<PAGE>

<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS                          1997           1996               OUR BUSINESS
----------------------------------------  -------------  -------------  -----------------------------
<S>                                       <C>            <C>            <C>
Net Sales...............................  $  28,062,000  $  28,694,000  Starmet Corporation
Net Income (loss).......................  $   1,482,000  $  (3,037,000) develops & manufactures
Earnings (loss) per share...............  $        0.30  $       (0.64) a variety of advanced
Weighted Average Number of Shares of                                    metal products serving a
  Common Stock Outstanding..............      4,973,870      4,778,928  diverse customer base.
Number of Employees at Year-end.........            235            190
Total Assets............................  $  34,704,000  $  35,118,000
Working Capital.........................  $  10,743,000  $   9,249,000
Stockholders' Equity....................  $  26,096,000  $  24,370,000
</TABLE>

CONTENTS
------------------------------------------------------------------
President's Letter................................................   1
Market Profile....................................................   4
Selected Financial Data...........................................  16
Management's Discussion and Analysis of Operations................  18
Consolidated Balance Sheets.......................................  23
Consolidated Statements of Operations.............................  24
Consolidated Statements of Stockholders' Equity...................  25
Consolidated Statements of Cash Flows.............................  26
Notes to Consolidated Financial Statements........................  27
Report of Independent Public Accountants..........................  48
Corporate Directory


<PAGE>

PRESIDENT'S LETTER

Dear Stockholder:



    Fiscal 1997 was a good year for Starmet Corporation (formerly Nuclear 
Metals, Inc.). While sales revenues were essentially level with Fiscal 1996, 
net income of $1.5 Million in Fiscal 1997 compared favorably with a $3.1 
million loss in the prior year. In November 1997 Starmet CMI, our wholly 
owned subsidiary, announced new orders and options valued at $5.5 million for 
work to be performed in Fiscal 1998 with revenues beginning in the second 
quarter. This unique facility for uranium conversion had been without a major 
customer since the fourth quarter of Fiscal 1996, resulting in negative cash 
flow during this period. The new orders to restart our uranium conversion 
process and further expand our Department of Energy licensed DUCRETE-TM- 
stabilization technology should result in Starmet CMI returning to revenue 
growth.


FINANCIAL HIGHLIGHTS

    Revenues in Fiscal 1997 of $28.1 million compared to $28.7 million in 
Fiscal 1996. Net income of $1.5 million compared favorably to a loss of $3.1 
million the prior year. Year-end backlog increased to $27.7 million from 
$23.3 million the prior year. Capital expenditures of $1.8 million compared 
to $1.4 million the prior year. Research and development spending of $1.3 
million compared to $0.9 million the prior year.

    The Fiscal 1997 year-end balance sheet showed an increase in the current 
ratio (current assets / current liabilities) to 2.5 : 1 from 1.99 : 1 in the 
prior year. Our Quick ratio (current assets less inventory / current 
liabilities) increased to 0.9 : 1 from 0.7 : 1 the prior year. Year-end cash 
and cash equivalents decreased to $0.27 million from $1.30 million the prior 
year. Long term debt increased to $3.4 million from $1.9 million in the prior 
year. State Street Bank & Trust Company, our commercial bank, increased the 
Company's line of credit to $6.0 million in December 1997.

NAME CHANGE AND NEW SUBSIDIARIES

    In late September 1997 shareholders voted to change the name of the 
company to Starmet Corporation and to create several wholly owned 
subsidiaries. This name change and new organizational structure should help 
us grow our business more rapidly by providing greater flexibility to create 
strategic alliances and otherwise finance the growth of our diverse 
technologies and markets.

                                      1
<PAGE>


STARMET CMI & NMI

    The company's uranium processing technology, used primarily for shielding 
applications and feed rod for advanced laser enrichment, is the foundation of 
the new Starmet CMI and NMI subsidiaries. Restart of our uranium hexafluoride 
(UF(6)) conversion process beginning in the second quarter of Fiscal 1998 
will dramatically improve plant utilization and is expected to provide the 
basis for profitability for Starmet CMI. Growing customer acceptance of 
DUCRETE-TM- as a commercially viable stabilization technology with beneficial 
reuse of the depleted uranium as a shielding material for high level wastes 
should result over the longer term in significant new business from the 
Department of Energy and commercial power companies.

STARMET POWDERS

    The PREP-TM- powder technology for producing spherical powder of a 
uniform size which is free of ceramic contamination is the cornerstone of 
this subsidiary. There are several niche markets for high-quality spherical 
powders, particularly in the medical products area, such as porous coatings 
for implants. Additionally, the company is developing new innovative 
technology to produce finer size spherical powders that can be consolidated 
into fully dense parts. We are targeting commercial parts made from our 
titanium powders due to the growing commercial interest in this aerospace 
metal.

STARMET AEROCAST & COMCAST

    Over the past six years, ongoing development efforts on our patented 
Beralcast-Registered Trademark- technology for producing lightweight, 
precision castings for aerospace applications have resulted in a significant 
cost reduction using present equipment; and installation of automated 
production equipment will result in further cost reductions that are expected 
to be significant. This has significantly improved this exciting material's 
economic viability in numerous applications. Our Beralcast-Registered 
Trademark- hardware is now in demonstration and prototype manufacture on its 
way to production for several new aerospace programs. Having our patented 
alloys selected and proven as a reliable "bill of material" on specific 
military programs is of the utmost importance and a good indicator of future 
performance.

    Commercial applications for Beralcast-Registered Trademark- components 
have a much faster but shorter product life cycle. Commercial applications 
require materials that are cost effective and are reliably manufactured. New 
computer disc drive armatures designed in Beralcast-Registered Trademark- now 
are being evaluated by four leading disc drive manufacturers. In commercial 
applications, the ramp from demonstration quantities to production quantities 
is generally only 18 months vs. 10 years for most military application. Now 
that substantial manufacturing cost savings have been demonstrated by 
aerospace applications we are rapidly 

                                       2

<PAGE>

approaching sizable production opportunities for several commercial 
applications.

COMMITMENT TO QUALITY

    During Fiscal 1997 the company became the first small business in the 
United States to qualify for the U. S. Army's highest Quality Certification. 
This ISO 9002 based quality system which the Army has called its Contractor 
Performance Certification Program required a two and a half year total 
company effort. Broad-based employee teams have worked together to improve 
and document processes and procedures and then to develop charts and graphs 
to monitor ongoing performance. Extensive employee participation in the 
measurement and review process has been essential to our success. This 
never-ending process has a single goal of continuously increasing customer 
satisfaction. In addition to receiving Army certification, the company has 
been recommended for ISO 9002 Certification by an international registrar. We 
expect to receive the formal ISO 9002 certification in early Calendar 1998.

THE FUTURE

    The name change, creation of several new subsidiaries, the Army funding 
to remove a holding basin on our Concord, Massachusetts property, the 
increasing Beralcast-Registered Trademark- requirements including a growing 
number of commercial applications and the return to meaningful production 
volumes at Starmet CMI beginning in the second quarter of Fiscal 1998, all 
position the Company well to continue growth and diversification. We have 
outstanding employees who very much join in the excitement of meeting our 
customers' needs today and tomorrow.

    We are committed to following a growth strategy and taking demonstrative 
actions that will enhance shareholder value.

    Thank you for your continued support and confidence. 

   /s/ Robert E. Quinn                             /s/ George J. Matthews
   --------------------------                      -----------------------
   Robert E. Quinn                                 George J. Matthews
   President                                       Chairman of the Board


                                       3

<PAGE>

STARMET

    The ability of a Company to adapt to a changing marketplace while 
maintaining strong customer relationships defines success. Starmet 
Corporation's dedication to solving customers' material related issues is the 
foundation of our ability to adapt and innovate. Our company has been 
transformed over the past three years from principally a manufacturer of 
depleted uranium for Government defense applications to a manufacturer 
offering a broad range of metal products and services. Our capabilities offer 
product solutions to complex issues in the aerospace, energy, medical, 
defense, sporting goods, and computer industries. These products range from 
Beralcast-Registered Trademark- computer disc drive armatures, enabling 
significantly improved data storage and retrieval, to uranium feed material 
for the Atomic Vapor Laser Isotope Separation process, the most advanced 
uranium isotope separation process currently being deployed for nuclear fuel 
production. Starmet Corporation's primary mission is to support its newly 
formed business units with research and development, customer and financial 
support, and operational capabilities consistent with the needs of our 
customers. The Company's business units include Starmet NMI, Starmet CMI, 
Starmet Aerocast, Starmet Comcast and Starmet Powders. Starmet Corporate also 
provides advanced material products and services directly to customers in 
aerospace-related industries consistent with Nuclear Metals' legacy of 
advanced metalworking processes.

    STARMET CORPORATION'S DEDICATION TO SOLVING CUSTOMERS' MATERIAL RELATED 
ISSUES IS THE FOUNDATION OF OUR ABILITY TO ADAPT AND INNOVATE. 

SOLUTIONS


                                       4

<PAGE>














                                       5

<PAGE>

STARMET NMI

    "Transition" describes our status in support of the Armed Forces for 
Depleted Uranium (DU) ammunition. Starmet NMI has provided DU ammunition to 
all branches of the United States Armed Forces. We are proud of our role in 
providing our soldiers with the best ammunition in the world. When we were 
visited by two Desert Storm tank commanders this past year we were told 
emphatically that lives are saved when our soldiers are able to rely 
completely on the quality, consistency, and performance of DU ammunition. 
However, events in the former Soviet Union, combined with the effectiveness 
of the ammunition deployed in Desert Storm, led the Army to the conclusion 
that fewer rounds needed to be stockpiled. As we produce 120MM DU rounds for 
the M1A2 Abrams tank at a tenth of previous rates, the need to transition 
from the ordnance marketplace to the commercial marketplace is evident. A 
versatile material, DU is used in commercial applications ranging from 
shielding devices for the medical industry to counterweight materials in wide 
body aircraft. While facilities in Concord, MA previously used for DU 
penetrator manufacture are being cleaned and readied for production expansion 
of our patented Beryllium Aluminum alloy, Beralcast-Registered Trademark-, 
Starmet will continue to support the Army's DU ammunition needs with 
consolidation of facilities and technical expertise to CMI in Barnwell, SC.

                                       6

<PAGE>
















                                       7

<PAGE>


STARMET CMI

    Novel technologies for difficult issues are the trademark of this unique 
business unit of Starmet. CMI is the only fully integrated DU processing 
facility in the United States. Customer needs for uranium and related 
materials are served by utilizing our patented technologies and a team of 
engineering specialists. Whether it involves transforming radioactive scrap 
metals into useable shielding products, refurbishing commercial and military 
aircraft counterweights, or producing feed materials for the Atomic Vapor 
Laser Isotope Separation process, CMI brings value to customers through 
technical excellence and proven technologies. The answer to the question of 
how to manage the growing inventory of uranium hexafluoride may be found in 
DUCRETE-TM- shielding, a patented form of ultra dense concrete using uranium 
oxide briquettes as aggregate in concrete. We have formed a partnership which 
ensures exclusive rights to DUCRETE-TM- shielding containers and barriers for 
use by nuclear utilities for mandated above-ground storage of spent fuel. 
Respect for the environment, innovative technologies, a skilled workforce and 
room to grow on 340 acres in South Carolina position CMI for success in the 
future.

    CMI BRINGS VALUE TO CUSTOMERS THROUGH TECHNICAL EXCELLENCE AND PROVEN 
TECHNOLOGIES


                                       8

<PAGE>
















                                       9
<PAGE>

STARMET AEROCAST

    Imagine the potential of an affordable aerospace material that is 22 
percent lighter than aluminum, 300% stiffer, with strength comparable to A356 
aluminum aerospace castings, and has six to ten times better vibration 
damping characteristics. Optical structures, electronic boxes, stable 
members, battery cases, navigational housings, satellite structures, tubular 
struts, and a seemingly endless number of additional possibilities are 
candidates for use of Starmet's patented Beralcast-Registered Trademark-. 
Investment castings are designed to meet volume demand at a competitive price 
for the customer. Starmet's engineering staff works closely with all of our 
customers to ensure that delivered product meets their needs for long-term 
production of low cost hardware. The value of this new material is in the 
flexibility now afforded the design engineer to increase the performance of 
new and existing hardware for tomorrow's aerospace needs.

