SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

     (Mark One)

/X/   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934 for the fiscal year ended September 30, 1999

                                       or

      Transition Report Pursuant to Section - or 15(d) of the Securities
      Exchange Act of 1934 for the transition period from to

                           COMMISSION FILE NO. 0-8836

                               STARMET CORPORATION
             (Exact name of Registrant as specified in its charter)

          MASSACHUSETTS                                   04-2506761
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                        Identification No.)

                                2229 MAIN STREET
                          CONCORD, MASSACHUSETTS 01742
               (Address of Principal Executive Offices) (Zip Code)

                                 (978) 369-5410
              (Registrant's telephone number, including area code)


           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                          Common Stock ($.10 Par Value)
                                (Title of Class)

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

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

The  aggregate  market  value  of the  Common  Stock of the  Registrant  held by
non-affiliates  (i.e.  persons  who are not  executive  officers,  directors  or
greater than 10% shareholders) was approximately  $12,677,282 as of November 30,
1999.

As of November 30, 1999,  there were issued and outstanding  4,795,674 shares of
the Registrant's Common Stock.
<PAGE>

                                     PART I


Forward Looking and Cautionary Statements

Except  for  the  historical   information  and  discussions  contained  herein,
statements  contained  in  this  Form  10-K,   including,   without  limitation,
statements  incorporated  herein by reference,  may constitute  "forward looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995. The Company may also make  forward-looking  statements in other reports
filed with the Securities  and Exchange  Commission,  in materials  delivered to
stockholders and in press releases. In addition,  the Company's  representatives
may from time to time make oral forward-  looking  statements.  Without limiting
the generality of the foregoing, the words "believes," "anticipates," "intends,"
"plans,"   "expects,"   and  similar   expressions   are  intended  to  identify
forward-looking  statements.  Such  forward-looking  statements  are  based on a
number of  assumptions  and  involve a number of risks and  uncertainties,  and,
accordingly,  actual results could differ materially from those projected in the
forward-looking statements. Factors that may cause such differences include, but
are not limited to, the factors  described in Item 7,  "Management's  Discussion
and Analysis of Financial Condition and Results of Operations."


ITEM 1. BUSINESS


General

Starmet   Corporation   (the  "Company"  or  "Starmet"),   was  incorporated  in
Massachusetts on July 31, 1972 as Nuclear Metals,  Inc., and changed its name on
October 1, 1997.  Effective fiscal year 1998, the Company  reorganized,  forming
four new wholly-owned  subsidiaries:  Starmet NMI Corporation,  Starmet Powders,
LLC, Starmet Comcast,  LLC and Starmet  Aerocast,  LLC.  Additionally,  Carolina
Metals Inc., the Company's wholly-owned subsidiary in Barnwell,  South Carolina,
was renamed Starmet CMI, Inc. Unless the context otherwise requires,  references
to the Company herein are intended to refer to the Company and its subsidiaries.

The Company is engaged in  manufacturing  a variety of specialty  metal products
using sophisticated  metallurgical  technology and metalworking  processes.  The
Company operates in four industry segments:  (1) fabrication of an assortment of
specialty  metal  products,  primarily  from depleted  uranium,  using  foundry,
extrusion,  and machining  capabilities;  (2) uranium  services and recycling of
low-level contaminated steel; (3) manufacture of high-purity, spherically shaped
metal powders;  and (4)  manufacture of  Beralcast(R),  the Company's  family of
beryllium aluminum,  metal matrix composites ("MMC") for use in certain advanced
commercial and aerospace applications.


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<PAGE>

Industry Segment Financial Information

The  following  table sets forth  certain  information  regarding  the  revenue,
operating  income  (loss)  and  identifiable  assets  attributable  to the  four
industry segments in which the Company operates.

                                                Year Ended September 30,
                                   ---------------------------------------------
                                     1999             1998              1997
                                   ---------       ----------       -----------
                                                  (as restated)    (as restated)
                                                 (in thousands)
Net Sales and Contract Revenues:
  Specialty Metal                  $  9,472        $ 18,845          $ 14,459
  Uranium Services and Recycle        7,472           5,905             4,965
  Powders                             5,406           5,078             4,348
  Composite Materials                 2,651           4,995             4,290

Operating Income (Loss):
  Specialty Metal                  $    762        $ (2,881)         $     50
  Uranium Services and Recycle       (1,038)        (11,519)            2,675
  Powders                             1,543             184               625
  Composite Materials                (2,200)         (3,546)           (2,539)

Identifiable Assets:
  Specialty Metal                  $  1,237        $  2,270          $  2,126
  Uranium Services and Recycle        9,115          10,458            13,964
  Powders                               929           1,052             1,221
  Composite Materials                 3,309           3,692             2,335

Segment  information  has been restated for 1998 and 1997 to be consistent  with
the 1999 presentation in accordance with SFAS No. 131.

See Note 15 of Notes to Consolidated Financial Statements.

The Company has no foreign  operations.  The  Company  has export  sales,  which
accounted  for 8%, 18% and 25% of net sales for the fiscal year ended  September
30, 1999, 1998 and 1997, respectively.

The following is a general description of the Company's four business segments:

Specialty Metal

Depleted  Uranium ("DU") is a dense,  heavy metal that is 67% heavier than lead.
Because  of  its  density  and  workability,  DU is an  effective  material  for
anti-armor  munitions,  or  penetrators,  and is used in several  United  States
government  and foreign  government  weapons  systems.  The U.S.  government has
funded and owns a portion of the  manufacturing  machinery and equipment used by
the  Company  for  producing  penetrators.  The  Company  continued  to  produce
penetrators  under a

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<PAGE>

production   contract  through  the  fourth  quarter  of  fiscal  1999.  Due  to
anticipated reduced U.S. government  procurement plans, the Company expects that
no revenues will be derived from DU penetrator operations after fiscal 1999.

The Company will  continue,  however,  under a multi-year  contract with Bechtel
BWXT Idaho,  to produce DU billets in support of the Army's tank armor  program.
This  contract  is  expected  to run  through  2001  subject  to annual  federal
government appropriations.  In addition, the Company continues to manufacture DU
industrial and medical shielding products.

Uranium Services and Recycle

Starmet develops and provides  products and services based upon its longstanding
metallurgical,  radiological and chemical  know-how,  including its expertise in
processing and converting uranium  hexafluoride (UF6) and its derivative uranium
tetrafluoride  (UF4)  into  products  that  can  be  utilized  in a  variety  of
specialized applications.

UF6 Conversion.  Starmet owns and operates the only production facility in North
America  capable of converting  natural UF6 and depleted UF6 into UF4.  Depleted
UF6 is a low-level  radioactive  by-product of the  enrichment of uranium.  From
UF4, the Company produces DU metal that it manufactures  into various  products.
In July 1998,  United States Enrichment  Corporation  ("USEC") awarded Starmet a
contract  with a maximum  value of $39  million,  of which $13  million has been
committed,  to convert UF6 to UF4.  Under the  contract,  USEC has the exclusive
right, during the first 32 months of the contract,  to negotiate with Starmet to
form a joint venture  company or similar  arrangement  in order to  commercially
exploit  business  opportunities  involving  the  utilization  of the  Company's
pending  patents on a new process to recover and  convert  fluorine  and related
products created by the conversion of UF4.

Fluorine  Mining.  The Company holds three U.S.  patents on a process to recover
and convert fluorine and related products from UF4 that is the by-product of UF6
conversion.  The United States  Department of Energy ("DOE") has stockpiled over
one  billion   pounds  of  UF6  which  Starmet   believes  must   eventually  be
dispositioned.  The Company is in phase two of a three phase development program
for the commercialization of fluorine recovery from UF6.

Counterweights.  Starmet operates an FAA-approved  facility in the United States
licensed to repair DU aircraft counterweights.  Aircraft counterweights are used
in wide body commercial and certain military  aircraft,  such as the Boeing 747,
DC-10 and L-1011, and are periodically  required to be refurbished.  The Company
refurbishes  DU  counterweights  for many  international  and domestic  carriers
flying wide body aircraft,  and has begun work on certain  military  aircraft as
well. The Company has a $6 million U.S. Air Force contract for the refurbishment
of C-141 aileron and elevator  assemblies  for the next four fiscal  years.  The
Company also has the capability to produce replacement counterweights.

AVLIS Feedstock.  The Company supplied DU and natural uranium alloy material for
use  as  AVLIS  feedstock  in  USEC's  AVLIS  program.  AVLIS  is a  laser-based
enrichment process that,  according to USEC, was expected to replace the current
gaseous diffusion process for producing  enriched fuel used in nuclear reactors.
The AVLIS program was cancelled by USEC in June 1999.

                                       4
<PAGE>

DUCRETE  Shielding.  The Company has received  exclusive  commercial  production
rights to a patented shielding product known as DUCRETE shielding,  which uses a
uranium  oxide  aggregate  mixed with  concrete  to form a  radiation  shielding
product.  The Company installed pilot facilities during 1997 to convert DU oxide
into high density DUCRETE shielding aggregate.  The Company is actively pursuing
a contract  with the DOE for  conversion  of uranium oxide into DU aggregate for
DUCRETE shielding  production.  To date, the Company has not received  contracts
for DUCRETE shielding products.

Powders

The Company  manufactures  certain metal  powders for niche markets  through its
proprietary  processes called the Rotating  Electrode Process ("REP(R)") and the
Plasma Rotating  Electrode  Process  ("PREP(R)"),  which produce spherical metal
particles  within a relatively  controllable  size range.  These metals  include
steel, titanium alloy and several nickel and cobalt-based alloys generally known
in the industry as specialty powders. Metal powders can be used effectively in a
variety  of  applications  where  exacting  sizes,  shapes and  cleanliness  are
important.  For example, clean cobalt, chrome and titanium powders, made through
PREP(R),  are used in medical implants to effectively bond prosthetic devices to
bone and tissue,  and uniform  steel  powders made  through  PREP(R) are used in
photocopiers,  sophisticated rapid prototyping applications,  and magnetic paint
for children's books,  wallpaper,  and toys.  Management  believes the Company's
metal powders offer performance advantages in these niche markets over competing
powders  because they are cleaner,  more  uniformly  spherical and have a higher
percentage  of particles  within a desired size range from a given amount of raw
material.


Composite Materials

Beralcast(R) is an investment-castable  and extrudable metal matrix composite of
beryllium  aluminum  designed for lightweight and high stiffness  structural and
electronic applications.

Defense & Commercial Aerospace.  Beralcast(R) components have been specified for
use on such high  performance  defense  applications  as the U. S. Army's RAH-66
Comanche helicopter program. In addition, the Company has manufactured prototype
parts  for  advanced  fighter  aircraft,  weapons,  navigational  and  targeting
systems.  Management  believes that its  Beralcast(R)  products  meet  demanding
performance  requirements for certain  applications  where stiffness,  vibration
damping, lightweight,  workability and material uniformity are critical, such as
the  Comanche  helicopter  program.  The Company  has  received  contracts  from
Lockheed Martin for several separate  Beralcast(R)  components to be used in the
night vision and target acquisition system on the Comanche  helicopter  program.
The qualities of Beralcast(R)  make it optimal for use in this type of aerospace
application  because  of  its  lightweight,   stiffness  and  vibration  damping
characteristics, which are required in the Army's latest version of night vision
and targeting  systems.  The U.S. Army has reported that without the benefits of
Beralcast(R), costs of the Comanche program would increase by approximately $300
million covering redesign and substitute materials.

In addition to the RAH-66  Comanche  applications,  Beralcast(R) is currently in
use on over twenty  different  defense  and  commercial  aerospace  applications
requiring  lightweight and high stiffness.



                                       5
<PAGE>

Many of these  programs are currently in the initial  prototype  phases and will
require significantly higher quantities once in the full production phase.

Computer Hard Disk Drives.  Using metal matrix  composites  ("MMC") of beryllium
aluminum,  hard disk  drive  designers  will  have the  ability  to  reduce  the
thickness of individual  arm sets in the disk stack and place  additional  disks
within  the  same  volume.   This  arm  set  thickness   reduction  will  enable
manufacturers to achieve increased  storage capacity while  maintaining  current
disk drive  dimensional  standards.  In addition,  the higher vibration  damping
properties of Beralcast(R),  which certain  customers have determined to be 6 to
10 times greater than aluminum,  significantly  increase data  retrieval  speeds
compared to conventional materials by facilitating higher disk rotational speeds
and  reducing  arm  vibration.  Using  these  properties  will enable disk drive
manufacturers to reduce the quantity of platters and the responding heads at the
same time increasing  storage  capacity.  Reducing  components in the drive will
provide  higher value to the customer and offset the  increased  cost of the MMC
arm set.  Furthermore,  Beralcast(R)  has lower  thermal  expansion  and is more
dimensionally stable than aluminum, characteristics that are critical in certain
next generation disk drive systems being developed to incorporate  laser-optical
technology.  Based in part upon input from customers concerning  performance and
component  requirements  for doubling data storage capacity in future disk drive
applications,  the Company  believes  Beralcast(R)  will be a critical aspect of
achieving  these goals.  The Company has produced  prototype and  pre-production
Beralcast(R)  disk drive arm sets for  evaluation by several of the leading disk
drive  manufacturers.  Certain  leading  disk drive  manufacturers  have  funded
research, development,  prototype work and production tooling to support initial
production plans.

The company recently introduced a lower cost version of is original Beralcast(R)
composite material  containing less beryllium.  These alloys called Beralcast(R)
MGA are custom  formulated to match customers cost and performance  requirements
by increasing or decreasing the beryllium  content.  Since  Beralcast(R) MGA was
introduced last year, four customers have placed  prototype orders for material,
which were  fabricated  into hard disk drive  assemblies.  These  customers  are
investigating  the  introduction  of this product into their next  generation of
high performance products.

To meet the anticipated  demand,  the company has entered a joint  manufacturing
agreement  with a leading  manufacturer  of aluminum  actuators.  This  company,
Alexandria  Extrusion  Company  (AEC) of  Alexandria,  MN has  demonstrated  its
capabilities to manufacture Beralcast(R) MGA into precision extrusions for their
current hard disk drive  customers.  The Company and AEC have  selected an Asian
contract  manufacturer  to support the  anticipated  increase in demand for this
next generation hard disk drive actuator material.

Commercial  Motion  Control  Applications.  The Company is  currently  producing
production  quantities of Beralcast(R)  investment castings for use in precision
mechanical   systems   supporting  the   semiconductor   manufacturing   market.
Beralcast(R),  which is 22% lighter  than  aluminum  and three times  greater in
stiffness,  has been  introduced  into  motion  control  applications  to enable
equipment  designers to increase their equipment  performance without increasing
the equipment size or volume.  This performance has enabled certain customers to
achieve up to 20%  increase  in Units per Hour  (UPH)  over  their  conventional
design.   Customers  are  continuing  to  investigate   existing  components  as
Beralcast(R) material substitution candidates. The Company is also investigating
other   commercial   applications,   which  would  benefit  from  the  increased
performance of Beralcast(R) alloys.

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<PAGE>

Sources of Raw Materials

Raw materials  used by the Company  include a number of metals and minerals used
to produce  its  products,  including  beryllium,  titanium,  aluminum,  nickel,
cobalt,  chromium and molybdenum,  among others. The Company currently purchases
beryllium,  a metal which is used to form some of its metal  matrix  composites,
principally  from a  producer-supplier  located in Kazakhstan  and from multiple
distributors  located in Estonia,  Kazakhstan,  Sweden, the United States, China
and Russia. The Company also purchases scrap beryllium from domestic and foreign
distributors.  The only three  producers of beryllium  worldwide  are located in
Kazakhstan,  the United States and China. The Company believes that a sufficient
supply of beryllium  remains available for its current demand.  However,  if its
MMC products  receive broad  commercial  acceptance,  the  Company's  demand for
beryllium will increase. The cost of beryllium could increase as a result of the
Company's  increased  demand,  and supplies of beryllium could also be affected.
Prices  of raw  materials  used by the  Company  can be  volatile,  which  could
significantly affect their availability and price. The Company has no long-term,
fixed price  contracts  or  arrangements  for the raw  materials  it  purchases.
Commercial metal deposits, such as beryllium, cobalt, nickel, titanium, chromium
and molybdenum, that are required for the alloys used in the Company's precision
castings  and  specialty  metal  powders,  are  found in only a few parts of the
world.

UF6, the raw material for DU products, is currently available in abundant supply
from DOE's inventory and from USEC's ongoing operations.

Manufacturing and Operations

Beralcast(R) is produced using a proprietary investment casting technology.  The
alloys are vacuum-induction melted and cast into pre-heated ceramic shells. Once
the casting has cooled sufficiently, the ceramic mold is removed and the casting
is cut from the gating and feed network.  The residual gating and feed materials
are recycled back into the casting process. The casting is subsequently finished
by  grinding,  deburring,  straightening,  welding  and  sandblasting  for final
inspection.  Following  inspection,  the  castings  are  delivered  to machining
facilities for finish machining into the final configuration.

The  investment  molds  used in the  process  are  produced  from a  formulation
developed specifically for Beralcast(R). These molds are fabricated using either
conventional  wax patterns or rapid  prototype  patterns.  Pursuant to a teaming
agreement   between  Starmet  and  Nu-Cast  Inc.,  a  producer  of  thin-walled,
lightweight  aluminum  castings,  the molds are  fabricated in  accordance  with
Starmet's specifications at Nu-Cast Inc. using a dedicated mold fabrication line
that was installed to support the manufacture of Beralcast(R)  investment molds.
To support the future growth of  Beralcast(R),  the Company intends to establish
ceramic mold manufacturing capabilities at its Concord facility.

The Company's Specialty Metal, Powders and Beralcast(R) activities are conducted
at a Company-owned site in Concord,  Massachusetts which comprises approximately
46 acres and  includes a 180,000  square feet  building  used for  manufacturing
activities, offices and warehousing.

The Company owns and operates a facility in Barnwell,  South Carolina located on
321 acres of land which  includes a 109,000  square  foot  facility  housing two
manufacturing  units (one unit


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<PAGE>

provides  the  capability  of  converting  UF6 to UF4 and a second unit houses a
reduction  process to convert UF4 to metallic depleted uranium) and a full-scale
analytical  laboratory,  and a 70,000  square  foot  facility,  adjacent  to the
manufacturing  facility,  to  provide  recovery  and  recycle  of DU  and  other
materials.

Research and Development Activities

The Company has on-going research and development  activities to support each of
its business segments.  The efforts in Beralcast(R)  products are focused on the
development of technology for producing shaped extrusions.  The Company believes
this technology will find  application in the production of disk drive actuators
and also for commercial and aerospace products.  For Powders products,  research
and  development  is focused on  producing  tubing from high  strength  titanium
alloys and on a new method for producing net shape parts from metal powders. The
Company is  continuing  with the  development  of its  technology  for  fluorine
recovery  from UF6. Work has been  successfully  completed on the first phase of
the three phase  development  program with better than  anticipated  results.  A
small  pilot  plant has been  installed  at the  Company's  Concord  facility to
further test and develop the process as part of the phase two effort.

The  Company  participates  in  certain  cooperative  research  and  development
activities through  arrangements with selected customers and government agencies
where there is potential for  utilizing  proprietary  technology or  specialized
resources not directly  available to the Company.  These  activities  are funded
both by the Company and through customer sponsored programs. The Company employs
a staff of six Ph.D. technologists with backgrounds in chemistry, mechanical and
metallurgical engineering to conduct research and new product development.

The  cost  for  Company-sponsored   research  and  development   activities  was
$1,243,000,   $1,421,000  and   $1,309,000  in  fiscal  1999,   1998  and  1997,
respectively.  Total revenues from customer-funded research and development were
$825,000, $831,000 and $793,000 in fiscal 1999, 1998 and 1997, respectively.

Sales and Marketing

The Company relies on a variety of marketing  strategies,  including advertising
and direct  sales.  Technical  papers given at industry  symposia,  presented by
Starmet and in conjunction with customers,  are also used as marketing  vehicles
for the Company's advanced metal products and services. In addition, the Company
has developed concurrent engineering procedures between customers, suppliers and
Starmet.  The  benefit  of  concurrent   engineering  is  to  provide  customers
cost-effective   solutions  to  product  designs  that  mitigate  technical  and
scheduling risks.

Sales  of MMC  products  at  present  are  made  directly  to  manufacturers  of
assemblies and systems.  The Company  markets its products  through a multi-step
process consisting of initial discussions of the products as well as engineering
and marketing  evaluations by the customer of sample material and  demonstration
products. In addition, the marketing strategy allows customers to use and market
Beralcast(R)  in the  relevant  application  and market and,  finally,  offers a
production program where expenditures are made on tooling, equipment and quality
control necessary to fulfill market requirements. The Company's sales and market
organization  consists  of sales  offices in Concord,

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<PAGE>

Massachusetts,  San Jose,  California,  and Barnwell,  South  Carolina and sales
representatives in Europe and Israel.

Patents, Trademarks and Licenses

The Company is actively pursuing patent  protection on new technologies  related
to new  products  and process  improvements  for all of the  Company's  business
segments.

The Company holds three U.S. patents on alloy  compositions for Beralcast(R) and
has applied for patent protection in Canada and Europe. The U.S. patents provide
patent rights through the year 2012. The Company also has one additional  patent
pending  covering  the  extrusion  of a metal  matrix  composite as a method for
producing disk drive actuators.

The Company holds three U.S.  patents which  provide  patent rights  through the
year 2018 on a process for recovering  fluorine from uranium  hexafluoride (UF6)
and the  production of fluoride  gases and  chemicals.  Four  additional  patent
applications are pending covering extensions of the technology to the production
of specific types of chemicals.

The Company holds a U.S. patent  relating to  developments in REP(R)  technology
for metal  powders  which  provides  patent  rights  through the year 2001 and a
second patent for a modified REP(R)  production  method to make fine ceramic and
metal  powders.  This patent  provides  patent rights through the year 2016. Two
patents are pending covering the production of millimeter size spherical silicon
balls and a method of producing metal parts from metal powders.

The Company has registered trademarks in the following names: REP(R), PREP(R)and
Beralcast(R).  The Company  has filed for  registration  with the United  States
Patent and  Trademark  Office for,  and is  asserting  common law rights in, its
mark: Starmet.

The Company believes that its current and anticipated businesses do not infringe
on any patent owned by others.

Significant Customers

A substantial  portion of the Company's  business is currently  conducted with a
relatively small number of large customers.  The Company's ten largest customers
accounted  for  approximately  72%,  67% and 78% of the  Company's  sales in the
fiscal years 1999,  1998 and 1997,  respectively.  While the  Company's  planned
expansion into new commercial markets may result in a substantial portion of its
revenues being derived from new  customers,  the dominance of a few companies in
certain  of these  targeted  markets  is  likely  to  continue  to  result  in a
substantial  portion of the Company's revenues being derived from a small number
of  significant  customers.  The  loss  of  one  of  its  key  customers  or any
significant  portion  of orders  from any such  customers  could have a material
adverse  affect on the  Company's  business,  results of operation and financial
condition.

