<PAGE>

                       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 (FEE REQUIRED)

For the fiscal year ended                   February 28, 2000
                           ------------------------------------------------

                                       OR

/ /            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)


For the transition period from                        to
                                -----------------         ------------------
                          Commission file number         0-72
                                                   ------------------

                            York Research Corporation
--------------------------------------------------------------------------------
                     (Exact name of registrant as specified)

                Delaware                              06-0608633
--------------------------------------------------------------------------------
    (State or other jurisdiction of                (I.R.S. Employer
    of incorporation or organization)             Identification No.)

   280 Park Avenue, Suite 2700 West,      New York, New York       10017
--------------------------------------------------------------------------------
(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number, including area code             (212) 557-6200
Securities registered pursuant to Section 12(b) of the Act: -------------------

                                                      Name of each exchange
     Title of each class                               on which registered

            None
    ---------------------

Securities registered pursuant to Section 12(g) of the Act:
                     Common stock, par value $.01 per share
--------------------------------------------------------------------------------
                                (Title of class)

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

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

         The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of June 9, 2000 was as follows:

                  Common Stock, $.01 par value - $ 25,038,266

         The aggregate market value of the voting stock held by affiliates and
non-affiliates of the Registrant as of June 9, 2000 was as follows:

                   Common Stock, $.01 par value - $ 29,279,562

    (Based on a closing price of $1.9375 for the common stock on such date.)

         The number of shares outstanding of the Registrant's classes of common
stock, as of June 9, 2000:

                 Common Stock, $.01 par value 15,112,032 shares
<PAGE>

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS


         This Report, including certain statements in the "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" sections, contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. When used in
this Report, the words "believe", "anticipate", "intend", "plan", "seek", "will
be", "expects", "estimates", "projects" and similar expressions identify such
forward-looking statements. Such statements regarding future events and/or the
future financial performance of the Company are subject to certain risks and
uncertainties which could cause actual events or the actual future results of
the Company to differ materially from any forward-looking statements. Certain of
these risks include changes in the markets in which the Company operates, price
volatility, interest rate volatility, construction risks, currency risks (in the
case of offshore projects and procurement), disturbances in the capital markets
which interfere with the Company's ability to finance its projects, changes in
applicable regulations, or change in supply or demand for energy and energy
projects, as well as possible adverse consequences resulting from the Chapter 11
filing of NAEC, claims by creditors of NAEC against the Company and the sale or
refinancing of certain of the Company's assets. See Item 1.A. In light of the
significant risks and uncertainties inherent in the forward-looking statements
included herein, the inclusion of such statements should not be regarded as a
representation by the Company or any other person that the objective and plans
of the Company will be achieved.







                                       2

<PAGE>

                                     PART I

ITEM 1                              BUSINESS
------                              --------



A.       General

         York Research Corporation (together with its subsidiaries, "York", the
"Company" or "we") is a developer, owner and marketer of environmentally
friendly ("Greenenergy") projects and products. Through our subsidiaries,
partnerships, joint ventures and affiliates, we are in the business of
developing, constructing and operating energy production facilities, including
those that utilize natural gas as fuel to produce thermal and electric power
("cogeneration"), and renewable energy projects that convert wind energy into
transmittable electric power (collectively, "Greenpower").

         Within our Greenpower business, we have five currently operating
facilities: in New York City, a 38 Megawatt ("MW") Warbasse cogeneration
facility (the "Warbasse facility") and a 286 MW Brooklyn Navy Yard cogeneration
facility (the "BNY facility"), in Big Spring, Texas a 34 MW wind energy facility
(the "Big Spring facility") and a 6.6 MW wind energy project (the "West Texas
project") and a 225 MW natural gas fueled power project in the Republic of
Trinidad and Tobago (the "Trinidad project"). Other power projects, both
domestic and international, are in earlier stages of development.

         York's Greenpower project development strategy is to increase
development activities selectively around the world, giving priority to
negotiated rather than publicly bid opportunities. We believe that the market
for wind energy projects will grow as wind power becomes increasingly
competitive as a source of energy, as a function of its price and environmental
benefits.

         On August 4, 1998, a $150,000,000, 12% portfolio bond financing due
October 30, 2007 was completed. This financing provided funding for construction
and completion of the Big Spring facility and the Trinidad project, and other
bond related costs, and future development activities. This financing was
underwritten by CS First Boston and is non-recourse to York but is secured by
certain assets and cash flow related to the BNY and Warbasse facilities, as well
as all of the cash flow and assets of the Big Spring facility and Trinidad
project. Construction of these projects has been completed and they are in
commercial operation.

      On March 2, 2000 North American Energy Conservation, Inc. ("NAEC"), an 85%
owned subsidiary of the Company, filed a voluntary petition under Chapter 11 of
the United States Bankruptcy Code with The United States Bankruptcy Court for
the Southern District of New York. Reference is made to the Company's Current
Report on Form 8-K dated March 2, 2000 for a description of the background and
circumstances surrounding the NAEC filing. As of February 28, 2000, the Company
accounted for the NAEC wholesale and retail natural gas marketing business as a
discontinued operation, as well as the electric marketing business, which was
discontinued previously. On April 20, 2000 NAEC sold its retail natural gas
marketing business to Amerada Hess Corporation (See Note 17).

         As of March 2, 2000 NAEC estimated that the total third party
obligations that would be the subject of the Chapter 11 proceedings approximated
$66 million. Of this amount approximately $25.6 million represents liquidated
damages alleged to be owed to certain gas suppliers. York has guaranteed
approximately $37 million of such $66 million total pre-petition debt of NAEC.
York and NAEC are conducting ongoing discussions with both the guaranteed and
non-guaranteed creditor groups in an effort to seek to arrive at a consensual
method of liquidating the liabilities.

                                       3
<PAGE>

         York has retained Credit Suisse First Boston ("CSFB") to help explore
strategic financing alternatives for selected York domestic and international
power projects. If these efforts are successful, York expects to utilize a
portion of the net proceeds (after redeeming the existing $150,000,000 senior
secured portfolio bonds, see Note 11) to fund all or part of its NAEC related
liabilities and the balance to fund continuing project development and for
general corporate purposes.

          There can be no assurance that the discussions referred to above being
conducted with the creditor groups will culminate in an agreement to resolve
NAEC's liabilities or York's obligations with respect to such liabilities. There
also can be no assurance that CSFB's efforts on behalf of the Company will be
successful. See Item 3 below as to litigation involving the NAEC creditors, and
Item 7.

         All note references are to the Notes to the Consolidated Financial
Statements.

B.       Greenpower

         See Item 1.A for information as to the possible sale, refinancing or
restructuring of certain York power projects.

         1.       Big Spring Renewable Energy Facility

         On October 21, 1997, York acquired 100% of the partnership interest in
New World Power Texas Renewable Energy Limited Partnership, whose significant
asset was a power purchase agreement ("PPA") with Texas Utilities Electric
Company ("TU Electric").

         York began commercial operation of this wind power project in May 1999
in accordance with the PPA. The facility has a capacity of 34 MW and includes 46
turbines, including four 1,650 Kilowatt ("kW") wind turbines ("V-66 turbines").

         2.       Trinidad Project

         On February 12, 1998, InnCOGEN Limited ("InnCOGEN"), a wholly owned
indirect Trinidadian subsidiary of York, signed a 30 year PPA with Trinidad and
Tobago Electricity Commission ("T&TEC"), the government owned transmission and
distribution company, under which T&TEC will purchase the bulk of the project
output. The Company constructed a 225 MW natural gas fueled combustion turbine
project which achieved commercial operation in September 1999 in accordance with
the PPA. Fixed capacity payments, primarily tied to U.S. inflation rates,
constitute the majority of project revenues. T&TEC has the obligation to supply
and pay for fuel for the project, thereby eliminating InnCOGEN's fuel risk on
the project. T&TEC's obligations under the PPA are supported by a guarantee of
the Trinidad government. The Trinidad project may also supply energy to several
proposed new industrial developments. The Trinidad facility utilizes three
General Electric turbines.

         3.       West Texas Renewable Energy Project

         On February 26, 1999 a second PPA was signed with TU Electric for 6.6
MW of capacity from a wind energy facility to be located on property adjacent to
the Big Spring facility.

         The Company has developed and is operating this second facility, which
is owned by a partnership of York and Primesouth, Inc. The new contract requires
TU Electric to buy all of the power generated by the four V-66 turbines, the
largest in North America, for 15 years plus options for two additional five-year
periods, in a similar manner to the Big Spring facility. Power from the new
program will be dedicated for use in Waco, Texas, as part of a renewable energy
program called "TU Renew" being offered to customers of TU Electric/Lone Star
Gas.