    Working closely with customers' engineers as products are designed 
assures future production costs are as low as possible. Teaming with our 
customers also ensures that we not only understand their needs, but share in 
their future.

    INVESTMENT CASTINGS ARE DESIGNED TO MEET VOLUME DEMAND AT A COMPETITIVE 
AFFORDABLE PRICE FOR THE CUSTOMER


                                      10


<PAGE>




















                                      11

<PAGE>

STARMET COMCAST
 
    Cost-effective, light, durable, and flexible are words that can be used 
to describe Beralcast -Registered Trademark-'s advantageous use for aerospace 
components. The commercial marketplace is equally demanding of such qualities 
in engineering materials. Where production of commercial products advance at 
dizzying rates, engineers are increasingly pressured to design with smaller 
and lighter components manufactured by innovative suppliers. Today's premium 
golf club heads are investment cast or forged from Titanium and its alloys. 
Titanium is twice the density of Beralcast -Registered Trademark- and offers 
less flexibility in its manufacture. Some golfers tell us Beralcast 
-Registered Trademark- is the Titanium of the future. In the computer 
hardware market Beralcast -Registered Trademark- offers significantly better 
performance characteristics than conventional materials. For example, 
Beralcast -Registered Trademark- will allow a vast increase in the data 
storage capacity and retrieval of tomorrow's computer disc drives. Prototypes 
using Starmet's Beralcast -Registered Trademark- are currently being 
qualified for this use. Other commercial applications for this material 
include those where a small premium can be paid for significantly enhanced 
performance and design flexibility.
 
    Imagine using Beralcast -Registered Trademark- instead of aluminum to 
enhance high speed assembly and inspection devices where Beralcast 
-Registered Trademark-'s vibration damping qualities can result in a five to 
ten fold performance improvement.

                                   12

<PAGE>






                                   13
<PAGE>

VISION
 
STARMET POWDERS
 
    Metal powders can be used effectively in a variety of applications where 
exacting sizes, shapes, and cleanliness are important. Clean cobalt chrome 
and titanium powders, made by our patented Plasma Rotating Electrode Process 
(PREP -TM-), are used in medical implants to effectively bond prosthetic 
devices to bone and tissue. Uniform steel powders are used not only in 
photocopiers and sophisticated rapid prototyping applications, but in 
magnetic paint for children's books, wallpaper, and toys. Materials that are 
difficult to fabricate from castings or forgings are candidates for a powder 
metallurgy approach. Oftentimes castings are converted to powders, which are 
in turn, reconsolidated into semi-finished components with improved 
mechanical properties. Fine titanium powders consolidated into semi-finished 
components represent tomorrow's challenge for advanced metal powder-making 
technologies at Starmet Powders. Combining a solid reputation for ultra-clean 
powder processing techniques with new and dedicated engineering resources, 
opens a world of possibilities for creating products. We have realized that 
such possibilities exist even more clearly when we combine our resources with 
other innovative companies whose enthusiasm for producing high value powder 
metallurgy products matches our own. We have a vision that includes 
consolidation of fine powders into complex shapes.

         COMBINING A SOLID REPUTATION FOR ULTRA-CLEAN POWDER PROCESSING
                 TECHNIQUES WITH NEW AND DEDICATED ENGINEERING
        RESOURCES, OPENS A WORLD OF POSSIBILITIES FOR CREATING PRODUCTS

                                     14

<PAGE>






                                     15
<PAGE>

                            SELECTED FINANCIAL DATA
               (NOT COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS)
        (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND NUMBER OF EMPLOYEES)
 
<TABLE>
<CAPTION>

OPERATING RESULTS FOR THE YEAR                                 1997       1996       1995       1994       1993
-----------------------------------------------------------  ---------  ---------  ---------  ---------  ---------
<S>                                                          <C>        <C>        <C>        <C>        <C>
Net Sales and Contract Revenues............................  $  28,062  $  28,694  $  18,784  $  19,004  $  17,019
Cost and Expenses..........................................     26,251     31,254     20,708     29,958     27,515
Operating Income (Loss)....................................      1,811     (2,560)    (1,924)   (10,954)   (10,496)
Other Income (Expense), Net................................       (298)      (476)      (118)      (430)      (557)
Income (Loss) Before Taxes.................................      1,513     (3,036)    (2,042)   (11,384)   (11,053)
Provision (Benefit) for Income Taxes.......................         31          1     (1,967)    (1,188)    (3,746)
Extraordinary Gain.........................................     --         --            585     --         --
Cumulative Change in Accounting Principle..................     --         --         --         --          1,100
Net Income (Loss)..........................................      1,482     (3,037)       510    (10,196)    (6,207)
Earnings (Loss) per Share*.................................       0.30      (0.64)      0.11      (2.22)     (1.35)
Capital Expenditures, Net..................................      1,788      1,449        777        709      1,265
Research and Development...................................      1,309        876        439        575      1,031

FINANCIAL POSITION AT YEAR-END

Stockholders' Equity.......................................     26,096     24,370     27,245     26,252     36,371
Share Outstanding*.........................................      4,784      4,782      4,776      4,614      4,590
Net Book Value per Common Share Outstanding*...............       5.45       5.10       5.70       5.69       7.92
Dividends Paid.............................................     --         --         --         --            459
Dividend per Share*........................................     --         --         --         --           0.13
Total Assets...............................................     34,704     35,118     40,886     40,542     57,223
Working Capital............................................     10,743      9,249     15,866     17,477     24,532
Long-term Debt net of Unamortized Discount (including
  current installments)....................................      3,363      1,874      4,480      4,859      8,986

OTHER DATA

Weighted Average Number of Shares of Common Stock
  Outstanding*.............................................      4,959      4,779      4,706      4,600      4,590
Backlog (at Year-end)......................................     27,654     23,248     30,709     14,512      8,285
Number of Employees (at Year-end)..........................        235        190        200        189        169
</TABLE>
 
------------------------
 
*   ADJUSTED TO REFLECT TWO FOR ONE STOCK SPLIT IN 1997

                                     16

<PAGE>
   
<TABLE>
<CAPTION>

                                                                 1992       1991       1990       1989      1988
OPERATING RESULTS FOR THE YEAR                                ---------  ---------  ---------  ---------  ---------
-----------------------------------------------------------   <C>        <C>        <C>        <C>        <C>
<S>                                                        
Net Sales and Contract Revenues............................   $  42,083  $  48,250  $  47,662  $  49,760  $  45,714
Cost and Expenses..........................................      39,791     44,930     44,734     45,350     42,378
Operating Income (Loss)....................................       2,292      3,320      2,928      4,410      3,336
Other Income (Expense), Net................................        (745)    (1,029)    (1,706)    (1,191)    (1,182)
Income (Loss) Before Taxes.................................       1,547      2,291      1,222      3,219      2,154
Provision (Benefit) for Income Taxes.......................         626        871        489        972        506
Extraordinary Gain.........................................           -     --         --         --         --
Cumulative Change in Accounting Principle..................           -     --         --         --         --
Net Income (Loss)..........................................         921      1,420        733      2,247      1,648
Earnings (Loss) per Share*.................................        0.20       0.30       0.15       0.43       0.31
Capital Expenditures, Net..................................       1,015      1,349      2,270      3,306      2,812
Research and Development...................................       1,233      1,357        685      1,007      1,186

FINANCIAL POSITION AT YEAR-END 

Stockholders' Equity.......................................      43,037     42,614     41,756     43,135     41,592
Share Outstanding*.........................................       4,590      4,670      4,768      5,192      5,264
Net Book Value per Common Share Outstanding*...............        9.38       9.13       8.76       8.31       7.90
Dividends Paid.............................................         276        238        251        263     --
Dividend per Share*........................................        0.06       0.05       0.05       0.05     --
Total Assets...............................................      66,391     70,810     73,603     76,520     75,461
Working Capital............................................      32,571     33,034     32,772     35,578     36,231
Long-term Debt net of Unamortized Discount (including 
  current installments)....................................      11,372     13,759     16,040     18,405     19,756

OTHER DATA

Weighted Average Number of Shares of Common Stock
  Outstanding*.............................................       4,604      4,738      4,894      5,244      5,354
Backlog (at Year-end)......................................      10,729     10,398     14,758     19,352     16,016
Number of Employees (at Year-end)..........................         231        456        455        574        585
</TABLE>
    

                               17
 
<PAGE>

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
                     FISCAL 1997 COMPARED WITH FISCAL 1996
 
    Net sales decreased by $632,000 or 2% in fiscal 1997. Sales in the 
Uranium Services and Recycle industry segment decreased by $1,224,000 or 20%; 
sales in the Specialty Metal Products industry segment decreased by $560,000 
or 4% and sales in the Depleted Uranium Penetrator industry segment increased 
by $1,152,000 or 13%.

    The decrease in the Uranium Services and Recycle industry segment was 
mainly due to lack of volume in depleted uranium products due to completion 
of a production contract for a foreign customer in fiscal 1996. This decrease 
was partially offset by increases in AVLIS feedstock production for the 
United States Enrichment Corporation (USEC). The decrease in the Specialty 
Metal Products industry segment was a result of decreased volumes of 
beryllium products partially offset by an increase in commercial depleted 
uranium products. The increase in the Depleted Uranium Penetrator industry 
segment was the result of higher production volume of penetrator blanks for a 
foreign customer and the revenue recognized pursuant to the Company's 
contract with the United States Army to remediate the holding basin facility 
(see Note 11).

    Gross profit (net sales and contract revenues less cost of sales) 
increased by $5,285,000 to $8,926,000 or 32% of sales as compared to 
$3,641,000 or 13% of sales for fiscal 1996. This increase in gross profit is 
primarily due to reduction of certain accruals in fiscal 1997 for site 
remediation and waste burial costs of $1,750,000 and a reduction of inventory 
reserves of $1,000,000. Also, gross profit for fiscal 1996 was reduced by an 
accrual of a $2,100,000 for anticipated fiscal 1997 operating losses 
associated with CMI's production contracts. As of September 30, 1997 the 
accrual has been fully utilized.

    Selling, general and administrative expenses increased by $124,000 to 
$5,448,000. This increase was primarily due to additional employees required 
to support the forecasted growth in business. As a percentage of sales, these 
expenses remained at 19% as compared to the prior year.

    Company-sponsored research and development expenses increased by 49% or 
$433,000 to $1,309,000 for fiscal 1997. As a percentage of sales, these 
expenses were 5% as compared to 3% in fiscal 1996.

    Interest and other income/(expense), net, decreased to ($2,000) for the 
fiscal year as compared to ($89,000) for the prior year. This decrease was 
mainly from absence in fiscal 1997 of a restructuring fee associated with 
amendments to the Company's credit facility during the third quarter of 
fiscal 1996. 

             (NOT COVERED BY REPORT OF INDEPENDENT PUBLIC ACCOUNTS)

                                       18
<PAGE>

    Interest expense decreased by $91,000 to $296,000 as compared to fiscal 
1996. This decrease was primarily the result of higher interest rates and 
fees associated with outstanding debt during fiscal 1996.

IMPACT OF YEAR 2000 ISSUE
 
    The Year 2000 issue is the result of computer programs being written 
using two digits rather than four to define the applicable year. Any of the 
Company's computer programs that have data-sensitive software may recognize a 
date using "00" as the year 1900 rather than the year 2000. This could result 
in a system failure or miscalculations causing disruptions of operations, 
including, among other things, a temporary inability to process transactions, 
send invoices, or engage in simular normal business activities.

    The Company is in the process of installing a new accounting software 
system. Management believes that subject to successful installation of the 
new accounting system, the year 2000 issue will not have a material adverse 
impact to the Company's operations or financial position.

