UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                              FORM 10-KSB /A-No. 2

(Mark One)
(  X  )           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the Fiscal Year Ended December 31, 2000

(     )         TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                            SECURITIES EXCHANGE ACT OF 1934
           for the transition period ______________ To ______________.
                          Commission file No. 000-24470

                                   NESCO, INC.
                 (Name of small business issuer in its charter)

                     Oklahoma                             73-1296420
         (State or other jurisdiction of             (I.R.S. Employer
          incorporation or organization)              Identification No.)

      12331 East 60th Street, Tulsa, OK                     74146
  (Address of principal executive offices)                (Zip Code)

                    Issuer's telephone number: (918)250-2227

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

           Securities registered pursuant to Section 12(g) of the Act:
                  Title of class: Common Stock, $.01 Par value

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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   .
                                                                      ---   ---

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the best of the  registrant's  knowledge,  in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.

         State issuer's revenues for its most recent fiscal year:  $36,954,000

         The aggregate  market value of the voting stock held by  non-affiliates
of the registrant computed using the average of the high and low sales prices at
which the stock sold on March 1, 2001 was $25,285,000.

The number of shares outstanding of each of the issuer's classes of common stock
as of February 28, 2001 is shown below:

                                                       Number of shares
          Title of Class                                 Outstanding
          --------------                                 -----------
  Common Stock, $.01 Par Value                            9,325,855

          Documents Incorporated by Reference
          -----------------------------------
Transitional Small Business Disclosure
Format (check one): Yes   ; No X .
                       ---    ---

<PAGE>

                                     PART II

Item 6.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

Comparison of Results of Operations for the Year Ended December 31, 2000, to the
Year Ended December 31, 1999.

         The Company had revenues of $36,954,000 in 2000 compared to $29,567,000
in 1999, a 25% increase.

         The fueling systems  segment  revenues  increased  $5,550,000 or 35% in
2000 compared to 1999 ($21,617,000 compared to $16,067,000). The fueling systems
segment includes fueling systems installation and upgrade,  cathodic protection,
tank montioring,  and appraisal fees.  Fueling systems  installation and upgrade
revenue  increased  18% or  $2,771,000  to  $18,013,000  in 2000 as  compared to
$15,242,000 for 1999. The increase in fueling systems  installation  and upgrade
resulted from the significant growth in the Company's  installation of ground-up
fueling  facilities  for grocery  stores and the  provision  of  facilities  for
convenience  store chains in  conjunction  with  assistance to the purchasers in
arranging  financing  for the stores.  The  cathodic  protection  portion of the
fueling  systems  revenue  declined 90% from  $3,403,000  in 1999 to $338,000 in
2000.  This  decline  resulted  from the  completion  in 1999 of the  upgrade of
existing fueling systems in accordance with regulatory compliance  requirements.
Tank  monitoring  revenue  increased  139% or $327,000 in 2000  compared to 1999
($562,000 compared to $235,000). The fueling systems segment includes revenue of
$2,704,000  for 2000 from  Hopkins  Appraisal  Services,  Inc.,  a wholly  owned
subsidiary acquired in June 2000.

<PAGE>

         Revenues  from our  environmental  segment  increased 6% or $816,000 to
$13,378,000 in 2000 compared to  $12,562,000  in 1999 due to increased  business
activity.  Within our environmental  segment, site assessments revenue increased
39% or $1,765,000 for 2000 compared to 1999 ($6,339,000 compared to $4,574,000).
TET Environmental Services was acquired in May 1999; therefore,  we received the
benefit of a full year of  revenues in 2000  compared  to eight  months in 1999.
Additionally,  site  assessments  and  reports  revenue  increased  due  to  the
acquisitions  of Trust  Environmental  Services,  Inc.  on August  31,  2000 and
Kentucky  Environmental Network, LLC on September 28, 2000. The increase in site
assessments  and reports also resulted from the greater volume of  environmental
work added by our  Oklahoma  and South  Carolina  divisions  not included in the
revenues added by the acquired companies.  Additionally,  increased revenue from
the site  assessment  and reports  category was due to the increased  regulatory
requirements for risk investigation,  assessment, and reporting. The remediation
revenue  portion  of the  environmental  segment  decreased  $1,846,000  in 2000
compared to 1999  ($6,133,000  compared  to  $7,979,000).  The decline  resulted
because,  during 2000,  environmental  segment management devoted a considerable
amount  of  time  to  the  acquisitions  made  as  opposed  to  the  initiation,
development, and completion of remediation projects.

         The miscellaneous segment increased 109% or $1,021,000 in 2000 compared
to 1999 ($1,959,000 compared to $938,000).  This increase resulted from the pump
sales, service, and maintenance operation in Dallas, Texas, and Tulsa, Oklahoma.
Additionally,  revenues  increased due to the  acquisition of Atlanta  Petroleum
Equipment  Company,  Inc. on September 29, 2000.  The pump sales,  service,  and
maintenance revenues account for substantially all of the miscellaneous  segment
revenues.

         Costs and expenses in 2000 were $25,370,000  compared to $18,826,000 in
1999, an increase of 35%. Costs and expenses for 2000  represented  69% of total
revenue for the year compared  with 64% for 1999.  The increase in the amount of
costs and expenses is due generally to the increased  business  activity  during
2000 and the addition of business activity generated by the companies acquired.

         The percentage  increase in labor costs was 24% in 2000, lower than the
25% growth in revenues during the same period.  The decrease in labor costs as a
percentage  of revenue was due to the  significant  increase  in  revenues  from
larger  fueling   systems   contracts  and  the  use  of  a  greater  amount  of
subcontractors  on those jobs.  Labor costs were  $6,056,000 in 2000 compared to
$4,878,000.

         Subcontractor  expense  increased 67% or $2,651,000 in 2000 compared to
1999 ($6,600,000  compared to $3,949,000).  The growth in subcontractor  expense
resulted from the significant growth in the Company's  installation of ground-up
fueling  facilities  for grocery  stores and the  provision  of  facilities  for
convenience  store chains in  conjunction  with  assistance to the purchasers in
arranging financing for the stores. These jobs typically use a higher proportion
of  subcontractors  than other categories of revenues  generated by the Company.
Supplies and materials  cost  increased  28% in 2000 to  $7,877,000  compared to
$6,133,000 for 1999.  The increase was due to the increase in business  activity
primarily from the greater volume of turn-key fueling systems  installed in 2000
compared  to  1999  and to the  increased  business  activity  generated  by the
acquired  companies.  Depreciation  expense  increased  43%, to $680,000 in 2000
compared to $476,000 in 1999,  due to the  significant  increase in vehicles and
equipment added to the Company during 2000 through acquisitions of equipment and
through additions of depreciable fixed assets from the acquired  companies.  Lab
services  expense was  $924,000 in 2000  compared to $756,000 in 1999.  This 22%
increase was due to the addition of the greater volume of site  assessments  and
reports  experienced  by the Company in 2000 compared to 1999.  Vehicle  expense
except depreciation increased 40% or $170,000 in 2000 compared to 1999 ($600,000
compared to  $430,000).  The increase in expense is  attributable  to the larger
numbers of vehicles owned and maintained by the Company through new acquisitions
of vehicles and vehicles added by acquisitions of companies in 2000.