                                       4
<PAGE>

         4.       The Warbasse Cogeneration Facility

          The 38MW combined cycle Warbasse facility, which is owned by
Warbasse-Cogeneration Technologies Partnership L.P. ("WCTP"), supplies all of
the thermal and electric needs of Amalgamated Warbasse Houses, Inc. ("AWH") and
the full capacity requirements of WCTP's 21MW electric power contract with
Consolidated Edison Company of New York, Inc. ("Con Edison"), as dispatched.
York constructed the Warbasse facility and continues to operate it under a
long-term operations and maintenance agreement. See Note 5 for information
regarding transactions between the Company and WCTP.

         5.       Brooklyn Navy Yard Cogeneration Facility

         Brooklyn Navy Yard Cogeneration Partners, L.P. ("BNYLP"), is owned
equally by a subsidiary of Edison Mission Energy ("Mission"), which is an
indirect wholly owned subsidiary of Edison International, and B-41 Associates
L.P. ("B-41LP") an entity in which York holds an indirect 74.7% equity interest
(see Item 1.C). BNYLP was formed to develop, construct, finance, own and operate
the 286 MW natural gas fired combined cycle BNY Facility.

         The facility has been operational since 1996 and supplies Con Ed with
both electricity and steam under a 40-year contract. Steam is delivered to Con
Ed's New York City district steam system, the world's largest, through a tunnel
under the East River. The BNY facility currently provides more than 15% of Con
Ed's total steam in New York City. Electric energy delivered represents about 3%
of peak power demand in the service territory. The facility also supplies energy
to the host industrial park and to an adjacent waste water facility.

         6.       Other Greenpower and Renewable Energy Projects Under
                  Development

         We have been funding development work on a variety of large and small
potential projects in the United States and internationally. There can be no
assurances that any of these projects will be completed or successful.

         7.       Discontinued Operations

         As of February 28, 2000, York accounted for the NAEC wholesale and
retail natural gas marketing business as a discontinued operation, in addition
to the previously discontinued electric marketing business. See Items 1.A and 3
for information about NAEC's Chapter 11 filing and claims against York relating
to NAEC.

C.       Subsidiaries, Partnerships and Joint Ventures

         The Company conducts a substantial portion of its business through
subsidiaries, partnerships and joint ventures, in some of which affiliates of
York have an interest.

         York owns 100% of the outstanding shares of B-41 Management Corp.
("B-41MC"), Cogeneration Technologies, Inc. ("Cogen"), and York Internet Power
Services, Inc.,

         York and its subsidiaries own 74.7% of B-41LP, the 50% partner in
BNYLP, as a result of the following:

         B-41MC holds a 5% general partnership interest in B-41LP.

         Cogen holds a 22% limited partnership in B-41LP resulting from
         assignment of a 40 MW PPA to B-41LP.

         York holds a 90% limited partnership interest in York Cogen Partners
         L.P. ("YCP"), which in turn holds a 53% limited partnership interest in
         B-41LP resulting from assignment of a 90 MW PPA to B-41LP.

                                       5
<PAGE>

         RV Associates L.P. ("RVA"), an entity indirectly controlled by York's
         Chairman, holds a 5% general partnership interest and a 15% limited
         partnership interest in B-41LP, resulting from assignment of a 40 MW
         PPA to B-41LP, assumption of certain partnership liabilities and
         acceptance of a reduced share of development fees and reimbursements.

         A portion of B-41LP's partnership interest in BNYLP has been pledged as
         collateral to unaffiliated third parties to secure certain obligations
         of B-41LP.

         York, through wholly owned subsidiaries, some of which are offshore,
owns 100% of the Big Spring facility and the Trinidad project.

         WCTP is a limited partnership whose 25% general partner is RRR'S
Ventures Ltd. ("RRR'S"). York's Chairman is president and a shareholder in
RRR'S. Entities unaffiliated with York or RRR'S own an aggregate of 75% limited
partnership interest in WCTP. RRR'S also holds a 10% general partnership
interest in YCP.

         The West Texas Renewables Limited Partnership is a partnership whose 1%
general partner is a subsidiary of York, and whose 99% limited partner is
Primesouth, Inc.

         York continues to own 85% of NAEC, which is in Chapter 11. See Items
1.A and 3.

D.       Backlog

         We do not currently calculate backlog because the revenue streams are
dependent upon a number of variable factors such as inflation, fuel prices and
electric utility rates and utilizations.

E.       Patents and Trademarks

         We have no patents or trademarks that can be considered material to our
businesses.

F.       Research and Development

         Since research and development costs are not significant, we do not
account separately for these costs.

G.       Raw Materials and Suppliers

         We are not dependent on any single source of supplies or services for
our activities. Certain of the facilities enter into long-term contracts with
suppliers; however alternative sources are typically available.

H.       Marketing

         We market our projects and products through a dedicated sales staff,
supplemented by our technical support personnel and management personnel, and by
consultants internationally.

I.       Employees

         As of May 1, 2000, we employed 35 people on a full-time basis. Most of
our executives are technically trained and actively engaged in the project
development and sales areas.

J.       Competition

         There are many companies with access to greater financial resources
that are active in various aspects of our energy business. These companies will
continue to compete in the energy marketplace. We cannot assess the effect of
competition in the future.

                                       6
<PAGE>

K.       Customers

         During fiscal 2000, substantially all of the revenues were derived from
operating power projects. Each of the power projects is dependent on one
customer, typically a utility, for substantially all of its revenues.

L.       Environmental Matters

         We believe that the various technologies we employ, which provide for
increased efficiency, compared to conventional power generation facilities, are
not environmentally sensitive. The construction of power generation facilities
requires typical environmental impact statements and permitting procedures which
may result in delays. We believe that we are in compliance with federal, state
and local laws involving the protection of the environment. We do not believe
that continued compliance will require any material capital expenditures. Our
facilities are designed to comply with all applicable environmental laws.

M.       Regulation

         A subsidiary of the Company has been retained through an operations and
maintenance agreement to operate the Warbasse cogeneration facility in New York,
a qualifying cogeneration facility ("QF") pursuant to the Public Utility
Regulatory Policies Act of 1978 ("PURPA"). The BNY facility in New York has also
obtained QF status.

         Cogeneration projects that meet the QF criteria stated in the federal
rules generally are exempt from most of the federal, state and local regulations
that apply to generating facilities which are not QFs. However, the New York
State Public Service Commission ("NYPSC") has determined that it has the
authority to regulate sales of electricity by QFs to retail customers, though
the regulatory regime is less burdensome than that applied to traditional
utilities. Under New York statutes, QFs, like the Warbasse cogeneration
facility, having a maximum generating capacity of less than 80 MW, may
distribute electricity to users located at or near a project site and remain
exempt from NYPSC regulation.

         One of the criteria for QF status is that a total of no more than 50
percent of the equity interests may be owned by one or more companies that are
electric utility holding companies under the Public Utility Holding Company Act
of 1935 ("PUHCA"). Under PUHCA, an entity which owns 10 percent or more of the
voting securities of, or otherwise controls an electric utility company, is an
electric utility holding company. An electric utility holding company is defined
in PUHCA to mean a company that owns or operates physical facilities for the
generation, transmission or distribution of electricity for sale. QFs are
expressly exempt from this definition, and the Company therefore is not a public
utility holding company by virtue of its interests in QFs.

         The BNY facility intends to operate as an exempt wholesale generator
("EWG"). An EWG must be engaged exclusively in the business of owning or
operating an eligible facility and selling electricity at wholesale. An eligible
facility is a generating facility that is used solely to produce electricity for
sale at wholesale. An EWG is exempt under PUHCA and the Company would not become
a holding company under PUHCA by virtue of it or one of its subsidiaries or
affiliates holding 10% or more of the voting securities or partnership interests
in the BNY facility.

         When operated solely as an EWG, the BNY facility would be subject to
the New York Public Service Law and the jurisdiction of the NYPSC with respect
to matters other than the sale of electricity at wholesale. Assuming that the
NYPSC applies the policies that it has applied to other EWGs in previous cases,
the BNY facility will be required to comply with minimal regulatory requirements
regarding financial and organizational matters. The NYPSC has no jurisdiction
over the rates, terms and conditions of the sale of electricity generated by the
BNY facility and sold to Con Edison and Brooklyn Navy Yard Development Corp. for
resale. Further, to the extent operated solely as an EWG, the BNY facility
operates and maintains a steam plant and would be subject to regulation by the
NYPSC as a steam corporation. The NYPSC has issued a certificate of public
convenience and necessity to the BNY facility as a steam corporation, and has
required that the BNY facility comply with only minimal regulatory requirements
regarding financial and organizational matters.

                                       7
<PAGE>

         The Big Spring facility has been self-certified as a QF. The Federal
Energy Regulatory Commission granted EWG status to the Trinidad project and the
West Texas Renewable Energy project.

ITEM 2                             PROPERTIES
------                             ----------

         We lease our facilities. We consider our facilities to be suitable and
adequate for the purposes for which they are used.