INCOME TAXES
 
    Income taxes provided during 1997 and 1996 were at effective rates of 2% 
and 0%, respectively. The 1997 effective rate of 2% differs from the 
statutory rate of 34% due to a reduction in the valuation allowance 
associated with the benefit of net operating loss carryforwards.

INFLATION
 
    Inflation has not had a material impact on the Company's cost of doing 
business. Management attempts to protect the Company by adjusting prices 
where market conditions permit and by reviewing and improving production 
processes where possible. Price escalation clauses also are negotiated into 
long-term contracts when possible.

LIQUIDITY AND CAPITAL RESOURCES
 
    During the year ended September 30, 1997, the Company's primary sources 
of capital have been shareholder notes payable and borrowings through its 
revolving credit facility with its commercial bank. On August 7, 1997, the 
Company entered into a Third Amendment to the Credit Agreement dated March 
31, 1995, which increased the principal amount of the credit facility from 
$4.25 million to $6.55 million. The increase in the credit facility was to 
provide the Company with a letter of credit to satisfy its financial 
assurance requirements as defined by DHEC in connection with the 
Company's license to operate in South Carolina.

    On October 1, 1997, the Company amended and restated its Credit Agreement 
dated March 31, 1995, as amended, with its lender, pursuant to the terms of 
an Amended and Restated Credit Agreement ("Cedit Agreement" The total amount 
of the credit thereunder available to the Company remained at $6.55 million, 
and the Company 

             (NOT COVERED BY REPORT OF INDEPENDENT PUBLIC ACCOUNTS)

                                        19

<PAGE>

and all its subsidiaries became borrowers under the Credit Agreement. The 
Credit Agreement is secured by an Amended and Restated Joint Security 
Agreement, whereby the Company and its subsidiaries granted to the lender a 
first priority security interest in all accounts, inventory and general 
intangibles. The Company is subject to certain operating and financial 
covenants, including minimum tangible capital, as defined and net income 
requirements in connection with the credit facility. 

    The Company has entered into a First Amendment to Credit Agreement with its
lender dated December 9, 1997, which provides for an increase in the credit
facility to $8.05 million.

    On December 29, 1997, the Company entered into a Second Amendment to the 
Credit Agreement which provides for the following; (a) an increase in the 
total amount of credit available to the Company from $8.05 million to $9.55 
million; (b) the terms of repayment for the line of credit have been revised 
so that $1.5 million is due July 1, 1998, $1.5 million is due October 1, 1998 
and the balance, $3.0 million is due on February 28, 1999; and (c) all 
previous events of non-compliance with The Credit Agreement have been waived 
and certain financial covenants have been amended.

    In consideration of the Second Amendment to the Credit Agreement the 
Company has issued to the lender a warrant to purchase 25,000 shares of 
common stock at the ten day average of fair market value as of December 29, 
1997. These warrants have a seven year exercise period. The Company also paid 
its lender $15,000 upon execution of the Amendment.

    During the quarter ended September 30, 1997, the Company sold $500,000 of 
subordinated debt, with warrants to purchase common stock, to a shareholder, 
bringing the principal amount of such subordinated debt to $1,350,500. This 
additional capital was provided to the Company in support of growth in new 
product areas. The Company also issued convertible debt in the original 
principal amount of $900,000 to certain shareholders on December 23, 1997. 
(See note 6 of the notes to consolidated financial statements for details of 
the Credit Agreement and subordinated debt issued to certain of the Company's 
shareholders).

    The Company has outstanding approximately $180,000 in principal amount on 
industrial revenue bond indebtedness related to the Starmet CMI facility. The 
Company also has a term note in the amount of $370,000 with Palmetto Federal 
Savings Bank of South Carolina. This loan is secured by a mortgage on Starmet 
CMI's South Carolina property. The Company is a guarantor under the Palmetto 
loan. 


              (NOT COVERED BY REPORT OF INDEPENDENT PUBLIC ACCOUNTS)

                                      20
<PAGE>

    The Company is expanding its facilities by adding new equipment and 
modifying manufacturing floor space to accommodate changing product lines and 
customer demands. The Company anticipates that this will require capital 
expenditures totaling approximately $2,000,000 during fiscal 1998.

    The Company did not declare any cash dividends during its last three 
fiscal years. The Company does not expect to pay cash dividends in the next 
fiscal year. Future cash dividends, if any, would be paid on an annual basis, 
the amount of which is subject to the determination and approval of the 
Company's Board of Directors. The Credit Agreement also prohibits the 
declaration or payment of dividends without the lender's consent.
 
    The Company believes, based on assumptions concerning backlog fulfillment 
and the expected timing of new orders, that its cash from operations together 
with currently available credit facilities, will be sufficient to sustain 
operations in 1998 and to fund required capital expenditures.
 
FISCAL 1996 COMPARED WITH FISCAL 1995
 
    Net sales increased by $9,910,000 or 53% in fiscal 1996. Sales in the 
Uranium Services and Recycle industry segment increased by $1,220,000 or 25%; 
sales in the Specialty Metal Products industry segment increased by 
$1,628,000 or 13% and sales in the Depleted Uranium Penetrator industry 
segment increased by $7,062,000 or 412%. The increase in the Uranium Services 
and Recycle industry segment was mainly due to increases in AVLIS feedstock 
production for the United States Enrichment Corporation (USEC). The increase 
in the Specialty Metal Products industry segment was a result of higher sales 
of beryllium products and commercial depleted uranium. The increase in the 
Depleted Uranium Penetrator industry segment was the result of higher large 
caliber penetrator production sales.
 
    During the third quarter of fiscal 1996, the Company reduced its 
workforce from 55 to 24 employees at the Carolina Metal's (CMI) facility due 
to reduced production requirements resulting from the completion of a 
multi-year contract for the manufacture of depleted uranium for a foreign 
customer and the lack of anticipated new orders. The Company had expected to 
obtain substantial orders from USEC and the Department of Energy (DoE) in the 
second half of fiscal 1996. These orders have yet to be materialized and as a 
result CMI is operating at approximately 40% capacity on a one-shift basis 
and is expected to do so through most of fiscal 1997. In the fourth quarter 
of fiscal 1996 the Company established a $2,100,000 reserve for estimated 
fiscal 1997 losses associated with CMI's current production contracts. The 
Company is obligated to complete these contracts, which are fixed price. The 
Company 

             (NOT COVERED BY REPORT OF INDEPENDENT PUBLIC ACCOUNTS)

                                      21

<PAGE>

continues to pursue alternate production contracts and believes that 
significant orders eventually will be received for work at the CMI facility. 
In the event that the prospects for greater utilization of the CMI facility 
do not improve, the Company will reevaluate the carrying value of its CMI 
facility during fiscal 1997, which could result in a further writedown of 
plant assets.
 
    Gross profit (net sales and contract revenues less cost of sales) 
increased by $309,000 to $3,641,000 or 13% of sales as compared to $3,332,000 
or 18% of sales for fiscal 1995. This increase in gross profit is primarily 
due to increased sales volume during fiscal 1996. As a percentage of sales, 
the decrease in gross profit is primarily due to the establishment of a 
$2,100,000 reserve for estimated losses associated with CMI's production 
contracts.
 
    Selling, general and administrative expenses increased by $507,000 to 
$5,324,000. This increase was primarily due to additional employees required 
to support the growth in business. As a percentage of sales, these expenses 
decreased to 19% as compared to 26% for the prior year, as a result of sales 
increasing at a higher rate than expenses.
 
    Company-sponsored research and development expenses increased by 100% or 
$437,000 to $876,000 for fiscal 1996. As a percentage of sales, these 
expenses were 3% as compared to 2% in fiscal 1995.
 
    Interest and other income, net, decreased to $(476,000) for the fiscal 
year as compared to $232,000 for the prior year. This decrease was mainly 
from a $150,000 restructuring fee associated with amendments to the Company's 
credit facility during the third quarter of fiscal 1996 and a gain of 
$175,000 recognized during the second quarter of fiscal 1995 on the sale of 
an office building.
 
    Interest expense increased by $37,000 to $387,000 as compared to fiscal 
1995. This increase was primarily the result of higher interest rates and 
fees associated with outstanding debt during fiscal 1996.
 
    During fiscal 1995, the Company realized a $585,000 extraordinary gain, 
net of taxes of $10,000, on the early extinguishment of debt.

               (NOT COVERED BY REPORT OF INDEPENDENT PUBLIC ACCOUNTS)

                                        22
<PAGE>

                           CONSOLIDATED BALANCE SHEET
 
<TABLE>
<CAPTION>
ASSETS                                                                  1997        1996
                                                                     ----------  ----------
<S>                                                                  <C>         <C>
  CURRENT ASSETS:
    Cash and cash equivalents...................................... $   195,000  $ 1,051,000
    Restricted cash................................................      73,000      250,000
    Accounts receivable, net of allowances for doubtful accounts 
      of $421,000 in 1997 and $821,000 in 1996.....................   5,546,000    4,931,000
    Inventories....................................................  11,440,000   12,025,000
    Other current assets...........................................     619,000      376,000
                                                                    -----------  -----------
      Total Current Assets.........................................  17,873,000   18,633,000
                                                                    -----------  -----------
  PROPERTY, PLANT AND EQUIPMENT:
    Land...........................................................   2,124,000    2,178,000
    Buildings......................................................  17,656,000   18,040,000
    Machinery, equipment, and fixtures.............................  18,472,000   26,179,000
    Construction-in-progress.......................................     831,000      583,000
                                                                    -----------  -----------
      Total Property, Plant and Equipment..........................  39,083,000   46,980,000
    Less: Accumulated depreciation.................................  24,036,000   31,834,000
                                                                    -----------  -----------
    Net property, plant, and equipment.............................  15,047,000   15,146,000
  OTHER ASSETS.....................................................   1,784,000    1,339,000
                                                                    -----------  -----------
                                                                    $34,704,000  $35,118,000
                                                                    -----------  -----------
                                                                    -----------  -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
  CURRENT LIABILITIES:
    Current portion of long-term obligations....................... $ 1,885,000  $   510,000
    Accounts payable...............................................   3,123,000    2,143,000
    Accrued payroll and related costs..............................   1,215,000    1,170,000
    Other accrued expenses.........................................     907,000    5,561,000
                                                                    -----------  -----------
      Total Current Liabilities....................................   7,130,000    9,384,000
                                                                    -----------  -----------
  LONG-TERM OBLIGATIONS............................................     430,000      644,000
                                                                    -----------  -----------
  NOTES PAYABLE TO SHAREHOLDERS....................................   1,048,000      720,000
                                                                    -----------  -----------
  STOCKHOLDERS' EQUITY:............................................
    Common stock, par value $.10; authorized--15,000,000 shares;
      issued and outstanding for 1997 and 1996; 4,784,244 shares
      and 4,781,928 shares, respectively...........................     478,000      478,000
    Additional paid-in capital.....................................  14,033,000   14,019,000
    Warrants Issued................................................     360,000      130,000
    Retained earnings..............................................  11,225,000    9,743,000
                                                                    -----------  -----------
      Total Stockholders' Equity...................................  26,096,000   24,370,000
                                                                    -----------  -----------
                                                                    $34,704,000  $35,118,000
                                                                    -----------  -----------
                                                                    -----------  -----------
</TABLE>
 
                  THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                         CONSOLIDATED FINANCIAL STATEMENTS.