USEC is the only customer of the Company's UF6  conversion  and AVLIS  feedstock
material.  The AVLIS program was  cancelled by USEC in June 1999.  AVLIS program
sales  amounted to $1,066,000 in fiscal 1999.  Sales to USEC  accounted for 23%,
14% and 14% of  sales  in  fiscal  1999,  1998,  and  1997  respectively.

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<PAGE>
Royal Ordnance,  a U.K.  defense  contractor,  is a significant  customer of the
Company's DU Specialty  Metal's  penetrator  business.  Sales to Royal  Ordnance
accounted  for 2%,  13%  and  19% of  sales  in  fiscal  1999,  1998,  and  1997
respectively.

Primex Technologies is also a significant customer of the Company's DU Specialty
Metal's penetrator business. Sales to Primex Technologies accounted for 11%, 12%
and 12% of sales in  fiscal  1999,  1998,  and 1997  respectively.  The  Company
provided Primex  Technologies  with 120mm penetrators for the U.S. Army's ABRAMS
Tank program through the fourth quarter of fiscal 1999.

Lockheed Martin is a significant customer of the Company's Beralcast(R) products
business. Sales to Lockheed Martin accounted for 5%, 11%, and 7% of sales during
fiscal 1999, 1998, and 1997 respectively.

Employee Relations

As of September 30, 1999, the Company  employed 144 employees.  No employees are
covered by any collective bargaining  agreements.  The Company believes that its
relationships with its employees are satisfactory.

Backlog

The Company's backlog was $22,686,000,  $27,532,000 and $27,654,000 at September
30, 1999, 1998 and 1997,  including the portions  thereof  represented by orders
from the Company's principal customers,  USEC, Royal Ordnance,  Primex, Lockheed
Martin,  Robins AFB, and Bechtel BWXT Idaho.  The Company believes all orders in
backlog are firm.  The Company  expects  that  approximately  50% of the backlog
orders  will be filled in the next  fiscal  year.  The  Company  has an unfunded
option under its USEC UF6 conversion  contract valued at $26 million that is not
included in backlog.

Environmental, Safety and Regulatory Matters

Materials  regularly  processed by the Company,  including  depleted uranium and
beryllium,  have  characteristics  considered to be health or safety  hazards by
various federal,  state and local regulatory  agencies.  The processing of these
materials requires a high level of safety  consciousness,  personnel  monitoring
devices  and special  equipment.  Depleted  uranium is a  low-level  radioactive
material,  and the Company is subject to government  licensing  and  regulation.
Depleted  uranium in the finely divided state,  such as grinding dust or machine
turnings,  is combustible at room  temperature and requires special handling for
safe operations and disposal of process wastes. Airborne beryllium in respirable
form, such as powder, dusts or mists generated in some manufacturing  processes,
can  represent  a hazard  to the  lungs  in  certain,  susceptible  individuals.
Processing  this  material  requires  use  of  extensive  ventilation  and  dust
collecting systems.

The  Company is  subject to  environmental  laws that (i) govern  activities  or
operations that may have adverse  environmental  effects,  such as discharges to
land,  air and water,  as well as handling  and  disposal  practices  for solid,
radioactive  and hazardous  wastes,  and (ii) impose  liability for the


                                       10
<PAGE>

costs of cleaning up, and certain damages  resulting from, sites of past spills,
disposals or other releases of hazardous  substances  and  materials,  including
liability  under CERCLA and similar  state  statutes for the  investigation  and
remediation of  environmental  contamination at properties owned and/or operated
by it and at  off-site  locations  where it has  arranged  for the  disposal  of
hazardous  substances.  In 1997, the Company's licenses at its Concord and South
Carolina  facilities  were  renewed  for a  period  of  five  years  subject  to
compliance with permitting conditions.

The presence and use in the  Company's  operations of materials  with  hazardous
characteristics  subjects  the  Company to  regulation  and  scrutiny by various
governmental  agencies.  Management  believes  that the Company is  presently in
compliance  in all material  respects  with  existing  federal,  state and local
regulations and has no knowledge of any threatened  governmental  action against
the Company for violations of any such laws, statutes or regulations,  except as
described  below.  However,  the potential  effects of evolving  legislation and
regulations affecting the Company's business cannot be predicted.

If it is  determined  that  the  Company  is  not  in  compliance  with  current
environmental  laws,  the  Company  could be  ordered  to  curtail  or cease its
operations and could be subject to fines and  penalties.  The amount of any such
fines and penalties  could be material.  In addition,  the Company uses depleted
uranium,  beryllium  and  other  hazardous  substances.  If a  release  of  such
hazardous  substances  occurs  on or from the  Company's  properties  or from an
off-site disposal  facility,  the Company may be held liable and may be required
to pay the cost of remedying  the  condition.  The amount of any such  liability
could be material and any such liability could have a material adverse effect on
the Company' business, results of operations and financial condition.

The Company has made,  and will  continue to make,  expenditures  to comply with
current and future  environmental  laws. The Company  anticipates  that it could
incur  additional  capital  and  operating  costs in the  future to comply  with
existing  environmental  laws and new  requirements  arising from new or amended
statutes  and  regulations.  In  addition,  because  the  applicable  regulatory
agencies   have  not  yet   promulgated   final   standards  for  some  existing
environmental  programs, the Company cannot at this time reasonably estimate the
cost for compliance with these additional  requirements.  The amount of any such
compliance  costs could be material and any additional  expenditures  related to
compliance,  if material,  would have a material adverse effect on the Company's
business,  results of operation  and  financial  condition.  The Company  cannot
predict  the impact  that future  regulations  will  impose  upon the  Company's
business.

In the process of manufacturing depleted uranium products, the Company generates
low-level radioactive waste materials that must be disposed of at sites licensed
by federal, state, and local governments.  The operation of these disposal sites
is at the discretion of these regulatory entities,  which may at times result in
temporary or long-term closures and limited access.

For a number of years,  ending in 1985,  the  Company  deposited  spent acid and
associated  depleted uranium waste and other residual  materials by neutralizing
them with lime and discharging the neutralized mixture to a holding basin on its
premises  in  Concord.  The Company  now uses a "closed  loop"  process  that it
developed to discontinue such discharges.  The Company has removed a substantial
quantity of hazardous  materials from the holding basin, and additional  actions
will  be  required  to  close  the  holding  basin  as  required  by  government
regulations.

                                       11
<PAGE>

Concord Site Remediation and Decommissioning Planning Requirements

The Company is required to maintain certain licenses issued by the Massachusetts
Department of Public Health ("DPH") and South Carolina  Department of Health and
Environmental  Control ("DHEC") in order to possess and process depleted uranium
materials  at  its  facilities  in  Massachusetts  and  South  Carolina.   Under
applicable   licensing    regulations    pertaining   to   Decommissioning   and
Decontamination  ("D&D") at licensed sites, the Company submitted to the Nuclear
Regulatory  Commission  ("NRC") (the predecessor of DPH, in this regard) 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 South Carolina  facility DFP estimate is
$2.9 million.  The Company is required to provide  financial  assurance for such
decommissioning  pursuant to applicable  regulations.  Substantially  all of the
depleted uranium materials to which the DFP requirements apply were processed by
the Company for the United States  Government.  The Company's  DFP's 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
location's  regulatory  agency.  However,  the  Company's  letters of credit are
subject to the agreement with its principal lender,  which expires on August 15,
2000. The Company has notified the U.S. Army that it is discontinuing penetrator
production and that it will cease using related government  furnished equipment.
Accordingly,  the U.S. Army and the Company are  negotiating the removal of such
equipment and the  decommissioning  and decontamination of the affected portions
of the  Company's  facilities.  The Company has submitted a proposal to the U.S.
Army  requesting  the  modification  and funding of an  existing  facilitization
contract,  which, in addition to other work proposed therein,  would provide the
Company  with  funding  to cover  some of the  estimated  D&D  costs,  which are
material. The Company is in the process of negotiating the contract modification
scope of work with the U.S.  Army,  but there is no assurance  that Army funding
will be  provided.  If this funding is not  provided,  the  Company's  business,
results of operation and financial  condition  would be materially and adversely
affected.

The United  States Army, in a Memorandum  of Decision  dated  September 13, 1996
(the "Army  Decision"),  pursuant to Public Law 85-804,  agreed to fund  certain
costs associated with remediation of the Company's Concord holding basin site as
well as some of the costs of D&D related to that facility,  based in part on the
Army's determination that the Company's activities are essential to the national
defense.  Additionally,  the  Company is  currently  performing  on a U.S.  Army
facilities  contract that obligates the Army to restore those facilities used in
the production of penetrators once the Company ceases DU penetrator production.

The United  States  Army has issued to the Company a fixed  price  contract  for
remediation of the holding basin and the Company entered into a subcontract with
Zhagrus  Environmental,  Inc.  ("Zhagrus")  to  perform  this  remediation.  The
Company's  contract  with Zhagrus is based on a specified  volume of waste to be
removed  from the  basin  and  delivered  to the  Envirocare  radioactive  waste
disposal site in Utah. The volume of the material removed exceeded the specified
level.  Under the Zhagrus contract,  the Company agreed to pay an additional fee
per cubic yard of excess  material  removed  dependant  upon certain  actions by
Zhagrus. In addition, Zhagrus has notified the Company that Zhagrus has incurred
additional  costs in  connection  with the  disposal  of the  material  from the
holding  basin as a result of the need to treat the material to meet

                                       12
<PAGE>

conditions for burial imposed by applicable environmental  regulations.  Zhagrus
has requested that the Company pay it any  additional  costs incurred by Zhagrus
as a result of such  additional  services.  On  November  4, 1998,  the  Company
received a written  claim from  Zhagrus for excess costs of  approximately  $5.0
million.  Zhagrus'  claim is the  subject of  litigation  described  in Item 3 -
"Legal Proceedings". If these costs are not recovered from the U.S. Army and the
Company is held  responsible for these costs, the Company would have no means to
finance  these costs,  and the  Company's  business,  results of  operation  and
financial  condition  would be materially  and adversely  affected.  The cost of
remediating the holding basin at its Concord, Massachusetts facility will exceed
the amounts  covered by the  Company's  fixed price  contract with the U.S. Army
(the "Army  Contract"),  by at least $1.7 million  which has been  recorded as a
liability  as of  September  30,  1998.  (The exact  amount of the excess  costs
presently is unknown,  but the Company believes that the potential range of such
costs is between $1.7 million and $8.0  million,  inclusive of the Zhagrus claim
of $5.0  million).  The Company  believes that all or a certain  portion of such
excess  costs  may  be   recoverable   pursuant  to  a  contract   modification.
Alternatively, the Company believes that all or a certain portion of such costs,
subject to  confirmation  by government  auditors,  are recoverable as allowable
overhead  on future  government  contracts,  which  the  Company  expects  to be
awarded.  In December 1998, the Company submitted an engineering change proposal
to the U.S. Army seeking a contract  modification that would provide the Company
with funding to cover such estimated excess remediation costs. In February 1999,
based on discussions  with the U.S.  Army,  the Company  submitted a claim under
P.L.  85-804  requesting  payment of these excess costs.  In June 1999, the U.S.
Army denied the latter  request.  In August 1999, the Company  re-submitted  the
engineering  change  proposal and is awaiting a response from the U.S.  Army. If
these costs,  potentially ranging from $1.7 to $8.0 million, are incurred by the
Company without reimbursement or funding from other sources,  including the U.S.
Army, the Company's business, results of operation and financial condition would
be materially and adversely affected.

The Company has no 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,  management  believes,  based upon examination of
relevant contracts, the actions of the Army with respect to D&D of facilities of
other  contractors,  and discussions with counsel,  that the Army is responsible
for its estimated  share of D&D. If these costs are not recovered  from the U.S.
Army, the Company would have no means to finance these costs,  and the Company's
business,  results of operation and financial  condition would be materially and
adversely affected.

The Company has potential liabilities  associated with discontinued or suspended
aspects of its depleted uranium  business,  including costs associated with site
remediation,  decontamination and decommissioning of existing  facilities,  cost
overruns on existing  contracts with the U.S. Army and Zhagrus.  These potential
liabilities include a contested $5.0 million cost associated with the additional
treatment  of  waste  under  the  Zhagrus  contract  and   decontamination   and
decommissioning  costs  of up to  $14.6  million  associated  with  its  present
facilities and equipment.  The Company has  insufficient  capital to cover these
liabilities and no current  capability to finance such  liabilities.  Management
believes,  based upon written advice of consultants  and counsel,  that the U.S.
Government  has  a  responsibility  to  pay,  directly  and  indirectly,  for  a
substantial  portion  of  these  costs.  The  United  States  Army,  in the Army
Decision,  agreed that it would fund  remediation of the  Corporation's  Concord
holding basin site as well as D&D related to that facility, based in part on the
Army's  determination  that the  Corporation's  activities  are essential to the
national

                                       13
<PAGE>

defense.  However,  while there are two contract  modification  proposals  being
reviewed by the Army,  there is  presently  no approved  funding and no specific
written agreement from the U.S.  Government to reimburse or fund these costs. No
reserve  for  these  potential  liabilities  has  been  taken  on the  Company's
financial  statements.  If these  liabilities  become the  responsibility of the
Company,  the  Company  would be  forced to  consider  receivership  or  similar
proceedings  to preserve the  Company's  business  operations  and the Company's
business,  financial condition and results of operations would be materially and
adversely affected.

ITEM 2. PROPERTIES

CONCORD,  MASSACHUSETTS--The  majority of the Company's activities are conducted
at a Company-owned  site which comprises  approximately  46 acres and includes a
180,000  square foot building  used for  manufacturing  activities,  offices and
warehousing.

BARNWELL, SOUTH CAROLINA--Starmet CMI, the Company's wholly owned subsidiary, is
located on 321 acres of land that includes:

       109,000 square foot facility  housing two  manufacturing  units: one unit
       provides the capability of converting DU and natural uranium gas (UF6) to
       green salt (UF4) and a second unit houses a reduction  process to convert
       green salt (UF4) to metallic depleted uranium and a full scale analytical
       laboratory

       70,000  square  foot  DU  Recycle   Technology  Center  adjacent  to  the
       manufacturing  facility  which  provides the  technology  and  facilities
       required to provide  recovery  and recycle of depleted  uranium and other
       useful   materials   as  well  as  aircraft   counterweight   repair  and
       refurbishment.

ITEM 3. LEGAL PROCEEDINGS

The Company is named as a Potentially Responsible Party ("PRP") in regard to the
Maxey  Flats,  Kentucky,  Superfund  Site.  This site was used  until  1977 as a
licensed and approved low-level  radioactive waste disposal site. A committee of
PRPs,  including  the  Company,  has  submitted  a  remedial  investigation  and
feasibility study report to the Environmental  Protection  Agency. The agreement
signed by the settling parties in July 1995 outlines the responsibilities of all
PRPs and states that the PRPs will undertake the initial  remedial phase ("IRP")
of the site  remediation  at an estimated  cost of $60  million.  Based upon the
percentage of responsibility  allocated to the Company,  its remaining liability
at this site is expected to be approximately $70,000 over 8 years.

On February 5, 1999,  the Company was served with a summons and  complaint  in a
common law diversity  tort action filed in the United States  District Court for
the Eastern  District of Tennessee,  entitled  Orick v. Brush  Wellman,  et al.,
3:98-CV-652 (E.D.  Tenn.),  naming as defendants eight  corporations,  including
Starmet Corporation.  The complaint also names the United States of America as a
defendant  under the Federal  Tort Claims Act.  The  complaint  alleges that the
defendants failed to adequately warn the plaintiff, an employee of a facility in
Tennessee that processes beryllium products,  regarding the dangers of beryllium
and  beryllium  manufacturing.  The complaint  seeks $1 million in  compensatory
damages  against the Company,  as well as punitive  damages of $10 million.  The
Company  believes  that the claims are without  merit and intends to

                                       14
<PAGE>

vigorously  defend  against the claim.  However,  there can be no assurance that
this  litigation  will ultimately be resolved on terms that are favorable to the
Company.  On  February  17,  1999,  the  Company  was served  with a summons and
complaint in a breach of contract action filed in The Superior Court,  County of
Middlesex,  Commonwealth of Massachusetts,  entitled Zhagrus Environmental, Inc.
et. al. v. Nuclear Metals, Inc. et. al., MCV99-01057, naming the Company and its
subsidiaries  as defendants.  The Company  removed the case to federal  district
court in  Massachusetts on March 18, 1999, where it was docketed as Civil Action
No.  99-CV-10600-RGS.  The  complaint  alleges,  among  other  things,  that the
defendants  materially  breached their  agreement  with the  plaintiff,  Zhagrus
Environmental  Inc.,  entitled  "Holding  Basin  Remediation  and Waste Disposal
Agreement"  dated May 8, 1997,  and that  plaintiffs,  Zhagrus and Envirocare of
Utah,  Inc., are entitled to a judgment in the amount of at least $8,368,883 for
services  rendered  pursuant to such  agreement.  On June 18, 1999,  the Company
filed its answer to the complaint denying liability, and asserted a counterclaim
against the plaintiffs alleging, among other things, breach of contract,  breach
of implied covenant of good faith,  deceit,  and violation of Mass. Gen. Laws c.
93A. On July 7, 1999, the Company and plaintiffs  agreed,  pending resolution of
the lawsuit,  to entry of an order placing certain  limited  restrictions on the
Company's ability to enter into significant transactions without affording prior
notice  to the  plaintiffs.  Although  the  Company  believes  that it has valid
defenses to the claims alleged in this complaint, there can be no assurance that
this  litigation  will ultimately be resolved on terms that are favorable to the
Company.  The  Company  has  sought  relief  from the Army for a portion  of the
amounts claimed by the  plaintiffs,  to the extent that the Company is otherwise
required to pay those amounts. Of the $8,368,883, $3.5 million has been recorded
as a liability.  The Company believes there are material issues of fact relating
to the amount of this  liability  ($3.5  million)  which are the  subject of the
Zhagrus litigation.

On February 24, 1999,  the Company was served with a summons and  complaint in a
common law diversity  tort action filed in the United States  District Court for
the Eastern District of Tennessee,  entitled Jerry Lynn Hall & Rose Mary Hall v.
Brush Wellman, et al.,  3:99-CV-110 (E.D. Tenn.),  naming as defendants fourteen
corporations,  including  Starmet  Corporation.  The complaint  alleges that the
defendants failed to adequately warn the plaintiff, an employee of a facility in
Tennessee that processes beryllium products,  regarding the dangers of beryllium
and  beryllium  manufacturing.  The complaint  seeks $6 million in  compensatory
damages  against the Company,  as well as punitive  damages of $10 million.  The
Company  believes  that the claims are without  merit and intends to  vigorously
defend  against  the  claim.  However,  there  can  be no  assurance  that  this
litigation  will  ultimately  be  resolved  on terms that are  favorable  to the
Company.

On December 13, 1999,  the Company was served with a summons and  complaint in a
common law diversity  tort action filed in the United States  District Court for
the Eastern District of Tennessee,  entitled Jesse McDonald v. Brush Wellman, et
al.,  3:99-CV-642  (E.D.  Tenn.),  naming as defendants  thirteen  corporations,
including Starmet Corporation.  The complaint alleges that the defendants failed
to adequately  warn the  plaintiff,  an employee of a facility in Tennessee that
processes beryllium  products,  regarding the dangers of beryllium and beryllium
manufacturing.  The complaint seeks $5 million in  compensatory  damages against
the Company,  as well as punitive  damages of $10 million.  The Company believes
that the claims are without merit and intends to vigorously  defend  against the
claim.  However,  there can be no assurance that this litigation will ultimately
be resolved on terms that are favorable to the Company.

                                       15
<PAGE>

On December 20, 1999,  the Company was served with a summons and  complaint in a
common law diversity  tort action filed in the United States  District Court for
the Eastern  District of Tennessee,  entitled John Langley v. Brush Wellman,  et
al.,  3:99-CV-655  (E.D.  Tenn.),  naming as defendants  thirteen  corporations,
including Starmet Corporation.  The complaint alleges that the defendants failed
to adequately  warn the  plaintiff,  an employee of a facility in Tennessee that
processes beryllium  products,  regarding the dangers of beryllium and beryllium
manufacturing.  The complaint seeks $6 million in  compensatory  damages against
the Company,  as well as punitive  damages of $10 million.  The Company believes
that the claims are without merit and intends to vigorously  defend  against the
claim.  However,  there can be no assurance that this litigation will ultimately
be resolved on terms that are favorable to the Company.

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

No matters were submitted to a vote of the Company's security holders during the
fourth quarter of the fiscal year ended September 30, 1999.



                                       16
<PAGE>

                                     PART II


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

The  Company's  Common Stock is traded on the NASDAQ  National  Market under the
symbol "STMT". The high and low bid prices for the two years ended September 30,
1999 and 1998 are reflected in the following table.  This  information  reflects
inter-dealer prices, without retail mark-up, markdown or commissions and may not
represent actual transactions.

As of  September  30,  1999,  there were 224 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.

                                                         High            Low
Fiscal 1998:
  1st Quarter                                            31.00          14.25
  2nd Quarter                                            36.00          21.50
  3rd Quarter                                            38.00          12.75
  4th Quarter                                            24.12           8.50

Fiscal 1999:
  1st Quarter                                            14.50           3.00
  2nd Quarter                                            10.50           5.00
  3rd Quarter                                             6.50           2.25
  4th Quarter                                             4.88           1.50

The  Company did not declare  any cash  dividends  during its last three  fiscal
years.  Given the Company's  current cash flow  situation,  the Company does not
expect to pay cash  dividends in the next year.  The company  presently  expects
that  future  cash  dividends,  if any,  would be paid on an annual  basis in an
amount  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.


