  shipments  in 1999
compared  to the same period in 1998.  Even with the current  higher oil prices,
HDS continues to be affected by volatile  market  conditions that prevail in the
oil  related  fields  of  refining,  processing,   chemicals  and  petrochemical
operations throughout the Gulf Coast.

HDS  services  and repairs  various  types of  mechanical  equipment,  including
compressors  (centrifugal,  rotary, axial and reciprocating),  pumps,  turbines,
engines, heat exchangers,  centrifuges,  rollers, gears, valves, blowers, kilns,
crushers and mills.  Services provided include  emergency  repair,  disassembly,
inspection, repair testing, parts duplication, machining,


<PAGE>
4


balancing,   metalizing,   milling,  grinding,  boring,  welding,  modification,
reassembly,   field   machining,   maintenance,    alignment,   field   service,
installation, startup and training.

HDS employed 34 people on December  31,  1999.  It operates out of a facility in
Houston,  Texas which was  purchased  by HDS in 1990.  The  facility  includes a
repair shop and office space.

HDS serves various industrial  customers,  including those in the petrochemical,
chemical,  refinery,  utility,  waste and waste treatment,  minerals processing,
power generation, pulp and paper and irrigation industries.


OTHER DATA

Competition  in the Company's  machine  repair  business  consists of nine major
original  equipment   manufacturers   (OEM)  and  numerous  smaller  independent
competitors. Many of these competitors have special strengths in certain product
areas because of customer  preferences for OEM suppliers or because  specialized
patented  technologies  are offered.  The principal  methods of competition  are
price, quality, delivery, customer service and warranty.

The principal raw materials and purchased  components used in the machine repair
business  are alloy and  stainless  steels,  castings  and  forgings,  aluminum,
copper, gears and other basic materials.  Alternative sources of supply exist or
could be developed for all of these raw materials and components.  This business
is highly labor intensive.

Some of the  Company's  products,  processes  and systems are covered by patents
owned by or licensed to the Company. No particular product, process or system is
dependent on a single fundamental patent, the loss of which would jeopardize the
Company's business.  The Company licenses the use of a number of its trademarks,
from which it receives income.

During the past three years,  Entergy and Amoco Chemical were the only customers
who accounted for 10% or more of total Company sales.  Entergy  generated 13% of
1999 sales and Amoco Chemical 24% of 1998 sales and 12% of 1997 sales.

Expenditures relating to compliance with federal,  state and local environmental
protection  laws are not  expected  to have a material  effect on the  Company's
capital expenditures,  results of operations, financial condition or competitive
position.  The  Company  is not  aware  of any  present  statutory  requirements
concerning  environmental  quality that would necessitate  capital outlays which
would materially  affect the Company.  In conjunction  with  consummation of the
Plan of  Reorganization,  the  Company  settled all known  environmental  claims
asserted by the United States  Environmental  Protection Agency (EPA) as well as
claims  asserted by certain state agencies.  However,  the EPA and third parties
have claimed that  Allis-Chalmers  is liable for cleanup costs  associated  with
certain  hazardous waste disposal sites in which products  manufactured and sold
by  Allis-Chalmers  before  consummation  of the  Plan  of  Reorganization  were
ultimately disposed of by others. Since Allis-Chalmers manufactured and sold the
products  disposed  of in  these  sites  before  consummation  of  the  Plan  of
Reorganization, Allis-Chalmers


<PAGE>

                                                                               5

has taken the position  that all cleanup costs or other  liabilities  related to
these sites were discharged in the bankruptcy. See Item 3. LEGAL PROCEEDINGS.

The Company's  employment was 37, 47 and 42 at December 31, 1999, 1998 and 1997,
respectively.

For more  detailed  information,  you should read in their  entirety the audited
1999  Consolidated   Financial  Statements,   Notes  to  Consolidated  Financial
Statements and Management's  Discussion and Analysis of Financial  Condition and
Results of Operations contained elsewhere
in this report.

(d)   Financial Information About Foreign and
      Domestic Operations and Export Sales

The Company has no foreign operations or significant export sales.


ITEM 2. PROPERTIES.

The Company's  principal  operating facility is a 25,000 square foot repair shop
and office  building in Houston,  Texas,  which is owned by HDS. The facility is
considered adequate and suitable for the Company's principal business.


ITEM 3.  LEGAL PROCEEDINGS.

REORGANIZATION PROCEEDINGS UNDER CHAPTER 11
OF THE UNITED STATES BANKRUPTCY CODE

On June 29,  1987,  Allis-Chalmers  and 17 of its  domestic  subsidiaries  filed
separate voluntary  petitions for reorganization  under Chapter 11 of the United
States  Bankruptcy  Code.  The  Plan  of  Reorganization  was  confirmed  by the
Bankruptcy Court on October 31, 1988 after acceptance by the Company's creditors
and shareholders,  and the Plan of Reorganization was consummated on December 2,
1988.

At  confirmation,  the Bankruptcy  Court approved the  establishment  of the A-C
Reorganization  Trust as the primary vehicle for distributions under the Plan of
Reorganization,  two  trust  funds to  service  health  care and life  insurance
programs for retired  employees and a trust fund to process and liquidate future
product  liability claims.  Cash of approximately  $400 million and other assets
with  a net  book  value  of  $38  million  were  distributed  to  creditors  or
transferred  to  the  trusts,   and  the  trusts  assumed   responsibility   for
substantially  all remaining cash  distributions to be made to holders of claims
and interests  pursuant to the Plan of  Reorganization.  The Company was thereby
discharged  of  all  debts  that  arose  before  confirmation  of  the  Plan  of
Reorganization,  and all of its capital stock was canceled and made eligible for
exchange for shares of the reorganized Company.

<PAGE>
6


The Company does not administer any of the aforementioned  trusts and retains no
responsibility for the assets transferred to or distributions to be made by such
trusts pursuant to the Plan of Reorganization.

For a  description  of  restrictions  on the transfer of the common stock of the
reorganized  Company,  see Item 5.  MARKET FOR  REGISTRANT'S  COMMON  EQUITY AND
RELATED STOCKHOLDER MATTERS.


ENVIRONMENTAL PROCEEDINGS

As part of the Plan of  Reorganization,  the Company made a cash payment of $4.5
million to the EPA in  settlement  of the EPA's claims for cleanup  costs at all
sites where the Company was alleged to have disposed of hazardous waste. The EPA
settlement  included  both  past and  future  cleanup  costs at these  sites and
released the Company of liability for claims of  contribution or indemnity which
may be asserted by other potentially  responsible parties against Allis-Chalmers
in connection with these specific sites.

In addition to the EPA settlement, the Company negotiated settlements of various
environmental  claims  which had been  asserted by certain  state  environmental
protection agencies.  These settlements,  totaling approximately  $200,000, were
approved by the Bankruptcy Court.

Since  consummation of the Plan of  Reorganization on December 2, 1988, a number
of parties, including the EPA, have asserted that the Company is responsible for
the cleanup of hazardous waste sites.  These assertions have been made only with
respect to the Company's prebankruptcy  activities. No claims have been asserted
against the Company involving its postbankruptcy operations.

Before the settlement with the EPA in the bankruptcy proceedings, an attempt was
made by the parties to identify all possible  hazardous waste disposal sites and
to settle all liabilities  relating to those sites.  Notwithstanding the breadth
of the settlement, various EPA regional offices have continued to assert cleanup
claims against Allis-Chalmers with respect to several sites. Apparently, not all
offices of the EPA are aware of the settlement agreement,  since at least two of
these claims involve sites with respect to which the EPA specifically agreed not
to sue.

Certain  other  parties  have  asserted  that the  Company  is  responsible  for
environmental   cleanup  costs  or  associated  EPA  fines  in  connection  with
additional sites. In each instance the Company activities complained of occurred
prior to the Company's bankruptcy proceedings and the third parties did not file
proofs of claim in the  bankruptcy  proceedings.  The  filing of such  proofs of
claim is required by the Bankruptcy  Code to effect a claim against a Chapter 11
debtor. A bankruptcy  discharge defense has been asserted by the Company in each
instance.

Although the law in this area is still somewhat unsettled,  three Federal Courts
of Appeal have held that a debtor can be  discharged  of  environmental  cleanup
liabilities  related to its  prebankruptcy  activities.  The Company believes it
will prevail in its position that its liability to
<PAGE>

                                                                               7

the EPA and third parties for prebankruptcy environmental cleanup costs has been
fully  discharged.  In one  particular  site, the EPA's Region III has concurred
with  the  Company's  position  that  claims  for  environmental   cleanup  were
discharged pursuant to the bankruptcy.  While each site is unique with different
circumstances,  the Company has notified  other  Regional  Offices of the EPA of
this  determination  associated  with the Region III site.  The  Company has not
received responses from the other Regional offices.

The EPA and certain  state  agencies  also  continue to request  information  in
connection  with various waste disposal sites in which products  manufactured by
Allis-Chalmers before consummation of the Plan of Reorganization were ultimately
disposed  of by other  parties.  Although  the Company  has been  discharged  of
liabilities  with  respect to hazardous  waste  sites,  it is under a continuing
obligation  to provide  information  with respect to its products to federal and
state agencies.  The A-C Reorganization Trust, under its mandate to provide Plan
of Reorganization implementation services to the Company, has responded to these
informational requests because prebankruptcy activities are involved.


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

Not applicable.


<PAGE>

8

                                     PART II

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

The Plan of  Reorganization  provided  for  cancelling  the old common  stock of
Allis-Chalmers  on  December  2,  1988  and  issuing  new  common  stock  of the
reorganized  Company  (Common Stock) to certain holders of claims and interests,
including holders of old common stock.

After  receiving  approval of a majority of  shareholders  of Common Stock,  the
Company   amended  its  Amended  and  Restated   Certificate  of   Incorporation
(Amendment),  effective as of July 8, 1992,  to effect a 1-for-15  reverse stock
split of the Common Stock pursuant to which each 15 shares of Common Stock, $.01
par value per share,  were combined into one share of new Common Stock, $.15 par
value per share.  In lieu of the issuance of fractional  shares of Common Stock,
the Amendment  provided that  shareholders  owning less than 15 shares of Common
Stock were  entitled to receive a cash payment at the rate of $8.85 per share of
Common Stock (equivalent to $0.59 per share of the presplit Common Stock).  This
action,  decreased the number of outstanding shares of Common Stock to 1,003,596
from  15,164,195  shares  immediately  prior  to the  reverse  stock  split  and
decreased the number of  shareholders  to 7,408 from 17,799 prior to the reverse
stock split. Pursuant to the PBGC Agreement (See ITEM 7. MANAGEMENTS  DISCUSSION
AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF OPERATIONS and NOTE 7 to the
FINANCIAL STATEMENTS entitled  SHAREHOLDERS  DEFICIT),  in June 1999 the Company
issued (pursuant to the exemption from Registration  provided by Section 4(2) of
the Securities Act of 1933 and/or Regulation D thereunder) 585,100 shares of its
common stock to the PBGC increasing the total shares outstanding to 1,588,128 as
of March 31, 1999. Per share amounts in the  accompanying  financial  statements
reflect the  reverse  stock  split and  issuance of shares  pursuant to the PBGC
Agreement.

The Common  Stock is subject to trading  restrictions  that are set forth in the
Company's  Amended  and  Restated  Certificate  of  Incorporation.  The  trading
restrictions are designed to maximize the likelihood of preserving the Company's
substantial  net operating loss  carryforwards.  There is no established  public
trading market for the Common Stock. It is not certain when or if trading in the
Common Stock will commence or on which  registered  stock  exchange or quotation
system,  if any, the Common  Stock may  eventually  be listed or quoted.  At the
present time,  the Company does not intend to file a listing  application to any
registered  national  stock  exchange or Nasdaq for trading or  quotation of the
Common Stock.