                                             Square
                                             Footage               Use
                                             -------               ---

Entity/Location
York Research Corporation
280 Park Avenue                                (1)                Office
New York, New York

Subsidiaries
Cogeneration Technologies, Inc.                (1)                Office
280 Park Avenue
New York, New York



 (1)  Total square footage shared by York and Cogen at this location is 16,700.

         Each of the power facilities and projects located in Big Spring, Texas
and Trinidad, leases the land on which it is located from a third party.


ITEM 3                        LEGAL PROCEEDINGS
------                        -----------------

         On March 2, 2000, NAEC filed a voluntary petition for Chapter 11
Bankruptcy in the United States Bankruptcy Court for the Southern District of
New York. That action is still pending. Reference is made to the Company's
Current Report on Form 8-K dated March 2, 2000 for a description of the
background and circumstances surrounding the NAEC filing. As a result of the
bankruptcy filing, all actions against NAEC are stayed.

         Certain liabilities of NAEC have been guaranteed by the Company and in
consequence, NAEC creditors holding Company guarantees have formed an ad hoc
committee, which in turn has retained counsel and a financial advisor. The
Company is currently negotiating with the ad hoc committee with respect to a
possible settlement of the guaranteed obligations to be made out of the proceeds
of the sale or refinancing of certain of the company's assets, See Item 1.A
above. While most of the creditors holding guarantees are informally standing
still pending the outcome of settlement discussions, three of such creditors
have instituted litigation. Pursuant to stipulations between the Company and
each of the plaintiffs, the Company has not yet been required to file any answer
or response, the times for which have been extended by mutual agreement.

                                       8
<PAGE>

         Three creditors of NAEC have instituted litigation against the Company,
as follows:

         1. CNG Field Services Company and CNG Transmission Corporation,
Plaintiffs against York Research Corp., Defendant, pending in the Supreme Court
of the State of New York, County of New York, claiming damages of $3,416,686.99,
plus interest.

         2. PG&E Energy Trading - Gas Corporation vs. York Research Corporation,
in the District Court of Harris Texas, 133rd Judicial District. The Complaint
does not allege any specific amount of damages, but claims actual damages,
attorneys' fees, interest and court costs.

         3. El Paso Merchant Energy - Gas L.P., Plaintiff vs. York Research
Corporation, Defendant, in the District Court of Harris County, Texas, 157th
Judicial District, claiming damages of $4,790,934.29 plus interest, attorneys'
fees and court costs.




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

         None








                                       9

<PAGE>

                                     PART II

                       MARKET FOR THE REGISTRANTS COMMON STOCK
ITEM 5                   AND RELATED SECURITY HOLDER MATTERS
------                  -------------------------------------



         Our common stock is traded on the NASDAQ National Market System under
the symbol "YORK". The following table shows the range of high and low closing
sales prices for the common stock.

                                                      High               Low
                                                      ----               ---

Fiscal Year 2000
----------------
First Quarter                                       7-5/16              4-1/2
Second Quarter                                      6-9/16              4-1/2
Third Quarter                                       4-31/32             3-5/8
Fourth Quarter                                       4-7/8             3-5/32

Fiscal Year 1999
----------------
First Quarter                                          8                6-7/8
Second Quarter                                         7               4-3/16
Third Quarter                                       5-1/16              3-1/4
Fourth Quarter                                      5-5/16             3-3/16



         On May 12, 2000, we had 359 holders of record of our common stock. We
have not declared any common stock or cash dividends during the last five years
and have no present intention to declare cash dividends. Pursuant to a covenant
under the portfolio bond financing, York agreed to limit annual cash dividends
to $.01 per share.







                                       10
<PAGE>



ITEM 6                      SELECTED FINANCIAL DATA
------                      -----------------------
                (in thousands of dollars, except per share data)

<TABLE>
<CAPTION>
                                                                               For the Year Ended
                                                                               ------------------
                                                    2/28/00        2/28/99       2/28/98          2/28/97       2/28/96
                                                    -------        -------       -------          -------       -------
<S>                                              <C>             <C>            <C>               <C>         <C>
Total Revenues                                   $    22,533     $    6,238     $  13,787         $19,756     $   14,392
                                                 ===========     ==========     =========         =======     ==========

Income (loss)from continuing operations          $     3,585    ($    1,217)    $   4,134         $ 6,861     $    4,018
                                                 ===========     ==========     =========         =======     ==========

Net income (loss)                               ($    31,142)    ($   5,990)    $  12,044         $ 7,518     $    4,018
                                                 ===========     ==========     =========         =======     ==========

Earnings (loss) per share - Basic:
    From continuing operations                   $     0. 24     ($    0.09)    $    0.29         $  0.54     $     0.34
                                                 ===========     ==========     =========         =======     ==========

    Total                                       ($      2.12)    ($    0.42)    $    0.86         $  0.59     $     0.34
                                                 ===========     ==========     =========         =======     ==========

Earnings (loss) per share - Diluted:
    From continuing operations                   $      0.23     ($    0.09)    $    0.27         $  0.46     $     0.32
                                                 ===========     ==========     =========         =======     ==========

    Total                                       ($      2.03)    ($    0.42)    $    0.77         $  0.49     $     0.32
                                                 ===========     ==========     =========         =======     ==========


Total assets                                     $   269,886     $  266,101     $ 134,139         $92,669     $   67,842
                                                 ===========     ==========     =========         =======     ==========

Limited recourse long-term
   liabilities                                   $   150,000     $  150,000     $       0         $29,283     $   28,959
                                                 ===========     ==========     =========         =======     ==========

Other long-term liabilities                      $       655     $    1,300     $     744         $   674     $      685
                                                 ===========     ==========     =========         =======     ==========

Deferred revenue and other
   credits                                       $     2,941     $    3,114     $   3,287         $ 3,460     $    3,460
                                                 ===========     ==========     =========         =======     ==========

Stockholders' equity                             $    36,003     $   64,877     $  63,747         $46,167     $   32,308
                                                 ===========     ==========     =========         =======     ==========

Cash dividends declared
   per common share                              $         0     $        0     $       0         $     0     $        0
                                                 ===========     ==========     =========         =======     ==========

</TABLE>

Note: All years presented reflect the natural gas and electric marketing
      businesses as discontinued operations.


                                       11
<PAGE>

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

Introduction

         The Company's business is Greenpower, which includes developing,
constructing and operating Greenenergy production facilities, including those
that utilize natural gas as fuel to produce thermal and electric power
("cogeneration") or renewable energy projects primarily converting wind energy
into transmittable electric power.

         Within our Greenpower business, we have five currently operating
facilities: in New York City, a 38MW Warbasse cogeneration facility (the
"Warbasse facility") and a 286MW Brooklyn Navy Yard cogeneration facility (the
"BNY facility"), in Big Spring, Texas, a 34MW wind energy facility (the "Big
Spring facility") and a 6.6MW wind energy facility (the "West Texas project")
and a 225 MW natural gas fueled power project in the Republic of Trinidad and
Tobago (the "Trinidad project")

         On March 2, 2000 North American Energy Conservation, Inc. ("NAEC"), an
85% owned subsidiary of the Company, filed a voluntary petition under Chapter 11
of the United States Bankruptcy Code with the United States Bankruptcy Court for
the Southern District of New York. As of February 28, 2000, the Company
accounted for NAEC's wholesale and retail natural gas marketing business as a
discontinued operation, as well as the electric marketing business, which was
discontinued previously. On April 20, 2000 NAEC sold its retail natural gas
marketing business to Amerada Hess Corporation (see Note 17A).

         See Note 3 for disclosure of the impact of significant new accounting
pronouncements.

Liquidity and Capital Resources

Overview

         The Company finances initial development of its projects' cash needs
from its own funds. When a project is determined to be feasible, the Company
will generally seek to finance construction through some form of non-recourse
project financing. Once a project is operational, any additional capital
requirements are expected to be met by the operations of the facility. In
addition, the Company may finance future projects through the sale of partial
interests or other financing techniques. For example, construction of the West
Texas project was financed by a capital contribution of the limited partner in
this project.

         General corporate, pre-financing project development and negative
working capital needs have historically been met by the cash flow derived from
the power projects. However, unless the Company is successful in the
restructuring described below, there can be no assurance that it will have
sufficient working capital to meet its obligations.

         As of March 2, 2000 NAEC estimated that the total third party
obligations that would be the subject of the Chapter 11 proceedings approximated
$66 million. Of this amount approximately $25.6 million represents liquidated
damages alleged to be owed to certain gas suppliers. York has guaranteed
approximately $37 million of such $66 million total pre-petition debt of NAEC.
York and NAEC are conducting ongoing discussions with both the guaranteed and
non-guaranteed creditor groups in an effort to seek to arrive at a consensual
method of liquidating the liabilities. The Company is seeking to settle these
obligations through a combination of cash and equity securities.

                                       12
<PAGE>
         Reference is made to the Company`s Current Report on Form 8-K dated
March 2, 2000 for a complete description of the background and circumstances
surrounding the NAEC filing. As a result of the Chapter 11 filing, all actions
against NAEC are stayed.