                                       17
<PAGE>
<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA

                                                 1999        1998        1997         1996               1995
                                                                                  (as restated)    (as restated)
                                                   (in thousands except for employee and per share data)
<S>                                          <C>         <C>        <C>            <C>             <C>
Operating Results for the Year
Net Sales and Contract Revenues               $ 25,001    $ 34,823    $ 28,062      $ 28,694        $ 18,784
Cost and Expenses                               25,934      52,585      27,251        30,604          20,708
Operating Income (Loss)                           (933)    (17,762)        811        (1,910)         (1,924)
Other Income (Expense), Net                     (1,509)     (1,269)       (298          (476)           (118)
Income (Loss) Before Taxes                      (2,442)    (19,031)        513        (2,386)         (2,042)
Provision (Benefit) for Income Taxes              --          --            31             1          (1,967)
Extraordinary Gain                                --          --          --             585            --
Net Income (Loss)                               (2,442)    (19,031)        482        (2,387)            510
Earnings (Loss) Per Share                                    (0.51)      (3.97)         0.10            0.11
Capital Expenditures, Net                           88       4,585       1,788         1,449             777
Research and Development                         1,243       1,421       1,309           876             439

Financial Position at Year-end
Stockholders' Equity                             4,635       7,077      25,746        25,020          27,245
Shares Outstanding                               4,791       4,791       4,784         4,782           4,776
Net Book Value per Common Share Outstanding       0.97        1.48        5.39          5.24            5.70
Dividends Paid                                    --          --          --            --              --
Dividend Per Share                                --          --          --            --              --
Total Assets                                    25,856      32,433      34,354        35,768          40,886
Working Capital                                (13,218)    (12,138)      4,542         4,048          15,866
Long-term Debt net of Unamortized Discount      10,127      10,665       3,363         1,874           4,480
(including Current Installments)

Other Data
Weighted Average Number of Shares of Common
  Stock Outstanding                              4,791       4,789       4,959         4,779           4,706
Backlog (at Year-end)                           22,686      27,532      27,654        23,248          30,709
Number of Employees (at Year-end)                  144         280         235           190             200

</TABLE>

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

General

The following  discussion and analysis of the Company's  financial condition and
results  of  operations  is based on the four  business  segments  in which  the
Company currently reports its results,  namely Specialty Metal, Uranium Services
and Recycle,  Powders,  and Composite  Materials.  The  Specialty  Metal segment
includes the  fabrication  of primarily  depleted  uranium (DU) metal  products,
using  foundry,  extrusion,  and machining  capabilities.  Its products  include
industrial and medical shielding  products,  DU billets in support of the Army's
tank armor program and the  production of various DU penetrators (a component of
armor-piercing  ammunition used in certain U.S.  military gun systems) which are
sold to prime contractors  manufacturing such ammunition for the U.S. Department
of Defense or to foreign military  operations.  The Uranium Services and Recycle
segment includes the conversion of UF6 for United States Enrichment Corporation,
repair and  refurbishment  of DU  aircraft  counterweights  for  commercial  and
military aircraft and the manufacture of depleted  uranium.  The Powders segment
includes the  production and sale of various metal powders  manufactured  by the
Company's patented Rotating Electrode

                                       18
<PAGE>

Process.  The Composite  Materials segment includes the manufacture of beryllium
aluminum composite materials for defense and commercial aerospace  applications,
computer hard disk drives,  and commercial  motion control  applications for the
semiconductor manufacturing market.

Fiscal 1999 was a year of transition  for the Company.  As the Company began the
year, there were four major issues: (1) return the Company to profitability, (2)
further the  commercialization  of existing  and  emerging  technologies  as the
Company exits the penetrator  business,  (3) improve the Company's liquidity and
(4)  negotiate an extension to the  existing  maturity  date with its  principal
lender  which  was due to  expire  on  March  31,  1999.  The  Company  achieved
significant progress on all four fronts.

The Company completed fiscal 1999 with five consecutive  profitable  months. The
fourth  quarter  was the first  profitable  quarter in eighteen  months.  In the
quarter,  the Company  generated  net income of $553,000,  or $0.12 per share on
basic average  shares  outstanding  of 4,791,000,  on revenues in excess of $6.0
million,  a  profitability  of 9.2%.  Compared to the Company's last  profitable
quarter,  net  income  more than  doubled on $4.7  million  (44%) less in sales,
reflecting the Company's success in bringing its cost structure in line with the
current levels of revenue.  The quarterly  breakeven  point was reduced to under
$5.5 million in revenues, or half of what it was a year earlier.

Compared to the third quarter of fiscal 1999, fourth quarter revenues  increased
by  $387,000  and net income  improved by  $1,371,000,  or $0.29 cents per basic
share  outstanding.  The profit  improvement  for the quarter is attributable in
part to reduced direct and indirect  manufacturing  costs but more significantly
to reduced  selling,  general  and  administrative  expenses.  This is a further
reflection of the aggressive cost reductions, comprehensive restructuring of the
organization and spending curbs implemented by the Company over the past year.

During fiscal 1999, the Company  introduced  Beralcast(R) as a high  performance
composite  material for the next generation of computer disk drives. The Company
has produced  cast and extruded MMC prototype  and  pre-production  Beralcast(R)
disk  drive  arm sets for  evaluation  by  several  of the  leading  disk  drive
manufacturers.  Certain leading disk drive  manufacturers  have funded research,
development, prototype work and production tooling to support initial production
plans. Also, the Company developed motion control  applications for Beralcast(R)
and introduced it to the semiconductor manufacturing market for use in precision
mechanical  systems  and  is  currently  producing   production   quantities  of
Beralcast(R) investment castings.

During fiscal 1999, the Company continued with the development of its technology
for fluorine  recovery  from UF6.  Work has been  successfully  completed on the
first phase of the three phase development  program with better than anticipated
results.  A small  pilot  plant  has been  installed  at the  Company's  Concord
facility  to  further  test and  develop  the  process  as part of the phase two
effort.

Despite  the  reported  net loss of  $2,442,000  for fiscal  1999,  the  Company
generated positive cash flow from operations,  reduced trade accounts payable by
$2.3 million,  and paid down it's revolving  line of credit by $1.0 million.  On
November 12, 1999,  the Company  entered  into an agreement  with its  principal
lender to further extend the maturity of its current credit  agreement to August
15, 2000. The Company  presently  expects to meet certain  conditions that would
extend the final  maturity to


                                       19
<PAGE>

June 10, 2001, at which time the Company  projects the  principal  balance to be
sharply reduced from current levels.  The return to  profitability in the fourth
quarter of fiscal 1999 and generating  positive cash flow from  operations  were
key factors in obtaining this extension.

As we move into fiscal  2000,  the Company is poised to exploit the  significant
improvements  made in fiscal  1999.  The Company is  continuing  to evaluate new
business opportunities for both existing and emerging patented technologies. The
Company continues to pursue potential expansion of its titanium powder business;
development of its Beralcast(R)  investment casting technology for aerospace and
defense  applications;  development of its  Beralcast(R)  MGA extrudable MMC for
computer disk drive applications,  and development of its DUCRETE(TM)  shielding
technology for potential radiation shielding applications. The Company continues
to invest heavily in research and  development of processes to recover  valuable
fluorine compounds from uranium  tetrafluoride.  All of these have the potential
of making significant contributions to the future profitability of the Company.

Segment Information

The following table sets forth certain information regarding the revenue,  gross
profit (loss) and identifiable assets attributable to the four business segments
in which the Company currently operates:
                                                  Year Ended September 30,
                                        ---------------------------------------
                                          1999           1998          1997
                                        --------      --------       --------
                                                    (as restated)  (as restated)
                                                   (in thousands)
Net sales and contract revenues:
  Specialty Metal                       $  9,472      $ 18,845       $ 14,459
  Uranium Services and Recycle             7,472         5,905          4,965
  Powders                                  5,406         5,078          4,348
  Composite Materials                      2,651         4,995          4,290
Operating Income (Loss):
  Specialty Metal                       $    762      $ (2,881)      $     50

  Uranium Services and Recycle            (1,038)      (11,519)         2,675
  Powders                                  1,543           184            625
 Composite Materials                      (2,200)       (3,546)        (2,539)

Identifiable Assets:
  Specialty Metal                       $  1,237      $  2,270       $  2,126
  Uranium Services and Recycle             9,115        10,458         13,964
  Powders                                    929         1,052          1,221
 Composite Materials                       3,309         3,692          2,335

Segment  information  has been restated for 1998 and 1997 to be consistent  with
the 1999 presentation in accordance with SFAS No. 131.

                                       20
<PAGE>

Results of Operations

The following table sets forth certain items in the  consolidated  statements of
income as a percentage of net sales and contract revenues for fiscal years 1999,
1998 and 1997.

                                                      Year Ended September 30
                                                 -------------------------------
                                                  1999     1998        1997
                                                 ------   ------   -------------
                                                                   (as restated)

Net sales and contract revenues:                  100%     100%        100%
Costs and expenses:
  Cost of sales                                   (77)    (115)        (72)
  Selling, general and administrative expenses    (22)     (32)        (19)
  Research and development expenses                (5)      (4)         (5)
  Loss on write-off of fixed assets                --       --          (1)
Operating income (loss)                            (4)     (51)          3
Interest and other income (expense), net           --       (1)         --
Interest expense                                   (6)      (3)         (1)
Income (loss) before income taxes                 (10)     (55)          2
Provision (benefit) for income taxes               --       --          --
Net income (loss)                                 (10)     (55)          2


Fiscal 1999 Compared with Fiscal 1998

Net sales  decreased  by  $9,822,000,  or 28%,  to  $25,001,000  in fiscal  1999
compared  fiscal  1998.  Sales  in the  Specialty  Metal  segment  decreased  by
$9,379,000,  or 50%, due to the reduction in foreign DU  penetrator  procurement
and the absence of revenue  recognized  during fiscal 1999 on the remediation of
the holding  basin at the Concord  facility  pursuant to a U.S.  Army  contract.
Sales in the Uranium  Services and Recycle segment  increased by $1,567,000,  or
27%, due to the increased  revenue from the UF6 conversion  contract with United
States  Enrichment  Corporation  partially  offset by  reduced  AVLIS  feedstock
production.  USEC  cancelled  the  AVLIS  program  in June  1999.  Of the  sales
generated in fiscal 1999,  approximately  $4,357,000  related to penetrator  and
AVLIS  products  are not  expected to continue  into fiscal  2000.  Sales in the
Powders segment increased by $328,000,  or 6%, due primarily to increased demand
in the medical markets.  Sales in the Composite  Materials  segment decreased by
$2,344,000,  or 47%,  due to a  decreased  level  of  activity  on the  Comanche
helicopter  Beralcast(R)  prototype contract as the program went into a redesign
phase which is expected to be completed in early fiscal 2000.

Gross profit in the fiscal 1999 improved by $10,909,000  to $5,704,000  compared
to a loss of $5,205,000 in fiscal 1998. The Uranium Services and Recycle had the
greatest improvement as nearly $8.0 million of non-recurring costs were incurred
in 1998 from the write-down of DU inventory and the accrual for UF4  disposition
costs. As a percentage of total revenue, gross profit margin was 23%, a 38-point
improvement  over  fiscal  1998.  Had the  Company not  expensed  Holding  Basin
remediation costs of $1,193,000, the gross profit margin would have been 28% for
fiscal 1999.

                                       21
<PAGE>

Selling, general and administrative expenses decreased by $5,742,000, or 52%, to
$5,394,000  in fiscal 1999  compared to fiscal  1998.  The  decrease in selling,
general and administrative expenses is primarily due to the termination of sales
office leases,  reductions in administrative  staff and various cost containment
measures and the  non-recurring  costs of $1,300,000 in connection with a failed
public  offering in fiscal 1998.  As a  percentage  of total  revenue,  selling,
general and administrative expenses are 22% as compared to 32% for fiscal 1998.

Interest  expense  increased to  $1,414,000  in fiscal 1999 from  $1,124,000  in
fiscal 1998. This increase is attributable to interest  expense  associated with
increased borrowings during the first half of fiscal 1999.

Fiscal 1998 Compared with Fiscal 1997

Net sales increased by $6,761,000 or 24% to $34,823,000 in 1998 from $28,062,000
in 1997.  Sales in the Specialty  Metal segment  increased to  $18,845,000  from
$14,459,000,  an increase  of 30%.  Sales in the  Uranium  Services  and Recycle
segment  increased to $5,905,000 from  $4,965,000,  an increase of 19%. Sales in
the Powders segment increased to $5,078,000 from $4,348,000, an increase of 17%.
Sales  in  the  Composite   Materials   segment  increased  to  $4,995,000  from
$4,290,000, an increase of 16%.

The sales  increase in the  Specialty  Metal  segment was  principally  due to a
$3,470,000  increase in revenue  recognized  in 1998 on the  remediation  of the
holding  basin  at the  Company's  Concord  facility  pursuant  to an U.S.  Army
contract. The sales increase in the Uranium Services and Recycle segment was due
primarily to AVLIS feedstock production orders that were completed in the second
and third quarter of fiscal 1998. The Powders segment increased due primarily to
greater demand in the medical markets.  Sales in the Composite Materials segment
increased  due  to a  greater  level  of  activity  on the  Comanche  helicopter
Beralcast(R) prototype contract.

Gross profit in the fiscal 1998 deteriorated by $13,131,000 to a $5,205,000 loss
when  compared  to fiscal  1997.  Included in the loss in 1998 is an increase in
inventory  reserves for UF4, DU, and other related  inventories of approximately
$4,300,000  to reserve  for the full  carrying  value of the  inventory  and the
accrual of $3,400,000 for the related disposition costs of the UF4. The increase
in estimated costs of remediating the holding basin of approximately  $1,700,000
and  the  decrease  in  the  gross  margin  of  approximately  $2,100,000,   for
penetrators due to manufacturing inefficiencies and lower volumes as the Company
completes the remainder of the penetrator  contracts were significant factors in
the 1998 margin decline.  As a percentage of total revenue,  gross profit margin
was (15%), a 43 point deterioration over fiscal 1997.

Selling,  general and administrative expenses increased by $5,688,000 or 104% in
fiscal 1998, primarily due to an increase in sales and administrative  personnel
in  expectation  of growth in its  business and costs  associated  with a failed
public offering of $1,300,000. As a percentage of sales, these expenses were 32%
in fiscal 1998 compared to 19% in fiscal 1997.

Interest expense and amortization of warrants  increased to $1,124,000 in fiscal
1998 from $296,000 in fiscal 1997,  primarily due to interest expense associated
with increased  borrowings.  In connection with additional  borrowings under the
Company's existing credit facility in December 1997, the Company issued warrants
to its  principal  bank  lender,  which has been  recorded  as a


                                       22
<PAGE>

discount to the related debt at fair value.  The fair value  attributable to the
warrants,  $327,000, was amortized as interest expense for the period January 1,
1998 through October 1, 1998.

Income taxes  during both of fiscal 1998 and 1997 were at an  effective  rate of
0%. The Company has unrecognized net operating loss carryforwards resulting in a
minimal effective tax rate.

Liquidity and Capital Resources

In fiscal 1999 as in fiscal 1998,  the Company  continued  to realize  financial
losses and  liquidity  problems.  The Company  continues  to have a  significant
working capital  deficiency and has  restructured or amended its debt agreements
with its  principal  lender a number of times.  The  Company  has been  served a
complaint for breach of contract by one of its principal  vendors.  In addition,
the Company has significant potential  liabilities  associated with discontinued
or suspended aspects of its business which it believes are the responsibility of
the U.S.  Government.  If these liabilities were to become the responsibility of
the Company,  the Company  would be required to consider  insolvency  or similar
reorganization  proceedings to preserve its business operations.  In response to
this situation,  the Company is pursuing  alternative  financing,  arranging for
vendor payment plans, and continuing to restructure internally.  The independent
accountants'   report  on  the  Company's   financial   statements  contains  an
explanatory  paragraph expressing  substantial doubt about the Company's ability
to  continue  as a going  concern.  The  following  discussion  below  describes
management's plans in this regard.

At September 30, 1999, the Company had a working capital deficit of $13,218,000,
a decrease in working  capital of $1,080,000 from a deficiency of $12,138,000 at
the end of fiscal 1998. For fiscal 1999, the Company's  accounts  receivable and
inventories decreased by $2,485,000 and $1,770,000,  respectively, compared with
September 30, 1998 levels. Cash (less restricted cash) at September 30, 1999 was
$14,000. The current portion of long-term  obligations  increased by $170,000 to
$8,752,000  from  $8,582,000.  The  revolving  line of  credit  was paid down by
$981,000  utilizing the cash  generated  from  operations  and the proceeds from
additional  shareholder  notes,  but the  reduction  was  more  than  offset  by
$1,423,000 of shareholder debt becoming  current,  as it matures in fiscal 2000.
At  the  end  of  fiscal  1999,  the  long-term  portion  of  notes  payable  to
shareholders,   net  of  unamortized  warrants,  decreased  to  $1,375,000  from
$2,083,000 at September 30, 1998.

On October 15,  1998 the  Company  issued a 10%  Subordinated  Debenture  in the
amount of $500,000 to a current shareholder.  Warrants totaling 60,000 shares at
an exercise  price of $6.00 per share have also been issued in  connection  with
this Debenture.

On December 10, 1998 certain  shareholders of the Company agreed to a three-year
extension to December 10, 2001 on the 10%  convertible  debt held by them in the
amount of $850,500.  Payments of the related interest have been extended to June
10, 1999.  Warrants  totaling 102,000 shares with an exercise price of $6.00 per
share have also been issued in connection with this extension.

The Company is technically in default of certain  financial  covenants under the
bank  arrangement  with its principal  lender.  However,  on June 23, 1999,  the
Company  entered into an agreement  with its principal  lender to forbear on all
collection actions until February 15, 2000. On November 12,


                                       23
<PAGE>

1999,  the Company  entered into an agreement to further  extend the maturity to
August 15, 2000.  The  agreement  also  includes  various  extension  periods if
certain conditions are met prior to August 15, 2000.

Management's plans with regard to the existing working capital deficiency are to
continue to adjust  spending  levels to  appropriate  amounts to ensure  greater
financial  stability  while actively  exploring  additional  capital  generating
opportunities  including,  but not limited to, the sale and  leaseback  of owned
property,  asset sales and joint ventures.  The Company is also managing payment
plans with certain suppliers.

In addition to write-offs  that were recorded during fiscal 1998, as required by
generally accepted accounting principles,  the Company has potential liabilities
associated  with  discontinued  or  suspended  aspects of its  depleted  uranium
business, including costs associated with site remediation,  decontamination and
decommissioning of existing facilities, cost overruns on existing contracts with
the U.S. Army and Zhagrus. For further discussion,  see Part I - "Environmental,
Safety and Regulatory Matters" and "Concord Site Remediation and Decommissioning
Requirements" These potential  liabilities include a contested $5.0 million cost
associated with the additional treatment of waste under the Zhagrus contract and
decontamination and decommissioning costs of up to $14.6 million associated with
its present  facilities and equipment.  The Company has insufficient  capital to
cover these  liabilities and no current  capability to finance such liabilities.
Management  believes  that  the U.S.  Government  has a  responsibility  to pay,
directly and indirectly,  for a substantial  portion of these costs.  The United
States  Army,  in a  Memorandum  of  Decision  dated  September  13,  1996  (the
"Memorandum  of Decision")  pursuant to Public Law 85-804,  agreed that it would
fund a substantial  portion of the remediation  costs for the Company's  Concord
holding basin site. As a result of cost overruns in connection  with the holding
basin remediation,  the Company has requested additional  remediation funds from
the Army;  however,  while the engineering  change proposal is being reviewed by
the Army,  there is  presently  no  approved  funding  and no  specific  written
agreement from the U.S.  Government to reimburse or fund these overrun costs. No
reserve  for  these  potential  liabilities  has  been  taken  on the  Company's
financial  statements.  If these  liabilities  become the  responsibility of the
Company,  the  Company  would  be  forced  to  consider  insolvency  or  similar
reorganization proceedings to preserve the Company's business operations and the
Company's  business,  financial  condition  and results of  operations  would be
materially and adversely affected.

Certain Factors That May Affect Future Results

The Company does not provide forecasts of its future financial performance. From
time to time, however, information provided by the Company or statements made by
its employees may contain "forward looking"  information that involves risks and
uncertainties. In particular, statements contained in this Annual Report on Form
10-K that are not historical fact may constitute  forward looking statements and
are made under the "Safe Harbor"  section of the Private  Securities  Litigation
Reform Act of 1995.  The Company's  actual  results of operations  and financial
condition have varied and may in the future vary significantly from those stated
in any  forward  looking  statements.  Factors  that may cause such  differences
include, but are not limited to, the risks,  uncertainties and other information
discussed within this Annual Report on Form 10-K, as well as the accuracy of the
Company's internal estimates of revenue and operating expense levels.

                                       24
<PAGE>

The  following  discussion  of the  Company's  risk  factors  should  be read in
conjunction  with the financial  statements  and related notes thereto set forth
elsewhere in this report.  The  following  factors,  among  others,  could cause
actual  results to differ  materially  from  those set forth in forward  looking
statements  contained or  incorporated by reference in this report and presented
by management from time to time. Such factors, among others, may have a material
adverse effect upon the Company's business,  results of operations and financial
conditions.

Risk Factors

Insufficient  Working  Capital.  The  Company  will  need  to  expend  funds  in
connection  with,  but  not  limited  to,  manufacturing,  sales  and  marketing
activities,  product research and development,  and personnel costs.  Such plans
will require  expenditures of capital. If capital resources of the Company prove
to be inadequate to fund such projects, because development costs greatly exceed
the budget,  because  anticipated  revenues and  financing are delayed or do not
occur, because expenses increase beyond  expectations,  or for any other reason,
it may be  necessary  for the Company to borrow funds or sell more of its equity
to raise  working  capital in the near future.  There can be no  assurance  that
additional financing will be available,  or available on the terms that would be
at all  favorable to the Company.  The Company  will require  additional  equity
capital  to  finance  its  projected  operations  at some  point in the  future.
Additional equity financings will result in dilution of stockholders'  interests
and may not be on terms  favorable to the Company or existing  stockholders.  If
adequate funds are not available,  the Company may have to reduce substantially,
or eliminate, certain aspects of its proposed activities, or otherwise modify or
curtail its operating plans.

Possible Future Environmental Liabilities. The Company has potential liabilities
and costs  associated with  discontinued  or suspended  aspects of its business,
including  costs   associated  with  site   remediation,   decontamination   and
decommissioning of existing facilities,  and cost overruns on existing contracts
with the U.S. Army and Zhagrus  Environmental,  Inc. These potential liabilities
include a contested $5.0 million cost associated  with the additional  treatment
allegedly   required  under  the  Zhagrus  contract  and   decontamination   and
decommissioning  costs  of up to  $14.6  million  associated  with  its  present
facilities and equipment.  The Company has  insufficient  capital to cover these
liabilities  and no current  plan for  financing  such  liabilities.  Management
believes that the U.S.  Government  has a  responsibility  to pay,  directly and
indirectly,  for a substantial portion of these costs. However,  while there are
two  contract  modification  proposals  being  reviewed  by the  Army,  there is
presently no approved  funding and no specific  written  agreement from the U.S.
Government  to  reimburse or fund these  costs.  No reserve for these  potential
liabilities  has been  taken on the  Company's  financial  statements.  If these
liabilities  become the  responsibility  of the  Company,  the Company  would be
forced to consider  insolvency or similar  proceedings to preserve the Company's
business operations and the Company's business,  financial condition and results
of operations would be materially and adversely affected.