                                     23

<PAGE>

                      CONSOLIDATED STATEMENT OF OPERATIONS


<TABLE>
<CAPTION>
                                                                        1997          1996          1995
                                                                   ------------  ------------  ------------
<S>                                                                <C>           <C>           <C>
NET SALES AND CONTRACT REVENUES............................        $ 28,062,000  $ 28,694,000  $ 18,784,000
                                                                   ------------  ------------  ------------
COST AND EXPENSES:
  Cost of sales............................................          19,136,000    25,053,000    15,452,000
  Selling, general, and administrative expenses............           5,448,000     5,324,000     4,817,000
  Research and development expenses........................           1,309,000       876,000       439,000
  Loss on write-off of fixed asset.........................             358,000            --            --
                                                                   ------------  ------------  ------------
 
                                                                     26,251,000    31,253,000    20,708,000
                                                                   ------------  ------------  ------------
 
OPERATING INCOME (LOSS)....................................           1,811,000    (2,560,000)   (1,924,000)
INTEREST AND OTHER INCOME (EXPENSE), NET...................              (2,000)      (89,000)      232,000
INTEREST EXPENSE...........................................            (296,000)     (387,000)     (350,000)
                                                                   ------------  ------------  ------------
 
INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM...           1,513,000    (3,036,000)   (2,042,000)
PROVISION (BENEFIT) FOR INCOME TAXES.......................              31,000         1,000    (1,967,000)
                                                                   ------------  ------------  ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM....................           1,482,000    (3,037,000)      (75,000)
EXTRAORDINARY GAIN ON EXTINGUISHMENT OF DEBT NET OF TAXES 
OF $10,000.................................................                  --            --       585,000
                                                                   ------------  ------------  ------------
NET INCOME (LOSS)..........................................        $  1,482,000  $ (3,037,000) $    510,000
                                                                   ------------  ------------  ------------
                                                                   ------------  ------------  ------------
 
Per Share Information*
----------------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM....................                0.30         (0.64)          (0.02)
EXTRAORDINARY GAIN ON EXTINGUISHMENT OF DEBT NET OF TAXES 
OF $10,000.................................................                  --            --            0.12
                                                                   ------------  ------------  --------------
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE...        $       0.30  $      (0.64) $         0.11
                                                                   ------------  ------------  --------------
                                                                   ------------  ------------  --------------
 
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT 
SHARES OUTSTANDING..........................................          4,958,870      4,778,928       4,705,512
                                                                   ------------  -------------  --------------
                                                                   ------------  -------------  --------------
 
DIVIDENDS PER SHARE.........................................      $         --  $          --  $           --
                                                                   ------------  -------------  --------------
                                                                   ------------  -------------  --------------
</TABLE>
 
*Adjusted to reflect 2 for 1 stock split in the 2nd quarter of 1997.



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


                                        24

<PAGE>


                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                             Common Stock
                                        ---------------------      Additional
                                          Number           Par       Paid-in                        Retained 
                                        of Shares         Value      Capital         Warrants       Earnings             Total
                                        ----------     ----------  -----------       --------     -----------        ------------
                                        <S>            <C>         <C>               <C>           <C>               <C>
Balance at September 30, 1994.........  4,614,928     $  460,000  $13,522,000        $  --        $12,270,000       $ 26,252,000
                                        ----------     ----------  -----------       --------     ------------       ------------
Stock Options Exercised...............    161,000         18,000      465,000           --             --                483,000
Net Income for Year...................       --             --          --              --            510,000            510,000
                                        ----------     ----------  -----------       --------     ------------       ------------
Balance at September 30, 1995.........   4,775,928     $  478,000  $13,987,000       $   --       $ 12,780,000       $ 27,245,000
                                        ----------     ----------  -----------       --------     ------------       ------------

Warrants issued.......................       --             --          --            130,000           --                130,000
Stock Options Exercised...............       6,000          --          32,000           --             --                 32,000
Net Loss for Year.....................       --             --          --               --         (3,037,000)        (3,037,000)
                                        ----------     ----------  -----------       --------     ------------       ------------
Balance at September 30, 1996.........   4,781,928     $  478,000  $14,019,000       $130,000      $ 9,743,000       $ 24,370,000
                                        ----------     ----------  -----------       --------     ------------       ------------


Warrants issued.......................       --             --          --            230,000           --                230,000
Stock Options Exercised...............       2,316          --          14,000           --             --                 14,000
Net Income for Year...................       --             --          --               --          1,482,000          1,482,000
                                        ----------     ----------  -----------       --------     ------------       ------------

Balance at September 30, 1997.........   4,784,244     $  478,000  $14,033,000       $360,000     $ 11,225,000       $ 26,096,000
                                        ----------     ----------  -----------       --------     ------------       ------------
                                        ----------     ----------  -----------       --------     ------------       ------------

</TABLE>

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

                                      25

<PAGE>

                     CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                    1997          1996            1995
                                                                -----------   ------------   ------------
<S>                                                             <C>           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)..........................................   $ 1,482,000   $(3,037,000)   $   510,000
  Adjustments to reconcile net income to net cash
   provided (used) by operating activities
     Depreciation and amortization...........................     1,588,000     1,493,000      1,339,000
     Loss on write-off of fixed assets.......................       358,000            --             --
     Changes in assets and liabilities, net-
       Decrease (increase) in accounts receivable............      (616,000)     (201,000)       725,000
       Decrease (increase) in inventories....................       585,000     2,099,000     (2,982,000)
       (Decrease) increase in accounts payable and
        accrued expenses.....................................    (3,629,000)    3,358,000      1,387,000
     Gain on sale of building................................            --       (75,000)      (175,000)
     Changes in accrued and deferred taxes...................            --            --         (1,000)
     Changes in other long-term liabilities..................            --      (301,000)      (981,000)
     Other...................................................      (689,000)      440,000       (100,000)
                                                                -----------   -----------    -----------
       Net cash provided (used) by operating activities......      (921,000)    3,776,000       (278,000)
                                                                -----------   -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures, net..................................    (1,788,000)   (1,449,000)      (777,000)
  Sales of marketable securities, net........................            --       170,000        326,000
  Proceeds from sale of Property, Plant & Equipment..........            --       172,000        487,000
                                                                -----------   -----------    -----------
       Net cash (used) provided by investing activities......    (1,788,000)   (1,107,000)        36,000
                                                                -----------   -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Principal payments under long-term obligations.............      (545,000)           --             --
  Payments on bank debt......................................    (9,801,000)   (4,856,000)    (4,103,000)
  Proceeds from bank debt....................................    11,508,000     1,530,000      3,725,000
  Proceeds from Notes Payable to Shareholders and Warrants...       500,000       850,000             --
  Proceeds from Stock issuance...............................        14,000        32,000        483,000
                                                                -----------   -----------    -----------
       Net cash (used) provided by financing activities......     1,676,000    (2,444,000)       105,000
                                                                -----------   -----------    -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
  Cash and cash equivalents at beginning of year.............    (1,033,000)      225,000       (137,000)
  Cash and cash equivalents at end of year...................     1,301,000     1,076,000      1,213,000
                                                                -----------   -----------    -----------
                                                                $   268,000   $ 1,301,000    $ 1,076,000
                                                                -----------   -----------    -----------
                                                                -----------   -----------    -----------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid (received) during the year for:
       Interest, net of amounts capitalized..................   $   266,000   $   345,000    $   280,000
       Income tax refunds received...........................   $    14,000   $    11,000    $   978,000

NON-CASH INVESTING & FINANCING ACTIVITIES:
  Capital lease obligations..................................   $        --   $    75,000    $        --

</TABLE>

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


                                      26
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. OPERATIONS

    Starmet Corporation (The Company) is a manufacturer of specialized metal 
products which are fabricated by a variety of metalworking processes. 
Effective October 1, 1997 the company changed its name from Nuclear Metals, 
Inc. to Starmet Corporation. Export sales to foreign unaffiliated customers 
are 25% of total net sales and contract revenues in fiscal 1997, 28% in 
fiscal 1996, and 33% in fiscal 1995. A significant portion of the Company's 
sales revenue has been derived from major customers as follows:

                                         1997      1996      1995
                                         ----      ----      ----
Royal Ordnance.........................   19%       11%        -%
United States Enrichment Corp..........   14         5         --
Primex Technologies....................   12        20         8
Lockheed Martin........................    7        16        18
Lockheed Idaho Falls...................    5         4         9

2. SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

    The accompanying consolidated financial statements include the accounts 
of Starmet Corporation and its wholly owned subsidiaries: Starmet Powders, 
LLC, Starmet Aerocast, LLC Starmet Comcast, LLC, Starmet NMI Corporation, 
Starmet CMI Corporation, Starmet Holdings Corporation and NMI Foreign Sales 
Corporation. All material intercompany transactions and balances have been 
eliminated in consolidation.

FISCAL YEARS

    References in these financial statements to 1997, 1996, and 1995 are for 
the fiscal years ended September 30, 1997, September 30, 1996, and September 
30, 1995, respectively. The accompanying financial statements and all share 
and per share information have been restated to reflect a 2 for 1 stock split 
effective in April 1997.

REVENUE RECOGNITION

   
    Revenues are recorded when products are shipped, except for revenues on 
long- term contracts, which are recorded on the percentage-of-completion 
method. The percentage-of-completion method is used for research and 
development contracts and for production contracts, which require significant 
amounts of initial engineering and development costs. The 
percentage-of-completion is determined by relating the actual number of 
contract units completed to date to the total units to be completed under the 
respective contract or by relating total costs incurred to total estimated 
cost at completion. When 
    

                                       27

<PAGE>

the estimated total costs on a contract indicates a loss, the Company's 
policy is to record the entire loss currently. Performance incentives and 
penalties incorporated in certain government contracts are recognized when 
incentives are earned or awarded or when penalties are incurred or assessed. 
Contract revenues include fees resulting from facilitization contracts with 
the U. S. Army (contracts to establish production capacity through the 
purchase and installation of equipment to be owned by the U.S. Army). Costs 
associated with these contracts, exclusive of the costs to purchase the 
equipment ($0 in 1997, 1996 and in 1995) are included in cost of sales. The 
consolidated balance sheets do not include the cost of this U.S. Army-owned 
equipment.

CASH AND CASH EQUIVALENTS

    Cash and cash equivalents are recorded at cost, which approximates market 
value. Cash equivalents include certificates of deposit with a maturity of 
one year or less.

INVENTORIES

    Inventories are stated at the lower of cost (first-in, first-out) or 
market and include materials, labor, and manufacturing and engineering 
overhead.

PROPERTY, PLANT, AND EQUIPMENT

    Property, plant, and equipment are recorded at the lower of cost or net 
realizable value. For financial reporting purposes, the Company provides 
depreciation on the straight-line method over the estimated useful lives of 
the assets, which are as follows:

Buildings..................................................  20--30 years
Machinery, equipment, and fixtures.........................  3--10 years

    Maintenance and repairs are charged to operations as incurred; renewals 
and betterments are capitalized. When property, plant, and equipment are 
sold, retired or disposed of, the asset cost and accumulated depreciation are 
removed from the accounts, and the resulting gain or loss is included in 
operations.

    In Fiscal 1997, the Company adopted the Financial Accounting Standards 
Board ("FASB") issued Statement of Financial Accounting Standards (SFAS) No. 
121, "Accounting for the Impairment of Long-Lived Assets and of Long-Lived 
Assets to be Disposed of." This statement requires a review of impairment for 
long-lived assets and certain identifiable intangibles to be held and used by 
an entity whether events or changes in circumstances indicate that the 
carrying amount of the assets may not be recoverable. An impairment loss is 
recognized if the sum of the expected future cash flows to result from the 
use and eventual disposition of the asset is less than the carrying amount

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                       28

<PAGE>

of the asset. The amount by which the carrying amount of the asset exceeds 
the fair value less costs to sell, is an impairment loss. The effect of 
adopting this statement was not material to the Company's financial position 
or results of operation.

    In the fourth quarter of fiscal 1996, the Company established a 
$2,100,000 reserve for estimated losses associated with Starmet CMI's 
production contracts. The Company was obligated to complete these contracts, 
which were fixed price. The contracts have been completed and the reserve is 
$0 as of September 30, 1997.

INCOME TAXES

    The Company accounts for income taxes in accordance with SFAS No. 109, 
"Accounting for Income Taxes." Accordingly, the Company recognizes deferred 
income taxes based on the expected future tax consequences of differences 
between the financial statement basis and the tax basis of assets and 
liabilities, calculated using enacted tax rates in effect for the year in 
which the differences are expected to be reflected in the tax return. The 
Company records a valuation allowance against any net deferred tax assets 
whose realizability is uncertain.