         York has retained Credit Suisse First Boston ("CSFB") to help explore
strategic financing alternatives for certain York domestic and international
power projects. If these efforts are successful, York expects to utilize a
portion of the net proceeds (after redeeming the existing $150,000,000 senior
secured portfolio bonds, see Note 11) to fund all or part of its NAEC related
liabilities, and the balance to fund continuing project development and for
general corporate purposes.

         There can be no assurance that the discussions referred to above being
conducted with the creditor groups will culminate in an agreement to resolve
NAEC'S liabilities or York's obligations with respect thereto. There also can be
no assurance that CSFB's efforts on behalf of the Company will be successful.

Portfolio Bond Financing

         On August 4, 1998, a $150,000,000, 12% portfolio bond financing due
October 30, 2007 was completed. Through the issuance of project notes to a
funding company, this financing provided approximately $102 million toward
construction and completion of the Big Spring and Trinidad projects, funded a
debt service reserve of approximately $15 million, interest during construction
and other costs of approximately $12.25 million, as well as provided
approximately $20.75 million for general corporate purposes and future
development activities. This financing was underwritten by CSFB and is
non-recourse to York but is secured by certain assets and cash flows related to
the BNY and Warbasse facilities, as well as all of the cash flows and assets of
the Big Spring and Trinidad projects.

General

         During fiscal 2000, cash and cash equivalents decreased approximately
$10.8 million. Cash provided by operating activities of continuing operations
was approximately $4.5 million. Approximately $1.9 million was provided by
discontinued operations primarily due to an increase in accounts payable which
was partially offset by a decrease in accounts receivable.

         During fiscal 2000, investing activities used approximately $17.6
million as a result of revenues from operating projects being deposited into the
escrow accounts.

         During fiscal 2000, financing activities generated approximately
$400,000 primarily due to amounts received from the ESOP.



                                       13
<PAGE>


Year 2000 Compliance

         In analyzing its Year 2000 problem ("Y2K") exposure, York considered
the operations of both it and its subsidiaries, as well the operations of the
parties with whom they deal. Based on its experience and review to date, York
has not experienced any problems and does not believe that the issue of computer
programs and imbedded computer chips being unable to distinguish between the
year 1900 and the year 2000 will be material to the Company.

         York has evaluated the nature of its contracts, and the contracts of
its subsidiaries. The contracts for electricity provide for the counterparty to
make capacity payments representing the bulk of the payments under the contract,
whether or not electricity is delivered. As a result, York does not believe that
a contingency plan is necessary, and has not and does not currently intend to
adopt a formal contingency plan.

         York and its subsidiaries will continue to monitor their operations,
and the operations of their suppliers and customers, to ascertain whether any
unexpected Y2K problems arise. York has not incurred material Y2K costs to date;
and at this point there do not appear to be any material Y2K costs to be
incurred on behalf of York or any of its subsidiaries.


Results of Operations

Fiscal 2000 Compared to Fiscal 1999

         Revenues include the sale of electric energy to utility customers in
the case of the Big Spring and Trinidad projects. Revenues also include power
project services such as engineering services, fuel procurement and other
services. Cost of revenues include fuel, payroll, depreciation and other
operations and maintenance costs. Revenue increased approximately $16,295,000,
and cost of revenues increased approximately $4,811,000, when comparing fiscal
2000 to fiscal 1999, as a result of the commencement of the operations of Big
Spring in December 1998, West Texas in June 1999 and Trinidad in September 1999.

         The Big Spring project earned revenue of approximately $3,892,000 and
$342,000 respectively, and incurred costs of approximately $920,000 and $70,000
respectively, for the years ended February 28, 2000 and 1999. For fiscal 2000,
the Trinidad project earned revenues of approximately $9,296,000 and incurred
costs of approximately $2,226,000 of which approximately $1,287,000 relates to
depreciation. The Trinidad project has no fuel risk because the government
provides all the fuel utilized by the project. The amount earned on construction
of the West Texas facility (see Note 8c) also accounted for an increase in
revenues of approximately $1,388,000 for the year ended February 28, 2000.

         Selling, general and administrative expenses increased approximately
$2,533,000, when comparing fiscal 2000 to fiscal 1999. This increase is
comprised of the following: (a) expenses incurred developing power projects
increased approximately $1,047,000. There was an increase of approximately
$330,000 due to amortization of deferred financing costs due to the Portfolio
Bond Financing in August 1998. The balance of the increase primarily relates to
various expenses incurred in new project development. (b) general corporate
expenses increased approximately $1,486,000. There was in increase of
approximately $492,000 due to amortization of certain deferred charges related
to the Portfolio Bond Financing. The balance of this increase primarily relates
to professional and consulting fees and additional amounts spent on payroll and
employee benefits as a result of additional personnel.

         Interest income decreased approximately $1,238,000 when comparing
fiscal 2000 to fiscal 1999, due to decreased levels of cash available for
investment resulting principally from construction of the Trinidad and Big
Spring projects.

                                       14
<PAGE>

         Interest expense increased approximately $2,205,000 when comparing
fiscal 2000 to fiscal 1999. The increase was caused by the full year impact of
the Portfolio Bond Financing on fiscal 2000, net of interest capitalized on
construction costs incurred.

         Other income increased approximately $597,000 when comparing fiscal
2000 and fiscal 1999. These changes were primarily due to an increase in royalty
fees from BNYLP of approximately $285,000 and an increase in general partner
fees received from BNYLP of approximately $176,000.


Fiscal 1999 Compared to Fiscal 1998

         Revenues and cost of revenues include fuel and other operations and
maintenance costs. Revenues decreased approximately $7,548,000 when comparing
year to year. Of this decrease, $6,000,000 was attributable to a one time fee
received by B-41LP in fiscal 1998 from Mission. This decrease was offset in part
by an increase of approximately $342,000 due to the commencement of revenues in
December 1998 from the Big Spring facility. The balance of the decrease in
revenues, as well as the decrease in cost of revenues were mainly due to a
decrease in fuel costs as a result of increased efficiency in the Warbasse
facility and generally lower unit costs for fuel.

         Selling, general and administrative expenses increased approximately
$2,670,000 when comparing fiscal 1999 to fiscal 1998. Of this increase,
approximately $1,664,000 related to non-cash amortization of certain items as
follows: (1) an increase of approximately $382,000 as a result of the
recognition of the redemption of Class B Warrants relating to litigation, which
commenced in the fourth quarter of fiscal 1998; (2) an increase of approximately
$631,000 as a result of amortization expense of deferred financing costs due to
the Portfolio Bond Financing; and (3) an increase of approximately $651,000 due
to amortization of the deferred charge resulting from the transfer of a note to
a minority interest (see Note 16). In addition to these non-cash expenses,
expenses also increased approximately $476,000 when comparing year to year, due
to additional amounts spent on payroll and employee benefits, as a result of
additional personnel and salary increases.

         Interest income increased approximately $2,245,000 when comparing
fiscal 1999 to fiscal 1998, due to increased levels of cash available for
investment, mostly due to the Bond Financing.

         Interest expense increased approximately $6,267,000 when comparing year
to year, primarily as a result of the Bond Financing.

         Other income increased approximately $3,331,000 when comparing fiscal
1999 to fiscal 1998. The commencement in January 1998 of royalty fees received
by B-41LP from BNYLP accounted for an increase in other income of approximately
$4,683,000. This increase was offset by a decrease of approximately $1,035,000
due to a decrease in general partner fees received by B-41LP from BNYLP, and a
decrease of approximately $273,000 due to legal fees paid as the settlement of a
lawsuit.

         During fiscal 1998, the Company recorded an extraordinary gain in
connection with the settlement of its obligations to SBCC.


                                       15
<PAGE>

ITEM 7A                  DISCLOSURES ABOUT MARKET RISK
-------                  -----------------------------

Interest Rate Risk

         The Company's exposure to market risk for changes in interest rates
relates primarily to the Company's long-term debt obligations and line of
credit.

         The Company has no cash flow exposure due to rate changes for long-term
debt obligations. The Company primarily enters into debt obligations to support
general corporate purposes and capital expenditures for projects.

         The table below presents principal amounts and related weighted average
interest rates by year of maturity for the Company's cash equivalents,
marketable securities, cash in escrow, notes receivable and debt obligations.
The Company's notes receivable from WCTP bear interest at a variable rate of
Libor plus 2% and have no specific maturity.