Concentration  of  Customers.  A substantial  portion of the Company's  business
currently is conducted with a relatively  small number of large  customers.  The
Company's ten largest customers  accounted for approximately 72%, 67% and 78% of
the  Company's net sales in the fiscal year ended  September 30, 1999,  1998 and
1997,  respectively.  Two of these  customers  (USEC  and  Primex  Technologies)
individually  accounted  for  greater  than  10% of the  Company's  consolidated
revenues  in fiscal  1999.  The Company  currently  is  contracting  with Primex
Technologies  to


                                       25
<PAGE>

provide DU  penetrators  for the U.S.  Army's  ABRAMS Tank  program  through the
fourth  quarter of fiscal 1999.  USEC is the sole customer for the Company's UF6
conversion.  While the Company's planned  expansion into new commercial  markets
may result in a  substantial  portion of its  revenues  being  derived  from new
customers, the dominance of a few companies in certain of these targeted markets
is  likely to  continue  to result in a  substantial  portion  of the  Company's
revenues being derived from a small number of significant customers. The loss of
one of its key  customers  or any  significant  portion of orders  from any such
customers  could  have a  material  adverse  effect on the  Company's  business,
results of operation  and  financial  condition.  In addition,  the Company also
could be  materially  adversely  affected by any  substantial  work  stoppage or
interruption  of production  at any of its major  customers or if one or more of
its key customers were to reduce or cease conducting operations.

Competition.   The  Company  faces  significant   competition  from  established
companies  in  certain  of  its  product  lines.  In  addition,   the  Company's
Beralcast(R)  MMC's and other  products face  competition  from  alternative  or
competing  composite  materials,  products and  technologies,  some of which are
better established than those of the Company.  Many of the Company's current and
potential   competitors  have  significantly   greater   financial,   technical,
marketing,  purchasing and other  resources than the Company,  and, as a result,
may be able to respond more quickly to new or emerging technologies or standards
and to  changes  in  customer  requirements,  devote  greater  resources  to the
development,  promotion and sale of products, or deliver competitive products at
lower prices.  Increased  competition  is likely to result in price  reductions,
reduced  operating  margins and loss of market share,  any of which could have a
material  adverse  effect on the  Company's  business,  results of operation and
financial  condition.   Although  the  Company  believes  that  it  has  certain
technological   and  other  advantages  over  its  competitors,   realizing  and
maintaining these advantages will require continued  investment in manufacturing
capacity,  research and development,  sales and marketing,  and customer service
and  support.  There can be no assurance  that the Company will have  sufficient
resources  to continue  to make such  investments  or that the  Company  will be
successful in maintaining such advantages. The Company believes that its ability
to compete  successfully  depends on a number of factors both within and outside
of its control,  including  price,  product  quality,  success in developing and
introducing new products, and general market and economic conditions.  There can
be no  assurance  that the Company  will be able to compete as to these or other
factors or that  competitive  pressures faced by the Company will not materially
adversely affect its business, results of operation and financial condition.

Dependence on Key Personnel.  The Company's performance depends to a significant
extent upon a number of senior management and technical  personnel.  The loss of
the services of one or more key employees  could have a material  adverse effect
on the Company.  The Company does not maintain key person life  insurance on any
of its employees.  The Company's future  financial  results will depend in large
part on its ability to continue to attract and retain highly skilled, technical,
managerial  and  marketing  personnel  and the ability of its  officers  and key
employees to manage growth  successfully,  to implement  appropriate  management
information systems and controls,  and to continue successful development of new
products and  services  and  enhancements  to existing  products  and  services.
Competition for such personnel is intense and there can be no assurance that the
Company will continue to be successful in attracting and retaining the personnel
required to successfully develop new and enhanced products.

                                       26
<PAGE>

Legal  Proceedings.  The Company is involved in various legal  proceedings.  See
Part I Item 3, "Legal  Proceedings." An adverse judgment or settlement under any
of these  proceedings  could subject the Company to significant  liabilities and
expenses (e.g., reasonable royalties, lost profits, attorneys' fees and trebling
of damages for willfulness).

Substantial  Influence  of Principal  Stockholders.  The Company  believes  that
certain control share  acquisitions  have occurred and that members of the group
which  effected  such control share  acquisitions,  namely WIAF  Investors  Co.,
Charles  Alpert,  Joseph  Alpert,  Melvin B.  Chrein  M.D.,  Meryl J. Chrein and
Marshall J. Chrein  (collectively,  the "Investor  Group"),  as of September 30,
1999 were, in the  aggregate,  2,774,871  shares of Common Stock  (assuming full
conversion of debentures and exercise of all warrants held by certain members of
the Investor Group), or approximately 55% of the Company's outstanding shares of
Common Stock. As of September 30, 1999,  directors and executive officers of the
Company  beneficially  own in the  aggregate  747,077  shares  of  Common  Stock
(assuming   full   conversion  of  debentures  and  exercise  of  all  currently
exercisable  options  and  warrants  held by  certain  directors  and  executive
officers),  or  approximately  15% of the shares  entitled to vote. The Investor
Group  and/or  the  Company's   directors  and  executive  officers  could  have
substantial  influence  on matters  requiring  approval of  stockholders  of the
Company,  including  the election of  directors  or the approval of  significant
corporate matters.  This concentration of ownership by existing stockholders may
also have the  effect of  delaying  or  preventing  a change of  control  of the
Company.  The Investor  Group has made a filing with the Securities and Exchange
Commission  which the  Company  understands  to report  the  dissolution  of the
Investor Group.



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Index to Financial Statements and Schedules on Page F-1.

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

None.



                                       27
<PAGE>


                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The directors and executive officers of the Company as of September 30, 1999 are
as follows:

Name                         Age     Position With Company


George J Matthews             69     Chairman of the Board of Directors

Robert E. Quinn               45     Director, President, Treasurer and
                                     Chief Executive Officer of the Company

Kenneth A. Smith              62     Director

Frank H. Brenton              73     Director

Matthew Brady                 36     Director

Gerald R. Hoolahan            51     Director

Brian B. Sand                 34     Director

Randal E. Vataha              51     Director

Kevin R. Raftery              40     President, Starmet Commercial Castings, LLC
                                     and Starmet Aerocast, LLC

Douglas F. Grotheer           41     President, Starmet CMI Corporation

William T. Nachtrab           46     Vice President, Engineering & Technology

Gary W. Mattheson             47     Chief Financial Officer

Bruce E. Zukauskas            47     Vice President, Operations



Each  director  is  elected  for a  term  of  one  year.  There  are  no  family
relationships among any of the Company's directors.  The term of office for each
executive officer of the Company is the earlier of one year or until a successor
is chosen and qualified.  The executive officers are elected by the directors at
their first meeting  following the annual meeting of stockholders.  There are no
family relationships among the executive officers.


                                       28
<PAGE>

GEORGE J. MATTHEWS is Chairman of the Board of Directors since 1972. Chairman of
Matthews  Associates  Limited,  which is engaged in the business of investing in
and providing  management  consulting  and  assistance to small and medium sized
businesses,  including the Company.  Mr. Matthews has been a member of the Board
of Directors since 1972.

ROBERT E. QUINN was elected  President  and  Director of the Company on November
30, 1994 and Chief Executive Officer and Treasurer on January 20, 1998. Prior to
November  30,  1994,  he held the  position  of Vice  President,  Sales with the
Company for six years.  Upon  graduation  from  college,  Mr.  Quinn  joined the
Company as a sales  administrator.  Mr. Quinn is a graduate of Tufts  University
and has a Masters of Business Administration from Babson College. Mr. Quinn is a
member of the Massachusetts High Technology Council, National Defense Industrial
Association,  Tufts  University  Alumni  Admissions  and  sits on the  Board  of
Governors of the Concord Museum.

KENNETH A. SMITH is Professor of Chemical Engineering at Massachusetts Institute
of Technology  since 1971. Dr. Smith has been a member of the Board of Directors
since 1985.

FRANK H.  BRENTON  is  Principal  of Frank H.  Brenton  Associates,  a  business
consulting  firm.  From  1984 to 1986,  Chairman  of the Board of  Directors  of
Marshall's  Incorporated,  an off-price retailer and division of Melville,  Inc.
Mr. Brenton has been a member of the Board of Directors since 1986.

MATTHEW  BRADY is President of Berry Hill  Consulting,  a benefits and insurance
consulting  firm.  Mr. Brady has been a member of the Board of  Directors  since
1999.

GERALD R.  HOOLAHAN is a consultant  specializing  in  corporate  reengineering,
restructurings,   and  reorganizations  for  financial  institutions,  the  U.S.
District Court and private industry. Mr. Hoolahan has been a member of the Board
of Directors since 1999.

BRIAN B. SAND is the President of KABZ Co., a supplier of specialty products for
the retail  trade.  Mr. Sand has been a member of the Board of  Directors  since
1999.

RANDAL E. VATAHA is President  and  co-founder  of Game Plan LLC, an  investment
banking firm partially owned by BankBoston.  Mr. Vataha has been a member of the
Board of Directors since 1999.

KEVIN R.  RAFTERY  became  President  of Starmet  Commercial  Castings,  LLC and
Starmet Aerocast,  LLC (both subsidiaries of the Company) in October 1997. Prior
to that he was the Manager of the Company's Beralcast business unit. Mr. Raftery
was promoted to Program  Manager in 1994 and Business Unit Manager in 1996.  Mr.
Raftery is a recognized expert in casting,  extrusion,  heat treating,  coating,
welding and joining  technologies  for aerospace  specialty  metals.  During his
twenty year tenure with the Company,  Mr.  Raftery has authored and  co-authored
several  technical  publications and is a co-inventor of two Beralcast  patents.
Mr.  Raftery  received his B.S. in Mechanical  Engineering  Technology  from the
University of Massachusetts.

DOUGLAS F. GROTHEER became President of Starmet CMI Corporation (a subsidiary of
the Company) in 1997.  Prior to this promotion,  Mr. Grotheer was Vice President
of  Engineering,  Programs and Quality for the Company since 1994. Mr.  Grotheer
joined the Company as a project


                                       29
<PAGE>

engineer  directly  after  graduating  from college in 1980.  He was promoted to
Manager of Ordnance  Programs.  Mr.  Grotheer is a recognized  expert in uranium
metallurgy and  processing,  as well as ISO 9002 Quality  Systems.  Mr. Grotheer
received  his  degree  in  Materials  Engineering  from  Rensselaer  Polytechnic
Institute.

WILLIAM T. NACHTRAB, PH.D. has held the position of Vice President,  Engineering
and  Technology  with the Company  since 1997 and Vice  President of  Technology
since 1994. Dr. Nachtrab is the Company's senior technologist. Dr. Nachtrab, who
joined the Company in 1988,  is the author and  co-author of numerous  technical
and scientific publications and an inventor of four of the Company's patents. He
is a recognized expert in beryllium,  titanium, alloy steels, uranium metallurgy
and  extrusion  and powder metal  processing.  Before  joining the Company,  Dr.
Nachtrab was a Senior Member of the Technical  Staff of the GE/RCA  Corporation.
Prior to that he was a Division  Research  Engineer for Lukens Steel Company,  a
Research  Engineer  for  Lehigh  University,  and a  Metallurgist  for LTV Steel
Company.  Dr. Nachtrab has a Ph.D. in  Metallurgical  and Materials  Engineering
from Lehigh University.

GARY W. MATTHESON was promoted to Chief Financial  Officer in August 1999. Prior
to August  1999,  he held the  position of Corporate  Controller  since  joining
Starmet in March  1999.  Before  joining the  Company,  Mr.  Mattheson  was Vice
President, Finance and Administration at Ullo International, Inc. in Natick, MA;
and Vice President and Corporate  Controller at Reed  Publishing USA and Cahners
Publishing  Company,  an $800 million  division of Reed  Elsevier,  a U.K./Dutch
media  conglomerate.  Early in his career, Mr. Mattheson was an audit supervisor
with Ernst & Ernst. Mr.  Mattheson  received his B.S. in Accounting from Bentley
College and is a CPA.

BRUCE E.  ZUKAUSKAS has held the position of Vice  President,  Operations  since
October 1994. Prior to October 1994, he was Quality Manager for over five years.
Before  joining the Company,  Mr.  Zukauskas  served as Operations  Engineer for
Babcock and Wilcox Tubular  Products Group.  Mr.  Zukauskas is a graduate of the
U.S.  Military  Academy at West Point and the U.S. Army War College and received
his Masters in Industrial  Engineering  from the University of  Pittsburgh.  Mr.
Zukauskas is a Colonel and Brigade Commander in the U.S. Army Reserve.


SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section  16(a)  of the  Securities  Exchange  Act of  1934  requires  directors,
executive  officers and  stockholders  who own more than 10% of the  outstanding
common stock of the Company to file with the Securities and Exchange  Commission
and NASDAQ reports of ownership and changes in ownership of voting securities of
the  Company  and to  furnish  copies of such  reports  to the  Company.  To the
Company's  knowledge,  based  solely  on review  of the  copies of such  reports
furnished to the Company,  during the fiscal year ended  September  30, 1999, or
written  representations in certain cases, all Section 16(a) filing requirements
were complied with,  except that initial  statements of beneficial  ownership of
securities  were filed late for Messrs.  Mattheson,  Brady,  Hoolahan,  Sand and
Vataha.

                                       30
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION

The following table discloses for the periods presented the compensation for the
person who served as the Company's Chief  Executive  Officer and for each of the
four most highly compensated  executive officers of the Company,  other than the
Chief Executive  Officer,  whose total  compensation  exceeded  $100,000 for the
Company's  fiscal  year  ended  September  30,  1999  (collectively,  "the Named
Executive Officers"):
<TABLE>
<CAPTION>
                                                                                           Long Term Compensation
                                                                                       ----------------------------
                                                                                       Awards               Payouts
                                                                                       ------               -------
                                       Annual Compensation
                                       -------------------
                                                                                             Securities
                                                                               Restricted    Underlying                 All Other
   Name and Principal                                        Other Annual        Stock      Options/SARS      LTP     Compensation
        Position           Year(1)  Salary($)  Bonus ($)  Compensation ($)(2)   Award(s)$     (#) (6)      Payouts $       ($)
   ------------------      -------  ---------  ---------  -------------------  ----------   ------------   ---------  ------------
<S>                         <C>     <C>        <C>                <C>              <C>       <C>            <C>           <C>
George J. Matthews (4)(5)    1999    287,500      --               --               --          3,000         --           --
  Chairman of Board of       1998    350,000      --               --               --          7,500         --           --
  Directors                  1997    350,000      --               --               --           --           --           --

Robert E. Quinn (3)(5)       1999    200,000      --               --               --          7,500         --           --
  President , CEO and        1998    200,000    17,312             --               --         15,000         --           --
  Treasurer                  1997    200,000    15,000             --               --         25,000         --           --

William T. Nachtrab          1999    142,000      --               --               --          7,500         --           --
  Vice President,            1998    142,000    11,792             --               --         17,500         --           --
  Technology                 1997    131,616     9,050             --               --          8,000         --           --

Douglas F. Grotheer          1999    135,000      --               --               --          7,500         --           --
  President, Starmet CMI     1998    135,000    10,261             --               --          5,000         --           --
  Corporation                1997    121,934     6,700             --               --          5,000         --           --

Bruce E. Zukauskas           1999    135,000      --               --               --          7,500         --           --
  Vice President,            1998    128,125     9,787             --               --          5,000         --           --
  Operations                 1997    110,000     6,700             --               --          5,000         --           --

----------------
<FN>
(1)  The Company's fiscal year ends on September 30th of each year.
(2)  Excludes perquisites in amounts less than the threshold level required for reporting.
(3)  Mr. Quinn's  compensation for the fiscal year ended September 30, 1999 was determined  pursuant to his Employment  Agreement.
     See "Executive Agreements."
(4)  Mr.  Matthews is assigned as a consultant  to the Company  pursuant to a management  agreement  between  Matthews  Associates
     Limited and the Company.  All compensation  under the agreement is paid by the Company to Matthews  Associates  Limited.  See
     "Executive Agreements."
(5)  On January 20, 1998, Mr. Matthews  resigned as Chief  Executive  Officer and Treasurer of the Company and the Company elected
     Mr. Quinn as Chief Executive Officer and Treasurer.
(6)  Options have been adjusted to reflect the Company's two for one stock dividend paid on April 7, 1997.
</FN>
</TABLE>

Option Grants During Fiscal Year
The following  table sets forth certain  information  regarding  options granted
during the fiscal  year ended  September  30,  1999 by the  Company to the Named
Executive Officers:
<TABLE>
<CAPTION>
                                              Individual Grants
                                      --------------------------------
                                                                                             Potential Realizable
                         Number of      Percent of                                             Value at Assumed
                         Securities   Total Options                                      Annual Rates of Stock Price
                         Underlying     Granted to                                            Appreciation for
                          Options      Employees in   Exercise or Base   Expiration              Option Term
Name                      Granted      Fiscal Year        Price (2)         Date            (3) 10%         5%
----                      -------      -----------        ---------         ----            -------       ------
<S>                       <C>             <C>              <C>            <C>              <C>          <C>
George J. Matthews         3,000(1)        1.8%             $3.80          7/1/2009         $18,169      $ 7,169
Robert E. Quinn            7,500(1)        4.5%             $3.80          7/1/2009          45,422       17,923
William T. Nachtrab        7,500(1)        4.5%             $3.80          7/1/2009          45,422       17,923
Douglas F. Grotheer        7,500(1)        4.5%             $3.80          7/1/2009          45,422       17,923
Bruce E. Zukauskas         7,500(1)        4.5%             $3.80          7/1/2009          45,422       17,923

                                                                31
<PAGE>

-----------------
<FN>
(1)  These options are first exercisable on July 1, 2002.

(2)  The exercise price per share is the market price of the underlying Common Stock on the date of grant.

(3)  Amounts represent  hypothetical gains that could be achieved for the respective options if exercised at the end of the option
     term. These gains are based upon assumed rates of share price  appreciation set by the Securities and Exchange  Commission of
     five percent and ten percent compounded  annually from the date the respective options were granted to their expiration date.
     The gains shown are net of the option exercise price,  but do not include  deductions for taxes of the options exercise price
     or other expenses  associated  with the exercise.  Actual gains, if any, are dependent on the performance of the Common Stock
     and the date on which the option is exercised. There can be no assurance that the amounts reflected will be achieved.
</FN>
</TABLE>

Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values

The following table sets forth certain information  concerning options exercised
during the fiscal year ended September 30, 1999 by the Named Executive Officers,
as well as the aggregate  value of  unexercised  options held by such  executive
officers  on  September  30,  1999.  The  Company  has  no   outstanding   stock
appreciation rights, either freestanding or in tandem with options.
<TABLE>
<CAPTION>
                                                                Number of Securities
                                                               Underlying Unexercised        Value of Unexercised In-The-
                                                             Options at Fiscal Year-End      Money Options at FY End (2)
                                                             ---------------------------     ----------------------------
                                      Shares
                                     Acquired       Value
Name                                on Exercise   Realized   Exercisable   Unexercisable   Exercisable   Unexercisable
----                                -----------   --------   -----------   -------------   -----------   -------------
<S>                                     <C>        <C>        <C>           <C>               <C>            <C>
George J. Matthews                       0          $ 0         22,500         8,000           $ 0            $ 0
Robert E.Quinn                           0            0        101,667        25,833             0              0
William T. Nachtrab                      0            0         28,167        21,833             0              0
Douglas F. Grotheer                      0            0         15,000        12,500             0              0
Bruce E. Zukauskas                       0            0         20,000        12,500             0              0
----------------
<FN>
(1)  Value  realized  equals fair market value on the date of exercise,  less the  exercise  price,  times the number of
     shares acquired, without deducting taxes or commissions paid by employee.
(2)  Value of unexercised  options equals fair market value of the shares underlying  in-the-money  options on September
     30, 1999($2.125 per share), less the exercise price, times the number of options outstanding.
</FN>
</TABLE>

Pension Plan Table

The  following  table sets  forth the  aggregate  annual  benefit  payable  upon
retirement at normal retirement age for each level of remuneration  specified at
the listed years of service.

                                              Years of Service
                                 ---------------------------------------------
Remuneration                        15         20          25       30 or More
------------                        --         --          --       ----------

 $100,000                        $ 23,520   $ 31,360    $ 39,220      $ 47,040
  150,000                          38,520     51,360      64,200        77,040
  200,000                          53,520     71,360      89,200       107,040
  300,000                          83,520    111,360     139,200       167,040
  400,000                         113,520    151,360     189,200       227,040
  500,000                         143,520    191,360     239,200       287,040

The Company has a defined  benefit plan (the "Pension Plan") designed to provide
retirement benefits for employees and ancillary benefits to their beneficiaries,
joint annuitants and spouses.  All employees of the Company become  participants
in the  Pension  Plan after  attaining  the later of age 21 or a year of service
with the Company.  The Pension Plan provides  retirement benefits based on years
of service and  compensation.  An  employee's  benefits  under the Pension  Plan
generally become fully vested after five years of service.  At normal retirement
(the later of age 65 and five  years of Plan  participation),  participants  are
entitled to a monthly benefit for the remainder of their life in an amount equal
to one-twelfth  of the sum of their "Annual  Credits" for their last 30 years or

                                       32
<PAGE>

lesser period of employment with the Company and its predecessors. An employee's
"Annual  Credit"  is 1.25% of the  portion of his  annual  compensation  that is
subject to Social Security tax and two percent (2%) of the balance of his annual
compensation. Participants with five years of service are entitled to retirement
at age 55, but the monthly  benefit payable under the Pension Plan is reduced by
0.5% for each month that early  retirement  precedes  normal  retirement but not
less than $100 per month if the  Participant  has ten or more years of  service.
The surviving spouse of a retiree under the Plan is entitled to receive benefits
equal to one-half the amount the retiree had been receiving. Alternative benefit
payments that are equivalent to the benefit  described  above are also available
to  participants.  Benefits  payable  under the plan are not  reduced  by Social
Security payments to the retiree.  Amounts shown assume benefits commence at age
65. Benefit amounts shown are straight-life  annuities.  The executive  officers
named in the Summary  Compensation  Table have the  following  years of credited
service  for  pension  plan  purposes:  Robert E.  Quinn-23  years;  William  T.
Nachtrab-9 years; and Douglas  Grotheer-19 years and Bruce  Zukauskas-17  years.
Mr. Matthews does not participate in the Pension Plan.

Directors' Compensation and Stock Option Plan

Each  outside  director of the Company  receives an annual fee of $15,000 and is
eligible to receive options under the Company's 1995 Directors  Option Plan (the
"1995  Directors  Plan").  During  fiscal 1999,  the Company  granted to each of
Messrs.  Matthews,  Smith, Brenton,  Brady, Hoolahan, Sand and Vataha options to
purchase  3,000 shares of Common Stock at an exercise  price of $3.80 per share,
based on the market  price of the Common  Stock at that time.  At the same time,
the Company also granted Mr. Quinn (in his capacity as President of the Company)
an incentive  stock option to purchase  7,500 shares of Common Stock at the same
exercise price under the Company's 1999 Stock Option Plan.