    The deferred federal and state income taxes result primarily from using 
accelerated depreciation on property, plant, and equipment for income tax 
reporting purposes and from establishing reserves which are not currently 
deductible for income tax purposes, respectively.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are expensed as incurred. Research and 
development incurred under customer contracts are expensed through cost of 
sales in the period incurred. 

INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARES

    The Company currently calculates earnings per common share under 
Accounting Principles Board Opinion (APB) No. 15, "Earnings Per Share." 
Income/(loss) per share was computed by dividing the net income by the 
weighted average number of shares of common stock outstanding during each 
year. Common stock equivalents (stock options and stock warrants) were 
considered in the computation of earnings per common and common equivalent 
share for 1997. Stock options and stock warrants were not considered in 
computing the loss and income per share in 1996 and 1995, as the effect would 
have been antidilutive.

RECLASSIFICATIONS

    Certain amounts previously reported in the consolidated financial 
statements have been reclassified to conform to the 1997 presentation.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                       29

<PAGE>

NEW ACCOUNTING STANDARDS

    In March 1997, the Financial Accounting Standards Board issued SFAS No. 
128 "Earnings Per Share," which establishes standards for computing and 
presenting earnings per share for entities with publicly held common stock or 
potential common stock. SFAS No. 128 is effective for periods ending after 
December 15, 1997 and early adoption is not permitted. SFAS No. 128 replaces 
primary earnings per share with "basic earnings per common share." Basic 
earnings per common share is computed by dividing net income by the weighted 
average number of shares of common stock outstanding during the year. No 
dilution for any potentially dilutive securities is included. In addition, 
SFAS No. 128 replaces fully diluted earnings per common share with "diluted 
earnings per common share." Dilution for options and warrants under SFAS No. 
128 is computed using the average share price of the Company's common stock 
for the period, rather than the more dilutive greater than average share 
price or end-of-period share price required by APB No. 15. For fiscal years 
1997, 1996, and 1995 there would be no material change from primary and fully 
diluted earnings per common share to basic and diluted earnings per share 
under SFAS No. 128.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

    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.

DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS

    The Company's financial instruments consist mainly of cash and cash 
equivalents, restricted cash, accounts receivable, notes receivable from 
officers, accounts payable and notes payable. The carrying amounts of the 
Company's cash and equivalents, restricted cash accounts receivable, notes 
receivable from officers and accounts payable approximate their fair value 
due to the short-term nature of these instruments. The carrying value of the 
notes payable also approximates the fair value, based on rates available to 
the Company for debt with similar terms and remaining maturities.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                       30

<PAGE>

3. OTHER ACCRUED EXPENSES

    Accrued expenses consist of the following
    at September 30, 1997 and 1996
                                                      1997             1996
                                                    --------        ----------
    Waste burial cost............................   $404,000        $2,884,000
    Estimated loss on contracts..................      --            2,100,000
    Other........................................    503,000           577,000
                                                    --------        ----------
                                                    $907,000        $5,561,000
                                                    --------        ----------
                                                    --------        ----------

    During 1997, the Company reduced certain accruals by $1,750,000 for site 
remediation and waste burial costs which were deemed no longer necessary.

4. ACCOUNTS RECEIVABLE

    The following is an analysis of accounts receivable
    (net of allowances for doubtful accounts):
                                                       1997           1996
                                                    ----------      ----------
    Accounts receivable..........................   $5,460,000      $3,479,000
    Unbilled Receivables and Retainages due
     upon completion of contracts................       86,000       1,452,000
                                                    ----------      ----------
                                                    $5,546,000      $4,931,000
                                                    ----------      ----------

5. INVENTORIES

    Inventories (net of reserves) at September 30, 1997,
    and September 30, 1996, were as follows:
                                                       1997           1996
                                                    -----------    -----------
    Work-in-process..............................   $ 2,511,000    $   805,000
    Raw materials................................     8,271,000     10,512,000
    Spare parts..................................       658,000        708,000
                                                    -----------    -----------
                                                    $11,440,000    $12,025,000
                                                    -----------    -----------

    As of September 30, 1997, approximately $6.9 million of the Company's 
inventory consists of Depleted Uranium (DU) in various stages of production. 
This amount consists of both value-added costs to government owned material, 
($3.6 million), which is used for U.S. Military contracts and for material 
which the Company has acquired from other sources, ($3.3 million). During 
fiscal 1995 the U.S. Army notified the Company that the Army would provide 
the DU for production for the most recent penetrator contract. Management 
strongly believes that the Army is responsible to compensate the Company for 
the value- added costs of this material and that at a minimum the Army would 
allow the Company to use this material for non U.S. military contracts at no 
additional cost to the Company. Management is pursuing several Department of 
Energy programs that would require more DU over the next several years than 
the Company currently has on hand. Management believes that the carrying cost 
of the inventory on hand will be fully realizable through these possible 
programs or from its ongoing usage for U.S. and foreign military 
procurements, however it is uncertain how much of the inventory balance will 
be utilized in fiscal 1998. During 1997, the Company reduced inventory 
reserves by approximately $1,000,000 which were deemed no longer necessary.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                       31

<PAGE>

6. LONG-TERM OBLIGATIONS AND NOTES PAYABLE

    Long-term obligation notes payable of the Company at September 30, 1997, 
and September 30, 1996, are as follows:

<TABLE>
<CAPTION>

                                                                       1997           1996
                                                                   -----------    -----------
<S>                                                                <C>            <C>
Term Credit, interest rate of prime plus 0.5%
  due in monthly principal payments through 1996. . . . . . . .    $   --         $  133,000
Line of Credit, interest rate of prime plus 0.5%
  (9.0% at September 30, 1997). . . . . . . . . . . . . . . . .     1,706,000          --
Industrial Development Revenue Notes, variable
  interest rates (5.6524% at September 30, 1997)
  due in quarterly principal payments through 2000. . . . . . .       180,000        492,000
Notes payable to Shareholders interest
  only payments of 10% until maturity . . . . . . . . . . . . .     1,350,000        850,000
Note Payable, monthly interest and principal payments
  through November 2000, interest rate of 10.25%. . . . . . . .       370,000        457,000
Capital Leases. . . . . . . . . . . . . . . . . . . . . . . . .        59,000         72,000
                                                                   ----------     ----------
                                                                   $3,665,000     $2,004,000
Less Unamortized discount on Shareholder Debentures . . . . . .       302,000        130,000
Less Current portion of long-term obligations . . . . . . . . .     1,885,000        510,000
                                                                   ----------     ----------
Total Long-Term obligations and Shareholder Debentures. . . . .    $1,478,000     $1,364,000
                                                                   ----------     ----------
                                                                   ----------     ----------
</TABLE>

CREDIT FACILITY

    On August 7, 1997 the Company and it's commercial bank, State Street Bank 
& Trust Company signed the Third Amendment to their credit agreement dated 
March 31, 1995 (as amended, the "Credit Agreement"). The Third Amendment 
increases the Company's credit facilities from $4.25 million to $6.55 
million, with a maturity date of February 28, 1998. The $6.55 million 
consists of $3.55 million of letters of credit and $3.0 million credit line 
for working capital. Borrowings under the Credit Agreement bear interest at 
the prime rate plus 1/2 of 1%. The Company also pays a fee of 1/2 of 1% on 
the unused portion of the credit facilities.
 
    As of September 30, 1997 the Company was not in compliance with certain 
financial covenants contained in the Credit Agreement.
 
    On October 1, 1997, the Company amended and restated the Company's 
revolving credit facility with its lender, pursuant to the terms of an 
Amended and Restated Credit Agreement ("Credit Agreement"), which amended and 
restated the Credit Agreement dated March 31, 1995. The total amount of the 
credit available to the Company remained at $6.55 million, and the Company 
and all its subsidiaries became borrowers under the 

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


                                  32

<PAGE>

Credit Agreement. The Credit Agreement is secured by an Amended and Restated 
Joint Security Agreement, whereby the Company and its subsidiaries granted to 
the lender a first priority security interest in all accounts, inventory and 
general intangibles. The Company is subject to certain operating and 
financial covenants, including minimum tangible capital, as defined and net 
income requirements in connection with the credit facility.
 
    The Company has entered into a First Amendment to the Credit Agreement 
with its lender dated December 9, 1997, which provides for an increase in the 
credit facility to $8.05 million.
 
    On December 29, 1997, the Company entered into a Second Amendment to the 
Credit Agreement which provides for the following; a. the total amount of 
credit available to the Company increased from $8.05 million to $9.55 
million; b. the terms of repayment for the line of credit have been revised 
as such, $1.5 million is due July 1, 1998, $1.5 million is due October 1, 
1998 and the balance, $3.0 million is due in February 1999; c. all previous 
events of non-compliance with the Credit Agreement have been waived and 
certain financial covenants have been amended.
 
    In consideration of the Second Amendment to the Credit Agreement the 
Company has issued to their lender a warrant to purchase 25,000 shares of 
common stock at the ten day average of fair market value as of December 29, 
1997. The Company also paid its lender $15,000 upon execution of the 
Amendment.
 
    As of September 30, 1997, and December 29, 1997 $1.7 million and $4.5 
million were outstanding under the line of credit, respectfully. The Company 
had $3.55 million letters of credit outstanding, at December 29, 1997.
 
NOTES PAYABLE TO SHAREHOLDERS
 
    On January 10, 1996, the Company issued $500,500 in principle amount of 
its 10% Convertible Subordinated Debentures, the principle amount of which is 
convertible at the option of the holder into shares of the Company's Common 
Stock at the rate of $5.945 per share. The original maturity date of these 
Debentures, June 10, 1997, has been extended by the holders pursuant to 
certain letter agreements until December 10, 1998. These Debentures were 
issued to persons who are significant shareholders of the Company or related 
to such persons.
 
    On September 16, 1996 the Company issued an additional $350,000 in 
principal amount pursuant to its 10% Subordinated Debentures due December 10, 
1998 which were issued to certain sig-

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


                                   33
<PAGE>

nificant shareholders of the Company. In consideration for the Debentures, 
the holders were issued three-year warrants to purchase an aggregate of 
42,000 shares of common stock at an exercise price of $7.50 per share, 
subject to antidilution adjustments.

   
    On September 22, 1997 the Company issued an additional $500,000 in 
principal amount pursuant to its 10% Subordinated Debentures due December 10, 
2000 which were issued to a shareholder of the Company. In consideration for 
the Debentures, the holder was issued three-year warrants to purchase an 
aggregate of 60,000 shares of common stock at an exercise price of $17.875 
per share, subject to antidilution adjustments.
    

    On December 23, 1997 the Company issued an additional $950,000 in 
principle amount pursuant to its 10% Convertible Subordinated Notes due 
December 31, 1999 which were issued to certain significant shareholders of 
the Company. The principle amount of the Notes are convertible at the option 
of the holder into shares of the Company's Common Stock at the rate of $21.50 
per share
 
THE INDUSTRIAL REVENUE BONDS
 
    The Industrial Revenue Bonds (the "IRBs") outstanding consists of one 
note issue. The interest rates on this note is 66.5% of the lenders bank's 
prime interest rate. This note is secured by property, plant and equipment.
 
    The IRBs contain restrictive covenants including, among others, a 
requirement to maintain minimum working capital, consolidated net worth and a 
minimum current ratio. As of September 30, 1997, the Company was not in 
compliance with certain of these financial covenants. The Company has 
received a waiver from the trustee for these events of non-compliance.
 
    Maturities of long term obligations subsequent to September 30, 1997 are: 
1998--$1,885,000, 1999--$1,052,000; 2000--$655,000; thereafter $73,000.
 