<TABLE>
<CAPTION>
                                                                         (In Thousands)
                                                                         --------------
                                               Years Ended February 28,                                       Fair Value
                                               ------------------------                                       ----------
                                              2000                 2008                  Total         February 28, 2000
                                              ----                 ----                  -----         -----------------
<S>                                         <C>                    <C>                   <C>                     <C>
Cash equivalents
    Variable rate                           $2,200                   --                 $2,200                    $2,200
    Average interest rate                     4.7%                   --                   4.7%
Marketable securities
     Variable rate                          $1,200                   --                 $1,200                    $1,200
      Dividend rate                             0%                   --                     --
Cash in escrow
    Variable rate                          $10,423                   --                $10,423                   $10,423
    Average interest rate                     4.6%                   --                   4.6%
Notes receivable
    Variable rate                               --                   --                $57,331                       N/A
    Average interest rate                       --                   --                     8%
Long-term debt
    Fixed rate                                  --             $150,000               $150,000                  $150,000
    Average interest rate                       --                  12%                    12%
</TABLE>


ITEM 8            FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
------            -------------------------------------------

         See Index to Consolidated Financial Statements on Page 27.


ITEM 9          CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
------             ON ACCOUNTING AND FINANCIAL DISCLOSURES
                   ---------------------------------------

         None









                                       16
<PAGE>

                                    PART III


ITEM 10  DIRECTORS AND EXCUTIVE OFFICERS
-------  -------------------------------

The executive officers and directors of the Company are:

         Robert M. Beningson    Chairman of the Board, President
                                  and Chief Executive Officer

         Michael Trachtenberg   Executive Vice President, Chief
                                  Financial and Accounting Officer and Secretary

         Robert C. Paladino     Executive Vice President

         Vito L. Elefante       Senior Vice President

         Stanley Weinstein      Director

         Howard Sommer          Director

         Frederic S. Berman     Director

         Harvey Schultz         Director

         Mr. Robert M. Beningson, 71, was elected a director of the Company in
October 1981. In February 1982, Mr. Beningson was elected Chairman of the Board,
President and Chief Executive Officer of the Company. Mr. Beningson is Chief
Executive Officer and Chairman of the Board of each of the Company's
subsidiaries. Previously, Mr. Beningson was Chairman of the Board of Directors
of the Company between 1968 and 1979.

         Mr. Michael Trachtenberg, 51, a Certified Public Accountant, joined the
Company in January 1987 and was elected Vice President, Chief Financial Officer
and Secretary in March 1987. From November 1985, until joining the Company, Mr.
Trachtenberg was a financial consultant in private practice. Prior thereto, Mr.
Trachtenberg was Vice President-Finance and Chief Financial Officer of S&S
Corrugated Paper Machinery Co., Inc. From 1980 to 1984 Mr. Trachtenberg held
various positions with Carter Day Industries, Inc., an agricultural equipment
manufacturer and energy and environmental systems company, culminating in his
appointments as Vice President, Treasurer and Chief Financial Officer.

         Mr. Robert C. Paladino, 49, joined the Company in January 1987 and was
elected Executive Vice President in April 1990. From October 1980 until joining
the Company, Mr. Paladino was Senior Vice President and General Counsel of NPS
Technologies Group, Inc., an engineering and construction company serving the
electric utility industry. From 1974 to 1980, Mr. Paladino held various
positions with the Edison Electric Institute, the national organization for the
investor-owned electric utility industry, culminating in his appointment as
Director of Fossil Fuels and Assistant to the President.

         Mr. Vito L. Elefante, 50, joined the Company in April 1998 and was then
elected Vice President. Prior to joining York, Mr. Elefante was Vice President
of Edison Mission Energy New York, Inc. and Executive Director of Brooklyn Navy
Yard Cogeneration Partners, L.P. From 1972 to 1993, Mr. Elefante held various
positions at the Long Island Lighting Company, where he was responsible for
independent power generation, purchasing and fuels.

                                       17
<PAGE>


         Mr. Stanley Weinstein, 74, was elected to the Board of Directors in
May, 1995. Until 1991, Mr. Weinstein was a partner at Deloitte and Touche,
certified public accountants, and since such date, has been an independent
consultant.

         Mr. Howard Sommer, 59, was elected to the Board of Directors in
September, 1997. In September 1995, Mr. Sommer was elected the President and
Chief Executive Officer of New York Community Investment Company L.L.C., an
equity fund created and funded by eleven major banks in New York City. Beginning
in 1973, as President of the U.S. Capital Corporation and Fundex Capital
Corporation, he managed finance and investment company activities that provided
over $100 million in funding to small businesses. Prior to that time, Mr. Sommer
served in a management capacity for IBM and Xerox Corporation.

         Judge Frederic S. Berman, 73, was elected to the Board of Directors in
December, 1998. Judge Berman Served as a judge in the New York State Supreme
Court from 1976 through 1997, and since 1998 has served as a Judicial Hearing
Officer supervising jury selections in Manhattan Supreme Court, Civil Division.
He also serves as an arbitrator with the National Association of Securities
Dealers. Judge Berman served as a New York City Criminal Court judge from 1973
to 1976, and prior to that held numerous government positions, including New
York State Senator and Commissioner of New York City's Department of Rent and
Housing Maintenance.

         Mr. Harvey W Schultz, 58, was elected to the board of Directors in
November, 1998. He currently is a principal at Strategic Urban Solutions, Inc.
and Senior Vice President at Muss Development Company. From 1970 through 1990,
Mr. Schultz held various positions with the City of New York, including director
of the Economic Development Section of the New York City Department of City
Planning & Environmental Management for the New York City Planning Department,
Executive Assistant to the Brooklyn Borough President, and the Commissioner of
the New York City Department of Environmental Protection.

         None of the directors or executive officers of the company are related
to each other.












                                       18
<PAGE>

ITEM 11
-------

SUMMARY COMPENSATION TABLE
--------------------------

         The following table sets forth the compensation received by the
Company's Chief Executive Officer and the remaining most highly paid executive
officers for the three fiscal years ended February 28, 2000.

<TABLE>
<CAPTION>

----------------------------------------------------------------------------- -------------------------------------------
                                               Annual Compensation                         Long Term Compensation
                                               -------------------                         ----------------------
                                                                                      Awards                  Payouts
-------------------------------------------------------------------------------------------------------------------------
                                                                Other       Restr      LTIP    Options/    All Other
            Name               Year  Salary     Bonus ($)   Compensation    Stock    Payouts     SAR's   Compensations
                                        ($)                    ($) (1)      Awards     ($)      ($) (2)     ($) (3)
                                                                             ($)
------------------------------------------------------------------------------------------------------------------------
<S>                            <C>    <C>                <C>             <C>       <C>       <C>       <C>       <C>
ROBERT M. BENINGSON            2000   425,681            0               0         0         0         0         27,089
Chairman, President & Chief    1999   404,848            0               0         0         0         0         23,211
Executive Officer              1998   400,681    (5)44,780               0         0         0         0         18,568
------------------------------------------------------------------------------------------------------------------------
MICHAEL                        2000   240,000            0               0         0         0         0         20,000
TRACHTENBERG                   1999   231,346      125,000               0         0         0         0         18,944
Executive Vice President/      1998   210,000            0               0         0         0         0         20,044
Chief Financial and
Accounting Officer
------------------------------------------------------------------------------------------------------------------------
ROBERT C. PALADINO             2000   240,000            0               0         0         0         0         20,000
Executive Vice President       1999   226,153      100,000          30,000         0         0         0         18,944
                               1998   210,000            0               0         0         0         0         20,044
------------------------------------------------------------------------------------------------------------------------
VITO L. ELEFANTE (4)           2000   175,000            0               0         0         0         0         27,089
Vice President                 1999   178,461            0               0         0         0         0          1,244
------------------------------------------------------------------------------------------------------------------------
</TABLE>
         (1)  Forgiveness of indebtedness.
         (2)  The Company does not grant SAR's.
         (3)  Represents the value of the Company's contribution to the ESOP
              allocable to executives' account for such year.
         (4)  Mr. Elefante joined the Company during the fiscal year ended
              February 28, 1999.
         (5)  Bonus earned based on employment agreement and paid in May 1999.