<PAGE>

         Selling,  general and  administrative  expenses were $9,225,000 in 2000
compared to  $6,822,000  in 1999,  an increase of 35%.  Salaries  accounted  for
$1,154,000 of the  $2,404,000  increase in 2000.  The balance of the  $2,403,000
increase was due to the addition of acquisitions in Colorado, Virginia, Georgia,
Missouri,  Oklahoma,  Louisiana,  Kentucky, and Indiana.  Office rent, telephone
expense,  office  supplies,  and postage  increased  42% to  $1,309,000 in 2000,
compared  to  $925,000  in 1999,  due to  increased  business  activity  and the
addition of eight offices.  Bad debt expense decreased $152,000 in 2000 compared
1999  ($202,000  compared to  $354,000).  The  decrease was due to a decrease in
expected bad debts.  General  insurance  increased  $160,000 in 2000 compared to
1999 ($491,000 compared to $331,000). The increases in business activity and the
number of offices,  vehicles,  and  equipment  to be insured  accounted  for the
increased general insurance expense.  Employee  insurance  increased $113,000 in
2000 compared to 1999 ($315,000 compared to$202,000). The increase resulted from
additions of employees from growth in business  volume and from the  acquisition
of companies.

         Interest  expense is higher due to the larger debt  outstanding in 2000
necessary for funding of long-term  contracts,  additional working capital,  and
purchases of machinery and equipment. Additionally,  interest rates increased in
2000 compared to 1999. The prime rate at the beginning of 2000 was 8.5% compared
to 9.5% on December 31, 2000.  Interest expense for 2000 was $1,668,000 compared
to $677,000 in 1999, an increase of $991,000 or 146%.

Capital resources and liquidity

         Cash on hand at the end of 2000 was  $417,000  compared  to $629,000 at
the end of 1999.

         On May 12,  2000,  we  obtained  a new credit  facility  from Bank One,
Oklahoma, N.A. The existing line of credit and term loan with another lender and
a series of purchase  financing  and other loans were paid off with the proceeds
of the new credit facility.  The new credit facility  comprised three loans. The
term loan of $13,300,000  included  $2,500,000 for the  acquisition of a Florida
company and a Kentucky  company.  The funds were placed in the revolving line of
credit  facility  pending  the  closing of the  acquisitions.  When the  Florida
acquisition  was  terminated,  $1,900,000  of the  $2,500,000  borrowed for that
acquisition was applied to the purchase of Hopkins Appraisal Services,  Inc. The
second loan of $4,000,000 line of credit was for future acquisitions. As of June
30, 2000, $1,390,000 was borrowed against the acquisition line of credit to fund
the remainder of the Hopkins acquisition. The third loan was a revolving line of
credit for  $8,000,000  to be used for working  capital.  Interest  rates on the
loans float at the Bank One prime rate plus 125 to 175 basis points. We have the
option to fix the interest rate for specified periods at the Eurodollar rate for
such periods plus a margin previously established. The working capital revolving
line of credit loan matures  April 30, 2002,  and requires  monthly  payments of
interest  accrued.  On April 30, 2001,  the  acquisition  line of credit will be
converted  to a three year term loan with a five year  amortizing  schedule  and
require a monthly  principal payment of 1/60th of the acquisition loan principal
balance  plus  accrued  interest.  The term loan  matures  April 30,  2003,  and
requires a monthly principal payment of 1/60th of the original principal balance
plus accrued interest.

         On  September  29,  2000,  we obtained a temporary  increase in working
capital  revolving  credit  commitment  to  increase  the amount  available  for
borrowing under the Working Capital Revolving Credit Facility.  The facility was
increased from $8,000,000 to $10,500,000  for the period  beginning on September
29, 2000 and ending on December 31, 2000.

         On  October  30,   2000,   the  Company   sold  and  leased  back  four
office/warehouse sites occupied by us. The total sales price was $2,850,000. The
annual  rent  payments  are  $332,085  with a lease term of 12 years.  The lease
provides for two rent increases of approximately 5% each, one at the end of four
years and one at the end of eight years.

<PAGE>

         On  November  10,  2000,  we sold and leased  back an  office/warehouse
facility being  constructed  for occupancy by us. The sales price was $1,213,750
and the 10 year lease has an initial annual rent of $141,396.

         On December 20, 2000, we  restructured a portion of our working capital
revolving credit commitment and established an $8,000,000  non-revolving line of
credit for  construction  loans. A transfer of $6,000,000  from the  $10,500,000
working capital and temporary lines of credit was made to the construction  loan
line of credit.  The temporary working capital line of credit was eliminated and
the working capital line of credit was reduced to $6,500,000.  The  construction
loan  facility  matured  April 30, 2001,  was extended to August  10,2001 by the
fourth amendment to the original loan agreement, and will be extended to October
10, 2001 by the fifth amendment to the original loan agreement.

         On June 27, 2001, the Company entered into a fourth amendment to credit
agreement with Bank One, Oklahoma, N.A. The amendment provided that the interest
rate  applicable to the loan facility  would be changed to equal the Prime Rate,
plus three percent per annum;  the working  capital  credit  commitment  will be
subject to a  borrowing  base  limitation  equal to  eighty-five  percent of the
eligible  accounts;  and an extension of the construction loan facility maturity
date to August 10, 2001.

         On August 6,  2001,  Bank One  requested  the  Company  move its credit
facility to another  lender by the end of the year. The bank cited the Company's
lower than expected  profitability  and that the  Company's  type of business no
longer was the type of business  the bank wanted to keep in its loan  portfolio.
The Company is actively pursuing several other financing arrangements.

         We continued to make periodic debt  repayments  during this period.  We
believe that  additional  capital will be needed to fully implement our business
and growth plans and is  considering  various  alternatives  for obtaining  such
capital.

Item 7.  Financial Statements.

         Our Consolidated  Financial  Statements  required by this item begin at
page F-1 hereof.

Item 8.  Changes  in  and  Disagreements  With  Accountants  on  Accounting  and
         Financial Disclosure.

         None.



<PAGE>

                           INDEX TO FINANCIAL STATEMENTS


                                                                          Page
                                                                          ----

Report of Independent Auditors                                            F-2

Consolidated Balance Sheet as of December 31, 2000                        F-3

Consolidated Statements of Income for the Years Ended
   December 31, 2000 and 1999                                             F-4

Consolidated Statements of Changes in Shareholders' Equity
   for the Years Ended December 31, 2000 and 1999                         F-5

Consolidated Statements of Cash Flows for the Years Ended
   December 31, 2000 and 1999                                             F-6

Notes to Consolidated Financial Statements                                F-7





                                       F-1
<PAGE>

                           REPORT OF INDEPENDENT AUDITORS




To the Board of Directors
NESCO, Inc.



We have audited the accompanying consolidated balance sheet of NESCO, Inc. as of
December 31, 2000, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the two years in the period then
ended.  These  financial  statements  are the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of NESCO, Inc. as of December 31,
2000,  and the results of its  operations and its cash flows for each of the two
years  in the  period  then  ended  in  conformity  with  accounting  principles
generally accepted in the United States of America.

As  discussed  in Note 15,  the  accompanying  financial  statements  have  been
restated  from that  previously  reported  to correct  the  reported  amounts of
revenue  accounts  receivable  and costs  and  estimated  earnings  in excess of
billings on uncompleted contracts.