No dividends were declared or paid during 1999, 1998 or 1997.
<PAGE>

                                                                               9

ITEM 6.  SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
                                                     1999         1998         1997         1996         1995
                                                                   (millions, except per share data)

<S>                                              <C>           <C>           <C>          <C>          <C>
Statement of Operations Data:
  Sales                                          $     4.4     $    5.0      $   4.1      $   4.1      $   3.2

  Net income (loss)                                   (0.1)         0.6        (66.5)        (1.7)        (1.4)

  Net income (loss) per common share
    (Basic and Diluted)                               (.08)         .62       (66.34)       (1.72)       (1.44)


Statement of Financial
  Condition Data:

  Total assets                                         2.5          2.6          2.7          3.4          4.1

  Long-term debt classified as:
    Current                                            0.1          0.1          0.1          0.1          0.3
    Long-term                                          0.2          0.2          0.2          0.3            -

  Shareholders' deficit                              (66.5)       (67.4)       (68.0)       (13.6)        (9.9)

</TABLE>

<PAGE>
10


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

This discussion  should be read in conjunction with the  Consolidated  Financial
Statements including the Notes to Consolidated Financial Statements.

Overview

Allis-Chalmers, after emerging from Chapter 11 under the Plan of Reorganization,
entered into an agreement with AL-CH Company,  L.P. (Investor) pursuant to which
the Investor agreed to purchase 6.1 million shares (on a prereverse  stock split
basis) of Common Stock (40% of the  outstanding  Common Stock) for $3,750,000 in
cash.  The Investor is a limited  partnership  controlled  by Messrs.  Robert E.
Nederlander and Leonard Toboroff, two of the Company's directors.

The Company  continues  its efforts to conserve  cash  resources.  However,  the
expenses  associated  with the ongoing  Securities  and Exchange  Commission and
other governmental  reporting as well as legal,  accounting and audit, insurance
and costs  associated  with other  corporate  requirements  of a  publicly  held
company will continue to make it difficult for the Company, at its present size,
to achieve positive cash flow.

As of the date of the Chapter 11 filings in June 1987, the Company  sponsored 19
defined benefit plans providing  pensions for substantially all U.S.  employees.
The pension plan for U.S.  salaried  employees  was capped and frozen  effective
March 31, 1987, so there have been no further benefit  accruals after that date.
As a result of  divestitures  during the Chapter 11  proceedings,  eight  active
plans were  transferred to the buyers of the businesses,  leaving the Company as
sponsor  of 11  plans,  none of which  permitted  additional  benefit  accruals.
Effective  January 1, 1989,  the 11  remaining  plans were  consolidated  into a
single plan, the Allis-Chalmers Consolidated Pension Plan (Consolidated Plan).

In 1994, the Company's independent pension actuaries changed the assumptions for
mortality and  administrative  expenses used to determine the liabilities of the
Consolidated Plan. Primarily as a result of the changes in mortality assumptions
to reflect decreased mortality rates of the Company's retirees, the Consolidated
Plan was underfunded on a present value basis. In the first quarter of 1996, the
Company made a required cash contribution to the Consolidated Plan in the amount
of $205,000.  The Company did not, however, have the financial resources to make
the other  required  payments  during 1996 and 1997.  Given the inability of the
Company  to fund such  obligations  with its  current  financial  resources,  in
February  1997,   Allis-Chalmers   applied  to  the  Pension  Benefit   Guaranty
Corporation  (PBGC) for a "distress"  termination of the Consolidated Plan under
section  4041(c) of the Employee  Retirement  Income  Security  Act of 1974,  as
amended  (ERISA).  The PBGC  approved the distress  termination  application  in
September 1997 and agreed to a plan termination date of April 14, 1997. The PBGC
became trustee of the terminated Consolidated Plan on September 30, 1997.

<PAGE>


                                                                              11

Upon termination of the Consolidated  Plan,  Allis-Chalmers and its subsidiaries
incurred a liability to the PBGC for an amount equal to the Consolidated  Plan's
unfunded benefit  liabilities.  Allis-Chalmers  and its  subsidiaries  also have
liability to the PBGC, as trustee of the terminated  Consolidated  Plan, for the
outstanding balance of the Consolidated Plan's accumulated funding deficiencies.
The PBGC has estimated that the unfunded benefit liabilities and the accumulated
funding  deficiencies  (together,  the PBGC Liability) total approximately $67.9
million. Effective March 31, 1999, the Company issued 585,100 shares to the PBGC
reducing the pension  liability by the estimated fair market value of the shares
to $66.9 million.

In  September  1997,  Allis-Chalmers  and the PBGC  entered into an agreement in
principle for the settlement of the PBGC Liability which  required,  among other
things, satisfactory resolution of the Company's tax obligations with respect to
the  Consolidated  Plan under Section 4971 of the Internal Revenue Code of 1986,
as amended (Code). Section 4971(a) of the Code imposes, for each taxable year, a
first-tier tax of 10% on the amount of the accumulated  funding deficiency under
a plan like the  Consolidated  Plan.  Section  4971(b)  of the Code  imposes  an
additional, second-tier tax equal to 100% of such accumulated funding deficiency
if the deficiency is not "corrected"  within a specified  period.  Liability for
the taxes  imposed under section 4971  extends,  jointly and  severally,  to the
Company and to its commonly-controlled subsidiary corporations.

Prior to its  termination,  the  Consolidated  Plan had an  accumulated  funding
deficiency  in the  taxable  years  1995,  1996,  and 1997.  Those  deficiencies
resulted  in  estimated   first-tier   taxes  under  Code  section   4971(a)  of
approximately $900,000.

On July 16, 1998, the Company and the Internal  Revenue Service (IRS) reached an
agreement in principal to settle the Company's tax liability  under Code Section
4971 for $75,000.  Following final IRS approval, payment of this amount was made
on August 11, 1998.

In June 1999,  but  effective  as of March 31,  1999,  the  Company and the PBGC
entered into an agreement  for the  settlement of the PBGC  Liability  (the PBGC
Agreement).

Pursuant to the terms of the PBGC  Agreement,  the Company issued 585,100 shares
of its common stock to the PBGC, or 35% of the total number of shares issued and
outstanding  on a  fully-diluted  basis,  and the  Company  has a right of first
refusal  with  respect  to the sale of the shares of common  stock  owned by the
PBGC. In conjunction  with the share  issuance,  the Company reduced the pension
liability  to the PBGC based on the  estimated  fair market  value of the shares
issued on the effective date of March 31, 1999. In accordance  with the terms of
the PBGC  Agreement,  the Company was required to and has (i) decreased the size
of the Board of  Directors  of the Company  (the Board) to seven  members;  (ii)
caused a sufficient  number of then  current  directors of the Company to resign
from the Board and all committees thereof;  and (iii) caused Thomas M. Barnhart,
II,  Alexander P. Sammarco and David A.  Groshoff,  designees of the PBGC, to be
elected to the  Board.  The PBGC has  caused  the  Company to amend its  By-laws
(By-laws)  to  conform  to the  terms of the PBGC  Agreement.  Furthermore,  the
Company agreed to pay the PBGC's  reasonable  professional  fees on the 90th day
after a Release Event (as hereinafter defined),  which is currently evidenced by
a Company promissory note in favor of the PBGC in the amount of $75,000.  During
the term of the PBGC Agreement, the Company has

<PAGE>
12


agreed  not to issue or agree to issue any  common  stock of the  Company or any
"common stock  equivalent" for less than fair value (as determined by a majority
of the Board).  The Company  also  agreed not to merge or  consolidate  with any
other entity or sell, transfer or convey more than 50% of its property or assets
without majority Board approval and agreed not to amend its Amended and Restated
Certificate of Incorporation (Certificate) or By-laws.

In  order to  satisfy  and  discharge  the PBGC  Liability,  the PBGC  Agreement
provides that the Company must either:  (i) receive,  in a single transaction or
in a series of related transactions, debt financing which makes available to the
Company at least $10 million of borrowings or (ii) consummate an acquisition, in
a single transaction or in a series of related transactions,  of assets and/or a
business  where the purchase price  (including  funded debt assumed) is at least
$10 million (Release  Event).  If the 585,100 shares are disposed of by the PBGC
prior to a Release  Event and the final  satisfaction  and discharge of the PBGC
liability,  the liability  will be accreted by the estimated  fair market value,
$1,024,000, of the shares issued to the PBGC.

In  connection  with the PBGC  Agreement,  and as additional  consideration  for
settling the PBGC Liability,  the following  agreements,  each dated as of March
31, 1999 were also entered into: (i) a Registration Rights Agreement between the
Company  and PBGC  (the  Registration  Rights  Agreement);  and  (ii) a  Lock-Up
Agreement by and among the Company,  the PBGC,  AL-CH Company,  L.P., a Delaware
limited  partnership  (AL-CH),  Wells Fargo Bank,  as trustee under that certain
Amended and Restated Retiree Health Trust Agreement for UAW Retired Employees of
Allis-Chalmers  Corporation  (the UAW Trust),  and  Firstar  Trust  Company,  as
trustee under that certain  Amended and Restated  Retiree Health Trust Agreement
for Non-UAW Retired Employees of Allis-Chalmers  Corporation (the Non-UAW Trust)
(the Lock-Up Agreement).

The  Registration  Rights  Agreement  grants each holder of  Registrable  Shares
(defined in the  Registration  Rights  Agreement to basically mean the shares of
common  stock  issued to the PBGC  under the PBGC  Agreement)  the right to have
their shares registered  pursuant to the Securities Act of 1933, as amended,  on
demand or incidental to a registration  statement being filed by the Company. In
order to demand  registration of Registrable  Shares, a request for registration
by  holders of not less than 20% of the  Registrable  Shares is  necessary.  The
Company  may deny a request  for  registration  of such  shares  if the  Company
contemplates filing a registration statement within 90 days of receipt of notice
from the holders.  The Registration  Rights  Agreement also contains  provisions
that allow the Company to postpone the filing of any registration  statement for
up to 180 days.  The  Registration  Rights  Agreement  contains  indemnification
language similar to that usually contained in agreements of this kind.

The Lock-Up  Agreement  governs the  transfer and  disposition  of shares of the
Company's common stock and the voting of such shares, as well as grants the PBGC
a right of sale of its  shares  prior to AL-CH,  the UAW  Trust and the  Non-UAW
Trust.

Pursuant to the Lock-Up  Agreement,  unless the Board has  terminated the common
stock  transfer  restrictions  set  forth  in  Article  XIII  of  the  Company's
Certificate, AL-CH, the UAW Trust and the Non-UAW Trust each agreed that, during
the period commencing on March 31, 1999 and

<PAGE>

                                                                              13

ending on the third  anniversary of the Release Event, it will not,  directly or
indirectly,  sell, transfer, assign or dispose of any shares of Company stock it
beneficially  owns.  Commencing with the third  anniversary of the Release Event
and continuing until the fifth  anniversary of the Release Event, each of AL-CH,
the UAW Trust and the Non-UAW  Trust agreed not to sell,  transfer or dispose of
any shares of Company stock without first giving the PBGC an opportunity to sell
all or any portion of the shares of Company  stock the PBGC owns.  The foregoing
right of the PBGC applies to the sale of Company  stock in a public  offering or
otherwise.