         OPTIONS GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>

     -----------------------------------------------------------------------------------------------------------------
                                                           Individual Grants
     -----------------------------------------------------------------------------------------------------------------
                                               % of Total Options  Exercise Price     Expiration       Alternative
                Name           Options Granted     Granted to         ($/Share)          Date           Grant Date
                                     (#)          Employees in                                           Present
                                                   Fiscal Year                                          Value ($)
     -----------------------------------------------------------------------------------------------------------------
<S>                                          <C>                <C>
     ROBERT M. BENINGSON                     0                  0%             N/A               N/A              N/A
     -----------------------------------------------------------------------------------------------------------------
     MICHAEL TRACHTENBERG               35,000                 28%           4.625           4/14/09              N/A
     -----------------------------------------------------------------------------------------------------------------
     ROBERT C. PALADINO                 35,000                 28%           4.625           4/14/09              N/A
     -----------------------------------------------------------------------------------------------------------------
     VITO L. ELEFANTE                        0                  0%             N/A               N/A              N/A
     -----------------------------------------------------------------------------------------------------------------
</TABLE>


                                       19
<PAGE>

         AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
         OPTION VALUES


         The following table sets forth information on option exercises in
         fiscal 2000 by the named executive officers and the value of such
         officers' unexercised options at February 28, 2000.
<TABLE>
<CAPTION>

        --------------------------------------------------------------------------------------------------------------
                                                             Unexercised Options at          Value of Unexercised
                                    Shares     Value           Fiscal Year End (#)               In-the-Money
                   Name             Acquired  Realized                                             Options
                                       on     ($) (1)       Exercisable   Unexercisable    At Fiscal Year End ($) (1)
                                    Exercise
                                      (#)                                                 Exercisable    Unexercisable
        --------------------------------------------------------------------------------------------------------------
<S>                                  <C>        <C>             <C>                 <C>           <C>            <C>
        ROBERT M. BENINGSON          210,239    843,218         625,000             0             0              0
        --------------------------------------------------------------------------------------------------------------
        MICHAEL TRACHTENBERG               0          0         258,500        66,500         2,520              0
        --------------------------------------------------------------------------------------------------------------
        ROBERT C. PALADINO                 0          0         210,500        66,500         3,150              0
        --------------------------------------------------------------------------------------------------------------
        VITO L. ELEFANTE                   0          0          15,000        35,000             0              0
        --------------------------------------------------------------------------------------------------------------
</TABLE>

         (1)    Value calculated is the difference between closing price on the
                date of exercise or fiscal year end, respectively, and the
                exercise price.

         PENSION PLAN TABLE

                  The following table shows estimated annual retirement benefits
         payable to executive officers and employees.
<TABLE>
<CAPTION>

                                                           Years of Service (2)
                 -------------------------------------------------------------------------------------------
                 Remuneration (1)         10       15           20           25         30         35+
                 -------------------------------------------------------------------------------------------
<S>                             <C>       <C>        <C>          <C>          <C>        <C>         <C>
                                50,000    3,200      4,125        5,200        6,250      7,500       8,750
                               100,000    8,200     11,625       15,200       18,250     21,675      24,175
                               150,000   13,200     19,125       25,200       30,750     36,675      40,425
                               200,000   18,200     26,625       35,200       43,250     51,675      56,675
                               250,000   23,200     34,125       45,200       55,750     66,675      72,975
                 -------------------------------------------------------------------------------------------
</TABLE>
         (1)    Based on highest five year average and includes annual salary
                and cash bonus, if any. Benefits are not subject to deduction
                for social security.
         (2)    The years of credited service for individuals listed in the
                Summary Compensation Table are 43 for Robert M. Beningson, 12
                for Robert C. Paladino, and 16 for Michael Trachtenberg. Vito L.
                Elefante is not yet vested.

                  IRS regulations limit the amount of compensation credited for
         Pension Plan purposes to $160,000 per year, subject to cost of living
         increases.

         Section 16(a) Beneficial Ownership Reporting Compliance

                  Based on its review of Forms 3, 4 and 5 submitted to it by its
         Directors and Executive Officers, the Company is not aware of any
         non-compliance with the reporting provisions of Section 16 by its
         Directors or Executive Officers.


                                       20
<PAGE>



Employment Agreement

         On December 9, 1998, the Company entered into an Employment Agreement
with Mr. Beningson, its Chairman and Chief Executive Officer which covers fiscal
1997 and forward. This Agreement has a term of 6 years from the date of signing
and will be terminated upon Mr. Beningson's death, disability or an act taken by
Mr. Beningson constituting a felony under applicable law. The Agreement may be
terminated by Mr. Beningson if he is assigned duties inconsistent with his
position, if the Company fails to keep in effect certain benefit plans or upon a
change of control of the Company.

          Under this Agreement, Mr. Beningson's base compensation is $425,000
per year. In addition, Mr. Beningson is to be paid incentive compensation based
on the pre-tax earnings of the Company as follows: 1% of pre-tax earnings
between $4 million and $6 million, 1.5% of pre-tax earnings between $6 million
and $10 million, 2% of pre-tax earnings between $10 million and $15 million, and
3% of pre-tax earnings in excess of $15 million. In addition, upon Mr.
Beningson's involuntary termination by the Company or by his death or
disability, the Company will pay Mr. Beningson's base salary for one year and
50% percent of his base salary for an additional 9 years, but in no event after
Mr. Beningson has reached age 80.











                                       21
<PAGE>

                           SECURTIY OWNERSHIP OF CERTAIN
ITEM 12                   BENEFICIAL OWNERS AND MANAGEMENT
-------                   --------------------------------

Security Ownership of Certain Beneficial Owners


         The Following table sets forth the information indicated as of February
28, 2000, as to all persons known by the Board of Directors to be the beneficial
owners of more than five percent of the Corporation's Common Stock.
<TABLE>
<CAPTION>

      -----------------------------------------------------------------------------------------------------
            Name of Beneficial Owner              Amount and Nature of            Percent of Class(1)
                                                  Beneficial Ownership
      -----------------------------------------------------------------------------------------------------
<S>                                                <C>                               <C>
      Robert M. Beningson
      280 Park Avenue
      Suite 2700 West                                 3,316,520(2)                       20.0
      New York, NY  10017
      -----------------------------------------------------------------------------------------------------
      Stanley Weinstein
      280 Park Avenue
      Suite 2700 West                                   740,235(3)                        4.8
      New York, NY  10017
      -----------------------------------------------------------------------------------------------------
      York Research Corporation
      Employee Stock Ownership Plan
      280 Park Avenue                                   679,235                           3.8
      Suite 2700 West
      New York, NY  10017
      -----------------------------------------------------------------------------------------------------
                  See note references below
</TABLE>

         Security Ownership of Management

         The following table sets forth the information indicated as of February
28, 2000 with respect to common stock of the Company beneficially owned by
directors and officers of the Company and by directors and officers as a group:
<TABLE>
<CAPTION>
                 --------------------------------------------------------------------------------------
                 Name of Beneficial Owner             Amount and Nature of
                                                      Beneficial Ownership      Percent of Class (1)
                 --------------------------------------------------------------------------------------
<S>                                                       <C>                              <C>
                 Robert M. Beningson                      3,316,520(2)                     20.0
                 Stanley Weinstein                          740,235(3)                      4.8
                 Howard Sommer                               42,000(4)                      (9)
                 Harvey Schultz                              20,000(5)                      (9)
                 Frederic S. Berman                          20,000(5)                      (9)
                 Michael Trachtenberg                       361,000(6)                      2.3
                 Robert C. Paladino                         280,000(7)                      1.8
                 Vito L. Elefante                            50,000(8)                      (9)
                 Directors and officers as                4,829,755                        27.8
                 a group (6) persons
                 --------------------------------------------------------------------------------------
</TABLE>

(1)     The Percent of Class is based upon 15,270,156 issued shares of common
        stock as of February 28, 2000 plus the shares that underlie unexercised
        warrants or options held by the individuals.
(2)     Includes 760,000 shares owned directly or jointly, warrants to purchase
        700,000 shares of common stock, options to purchase 625,000 shares of
        common stock and 1,231,520 shares owned by entities of which Mr.
        Beningson is an officer and minority shareholder. Mr. Beningson
        disclaims beneficial ownership of these shares.

                                       22
<PAGE>

(3)     Includes 1,000 shares owned directly plus warrants to purchase 60,000
        shares of common stock, and 679,235 shares held by the ESOP of which Mr.
        Weinstein is the trustee.
(4)     Includes 2000 shares owned directly and a warrant to purchase 40,000
        shares of common stock.
(5)     Includes warrant to purchase 20,000 shares of common stock.
(6)     Includes 36,000 shares owned directly by Mr. Trachtenberg and options to
        purchase 325,000 shares of common stock.
(7)     Includes 3,000 shares owned directly by Mr. Paladino and options to
        purchase 277,000 shares of common stock.
(8)     Includes options to purchase 50,000 shares of common stock.
(9)     Less than 1% ownership.

COMPENSATION OF DIRECTORS

         Directors receive fees for attending Board or Committee meetings. In
fiscal 2000, 1999 and 1998, Mr. Weinstein received $24,000. In fiscal 2000 and
1999, Mr. Sommer received $24,000, and in fiscal 1998 received $10,000. In
fiscal 2000 and 1999, Mr. Schultz received $24,000 and $6,000, respectively. In
fiscal 2000 and 1999, Mr. Berman received $24,000 and $4,000, respectively.

         The Company has not entered into any employment contracts with any of
the herein named Officers or Directors, other than the previously mentioned
contract with Mr. Beningson.


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

(a) (1) and (a) (2): See Index to Consolidated Financial Statements at Page 27.