The accompanying  financial  statements have been prepared  assuming the Company
will  continue as a going  concern.  As  discussed  in Note 15 to the  financial
statements,  the Company is  experiencing  severe  liquidity  problems and is in
violation of certain debt  covenants.  The lending  institution has informed the
Company  that it is requiring  the Company to transfer its banking  relationship
and the Company is negotiating with other  institutions.  These conditions raise
substantial  doubt about the Company's  ability to continue as a going  concern.
The financial  statements do not include any adjustments  that might result from
the outcome of this uncertainty.

TULLIUS TAYLOR SARTAIN & SARTAIN LLP

Tulsa, Oklahoma
March 2, 2001, except as to Note 15
        as to which the date is August 16, 2001



                                       F-2
<PAGE>
<TABLE>
<CAPTION>

                                   NESCO, Inc.
                           CONSOLIDATED BALANCE SHEET
                                December 31, 2000
                            (In Thousands of Dollars)
                                     ASSETS
                                     ------
<S>                                                                                   <C>
Current assets:
         Cash                                                                         $    417
         Accounts receivable, trade, net of allowance for doubtful accounts of $310      9,898
         Current portion of lease contracts receivable                                   1,065
         Costs and estimated earnings in excess of billings on
              uncompleted contracts                                                      6,701
         Deferred income taxes                                                             224
         Materials and supplies                                                          2,845
         Prepaid expenses                                                                  378
                                                                                      --------
         Total current assets                                                           21,528
Property and equipment, net                                                              5,639
Lease contracts receivable less current portion                                          7,177
Goodwill and other intangibles, net of accumulated amortization of $255                  8,710
                                                                                      --------
Total assets                                                                          $ 43,054
                                                                                      ========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------
Current liabilities:
         Current maturites of notes payable                                           $ 28,025
         Accounts payable                                                                4,071
         Accrued income taxes                                                              942
         Other accrued liabilities                                                         766
                                                                                      --------
         Total current liabilities                                                      33,804
Long-term notes payable                                                                   --
Deferred income taxes                                                                      694
                                                                                      --------
Commitments and contingencies                                                             --
                                                                                      --------
Total liabilities                                                                       34,498
Shareholders' equity:
         Preferred Stock; 1,000,000 shares authorized; none issued
         Common Stock; par value $.01; 20,000,000 shares authorized;
            9,488,643 shares issued                                                         95
         Additional paid-in capital                                                      4,975
         Retained earnings                                                               3,812
         Common stock in Treasury, at cost, 162,788 shares                                (326)
                                                                                      --------
         Total shareholders' equity                                                      8,556
                                                                                      --------
Total liabilities and shareholders' equity                                            $ 43,054
                                                                                      ========

</TABLE>

    The accompanying notes are an integral part of the financial statements.



                                       F-3
<PAGE>

                                   NESCO, Inc.
                        CONSOLIDATED STATEMENTS OF INCOME
                 For the Years Ended December 31, 2000 and 1999
               (In Thousands of Dollars except per share amounts)



                                                2000        1999
                                               --------    --------

Revenue:
     Fueling Systems                           $ 21,617    $ 16,067
     Environmental                               13,378      12,562
     Miscellaneous                                1,959         938
                                               --------    --------
     Total Revenue                               36,954      29,567

Costs and expenses                               25,370      18,826
Selling, general and administrative expenses      9,225       6,822
                                               --------    --------
Total operating expenses                         34,595      25,648

Income from operations                            2,359       3,919

Other income (expense):
         Interest                                (1,668)       (677)
         Other, net                                 259         240
                                               --------    --------
Income before income taxes                          950       3,482
                                               --------    --------
Provision (benefit) for taxes on income
         Current                                    146       1,422
         Deferred                                   216        (104)
                                               --------    --------
                                                    362       1,318
                                               --------    --------
Net income                                     $    588    $  2,164
                                               ========    ========
Basic net income per share                     $   0.06    $   0.24
                                               ========    ========
Diluted net income per share                   $   0.06    $   0.23
                                               ========    ========



    The accompanying notes are an integral part of the financial statements.



                                       F-4
<PAGE>
<TABLE>
<CAPTION>

                                   NESCO, Inc.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                 For the Years Ended December 31, 2000 and 1999
                            (In Thousands of Dollars)




                                   Common Stock shares      Common     Additional
                                 ----------------------      Stock       Paid-in     Retained     Treasury
                                  Issued    In Treasury     Issued       Capital     Earnings      Shares        Total
                                 ---------  -----------    ---------   ----------    ---------    ---------    ---------
<S>                              <C>        <C>            <C>         <C>           <C>          <C>          <C>
Balance at Dec 31, 1998          9,388,643      122,991    $      94   $    3,998    $   2,365    $    (240)   $   6,217

Stock option issuances                --           --           --            120         --           --            120
Stock options exercised               --        (50,000)        --            (28)        --            103           75
Purchase of
   treasury stock                     --        249,797         --           --           --           (494)        (494)
Sale of treasury stock                --       (120,000)        --           --           --            240          240
Summit owner distributions
   net of current income taxes        --           --           --           --         (1,305)        --         (1,305)
Shares and options used to
   acquire businesses                 --        (40,000)        --             49         --             65          114

Net income                            --           --           --           --          2,164         --          2,164
                                 ---------  -----------    ---------   ----------    ---------    ---------    ---------

Balance at Dec 31, 1999          9,388,643      162,788           94        4,139        3,224         (326)       7,131

Shares, options, and
    warrants used to acquire
         businesses                100,000         --              1          836         --           --            837
Net income                            --           --           --           --            588         --            588
                                 ---------  -----------    ---------   ----------    ---------    ---------    ---------

Balance at Dec 31, 2000          9,488,643      162,788    $      95   $    4,975    $   3,812    $    (326)   $   8,556
                                 =========  ===========    =========   ==========    =========    =========    =========

</TABLE>


    The accompanying notes are an integral part of the financial statements.



                                       F-5
<PAGE>

                                   NESCO, Inc.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For the Years Ended December 31, 2000 and 1999
                            (In Thousands of Dollars)

                                                           2000        1999
                                                          --------    --------
Operating activities:
     Net income                                           $    588    $  2,164
     Adjustments to reconcile net income to net
       cash provided by (used in) operating activities:
         Depreciation and amortization                       1,119         684
         Stock options issued as consideration                --           120
         Deferred taxes                                        216        (104)
         Change in:
             Accounts receivable                            (1,882)      1,361
             Costs and estimated earnings in excess
               of billings on uncompleted contracts         (4,309)       (717)
             Materials and supplies                           (224)       (308)
             Prepaid expenses                                 (220)       (117)
             Accounts payable                                2,509        (550)
             Accrued liabilities                              (332)        390
             Lease contracts receivable                     (6,085)     (2,157)
             Other                                             486        (704)
                                                          --------    --------

Net cash provided by (used in) operating activities         (8,134)         62
                                                          --------    --------
Investing activities:
     Acquisition of  businesses, net of cash acquired       (6,934)     (4,114)
     Purchases of property and equipment                    (1,151)     (1,678)
     Proceeds from sales of property and equipment            --           121
                                                          --------    --------
     Net cash used in investing activities                  (8,085)     (5,671)
                                                          --------    --------
Financing activities:
     Proceeds from issuance of common stock
         and exercised options                                 359         323
     Proceeds from notes payable and long-term
         obligations                                        20,113       8,338
     Summit ownership distributions                           --        (1,174)
     Principal payments on notes payable and
         long-term obligations                              (4,465)     (1,086)
     Purchase of common shares                                --          (494)
                                                          --------    --------
     Net cash provided by financing
         activities                                         16,007       5,907
                                                          --------    --------
Increase (decrease) in cash                                   (212)        298
Cash, beginning of year                                        629         331
                                                          --------    --------
Cash, end of year                                         $    417    $    629
                                                          ========    ========

The accompanying notes are an integral part of the financial statements.