The Lock-Up Agreement also contains a voting  component.  During the term of the
Lock-Up Agreement, each party to the agreement agreed to vote, at any meeting of
the Company stockholders and in any written consent, all shares of Company stock
owned by it in favor of the  election  as  directors  of the Company the persons
nominated  by the  Nominating  Committee of the Board and to refrain from taking
any action contrary to or inconsistent with such obligation.  During the term of
the Lock-Up  Agreement,  each party to the agreement  further agreed not to vote
its  shares of  Company  stock or take any other  action to amend the  Company's
Certificate or By-laws in a manner that is  inconsistent  with, or in breach of,
the PBGC  Agreement.  Each  party  further  agreed  that it will vote all of its
shares  (i)  in  favor  of  certain   specified   amendments  to  the  Company's
Certificate,  (ii) for the election of the persons designated by the PBGC (each,
a PBGC  Director)  to serve on the Board and (iii) in favor of the  election  of
Company  directors  who are  committed  to  cause,  and who do  cause,  one PBGC
Director to be appointed to the  Nominating  Committee of the Board and one PBGC
Director to be appointed as the  Chairman of the  Compensation  Committee of the
Board.

The acquisition  environment has been unfavorable since the Investor's 1989 cash
contribution  to the Company and remained very  difficult for the Company during
1999.  The  problems  continued  to  include  the  Company's  lack of  cash  for
investment,  limited  availability  of debt financing for  acquisitions  and the
financial exposure associated with the Consolidated Plan. Therefore, the Company
continues  to proceed  cautiously  with its  efforts to  identify  and  evaluate
potential candidates for acquisition.

Results of Operations

Results of operations for 1999,  1998 and 1997 reflect the sole operation of the
business of Allis-Chalmers: the machine repair business, HDS.

Sales totaled $4.4 million in 1999,  compared with $5.0 million in 1998 and $4.1
million in 1997.  The  decrease in sales for 1999 from 1998 was due to continued
soft  conditions as a backlash to the very low oil prices during the second half
of 1998 which resulted in lower shipments in 1999 compared to the same period in
1998.  Even with the current higher oil prices,  HDS continues to be affected by
volatile  market  conditions that prevail in the oil related fields of refining,
processing, chemicals and petrochemical operations throughout the Gulf Coast.

Gross margins,  as a percentage of sales,  were 24.2%,  29.7% and 25.0% in 1999,
1998 and 1997, respectively.

<PAGE>
14


Marketing and  administrative  expense was $1.5  million,  $1.7 million and $1.7
million  in 1999,  1998 and 1997,  respectively.  Marketing  and  administrative
expense  was  35.4% of sales in 1999  compared  with  33.6% in 1998 and 40.9% in
1997.  The decrease in marketing and  administrative  expense was due to reduced
acquisition  costs as well as corporate  overhead.  While there were  additional
costs  incurred  in  1998 in  pursuit  of  corporate  acquisitions  and  certain
engineering  costs at HDS,  these costs were  offset by a  reduction  in 1998 of
legal  expenses as compared  to 1997 when the Company  experienced  nonrecurring
legal expenses  associated  with the  termination of the  Consolidated  Plan and
related  negotiations  with  the  PBGC and IRS.  A  significant  portion  of the
Company's  administrative expense continues to relate to expenses for Securities
and Exchange  Commission and other governmental  reporting as well as the legal,
accounting  and audit,  insurance  and other  requirements  of a  publicly  held
company.

Interest income in each of the years resulted mainly from earnings on short-term
investments.  Interest expense primarily relates to a term loan, the proceeds of
which were used to purchase the shop and office building from which HDS operates
and additional financing for capital improvements at HDS.

Pension  expense  which  relates to the  recognition  of the  pension  liability
associated with the Consolidated  Plan in accordance with Statement of Financial
Accounting Standards No. 87 "Employer's Accounting for Pensions," was $1,397,000
in 1997. In 1999 and 1998 there was no expense as a result of termination of the
Consolidated  Plan. The 1997 expense was for a nine month period as the transfer
of the  Consolidated  Plan to the PBGC took place on  September  30,  1997.  The
termination  of the  Consolidated  Plan resulted in an additional  $64.5 million
pension expense in 1997, including $.9 million for IRS excise taxes.

The Company had net loss of $113,000, or $.08 per common share in 1999, compared
with a net income of $618,000,  or $.62 per common share, in 1998 and a net loss
of  $66,545,000  in 1997.  Net income in 1998  included  income of $825,000 as a
result of a $900,000 IRS liability  settled for $75,000.  Recognition of pension
expense of  $65,926,000  accounted for a significant  portion of the net loss in
1997.

Liquidity and Capital Resources

At December 31, 1999, the Company had cash and short-term  investments  totaling
$501,000,  an increase from $223,000 at December 31, 1998 principally the result
of Plan of Reorganization implementation reimbursement.

Trade receivables at December 31, 1999 were $570,000,  compared with $796,000 at
December 31, 1998. This decrease was the result of an addition to the reserve of
$102,000  relating to a warranty  dispute,  decreased  sales in 1999 and certain
major projects completed and billed by HDS near the end of 1998.

Inventory at December 31, 1999 was  $157,000,  an increase from $127,000 at year
end 1998 due to one job  consisting  of  approximately  $81,000 in inventory not
completed until January, 2000.

<PAGE>

                                                                              15

Net  property,  plant and  equipment  at  December  31, 1999 was  $1,170,000,  a
decrease from $1,308,000 at December 31, 1998. The Company incurred only $21,000
on  capital  expenditures  during  1999.  In 1998,  approximately  $234,000  was
invested in machinery and equipment  acquisitions while  approximately  $119,000
was spent to improve HDS's facilities  (including air conditioning and upgrading
its telephone system).  The expenditures for additional or upgrades of machinery
and tooling were necessary to reduce production costs by decreasing downtime and
increasing  production  efficiency  output,  helping to position the Company for
further growth through the increased capacity and service capabilities it offers
to the marketplace.

Current maturities of long-term debt at December 31, 1999 and 1998 were $60,000.
Consistent with the prior year, the majority of the current maturities represent
payments on the real estate loan  refinanced by HDS in August 1996. The proceeds
of the original loan were used in 1990 for the purchase of the land and building
in which HDS operates its business in Houston,  Texas. The amount  refinanced is
required to be repaid in monthly installments of $3,278 through August 20, 2001,
when the  remaining  unpaid  balance is due. At December 31, 1999,  the interest
rate on the note was 10.5%. This rate is subject to adjustments  during the term
of the note in  accordance  with  increases or decreases in the prime rate.  The
note is  collateralized by the HDS facility (having a net book value of $432,000
at December 31, 1999) and the Company's guaranty.

The Company's  principal  sources of cash include earnings from operations.  The
cash requirements needed for the administrative expenses associated with being a
publicly held company are significant,  and management believes that the Company
will continue to use a substantial portion of its cash balances generated by HDS
for these purposes in 2000.

The A-C Reorganization Trust, pursuant to the Plan of Reorganization,  funds all
costs incurred by  Allis-Chalmers  which relate to implementation of the Plan of
Reorganization.  Such costs include an allocated  share of certain  expenses for
Company employees, professional fees and certain other administrative expenses.

The EPA and certain  state  environmental  protection  agencies  have  requested
information in connection with eleven  potential  hazardous waste disposal sites
in which products manufactured by Allis-Chalmers before consummation of the Plan
of  Reorganization  were disposed.  The EPA has claimed that  Allis-Chalmers  is
liable for cleanup costs  associated with several  additional  sites.  The EPA's
claims  with  respect  to one  other  site were  withdrawn  in 1994  based  upon
settlements  reached  with the EPA in the  bankruptcy  proceeding.  In addition,
certain third parties have  asserted that  Allis-Chalmers  is liable for cleanup
costs or associated EPA fines in connection  with  additional  sites.  In one of
these  instances a former site operator has joined  Allis-Chalmers  and 47 other
potentially  responsible  parties  as  a  third-party  defendant  in  a  lawsuit
involving cleanup of one of the sites. In each instance the environmental claims
asserted against the Company involve its prebankruptcy operations.  Accordingly,
Allis-Chalmers   has  taken  the  position  that  all  cleanup  costs  or  other
liabilities  related to these sites were  discharged in the  bankruptcy.  In one
particular site, the EPA's Region III has concurred with the Company's  position
that  claims  for  environmental   cleanup  were  discharged   pursuant  to  the
bankruptcy. While each site is unique with different circumstances,  the Company
has notified other Regional offices of the EPA of this determination  associated
with the Region III site. The Company has

<PAGE>
16


not received responses from the other Regional offices. No environmental  claims
have been asserted against the Company involving its postbankruptcy operations.

Management  considered the Company's only significant  application that was year
2000 sensitive was the accounting  system.  The accounting system experienced no
year 2000 problems and management  does not anticipate any additional  year 2000
problems..

Financial Condition

Shareholders'  deficit at December  31,  1999 was $66.5  million.  A  three-year
comparison of shareholders' deficit follows:

                 (millions)            1999          1998          1997
                                       ----          ----          ----

January 1                           $  (67.4)     $  (68.0)      $ (13.6)
Net income (loss)                       (0.1)          0.6         (66.5)
Pension liability adjustment             0.0           0.0          12.1
Issuance of common stock                 1.0             -             -
                                    --------      --------       -------

December 31                         $  (66.5)     $  (67.4)      $ (68.0)
                                    ========      ========       =======



ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
                   RISK.

None.


<PAGE>

                                                                              17

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


                   Index to Consolidated Financial Statements


                                                                           Page

Financial Statements:

  Report of Independent Accountants                                        18
  Statement of Operations for the Three Years Ended December 31, 1999      19
  Statement of Accumulated Deficit for the Three Years Ended
     December 31, 1999                                                     19
  Statement of Financial Condition at December 31, 1999 and 1998           20
  Statement of Cash Flows for the Three Years Ended December 31, 1999      21
  Notes to Consolidated Financial Statements                               22

  Financial Statement Schedule

      II     Valuation and Qualifying Accounts                             44




<PAGE>

18



                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
 Shareholders of Allis-Chalmers Corporation

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated  statements of income,  accumulated  deficit and cash flows present
fairly,  in all material  respects,  the  financial  position of  Allis-Chalmers
Corporation and its  subsidiaries at December 31, 1999 and 1998, and the results
of their  operations  and their  cash  flows for each of the three  years in the
period  ended  December 31,  1999,  in  conformity  with  accounting  principles
generally  accepted in the United  States.  In  addition,  in our  opinion,  the
financial  statement  schedule listed in the accompanying index presents fairly,
in all  material  respects,  the  information  set  forth  therein  when read in
conjunction with the related consolidated financial statements.  These financial
statements  and  financial  statement  schedule  are the  responsibility  of the
Company's  management;  our  responsibility  is to  express  an opinion on these
financial  statements and financial  statement  schedule based on our audits. We
conducted our audits of these  statements in accordance with auditing  standards
generally accepted in the United States,  which require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe  that our audits  provide a reasonable  basis for the opinion  expressed
above.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. The Company's application for
a distress  termination  of the  Allis-Chalmers  Consolidated  Pension Plan (the
"Consolidated  Plan") was approved by the Pension Benefit  Guaranty  Corporation
("PBGC") on September 30, 1997. At such date, the PBGC became the trustee of the
Consolidated  Plan and the Company and its  subsidiaries  incurred an  estimated
liability to the PBGC for unfunded benefit  liabilities and accumulated  funding
deficiencies totaling  approximately $68 million.  Effective March 31, 1999, the
Company issued 585,100 shares to the PBGC reducing the pension  liability by the
estimated  fair market value of the shares to $67 million.  The Company does not
have the  financial  resources to fund this  liability to the PBGC.  This matter
raises  substantial  doubt  about the  Company's  ability to continue as a going
concern.  Management's plans in regard to this matter are described in Note 9 to
the consolidated financial statements.  The consolidated financial statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.