(a) (3) Exhibits:

         3(a)     Certificate of Incorporation of the Company, as amended. (1)

         3(a)     Certificate of Amendment to the Company's Certificate of
                  Incorporation as filed with the Secretary of State of the
                  State of Delaware on May 16, 1988. (1)

         3(b)     Bylaws of the Company. (1)

         4(a)     Form of Certificate evidencing Common Stock, $.01 par value
                  per share, of the Company. (2)

         4(b)     Trust Indenture, between York Power Funding (Cayman) Limited
                  and The Bank of New York, as Trustee, dated July 30, 1998.
                  (12)

         4(c)     Form of 12% Senior Bonds due October 30, 2007 (included in
                  Exhibit 4(b) hereto). (12)

         4(d)     Form of 12% Series A Senior Bonds due October 30, 2007
                  (included in Exhibit 4(b) hereto). (12)

         4(e)     Exchange and Registration Rights Agreement between York Power
                  Funding (Cayman) Limited and Credit Suisse First Boston dated
                  August 4, 1998. (12)

         10(o)    Agreement for Construction of Additional Capacity, dated May
                  7, 1990, between Warbasse-Cogeneration Technologies
                  Partnership, L.P. and York Research Corporation. (3)

         10(q)    Lease and Energy Sale Agreement, dated December 18, 1989
                  between the Brooklyn Navy Yard Development Corporation and
                  Cogeneration Technologies, Inc., a wholly owned subsidiary of
                  the Company. (4)


                                       23
<PAGE>

         10(r)    Amended and Restated Limited Partnership Agreement by and
                  between Mission Energy New York, Inc. and B-41 Associates,
                  L.P., dated November 1, 1997, with Exhibits thereto. (11)

         10(s)    Stipulation of Settlement among counsel to plaintiffs in
                  litigation entitled In Re York Research Corporation Securities
                  Litigation, United States District Court, Southern District of
                  New York, Master File No. 91 Civ. 5040 (LJF), and counsel for
                  all defendants therein, dated January 15, 1993, with Exhibits
                  thereto. (5)

         10(t)    Final Judgment of Dismissal with Prejudice, In Re York
                  Research Corporation Securities Litigation, United States
                  District Court, Southern District of New York, Master File No.
                  91 Civ. 5040 (LJF). (5)

         10(u)    Amended and Restated Agreement of Limited Partnership of B-41
                  Associates L.P., dated December 26, 1992. (5)

         10(bb)   Promissory Note, dated November 17, 1994, made by
                  Warbasse-Cogeneration Technologies Partnership L.P. payable to
                  the order of Cogeneration Technologies, Inc. (8)

         10(cc)   Security Agreement, dated as of November 17, 1994, made by
                  Warbasse-Cogeneration Technologies Partnership L.P. to
                  Cogeneration Technologies, Inc. (8)

         10(dd)   Assignment and Security Agreement, dated as of November 17,
                  1994, made by Warbasse-Cogeneration Technologies Partnership
                  L.P. to Cogeneration Technologies, Inc. (8)

         10(ee)   Intercreditor Agreement, dated as of November 17, 1994, by and
                  among Tomen Power Corporation, B-41 Associates, L.P.,
                  Cogeneration Technologies, Inc. and Warbasse-Cogeneration
                  Technologies Partnership L.P. (8)

         10(ff)   Restructuring Fee Agreement, dated as of November 17, 1994, by
                  and among Warbasse-Cogeneration Technologies Partnership L.P.,
                  B-41 Associates, L.P. and Cogeneration Technologies, Inc. (8)

         10(gg)   Subordinated Promissory Note, dated as of November 17, 1994,
                  made by Warbasse-Cogeneration Technologies Partnership L.P.
                  payable to the order of B-41 Associates, L.P. in the principal
                  amount of $3,000,000. (8)

         10(hh)   Subordinated Promissory Note, dated as of November 17, 1994,
                  made by Warbasse-Cogeneration Technologies Partnership L.P.
                  payable to the order of Cogeneration Technologies, Inc. in the
                  principal amount of $3,000,000. (8)

         10(ii)   Agreement of Limited Partnership of York Cogen Partners, L.P.
                  (11)

         10(jj)   Renegotiation and Payment Agreement dated February 28, 1997 by
                  and between Sanwa Business Credit Corporation and B-41
                  Associates, L.P. (11)

         10(kk)   York Partners Reimbursement Agreement (PMNC) dated as of
                  November 1, 1997, among B-41 Associates, L.P., Brooklyn Navy
                  Yard Cogeneration Partners, L.P. and Edison Mission Energy.
                  (11)

         10(ll)   Amended and Restated Agreement of Limited Partnership of New
                  World Power Texas Renewable Energy Limited Partnership dated
                  as of September 29, 1997. (11)

         10(mm)   Renewable Resource Energy Purchase Agreement between Texas
                  Utilities Electric Company and New World Power Texas Renewable
                  Energy Limited Partnership date September 13, 1994, and
                  Amendment No. 1 thereto dated November 25, 1996, Amendment No.
                  2 thereto dated February 19, 1997 and Amendment No. 3 thereto
                  dated August 29, 1997. (11)

                                       24
<PAGE>


         10(nn)   Wind Turbine Equipment Sales and Installation Contract dated
                  as of March 31, 1998 between York Research Corporation and
                  Vestas-American Wind Technology, Inc. (11)

         10(oo)   Covenant Agreement dated as of August 4, 1998 between York
                  Research Corporation and The Bank of New York, as Bond
                  Trustee. (10)

         10(pp)   Equity Cash Flow Participation Agreement dated as of August 4,
                  1998 among Brooklyn Navy Yard Power LLC, Warbasse Power I LLC,
                  Warbasse Power II LLC, New World Power Texas Renewable Energy
                  Limited Partnership, York T&T Holdings, Inc., and The Bank of
                  New York, as administrative agent for the benefit of certain
                  holders. (10).

         10(qq)   U.S. Project Loan Agreement among Brooklyn Navy Yard Power
                  LLC, Warbasse Power I LLC, Warbasse Power II LLC, New World
                  Power Texas Renewable Energy Limited Partnership and York
                  Power Funding (Cayman) Limited, dated as of August 4, 1998.
                  (13)

         10(rr)   Trinidad Project Loan Agreement between York Ex International
                  SRL and York Power Funding (Cayman) Limited, dated as of
                  August 4, 1998. (13)

         10(ss)   Trinidad Loan Agreement between InnCOGEN, Limited and York
                  Holdings (Barbados) SRL, dated as of August 4, 1998. (13)

         10(tt)   U.S. Deposit and Disbursement Agreement among York Power
                  Funding (Cayman) Limited, Brooklyn Navy Yard Power LLC,
                  Warbasse Power I LLC, Warbasse Power II LLC, New World Power
                  Texas Renewable Energy Limited Partnership and The Bank of New
                  York, dated as of August 4, 1998. (13)

         10(uu)   Trinidad Deposit and Disbursement Agreement among York Power
                  Funding (Cayman) Limited, York Ex International SRL, York
                  Holdings (Barbados) SRL, InnCOGEN, Limited and The Bank of New
                  York, dated as of August 4, 1998. (13)

         10(vv)   U.S. Project Note Pledge Agreement between York Power Funding
                  (Cayman) Limited and The Bank of New York, dated as of August
                  4, 1998. (13)

         10(ww)   Trinidad Project Note Pledge Agreement between York Power
                  Funding (Cayman) Limited and The Bank of New York, dated as of
                  August 4, 1998. (13)

         10(xx)   Trinidad U.S. Pledge Agreement between York Research
                  Corporation and The Bank of New York, dated as of August 4,
                  1998. (13)

         10(yy)   Big Spring Guarantee between New World Power Texas Renewable
                  Energy Limited Partnership and The Bank of New York, dated as
                  of August 4, 1998. (13)

         10(zz)   Brooklyn Navy Yard Guarantee between Brooklyn Navy Yard Power
                  LLC and The Bank of New York, dated as of August 4, 1998. (13)

         10.53    Trinidad Guarantee between York Holdings (Barbados) SRL and
                  The Bank of New York, dated as of August 4, 1998. (13)

         10.54    Warbasse I Guarantee between Warbasse Power I LLC and The Bank
                  of New York, dated as of August 4, 1998. (13)

         10.55    Warbasse II Guarantee between Warbasse Power II LLC and The
                  Bank of New York, dated as of August 4, 1998. (13)

                                       25
<PAGE>

         10.56    Collateral Agency and Intercreditor Agreement among York Power
                  Funding (Cayman) Limited, Brooklyn Navy Yard Power LLC,
                  Warbasse Power I LLC, Warbasse Power II LLC, New World Power
                  Texas Renewable Energy Limited Partnership, York Ex
                  International SRL, York Holdings (Barbados) SRL, InnCOGEN,
                  Limited and The Bank of New York, dated as of August 4, 1998.
                  (13)

         10.57    Assignment and Security Agreement between York Power Funding
                  (Cayman) Limited and The Bank of New York, dated as of August
                  4, 1998. (13)

         10.58    Agency Agreement among York Power Funding (Cayman) Limited,
                  Brooklyn Navy Yard Power LLC, Warbasse Power I LLC, Warbasse
                  Power II LLC and New World Power Texas Renewable Energy
                  Limited Partnership, dated as of August 4, 1998. (13)

         10.59    Employment Agreement dated December 9, 1998, as amended
                  between the Company and Robert M. Beningson (9).