                                       F-6
<PAGE>

                                   NESCO, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         DESCRIPTION  OF  BUSINESS  - NESCO,  Inc.  (the  "Company"),  (National
         Environmental  Service Co. until December 27, 1999, when it changed its
         name  to  NESCO,   Inc.)  is  engaged  in  the  business  of  providing
         installation of fueling systems, equipment,  maintenance,  and services
         to the  owners  and  operators  of  petroleum  fueling  systems.  These
         services   include  site   management   (fuel   inventory   management,
         environmental   compliance  monitoring  and  reporting,   and  facility
         maintenance   management);   site   development   and  financing  (land
         acquisition,  design,  construction,  and financing); site installation
         and  upgrades.   The  Company  is  also  engaged  in  the  business  of
         environmental services (site analysis and remediation). The Company, an
         Oklahoma  corporation,   is  headquartered  in  Tulsa,   Oklahoma.  The
         Company's  markets are primarily  domestic with division  facilities in
         Oklahoma City,  Oklahoma;  Dallas and San Antonio,  Texas;  Clearwater,
         Florida;  Columbia, South Carolina;  Greenville,  North Carolina; South
         Charleston, West Virginia; Greensburg,  Pennsylvania; Tucker and Macon,
         Georgia;  Tempe,  Arizona;  Denver,  Colorado;  Noblesville,   Indiana;
         Independence, Missouri; Richmond, Virginia; and Lafayette, Louisiana.

         CONSOLIDATION   -  The  financial   statements  of   subsidiaries   are
         consolidated. Inter-company accounts and transactions are eliminated in
         consolidation.

         MATERIALS  AND SUPPLIES - Materials  and supplies  consist of purchased
         materials and are valued at cost (first-in, first-out).

         PROPERTY AND  EQUIPMENT - Property and  equipment  are carried at cost.
         Depreciation  is  provided  using  the  straight-line  method  over the
         estimated  useful  lives of the  related  assets  ranging  from 3 to 20
         years.  Gains and losses on  retirement  of property and  equipment are
         recognized in the period of  retirement.  Depreciation  expense  totals
         $904,000 and  $649,000 for the years ended  December 31, 2000 and 1999,
         respectively.

         DEVELOPED  SOFTWARE - Costs for new software  products and enhancements
         to  existing   software   products  are  expensed  as  incurred   until
         technological  feasibility  has  been  established.  Once  the  project
         reaches technological  feasibility,  all software development costs are
         capitalized   until  the  project  is  ready  for   release.   Software
         development  costs are  amortized  on the  straight-line  method over a
         maximum of 5 years or the expected  life of the  product,  whichever is
         less.  Capitalized  software  costs  totaled  $813,000  and $104,000 at
         December 31, 2000 and 1999,  respectively.  No amortization expense has
         been  recognized  as of December 31, 2000, as the projects were not yet
         complete.

         NET INCOME PER SHARE - Basic  earnings per share  ("EPS") is calculated
         by dividing  net earnings  available  to common  shares by the weighted
         average common shares outstanding. Diluted EPS is calculated similarly,
         except that it includes the dilutive effect of the assumed  exercise of
         all dilutive potential common shares outstanding.

         INCOME  TAXES -  Deferred  taxes are  determined  under  the  liability
         method,  whereby  deferred tax assets and  liabilities  are  recognized
         based on  differences  between  financial  statement  and tax  bases of
         assets and liabilities  using presently  enacted rates. At December 31,
         2000 and 1999,  deferred  taxes were  recorded  primarily for temporary
         differences related to depreciation of fixed assets.


                                      F-7
<PAGE>

         FINANCIAL  INSTRUMENTS - The Company's financial instruments consist of
         trade  accounts  receivable,  trade  accounts  payable,  short-term and
         long-term  debt. The carrying  amounts of these  financial  instruments
         approximate  fair value at December 31, 2000. The fair value of debt is
         estimated based on current rates offered for similar debt.

         CONCENTRATION OF CREDIT RISK - Financial  instruments which potentially
         subject the Company to  concentrations of credit risk consist primarily
         of trade  receivables  from customers,  cost and estimated  earnings in
         excess of  billings  on  uncompleted  contracts  which will be due from
         customers  when  billable  under the  contracts,  and  lease  contracts
         receivable.  The  Company  owns  title to  properties  subject to lease
         contracts. For other financial instruments the Company does not require
         collateral from its customers although it may have the ability to place
         liens.  Such credit risk is  considered by management to be limited due
         to the Company's broad customer base. One commercial customer accounted
         for 10% of sales in 1999.

         REVENUE RECOGNITION -The Company enters into fixed fee,  cost-plus-fee,
         and performance  incentive contracts.  For long-term  contracts,  other
         than  performance  incentive  contracts,  revenue is  recognized on the
         percentage of completion  method  measured by the  percentage of direct
         costs to date to  estimated  total  direct  costs  for  each  long-term
         contract.  For performance  incentive contracts,  revenue is recognized
         upon attainment of the performance criteria specified in the contracts.
         For  short-term and multiple unit  contracts,  revenue is recognized as
         services are  rendered,  based on physical  completion  of the project.
         Related costs are expensed as incurred. Provisions for estimated losses
         on  uncompleted  contracts  are made in the period in which such losses
         are determined.

         MANAGEMENT  ESTIMATES - The  preparation  of  financial  statements  in
         conformity  with  generally  accepted  accounting  principles  requires
         management to make estimates and  assumptions  that affect the reported
         amounts of assets and liabilities  and disclosure of contingent  assets
         and  liabilities  at the date of the financial  statements and reported
         amounts of revenue  and expense  during the  reporting  period.  Actual
         results could differ from those estimates. Significant items subject to
         such estimates and assumptions include the carrying value of long-lived
         assets including goodwill;  valuation  allowances for receivables;  and
         potential litigation claims and settlements.

         COMPREHENSIVE  INCOME - The Company has no  comprehensive  income items
         for the two years in the period ended December 31, 2000. Therefore, net
         income equals comprehensive income.

         GOODWILL - Goodwill  resulting from business  acquisitions is amortized
         over the estimated period of benefit of 20 years.  Amortization expense
         is $215,000 in 2000 and $35,000 in 1999.

         EMPLOYEE  STOCK  OPTIONS - When the  exercise  price of employee  stock
         options  equals or exceeds the market value of the stock at the date of
         grant, the Company recognizes no compensation expense.

         ADVERTISING COSTS - The Company expenses advertising costs as incurred.
         Advertising  expense  totaled  $179,000 and $91,000 for the years ended
         December 31, 2000 and 1999, respectively.

         NEW ACCOUNTING STANDARD - The Company will adopt Statement of Financial
         Accounting  Standards  ("SFAS")  No. 133,  "Accounting  for  Derivative
         Instruments  and Hedging  Activities" in 2001.  Currently,  the Company
         does  not  engage  in  hedging  activities  or  transactions  involving
         derivatives.