PricewaterhouseCoopers  LLP
Milwaukee, Wisconsin
March 24, 2000

<PAGE>

                                                                              19


                            STATEMENT OF OPERATIONS



                Year Ended December 31         1999         1998          1997
                ----------------------      ----------   ----------   ----------
                                               (thousands, except per share)

Sales                                        $  4,370     $  5,021     $  4,062
Cost of sales                                   3,312        3,530        3,048
                                             --------     --------     --------
      Gross Margin                              1,058        1,491        1,014

Marketing and administrative expense            1,546        1,689        1,660
                                             --------     --------     --------

    Loss from Operations                         (488)        (198)        (646)
Other income (expense):
  Interest income                                   7           33           54
  Interest expense                                (34)         (50)         (45)
  Pension expense (Note 9)                       --           --        (65,926)
  Other (Note 11, 9)                              402          833           18
                                             --------     --------     --------

   Net Income (Loss)                         $   (113)    $    618     $(66,545)
                                             ========     ========     ========

   Net Income (Loss) per Common Share
      (Basic and Diluted)                    $   (.08)    $    .62     $ (66.34)
                                             ========     ========     ========


                        STATEMENT OF ACCUMULATED DEFICIT

                Year Ended December 31         1999         1998          1997
                ----------------------      ----------   ----------   ----------
                                                        (thousands)

Accumulated deficit beginning of year        $(75,673)    $(76,291)    $ (9,746)
Net income (loss)                                (113)         618      (66,545)
                                             --------     --------     --------
Accumulated deficit end of year              $(75,786)    $(75,673)    $(76,291)
                                             ========     ========     ========


The accompanying Notes are an integral part of the Financial Statements.


<PAGE>

20

                        STATEMENT OF FINANCIAL CONDITION


                         December 31                       1999           1998
                       --------------                   ----------   -----------
                                                               (thousands)

Assets

Cash and cash equivalents                                 $    501     $    223
Trade receivables, net (Note 3)                                570          796
Inventories, net                                               157          127
Other current assets                                            66          112
                                                          --------     --------
    Total Current Assets                                     1,294        1,258

Net property, plant and equipment (Note 4)                   1,170        1,308
                                                          --------     --------
    Total Assets                                          $  2,464     $  2,566
                                                          ========     ========


Liabilities and Shareholders' Deficit

Current maturities of long-term debt                      $     60     $     60
Trade accounts payable                                         461          291
Accrued employee benefits                                      120          155
Accrued pension liability (Note 9)                          66,877       67,901
Other current liabilities                                      281          312
                                                          --------     --------
    Total Current Liabilities                               67,799       68,719

Accrued postretirement benefit obligations (Note 9)            927          981
Long-term debt (Note 6)                                        193          232

Commitments and contingent liabilities (Note 10)              --           --

Shareholders' deficit (Note 7)
  Common stock ($.15 par value, authorized
   2,000,000 shares, outstanding 1,588,128
   at December 31, 1999 and 1,003,028 at
   December 31, 1998)                                          238          152
  Capital in excess of par value                             9,093        8,155
  Accumulated deficit (accumulated deficit of
   $424,208 eliminated on December 2, 1988)                (75,786)     (75,673)
                                                          --------     --------

    Total Shareholders' Deficit                            (66,455)     (67,366)
                                                          --------     --------

    Total Liabilities and Shareholders' Deficit           $  2,464     $  2,566
                                                          ========     ========


The accompanying Notes are an integral part of the Financial Statements.
<PAGE>

                                                                              21

<TABLE>
                                         STATEMENT OF CASH FLOWS

<CAPTION>
                      Year Ended December 31                 1999        1998          1997
                      ----------------------              ---------    ---------     ---------
                                                                      (thousands)

<S>                                                        <C>          <C>          <C>
Cash flows from operating activities:
    Net (loss) income                                      $   (113)    $    618     $(66,545)
    Adjustments to reconcile net (loss) income to
      net cash provided (used) by operating activities:
       Depreciation and amortization                            165          149          131
         Gain on sale of equipment                               (2)        --           --
       Changes in working capital:
           Decrease (increase) in receivables, net              226         (113)         (31)
           Increase in inventories                              (30)         (26)          (8)
           Decrease in other current assets                      46            9           15
           Increase in trade accounts payable                   170           72          137
           (Decrease) increase in other current
             liabilities                                        (66)          60         (135)
            (Decrease) increase in accrued pension
             liability                                            0         (900)      65,926
            Other                                               (54)          (9)          (3)
                                                           --------     --------     --------
           Net cash provided (used) by operating
            activities                                          342         (140)        (513)

Cash flows from investing activities:
    Capital expenditures                                        (21)        (353)        (304)
    Proceeds from sale of equipment                              16            3            3
                                                           --------     --------     --------
           Net cash used by investing activities                 (5)        (350)        (301)

Cash flows from financing activities:
    Net proceeds from issuance of long-term debt               --             66         --
    Payment of long-term debt                                   (59)         (52)         (55)
                                                           --------     --------     --------
           Net cash provided (used) by financing
            activities                                          (59)          14          (55)
                                                           --------     --------     --------

Net increase (decrease) in cash and cash
 equivalents                                                    278         (476)        (869)

Cash and cash equivalents at beginning of year                  223          699        1,568
                                                           --------     --------     --------

Cash and cash equivalents at end of  year                  $    501     $    223     $    699
                                                           ========     ========     ========

Supplemental information - interest paid                   $     34     $     50     $     45
                                                           ========     ========     ========
Noncash investing and financing activities:
 Purchase of equipment under capital lease
  obligation                                               $     29     $   --       $   --
                                                           ========     ========     ========
 Issuance of common stock in partial
  settlement of accrued pension liability                  $  1,024     $   --       $   --
                                                           ========     ========     ========

</TABLE>

The accompanying Notes are an integral part of the Financial Statements.

<PAGE>

22


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.  EMERGENCE FROM CHAPTER 11

Allis-Chalmers Corporation  (Allis-Chalmers or the Company) emerged from Chapter
11  proceedings  on October  31, 1988 under a plan of  reorganization  which was
consummated on December 2, 1988. The Company was thereby discharged of all debts
that arose before  confirmation  of its First Amended and Restated Joint Plan of
Reorganization  (Plan  of  Reorganization),  and all of its  capital  stock  was
cancelled  and made  eligible  for  exchange  for shares of common  stock of the
reorganized Company (Common Stock).

Claims asserted  against the Company and allowed by the Bankruptcy  Court beyond
those recorded prior to the  consummation  date amounted to  approximately  $483
million. Such amounts were subsequently recorded by the Company in 1988. Because
total recorded liabilities discharged at consummation exceeded the book value of
assets and Common Stock  distributed to creditors and the various trusts at that
date, extraordinary income of $388.1 million was recorded.

See the Plan of Reorganization and the First Amended Disclosure  Statement dated
September 14, 1988 for additional information regarding distributions to holders
of claims and interests.


NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Allis-Chalmers  through its  wholly-owned  subsidiary,  Houston Dynamic Service,
Inc.,  services and repairs  various  types of mechanical  equipment,  including
compressors,  pumps, turbines, engines, heat exchangers,  centrifuges,  rollers,
gears, valves, blowers, kilns, crushers and mills.

Principles of Consolidation

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

Cash and Cash Equivalents

The Company  considers  all highly liquid  investments  with a maturity of three
months or less at the time of purchase to be cash equivalents.

Fair Value of Financial Instruments

The carrying  amounts in the Statement of Financial  Condition for cash and cash
equivalents, trade receivables and long-term debt approximate fair market value.
<PAGE>

                                                                              23

Inventories

Inventories  are  stated  at the  lower of  cost,  determined  by the  first-in,
first-out method, or market.

Properties and Depreciation

Plant and equipment  used in the business are stated at cost and  depreciated on
the  straight-line  basis over the  estimated  useful  lives of the assets which
generally  range from 40 years for  buildings,  3 to 12 years for  machinery and
equipment  and 3 to 12  years  for  tools,  patterns,  furniture  and  fixtures.
Maintenance   and  repairs  are   expensed  as  incurred.   Expenditures   which
significantly increase asset values or extend useful lives are capitalized.

Income Taxes

Deferred income taxes are determined on the liability  method in accordance with
Statement of Financial  Accounting  Standards (SFAS) No. 109. See Note 5. Income
Taxes.

Statements of Cash Flows

For purposes of the Statements of Cash Flows,  the Company  considers all highly
liquid  debt  instruments  with a  maturity  of three  months or less at date of
purchase to be cash equivalents.

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.

Major Customers

Entergy, the only customer to have 10% or more of total sales, accounted for 13%
of 1999 sales.  In 1998 and 1997,  Amoco  Chemical was the only  customer  which
accounted  for 10% or more of total  sales -- 24% of 1998  sales and 12% of 1997
sales.


NOTE 3.  RECEIVABLES

                      December 31                      1999            1998
                    --------------                 -----------     ----------
                                                               (thousands)
Trade accounts receivable                          $       692     $       817
Allowance for doubtful receivables                        (122)            (21)
                                                   -----------     -----------
                                                   $       570     $       796
                                                   ===========     ===========


<PAGE>

24


NOTE 4.  PROPERTY, PLANT AND EQUIPMENT

                   December 31                     1999               1998
                 --------------                 -----------        -----------
                                                        (thousands)
Land and buildings                              $       545        $       545
Machinery and equipment                               1,550              1,606
Tools, patterns, furniture, fixtures
  and leasehold improvements                            721                752
                                                -----------        -----------
                                                      2,816              2,903
Accumulated depreciation                             (1,646)            (1,595)
                                                -----------        -----------
                                                $     1,170        $     1,308
                                                ===========        ===========


NOTE 5.  INCOME TAXES

Temporary  differences  are  differences  between  the tax basis of  assets  and
liabilities  and their reported  amounts in the financial  statements  that will
result in  differences  between income for tax purposes and income for financial
statement  purposes in future years. A valuation  allowance is  established  for
deferred tax assets when management, based upon available information, considers
it more likely than not that a benefit from such assets will not be realized.

The following  table depicts the temporary  differences  as of December 31, 1999
and 1998:

                                                 1999              1998
                                             -----------        ----------
                                                       (millions)

Net future tax deductible items              $        35        $        35
Net operating loss carryforwards and
 other tax credits                                   123                156
Valuation allowance                                 (158)              (191)
                                             -----------        -----------

Net deferred taxes                           $         -        $         -
                                             ===========        ===========

Net future tax deductible items relate primarily to estimated future  bankruptcy
claim  payments to be made by the Company's two grantor  trusts.  Gross deferred
tax liabilities at December 31, 1999 and 1998 are not material.

The Plan of Reorganization  established the A-C  Reorganization  Trust to settle
claims and to make  distributions  to creditors  and certain  shareholders.  The
Company  transferred  cash and certain other property to the A-C  Reorganization
Trust  on  December  2,  1988.   Payments   made  by  the  Company  to  the  A-C
Reorganization  Trust did not generate tax  deductions  for the Company upon the
transfer but generate deductions for the Company as payments are made by the A-C
Reorganization Trust to holders of claims.

The Plan of Reorganization also created a trust to process and liquidate product
liability claims.  Payments made by the A-C Reorganization  Trust to the product
liability trust did not generate

<PAGE>

                                                                              25

current tax deductions for the Company.  Future  deductions will be available to
the Company as the product liability trust makes payments to liquidate claims.

The Company  believes the  above-named  trusts are grantor  trusts and therefore
includes the income or loss of these trusts in the Company's  income or loss for
tax  purposes,  resulting in an adjustment of the tax basis of net operating and
capital loss  carryforwards.  The income or loss of these trusts is not included
in the Company's results of operations for financial reporting purposes.