The Company has entered into a management  agreement  with  Matthews  Associates
Limited,  a  Massachusetts  corporation  ("MAL"),  of which George J.  Matthews,
Director and  Chairman of the Board of Directors of the Company,  is sole owner.
The management agreement is described below.

Employment Arrangements

Employment Agreement with Mr. Quinn

In October 1997, the Company entered into an amended  employment  agreement with
Mr.  Quinn.   Pursuant  to  the  agreement,   Mr.  Quinn  will  receive  initial
compensation  at the annual rate of $200,000,  subject to such annual  increases
and  bonuses  as the Board of  Directors  may from time to time  determine.  The
agreement shall continue in force until February 28, 2002,  unless terminated by
either party in accordance with its terms,  and is subject to annual renewals as
described in the agreement. During the term of the agreement and for a period of
two  years  after  its  expiration,  or after  the  termination  of Mr.  Quinn's
employment with the Company,  whichever  occurs later, Mr. Quinn may not compete
directly or indirectly  with the Company within the  continental  United States.
The Company shall require any successor to a majority of its business activities
to assume its obligations under this agreement.

                                       33
<PAGE>

Employment Agreements with Messrs. Nachtrab, Grotheer, and Raftery

In October 1997, the Company  entered into  employment  agreements  with Messrs.
Nachtrab, Grotheer, and Raftery (each an "Executive").  Under the terms of their
respective agreements,  Messrs. Nachtrab,  Grotheer, and Raftery are entitled to
an annual base salary of $142,000,  $135,000 and $125,000 respectively,  subject
to such annual  increases and bonuses as the Board of Directors may from time to
time  determine.  Each of the agreements  shall continue in force for an initial
period of three (3) years, unless such agreement is terminated by the Company or
the Executive in accordance with its terms. Annually, the Board of Directors, in
its  discretion,  may extend the term of each agreement for an additional  year.
During  the term of each  Agreement  and for a period  of 18  months  after  any
termination  of employment,  each  Executive may neither i) compete  directly or
indirectly with the Company within the continental United States nor ii) solicit
any of the  Company's  customers or  employees.  Each of the  agreements  may be
terminated  by the  Company  prior to a change in  control  (as  defined  in the
agreements) and upon twelve months written notice.

Management Agreement with Matthews Associates Limited

The Company has entered into a  management  agreement  with MAL.  The  agreement
provides MAL with a minimum  compensation of $350,000 per annum for all services
under  the  agreement.  This  agreement  was  modified  to  reduce  the  minimum
compensation  to $225,000  beginning  April 1, 1999.  The  agreement  expires on
February 28, 2004, subject to annual renewals as described in the agreement.  In
the event of termination of MAL by the Company,  the Company is obligated to pay
to MAL all of the amounts due under the agreement for the remaining term.

Compensation Committee Interlocks and Insider Participation

During the fiscal year ended  September 30, 1999,  the Board of Directors of the
Company was  responsible for  establishing  executive  compensation  (other than
stock  option   compensation).   Messrs.  Quinn  and  Matthews  participated  in
deliberations of the Company's Board of Directors  concerning  executive officer
compensation. Neither participated in setting his own compensation. No executive
officer  of the  Company  served  as a  director  or  member  of a  compensation
committee, or its equivalent, of another entity, one of whose executive officers
served as director of the Company.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table sets forth as of September 30, 1999,  certain  information
with respect to the beneficial  ownership of the Common Stock by (i) each person
known by the Company to be a beneficial  owner of more than five percent (5%) of
the Common Stock, (ii) each director of the Company,  (iii) each Named Executive
Officer and (iv) all directors and executive officers of the Company as a group.
Except as otherwise noted,  each party included in the table has sole voting and
investment power with respect to the shares beneficially owned.

                                       34
<PAGE>
<TABLE>
<CAPTION>

Name and Address of                                             Amount and Nature of Beneficial
Beneficial Owner                                                        Ownership                   Beneficially Owned Percent
-------------------                                                     ---------                   --------------------------
<S>                                                                   <C>                                     <C>

WIAF Investors Co. (1)(2)                                              2,055,415                               41.86%
  466 Arbuckle Avenue
  Lawrence, NY 11516

Meryl J. Chrein (1)(2)                                                   269,800                                5.60%
  21 Copper Beech Lane
  Lawrence, NY 11559

George J. Matthews (3)                                                   436,991                                9.03
  Chairman of the Board of Directors,
  Director & Consultant
  C/O Matthews Associates Limited
  100 Corporate Place
  Peabody, MA  01960

Dimensional Fund Advisors, Inc. (4)                                      331,600                                6.92
  1299 Ocean Avenue
  11th Floor
  Santa Monica, CA  90401

Robert E. Quinn (5)                                                      123,812                                2.53
  President, CEO, Treasurer

William T. Nachtrab (6)                                                   30,167                                  *
  Vice President, Engineering & Technology

Douglas F. Grotheer (7)                                                   17,074                                  *
  President of CMI Corporation

Bruce E. Zukauskas(8)                                                     22,000                                  *
  Vice President, Operations

Kenneth A. Smith, Director (9)                                            18,500

Frank H. Brenton, Director (9)                                            18,500                                  *

Matthew  Brady, Director                                                  16,000                                  *

Gerald R. Hoolahan, Director                                                --                                    --

Brian B. Sand, Director                                                   51,700                                 1.08%

Randal  E. Vataha                                                           --                                    --

All directors and executive officers (13 persons) as a group (10)        747,077                                14.82%
---------------------
<FN>
(1)  Does not reflect the effect on voting rights of the  Massachusetts  Control Share  Acquisition  Act. The Company is
     subject to Chapter 110D of the  Massachusetts  General Laws which governs "control share  acquisitions,"  which are
     acquisitions of beneficial ownership of shares which would raise the voting power of the acquiring person above any
     one of three  thresholds:  one-fifth,  one-third or one-half of the total voting power.  All shares acquired by the
     person making the control share  acquisition  within 90 days before or after any such  threshold is crossed  obtain
     voting rights only upon the authorization  from a majority of the stockholders other than the person acquiring such
     shares, officers of the Company and those directors of the Company who also are employees. Based on certain filings
     made with the SEC, the Company believes that certain control share  acquisitions have occurred and that the members
     of the group which affected such control share  acquisitions,  namely WIAF Investors Co.,  Charles  Alpert,  Joseph
     Alpert,  Melvin B. Chrein,  Meryl J. Chrein,  and Marshall J. Chrein  (collectively  the "Investor  Group") are the
     holders of 1,759,255 shares (the "Affected Shares") which were acquired in control share  acquisitions  (within the
     meaning of  Chapter  110D) and  accordingly  will have no voting  rights  unless or until  such  voting  rights are
     authorized as described in "Description of Capital Stock."
(2)  Derived from a Schedules 13D/A, dated September 30,1999.  The Company  understands the Schedule 13D/A to report the
     dissolution  of the Investor  Group.  Each person  reported sole voting and  dispositive  power with respect to the
     shares owned by such person. The Company understands the Schedule 13D/A to claim that none of the former members of
     the Investor  Group is the  beneficial  owner of  securities  beneficially  owned by any other former member of the
     Investor  Group.  Also  includes  79,438  which WIAF  Investors  Co. has the right to acquire  upon  conversion  of
     outstanding 10% Convertible Subordinated Debentures and 40,040 and 24,000 shares which WIAF Investors Co. and Meryl
     J. Chrein, respectively, have the right to acquire under outstanding warrants.

                                                           35
<PAGE>

(3)  Includes (i) 22,500 shares which may be purchased upon the exercise of currently  exercisable  options,  (ii) 2,326
     shares which may be acquired upon the conversion of an outstanding 10% Convertible  Subordinated  Debenture,  (iii)
     13,961  shares  which Mr.  Matthews'  wife has the right to  acquire  upon the  conversion  of an  outstanding  10%
     Convertible  Subordinated  Debenture,  and (iv) 1,980 shares owned by Mr.  Matthews' wife. Mr.  Matthews  disclaims
     beneficial ownership of the debenture and shares held by Mrs. Matthews.
(4)  The officers of Dimensional Fund Advisors,  Inc. also serve as officers of DFA Investment  Dimensions  Group,  Inc.
     (the "Fund") and The DFA Investment Trust Company (the "Trust"),  each an open-end  management  investment  company
     registered  under the Investment  Company Act of 1940. In their  capacity as officers of the Fund and Trust,  these
     persons vote 126,100 shares which are owned by the Fund and 13,000 shares which are owned by the Trust. Dimensional
     Fund Advisors, Inc. disclaims beneficial ownership of these securities.
(5)  Includes 101,667 shares that may be purchased upon the exercise of currently exercisable options.
(6)  Includes 28,167 shares that may be purchased upon the exercise of currently exercisable options.
(7)  Includes 15,000 shares that may be purchased upon the exercise of currently exercisable options.
(8)  Includes 20,000 shares that may be purchased upon the exercise of currently exercisable options.
(9)  Includes 12,500 shares that may be purchased upon the exercise of currently exercisable options.
(10) See notes (3), (5), (6), (7), (8), and (9) above. Also includes an additional 224,667 shares which may be purchased
     upon the exercise of currently exercisable options.

* Less than 1% ownership individually.
</FN>
</TABLE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company has  various  employment  and  management  agreements.  See Item 11,
"Employment  Arrangements." In December 1997, the Company sold $900,000 worth of
10%  Convertible  Subordinated  Debentures  due on  December  31,  1999  to WIAF
Investors Co. ($500,000),  Melvin Chrein ($150,000), Joshua Feibusch ($150,000),
Marshall  Chrein  ($50,000) and George Matthews  ($50,000).  Such debentures are
convertible  into  shares of Common  Stock at an  exercise  price of $21.50  per
share. WIAF Investors Co., Melvin Chrein and Marshall Chrein had filed Schedules
13D/A  identifying  themselves as part of an investor group which held more than
five  percent of the  Company's  outstanding  Common  Stock and filed a Schedule
13D/A dated  September 30, 1999  reporting the  dissolution  of such group.  Mr.
Matthews  is  currently  a  director  of the  Company  and at  the  time  of the
transaction  was the  Company's  Chief  Executive  Officer  and  Treasurer.  Mr.
Feibusch is not affiliated with the Company.


                                       36
<PAGE>


                                     PART IV

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

1. Financial Statements
         The  following  consolidated  financial  statements  of the Company are
         filed as part of this report:
           Independent Auditors' Reports
           Consolidated  Balance  Sheets--September  30, 1999 and  September 30,
           1998.
           Consolidated  Statements of Operations for the years ended  September
           30, 1999, 1998 and 1997.
           Consolidated  Statements of Stockholders'  Equity for the years ended
           September 30, 1999, 1998 and 1997.
           Consolidated  Statements of Cash Flows for the years ended  September
           30, 1999, 1998 and 1997.
           Notes to Consolidated Financial Statements

2. Financial Statement Schedule for the Three Years Ended September 30, 1999.
          Auditors' Report on Schedule II-Valuation and Qualifying Accounts

3. Form 8-K was filed on September 20, 1999 regarding a change in accounting
          firms.

4. Exhibits:

      ITEM NO.*         DESCRIPTION

         2        Plan of Reorganization, dated June 24, 1997. (12)

         3(a)     Articles of Organization, as amended, of the Registrant.(13)

         3(b)     By-laws,  as  amended,  of  the  Registrant,  incorporated  by
                  reference to File No. 2-62266, Part II, Exhibit 3(b).

         4(a)     Financing  Agreement,  dated  May  11,  1982,  among  Barnwell
                  County,  South Carolina,  Registrant and Carolina Metals, Inc.
                  (a wholly-owned subsidiary) relating to Barnwell County, South
                  Carolina Industrial  Development Revenue Bond (Nuclear Metals,
                  Inc.  project)  1982,  incorporated  by  reference to File No.
                  2-70044, Part II, Exhibit 4(d).

         4(b)     Financing  Agreement,  dated September 27, 1984 among Barnwell
                  County,  South Carolina,  Registrant and Carolina Metals, Inc.
                  (a wholly owned-subsidiary) relating to Barnwell County, South
                  Carolina Industrial  Development Revenue Bond (Nuclear Metals,
                  Inc.  project)  1984,  incorporated  by  reference to File No.
                  0-8836, Part II, Exhibit 4(e).

                                       37
<PAGE>

         4(c)     Financing  Agreement,  dated June 1, 1985 among  Massachusetts
                  Industrial  Finance  Agency  and the  Registrant  relating  to
                  Massachusetts  Industrial  Development Revenue Bond (NMI--1985
                  Concord Issue)  incorporated  by reference to File No. 0-8836,
                  Part II, Exhibit 4(f).

         4(d)     Nuclear  Metals,  Inc.  Non-Qualified  Stock  Option  Plan  as
                  amended. (1)

         4(e)     Nuclear Metals,  Inc. Restated Employees' Stock Option Plan as
                  amended. (1)

         4(f)     Nuclear Metals,  Inc. Directors' Stock Option Plan as amended.
                  (6)

         4(h)     Warrant to  Purchase  25,000  shares of the  Company's  Common
                  Stock issued to State Street Bank and Trust Company. (6)

         4(i)     Common Stock Purchase  Warrant dated September 16, 1996 issued
                  to Melvin B. Chrein and schedule of similar warrants. (7)

         4(j)     Common stock purchase  warrant dated September 22, 1997 issued
                  to Roger M. Marino for 60,000 shares.(13)

         10(a)    Agreement, effective March 1, 1993, between the Registrant and
                  Matthews Associates Limited. (2)

         10(c)    Employment  Agreement,  effective February 8, 1995 between the
                  Registrant and Robert E. Quinn. (7)

         10(d)    Agreement  with  Olin  Corporation   regarding  large  caliber
                  penetrators.  (Confidential  treatment  has been  granted  for
                  certain portions of this Exhibit). (3)

         10(e)    Credit  Agreement  dated  March 31,  1995  among the  Company,
                  Carolina Metals, Inc. and State Street Bank and Trust Company.
                  (4)

         10(f)    First Amendment to Credit  Agreement dated as of June 30, 1995
                  among the Company, Carolina Metals, Inc. and State Street Bank
                  and Trust Company. (5)

         10(g)    Amended  and  Restated  Revolving  Credit Note dated March 31,
                  1995 (as amended  December  24, 1996 ) of the  Registrant  and
                  Carolina Metals, Inc. (7)

         10(h)    Second  Amendment to Credit Agreement dated as of December 24,
                  1996 among the  Registrant,  Carolina  Metals,  Inc. and State
                  Street Bank and Trust Company. (7)

                                       38
<PAGE>

         10(i)    10% Convertible  Subordinated Debenture dated January 10, 1996
                  payable to WIAF  Investors  Co. in amount of  $334,000.00  and
                  schedule of similar debentures. (7)

         10(j)    10% Subordinated Debenture dated September 16, 1996 payable to
                  WIAF  Investors Co. in amount of  $334,000.00  and schedule of
                  similar debentures. (7)

         10(k)    Letter  Agreement dated as of September 16, 1996 with Kathleen
                  Matthews and schedule similar letter agreements. (7)

         10(l)    Joint Security  Agreement dated as of March 31, 1995 among the
                  Registrant,  Carolina  Metals,  Inc. and State Street Bank and
                  Trust Company. (6)

         10(m)    First  Amendment to Joint Security  Agreement  dated September
                  26, 1995 among the Registrant, Carolina Metals, Inc. and State
                  Street Bank and Trust Company. (6)

         10(n)    Patent Assignment of Security dated September 26, 1995 between
                  the Registrant and State Street Bank and Trust Company.(6)

         10(o)    Trademark  Assignment  of Security  dated  September  26, 1995
                  between  the  Registrant  and  State  Street  Bank  and  Trust
                  Company. (6)

         10(p)    Purchase  order dated August 23, 1995  between the  Registrant
                  and Olin Corporation.  (Confidential treatment requested as to
                  certain portions) (6)

         10(q)    Forbearance  and Amendment  Agreement  dated as of January 11,
                  1996 between the Registrant,  Carolina Metals,  Inc. and State
                  Street Bank and Trust Company. (6)

         10(r)    Waiver  of Breach of  Covenant,  by and among the  Registrant,
                  Carolina Metals, Inc. and State Street Bank and Trust Company.
                  (7)

         10(s)    Envirocare  of  Utah  Inc.   Low-Activity   Radioactive  Waste
                  Disposal Agreement.  (Confidential  treatment has been granted
                  for certain portions of this Exhibit). (9)

         10(t)    Amendment of Solicitation/Modification of Contract dated March
                  10, 1997 issued by Department of the Army. (10)

         10(u)    Securities Pledge Agreement dated July 3, 1997 between Khosrow
                  B. Semnoni and Nuclear Metals, Inc. (11)

         10(v)    Employment  Agreement,  effective  October 1, 1997 between the
                  Registrant and James M. Spiezio. (13)

                                       39
<PAGE>

         10(w)    Amended and Restated  Revolving  Credit Note dated  October 1,
                  1997  among  the  Company,   Starmet  Powders,   LLC,  Starmet
                  Aerocast,  LLC, Starmet Comcast, LLC, Starmet NMI Corporation,
                  Starmet CMI  Corporation,  Starmet Holdings  Corporation,  NMI
                  Foreign  Sales  Corporation  and State  Street  Bank and Trust
                  Company. (13)

         10(x)    Amended and Restated  Credit  Agreement  dated October 1, 1997
                  among the Company,  Starmet Powders,  LLC,  Starmet  Aerocast,
                  LLC,  Starmet Comcast,  LLC, Starmet NMI Corporation,  Starmet
                  CMI  Corporation,  Starmet Holdings  Corporation,  NMI Foreign
                  Sales  Corporation  and State  Street Bank and Trust  Company.
                  (13)

         10(y)    Amended and Restated Joint Security Agreement dated October 1,
                  1997  among  the  Company,   Starmet  Powders,   LLC,  Starmet
                  Aerocast,  LLC, Starmet Comcast, LLC, Starmet NMI Corporation,
                  Starmet CMI  Corporation,  Starmet Holdings  Corporation,  NMI
                  Foreign  Sales  Corporation  and State  Street  Bank and Trust
                  Company. (13)

         10(z)    Patent  Assignment  of Security  dated October 1, 1997 between
                  the Company and State Street Bank and Trust. (13)

         10(aa)   Employment  Agreement,  effective  October 1, 1997 between the
                  Registrant and William T. Nachtrab. (13)

         10(bb)   Employment  Agreement,  effective  October 1, 1997 between the
                  Registrant and Douglas F. Grotheer. (13)

         10(cc)   Employment  Agreement,  effective  October 1, 1997 between the
                  Registrant and Kevin R. Raftery. (13)

         10(dd)   First  Amendment to Credit  Agreement  dated as of December 9,
                  1997  among  the  Company,   Starmet  Powders,   LLC,  Starmet
                  Aerocast,  LLC, Starmet Comcast, LLC, Starmet NMI Corporation,
                  Starmet CMI  Corporation,  Starmet Holdings  Corporation,  NMI
                  Foreign  Sales  Corporation  and State  Street  Bank and Trust
                  Company. (13)

         10(ee)   Third Amendment to Credit Agreement dated August 7, 1997 among
                  Nuclear Metals,  Inc.,  Carolina Metals, Inc. and State Street
                  Bank and Trust Company. (13)

         10(ff)   Amendment  to  Employment  Agreement  dated  October  1,  1997
                  between the Registrant and Robert E. Quinn. (13)

         10(gg)   Letter agreement with Roger M. Marino dated September 22, 1997
                  between the registrant and Roger M. Marino. (13)

         10(hh)   10% Subordinated Debenture dated September 22, 1997 payable to
                  Roger Marino in the amount of $500,000.00. (13)

                                       40
<PAGE>

         10(ii)   Letter agreement dated December 23, 1997 regarding issuance of
                  subordinated   convertible  debentures  among  the  Registrant
                  Melvin Chrein,  WIAF Investors Co.,  Marshall  Chrein,  Joshua
                  Feibusch and George J. Matthews. (13)

         10(jj)   10% Convertible Subordinated Debenture dated December 23, 1997
                  payable to WIAF  Investors  Co. in amount of  $500,000.00  and
                  schedule of similar debentures. (13)

         10(kk)   Second  Amendment to Credit  Agreement dated December 29, 1997
                  among the Company,  Starmet Powders,  LLC,  Starmet  Aerocast,
                  LLC,  Starmet Comcast,  LLC, Starmet NMI Corporation,  Starmet
                  CMI  Corporation,  Starmet Holdings  Corporation,  NMI Foreign
                  Sales  Corporation  and State  Street Bank and Trust  Company.
                  (13)

         10(ll)   Second  Additional  Revolving  Credit Note dated  December 29,
                  1997  among  the  Company,   Starmet  Powders,   LLC,  Starmet
                  Aerocast,  LLC, Starmet Comcast, LLC, Starmet NMI Corporation,
                  Starmet CMI  Corporation,  Starmet Holdings  Corporation,  NMI
                  Foreign  Sales  Corporation  and State  Street  Bank and Trust
                  Company. (13)

         10(mm)   Eighth  Amendment to Credit  Agreement dated December 29, 1997
                  November 12, 1999 among the  Company,  Starmet  Powders,  LLC,
                  Starmet  Aerocast,  LLC,  Starmet  Comcast,  LLC,  Starmet NMI
                  Corporation,   Starmet  CMI   Corporation,   Starmet  Holdings
                  Corporation,  NMI Foreign Sales Corporation and Citizens Bank.
                  **

         21       Subsidiaries of the Registrant. (13)

         23(a)(b) Consents of Independent Public Accountants.**

         27       Financial Data Schedule.**

         99(a)    Memorandum  of  Decision  dated  September  13,  1996 from the
                  United States Army Contract Adjustment Board. (8)
       -------------------
       *     Item numbers correspond to Exhibit Table, Item 601, Regulation S-K

       **    Indicates an exhibit filed herewith

(1)      Incorporated by reference to the similarly  numbered Exhibit filed with
         the  Registrant's  Annual Report on Form 10-K for the fiscal year ended
         September 30, 1992.
(2)      Incorporated by reference to the similarly  numbered Exhibit filed with
         the  Registrant's  Quarterly  Report on Form 10-Q for the quarter ended
         June 30, 1992.
(3)      Incorporated by reference to Exhibit 10 to the  Registrant's  Quarterly
         Report on Form 10-Q for the quarter ended March 31, 1993.