                                       F-8
<PAGE>

2.       ACQUISITIONS

                  On  June  12,  2000,  NESCO  acquired  all of the  issued  and
         outstanding  shares of Hopkins  Appraisal  Services,  Inc. The purchase
         price was $3,000,000. The definitive agreement provided for the payment
         to David E. Hopkins of 250,000 shares over a period of five years (to a
         maximum of 50,000 shares per year) subject to the attainment of certain
         performance  objectives  in the  operation  and  management  of Hopkins
         Appraisal Services,  Inc. In anticipation of a possible award,  250,000
         shares  have  been  reserved.  As of  December  31,  2000,  none of the
         reserved shares have been awarded. Hopkins is a leader in the provision
         of appraisals on convenience stores and gasoline service stations.  The
         client list  includes a majority of major banks and major oil companies
         in the United States.

                  On August 31, 2000,  NESCO acquired certain assets and assumed
         certain liabilities of Trust Environmental  Services Company,  LLC. The
         purchase price was  $1,000,000 and warrants to purchase  120,000 shares
         of NESCO common stock at $4.00 per share.  The warrants  expire  August
         31, 2005. Trust is a provider of environmental  and related services to
         the owners and operators of fueling systems.

                  On September 1, 2000, the Company  acquired an office building
         located in Independence,  Missouri, from David E. and Margaret Hopkins,
         in exchange  for 100,000  shares of the  Company's  common  stock.  The
         building is  occupied  by Hopkins  Appraisal  Services,  Inc.  that was
         acquired by the Company on June 12, 2000.

                  On  September  28, 2000,  NESCO  acquired all of the shares of
         membership interests of the owners of Kentucky  Environmental  Network,
         LLC. The purchase  price was  $600,000.  Additionally,  the owners will
         receive five percent of the gross  revenues  invoiced and  collected by
         buyer for environmental consulting and remediation services rendered in
         the State of  Kentucky  during the period of five years  following  the
         date of acquisition.  This cost will be expensed as incurred.  Kentucky
         Environmental  Network  is a  provider  of  environmental  and  related
         services to the owners and operators of fueling systems.

                  On September  29, 2000,  NESCO  acquired all of the issued and
         outstanding  shares of Atlanta Petroleum  Equipment  Company,  Inc. The
         purchase price was $2,800,000 and options to purchase  80,000 shares of
         NESCO  common  stock at $4.00  per  share  for a period  of five  years
         following  closing.  Cash  of  $1,400,000  was  paid  at  closing.  The
         remainder  of the purchase  price will be paid as follows:  $700,000 on
         September  30,  2001  and  $700,000  on  September  30,  2002.  Atlanta
         Petroleum is a provider of petroleum  fueling systems  equipment sales,
         installation, service, maintenance, and related services.

                  Each of the four  business  combinations  described  above was
         accounted  for using the purchase  method of  accounting.  A portion of
         each purchase  price was allocated to assets  acquired and  liabilities
         assumed  based on  estimated  fair market  values,  at the dates of the
         acquisitions,  and the remainder of the purchase prices was recorded as
         goodwill.  Total goodwill in connection with these four acquisitions of
         $6,747,000 is being amortized over 20 years.



                                       F-9
<PAGE>

                  On April  30,  1999,  the  Company  acquired  the  assets of a
         division of Arizona Instrument Corporation,  Phoenix, Arizona, for cash
         in the amount of $1,062,000.  Assets acquired relate to the manufacture
         and marketing of the Soil Sentry and  Encompass  Systems for the remote
         monitoring of fueling systems.

                  On May 7,  1999,  the  Company  acquired  assets  and  assumed
         certain  liabilities of TET  Environmental  Services,  Inc.,  Columbia,
         South Carolina ("TET").  TET is a provider of environmental  consulting
         and services to the fueling  systems  industry.  The purchase price was
         $2,328,000.

                  The operating  results of these acquired  businesses have been
         included  in the  consolidated  statement  of income  from the dates of
         acquisition.  The table below reflects the unaudited pro forma combined
         results of the  Company,  and the six  purchase  business  combinations
         described above as if the acquisitions had taken place at the beginning
         of 2000 and 1999:

                                                  2000            1999
                                                  -----------------------
                                                        (unaudited)

         Net sales                                $47,506         $48,262
         Net income                               $ 2,069         $ 3,811
         Net income per share:
                  Basic                           $0.22           $0.41
                  Diluted                         $0.22           $0.41


                  On September  10, 1999,  NESCO  completed a merger with Summit
         Environmental  Services,  Inc. by exchanging 1.49 million shares of its
         common stock for all of the common stock of Summit.

                  The merger was  accounted  for as a pooling of  interests  and
         accordingly all prior period financial statements have been restated to
         include the combined  results of operations,  financial  position,  and
         cash flows of Summit.

                  The following  information  presents  certain income statement
         data of the separate companies for 1999 (in thousands):

                                                                     1999
                           Net Sales
                           NESCO                                  $24,572
                           Summit                                   4,995
                                                                  -------
                           Total                                  $29,567

                           Net Income
                           NESCO                                  $   539
                           Summit                                   1,625
                                                                  -------
                           Total                                  $ 2,164

                  Until the merger,  Summit was operated as a limited  liability
         company which is taxed as a partnership.  Accordingly,  Summit incurred
         no income  taxes  until the merger.  For  purposes  of  presenting  the
         combined  operation of the Company and Summit on a  retroactive  basis,
         Summit's  income has been adjusted by $429,000 in 1999,  representing a
         provision for income taxes at an

                                      F-10
<PAGE>

         effective  38% combined  federal and state tax rate.  Taxes on Summit's
         temporary  differences  have been  credited  to deferred  income  taxes
         payable and the remainder has been credited to retained earnings.

3.       ACCOUNTS AND LEASE CONTRACTS RECEIVABLE

                  Accounts  receivable  consist of unpaid billings for long-term
         percentage  of  completion  type  contracts,  billings  for  short-term
         multiple unit contracts (completed  contracts),  and completed contract
         projects  not yet billed.  Retainage  receivable  at December 31, 2000,
         totaled $276,000.

                  Accounts  receivable  at December  31, 2000,  include  amounts
         subject to claims of $609,000  arising  from  disputes.  The Company is
         suing to collect various collection matters.


                  Lease  contracts  receivable  result from  customer  leases of
         NESCO constructed  fueling facilities that qualify as sale-type leases.
         Annual future lease payments to be received under sales-type leases are
         as follows (dollars in thousands):

                        2001                               $  1,065
                        2002                                  1,067
                        2003                                  1,067
                        2004                                  1,067
                        Thereafter                           12,534
                                                           --------
                                                             17,867
                        Less unearned interest at 11.5%       9,625
                                                           --------
                        Total                                 8,242
                        Less current principal portion        1,065
                                                           --------
                                                           $  7,177
                                                           ========

                  As of  December  31,  2000,  one  customer  is in default  for
         nonpayment of lease  payments.  Total lease  contracts  receivable less
         unearned interest from this customer is $3,897,000. Management believes
         that disposition of the properties,  if necessary, will not result in a
         loss.