Tax carryforwards at December 31, 1999 are estimated to consist of net operating
losses of $349.0 million  expiring 2000 through 2019,  investment tax credits of
$376,000  expiring 2000 through 2001 and energy tax credits of $282,000 expiring
2000 through 2002.

During 1990,  the Company  initiated  litigation  against the  Internal  Revenue
Service (IRS) in the United States Bankruptcy Court for the Southern District of
New York,  challenging  the validity and retroactive  applicability  of proposed
regulations  issued by the IRS on August  13,  1990.  On January 2, 1992 the IRS
issued final regulations under Sections 269 and 382 of the Internal Revenue Code
of  1986  relating  to the use of net  operating  loss  carryforwards  following
corporate reorganizations under the Bankruptcy Code.

Following   issuance  of  the  final   regulations  the  Company   withdrew  its
retroactivity challenge because the final regulations were made retroactive only
to August 14, 1990 and are not applicable to a plan of  reorganization  that was
completed before then. The Company's Plan of  Reorganization  was consummated on
December 2, 1988. The Company,  however,  continued to challenge the validity of
other provisions of the regulations.

On June 8, 1992,  the Bankruptcy  Court issued a decision  denying the Company's
motion for a judgment against the IRS with respect to the application of Section
269 of the IRS Code to the  Company.  The Court also granted the IRS's motion to
dismiss the Company's complaint  challenging the regulations.  The Court entered
judgment  pursuant to its  decision on June 29,  1992 and,  consistent  with the
advice of its counsel, the Company decided not to appeal that judgment.

Although the Company was unable to obtain a judgment  that would have  prevented
the IRS from applying Section 269 to the Company,  the Court's ruling leaves the
Company in  substantially  the same  position it was in prior to issuance of the
final regulations.  The possibility of an IRS challenge under Section 269 of the
Internal Revenue Code to the Company's use of its prepetition net operating loss
carryforwards  has always  existed  and,  in light of the Court's  ruling,  that
possibility continues to exist.

The Court, however, stated that, should the IRS ever seek to use its new Section
269   regulations  to  limit  the  Company's  use  of  its  net  operating  loss
carryforwards,  nothing in its opinion would  prejudice  the Company's  right to
defend itself by using the Court's confirmation finding that the primary purpose
of the  Company's  Plan  of  Reorganization  was not tax  avoidance.  While  the
Company's Common Stock is subject to trading  restrictions which are designed to
maximize the

<PAGE>

26

likelihood  of  preserving  its net operating  loss  carryforwards,  a change in
ownership  of the  Company  could also limit the use of its net  operating  loss
carryforwards.


NOTE 6.  LONG-TERM DEBT

                December 31                        1999               1998
                -----------                    -----------        -----------
                                                         (thousands)

Real estate loan                               $       203        $       226
Other                                                   50                 66
                                               -----------        -----------
                                                       253                292
Less amounts classified as current                      60                 60
                                               -----------        -----------
                                               $       193        $       232
                                               ===========        ===========


The real estate loan  relates to the 1990  purchase of the land and  building in
Houston,  Texas which had  previously  been leased by HDS. In August  1996,  HDS
refinanced  this loan which is required to be repaid in monthly  installments of
$3,278 through  August 20, 2001 when the remaining  unpaid balance shall be due.
At December 31, 1999 and 1998, the interest rate on the note was 10.5%. The rate
will be adjusted  during the term of the note in  accordance  with  increases or
decreases in the prime rate. The note is collateralized  by the HDS facility,  (
having a net book value of  $432,000  at December  31,  1999) and the  Company's
guaranty.


NOTE 7.  SHAREHOLDERS' DEFICIT

During 1999,  the Company issued 585,100 shares of common stock to the PBGC. See
Note 9. As a result,  $86,000  was  reclassified  from  capital in excess of par
value to common  stock and  $938,000  was  credited  to capital in excess of par
value representing the excess of the fair market value of the shares issued over
par value.


NOTE 8.  LONG-TERM STOCK INCENTIVE PLAN

The Company's  Long-Term  Stock  Incentive Plan (1989) provides for the grant of
stock options, stock appreciation rights,  performance shares, restricted stock,
restricted stock units and other stock-based awards.  Under the plan the maximum
number of shares  which may be granted  with  respect to  stock-based  awards is
50,000.  Options  may be  granted  at prices  equal to or not less than the fair
market  value at date of grant,  except  that  options to  purchase up to 13,333
shares may be granted at a price which is not less than the fair market value on
October  25,  1989,  the date on which the plan was  approved  by  shareholders.
Options  are  exercisable  within a period  not to exceed 10 years  from date of
grant. The plan also provides for the discretionary  grant of stock appreciation
rights which allow the holder to receive in cash or shares of common stock

<PAGE>

                                                                              27

the difference between the exercise price and the fair market value of the stock
at the date of exercise. There have been no grants under the plan.


NOTE 9.  POSTRETIREMENT BENEFIT OBLIGATIONS

Pensions

As of the date of the Chapter 11 filings in June 1987, the Company  sponsored 19
defined benefit plans providing  pensions for substantially all U.S.  employees.
The pension plan for U.S.  salaried  employees  was capped and frozen  effective
March 31, 1987, so there have been no further benefit  accruals after that date.
As a result of  divestitures  during the Chapter 11  proceedings,  eight  active
plans were  transferred to the buyers of the businesses,  leaving the Company as
sponsor  of 11  plans,  none of which  permitted  additional  benefit  accruals.
Effective  January 1, 1989,  the 11  remaining  plans were  consolidated  into a
single plan, the Allis-Chalmers Consolidated Pension Plan (Consolidated Plan).

In accordance with the Plan of  Reorganization,  the 11 plans received a Company
contribution  of $53.8 million in December 1988. As a result of actions taken in
connection  with  this  contribution  and the  then-existing  securities  of the
pension plans, the assets of the Consolidated  Plan were invested in a dedicated
bond portfolio that consisted of high-grade fixed income securities in which the
market value of the assets was matched to the present  value of the  anticipated
pension benefits and  administrative  expenses of the Consolidated Plan in a way
intended to make the pension fund immune from interest rate fluctuations.

Under the Plan of Reorganization,  future contributions to the Consolidated Plan
were required if the mortality assumptions used in calculating the present value
of the  pension  benefits  expected  to be  paid  or  the  assumptions  used  in
calculating the future administrative expenses proved inaccurate.  For the years
1989 through 1993,  retirees eligible for benefits under the Consolidated  Plan,
as a group,  outlived the projections of the mortality  assumptions  used in the
Plan of  Reorganization  for funding the  Consolidated  Plan.  For the same five
years, actual administrative expenses were slightly in excess of assumed levels.
Effective January 1, 1994, the Company's  independent  actuaries  reflected such
decreased mortality for funding calculation purposes. For the years 1994 through
1996,  the  mortality   experience  was  negative   compared  with  the  revised
assumptions,  in an amount in excess of the 1989-1993  average  actuarial  loss.
This  mortality  loss was  partially  offset,  however,  by  gains in the  asset
portfolio.

This underfunded condition in the Consolidated Plan required the Company to make
significant  cash  contributions  to  the  Consolidated  Plan  pursuant  to  the
Employment  Retirement Income Security Act of 1974, as amended (ERISA),  funding
requirements starting in 1996.

The Company failed to make required  quarterly  contributions  starting in April
1996,  resulting  in the  filing  of a  lien  by the  Pension  Benefit  Guaranty
Corporation  (PBGC)  against the Company.  Given the inability of the Company to
fund such  obligations with its lack of financial  resources,  in February 1997,
Allis-Chalmers  applied  to  the  PBGC  for  a  "distress"  termination  of  the
Consolidated Plan under section 4041(c) of ERISA. The PBGC approved the distress

<PAGE>

28


termination  application in September  1997 and agreed to a termination  date of
April 14, 1997. The PBGC became trustee of the terminated  Consolidated  Plan on
September 30, 1997.

Upon termination of the Consolidated  Plan,  Allis-Chalmers and its subsidiaries
incurred a liability to the PBGC for an amount equal to the Consolidated  Plan's
unfunded benefit  liabilities.  Allis-Chalmers  and its subsidiaries also have a
liability to the PBGC, as trustee of the terminated  Consolidated  Plan, for the
outstanding balance of the Consolidated Plan's accumulated funding deficiencies.
The PBGC has estimated that the unfunded benefit liabilities and the accumulated
funding  deficiencies  (together,  the PBGC Liability) total approximately $67.9
million.  Effective  March 31, 1999, the Company issued 585,100 shares  reducing
the pension  liability by the estimated fair market value of the shares to $66.9
million.

In  September  1997,  Allis-Chalmers  and the PBGC  entered into an agreement in
principle for the settlement of the PBGC Liability which  required,  among other
things, satisfactory resolution of the Company's tax obligations with respect to
the  Consolidated  Plan under Section 4971 of the Internal Revenue Code of 1986,
as amended (Code). Section 4971(a) of the Code imposes, for each taxable year, a
first-tier tax of 10% on the amount of the accumulated  funding deficiency under
a plan like the  Consolidated  Plan.  Section  4971(b)  of the Code  imposes  an
additional, second-tier tax equal to 100% of such accumulated funding deficiency
if the deficiency is not "corrected"  within a specified  period.  Liability for
the taxes  imposed under section 4971  extends,  jointly and  severally,  to the
Company and to its commonly-controlled subsidiary corporations.

Prior to its  termination,  the  Consolidated  Plan had an  accumulated  funding
deficiency  in the  taxable  years  1995,  1996,  and 1997.  Those  deficiencies
resulted  in  estimated   first-tier   taxes  under  Code  section   4971(a)  of
approximately $900,000.

On July 16, 1998, the Company and the Internal  Revenue Service (IRS) reached an
agreement in principal to settle the Company's tax liability  under Code Section
4971 for $75,000.  Following final IRS approval, payment of this amount was made
on August 11, 1998.

In June 1999,  but  effective  as of March 31,  1999,  the  Company and the PBGC
entered into an agreement  for the  settlement of the PBGC  Liability  (the PBGC
Agreement).

Pursuant to the terms of the PBGC  Agreement,  the Company issued 585,100 shares
of its common stock to the PBGC, or 35% of the total number of shares issued and
outstanding  on a  fully-diluted  basis,  and the  Company  has a right of first
refusal  with  respect  to the sale of the shares of common  stock  owned by the
PBGC. In conjunction  with the share  issuance,  the Company reduced the pension
liability  to the PBGC based on the  estimated  fair market  value of the shares
issued on the effective date of March 31, 1999. In accordance  with the terms of
the PBGC  Agreement,  the Company was required to and has (i) decreased the size
of the Board of  Directors  of the Company  (the Board) to seven  members;  (ii)
caused a sufficient  number of then  current  directors of the Company to resign
from the Board and all committees thereof;  and (iii) caused Thomas M. Barnhart,
II,  Alexander P. Sammarco and David A.  Groshoff,  designees of the PBGC, to be
elected to the  Board.  The PBGC has  caused  the  Company to amend its  By-laws
(By-laws)  to  conform  to the  terms of the PBGC  Agreement.  Furthermore,  the
Company agreed to pay the PBGC's  reasonable  professional  fees on the 90th day
after a Release Event (as

<PAGE>

                                                                              29

hereinafter defined),  which is currently evidenced by a Company promissory note
in favor of the  PBGC in the  amount  of  $75,000.  During  the term of the PBGC
Agreement,  the  Company  has  agreed  not to issue or agree to issue any common
stock of the Company or any "common stock  equivalent"  for less than fair value
(as determined by a majority of the Board). The Company also agreed not to merge
or consolidate  with any other entity or sell,  transfer or convey more than 50%
of its  property or assets  without  majority  Board  approval and agreed not to
amend its Amended and Restated  Certificate of  Incorporation  (Certificate)  or
By-laws.