                                       41
<PAGE>

(4)      Incorporated by reference to Exhibit 10A to the Registrant's  Form 10-Q
         for the Quarter ended March 31, 1995.
(5)      Incorporated by reference to Exhibit 10(c) to the  Registrant's  Annual
         Report on Form 10-K for the fiscal year ended September 30, 1995.
(6)      Incorporated by reference to the similarly  numbered Exhibit filed with
         the  Registrant's  Annual Report on Form 10-K for the fiscal year ended
         September 30, 1995.
(7)      Incorporated by reference to the similarly  numbered Exhibit filed with
         the  Registrant's  Annual Report on Form 10-K for the fiscal year ended
         September 30, 1996.
(8)      Incorporated  by  reference  to Exhibit 99 filed with the  Registrant's
         Annual  Report on Form 10-K for the  fiscal  year ended  September  30,
         1996.
(9)      Incorporated by reference to Exhibit 10A to Registrant's  Form 10-Q for
         the quarter ended March 31, 1997.
(10)     Incorporated by reference to Exhibit 10B to Registrant's  Form 10-Q for
         the quarter ended March 31, 1997.
(11)     Incorporated by reference to Exhibit 10 to  Registrant's  Form 10-Q for
         the quarter ended June 30, 1997.
(12)     Incorporated  by reference to Annex A to  Registrant's  proxy statement
         for special meeting held on September 29, 1997.
(13)     Incorporated  by  reference  to the  exhibits to the  Company's  Annual
         Report on Form 10-K for the fiscal year ended September 30, 1997



                                       42
<PAGE>


                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULES




                                                                          Page


Independent Auditors' Reports                                             F-2

Consolidated Balance Sheets--September 30, 1999 and September 30, 1998.   F-4

Consolidated Statements of Operations for the years ended September 30,
     1999, 1998 and 1997.                                                 F-5

Consolidated Statements of Stockholders' Equity for the years ended
     September 30, 1999, 1998 and 1997.                                   F-6

Consolidated Statements of Cash Flows for the years ended September 30,
     1999, 1998 and 1997.                                                 F-7

Notes to Consolidated Financial Statements                                F-8

Schedule II--Valuation and Qualifying Accounts                            F-32


                                      F-1


<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors and Stockholders of Starmet Corporation:

We  have  audited  the  accompanying   consolidated  balance  sheet  of  Starmet
Corporation  and   subsidiaries  as  of  September  30,  1999  and  the  related
consolidated  statements of operations,  stockholders' equity and cash flows for
the year then ended.  These  financial  statements and the schedule  referred to
below are the responsibility of the Company's management.  Our responsibility is
to express an opinion on these  financial  statements  and schedule based on our
audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Starmet Corporation
and  subsidiaries as of September 30, 1999, and the results of their  operations
and their  cash  flows  for the year then  ended in  conformity  with  generally
accepted accounting principles.

The  consolidated  financial  statements  referred  to above have been  prepared
assuming that the Company will continue as a going concern. As discussed in Note
1 to the financial  statements,  the Company has incurred  significant losses in
1999 and 1998,  has a working  capital  deficit  at  September  30,  1999 and is
operating under a forebearance agreement with its bank, which raise substantial
doubt about its ability to continue as a going  concern.  Management's  plans in
regard to these matters are also  described in Note 1. The financial  statements
do not  include  any  adjustments  that might  result  from the  outcome of this
uncertainty.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements  taken as a whole.  The schedule listed in the index of the financial
statements  is  presented  for  purposes of complying  with the  Securities  and
Exchange  Commission  rules and is not part of the basic  financial  statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic  financial  statements  and, in our opinion,  fairly  states in all
material  respects the financial  data required to be set forth therein for 1999
in relation to the basic financial statements taken as a whole.



                                                    BDO SEIDMAN, LLP



December 3, 1999

                                      F-2

<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

       To the Board of Directors and Stockholders of Starmet Corporation:

       We have audited the accompanying  consolidated  balance sheets of Starmet
Corporation  (formerly Nuclear Metals,  Inc.) (a Massachusetts  Corporation) and
subsidiaries as of September 30, 1998, and the related  consolidated  statements
of operations,  stockholders' equity and cash flows for each of the two years in
the period ended September 30, 1998. These financial statements and the schedule
referred  to below  are the  responsibility  of the  Company's  management.  Our
responsibility  is to  express  an opinion  on these  financial  statements  and
schedule based on our audits.

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

       In our opinion,  the consolidated  financial statements referred to above
present  fairly,  in all material  respects,  the financial  position of Starmet
Corporation and  subsidiaries as of September 30, 1998, and the results of their
operations  and their cash  flows for each of the two years in the period  ended
September 30, 1998, in conformity with generally accepted accounting principles.

       The  accompanying  consolidated  financial  statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1 to the financial  statements,  the Company has incurred a significant  loss in
1998 and is in default under its credit agreement, which raise substantial doubt
about its ability to continue as a going concern.  Management's  plans in regard
to these matters are also  described in Note 1. The financial  statements do not
include any adjustments that might result from the outcome of this uncertainty.

       Our audit was made for the  purpose  of  forming  an opinion on the basic
financial  statements  taken as a whole. The schedule listed in the index of the
financial  statements is presented for purposes of complying with the Securities
and Exchange Commission rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic  financial  statements  and, in our opinion,  fairly  states in all
material  respects  the  financial  data  required  to be set forth  therein  in
relation to the basic financial statements taken as a whole.

       The consolidated  financial  statements and schedule referred to above as
of September 30, 1997 and for the year then ended,  have been restated (see Note
2).


                                                      ARTHUR ANDERSEN LLP
       Boston, Massachusetts
       January 8, 1999



                                      F-3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>

                                  CONSOLIDATED BALANCE SHEETS

                                                                      1999            1998
<S>                                                             <C>             <C>
ASSETS
  Current Assets:
    Cash and cash equivalents                                    $     14,000    $    327,000
    Restricted cash                                                   238,000         238,000
    Accounts receivable, net of allowances for doubtful
        accounts of $200,000 in 1999 and $524,000 in 1998           3,535,000       6,020,000
    Inventory                                                       2,426,000       4,005,000
    Other current assets                                              415,000         545,000
                                                                 ------------    ------------
      Total Current Assets                                          6,628,000      11,135,000
                                                                 ------------    ------------

  Property, Plant and Equipment:
    Land                                                            2,136,000       2,136,000
    Buildings                                                      18,961,000      18,866,000
    Machinery, equipment and fixtures                              22,545,000      22,505,000
    Construction-in-progress                                          114,000         161,000
                                                                 ------------    ------------
      Total Property, Plant and Equipment                          43,756,000      43,668,000
    Less: Accumulated depreciation                                 27,645,000      25,731,000
                                                                 ------------    ------------
    Property, plant, and equipment, net                            16,111,000      17,937,000

  Non-current Inventory                                             1,309,000       1,500,000
  Other Assets                                                      1,808,000       1,861,000
                                                                 ------------    ------------
                                                                 $ 25,856,000    $ 32,433,000
                                                                 ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
 Current Liabilities:
   Current portion of long-term obligations                      $  8,752,000    $  8,582,000
   Accounts payable                                                 6,084,000       8,392,000
   Accrued payroll and related costs                                  670,000       1,541,000
   Other accrued expenses                                           4,255,000       4,758,000
                                                                 ------------    ------------
     Total Current Liabilities                                     19,761,000      23,273,000
 Long-Term Obligations:
   Notes Payable to Shareholders                                    1,375,000       2,083,000
 Stockholders' Equity
   Common stock, par value $.10; authorized - 15,000,000
   shares; 4,790,674 issued and outstanding for 1999 and 1998         479,000         479,000
   Additional paid-in capital                                      14,067,000      14,067,000
   Warrants issued                                                    772,000         687,000
   Accumulated deficit                                            (10,598,000)     (8,156,000)
                                                                 ------------    ------------
     Total Stockholders' Equity                                     4,720,000       7,077,000
                                                                 ------------    ------------
                                                                 $ 25,856,000    $ 32,433,000
                                                                 ============    ============
<FN>
    THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS
</FN>
</TABLE>

                                              F-4
<PAGE>
<TABLE>
<CAPTION>
                                           CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                                 1999             1998            1997
                                                                                                             (as restated)

<S>                                                                         <C>             <C>             <C>
Net Sales and Contract Revenues                                              $ 25,001,000    $ 34,823,000    $ 28,062,000
                                                                             ------------    ------------    ------------
Cost and Expenses:
Cost of sales                                                                  19,297,000      40,028,000      20,136,000
Selling, general, and administrative expenses                                   5,394,000      11,136,000       5,448,000
Research and development expenses                                               1,243,000       1,421,000       1,309,000
Loss on write-off of fixed assets                                                    --              --           358,000
                                                                             ------------    ------------    ------------
                                                                               25,934,000      52,585,000      27,251,000
                                                                             ------------    ------------    ------------

Operating Income (Loss)                                                          (933,000)    (17,762,000)        811,000
Interest Income and Other Expense, net                                             95,000         145,000           2,000
Interest Expense                                                                1,414,000       1,124,000         296,000
                                                                             ------------    ------------    ------------

Income (Loss) Before Income Taxes                                              (2,442,000)    (19,031,000)        513,000

Provision  for Income Taxes                                                          --              --            31,000
                                                                             ------------    ------------    ------------

Net Income (Loss)                                                            $ (2,442,000)   $(19,031,000)   $    482,000
                                                                             ============    ============    ============

Per Share Information
Basic Net Income (Loss) per Common and Common Equivalent Share               $      (0.51)   $      (3.97)   $       0.10
                                                                             ============    ============    ============


Weighted average number of common and common equivalent shares
outstanding                                                                     4,791,000       4,789,000       4,783,000
                                                                             ============    ============    ============

Diluted Net Income (loss) per Common and Dilutive Potential Common Shares
Outstanding                                                                  $      (0.51)   $      (3.97)   $       0.10
                                                                             ============    ============    ============

Weighted average number of common and dilutive potential common shares
outstanding                                                                     4,791,000       4,789,000       4,959,000
                                                                             ============    ============    ============


<FN>
                   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS
</FN>
</TABLE>

                                                            F-5
<PAGE>
<TABLE>
<CAPTION>
                                        CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

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

                                                                    Additional                    Retained
                                      Number of                      Paid-in                      Earnings
                                       Shares        Par value       Capital        Warrants     (Deficit)         Total
                                    ------------   ------------   ------------   ------------   ------------    ------------

<S>                                   <C>         <C>            <C>            <C>            <C>             <C>
Balance at September 30, 1996          4,783,000   $    478,000   $ 14,019,000   $    130,000   $ 10,393,000    $ 25,020,000
                                    ------------   ------------   ------------   ------------   ------------    ------------

Warrants issued                             --             --             --          230,000           --           230,000
Stock options exercised                    2,000           --           14,000           --             --            14,000
Net income for year (as restated)           --             --             --             --          482,000         482,000
                                    ------------   ------------   ------------   ------------   ------------    ------------

Balance at September 30, 1997          4,785,000   $    478,000   $ 14,033,000   $    360,000   $ 10,875,000    $ 25,746,000
                                    ------------   ------------   ------------   ------------   ------------    ------------

Warrants issued                             --             --             --          327,000           --           327,000
Stock options exercised                    6,000          1,000         34,000           --             --            35,000
Net loss for year                           --             --             --             --      (19,031,000)    (19,031,000)
                                    ------------   ------------   ------------   ------------   ------------    ------------

Balance at September 30, 1998          4,791,000   $    479,000   $ 14,067,000   $    687,000   $ (8,156,000)   $  7,077,000
                                    ------------   ------------   ------------   ------------   ------------    ------------

Warrants issued                             --             --             --           85,000           --            85,000
Net loss for year                           --             --             --             --       (2,442,000)     (2,442,000)
                                    ------------   ------------   ------------   ------------   ------------    ------------

Balance at September 30, 1999          4,791,000   $    479,000   $ 14,067,000   $    772,000   $(10,598,000)   $  4,720,000
                                    ------------   ------------   ------------   ------------   ------------    ------------
<FN>
              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS
</FN>
</TABLE>

                                                             F-6
<PAGE>
<TABLE>
<CAPTION>

                                               CONSOLIDATED STATEMENT OF CASH FLOW
                                                                       1999                   1998                     1997
                                                                  -------------           -------------           -------------
                                                                                                                  (as restated)
<S>                                                              <C>                     <C>                     <C>
Cash flows from operating activities:
  Net income (loss)                                               $ (2,442,000)           $(19,031,000)           $    482,000
  Adjustments to reconcile net income (loss) to net
  cash provided (used) by operating activities:
    Depreciation and amortization                                    1,995,000               2,157,000               1,588,000
    Loss on write-off of fixed assets                                     --                      --                   358,000
    Changes in assets and liabilities, net:
      Decrease (increase) in accounts receivable                     2,485,000                (474,000)               (616,000)
      Decrease (increase) in inventory, net of reserves              1,769,000               5,585,000               1,585,000
      Decrease (increase) in other current assets                      131,000                  74,000                (243,000)
      Decrease (increase) in other assets                               53,000                 (77,000)               (445,000)
      (Decrease) increase in accounts payable and
          accrued expenses                                          (3,598,000)              9,446,000              (3,629,000)
    Other                                                                 --                    26,000                  (1,000)
                                                                  ------------            ------------            ------------
       Net cash provided (used) by operating activities                393,000              (2,294,000)               (921,000)
                                                                  ------------            ------------            ------------

Cash flows from investing activities:
  Capital expenditures                                                 (88,000)             (4,585,000)             (1,788,000)
                                                                  ------------            ------------            ------------
      Net cash (used) provided by investing activities                 (88,000)             (4,585,000)             (1,788,000)
                                                                  ------------            ------------            ------------

Cash flows from financing activities:
  Principal payments under long-term obligations                      (138,000)               (184,000)               (545,000)
  Payments on bank debt                                               (981,000)            (19,332,000)             (9,801,000)
  Proceeds from bank debt                                                 --                25,792,000              11,508,000
  Proceeds from notes payable and warrants to
      shareholders                                                     500,000                 900,000                 500,000
  Proceeds from stock issuance                                            --                      --                    14,000
                                                                  ------------            ------------            ------------
      Net cash (used) provided by financing activities                (619,000)              7,176,000               1,676,000
                                                                  ------------            ------------            ------------

Net increase (decrease) in cash and cash equivalents:
Cash and cash equivalents at beginning of year                         565,000                 268,000               1,301,000
Cash and cash equivalents at end of year                               252,000                 565,000                 268,000
                                                                  ------------            ------------            ------------
                                                                  $   (313,000)           $    297,000            $ (1,033,000)
                                                                  ============            ============            ============
Supplemental disclosures of cash flow information:
  Cash paid (received) during the year for:
      Interest, net of amounts capitalized                        $  1,420,000            $  1,019,000            $    266,000
      Income tax refunds received                                 $       --              $       --              $    (14,000)

Non-cash investing and financing activities:
  Loss on write-off of non-current inventory                      $       --              $  4,951,000            $       --

<FN>
                     THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS
</FN>
</TABLE>

                                                              F-7
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  LIQUIDITY

Starmet  Corporation  (The  Company)  is a  manufacturer  of  specialized  metal
products that are fabricated by a variety of metalworking  processes.  Effective
October 1, 1997 the  company  changed  its name from  Nuclear  Metals,  Inc.  to
Starmet  Corporation.  The  Company's  financial  statements  for the year ended
September  30,  1999  have  been  prepared  on  a  going  concern  basis,  which
contemplates  the  realization  of assets and payment of the  liabilities in the
normal  course of  business.  In  fiscal  1999 as in fiscal  1998,  the  Company
continued  to realize  financial  losses and  liquidity  problems.  The  Company
continues to have a significant  working capital deficiency and has restructured
or amended its debt agreements with its principal  lender a number of times. The
Company  has been  served a  complaint  for  breach  of  contract  by one of its
principal  vendors.   In  addition,   the  Company  has  significant   potential
liabilities  associated with  discontinued or suspended  aspects of its business
which  it  believes  are the  responsibility  of the U.S.  Government.  If these
liabilities were to become the responsibility of the Company,  the Company would
be required to consider  insolvency  or similar  reorganization  proceedings  to
preserve its business operations.  In response to this situation, the Company is
pursuing  alternative  financing,   arranging  for  vendor  payment  plans,  and
continuing to restructure internally.

At September 30, 1999, the Company had a working capital deficit of $13,218,000,
a decrease in working  capital of $1,080,000 from a deficiency of $12,138,000 at
the end of fiscal 1998. For fiscal 1999, the Company's  accounts  receivable and
inventories decreased by $2,485,000 and $1,770,000,  respectively, compared with
September 30, 1998 levels. Cash (less restricted cash) at September 30, 1999 was
$14,000. The current portion of long-term  obligations  increased by $170,000 to
$8,752,000  from  $8,582,000.  The  revolving  line of  credit  was paid down by
$981,000  utilizing the cash  generated  from  operations  and the proceeds from
additional  shareholder  notes,  but the  reduction  was  more  than  offset  by
$1,423,000 of shareholder debt becoming  current,  as it matures in fiscal 2000.
At  the  end  of  fiscal  1999,  the  long-term  portion  of  notes  payable  to
shareholders,   net  of  unamortized  warrants,  decreased  to  $1,375,000  from
$2,083,000 at September 30, 1998.

Management's plans with regard to the existing working capital deficiency are to
continue to adjust  spending  levels to  appropriate  amounts to ensure  greater
financial  stability  while actively  exploring  additional  capital  generating
opportunities  including,  but not limited to, the sale and  leaseback  of owned
property,  asset sales and joint ventures.  The Company is also managing payment
plans with certain suppliers.

As a  result  of the  significant  loss in  fiscal  1998 and the  status  of the
Company's  bank  arrangements,  management  was forced to reassess its operating
plan. The revised plan included significant  reductions in personnel and various
spending levels executed during fiscal 1999. The Company's liquidity constraints
required the restructuring and extension of terms on all trade payables.

In addition to write-offs  that were recorded during fiscal 1998, as required by
generally accepted accounting principles,  the Company has potential liabilities
associated  with  discontinued  or


                                      F-8
<PAGE>

suspended aspects of its depleted uranium  business,  including costs associated
with  site  remediation,   decontamination   and   decommissioning  of  existing
facilities,  cost overruns on existing contracts with the U.S. Army and Zhagrus.
For  further  discussion,  see Part I -  "Environmental,  Safety and  Regulatory
Matters" and "Concord Site Remediation and  Decommissioning  Requirements" These
potential  liabilities include a contested $5.0 million cost associated with the
additional treatment of waste under the Zhagrus contract and decontamination and
decommissioning  costs  of up to  $14.6  million  associated  with  its  present
facilities and equipment.  The Company has  insufficient  capital to cover these
liabilities and no current  capability to finance such  liabilities.  Management
believes that the U.S.  Government  has a  responsibility  to pay,  directly and
indirectly, for a substantial portion of these costs. The United States Army, in
a Memorandum of Decision dated September 13, 1996 (the "Memorandum of Decision")
pursuant to Public Law 85-804,  agreed that it would fund a substantial  portion
of the  remediation  costs for the  Company's  Concord  holding basin site. As a
result of cost overruns in connection  with the holding basin  remediation,  the
Company has requested additional remediation funds from the Army; however, while
the  engineering  change  proposal  is  being  reviewed  by the  Army,  there is
presently no approved  funding and no specific  written  agreement from the U.S.
Government  to  reimburse  or fund these  overrun  costs.  No reserve  for these
potential liabilities has been taken on the Company's financial  statements.  If
these liabilities become the responsibility of the Company, the Company would be
forced  to  consider  receivership  or  similar  reorganization  proceedings  to
preserve the Company's business operations and the Company's business, financial
condition and results of operations would be materially and adversely  affected.

2.  OPERATIONS

Export sales to foreign unaffiliated customers, primarily to the United Kingdom,
are 8%, 18% and 25% of total net sales and  contract  revenues  in fiscal  1999,
1998 and 1997,  respectively.  A  significant  portion  of the  Company's  sales
revenue has been derived from major customers as follows:

                                                  1999        1998        1997

United States Enrichment Corporation ("USEC")      23%        14%         14%
Royal Ordnance                                     2%         13%         19%
Primex Technologies                                11%        12%         12%
Lockheed Martin                                     5%        11%          7%


In August 1998,  the Company  restated its  September 30, 1996 and September 30,
1997 consolidated financial statements. The restatement related to the Company's
accounting for inventory reserves. During the year ended September 30, 1996, the
Company had provided approximately $3.3 million of reserves for DU inventory, of
which  approximately  $1.0 million of such  reserves  were  reversed into income
during the year ended September 30, 1997,  based upon  management's  estimate of
the future recoverability of DU inventory.  After further review,  management of
the Company has determined,  based on consideration of the applicable accounting
literature  and all of the  relevant  information  available  at the time of the
release of the  Company's  September  30, 1996  financial  statements,  that the
reserves  provided  in 1996  should  have been lower by  approximately  $650,000
($0.14 per diluted share) and the reversal of approximately  $1.0


                                      F-9
<PAGE>

million  ($0.20 per diluted share) of such reserves in 1997 should not have been
recorded.  In the future,  inventory  reserves  will not be  reversed  until the
related inventory is sold or disposed of.

                                                  1997
                               ---------------------------------------
                                As Reported               As Restated
                                -----------               -----------

Net Income:                     $  1,482,000              $   482,000
Income per share
  Basic                         $       0.31              $      0.10
  Diluted                       $       0.30              $      0.10


3.  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 1999,  1998,  and 1997 are for the
fiscal years ended  September 30, 1999,  September  30, 1998,  and September 30,
1997, 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 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.) The  consolidated  balance sheets do not include
the cost of this U.S. Army owned equipment.


                                      F-10
<PAGE>


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 three months
or less.


Restricted Cash

The  Company  is  required  to  maintain  a certain  amount of cash at a bank as
collateral  for a letter of credit  issued by the bank on behalf of the Company.
As of September 30, 1999, $238,000 was held in an account with the bank pursuant
to the letter of credit agreement.

Inventory

Inventories are stated at the lower of cost (first-in,  first-out) or market and
include  materials,  labor,  and  manufacturing  and engineering  overhead.  The
Company  provides for inventory  reserves by charges to cost of sales when it is
determined  that such  reserves  are  necessary  for matters  such as excess and
obsolete  inventories.  Increases in estimated  reserve  requirements,  based on
relevant  information,  management's  experience,  and the  timing  of  expected
inventory  usage,  are  charged  to cost of sales  in the  period  in which  the
increase is  determined.  Inventory  reserves are not reversed until the related
inventory is sold or disposed of.  During  1999,  the Company  wrote off certain
inventories by a charge to the related reserves.

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.