4.       UNCOMPLETED CONTRACTS

                  Costs,   estimated   earnings  and  billings  on   uncompleted
         contracts are summarized as follows (in thousands):

                                                                   2000
         Costs incurred on uncompleted
                  non-environmental contracts                     $  3,984
         Estimated earnings recognized                               2,060
                                                                  --------
                                                                     6,044
         Revenue recognized on environmental contracts               3,222
         Billings to date                                           (2,565)
                                                                  --------
                                                                  $  6,701

         Costs and estimated earnings in excess of
                  billings on uncompleted contracts               $  6,701
                                                                  ========

                                      F-11
<PAGE>

5.       PROPERTY, PLANT AND EQUIPMENT

         Property and equipment, at cost:
                  Land                                             $   175
                  Buildings and improvements                           566
                  Vehicles                                           3,570
                  Testing, drilling and other equipment              1,884
                  Furniture, fixtures and other                      2,430
                                                                   -------
                                                                     8,625
                  Less accumulated depreciation                      2,986
                                                                   -------
                       Property and equipment, net                 $ 5,639
                                                                   =======

                  On October 30,  2000,  the  Company  sold and leased back four
         office/warehouse  sites occupied by the Company.  The total sales price
         was $2,850,000. The annual rent payments are $332,085 with a lease term
         of 12 years. The lease provides for two rent increases of approximately
         5%  each,  one at the end of  four  years  and one at the end of  eight
         years.  The gain  from sale of  $1,339,000  will be  amortized  to rent
         expense over the 12 year leasehold period.

                  On November  10,  2000,  the  Company  sold and leased back an
         office/warehouse  facility  being  constructed  for  occupancy  by  the
         Company.  The sales price was  $1,213,750  and the 10 year lease has an
         initial annual rent of $141,396 (See Note 11).

6.       NOTES PAYABLE

         Notes  payable at  December  31,  2000,  consist of the  following  (in
         thousands):

         Revolving line of credit of $6,500,000 bearing interest at the
                  Bank One, Oklahoma, N.A. prime rate floating plus 125
                  basis  points  (10.75% at December  31,  2000),  with
                  interest  payable  monthly and principal due on April
                  30,  2002.  The  Company  has the  option  to fix the
                  interest rate for specified periods at the Eurodollar
                  rate  for  such  period  plus  a  margin   previously
                  established.  The  line  is  collateralized  by  real
                  estate, accounts receivable, supplies, and equipment.
                                                                         $ 6,052

         Construction  line of credit of $8,000,000 bearing interest at
                  the Bank One,  Oklahoma N.A. prime rate floating plus
                  175  basis  points  (11.25%  at  December   31,2000),
                  interest  payable monthly and principal due April 30,
                  2001.  The Company has the option to fix the interest
                  rate for specified periods at the Eurodollar rate for
                  such period plus a margin previously established. The
                  line  is  collateralized  by  real  estate,  accounts
                  receivable, supplies, and equipment.                     6,029

         Acquisition  line  of credit bearing interest at the Bank One,

                  Oklahoma,  N.A.  prime rate  floating  plus 125 basis
                  points  (10.75% at December 31, 2000),  with interest
                  payable in monthly  installments.  On April 30, 2001,
                  the acquisition line of credit will be converted to a
                  three  year term  loan  with a five  year  amortizing
                  schedule and require a monthly  principal  payment of
                  1/60th of

                                      F-12
<PAGE>

                  the acquisition  loan principal  balance plus accrued
                  interest.  The term loan matures April 30, 2003.  The
                  Company has the option to fix the  interest  rate for
                  specified  periods  at the  Eurodollar  rate for such
                  period plus a margin previously established. The note
                  is  collateralized   by  real  estate,   receivables,
                  inventory, and equipment.                                4,000

         Term  loan  payable  to  bank  bearing  interest  at Bank One,
                  Oklahoma,  N.A.  prime rate  floating  plus 125 basis
                  points  (10.75% at  December  31,  2000),  payable in
                  monthly   installments   of  $221,667   plus  accrued
                  interest.  The loan matures May 31, 2003. The Company
                  has the option to fix the interest rate for specified
                  periods at the Eurodollar rate for such period plus a
                  margin   previously   established.    The   loan   is
                  collateralized by real estate,  accounts  receivable,
                  supplies, and equipment.                                 9,970

         Notes  payable  bearing  interest at rates from 8.0% to 10.5%,
                  payable in monthly  installments  aggregating  $8,900
                  including   interest  with  various   maturity  dates
                  through August 2005. The notes are  collateralized by
                  vehicles and equipment.                                  1,974
                                                                          ------

         Total current portion                                            28,025
                                                                          ======

                  The Bank One, Oklahoma N.A. credit facilities  contain certain
         restrictive covenants.  The Company is restricted from paying dividends
         and is  limited  as to the  incurrence  of  additional  debt  and as to
         capital expenditures and business acquisitions.  Among other covenants,
         the Company must maintain minimum leverage and current ratios.  Certain
         debt agreements  contain  restrictions  on working capital  (minimum of
         approximately  $25 million at December 31, 2000) and other  restrictive
         covenants. For the year ended December 31, 2000, the Company was not in
         compliance  with three debt  covenants  related to the minimum  current
         ratio,  minimum debt service  coverage ratio,  and the maximum leverage
         ratio.  The covenants are  determined  quarterly  based on the trailing
         four  quarters  ending on each  determination  date.  The  Company  has
         obtained  a waiver  from the lender as of  December  31,  2000  waiving
         noncompliance through December 31, 2000. (See Note 15).

7.       COMMITMENTS AND CONTINGENCIES

                  Total rent  expense for the years ended  December 31, 2000 and
         1999, was $474,000 and $257,000 respectively.  Rental commitments under
         noncancelable  leases are $662,000 in 2001,  $552,000 in 2002, $480,000
         in 2003,  $366,000  in 2004,  and  $349,000  in  2005,  and  $2,846,000
         thereafter.

                  The  Company is not a party to any  litigation  which,  in the
         judgment of the Company,  would have a material  adverse  effect on its
         operations or financial condition if adversely determined. However, due
         to the  nature  of its  business,  it is,  from  time to  time,  and is
         currently, a party to certain legal proceedings arising in the ordinary
         course of its business.

8.       STOCK OPTION PLANS

                  Effective April 22, 1994, the Company established The National
         Environmental  Service  Co.  1994  Employee  Stock Plan (the  "Employee
         Plan") and The National Environmental Service Co.


                                      F-13
<PAGE>
<TABLE>
<CAPTION>

         Director Stock Option Plan (the "Director  Plan"). On May 18, 2000, the
         NESCO, Inc. 2000 Equity Incentive Plan was adopted by the shareholders.
         The total amount of common stock  authorized  and reserved for issuance
         under the Employee  Plan is 782,586  shares and under the Director Plan
         is 150,000 shares.  At December 31, 2000 and 1999,  482,586 and 665,586
         shares were available for future grants.