7. INCOME TAXES
 
    The provision (benefit) for income taxes differs from the amount computed 
by applying the statutory federal income tax rate due to the following:

<TABLE>
<CAPTION>

                                                                      1997        1996      1995
                                                                     ------      -----     ------
<S>                                                                  <C>         <C>
Statutory rate. . . . . . . . . . . . . . . . . . . . . . . . . .     34.0%      (34.0)%   (34.0)%
Increase (reduction) in taxes resulting from:
  State taxes, net of federal effect. . . . . . . . . . . . . . .      6.0        (6.0)     (6.0)
  Valuation allowance . . . . . . . . . . . . . . . . . . . . . .    (38.0)       40.0      (2.0)
  Tax reserves no longer required . . . . . . . . . . . . . . . .      --          --      (48.0)
  Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      --          --       (6.0)
                                                                     -----       -----     -----
                                                                       2.0%        -- %    (96.0)%
                                                                     -----       -----     -----
                                                                     -----       -----     -----
</TABLE>


           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                  34
<PAGE>

    As of September 1997, the Company has a federal net operating loss 
carryforward of approximately $11.1 million of which $3.2 million expires in 
2009 and $1.8 million expires in 2010, $3.0 million expires in 2011, and $3.1 
million in 2012. State net operating loss carry forwards of approximately 
$20.2 million, will expire between 1999 through 2009. These net operating 
loss carryforwards are fully reserved by valuation allowances due to 
uncertainty regarding their realizability.
 
    The components of the provision (benefit) for income taxes are as follows:

<TABLE>
<CAPTION>
                                                                             1997          1996          1995
                                                                         -------------  -----------  -------------
<S>                                                                      <C>            <C>          <C>
Current (Benefit) Provision:
  Federal..............................................................  $    (961,000) $  (363,000) $    (766,000)
  State................................................................       (299,000)    (112,000)      (135,000)
  Valuation allowance..................................................      1,260,000      475,000        901,000
                                                                         -------------  -----------  -------------
    Total current (Benefit) Provision..................................  $          --  $        --  $          --
                                                                         -------------  -----------  -------------
                                                                         -------------  -----------  -------------
Deferred (Benefit) Provision:
  Federal..............................................................  $  (1,310,000) $  (592,000) $  (1,819,000)
  State................................................................       (451,000)    (183,000)      (148,000)
  Valuation Allowance..................................................      1,792,000      776,000             --
                                                                         -------------  -----------  -------------
     Total deferred (Benefit) Provision:...............................         31,000        1,000     (1,967,000)
                                                                         -------------  -----------  -------------
     Total (Benefit) Provision:........................................  $      31,000        1,000     (1,967,000)
                                                                         -------------  -----------  -------------
                                                                         -------------  -----------  -------------
</TABLE>


    During 1995 the Company received $978,000 of Federal income tax refunds. As
of September 30, 1994, the Company had established a full valuation allowance
for this amount. Accordingly, the Company reduced its valuation allowance by
$978,000 upon receipt of this amount.
 
    The Company has provided a full valuation allowance on the net deferred tax
assets as of September 30, 1997, and 1996. The Company's alternative minimum tax
credit has an unlimited life. The tax effects of significant items making up the
deferred tax liabilities and deferred tax assets, as of the end of the 1997 and
1996 fiscal years are as follows:
 
 
<TABLE>
<CAPTION>
                                                                                          1997           1996
                                                                                      -------------  -------------
<S>                                                                                   <C>            <C>
Assets:
  Reserves not currently deductable for tax purpose.................................  $   1,665,000  $   2,475,000
  Accrued employee health benefits..................................................         36,000         38,000
  Federal operating loss carryforward...............................................      3,344,000      1,850,000
  State operating loss carryforwards and other assets...............................      1,903,000      1,438,000
  Other.............................................................................        460,000      1,867,000
  Valuation allowance...............................................................     (4,082,000)    (4,653,000)
                                                                                      -------------  -------------
    Total deferred tax assets.......................................................      3,326,000      3,015,000
    Alternative minimum tax credit..................................................        407,000        407,000
                                                                                      -------------  -------------
                                                                                      $   3,733,000  $   3,422,000
                                                                                      -------------  -------------
                                                                                      -------------  -------------
Liabilities:
  Fixed asset basis difference......................................................  $   2,422,000  $   2,549,000
  Employee benefits.................................................................        813,000        715,000
  Other                                                                                     498,000        158,000
                                                                                      -------------  -------------
                                                                                      $   3,733,000  $   3,422,000
                                                                                      -------------  -------------
                                                                                      -------------  -------------
</TABLE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                  35

<PAGE>

8. STOCK OPTIONS AND WARRANTS AGREEMENTS

STOCK OPTION PLANS

    A total of 342,680 shares of common stock have been reserved for issuance 
upon exercise of options issued or issuable pursuant to the Company's stock 
option plans for employees and directors. The exercise price of options 
issued or issuable under such plans may not be less than 100% of the fair 
market value of the shares purchasable on the date of grant of the options. 
Information concerning options which have been granted under the plans and 
the exercise prices thereof is set forth below. Those options with an 
indicated exercise price of $3.32 expire in 2003, those with an exercise 
price of $6.75, $7.00, or $8.00 expire in 2004, those with an exercise price 
of $6.13 expire in 2005, those with an exercise price of $7.38 expire in 
2006, and those with an exercise price of $15.56 expire in 2007, in each case 
on the anniversary of the date of the grant.

    Common shares under option are presented:

<TABLE>
<CAPTION>
                                                       1997                           1996                       1995
                                            ----------------------------  ----------------------------   ---------------------

                                                            Weighted                      Weighted                   Range of
                                              Number         Average        Number         Average        Number     Exercise
                                             of Shares   Exercise Price   of Shares   Exercise Price     of Shares    Prices
                                            ----------   ---------------  ----------   ---------------   ---------   ---------
<S>                                         <C>          <C>              <C>          <C>               <C>         <C>
Options outstanding, beginning of year...    211,000          6.20          77,000          6.25         197,800    3.00-8.00 
  Exercised..............................     (2,316)         6.13              --            --        (161,000)        3.00 
  Granted................................    128,000         11.53         136,000          6.13          50,600    6.75-7.00 
  Canceled...............................     (3,334)         6.88          (2,000)         3.32         (10,400)   3.00-3.25 
                                           ----------   ---------------  ----------   ---------------   ---------   --------- 
Options outstanding, end of year.........    333,350          8.24         211,000          6.20          77,000    3.32-8.00 
                                           ----------   ---------------  ----------   ---------------   ---------   --------- 
                                           ----------                    ----------                     ---------             
Options exercisable......................    205,361                       100,444                        25,719              
                                           ----------                    ----------                     ---------             
                                           ----------                    ----------                     ---------             
Options available for future grants......      9,330
                                           ----------
                                           ----------
Weighted average fair value per share
 of options granted during the year......                     12.25                         12.25
</TABLE>

    The following summarizes certain data for options outstanding at September
30, 1997

<TABLE>
<CAPTION>
                                                                                                              Weighted
                                                                                               Weighted        Average
                                                                                 Range of       Average       Remaining
                                                                    Number       Exercise      Exercise      Contractual
                                                                   of Shares      Prices        Prices          Life
                                                                  -----------  -------------  -----------  ---------------
<S>                                                               <C>          <C>            <C>          <C>
Options outstanding, end of year:...............................      15,000       3.32-4.98        3.32           6.21
                                                                     243,350       4.98-7.47        6.60           8.02
                                                                      10,000      7.47-11.21        8.00           6.79
                                                                      65,000     11.21-15.56       15.56           9.85
                                                                  -----------
                                                                     333,350                        8.24           8.26
                                                                  -----------
                                                                  -----------

Options Exercisable:............................................      15,000       3.32-4.98        3.32
                                                                     158,651       4.98-7.47        6.60
                                                                      10,000      7.47-11.21        8.00
                                                                      21,710     11.21-15.56       15.56
                                                                  -----------
                                                                     205,361
                                                                  -----------
                                                                  -----------
</TABLE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                      36
<PAGE>

WARRANT AGREEMENTS

    In consideration of entering into a credit agreement with its lender in 
January 1996, the Company issued the lender a warrant to purchase 50,000 
shares of the Company's common stock for $5.95 per share, which was the 
approximate market value of the Company's common stock at the date of the 
transaction. These warrants expire in 2005. The holder of the warrant has the 
option to exercise a portion of the warrant in a cashless transaction by 
surrendering the remaining portion of the warrant as defined.

    In consideration of the purchase of its 10% Subordinated Notes due 
December 10, 2000, the Company issued the holder of the Note three-year 
warrants to purchase 42,000 shares of common stock for $7.50 per share, which 
was the approximate market value of the Company's common stock at the date of 
the transactions. The holder of the warrant has the option to exercise a 
portion of the warrant in a cashless transaction by surrendering the 
remaining portion of the warrant as defined.

    In consideration of the purchase of its 10% Subordinated Notes due 
December 10, 1998, the Company issued the holder of the Notes three-year 
warrants to purchase 60,000 shares of common stock for $17.875 per share, 
which was the approximate market value of the Company's common stock at the 
date of the transactions.

    In consideration of the Second Amendment to the Credit Agreement the 
Company issued to their lender a warrant to purchase 25,000 shares of common 
stock of the Company at the average fair market value for the ten days ended 
December 29, 1997.

PRO FORMA STOCK-BASED COMPENSATION EXPENSE

    In October 1995, FASB issued SFAS No. 123, "Accounting for Stock-Based 
Compensation," which sets forth a fair-value based method of recognizing 
stock-based compensation expense. As permitted by SFAS No. 123, the Company 
has elected to continue to apply APB No. 25 to account for its stock-based 
compensation plans. Had compensation cost for awards in 1997 and 1996 under 
the Company's stock-based compensation plans been determined based on fair 
value at the grant dates consistent with the method set forth under SFAS No. 
123, the effect on the Company's net income and earnings per share would have 
been as follows:
 
In thousands except per share amounts

                                                          1997         1996
                                                        ---------    ---------
Net Income (Loss).....................................   $ 1,482     $ (3,037)
  As reported.........................................     1,373       (3,100)
  Pro forma...........................................
Primary/fully diluted earnings per share:
  As reported.........................................   $  0.30     $  (0.64)
  Pro forma...........................................      0.28        (0.65)


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                       37

<PAGE>

    Because the method prescribed by SFAS No. 123 has not been applied to
options granted prior to October 1, 1995, the resulting pro forma compensation
expense may not be representative of the amount to be expensed in future years.
Pro forma compensation expense for options granted is reflected over the vesting
period; therefore future pro forma compensation expense may be greater as
additional options are granted.
 
    The fair value of each option granted was estimated on the grant date using
the Black-Scholes option pricing model with the following weighted average
assumptions: risk-free interest rates of 6.19% to 6.21% and5.38% to 6.50% for
1997 and 1996, respectively, expected life of 10 years, expected volatility of
51% and 54% for 1997 and 1996, respectively.
 
9. PENSION PLAN
 
    The Company has a defined benefit pension plan designed to provide
retirement benefits to all employees. This plan provides pension benefits that
are based on the employee's salary and years of service. The Company's policy is
to fund the plan at a level within the range required by applicable regulations.
 
    The Company's net pension cost for 1997, 1996, and 1995 was $375,000,
$281,000, and $165,000, respectively. During 1997, the Company used the weighted
average discount rate of 8.0%. Net pension cost for the Company's defined
benefit plan included the following components:

<TABLE>
<CAPTION>

                                                                                1997            1996           1995
                                                                              ----------    -----------   -------------
<S>                                                                           <C>           <C>           <C>
Service cost - benefits earned during the period.......................      $   308,000    $   183,000    $   155,000
Interest cost on projected benefit obligation..........................        1,056,000      1,022,000        954,000
Actual return on plan assets...........................................       (1,570,000)      (932,000)      (985,000)
Net amortization and deferral..........................................          581,000          8,000         41,000
                                                                             ------------    ----------     ----------
Net pension cost.......................................................      $   375,000     $  281,000     $  165,000
                                                                             ------------    ----------     ----------
                                                                             ------------    ----------     ----------
  Assumptions used in determining the plan's funded status:  
  Discount rate.......................................................               8.0%           8.0%           8.0%
  Expected rate of increase in compensation levels....................               5.5%           5.5%           5.5%
  Expected long-term rate of return on assets.........................               8.5%           8.5%           8.5%

</TABLE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


                                  38

<PAGE>

    The following table sets forth the plan's funded status as of September 30,
1997, and September 30, 1996:
                                                  1997                 1996
                                           ----------------    ---------------
    Vested benefit obligation............  $   (12,421,000)    $   (11,869,000)
    Accumulated benefit obligation.......      (12,456,000)        (11,884,000)
    Projected benefit obligation.........      (14,164,000)        (13,654,000)
    Plan assets at fair value............       14,418,000          12,517,000
    Funded status........................          254,000          (1,137,000)
    Unrecognized prior service costs.....           89,000              98,000
    Unrecognized net loss................        1,698,000           2,392,000
                                           ----------------    ---------------
    Prepaid pension cost.................   $    2,041,000     $     1,353,000
                                           ----------------    ---------------
                                           ----------------    ---------------

    Plan assets are invested under the provision of a trust agreement with a
bank in common trust funds.
 