In  order to  satisfy  and  discharge  the PBGC  Liability,  the PBGC  Agreement
provides that the Company must either:  (i) receive,  in a single transaction or
in a series of related transactions, debt financing which makes available to the
Company at least $10 million of borrowings or (ii) consummate an acquisition, in
a single transaction or in a series of related transactions,  of assets and/or a
business  where the purchase price  (including  funded debt assumed) is at least
$10 million (Release  Event).  If the 585,100 shares are disposed of by the PBGC
prior to a Release  Event and the final  satisfaction  and discharge of the PBGC
liability,  the liability  will be accreted by the estimated  fair market value,
$1,024,000, of the shares issued to the PBGC.

In  connection  with the PBGC  Agreement,  and as additional  consideration  for
settling the PBGC Liability,  the following  agreements,  each dated as of March
31, 1999 were also entered into: (i) a Registration Rights Agreement between the
Company  and PBGC  (the  Registration  Rights  Agreement);  and  (ii) a  Lock-Up
Agreement by and among the Company,  the PBGC,  AL-CH Company,  L.P., a Delaware
limited  partnership  (AL-CH),  Wells Fargo Bank,  as trustee under that certain
Amended and Restated Retiree Health Trust Agreement for UAW Retired Employees of
Allis-Chalmers  Corporation  (the UAW Trust),  and  Firstar  Trust  Company,  as
trustee under that certain  Amended and Restated  Retiree Health Trust Agreement
for Non-UAW Retired Employees of Allis-Chalmers  Corporation (the Non-UAW Trust)
(the Lock-Up Agreement).

The  Registration  Rights  Agreement  grants each holder of  Registrable  Shares
(defined in the  Registration  Rights  Agreement to basically mean the shares of
common  stock  issued to the PBGC  under the PBGC  Agreement)  the right to have
their shares registered  pursuant to the Securities Act of 1933, as amended,  on
demand or incidental to a registration  statement being filed by the Company. In
order to demand  registration of Registrable  Shares, a request for registration
by  holders of not less than 20% of the  Registrable  Shares is  necessary.  The
Company  may deny a request  for  registration  of such  shares  if the  Company
contemplates filing a registration statement within 90 days of receipt of notice
from the holders.  The Registration  Rights  Agreement also contains  provisions
that allow the Company to postpone the filing of any registration  statement for
up to 180 days.  The  Registration  Rights  Agreement  contains  indemnification
language similar to that usually contained in agreements of this kind.

The Lock-Up  Agreement  governs the  transfer and  disposition  of shares of the
Company's common stock and the voting of such shares, as well as grants the PBGC
a right of sale of its  shares  prior to AL-CH,  the UAW  Trust and the  Non-UAW
Trust.

Pursuant to the Lock-Up  Agreement,  unless the Board has  terminated the common
stock  transfer  restrictions  set  forth  in  Article  XIII  of  the  Company's
Certificate, AL-CH, the UAW Trust and the Non-UAW Trust each agreed that, during
the period  commencing on March 31, 1999 and ending on the third  anniversary of
the Release Event, it will not, directly or indirectly, sell,

<PAGE>

30


transfer, assign or dispose of any shares of Company stock it beneficially owns.
Commencing with the third  anniversary of the Release Event and continuing until
the fifth anniversary of the Release Event, each of AL-CH, the UAW Trust and the
Non-UAW  Trust agreed not to sell,  transfer or dispose of any shares of Company
stock without first giving the PBGC an opportunity to sell all or any portion of
the  shares of  Company  stock the PBGC owns.  The  foregoing  right of the PBGC
applies to the sale of Company stock in a public offering or otherwise.

The Lock-Up Agreement also contains a voting  component.  During the term of the
Lock-Up Agreement, each party to the agreement agreed to vote, at any meeting of
the Company stockholders and in any written consent, all shares of Company stock
owned by it in favor of the  election  as  directors  of the Company the persons
nominated  by the  Nominating  Committee of the Board and to refrain from taking
any action contrary to or inconsistent with such obligation.  During the term of
the Lock-Up  Agreement,  each party to the agreement  further agreed not to vote
its  shares of  Company  stock or take any other  action to amend the  Company's
Certificate or By-laws in a manner that is  inconsistent  with, or in breach of,
the PBGC  Agreement.  Each  party  further  agreed  that it will vote all of its
shares  (i)  in  favor  of  certain   specified   amendments  to  the  Company's
Certificate,  (ii) for the election of the persons designated by the PBGC (each,
a PBGC  Director)  to serve on the Board and (iii) in favor of the  election  of
Company  directors  who are  committed  to  cause,  and who do  cause,  one PBGC
Director to be appointed to the  Nominating  Committee of the Board and one PBGC
Director to be appointed as the  Chairman of the  Compensation  Committee of the
Board.

Medical and Life

Pursuant  to the Plan of  Reorganization,  the Company  assumed the  contractual
obligation to Simplicity  Manufacturing,  Inc. (SMI) to reimburse SMI for 50% of
the  actual  cost of medical  and life  insurance  claims for a select  group of
retirees  (SMI  Retirees)  of the prior  Simplicity  Manufacturing  Division  of
Allis-Chalmers.


<PAGE>

                                                                              31

Net  postretirement  benefit expense for the years ended December 31, 1999, 1998
and 1997 included the following components (in thousands):

<TABLE>
<CAPTION>
                                                    1999             1998                1997
                                                -----------       -----------        -----------

<S>                                             <C>               <C>                <C>
Service cost                                    $         -       $         -        $         -
Interest cost                                            41                53                 62
Recognized actuarial gain                               (37)              (22)                (3)
                                                -----------       -----------        -----------
Net periodic postretirement benefit cost        $         4       $        31        $        59
                                                ===========       ===========        ===========
</TABLE>

The change in benefit  obligation and plan assets and  reconciliation  of funded
status  for the  years  ended  December  31,  1999 and 1998 are as  follows  (in
thousands):

Change in APBO                                          1999            1998
                                                   -----------     -----------

Benefit obligation at beginning of year            $       606     $       733
Interest cost                                               41              53
Actuarial gain                                            (125)           (140)
Benefits paid                                              (58)            (40)
                                                   -----------     -----------
Benefit obligation at end of year                  $       464     $       606
                                                   ===========     ===========

Change in Plan Assets

Fair value of plan assets at beginning of year     $         -     $         -
Employer contribution                                       58              40
Benefits paid                                              (58)            (40)
                                                   -----------     -----------
Fair value of plan assets at end of year           $         -     $         -
                                                   ===========     ===========

Reconciliation of Funded Status

Benefit obligation at end of year                  $      (464)    $      (606)
Fair value of plan assets at end of year                     -               -
                                                   -----------     -----------

Funded status                                             (464)           (606)
Unrecognized net actuarial gain                           (463)           (375)
                                                   -----------     -----------

Accrued Benefit Cost                               $      (927)    $      (981)
                                                   ===========     ===========

The  assumed  health  care cost trend  rate used in  measuring  the  accumulated
postretirement  benefit  obligation  was 6.2% at  December  31, 1999 and 6.5% at
December 31, 1998.  The assumed rate  decreases each year until an ultimate rate
of 5.0% is reached at December 31,  2004.  The health care cost trend rate has a
significant effect on the amounts reported.  For example, a one percentage point
increase  in the health  care cost trend rate  would  increase  the  accumulated
postretirement benefit obligation by approximately $26,000 at December 31, 1999.
The discount rate used in determining  the  accumulated  postretirement  benefit
obligation was 7.25% at December 31, 1999 and 7.5% at December 31, 1998.
<PAGE>

32


NOTE 10.  COMMITMENTS AND CONTINGENT LIABILITIES

Substantially  all  litigation  proceedings  pending  against the  Company  were
resolved pursuant to emergence from the Chapter 11 proceedings in 1988.  Various
loans, lease agreements and other commitments and contractual obligations of the
Company were also satisfied pursuant to the Plan of Reorganization.  The Company
knows of no significant  pre-Plan of Reorganization  lawsuits  presently pending
against it or its subsidiaries which have not been assumed by the various trusts
or other entities.

The Company is a party to litigation  matters and claims which are normal in the
course of its operations, and, while the results of litigation and claims cannot
be predicted with certainty,  management believes that the final outcome of such
matters will not have a material  adverse  effect on the Company's  consolidated
financial position.

Environmental Matters

The  Environmental  Protection  Agency  (EPA) and  certain  state  environmental
protection  agencies  have  requested  information  in  connection  with  eleven
potential  hazardous  waste  disposal sites in which  products  manufactured  by
Allis-Chalmers  before consummation of the Plan of Reorganization were disposed.
The EPA has claimed that  Allis-Chalmers  is liable for cleanup costs associated
with several  additional  sites. The EPA's claims with respect to one other site
were  withdrawn  in 1994  based  upon  settlements  reached  with the EPA in the
bankruptcy  proceeding.  In addition,  certain  third parties have asserted that
Allis-Chalmers is liable for cleanup costs or associated EPA fines in connection
with  additional  sites.  In one of these  instances a former site  operator has
joined  Allis-Chalmers and 47 other potentially  responsible  parties as a third
party  defendant  in a lawsuit  involving  cleanup of one of the sites.  In each
instance  the  environmental  claims  asserted  against the Company  involve its
prebankruptcy  operations.  Accordingly,  Allis-Chalmers  has taken the position
that all  cleanup  costs or  other  liabilities  related  to  these  sites  were
discharged in the bankruptcy.  In one particular  site, the EPA's Region III has
concurred with the Company's position that claims for environmental cleanup were
discharged pursuant to the bankruptcy.  While each site is unique with different
circumstances,  the Company has notified  other  Regional  offices of the EPA of
this  determination  associated  with the Region III site.  The  Company has not
received responses from the other Regional offices. No environmental claims have
been asserted against the Company involving its postbankruptcy operations.

Allis-Chalmers Consolidated Pension Plan

Contributions to the Consolidated  Plan were required  starting in 1996 due to a
change in the mortality assumptions used in calculating the present value of the
pension benefits expected to be paid and the assumptions used in calculating the
future  administrative  expenses  compared with the projections of the mortality
and  administrative  expense  assumptions used in the Plan of Reorganization for
funding the Consolidated  Plan.  Contributions were projected to be $2.5 million
in 1996, then increasing to $3.1 million in 1997 and $8.1 million in 1998. After
making one  installment  of $205,000 on January 15, 1996,  the Company failed to
make  any  subsequent  installments.  The  Company's  failure  to make  required
quarterly contributions starting in April 1996, resulted in the filing of a lien
by the PBGC against the Company. Given the inability of

<PAGE>

                                                                              33

the Company to fund such obligations with its current  financial  resources,  in
February 1997,  Allis-Chalmers  applied to the PBGC for a "distress" termination
of the  Consolidated  Plan under section 4041(c) of ERISA. The PBGC approved the
distress  termination  application  in  September  1997  and  agreed  to a  plan
termination  date of April 14, 1997.  The PBGC became  trustee of the terminated
Consolidated Plan on September 30, 1997.

For additional information regarding the Consolidated Plan, see Note 9.


NOTE 11.  RELATED PARTY TRANSACTIONS

H. Sean  Mathis,  Chairman  of the Board and Chief  Executive  Officer,  Leonard
Toboroff,  Vice Chairman of the Board and Executive  Vice  President and John T.
Grigsby,  Jr., Vice Chairman of the Board,  Executive  Vice  President and Chief
Financial  Officer,  did not  receive  any  compensation  for their  services as
executive officers of the Company for the three years ended December 31, 1999.