                  SFAS  No.  123,  "Accounting  for  Stock-Based  Compensation,"
         ("SFAS 123") provides an alternative method of determining compensation
         cost for stock options,  which alternative method may be adopted at the
         option of the  Company.  Had  compensation  cost for these  plans  been
         determined  consistent  with SFAS 123, the Company's net income and EPS
         would have been reduced to the following pro forma amounts:

                                                   2000           1999
                                                  ------         ------
         Net income:
              As reported                         $  588         $2,164
              Pro Forma                              443          2,117
         Basic EPS:
              As reported                         $ 0.06         $ 0.24
              Pro Forma                           $ 0.05         $ 0.23
         Diluted EPS:
              As reported                         $ 0.06         $ 0.23
         Pro Forma                                $ 0.05         $ 0.23



                  A  summary  of the  status  of the  Company's  employee  stock
         options at  December  31, 2000 and 1999,  and changes  during the years
         then ended is presented below:

                                                                          2000                      1999
                                                                  ---------------------    ---------------------
                                                                             Wtd. Avg.                 Wtd. Avg.
                                                                   Shares   Exer. Price     Shares    Exer.Price
                                                                  -------   -----------    -------    ----------
<S>                                                               <C>       <C>            <C>        <C>
         Outstanding at beginning of year                         257,000      $2.49       255,000       $2.75
         Granted                                                  235,000      $3.92        75,000       $2.00
         Forfeited                                                (42,000)     $3.00       (73,000)      $2.86
                                                                  -------      -----       -------       -----
         Outstanding at end of year                               450,000      $3.19       257,000       $2.49
                                                                  =======      =====       =======       =====
         Exercisable at end of year                               229,000      $3.03       123,600       $2.75
                                                                  =======      =====       =======       =====
         Weighted average fair value of options granted           $2.11                     $1.43
                                                                  =====                     =====

         Weighted average remaining contractual life              4.9 years                 6.3 years

</TABLE>

                  The fair value of each option  grant is  estimated on the date
         of  grant  using  the  Black-Scholes  option  pricing  model  with  the
         following  weighted-average  assumptions  used for  grants  in 2000 and
         1999,  respectively:  risk  free  interests  rates of 6.0%  and  5.05%;
         expected  dividend  yields of 68%;  expected lives of 3.9 years in 2000
         and 10 years in 1999; and expected volatility of 68% in 2000 and 1999.


                                      F-14
<PAGE>
<TABLE>
<CAPTION>

                  A summary  of the  status of options  and  warrants  issued to
         non-employees  at December  31, 2000 and 1999,  and changes  during the
         years then ended is presented below:

                                                                          2000                          1999
                                                                  ----------------------------------------------------
                                                                              Wtd. Avg.                     Wtd. Avg.
                                                                  Shares     Exer. Price       Shares      Exer. Price
                                                                  -------    -----------       -------     -----------
<S>                                                               <C>        <C>               <C>         <C>
         Outstanding at beginning of year                         313,685       $2.18          163,685        $1.95
         Granted                                                  200,000       $4.00          200,000        $2.20
         Exercised                                                   --                        (50,000)       $1.50
                                                                  -------       -----          -------        -----
         Outstanding at end of year                               513,685       $2.89          313,685        $2.22
                                                                  =======       =====          =======        =====
         Exercisable at end of year                               513,685       $2.89          313,685        $2.18
                                                                  =======       =====          =======        =====
         Weighted average fair value of options granted           $2.38                        $0.59
                                                                  =====                        =====

                  Weighted average remaining contractual life     3.5 years                    2.4 years

</TABLE>

                  The Company  periodically  issues  stock or stock  warrants to
         third parties as consideration  for all or a portion of the acquisition
         price of an  acquired  company.  On August  31,  2000,  NESCO  acquired
         certain assets and assumed certain  liabilities of Trust  Environmental
         Services  Company,  LLC. The purchase price was $1,000,000 and warrants
         to purchase  120,000  shares of NESCO  common stock at $4.00 per share.
         The warrants  expire August 31, 2005. The warrants were valued at $2.38
         each using the  Black-Scholes  option  pricing model with the following
         weighted-average  assumptions: rate of 6.0%; expected dividend yield of
         0%; expected life of 5 years; and expected volatility of 68%.

9.       SHAREHOLDERS' EQUITY

                  In the first quarter of 1999, the Company  repurchased a total
         of 234,000  shares of its  common  stock.  The amount of the  purchases
         totaled $481,000.

                  Options  awarded  April 30,  1997,  for the purchase of 50,000
         shares of the Company's  common stock were exercised on April 15, 1999.
         The amount received by the Company upon exercise totaled $75,000.

                  On September 9, 1999, the Company sold 120,000 treasury shares
         of its common stock at $2.00 per share or $240,000.

                  On September 10, 1999, the Company  acquired all of the issued
         and outstanding shares of Summit  Environmental  Services,  Inc., Enid,
         Oklahoma,  in exchange for  1,488,503  shares of the  Company's  common
         stock.  The  transaction  was  accounted for under pooling of interests
         rules.

                  Between   December  3  and  December  9,  1999,   the  Company
         repurchased  4,300  shares of its common  stock at an average  price of
         $2.99 per share or $13,000.

10.      INCOME TAXES

                  The tax effects of temporary differences that give rise to the
         deferred  tax assets and  liabilities  at  December  31,  2000,  are as
         follows:

                  Financial basis in excess of tax basis of
                    fixed assets                                  $ (694)
                                                                  ------
                  Other                                           $  224
                                                                  ------

                                      F-15
<PAGE>

                  The following  table  summarizes the  significant  differences
         between the U.S. Federal statutory tax rate and the Company's effective
         tax rate for financial statement purposes.

                                                 2000          1999
                                                 ----          ----

         Statutory tax rate                      34.0%         34.0%
         State income taxes, net                  3.7%          2.5%
         Other                                     .4%          1.5%
                                                 -----        ------
                                                 38.1%         38.0%
                                                 =====        ======

11.      RELATED PARTIES

                  The Company is building an office  building  and  warehouse in
         Oklahoma City, and Company offices in Norman, Edmond, and Oklahoma City
         will be combined at the new facility.  On November 9, 2000, the Company
         sold the partially  completed  building to Eddy L. Patterson,  Chairman
         and CEO of the Company. The selling price of the completed building was
         $1,213,750 of which  $500,000 was paid at closing with the remainder to
         be  paid  at  completion  of  the  construction  and  occupancy  of the
         building.  On  January  1,  2001,  the  Company  entered  into a  lease
         agreement  with Mr.  Patterson  in which  the  Company  will  lease the
         premises from Mr.  Patterson.  The lease has a term of 10 years with an
         initial monthly lease payment of $11,783.  At the end of four years the
         lease  payment will be  increased  to $12,372 per month.  At the end of
         eight  years  the lease  payment  will be  increased  to  $12,991.  Mr.
         Patterson  and the  Company  entered  into the  agreement  and lease to
         facilitate  the  financing of the  construction  of the  property.  Mr.
         Patterson expects to sell the project and transfer the lease. The board
         of  directors  ratified  the  transaction  on December  12,  2000.  The
         Company's  cost to  acquire  the land and  construct  the  building  is
         estimated  to be  $1,124,000  of which  $623,000  has been  incurred at
         December 31, 2000.  The excess of the selling  price over the Company's
         cost will be amortized over the 10 year lease period.