10. POST RETIREMENT BENEFITS
 
    Effective the beginning of fiscal 1994 the Company adopted Statement of
Financial Accounting Standards No. 106 ("SFAS 106"), "Employers' Accounting for
Post retirement Benefits Other Than Pensions". The statement requires companies
to accrue the cost of post retirement health care and life insurance benefits
within the employees' active service periods.
 
    The Company provides employees who retired from the Company prior to January
1, 1993, with at least ten years of service and under the age of 65, with Group
Health Insurance on a cost-sharing basis. Coverage for an employee's spouse or
dependents will also continue under this plan until the employee has reached age
65 at which time, the coverage ceases. In addition, the Company provides the
same employees who are at least 62 years of age with life insurance equal to
their ending annual salary up to a maximum of $50,000.
 
    For employees who retire after January 1, 1993, the post-retirement benefits
do not include health insurance. In addition, the life insurance benefit, up to
a maximum of $50,000, is provided for one year after retirement.
 
    The accumulated benefit obligation of these benefits as of September 30,
1997, is approximately $767,000 ($5,000 for medical insurance and $762,000 for
life insurance). Plan assets of $401,000 in cash reserves are on hand with an
insurance company to partially cover the cost of the life insurance benefits.
The Company adopted the new standard prospectively as of October 1, 1993, and is
amortizing the transition obligation of $456,000, over three years for the
medical insurance benefits and fifteen years for the life insurance benefits.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                               39

<PAGE>

    Post retirement benefit expense for fiscal 1997,1996 and 1995 as follows:


<TABLE>
<CAPTION>

                                                                                1997            1996           1995
                                                                              ----------    -----------   -------------
<S>                                                                           <C>           <C>           <C>
Service cost of benefits earned........................................      $     1,000    $     1,000    $     1,000
Interest cost on liability.............................................           59,000         58,000         57,000
Return on plan assets..................................................          (12,000)       (12,000)       (10,000)
Amortization of transition obligation..................................           24,000         24,000         48,000
                                                                             ------------    ----------     ----------
Net postretirement benefit cost........................................      $    72,000     $   71,000     $   96,000
                                                                             ------------    ----------     ----------
                                                                             ------------    ----------     ----------
</TABLE>
 
    The following table sets forth the Benefit Plan's funded status as of
September 30, 1997 and September 30 1996:

<TABLE>
<CAPTION>

                                                                                1997            1996
                                                                            -----------     ------------
<S>                                                                        <C>              <C>
Accumulated Post Retirement Benefit obligation..........................    $  (767,000)     $  (758,000)
Plan Asset at Fair Value................................................        401,000          401,000
                                                                            -----------     ------------
Funded Status...........................................................    $  (366,000)     $  (357,000)
Transition obligation...................................................        267,000          266,000
                                                                            -----------     ------------
Accrued Post Retirement Benefit Cost....................................    $   (99,000)     $   (91,000)
                                                                            -----------     ------------
</TABLE>

    The following actuarial assumptions were used:
 
<TABLE>
<CAPTION>

                                                                                1997         1996           1995
                                                                              --------    ----------     ---------
<S>                                                                           <C>           <C>           <C>
Salary increase..........................................................        5.5%          5.5%          5.5%
Discount rate............................................................        8.0%          8.0%          7.0%
Return on Assets.........................................................        3.0%          3.0%          3.0%
Medical Inflation........................................................        4-9%          4-9%         10.0%

</TABLE>


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                    40

<PAGE>

11. COMMITMENTS AND CONTINGENCIES EXPANSION

EXPANSION
 
    The Company is expanding its facilities by adding new equipment and 
modifying manufacturing floor space to accommodate changing product lines and 
customer demands. The Company anticipates that this will require capital 
expenditures totaling approximately $2,000,000 during fiscal 1998. These 
capital needs will be funded through cash flow from operations, shareholder 
notes and long-term debt. There is no guarantee that the Company will be able 
to obtain adequate financing at acceptable terms to meet these needs.
 
WASTE DISPOSAL
 
    In the process of manufacturing depleted uranium products, the Company 
generates low-level radioactive waste (LLRW) that must be disposed of at 
sites licensed by federal, state, and local governments. At present, there is 
one licensed commercial repository in the United States available for use by 
the Company. For LLRW originating in Concord, no site currently exists and 
provisions have been made to accommodate interim storage. State government 
has the responsibility to implement the provisions of the federal Low-Level 
Waste Policy Amendments Act and provide a state solution for Massachusetts 
companies that generate this type of waste. Management is of the opinion that 
an extended period of storage can be accommodated within existing buildings 
and in an environmentally safe manner acceptable to all regulatory agencies 
until such time as an acceptable site is identified.
 
HOLDING BASIN FACILITY
 
    For a number of years, ending in 1985, the Company disposed of 
manufacturing-related depleted uranium waste and the associated spent acid 
and other residual materials by neutralizing with lime and discharging the 
neutralized mixture to a holding basin on its premises in Concord, 
Massachusetts. In 1986 the holding basin was covered with hypalon, an 
impervious material used to prevent rain and surface run-off water from 
leaking through the holding basin. The Company now uses a proprietary "closed 
loop" process that it developed to discontinue such discharges. The Company 
believes that both practices were and are in compliance with all applicable 
regulations.
 
    The Company is required to maintain certain licenses issued by the 
Massachusetts Department of Public Health ("DPH") and the South Carolina 
Department of Health and Environmental Control ("DHEC") in order to possess 
and 

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                      41

<PAGE>

process depleted uranium materials at its facilities in Massachusetts and 
South Carolina, respectively. Under applicable licensing regulations 
pertaining to decommissioning and disposal of certain hazardous materials 
("D&D") at licensed sites, the Company submitted to the Nuclear Regulatory 
Commission ("NRC") and the applicable state agencies a Decommissioning 
Funding Plan ("DFP") to provide for possible future decommissioning of its 
facilities. The Concord Facility DFP estimated cost is $11.7 million and the 
Barnwell Facility DFP estimates is $2.9 million. The Company is required to 
provide financial assurance for such decommissioning pursuant to applicable 
regulations. The Company has satisfied these requirements and as a result, 
the site licenses for both locations have been renewed.
 
    Substantially all of the depleted uranium materials to which the DFP 
requirements apply were processed by the Company for the United States 
Government. Based on the terms of certain contracts that the Company entered 
into with the United States Government to process such depleted uranium 
materials, the Company believes that such materials continue to be owned by 
the United States Government and that the United States Government is 
obligated, under applicable law, to pay for its percentage of eventual D&D. 
The Company's DFP reflect its position that it is obligated to provide 
financial assurance only with respect to the portion of the materials which 
are attributable to the Company's commercial production for parties other 
than the United States Government and that this obligation has been satisfied 
by a letter of credit to each geographic locations regulatory agency.
 
    The United States Army, in a memorandum of Decision dated September 13, 
1996, determined pursuant to Public Law 85-804, that it should fund 
remediation of the Concord holding basin site as well as D&D related to the 
Concord facility, based in part on the Army's determination that the 
Company's activities are essential to the national defense. The United States 
Army has issued a fixed price contract, for approximately $6.2 million for 
remediation of the holding basin and the Company entered into a fixed price 
contract with a contractor to perform this remediation. This work is expected 
to continue into the first half of fiscal 1998. The Company's contract with 
the contractor is fixed price based on a specified volume of waste to be 
removed from the basin and delivered to a burial site. If the volume of the 
material removed exceeds the specified level then the Company is 

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                      42

<PAGE>

obligated to pay an additional fee per cubic yard of excess material removed. 
Based on the current estimates, management believes that the amount of 
material to be removed will not exceed the specified amount and that the 
fixed price contract issued by the United States Army will be adequate to 
fully fund the remediation of the basin. The Army has provided written 
assurances (subject to funding appropriations) of its intention to provide 
funding for D&D costs at the Concord facility in addition to the Basin under 
future contracts or, in the event that no future contracts were awarded 
(which the Army has indicated is unlikely in view of its current plans). 
under an existing contract. D&D costs for the Company's CMI facility are 
adequately covered by the existing letter of credit, which is currently in 
place to assure funding for potential D&D obligations to date. The Company 
has no written assurance that the Army will accept responsibility for the 
share of the estimated cost of D&D at its South Carolina facility which 
directly resulted from production work under U.S. government contracts on 
government supplied materials. However, based on the advice of legal counsel, 
management believes that the Army is responsible for its estimated share of 
D&D.
 
LEGAL PROCEEDINGS
 
    On December 9, 1997, Brush Wellman, Inc. ("Brush Wellman") filed a patent 
infringement suit against Starmet Corporation in United States District Court 
for the District of Massachusetts (Case No. 97-12705-RCO) alleging that the 
Company is infringing a patent awarded to Brush Wellman for the investment 
casting of aluminum beryllium alloys. Brush Wellman currently holds U.S. 
Patent No. 5,642,773 entitled "Aluminum Alloys Containing Beryllium and 
Investment Casting of Such Alloys." Brush Wellman is seeking an injunction of 
the Company's alleged patent infringement, monetary damages (including treble 
damages) and attorney fees. The Company has been advised by patent counsel 
that Brush Wellman's claims are without merit and that Brush Wellman's patent 
is invalid. The Company's answer to Brush Wellman's complaint is due December 
30, 1997 and the Company intends to challenge the validity of Brush Wellman's 
patent, deny any patent infringement by the Company and assert counterclaims 
against Brush Wellman.
 
12. TRANSACTIONS WITH RELATED PARTIES
 
    Under the terms of a management agreement, Matthews Associates Limited is 
entitled to an annual management fee.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                      43

<PAGE>

    George J. Matthews, Chairman of the Board of Directors, and a significant 
shareholder, is sole owner of Matthews Associates Limited. These fees, as 
well as certain expenses of Matthews Associates Limited that were reimbursed 
by the Company, have been included in selling, general, and administrative 
expenses. Management fees were $350,000 in 1997, 1996, and 1995. Mr. Matthews 
does not receive any other salary or fee for services as Chairman of the 
Board of Directors. Also see Note 6 for Notes Payable to Shareholders.
 
13. MAINTENANCE AND REPAIRS
 
    Maintenance and repair expenditures, which are charged to cost and 
expense as incurred, amounted to $1,536,000 in 1997, $1,092,000 in 1996, and 
$854,000 in 1995.
 