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


                                      F-11
<PAGE>

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.
<TABLE>
<CAPTION>
                                                                     1999                1998                1997
                                                               ------------------    --------------    -----------------
<S>                                                                <C>                  <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                                              (40.0)              (40.0)              (38.0)
                                                               ------------------    --------------    -----------------
                                                                        --  %               -- %               2.0  %
                                                               ==================    ==============    =================
</TABLE>

As of September 1999, the Company has a federal net operating loss  carryforward
of approximately  $23 million expiring at various dates from 2009 to 2019. State
net operating  loss carry  forwards of  approximately  $20 million,  will expire
between 2000 through 2010.  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>

                                                    1999           1998           1997
                                                ------------   ------------   ------------
<S>                                            <C>            <C>            <C>
   Current (Benefit) Provision
     Federal                                    $(1,650,000)   $(2,355,000)   $  (961,000)
     State                                         (300,000)      (729,000)      (299,000)
     Valuation allowance                          1,950,000      3,084,000      1,260,000
                                                -----------    -----------    -----------
         Total current (Benefit) Provision             --             --             --
                                                ===========    ===========    ===========


     Deferred (Benefit) Provision:
       Federal                                  $   800,000    $(3,490,000)   $(1,310,000)
       State                                        150,000     (1,080,000)      (451,000)
       Valuation allowance                         (950,000)     4,570,000      1,792,000
                                                -----------    -----------    -----------
           Total deferred (Benefit) Provision          --             --           31,000
                                                -----------    -----------    -----------
           Total (Benefit) Provision                   --             --           31,000
                                                ===========    ===========    ===========
</TABLE>

The Company has  provided a full  valuation  allowance  on the net  deferred tax
assets as of September 30, 1999 and 1998. 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 1999 and
1998 fiscal years are as follows:

                                      F-12
<PAGE>
<TABLE>
<CAPTION>
                                                                     1999             1998
                                                                 ------------    -------------
        <S>                                                     <C>             <C>
         Assets:
           Reserves not currently deductible for tax purposes    $  4,839,000    $  5,526,000
           Federal operating loss carryforward                      7,512,000       5,423,000
           State operating loss carryforwards and other assets      1,900,000       2,025,000
           Other                                                      700,000         709,000
           Valuation allowance                                    (10,085,000)     (9,085,000)
                                                                 ------------    ------------
               Total deferred tax assets                            4,866,000       4,598,000
               Alternative minimum tax credit                         407,000         407,000
                                                                 ------------    ------------
                                                                 $  5,273,000    $  5,005,000
                                                                 ============    ============
         Liabilities
           Fixed asset basis difference                          $  4,100,000    $  3,830,000
           Employee benefits                                          723,000         720,000
           Other                                                      450,000         455,000
                                                                 ------------    ------------
                                                                 $  5,273,000    $  5,005,000
                                                                 ============    ============
</TABLE>

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.

The  cost  for  Company-sponsored   research  and  development   activities  was
$1,243,000,   $1,421,000  and   $1,309,000  in  fiscal  1999,   1998  and  1997,
respectively.  Total revenues from customer-funded research and development were
$825,000, $831,000 and $793,000 in fiscal 1999, 1998 and 1997, respectively.

Income (Loss) per Share of Common Stock

The Company  adopted  SFAS No 128,  Earnings per Share,  effective  December 15,
1997. SFAS No. 128 replaces  primary earnings per share with "basic earnings per
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.  In loss  periods,  potentially  dilutive  securities  are
excluded as they would be anti-dilutive. All previously reported amounts for EPS
have been restated to conform with SFAS 128.

Common share and common share dilutive potential disclosures are:


                                      F-13
<PAGE>

                                              Years Ended September 30,
                                        ------------------------------------
                                          1999           1998          1997
                                        ---------     ---------     ---------
Weighted average common shares
  outstanding                           4,791,000     4,789,000     4,783,000
Dilutive potential common shares             --            --         176,000
                                        ---------     ---------     ---------
Diluted common shares                   4,791,000     4,789,000     4,959,000
                                        =========     =========     =========
Options and warrants excluded from
  diluted income per common share as
  their effect would be anti-dilutive   1,170,000       769,000          --
                                        =========     =========     =========


Reclassification

Certain amounts  previously  reported in the consolidated  financial  statements
have been reclassified to conform to the 1999 presentation.

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 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.

Legal Costs for Loss Contingencies

Legal costs are recorded in the period in which the legal services are provided.

Recent Accounting Pronouncements

In June 1997,  the FASB issued SFAS No. 131,  Disclosures  about  Segments of an
Enterprise and Related Information. This statement established standards for the
way that public business enterprises report information about operating segments
in annual  financial  statements and requires that  enterprises  report selected
information  about  operating  segments in interim  financial  reports issued to
stockholders.  This  statement is effective  for fiscal  years  beginning  after
December 15, 1997. In the initial year of application,  comparative  information
for earlier years will be provided


                                      F-14
<PAGE>

unless  deemed   impractical.   This   statement,   requiring  only   additional
informational  disclosures,  has become  effective for the Company's fiscal year
ended September 30, 1999.

In  June  1998,  the  FASB  issued  SFAS  No.  133,  Accounting  for  Derivative
Instruments  and Hedging  Activities.  This  statement  establishes  account and
reporting  standards for derivative  instruments,  including certain  derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity  recognize all derivatives as either assets or liabilities in the
statement of financial  position and measure  those  instruments  at fair value.
This  statement is effective for all fiscal  quarters of fiscal years  beginning
after June 15,  1999.  The  Company  does not  anticipate  the  adoption of this
statement  will have a material  impact on its financial  position or results of
operations.

In April 1998,  Statement Of Position  98-5,  Reporting on the Costs of Start-up
Activities was issued which required such costs,  including  organization costs,
to be expensed as incurred and is effective  for fiscal  years  beginning  after
December 15, 1998.  The Company does not expect that this  Statement of Position
will  have a  material  impact  on the  Company's  statement  of  operations  or
financial position.

4.  ACCOUNTS RECEIVABLE

The  following  is an analysis of accounts  receivable  (net of  allowances  for
doubtful accounts):

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


Accounts receivable, net of reserves      $3,388,000             $5,327,000
Unbilled receivables and retainages due
  upon completion of contracts               147,000                693,000
                                          ----------             ----------
                                          $3,535,000             $6,020,000
                                          ==========             ==========

5.  INVENTORY

Inventory (net of reserves) at September 30, 1999 and 1998, was follows:

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

     Raw materials                          $1,324,000           $1,605,000
     Workinprogress                          2,040,000            3,177,000
     Finished goods                            371,000              723,000
                                            ----------           ----------

                                             3,735,000            5,505,000
     Less noncurrent inventory               1,309,000            1,500,000
                                            ----------           ----------

     Current inventory                      $2,426,000           $4,005,000
                                            ==========           ==========


As of September 30, 1999 and 1998,  approximately  $2.0 million and $2.5 million
of the  Company's  inventory  net of $7.7  million  and $7.9  million  reserves,
respectively, consists of Depleted Uranium


                                      F-15
<PAGE>

(DU) in various stages of production.
During 1998, the Company  increased its reserve for DU from $3.2 million to $7.9
million to fully reserve for DU in various stages of production. See Note 2.

6.  OTHER ACCRUED EXPENSES

Accrued expenses consist of the following at September 30, 1999 and 1998.

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

     Waste burial cost          $2,710,000          $4,149,000
     Other                       1,545,000             609,000
                                ----------          ----------

                                $4,255,000          $4,758,000
                                ==========          ==========

During 1999, the Company  reduced  certain  accruals for waste burial costs that
were deemed no longer necessary.

7.  LONG-TERM OBLIGATIONS AND NOTES PAYABLE

Long-term obligations and notes payable of the Company are as follows:
<TABLE>
<CAPTION>
                                                                            1999                  1998
                                                                        -----------           -----------
<S>                                                                    <C>                   <C>

Line of Credit, interest rate of prime plus 0.5%
  (8.75% and 9.0% at September 30, 1999 and 1998, respectively)         $ 6,190,000           $ 7,171,000
Industrial Development Revenue Notes, variable
  interest rates (5.4862% at September 30, 1998)                               --                 100,000
Notes Payable to  Shareholders,  interest
  only payments of 10% until maturity at  various dates from
  December 31, 1999 to December 10, 2001                                  2,876,000             2,247,000
Note Payable, monthly principal and interest payments
  through May 2001, interest rate of 10.25%                                 179,000               283,000
Note Payable, monthly principal and interest payments through
  October 29, 2003, interest rate of 10.25%                                 458,000               486,000
Note Payable, monthly principal and interest payments through
  September 30, 2008, interest rate of 10%                                  472,000               498,000
Capital Leases                                                               29,000                44,000
                                                                        -----------           -----------

                                                                         10,204,000            10,829,000

Less unamortized discount on shareholder debentures                          77,000               164,000
Less current portion of long-term obligations                             8,752,000             8,582,000
                                                                        -----------           -----------

Total long-term obligations and shareholder debentures                  $ 1,375,000           $ 2,083,000
                                                                        ===========           ===========
</TABLE>

                                      F-16
<PAGE>

Credit Facility

The  Company  has a secured  revolving  line of credit with a bank that has been
amended a number of times.  The  Company  is  technically  in default of certain
financial  covenants  under  the bank  arrangement  with its  principal  lender.
However,  on June 23,  1999,  the Company  entered  into an  agreement  with its
principal  lender to forbear on all collection  actions until February 15, 2000.
On November 12, 1999,  the Company  entered into an agreement to further  extend
the maturity to August 15, 2000. The agreement also includes  various  extension
periods  if certain  conditions  are met prior to August  15,  2000 which  could
extend the final maturity to June 10, 2001.

Notes Payable to Stockholders

On October 15, 1998 the Company issued a 10% subordinate Debenture in the amount
of $500,000  to a current  shareholder.  Warrants  totaling  60,000  shares at a
strike  price of  $6.00  per  warrant  have  also  been  issued  as part of this
Debenture.

Maturities   of  debt   obligations   subsequent  to  September  30,  1999  are:
2000--$8,829,000; 2001--$0; 2002--$1,375,000 and $0 thereafter.

8.  STOCK OPTION AND WARRANT AGREEMENTS

Stock Option Plans

As of September  30,  1999, a total of 921,350  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 or $6.38
expire in 2005, those with an exercise price of $7.38 expire in 2006, those with
an exercise  price of $15.56 expire in 2007, and those with an exercise price of
$23.67 expire in 2008, and those with an exercise price of $3.80 expire in 2009,
in each case on the anniversary of the date of the grant.

Common shares under option are as follows:




                                      F-17
<PAGE>

<TABLE>
<CAPTION>
                                                  1999                        1998                        1997
                                       --------------------------    ------------------------    ----------------------
                                                       Weighted                     Weighted                   Weighted
                                                       Average                      Average       Number       Average
                                         Number        Exercise        Number       Exercise        of         Exercise
                                       of Shares        Price        of Shares       Price        Shares        Price
                                       ----------    ------------    ----------    ----------    ---------    ----------
<S>                                     <C>          <C>              <C>          <C>           <C>           <C>
Options outstanding, beginning of year   592,000      $   14.27        367,000      $  8.24       241,000       $  6.20

       Exercised                            --                          (6,000)        6.54        (2,000)         6.13
       Granted                           166,800           3.80        238,000        23.67       131,000         11.53
       Canceled                          (54,200)         23.67         (7,000)       17.07        (3,000)         6.88
                                        --------      ---------       --------      -------       -------       -------

Options outstanding, end of year         704,600        $ 11.05        592,000      $ 14.27       367,000       $  8.24
                                        ========      =========       ========      =======       =======       =======

Options exercisable                      376,800                       265,500                    205,300
                                        ========                      ========                    =======

Options available                        216,750                        46,400                      9,300
                                        ========                      ========                    =======

Weighted average fair value per share of
options granted during the year                       $    1.80                     $ 14.70                     $  8.18

</TABLE>

The following  summarizes certain data for options  outstanding at September 30,
1999:
<TABLE>
<CAPTION>
                                                                                                       Weighted
                                                                                     Weighted          Average
                                                   Number          Range of           Average          Remaining
                                                    of             Exercise          Exercise        Contractual
                                                   Shares            Prices           Prices            Life
                                                -----------    ----------------    --------------    ------------
<S>                                              <C>             <C>                  <C>                <C>
Options outstanding, end of year                   181,800        Up to $5.00          $ 3.76             9.29
                                                   279,350        $5.01 -$10.00          6.63             5.98
                                                   243,450        Over $10.00           21.57             8.30
                                                ----------

                                                   704,600                             $11.05             7.63
                                                ==========

Options exercisable                                 15,000        Up to $5.00            3.32             4.13
                                                   259,700        $5.01 -$10.00          6.57             5.90
                                                   102,100        Over $10.00           20.34             8.20
                                                ----------
                                                   376,800                             $10.17             6.45
                                                ==========
</TABLE>

On February 20, 1998,  the Board of Directors  adopted the Company's  1998 Stock
Plan (the  "1998  Stock  Plan")  and the 1998  Stock  Plan was  approved  by the
Company's stockholders at a meeting on March 18, 1998. The Company had initially
reserved  300,000  shares of Common Stock for issuance under the 1998 Stock Plan
to employees,  officers,  directors and  consultants of the Company.  On May 10,
1999, the Company stockholders approved increasing the number of reserved shares
of Common Stock to 500,000 for the 1998 Stock Plan.

The 1998 Stock Plan  provides for the granting of incentive  stock options which
are intended to meet the  requirements  of Section 422 of the  Internal  Revenue
Code of 1986,  as amended  (the  "Code"),  the granting of  non-qualified  stock
options  which  do not  meet  the  requirements  of  Section  422  of the  Code,
opportunities  to make direct  purchases  of the  Company's  Common  Stock,  and

                                      F-18
<PAGE>

opportunities  to make awards of the Company's  Common Stock. If any unexercised
option  granted  pursuant  to the 1998 Stock Plan lapses or  terminates  for any
reason,  the shares of Common  Stock  covered  thereby are again  available  for
subsequent option grants under the 1998 Stock Plan.

On March 18, 1998,  the Company  granted  options to purchase  200,000 shares of
Common Stock at an exercise price of $23.67 per share, based on the market price
of the Common  Stock at that time,  under the 1998 Stock Plan,  of which  65,000
were granted to certain Company officers. The remaining options to purchase were
granted to all of the full-time employees of the Company.

On July 1, 1999,  the  Company  granted  options to purchase  145,800  shares of
Common Stock at an exercise price of $3.80 per share,  based on the market price
of the Common  Stock at that time,  under the 1998 Stock Plan,  of which  45,000
were granted to certain Company officers. The remaining options to purchase were
granted to all of the full-time employees of the Company.

On  November  20,  1995,  the Board of  Directors  adopted  the  Company's  1995
Directors  Plan (the  "1995  Directors  Plan") and the 1995  Directors  Plan was
approved by the Company's  stockholders at a meeting on May 1, 1996. The Company
has reserved 70,000 shares of Common Stock for issuance under the 1995 Directors
Plan to the Company's non-management directors.

Options granted under the 1995 Directors Plan will be non-qualified options that
do not meet the  requirements  of Section  422 of the Code.  If any  unexercised
option granted  pursuant to the 1995 Directors Plan lapses or terminates for any
reason,  the shares of Common  Stock  covered  thereby are again  available  for
subsequent  option grants under the 1995  Directors  Plan. On July 1, 1999,  the
Company granted options to purchase 21,000 shares of Common Stock at an exercise
price of $3.80 per share,  based on the market price of the Common Stock at that
time, under the 1995 Directors Plan. The Company has granted options to purchase
49,500 shares of Common Stock at varying  exercise  prices based upon the market
price of the Common Stock at the time of grant under the 1995 Directors Plan.

On December 21,  1981,  the Board of Directors  adopted the  Company's  Employee
Stock  Plan (the  "1981  Stock  Plan"),  which  was  approved  by the  Company's
stockholders  at a meeting on  February  3, 1982 and  subsequently  amended  and
restated  by the Board of  Directors  on August 1,  1990.  The 1981  Stock  Plan
provides for the granting of options to purchase  255,800 shares of Common Stock
to the Company's employees,  and such options are intended to be incentive stock
options and meet the  requirements  of Section  422 of the Code.  On February 4,
1988,  the  Board of  Directors  adopted,  and  amended  on August  1,  1990,  a
Non-Qualified  Stock  Plan,  under  which  190,000  shares of Common  Stock were
reserved for the granting of  non-qualified  options to certain of the Company's
key employees.  Also, on August 1, 1990, the Company  adopted a Directors  Plan,
under which  70,000  shares of Common  Stock were  reserved  for the granting of
non-qualified options to the Company's directors.  No additional options will be
granted under these plans; however,  351,350 options are outstanding under these
plans as of September 30, 1999.

Warrant Agreements

In  consideration  of entering into a credit  agreement  with its principal bank
lender in September  1995,  the Company  issued the lender a warrant (the "First
Warrant")  to  purchase  50,000  shares  (subject  to  adjustment   pursuant  to
anti-dilution provisions contained in the warrant) of the


                                      F-19
<PAGE>

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.  The First
Warrant  expires  in 2005.  The  holder of the First  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  holders  of the notes  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 holders of the warrants have the option to exercise a portion
of the warrant in a cashless  transaction by surrendering the remaining  portion
of the warrants.

In consideration of the purchase of its 10% Subordinated  Notes due December 10,
2000, 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 Amended Credit  Agreement the
Company issued,  to its principal  lender,  a warrant (the "Second  Warrant") to
purchase  25,000  shares  (subject  to  adjustment   pursuant  to  anti-dilution
provisions  of the warrant) of Common Stock of the Company at an exercise  price
of $23.58 per share,  based on the average  fair  market  value for the ten days
ended December 29, 1997.

On December 10, 1998 certain  shareholders of the Company agreed to a three-year
extension  to  December  10, 2001 on the 10%  convertible  debt in the amount of
$850,500.  Warrants  totaling  102,000  with a strike price of $6.00 per warrant
have also been issued as part of this extension.

The following  summarizes certain data for warrants outstanding at September 30,
1999:

                                             Purchase           Number of
                                               Price              Shares
                                         ----------------    ----------------
  Expiration Date:
    September 22, 2000                       $  17.785             60,000
    December 10, 2001                            7.500             42,000
    December 10, 2001                            6.000            162,000
    September 30, 2005                           5.950             50,000
    December 29, 2007                            4.500             25,000
                                                               ----------
    Total                                                         339,000
                                                               ==========

See Note 12, Subsequent Events for warrant activity subsequent to year-end.


                                      F-20
<PAGE>

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 1999,  1998 and 1997
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:
<TABLE>
<CAPTION>
In thousands except per share amounts                                 1999              1998            1997
                                                              ---------------     --------------    ------------
<S>                                                          <C>                 <C>               <C>
Net income (loss):
         As reported                                          $      (2,442)      $    (19,031)     $      482
         Pro forma                                            $      (2,524)      $    (19,912)     $      373
Basic and fully diluted earnings per share:
        As reported                                           $       (0.51)      $      (3.97)     $     0.10
        Pro forma                                             $       (0.51)      $      (4.16)     $     0.08
</TABLE>

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 5.95% to  6.48%,  5.76% to 6.50% and
6.19% to 6.21% for 1999, 1998 and 1997, respectively, expected life of 10 years,
expected volatility of 50%, 52%, and 51% for 1999, 1998 and 1997, 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 1999, 1998, and 1997 was $195,000,  $359,000,
and $375,000,  respectively.  During 1999,  the Company used a weighted  average
discount rate of 8.0%. Net pension cost for the Company's  defined  benefit plan
included the following components:



                                      F-21
<PAGE>

<TABLE>
<CAPTION>
                                                                    1999                 1998                1997
                                                                ------------          -----------         -----------
<S>                                                            <C>                   <C>                 <C>
Service cost - benefits earned during the period                $   341,000           $   382,000         $   308,000
Interest cost on projected benefit obligation                     1,069,000             1,133,000           1,056,000
Actual return on plan assets                                     (1,459,000)             (681,000)         (1,570,000)
Net amortization and deferral                                       244,000              (475,000)            581,000
                                                                -----------           -----------         -----------
                                                                $   195,000           $   359,000         $   375,000
                                                                ===========           ===========         ===========

Assumptions used in determining the plan's funded status:
Discount rate                                                        8.0%                 8.0%                 8.0%
Expected rate of increase in compensation levels                     4.5%                 5.5%                 5.5%
Expected long-term rate of return on assets                          8.5%                 8.5%                 8.5%
</TABLE>

The following table sets forth the plan's funded status as of September 30, 1999
and September 30, 1998:

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

Accumulated benefit obligation            $(13,166,000)          $(13,165,000)
Projected benefit obligation               (14,390,000)           (15,321,000)
Plan assets at fair value                   15,485,000             14,858,000
Funded status                                1,095,000               (464,000)
Unrecognized prior service costs                70,000                 80,000
Unrecognized net loss                          838,000              2,582,000
Prepaid pension cost                         2,003,000              2,198,000

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, 1999
and 1998,  is  approximately  $685,000  (for life  insurance  only) and  763,000
($5,000 for medical insurance and


                                      F-22
<PAGE>

758,000  for life  insurance),  respectively.  Plan  assets of  $493,000 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.  There are no longer any participants eligible for post
retirement medical benefits.

Post retirement benefit expense for fiscal 1999, 1998 and 1997 as follows:

                                          1999          1998          1997
                                        ---------     --------      --------

Service cost of benefits earned         $  2,000      $  1,000      $  1,000
Interest cost on liability                54,000        59,000        59,000
Return on plan assets                    (16,000)      (12,000)      (12,000)
Amortization of transition obligation     24,000        24,000        24,000
                                        --------      --------      --------

Net post retirement benefit cost        $ 64,000      $ 72,000      $ 72,000
                                        ========      ========      ========

The following  table sets forth the Benefit Plan's funded status as of September
30, 1999 and 1998:

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

Accumulated post retirement benefit obligation   $(685,000)        $(763,000)
Plan assets at fair value                          493,000           413,000
                                                 ---------         ---------
Funded status                                     (192,000)         (350,000)
Transition obligation                              106,000           242,000
                                                 ---------         ---------

Accrued post retirement benefit cost             $ (86,000)        $(108,000)
                                                 =========         =========

The following actuarial assumptions were used:

                                            1999            1998        1997
                                           ------          ------      ------
Salary increase                             4.5%            5.5%        5.5%
Discount rate                               8.0%            8.0%        8.0%
Return on assets                            3.0%            3.0%        3.0%
Medical inflation                           N/A             4-9%        4-9%

11.  COMMITMENTS AND CONTINGENCIES

Waste Disposal

In the process of manufacturing depleted uranium products, the Company generates
low-level radioactive waste materials that must be disposed of at sites licensed
by federal, state, and local governments.  The operation of these disposal sites
is at the discretion of these regulatory entities,  which may at times result in
temporary or long-term closures and limited access.