12.      NET INCOME PER SHARE

                  Basic and diluted EPS for the years  ended  December  31, 2000
         and 1999, were computed as follows:

                                                           2000        1999
                                                          -------     -------
         Basic EPS Computation:
                  Net income                              $   588     $ 2,164
                  Weighted average number of common
                           shares outstanding               9,276       9,195
                                                          -------     -------
         Basic EPS                                        $  0.06     $  0.24
                                                          =======     =======


                                                           2000        1999
                                                          -------     -------
         Diluted EPS Computation:
                  Net income                              $   588     $ 2,164
                  Weighted average number of common
                           shares outstanding               9,276       9,195
                  Incremental number of shares for
                           assumed exercise of options        258          12
                                                          -------     -------
         Total shares                                       9,534       9,281
                                                          -------     -------
         Diluted EPS                                      $  0.06     $  0.23
                                                          =======     =======

                                      F-16
<PAGE>
<TABLE>
<CAPTION>

                  Outstanding  stock  options to purchase  common  stock with an
         exercise  price  greater than the average  market price of common stock
         were not included in the  computation of diluted EPS for 2000 and 1999.
         The balance of such options was 405,000 in 2000 with an exercise  price
         of $3.56 per share.  The  balance of such  options  was 155,685 in 1999
         with an exercise price of $3.00 per share.

13.      SEGMENT INFORMATION

                  The Company's  operations are  classified  into two reportable
         business  segments:  fueling systems and  environmental.  Each business
         segment is comprised  of several  divisions  or  subsidiary  operations
         which  individually   operate   predominately  either  in  the  fueling
         installations business or the environmental business.

                  Fueling systems includes site management, site development and
         financing, and site installations and upgrades. Fueling site management
         services include fuel inventory  management,  environmental  compliance
         monitoring and reporting, and facility management. Site development and
         financing services include land acquisition,  design, construction, and
         financing.

                  Environmental services consist primarily of environmental site
         analysis and remediation of contaminated sites.

                  The Company  allocates  resources  and  evaluates  performance
         based on the pre-tax  income of  operating  divisions.  The  accounting
         policies of the reportable  segments are the same as those described in
         the summary of significant accounting policies. Inter-segment sales are
         at current market  prices.  Interest and income taxes are attributed to
         corporate activities.

                  Following is a tabulation of business segment  information for
         2000 and 1999.  Corporate  information is included to reconcile segment
         data to the consolidated statements.

                  The Company's business segments have been grouped as follows:

         2000                                           Thousands of Dollars
                               ------------------------------------------------------------------
                                            Inter-    Pre-tax                       Additions
                                            Segment   Income                   Depr. &  Long-term
         Segment                Sales       Sales     (Loss)      Assets       Amort.     Assets
         -------               ------------------------------------------------------------------
<S>      <C>                   <C>        <C>        <C>          <C>          <C>       <C>
         Fueling Systems       $21,617    $   --     $  1,748     $25,007      $ 500     $ 6,662
         Environmental          13,378        --        2,891      13,582        424       2,449
         Miscellaneous           1,959         390        106       3,342         97         566
         Corporate overhead       --          --       (3,795)        664         98       6,153
                               ------------------------------------------------------------------
                               $36,954    $    390   $    950     $43,054     $1,119     $15,830
                               ==================================================================

         1999                                           Thousands of Dollars
                               ------------------------------------------------------------------
                                            Inter-    Pre-tax                       Additions
                                            Segment   Income                   Depr. &  Long-term
         Segment                Sales       Sales     (Loss)      Assets       Amort.     Assets
         -------               ------------------------------------------------------------------
         Fueling Systems       $16,067    $   --     $  1,308     $ 9,759      $ 344     $   906
         Environmental          12,562        --        4,616      10,017        271       3,478
         Miscellaneous             938         860         87       1,679         25         189
         Corporate overhead       --          --       (2,529)      1,340         44         232
                               ------------------------------------------------------------------
                               $29,567    $    860   $  3,482     $22,895      $ 684     $ 4,805
                               ==================================================================

</TABLE>

                                      F-17
<PAGE>

14.      SUPPLEMENTAL CASH FLOW INFORMATION

                                                                 2000     1999
                                                                 ----     ----
         Cash paid for interest                                  $1,400   $  625
                                                                 ======   ======
         Cash paid for income taxes                              $   85   $1,000
                                                                 ======   ======
         Non-cash investing and financing activities:
                  Issuance of equity instruments in
                     connection with acquisitions                $  836   $   19
                  Issuance of stock option and warrants
                  for services                                   $    -   $  175
                                                                 ======   ======

15.      RESTATEMENT AND GOING CONCERN CONSIDERATIONS

         In July and August 2001, members of Company management  determined that
         certain  accounts  receivable  recorded  in  December  2000  might have
         resulted from accounting irregularities. In addition, it was determined
         that estimated earnings in excess of billings on uncompleted  contracts
         may have been recorded,  in a  contravention  of the Company's  revenue
         recognition   accounting  policy,  for  certain  performance  incentive
         contracts for which the contractual  performance  criteria had not been
         met. The Audit  Committee was informed of these  matters in August.  At
         the Audit Committee's  direction,  the investigation that was begun was
         continued. The investigation confirmed that 2000 revenue was overstated
         due to irregularities in the recording of accounts receivable invoices,
         the need for certain other  accounts  receivable  adjustments,  and the
         need to adjust  previously  recorded contract  earnings.  Based on this
         investigation,  the Company and the Audit Committee  concluded that the
         2000  financial   statements   required   adjustments  of  the  amounts
         previously  reported for accounts receivable of $2,729,238 and contract
         costs and  estimated  earnings  in excess of  billings in the amount of
         $923,244.  Net of the  related  provision  for income  tax,  net income
         reported in the accompanying  financial  statements has been reduced by
         $2,264,610 from the amount previously reported.

         For the year ended December 31, 2000, the Company was not in compliance
         with three debt  covenants  of its  principal  credit  facility.  These
         covenants  related to minimum  crrrent  ratio,  minimum  debt  coverage
         service ratio, and the maximum leverage ratio. The lending  institution
         waived the noncompliance,  prior to the adjustments described above, as
         of  December  31,  2000,  and  again at March  31,  2001.  The  Company
         continues to be out of  compliance  with these  covenants and in August
         2001,  the  lending  institution  informed  the  Company  that  it  was
         requiring the Company to transfer its banking  relationships to another
         institution. Accordingly, all amounts owed under notes to the financial
         institution  have  been  classified  as  current  in  the  accompanying
         financial statements. The Company is in the process of negotiating with
         other institutions to moveits banking relationship.

         During 2000 and continuing in 2001, the Company's operating  activities
         have not produced  positive cash flow.  During 2000, the Company relied
         on its primary credit facility to fund operations and investments. Lack
         of liquidity in 2001 has impeded the  Company's  ability to pay vendors
         and  subcontractors  when due, which affects operations in the ordinary
         course  of  business.  As a result,  in the near  term,  the  Company's
         ability to continue as a going  concern is  dependent on the actions of
         the current lending  institution and, in the longer term, it depends on
         the  speed it can put in place,  and the  adequacy  of the  replacement
         credit facility.  The accompanying  financial statements do not contain
         any adjustments resulting from this contingency.

         At the August 16,  2001,  Board of  Directors  meeting,  the  Company's
         Chairman and President resigned.

                                      F-18
<PAGE>

                                   Signatures

         In accordance  with Section 13 or 15(d) of the Exchange Act,  Regisrant
caused this amendment to be signed on its behalf by the  undersigned,  thereunto
duly authorized, August 17, 2001.


                                        NESCO, Inc.

                                        By:  /s/ Larry G. Johnson
                                           -------------------------------------
                                           Larry G. Johnson
                                           Vice President & Secretary-Treasurer