14. INDUSTRY SEGMENT INFORMATION
 
    The Company is engaged in the manufacture and sale of various specialty 
metal products. The Company operates in three industry segments: Uranium 
Services and Recycle, Specialty Metal Products, and Depleted Uranium 
Penetrators.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                      44  
<PAGE>

    Information relating to the Company's operations for the industry 
segments described above for each of the three years in the period ended 
September 30 is as follows:

   
                                            1997         1996          1995

Net Sales and Contract Revenues:        
  Uranium Services & Recycle..........  $ 4,965,000   $ 6,189,000   $ 4,969,000
  Specialty Metal Products............   13,170,000    13,730,000    12,102,000
  Depleted Uranium Penetrators........    9,927,000     8,775,000     1,713,000
                                        -----------   -----------   -----------
    Total.............................  $28,062,000   $28,694,000   $18,784,000
                                        -----------   -----------   -----------
                                        -----------   -----------   -----------

Operating Income (Loss):
  Uranium Services & Recycle.........   $ 1,195,000   $(2,700,000)  $(996,000)
  Specialty Metal Products...........       391,000     1,432,000    (341,000)
  Depleted Uranium Penetrators.......       575,000      (942,000)   (237,000)
                                        -----------   -----------   -----------
    Subtotal.........................     2,161,000    (2,210,000)  (1,574,000)

General Corporate Expenses...........       350,000       350,000      350,000
                                        -----------   -----------   -----------
Net Operating Income(Loss)...........     1,811,000    (2,560,000)  (1,924,000)
                                        -----------   -----------   -----------
Other Expense, Net...................       298,000       476,000       118,000
                                        -----------   -----------   -----------
Income (Loss) Before Taxes...........   $ 1,513,000   $(3,036,000)  $(2,042,000)
                                        -----------   -----------   -----------
                                        -----------   -----------   -----------

Identifiable Assets:
  Uranium Services & Recycle.........   $12,846,000   $13,749,000   $16,609,000
  Specialty Metal Products...........     8,199,000     6,195,000     5,140,000
  Depleted Uranium Penetrators.......     7,691,000     8,441,000    12,158,000
  Corporate..........................     5,968,000     6,733,000     6,979,000
                                        -----------   -----------   -----------
    Total............................   $34,704,000   $35,118,000   $40,886,000
                                        -----------   -----------   -----------
                                        -----------   -----------   -----------

Depreciation and Amortization Expenses:
  Uranium Services & Recycle.........   $   492,000   $   430,000   $   404,000
  Specialty Metal Products...........       275,000       291,000       251,000
  Depleted Uranium Penetrators.......       498,000       519,000       443,000
  Corporate..........................       323,000       254,000       241,000
                                        -----------   -----------   -----------
    Total............................   $ 1,588,000   $ 1,494,000   $ 1,339,000
                                        -----------   -----------   -----------
                                        -----------   -----------   -----------

Capital Expenditures:
  Uranium Services & Recycle.........   $   627,000   $   379,000   $   325,000
  Specialty Metal Products...........       746,000       436,000        85,000
  Depleted Uranium Penetrators.......         6,000        77,000         6,000
  Corporate..........................       409,000       557,000       361,000
                                        -----------   -----------   -----------
    Total............................   $ 1,788,000   $ 1,449,000   $   777,000
                                        -----------   -----------   -----------
                                        -----------   -----------   -----------

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
    

                                      45

<PAGE>

    The Uranium Services and Recycle segment includes the manufacture of 
depleted uranium products (non-penetrator) and the recycle of low level 
radioactive metal. The Specialty Metal Products segment includes a large 
assortment of metal products fabricated using foundry, extrusion, and 
machining capabilities including commercial depleted uranium products and 
involves the production and sale of various metal powders manufactured by the 
Company's patented Rotating Electrode Process. Operations in the Depleted 
Uranium Penetrator industry segment include the production of various 
penetrators (a component of armor-piercing ammunition used in certain U.S. 
military gun systems) which are sold to a department of the U.S. Department 
of Defense (DOD), to prime contractors manufacturing such ammunition for the 
DOD or to foreign military operations. Revenues derived from contract 
research and development activities have been included in the above segments 
based on the nature of the product.
 
    Net sales and contract revenues by industry segment include sales to 
unaffiliated customers (intersegment sales are not significant). A 
significant portion of the Company's revenues has been derived from five 
major customers (see Note 1). Sales to United States Enrichment Corporation 
are included in the Uranium Services & Recycle industry segment. Sales to 
Royal Ordnance and Primex Technologies are included in the depleted Uranium 
Penetrators industry segment. Sales to Lockheed Martin and Lockheed Idaho 
Falls are included in the Speciality Metal Products industry segment.
 
    Due to the utilization among segments of common production facilities and 
equipment and the involvement of a single management organization in all 
phases of the Company's operations, necessary allocations have been made 
based on estimates which management believes to be reasonable.
 
    Operating income includes net sales and contract revenues less operating 
expenses allocated to the individual segments. General corporate expenses 
represent expenses which are not of an operating nature and, therefore, are 
not allocable to industry segments.
 
    Identifiable assets shown include accounts receivable, inventory, and 
plant and equipment that have been allocated to each of the Company's 
industry segments. Corporate assets consist primarily of cash and other 
assets.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                      46
<PAGE>

15. QUARTERLY RESULTS (UNAUDITED)
 
    Financial results by quarter for 1997, 1996 and 1995 are summarized below

<TABLE>
<CAPTION>
                                      First            Second           Third           Fourth
                                     Quarter           Quarter         Quarter          Quarter
                                   ---------          ----------      --------         ----------
<S>                                <C>               <C>               <C>             <C> 
1997                         
Net Sales.......................     $ 7,271          $ 5,342          $ 7,013         $ 8,436
Operating Income (Loss).........         566              173              399             673
Net Income (Loss)...............         509              109              293             571
Net Income (Loss) per share.....        0.10             0.02             0.06            0.12

1996
Net Sales.......................     $ 6,671          $10,021          $ 6,434           5,568
Operating Income (Loss).........         198              287              523          (3,568)
Net Income (Loss)...............         109              238              249          (3,633)
Net Income (Loss) per share.....        0.02             0.05             0.05           (0.76)

1995
Net Sales.......................     $ 5,626          $ 4,213          $ 3,753         $ 5,191
Operating Income (Loss).........         220           (1,355)              45            (834)
Income (Loss) before
  extraordinary item............         121             (300)              39              65
Extraordinary gain on 
  extinguishment of debt........          --              585               --              --
Net Income......................         121              285               39              65
Per share amounts:
Income (Loss) before
  extraordinary item............        0.03            (0.06)            0.01            0.01
Extraordinary gain on 
  extinguishment of debt........          --             0.12               --              --
Net Income per share............        0.03             0.06             0.01            0.01

</TABLE>

    During 1997 the Company reduced certain accruals by $1,750,000 for site 
remediation and waste burial costs, $670,000 in the second quarter and 
$1,080,000 in the fourth quarter. Also during 1997 the Company had reduced 
inventory reserves by $1,000,000, $90,000 in the first quarter, $650,000 in 
the second quarter and $260,000 in the fourth quarter.

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                 47

<PAGE>

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF STARMET CORPORATION :
 
    We have audited the accompanying consolidated balance sheets of Starmet 
Corporation (formerly know as Nuclear Metals, Inc.) (a Massachusetts 
corporation) and subsidiaries as of September 30, 1997 and 1996 and the 
related consolidated statements of operations, stockholders' equity and cash 
flows for each of the three years in the period ended September 30, 1997. 
These financial statements are the responsibility of the Company's 
management. Our responsibility is to express an opinion on these financial 
statements based on our audits.
 
    We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement. An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements. 
An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the overall 
financial statement presentation. We believe that our audits provide a 
reasonable basis for our opinion.
 
    In our opinion, the financial statements referred to above present 
fairly, in all material respects, the financial position of Starmet 
Corporation and subsidiaries as of September 30, 1997 and 1996, and the 
results of their operations and their cash flows for each of the three years 
in the period ended September 30, 1997 in conformity with generally accepted 
accounting principles.
 
ARTHUR ANDERSEN LLP
 
Boston, Massachusetts 
November 14, 1997 
(except with respect to the matters
discussed in Note 6 and 11 as to which
the date is December 29, 1997)

                                  48

<PAGE>

                            COMMON STOCK INFORMATION
 
    The Company's common stock is traded on the NASDAQ Market under the 
symbol STMT. As reported by a principal market maker for the stock, the high 
and low bid prices for the three years ended September 30 are reflected in 
the following table. This information reflects inter-dealer prices, without 
retail mark-up, mark-down or commissions and may not represent actual 
transactions.
 
    As of September 30, 1997, there were approximately 300 holders of record 
of the Company's Common Stock. The Company believes the actual number of 
beneficial owners of the Company's Common Stock is greater because a large 
number of shares are held in custodial or nominee accounts.
 
    The Company did not declare any cash dividends during its last two fiscal 
years. Given the Company's current cash flow situation, the Company does not 
expect to pay cash dividends in the next year. Future cash dividends, if any, 
would be paid on an annual basis, the amount of which is subject to the 
determination and approval of the Company's Board of Directors. The Company's 
loan agreement with a bank prohibits the declaration of dividends without the 
bank's consent.
 
HEADQUARTERS
2229 Main Street, Concord, Massachusetts 01742
 
STARMET CMI
Highway 80, Barnwell, South Carolina 29812
 
TRANSFER AGENT AND REGISTRAR
State Street Bank & Trust Company
225 Franklin Street, Boston, Massachusetts 02110
 
AUDITORS 
Arthur Andersen LLP
225 Franklin Street, Boston, Massachusetts 02110
 
ANNUAL MEETING

   The annual meeting of stockholders will be held on March 
18, 1998 at 10:00 A.M. at the offices of State Street Bank & Trust Company, 
225 Franklin Street, Boston, Massachusetts 02110.
 
FORM 10-K 

    The Company's Annual Report on Form 10-K as filed with the Securities and 
Exchange Commission will be provided without charge to shareholders on 
written request. Request should be directed to the Vice President, Finance 
and Administration, Starmet Corporation, 2229 Main Street, Concord, 
Massachusetts 01742.
 
<TABLE>
<CAPTION>
    1997*        HIGH        LOW
-------------  ---------  ---------
<S>            <C>        <C>
  1st Quarter     10 3/4      7 1/4
  2nd Quarter     17 5/8      9
  3rd Quarter     18 1/2     14
  4th Quarter     19         14 1/2
</TABLE>
 
<TABLE>
<CAPTION>
    1996*        HIGH        LOW
-------------  ---------  ---------
<S>            <C>        <C>
  1st Quarter      7          5 1/4
  2nd Quarter     10 1/2      5 1/2
  3rd Quarter      9 1/4      6 3/4
  4th Quarter      9 3/8          6
</TABLE>
 
<TABLE>
<CAPTION>
    1995*        HIGH        LOW
-------------  ---------  ---------
<S>            <C>        <C>
  1st Quarter      9          6 5/8
  2nd Quarter      8 3/8      5 3/4
  3rd Quarter      7 1/4      5 3/4
  4th Quarter      7 1/8      5 1/2
</TABLE>
 
------------------------
 
*Adjusted to reflect 2 for 1 stock split in the third quarter of fiscal 1997.
 
(CORPORATE)DIRECTORY 
BOARD OF DIRECTORS 
George J. Matthews, CHAIRMAN 
Wilson B. Tuffin, VICE CHAIRMAN 
Robert E. Quinn, PRESIDENT 
Frank H. Brenton, CHAIRMAN MARSHALL'S INCORPORATED, RETIRED 
Kenneth A. Smith, PROFESSOR OF CHEMICAL ENGINEERING 
MASSACHUSETTS INSTITUTE OF TECHNOLOGY 

EXECUTIVE OFFICERS AND CORPORATE STAFF 
George J. Matthews, CHAIRMAN OF THE BOARD OF DIRECTORS, 
CEO AND TREASURER 
Wilson B. Tuffin, VICE CHAIRMAN OF THE BOARD OF DIRECTORS
Robert E. Quinn, PRESIDENT 
Kevin R. Raftery, PRESIDENT STARMET COMCAST & AEROCAST
Douglas F. Grotheer, PRESIDENT STARMET CMI
William T. Nachtrab, VICE PRESIDENT, TECHNOLOGY & ENGINEERING
James M. Spiezio, VICE PRESIDENT, FINANCE AND ADMINISTRATION
Bruce E. Zukauskas, VICE PRESIDENT, OPERATIONS
James H. Scarboro, VICE PRESIDENT, MARKETING
Frank J. Vumbaco, VICE PRESIDENT, HEALTH/SAFETY AND CORPORATE COMMUNICATIONS
Thomas A. Wooters, CLERK
Rebecca L. Perry, CONTROLLER