                                      F-23
<PAGE>

Concord Site Remediation and Decommissioning Planning Requirements

The Company is required to maintain certain licenses issued by the Massachusetts
Department of Public Health ("DPH") and South Carolina  Department of Health and
Environmental  Control ("DHEC") in order to possess and process depleted uranium
materials  at  its  facilities  in  Massachusetts  and  South  Carolina.   Under
applicable   licensing    regulations    pertaining   to   Decommissioning   and
Decontamination  ("D&D") at licensed sites, the Company submitted to the Nuclear
Regulatory  Commission  ("NRC") (the predecessor of DPH, in this regard) 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 South Carolina  facility DFP estimate is
$2.9 million.  The Company is required to provide  financial  assurance for such
decommissioning  pursuant to applicable  regulations.  Substantially  all of the
depleted uranium materials to which the DFP requirements apply were processed by
the Company for the United States  Government.  The Company's  DFP's 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
location's  regulatory  agency.  However,  the  Company's  letters of credit are
subject to the agreement with its principal lender,  which expires on August 15,
2000. The Company has notified the U.S. Army that it is discontinuing penetrator
production and that it will cease using related government  furnished equipment.
Accordingly,  the U.S. Army and the Company are  negotiating the removal of such
equipment and the  decommissioning  and decontamination of the affected portions
of the  Company's  facilities.  The Company has submitted a proposal to the U.S.
Army  requesting  the  modification  and funding of an  existing  facilitization
contract,  which, in addition to other work proposed therein,  would provide the
Company  with  funding  to cover  some of the  estimated  D&D  costs,  which are
material. The Company is in the process of negotiating the contract modification
scope of work with the U.S.  Army,  but there is no assurance  that Army funding
will be  provided.  If this funding is not  provided,  the  Company's  business,
results of operation and financial  condition  would be materially and adversely
affected.

The United  States Army, in a Memorandum  of Decision  dated  September 13, 1996
(the "Army  Decision"),  pursuant to Public Law 85-804,  agreed to fund  certain
costs associated with remediation of the Company's Concord holding basin site as
well as some of the costs of D&D related to that facility,  based in part on the
Army's determination that the Company's activities are essential to the national
defense.  Additionally,  the  Company is  currently  performing  on a U.S.  Army
facilities  contract that obligates the Army to restore those facilities used in
the production of penetrators once the Company ceases DU penetrator production.

The United  States  Army has issued to the Company a fixed  price  contract  for
remediation of the holding basin and the Company entered into a subcontract with
Zhagrus  Environmental,  Inc.  ("Zhagrus")  to  perform  this  remediation.  The
Company's  contract  with Zhagrus is based on a specified  volume of waste to be
removed  from the  basin  and  delivered  to the  Envirocare  radioactive  waste
disposal site in Utah. The volume of the material removed exceeded the specified
level.  Under the Zhagrus contract,  the Company agreed to pay an additional fee
per cubic yard of excess  material  removed  dependant  upon certain  actions by
Zhagrus. In addition, Zhagrus has notified the Company that Zhagrus has incurred
additional  costs in  connection  with the  disposal  of the  material  from the
holding  basin as a result of the need to treat the material to meet


                                      F-24
<PAGE>

conditions for burial imposed by applicable environmental  regulations.  Zhagrus
has requested that the Company pay it any  additional  costs incurred by Zhagrus
as a result of such  additional  services.  On  November  4, 1998,  the  Company
received a written  claim from  Zhagrus for excess costs of  approximately  $5.0
million.  Zhagrus' claim is the subject of litigation  described below. If these
costs are not recovered  from the U.S. Army and the Company is held  responsible
for these costs, the Company would have no means to finance these costs, and the
Company's  business,  results of  operation  and  financial  condition  would be
materially and adversely affected.  The cost of remediating the holding basin at
its  Concord,  Massachusetts  facility  will exceed the  amounts  covered by the
Company's fixed price contract with the U.S. Army (the "Army  Contract"),  by at
least $1.7 million  which has been  recorded as a liability as of September  30,
1998.  (The exact  amount of the excess  costs  presently  is  unknown,  but the
Company  believes that the potential range of such costs is between $1.7 million
and $8.0 million, inclusive of the contested Zhagrus claim of $5.0 million). The
Company  believes  that all or a certain  portion  of such  excess  costs may be
recoverable  pursuant  to a contract  modification.  Alternatively,  the Company
believes that all or a certain portion of such costs, subject to confirmation by
government auditors,  are recoverable as allowable overhead on future government
contracts,  which the Company  expects to be  awarded.  In  December  1998,  the
Company  submitted an  engineering  change  proposal to the U.S.  Army seeking a
contract  modification that would provide the Company with funding to cover such
estimated excess  remediation costs. In February 1999, based on discussions with
the U.S.  Army,  the  Company  submitted a claim  under P.L.  85-804  requesting
payment of these excess  costs.  In June 1999,  the U.S.  Army denied the latter
request.  In August  1999,  the  Company  re-submitted  the  engineering  change
proposal  and is  awaiting  a  response  from the  U.S.  Army.  If these  costs,
potentially  ranging  from $1.7 to $8.0  million,  are  incurred  by the Company
without  reimbursement  or funding from other sources,  including the U.S. Army,
the Company's  business,  results of operation and financial  condition would be
materially and adversely affected.

The Company has no 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,  management  believes,  based upon examination of
relevant contracts, the actions of the Army with respect to D&D of facilities of
other  contractors,  and discussions with counsel,  that the Army is responsible
for its estimated  share of D&D. If these costs are not recovered  from the U.S.
Army, the Company would have no means to finance these costs,  and the Company's
business,  results of operation and financial  condition would be materially and
adversely affected.

The Company has potential liabilities  associated with discontinued or suspended
aspects of its depleted uranium  business,  including costs associated with site
remediation,  decontamination and decommissioning of existing  facilities,  cost
overruns on existing  contracts with the U.S. Army and Zhagrus.  These potential
liabilities include a contested $5.0 million cost associated with the additional
treatment  of  waste  under  the  Zhagrus  contract  and   decontamination   and
decommissioning  costs  of up to  $14.6  million  associated  with  its  present
facilities and equipment.  The Company has  insufficient  capital to cover these
liabilities and no current  capability to finance such  liabilities.  Management
believes,  based upon written advice of consultants  and counsel,  that the U.S.
Government  has  a  responsibility  to  pay,  directly  and  indirectly,  for  a
substantial  portion  of  these  costs.  The  United  States  Army,  in the Army
Decision,  agreed that it would fund  remediation of the  Corporation's  Concord
holding basin site as well as D&D related to that facility, based in part on the
Army's  determination  that the  Corporation's  activities  are essential to the
national

                                      F-25
<PAGE>

defense.  However,  while there are two contract  modification  proposals  being
reviewed by the Army,  there is  presently  no approved  funding and no specific
written agreement from the U.S.  Government to reimburse or fund these costs. No
reserve  for  these  potential  liabilities  has  been  taken  on the  Company's
financial  statements.  If these  liabilities  become the  responsibility of the
Company,  the  Company  would be  forced to  consider  receivership  or  similar
proceedings  to preserve the  Company's  business  operations  and the Company's
business,  financial condition and results of operations would be materially and
adversely affected.

Legal Proceedings

The Company is named as a Potentially Responsible Party ("PRP") in regard to the
Maxey  Flats,  Kentucky,  Superfund  Site.  This site was used  until  1977 as a
licensed and approved low-level  radioactive waste disposal site. A committee of
PRPs,  including  the  Company,  has  submitted  a  remedial  investigation  and
feasibility study report to the Environmental  Protection  Agency. The agreement
signed by the settling parties in July 1995 outlines the responsibilities of all
PRPs and states that the PRPs will undertake the initial  remedial phase ("IRP")
of the site  remediation  at an estimated  cost of $60  million.  Based upon the
percentage of responsibility  allocated to the Company,  its remaining liability
at this site is expected to be approximately $70,000 over 8 years.

On February 5, 1999,  the Company was served with a summons and  complaint  in a
common law diversity  tort action filed in the United States  District Court for
the Eastern  District of Tennessee,  entitled  Orick v. Brush  Wellman,  et al.,
3:98-CV-652 (E.D.  Tenn.),  naming as defendants eight  corporations,  including
Starmet Corporation.  The complaint also names the United States of America as a
defendant  under the Federal  Tort Claims Act.  The  complaint  alleges that the
defendants failed to adequately warn the plaintiff, an employee of a facility in
Tennessee that processes beryllium products,  regarding the dangers of beryllium
and  beryllium  manufacturing.  The complaint  seeks $1 million in  compensatory
damages  against the Company,  as well as punitive  damages of $10 million.  The
Company  believes  that the claims are without  merit and intends to  vigorously
defend  against  the  claim.  However,  there  can  be no  assurance  that  this
litigation  will  ultimately  be  resolved  on terms that are  favorable  to the
Company.

On February 17, 1999,  the Company was served with a summons and  complaint in a
breach of contract  action filed in The  Superior  Court,  County of  Middlesex,
Commonwealth of Massachusetts,  entitled Zhagrus Environmental,  Inc. et. al. v.
Nuclear  Metals,  Inc.  et.  al.,  MCV99-01057,   naming  the  Company  and  its
subsidiaries  as defendants.  The Company  removed the case to federal  district
court in  Massachusetts on March 18, 1999, where it was docketed as Civil Action
No.  99-CV-10600-RGS.  The  complaint  alleges,  among  other  things,  that the
defendants  materially  breached their  agreement  with the  plaintiff,  Zhagrus
Environmental  Inc.,  entitled  "Holding  Basin  Remediation  and Waste Disposal
Agreement"  dated May 8, 1997,  and that  plaintiffs,  Zhagrus and Envirocare of
Utah,  Inc., are entitled to a judgment in the amount of at least $8,368,883 for
services  rendered  pursuant to such  agreement.  On June 18, 1999,  the Company
filed its answer to the complaint denying liability, and asserted a counterclaim
against the plaintiffs alleging, among other things, breach of contract,  breach
of implied covenant of good faith,  deceit,  and violation of Mass. Gen. Laws c.
93A. On July 7, 1999, the Company and plaintiffs  agreed,  pending resolution of
the lawsuit,  to entry of an order placing certain  limited  restrictions on the
Company's ability to enter into significant transactions without affording prior
notice  to the  plaintiffs.  Although  the  Company  believes  that it has valid
defenses to the claims alleged in this complaint, there can be no

                                      F-26
<PAGE>

assurance  that this  litigation  will  ultimately be resolved on terms that are
favorable  to the  Company.  The Company  has sought  relief from the Army for a
portion of the amounts claimed by the plaintiffs, to the extent that the Company
is otherwise required to pay those amounts. Of the $8,368,883,  $3.5 million has
been recorded as a liability.  The Company believes there are material issues of
fact  relating  to the amount of this  liability  ($3.5  million)  which are the
subject of the Zhagrus litigation.

On February 24, 1999,  the Company was served with a summons and  complaint in a
common law diversity  tort action filed in the United States  District Court for
the Eastern District of Tennessee,  entitled Jerry Lynn Hall & Rose Mary Hall v.
Brush Wellman, et al.,  3:99-CV-110 (E.D. Tenn.),  naming as defendants fourteen
corporations,  including  Starmet  Corporation.  The complaint  alleges that the
defendants failed to adequately warn the plaintiff, an employee of a facility in
Tennessee that processes beryllium products,  regarding the dangers of beryllium
and  beryllium  manufacturing.  The complaint  seeks $6 million in  compensatory
damages  against the Company,  as well as punitive  damages of $10 million.  The
Company  believes  that the claims are without  merit and intends to  vigorously
defend  against  the  claim.  However,  there  can  be no  assurance  that  this
litigation  will  ultimately  be  resolved  on terms that are  favorable  to the
Company.

On December 13, 1999,  the Company was served with a summons and  complaint in a
common law diversity  tort action filed in the United States  District Court for
the Eastern District of Tennessee,  entitled Jesse McDonald v. Brush Wellman, et
al.,  3:99-CV-642  (E.D.  Tenn.),  naming as defendants  thirteen  corporations,
including Starmet Corporation.  The complaint alleges that the defendants failed
to adequately  warn the  plaintiff,  an employee of a facility in Tennessee that
processes beryllium  products,  regarding the dangers of beryllium and beryllium
manufacturing.  The complaint seeks $5 million in  compensatory  damages against
the Company,  as well as punitive  damages of $10 million.  The Company believes
that the claims are without merit and intends to vigorously  defend  against the
claim.  However,  there can be no assurance that this litigation will ultimately
be resolved on terms that are favorable to the Company.

On December 20, 1999,  the Company was served with a summons and  complaint in a
common law diversity  tort action filed in the United States  District Court for
the Eastern  District of Tennessee,  entitled John Langley v. Brush Wellman,  et
al.,  3:99-CV-655  (E.D.  Tenn.),  naming as defendants  thirteen  corporations,
including Starmet Corporation.  The complaint alleges that the defendants failed
to adequately  warn the  plaintiff,  an employee of a facility in Tennessee that
processes beryllium  products,  regarding the dangers of beryllium and beryllium
manufacturing.  The complaint seeks $6 million in  compensatory  damages against
the Company,  as well as punitive  damages of $10 million.  The Company believes
that the claims are without merit and intends to vigorously  defend  against the
claim.  However,  there can be no assurance that this litigation will ultimately
be resolved on terms that are favorable to the Company.

The Company is involved in various other legal  proceedings  that have arisen in
the ordinary course of business.  Management  believes the outcome of such legal
proceedings will not have a material  adverse impact on the Company's  financial
position or results of operations.


                                      F-27
<PAGE>

12.      SUBSEQUENT EVENTS

The Company is in default of the financial  covenants under the bank arrangement
with its  principal  lender.  On June 23,  1999,  the  Company  entered  into an
agreement with its principal  lender to forbear on all collection  actions until
February 15, 2000. On November 12, 1999,  the Company  entered into an agreement
to further  extend the maturity to August 15, 2000.  The agreement also includes
various  extension  periods if certain  conditions are met prior August 15, 2000
which could extend the final maturity to June 10, 2001.

On December 31, 1999,  the original  maturity date of certain  debentures due to
shareholders,  certain  shareholders  of  the  Company  agreed  to a  three-year
extension  to  December  31, 2002 on the 10%  convertible  debt in the amount of
$900,000.  In  consideration  for extending the maturity date of the Debentures,
the interest  rate was  increased to 14% and the holders were issued  three-year
warrants  to  purchase  an  aggregate  of 108,000  shares of common  stock at an
exercise price of $3.875 per share, subject to anti-dilution adjustments.

13.  TRANSACTIONS WITH RELATED PARTIES

Under  the terms of a  management  agreement,  Matthews  Associates  Limited  is
entitled to an annual management fee.

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  $287,500  in 1999 and  $350,000  in 1998 and  1997.  This
agreement was modified to reduce the minimum  compensation to $225,000 beginning
April 1, 1999.  The  agreement  expires on February 28, 2004,  subject to annual
renewals as described in the agreement.  Mr. Matthews does not receive any other
salary or fee for services as Chairman of the Board of Directors.

14.  MAINTENANCE AND REPAIRS

Maintenance  and repair  expenditures,  which are charged to cost and expense as
incurred,  amounted to $644,000,  $1,565,000  and  $1,536,000 in 1999,  1998 and
1997, respectively.


15.  INDUSTRY SEGMENT INFORMATION

The Company is engaged in the  manufacture  and sale of various  specialty metal
products.  The Company  operates in four  industry  segments:  Specialty  Metal,
Uranium Services and Recycle, Powders and Composite Materials.

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:



                                      F-28
<PAGE>

                                       1999            1998            1997
                                   ------------    ------------    ------------
                                                   (as restated)   (as restated)
Net sales and contract revenues:
  Specialty Metal                  $  9,472,000    $ 18,845,000    $ 14,459,000
  Uranium Services and Recycle        7,472,000       5,905,000       4,965,000
  Powders                             5,406,000       5,078,000       4,348,000
  Composite Materials                 2,651,000       4,995,000       4,290,000
                                   ------------    ------------    ------------
  Total                            $ 25,001,000    $ 34,823,000    $ 28,062,000
                                   ------------    ------------    ------------

Operating income (loss):
  Specialty Metal                  $    762,000    $ (2,881,000)   $     50,000
  Uranium Services and Recycle       (1,038,000)    (11,519,000)      2,675,000
  Powders                             1,543,000         184,000         625,000
  Composite Materials                (2,200,000)     (3,546,000)     (2,539,000)
                                   ------------    ------------    ------------
      Subtotal                     $   (933,000)   $(17,762,000)   $    811,000

Other expense, net                    1,509,000       1,269,000         298,000
                                   ------------    ------------    ------------

Income (loss) before taxes         $ (2,442,000)   $(19,031,000)   $    513,000
                                   ============    ============    ============

Identifiable assets:
  Specialty Metal                  $  1,237,000    $  2,270,000    $  2,126,000
  Uranium Services and Recycle        9,115,000      10,458,000      13,964,000
  Powders                               929,000       1,052,000       1,221,000
  Composite Materials                 3,309,000       3,692,000       2,335,000
  Corporate                          11,266,000      14,961,000      14,708,000
                                   ------------    ------------    ------------
  Total                            $ 25,856,000    $ 32,433,000    $ 34,354,000
                                   ============    ============    ============

Depreciation:
  Specialty Metal                  $    469,000    $    471,000    $    412,000
  Uranium Services and Recycle          750,000         730,000         726,000
  Powders                                 9,000           2,000           1,000
  Composite Materials                   406,000         320,000         208,000
  Corporate                             280,000         226,000         203,000
                                   ------------    ------------    ------------
  Total                            $  1,914,000    $  1,749,000    $  1,550,000
                                   ============    ============    ============

Segment  information  has been restated for 1998 and 1997 to be consistent  with
the 1999 presentation in accordance with SFAS No. 131.

The  Specialty  Metal segment  includes the  fabrication  of primarily  depleted
uranium  (DU)  metal   products,   using  foundry,   extrusion,   and  machining
capabilities.  It's products include industrial and medical shielding  products,
DU billets in support of the Army's  tank armor  program and the  production  of
various DU penetrators (a component of armor-piercing ammunition used in certain
U.S.  military gun systems)  which are sold to prime  contractors  manufacturing
such  ammunition  for


                                      F-29
<PAGE>

the U.S.  Department of Defense or to foreign military  operations.  The Uranium
Services and Recycle  segment  includes the  conversion of UF6 for United States
Enrichment  Corporation,  repair and refurbishment of DU aircraft counterweights
for commercial and military  aircraft and the  manufacture of depleted  uranium.
The Powders  segment  includes the  production and sale of various metal powders
manufactured by the Company's patented Rotating Electrode Process. The Composite
Materials  segment  includes the  manufacture  of beryllium  aluminum  composite
materials for defense and commercial aerospace applications,  computer hard disk
drives,  and  commercial  motion  control  applications  for  the  semiconductor
manufacturing market.

Net sales  and  contract  revenues  by  segment  include  sales to  unaffiliated
customers (intersegment sales are not significant). A significant portion of the
Company's  revenues  has been derived  from four major  customers  (see Note 2).
Sales to United  States  Enrichment  Corporation  are  included  in the  Uranium
Services & Recycle segment.  Sales to Royal Ordnance and Primex Technologies are
included in the Specialty  Metal segment.  Sales to Lockheed Martin are included
in the Composite Materials 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 (loss) includes net sales and contract  revenues less the cost
of  sales  of the  individual  segments  and  less  allocated  selling,  general
administrative and R&D expenses.  Other expenses, net include interest and other
income and expenses.

Identifiable  assets shown include  inventory and plant and equipment  that have
been  allocated to each of the  Company's  segments.  Corporate  assets  consist
primarily of cash,  accounts  receivable,  unallocated  plant and  equipment and
other assets.

16.  QUARTERLY RESULTS (UNAUDITED)

Financial  results by quarter for 1999,  1998 and 1997 are  summarized  below in
thousands except for per share information:


                                      F-30
<PAGE>

                                      First      Second      Third      Fourth
                                     Quarter     Quarter    Quarter     Quarter

1999
Net sales                           $  7,419    $  5,919   $  5,638    $  6,025
Operating income (loss)                  334      (1,653)      (437)        823
Net income (loss)                        (87)     (2,091)      (817)        553
Basic net income (loss) per share      (0.02)      (0.44)     (0.17)       0.12

1998
Net sales                           $  8,079    $ 10,690   $  7,429    $  8,625
Operating income (loss)               (1,427)        628     (2,301)    (14,662)
Net income (loss)                     (1,561)        272     (2,765)    (14,977)
Basic net income (loss) per share      (0.33)       0.06      (0.58)      (3.12)


1997
Net sales                           $  7,271    $  5,342   $  7,013    $  8,436
Operating income (loss)                  476        (477)       399         413
Net income (loss)                        419        (541)       293         311
Basic net income (loss) per share       0.09       (0.11)      0.06        0.06



                                      F-31
<PAGE>

<TABLE>
<CAPTION>


                            STARMET CORPORATION AND SUBSIDIARIES
                       Schedule II- Valuation and Qualifying Accounts
                        For the Three Years Ended September 30, 1999

                                                     Additions
                                       Balance at    Charged to
                                      Beginning of   Costs and
Classification                            Year        Expenses     Deductions    End of Year
--------------                            ----        --------     ----------    -----------
<S>                                   <C>          <C>           <C>            <C>

YEAR ENDED SEPTEMBER 30, 1999:

Allowance for doubtful accounts        $  524,000   $    (9,000)  $    315,000   $  200,000
                                       ==========   ===========   ============   ==========

Inventory Reserves                     $9,163,000   $      --     $    852,000   $8,311,000
                                       ==========   ===========   ============   ==========

YEAR ENDED SEPTEMBER 30, 1998:

Allowance for doubtful accounts        $  421,000   $   103,000   $       --     $  524,000
                                       ==========   ===========   ============   ==========

Inventory Reserves                     $4,212,000   $ 4,951,000   $       --     $9,163,000
                                       ==========   ===========   ============   ==========

YEAR ENDED SEPTEMBER 30, 1997:

Allowance for doubtful accounts        $  821,000   $      --     $    400,000   $  421,000
                                       ==========   ===========   ============   ==========

Inventory Reserves (as restated) (a)   $4,212,000   $      --     $       --     $4,212,000
                                       ==========   ===========   ============   ==========

<FN>
----------
(a)      See Note 1 of Notes to Consolidated Financial Statements
</FN>
</TABLE>


                                      F-32
<PAGE>


                                   SIGNATURES

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

                              STARMET CORPORATION


Date:  January 13, 2000       By: /s/ Robert E. Quinn
                              Robert E. Quinn, President and Chief Executive
                              Officer (principal executive officer and director)

Date: January 13, 2000        By: /s/ Gary W. Mattheson
                              Gary W. Mattheson, Chief Financial Officer

Date: January 13, 2000        By: /s/ George J. Matthews
                              George J. Matthews, Chairman of the Board of
                              Directors

Date: January 13, 2000        By: /s/ Matthew Brady
                              Matthew Brady, Director

Date: January 13, 2000        By: /s/ Frank H. Brenton
                              Frank H. Brenton, Director

Date: January 13, 2000        By: /s/ Gerald R. Hoolahan
                              Gerald R. Hoolahan, Director

Date: January 13, 2000        By: /s/ Brian B. Sand
                              Brian B. Sand, Director

Date: January __, 2000        By:_________________________
                              Kenneth A. Smith, Director

Date: January 13, 2000        By: /s/ Randal E. Vataha
                              Randal E. Vataha, Director