During 1999, Allis-Chalmers received payments totaling $400,000 as reimbursement
for   expenditures   they   incurred  in  prior  years  on  behalf  of  the  A-C
Reorganization  Trust.  These  payments  are  included  as other  income  in the
accompanying Statement of Operations.


NOTE 12.  QUARTERLY FINANCIAL DATA

<TABLE>
<CAPTION>
  (unaudited)
                                      First                 Second                  Third                  Fourth
                                      Quarter               Quarter                 Quarter*               Quarter
                                --------------------------------------------------------------------------------------------
                                 1999        1998       1999        1998       1999       1998         1999        1998
                                ------     -------   --------   ---------   --------    --------    --------   ---------
                                                                    (thousands, except per share)

<S>                           <C>         <C>        <C>          <C>       <C>         <C>         <C>         <C>
Sales                         $  1,052    $  1,503   $  1,084     $1,249    $    894    $     943   $  1,340    $  1,326
Gross Margin                       339         486        249        312         212          273        258         420

Net Income (Loss)                  (57)        137       (137)      (197)       (122)         680        203          (2)

Net Income (Loss) per
  Common Share
  (basic and diluted)             (.06)        .14       (.09)      (.20)       (.08)         .68        .13         0.0

*Net income in the third quarter of 1998 included income of $825,000 as a result
  of a $900,000 IRS liability settled for $75,000.

</TABLE>

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

None.
<PAGE>

34


                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

(a)    Identification of Directors

       The following individuals currently serve as directors of the Company.

       Thomas M.  Barnhart  II, age 38, a director and  Chairman  since  October
       1999. Mr. Barnhart is Senior Vice President and Associate General Counsel
       of Pacholder Associates, Inc., Cincinnati, Ohio, a financial advisory and
       money  management firm  representing the PBGC. In 1999, Mr. Barnhart also
       became Chairman of Phonetel  Technologies Inc. Mr. Barnhart serves on the
       Board on behalf of the PBGC

       David A. Groshoff,  age 28, a director  since October 1999. Mr.  Groshoff
       has been employed by Pacholder Associates,  Inc. since September 1997 and
       currently  serves as  Assistant  Vice  President  and  Assistant  General
       Counsel.  Between  1995 - 1997,  Mr.  Groshoff  was an  associate at Katz
       Management Group, a Cincinnati-based  professional athlete representation
       firm,  as well as a law clerk for Richard L. Katz Co.,  L.P.A.,  Brian M.
       Goldberg,  Moskowitz  &  Moskowitz,  and the firm of Smith & Colner.  Mr.
       Groshoff serves on the Board on behalf of the PBGC.

       Dr.  Richard  Lichtenstein,  age 52, a director  since October 1999.  Dr.
       Lichtenstein is an Associate Professor of Health Management and Policy at
       the  University of Michigan  School of Public  Health,  where he has been
       employed  since  1971.  He is not a director of any other  publicly  held
       companies.

       Robert E. Nederlander, age 66, a director since May 1989. Mr. Nederlander
       served as Chairman of the Board of  Allis-Chalmers  Corporation  from May
       1989 to 1993, and from 1993 to 1996 as Vice Chairman. Mr. Nederlander has
       been  Chairman of the Board of Riddell  Sports Inc.  since April 1988 and
       was Riddell Sports Inc.'s Chief Executive Officer from April 1988 through
       March 1993. From February 1992 until June 1992, Mr.  Nederlander was also
       Riddell  Sports Inc.'s  interim  President and Chief  Operating  Officer.
       Since November 1981, Mr. Nederlander has been President and/or a director
       of the Nederlander  Organization,  Inc., owner and operator of one of the
       world's largest chains of legitimate  theaters.  Since December 1998, Mr.
       Nederlander  is  co-managing  member  of  the  Nederlander  Company  LLC,
       operator of legitimate  theaters in various  cities outside New York. Mr.
       Nederlander  served  as the  Managing  General  Partner  of the New  York
       Yankees from August 1990 until  December  1991, and he has been a limited
       partner since 1973. Since July 1995, Mr.  Nederlander serves on the Board
       of  Directors  of Cendant  Corporation,  formerly  Hospitality  Franchise
       Systems,  Inc. (HFS). Mr.  Nederlander is Chairman of the Board and Chief
       Executive  Office of MEGO Financial  Corporation  since January 1988, and
       served as a director of MEGO Mortgage  Corp.  from  September  1996 until
       June 1998.  Since October 1985,  Mr.  Nederlander  has been  President of
       Nederlander  Television and Film  Productions,  Inc. In October 1996, Mr.
       Nederlander became a

<PAGE>

                                                                              35

       director of News  Communications  Inc., a publisher of community oriented
       free circulation newspapers.

       Alexander P. Sammarco, age 28, a director since October 1999. Mr. Samarco
       has been employed by Pacholder Associates,  Inc. since 1996 and currently
       serves as Vice  President.  Mr. Sammarco serves on the Board on behalf of
       the PBGC.

       Allan R. Tessler,  age 63, a director since  September  1992. Mr. Tessler
       served  as  Chairman  of the Board and  Chief  Executive  Officer  of the
       Company from November 1993 until January 1996. Mr. Tessler is Chairman of
       the Board and Chief Executive  Officer of International  Financial Group,
       Inc. since 1987; and director of Data Broadcasting Corporation since June
       1992.  Mr.  Tessler is also  Chairman  of the Board of Enhance  Financial
       Services Group, Inc., Chairman of the Board and Chief Executive Office of
       Jackpot Enterprises, Inc., and and director of The Limited, Inc.

       Leonard  Toboroff,  age 67, a director since May 1989.  Mr.  Toboroff has
       been a Vice Chairman of the Board and an Executive  Vice President of the
       Company since May 1989; a director and Vice  Chairman of Riddell  Sports,
       Inc. from April 1988 to the present; a practicing  attorney  continuously
       since  1961 to the  present;  a  director  since  August  1987 and former
       Chairman and Chief  Executive  Officer from  December 1987 to May 1988 of
       Ameriscribe;  and  formerly  a  director,  Chairman  and Chief  Executive
       Officer  from May 1982  through  June  1982 and Vice  Chairman  June 1982
       through September 1988 of American Bakeries Company. Mr. Toboroff is also
       a director of Banner Aerospace,  Inc., Saratoga Beverage, Inc. and H-Rise
       Recycling Corp.

(b)    Identification of Executive Officers


        Name, Age as of March 1,
          2000, and Position                 Business Experience

        Leonard Toboroff, 67,           See Item 10, subsection (a) above.
        Vice Chairman of the Board
        and Executive Vice
        President

        John T. Grigsby, Jr., 59,       Vice   Chairman  of  the  Board  of  the
        Executive Vice President and    Company  from  May  1989  until  October
        Chief Financial Officer         1999, an Executive Vice President  since
                                        October 1989 and Chief Financial Officer
                                        since  January 1996,  having  previously
                                        served  since   December   1988  as  the
                                        Company's  Chairman and Chief  Executive
                                        Officer.  Prior to that  time and  since
                                        July 1987,  Mr.  Grigsby was employed by
                                        the   Company  as   Managing   Director,
                                        Restructure  Project.  Mr.  Grigsby also
                                        serves   as   the   A-C   Reorganization
                                        Trustee,   as   President   of   Thomson
                                        McKinnon    Securities,    Inc.   during
                                        winddown and  liquidation of its affairs
                                        and   President   and  Chief   Executive
                                        Officer of

<PAGE>

36

                                        N.W.  Liquidating,  Inc.  He has  been a
                                        director  of 1st  Southern  Bank of Boca
                                        Raton,  Florida since September 1987 and
                                        First  Florida  Industries,  Inc.  since
                                        July 1985.

        Jeffrey I. Lehman, 50,          Mr. Lehman commenced his employment with
        Treasurer                       Allis-Chalmers  and was  elected  to his
                                        current position in February 1996. Since
                                        1991,  Mr.  Lehman has been  employed by
                                        the A-C Reorganization Trust and Thomson
                                        McKinnon  Securities during winddown and
                                        liquidation  of  their  affairs.  He has
                                        also  provided  financial   consultation
                                        since 1985.

(c)     Identification of Certain Significant Employees

        None

(d)     Family Relationships

        None

(e)     Business Experience

        See this Item 10, subsections (a) and (b) above.

(f)     Involvement in Certain Legal Proceedings

        None

(g)     Promoters and Control Persons

        Not applicable

             Section 16(a) Beneficial Ownership Reporting Compliance

Section  16(a) of the  Securities  Exchange Act of 1934  requires the  Company's
directors and executive officers, as well as beneficial owners of 10% or more of
the  Company's  Common  Stock,  to file reports  concerning  their  ownership of
Company equity  securities  with the Securities and Exchange  Commission and the
Company. Based solely upon information provided to the Company and by individual
directors,  executive  officers and such beneficial owners, the Company believes
that during the fiscal year ended December 31, 1999 all its directors, executive
officers and beneficial  owners of 10% or more of its Common Stock complied with
the Section 16(a) filing requirements, except that Form 3s required when Messrs.
Barnhart, Groshoff, Sammarco and Lichtenstein became directors were filed late.
<PAGE>

                                                                              37

ITEM 11.  EXECUTIVE COMPENSATION.

EXECUTIVE COMPENSATION

No executive  officer  earned in excess of $100,000 in 1999.  H. Sean Mathis who
served as Chairman of the Board and Chief  Executive  Officer in 1997,  1998 and
1999 received no compensation for his services as such.

LONG-TERM STOCK INCENTIVE PLAN

The Company's Long-Term Stock Incentive Plan (1989), adopted by the shareholders
at the 1989  shareholders  meeting,  provides  for  grants to  officers  and key
employees of stock  options,  stock  appreciation  rights,  performance  shares,
restricted  stock,  restricted  stock units and other  stock-based  awards.  The
maximum number of shares which may be granted with respect to stock-based awards
is 50,000. Options to purchase shares may be granted at prices equal to not less
than the fair market value at the date of grant, except that options to purchase
up to 13,333  shares may be  granted at a price  which is not less than the fair
market value on October 25, 1989, the date on which the Stock Incentive Plan was
approved by shareholders.  Options are exercisable within a period not to exceed
10 years  from date of grant.  Stock  appreciation  rights  allow the  holder to
receive the  difference  between the exercise price and the fair market value of
the stock at the date of  exercise in cash or shares of common  stock.  No stock
options or stock appreciation rights have been granted to date.

RETIREMENT PLAN

The  Consolidated  Plan covered 4 active employees at the beginning of 1999. The
Consolidated  Plan is a tax qualified  defined benefit  pension plan.  Effective
March 31, 1987, the  Consolidated  Plan was capped and frozen,  without  further
increase in benefits provided by the Company after that date.

The  retirement  benefits paid under this plan are before any  adjustment  for a
surviving  spouse's  pension  and are not subject to Social  Security  offset or
other deductions.

SAVINGS PLAN

The Company's  Savings Plan was initiated in 1968.  The Savings Plan permits the
Company to contribute in its discretion cash or stock to participants' accounts.
However, on June 1, 1985, the Company discontinued  contributions to the Savings
Plan.

Due to the significant administrative costs associated with the Savings Plan, on
December  22, 1997,  the Company  filed an  Application  for  Determination  for
Terminating the Savings Plan with the IRS. The  participants in the Savings Plan
were notified of the termination  which became effective  September 20, 1998, at
which time all funds had been withdrawn from the Savings Plan.

<PAGE>

38


COMPENSATION OF DIRECTORS

Since  December  1,  1990,  the  annual  retainer  for  services  as a  director
(previously  $13,500 per year) has been  suspended,  the attendance fee for each
Board meeting  attended was reduced from $425 to $100 and the attendance fee for
each Committee meeting was suspended.

TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENT

None.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN
          BENEFICIAL OWNERS AND MANAGEMENT.

(a)     Security Ownership of Certain Beneficial Owners

        The following  table lists the beneficial  ownership with respect to all
        persons known to the Company to be the beneficial  owner of more than 5%
        of the Company's Common Stock as of March 1, 2000.

                                              Amount and Nature      Percent of
               Name and Address                   of Ownership          Class

    Pension Benefit Guaranty Corporation
    c/o Pacholder Associates, Inc.
    8044 Montgomery Road
    Suite 382
    Cincinnati, OH 45236                             585,100             36.8%

    AL-CH Company, L.P., 810 Seventh
    Avenue, New York, NY  10019
    (includes shares held by Messrs.
    Nederlander and Toboroff
    as described below)                              407,251(1)          25.6%

    Wells Fargo Bank, P.O. Box 60347,
    Los Angeles, CA  90060, Trustee
    under that certain Amended and
    Restated Retiree Health Trust
    Agreement for UAW Retired
    Employees of Allis-Chalmers
    Corporation                                      136,406              8.6%

<PAGE>

                                                                              39


                                              Amount and Nature      Percent of
               Name and Address                   of Ownership          Class

    Firstar Trust Company,
    777 East Wisconsin Avenue,
    Milwaukee, WI  53202, Trustee
    under that certain Amended and
    Restated Retiree Health Trust
    Agreement for Non-UAW Retired
    Employees of Allis-Chalmers
    Corporation                                      101,977              6.4%

     (1)  Messrs.  Nederlander  and Toboroff are  beneficial  owners of and have
          shared  voting  power and shared  dispositive  power over the  407,251
          shares of common stock held by AL-CH Company, L.P., a Delaware limited
          partnership,  of which  the  general  partners  are  Q.E.N.,  Inc.,  a
          Michigan corporation controlled by Mr. Nederlander, and Lenny Corp., a
          Delaware corporation  controlled by Mr. Toboroff. Mr. Allan R. Tessler
          is a limited partner in AL-CH Company, L.P.

(b)     Security Ownership of Management

        The  following  table sets forth the number of shares of Common Stock of
        the Company  beneficially  owned as of March 1, 2000 by  directors,  the
        former Chief Executive  Officer (the only "named  executive  officer" of
        the Company) and all directors and executive officers as a group. Except
        as otherwise noted in the footnotes, the persons listed have sole voting
        and investment power over the shares beneficially owned.

                                            Amount and Nature        Percent of
                   Name                          of Ownership           Class

        Thomas M. Barnhart II (1)                         0                 *
        David A. Groshoff (1)                             0                 *
        Dr. Richard Lichtenstein                          0                 *
        H. Sean Mathis                                    0                 *
        Robert E. Nederlander (2)                   407,251                25.6%
        Alexander P. Sammarco (1)                         0                    *
        Allan R. Tessler                                  0                    *
        Leonard Toboroff (2)                        407,251                25.6%

        All directors and
        officers as a group
        (ten persons)                               416,786                26.2%

        *less than 1%

       (1)    Even though Messrs. Barnhart, Groshoff and Sammarco were appointed
              to the  Board by the PBGC  under the PBGC  Agreement,  they do not
              beneficially  own the 585,100 shares of the Company's Common Stock
              owned by the PBGC.

<PAGE>

40


       (2)    Messrs. Nederlander and Toboroff are beneficial owners of and have
              shared voting power and shared  dispositive power over the 407,251
              shares of common  stock held by AL-CH  Company,  L.P.,  a Delaware
              limited  partnership,  of which the general  partners  are Q.E.N.,
              Inc., a Michigan  corporation  controlled by Mr. Nederlander,  and
              Lenny Corp., a Delaware  corporation  controlled by Mr.  Toboroff.
              Mr. Allan R. Tessler is a limited partner in AL-CH Company, L.P.

(c)     Changes in Control

        None


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

(a)     Transactions with Management and Others

        None

(b)     Certain Business Relationships

        None

(c)     Indebtedness of Management

        None

(d)     Transactions with Promoters

        Not applicable

<PAGE>

                                                                              41

                                     PART IV


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


(a)     List of Documents Filed. The Index to Financial Statements and Financial
        Schedule  is included on page 15 of this  report.  Financial  statements
        Schedules not included in this report have been omitted because they are
        not  applicable  or the required  information  is shown in the Financial
        Statements or Notes thereto.

(b)     Reports  on Form 8-K.  There  were no  Reports  on Form 8-K filed in the
        fourth quarter of 1998.

(c)     Exhibits:

          2 .1. First Amended  Disclosure  Statement pursuant to Section 1125 of
        the Bankruptcy Code, which includes the First Amended and Restated Joint
        Plan  of  Reorganization  dated  September  14,  1988  (incorporated  by
        reference to the Company's Report on Form 8-K dated December 1, 1988).

          3.1.  Amended and Restated Certificate of Incorporation of Allis-
        Chalmers Corporation (incorporated by reference to the Company's Report
        on Form 8-A dated August 12, 1992).

          3.2.  Amended  and  Restated  By-laws  of  Allis-Chalmers  Corporation
        (incorporated  by reference to the Company's Report on Form 10-Q for the
        quarter ended September 30, 1999).

        10.1.  Amended and  Restated  Retiree  Health  Trust  Agreement  between
        Allis-Chalmers   Corporation  and  Wells  Fargo  Bank  (incorporated  by
        reference to Exhibit C-1 of the First Amended and Restated Joint Plan of
        Reorganization dated September 14, 1988 included in the Company's Report
        on Form 8-K dated December 1, 1988).

        10.2.  Amended and  Restated  Retiree  Health  Trust  Agreement  between
        Allis-Chalmers  Corporation and Firstar Trust Company  (incorporated  by
        reference to Exhibit C-2 of the First Amended and Restated Joint Plan of
        Reorganization dated September 14, 1988 included in the Company's Report
        on Form 8-K dated December 1, 1988).


*A management contract or compensatory plan or arrangement.

<PAGE>

42

        10.3. Reorganization Trust Agreement between Allis-Chalmers  Corporation
        and John T. Grigsby,  Jr., Trustee (incorporated by reference to Exhibit
        D of the First Amended and Restated Joint Plan of  Reorganization  dated
        September 14, 1988  included in the  Company's  Report on Form 8-K dated
        December 1, 1988).

        10.4.   Product   Liability  Trust  Agreement   between   Allis-Chalmers
        Corporation and Bruce W. Strausberg,  Trustee (incorporated by reference
        to  Exhibit  E  of  the  First  Amended  and  Restated   Joint  Plan  of
        Reorganization dated September 14, 1988 included in the Company's Report
        on Form 8-K dated December 1, 1988).

        10.5.* Allis-Chalmers  Corporation Long-Term Stock Incentive Plan (1989)
        (incorporated  by reference to the Company's Report on Form 10-Q for the
        quarter ended September 30, 1989).

        10.6.  Subscription  and Shareholder  Agreement  between  Allis-Chalmers
        Corporation and AL-CH Company,  L.P. dated May 18, 1989 (incorporated by
        reference to the Company's Report on Form 8-K dated May 24, 1989).

        10.7.   Commercial   Installment   Loan   Agreement   by   and   between
        Allis-Chalmers  Corporation and Marine Midland Bank,  N.A.,  dated as of
        December 20, 1989  (incorporated by reference to the Company's Report on
        Form 8-K dated December 20, 1989).

        10.8.*  Employment Agreement between Allis-Chalmers Corporation and
        John T. Grigsby, Jr. (incorporated by reference to the Company's Report
        on Form 10-Q for the quarter ended September 30, 1989).

        10.9.*  Allis-Chalmers  Savings Plan  (incorporated  by reference to the
        Company's Report on Form 10-K for the year ended December 31, 1988).

        10.10.*  Allis-Chalmers   Consolidated  Pension  Plan  (incorporated  by
        reference  to the  Company's  Report  on Form  10-K for the  year  ended
        December 31, 1988).

        10.11.  Agreement  dated as of March 31,  1999,  by and  between  Allis-
        Chalmers  Corporation  and  the  Pension  Benefit  Guaranty  Corporation
        (incorporated by reference to the Company's Report on Form 10-Q for the
        quarter ended June 30, 1999).

        10.12.  Lock-up  Agreement  dated as of March  31,  1999,  by and  among
        Allis-Chalmers  Corporation,  the Pension Benefit Guaranty  Corporation,
        acting in its individual capacity and as trustee of the Allis-Chalmers

*A management contract or compensatory plan or arrangement.

<PAGE>

                                                                              43

        Consolidated  Pension Plan,  AL-CH Company,  L.P.,  Wells Fargo Bank, as
        trustee  under that certain  Amended and Restated  Retiree  Health Trust
        Agreement for UAW Retired  Employees of  Allis-Chalmers  Corporation and
        Firstar  Trust  Company,  as trustee  under  that  certain  Amended  and
        Restated Retiree Health Trust Agreement for non-UAW Retired Employees of
        Allis-Chalmers  Corporation  (incorporated by reference to the Company's
        Report on Form 10-Q for the quarter ended June 30, 1999).

        10.13.  Registration Rights Agreement dated as of March 31, 1999, by and
        between  Allis-Chalmers  Corporation  and the Pension  Benefit  Guaranty
        Corporation  (incorporated  by reference to the Company's Report on Form
        10-Q for the quarter ended June 30, 1999).

        21.1.  Subsidiaries of Allis-Chalmers Corporation.

        27.1.  Financial Data Schedule.

*A management contract or compensatory plan or arrangement.


<PAGE>

44


            ALLIS-CHALMERS CORPORATION AND CONSOLIDATED SUBSIDIARIES

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

                                   (thousands)


                        Balance at                                   Balance
   Year Ended            Beginning                                   at Close
December 31, 1997       of Period      Additions     Deductions      of Period
-----------------      -----------     ---------     ----------      ---------

Doubtful receivables   $        30    $         6   $           0   $        36
                       -----------    -----------   -------------   -----------


                        Balance at                                   Balance
   Year Ended            Beginning                                   at Close
December 31, 1998       of Period      Additions     Deductions      of Period
-----------------      -----------     ---------     ----------      ---------

Doubtful receivables   $        36    $         0   $          15   $        21
                       -----------    -----------   -------------   -----------


                        Balance at                                   Balance
   Year Ended            Beginning                                   at Close
December 31, 1999       of Period      Additions     Deductions      of Period
-----------------      -----------     ---------     ----------      ---------

Doubtful receivables   $        21    $       102   $           1   $       122
                       -----------    -----------   -------------   -----------




<PAGE>

                                                                              45

                                   SIGNATURES

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

                                Allis-Chalmers Corporation



                               /s/John T. Grigsby, Jr.
                               John T. Grigsby, Jr.
                               Executive Vice President and Chief
                               Financial Officer
                               Date: March 29, 2000


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  as  amended,  this report has been signed on March 29, 2000 by the
following persons on behalf of the registrant and in the capacities indicated.



/s/Thomas M. Barnhart II                     /s/Alexander P. Sammarco
Thomas M. Barnhart II, Director              Alexander P. Sammarco, Director




/s/ David A. Groshoff                        /s/Allan R. Tessler
David A. Groshoff, Director                  Allan R. Tessler, Director




/s/Dr. Richard Lichtenstein                  /s/Leonard Toboroff
Dr. Richard Lichtenstein, Director           Leonard Toboroff, Director



/s/Robert E. Nederlander
Robert E. Nederlander, Director