         21       Subsidiaries of the Company

         23       Consent of Independent Certified Public Accountants.

(b)      Reports on Form 8-K

         All other exhibits and financial statement schedules have been omitted
         because they have been previously filed or incorporated by reference
         are inapplicable, or the required information is included elsewhere in
         the Consolidated Financial Statements or the notes thereto.

         The following reports on Form 8-K were filed during the quarter ended
February 28, 2000:
                  None

(1)      Previously filed as an Exhibit, under the corresponding exhibit number,
         to the Company's Form 10-K for the fiscal year ended September 30,
         1982, Commission file number 0-72, and incorporated herein by
         reference.

(2)      Previously filed as an Exhibit, under the corresponding exhibit number
         with Registration Statement No. 33-13899 on April 30, 1987 and
         incorporated herein by reference.

(3)      Previously filed as an Exhibit with the Company's Form 10-Q for the
         quarter ended June 30, 1990 and incorporated herein by reference.

(4)      Previously filed as an Exhibit with the Company's Form 10-K for the
         year ended September 30, 1990 and incorporated herein by reference.

(5)      Previously filed as an Exhibit with the Company's Form 10-K for the
         year ended February 28, 1993 and incorporated herein by reference.

(6)      Previously filed as an Exhibit with the Company's Form 10-K for the
         year ended February 28, 1994 and incorporated herein by reference.

(7)      Previously filed as an Exhibit with the Company's Form 10-Q for the
         quarter ended August 31, 1994 and incorporated herein by reference.

(8)      Previously filed as an Exhibit with the Company's Form 10-Q for the
         quarter ended November 30, 1994 and incorporated herein by reference.

(9)      Compensatory arrangement.

(10)     Previously filed as an Exhibit with the Company's Form 10-Q for the
         quarter ended August 31, 1998, and incorporated herein by reference.

(11)     Previously filed as on Exhibit with the Company's Form 10-K for the
         year ended February 28, 1998 and incorporated herein by reference.

(12)     Incorporated by reference from Registration Statement 333-68839 filed
         by York Power Funding (Cayman) Limited.

(13)     Previously filed as on Exhibit with the Company's Form 10-K for the
         year ended February 28, 1999 and incorporated herein by reference.



                                       26
<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                                 Page(s)
<S>                                                                                <C>
    York Research Corporation and Subsidiaries:

         Report of Independent Certified Public Accountants                        28

         Consolidated Financial Statements:
          Consolidated Balance Sheets - February 28, 2000 and 1999                 29

          Consolidated Statements of Operations for the Years Ended                30
           February 28, 2000, February 28, 1999 and February 28,
           1998

          Consolidated Statement of Stockholders' Equity for the                   31
           Years Ended February 28, 2000, February 28, 1999 and
           February 28, 1998

          Consolidated Statements of Cash Flows for the                            32
           Years Ended February 28, 2000, February 28, 1999
           and February 28, 1998

          Notes to Consolidated Financial Statements                          33  through 57

</TABLE>








                                       27
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


The Board of Directors and Stockholders
York Research Corporation:

      We have audited the accompanying consolidated balance sheets of York
Research Corporation and Subsidiaries at February 28, 2000 and 1999, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended February 28, 2000. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

      In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
York Research Corporation and Subsidiaries at February 28, 2000 and 1999, and
the consolidated results of their operations and their consolidated cash flows
for each of the three years in the period ended February 28, 2000, in conformity
with accounting principles generally accepted in the United States.

Grant Thornton LLP




New York, New York
June 6, 2000









                                       28
<PAGE>
                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                   February 28,           February 28,
                                                                                      2000                   1999
                                                                                 -------------          -------------
<S>                                                                              <C>                    <C>
ASSETS
Current Assets:
      Cash and cash equivalents                                                  $   7,490,106          $  18,280,025
      Marketable securities                                                          1,199,600                159,279
      Trade accounts receivable                                                      4,301,512                322,389
      Income tax refund receivable                                                          --              1,601,799
      Other receivables - related parties                                            4,625,043              2,432,913
      Cash in escrow                                                                10,422,747             13,315,468
      Deferred tax asset                                                             8,214,200              6,836,000
      Other current assets                                                           1,118,751                214,324
      Net assets of discontinued operations                                                 --                977,756
                                                                                 -------------          -------------
           Total current assets                                                     37,371,959             44,139,953

Property, plant and equipment, net                                                 134,811,684                340,935
Long-term receivables - WCTP                                                        14,333,941             11,001,027
Construction in progress                                                               280,956             98,149,993
Cash in escrow                                                                              --             33,864,069
Long-term notes receivable - WCTP                                                   57,330,535             57,330,535
Intangible assets, net                                                              17,884,133             19,821,691
Deferred tax asset                                                                   6,002,000                     --
Other assets (including advances to employees of $769,136
         and $654,825, respectively)                                                 1,871,023              1,452,384
                                                                                 -------------          -------------
           Total assets                                                          $ 269,886,231          $ 266,100,587
                                                                                 =============          =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Project payables                                                           $  10,758,415          $  21,952,531
      Accrued expenses and other payables                                           12,037,342              9,126,964
      Current portion of deferred revenue                                                   --              1,981,002
      Income tax payable                                                               933,883                     --
      Net liabilities of discontinued operations                                    53,756,278                     --
                                                                                 -------------          -------------
           Total current liabilities                                                77,485,918             33,060,497

Project notes payable                                                              150,000,000            150,000,000
Other long-term liabilities                                                            654,635              1,299,928
Deferred revenue and other credits                                                   2,941,000              3,114,000
Deferred tax liability                                                                      --             11,503,100
                                                                                 -------------          -------------
           Total liabilities                                                       231,081,553            198,977,525

Minority interest in partnership                                                     2,801,860              2,246,362

Commitments and contingencies

Stockholders' equity
      Common stock, Class A, $.01 par value;  authorized 10,000,000
         shares;  none issued                                                               --                     --
      Common stock, $.01 par value;  authorized 50,000,000 shares;
         issued 15,270,156 and 15,018,526 shares, respectively                         152,702                150,185
      Additional paid-in capital                                                    68,702,128             68,445,116
      Accumulated earnings (deficit)                                               (29,993,869)             1,147,719
      Accumulated other comprehensive income (net of tax of $353,800)                  686,625                     --
                                                                                 -------------          -------------
                                                                                    39,547,586             69,743,020
      Less:
      Treasury stock, at cost (158,124 and 123,124 shares, respectively)            (1,564,713)            (1,409,401)
      Notes receivable - sale of common stock                                         (463,669)              (818,981)
      Deferred compensation - ESOP                                                  (1,516,386)            (2,637,938)
                                                                                 -------------          -------------
           Total stockholders' equity                                               36,002,818             64,876,700
                                                                                 -------------          -------------
           Total liabilities and stockholders' equity                            $ 269,886,231          $ 266,100,587
                                                                                 =============          =============
</TABLE>

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

                                       29
<PAGE>

              YORK RESEARCH CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF OPERATIONS
                   FOR THE YEARS ENDED FEBRUARY 28,
<TABLE>
<CAPTION>
                                                                          2000             1999              1998
                                                                      ------------     ------------     ------------
<S>                                                                   <C>              <C>              <C>
Revenues                                                              $ 22,533,494     $  6,238,207     $ 13,786,604

Costs of revenues                                                       10,818,658        6,007,344        7,606,762
                                                                      ------------     ------------     ------------

Gross Profit                                                            11,714,836          230,863        6,179,842
                                                                      ------------     ------------     ------------

Selling, general and administrative:
      Power project services                                             2,704,933        1,657,787          876,427
      General corporate expenses                                         8,553,089        7,066,754        5,241,516
                                                                      ------------     ------------     ------------
           Total selling, general and administrative                    11,258,022        8,724,541        6,117,943
                                                                      ------------     ------------     ------------

Other income (expense):
      Interest income - WCTP                                             4,411,197        4,343,975        4,510,531
      Interest income                                                    1,186,771        2,425,168          179,833
      Interest expense                                                  (8,482,517)      (6,277,199)         (10,678)
      Other income                                                       6,568,031        5,970,575        2,639,139
      Minority interest in partnership                                    (555,497)        (546,766)        (567,646)
                                                                      ------------     ------------     ------------
                                                                         3,127,985        5,915,753        6,751,179
                                                                      ------------     ------------     ------------

Income (loss) from continuing operations
      before income taxes                                                3,584,799       (2,577,925)       6,813,078

Provision (benefit) for income taxes:                                           --       (1,360,810)       2,678,941
                                                                      ------------     ------------     ------------

Income (loss) from continuing operations                                 3,584,799       (1,217,115)       4,134,137

Discontinued operations:
      Loss from discontinued operations                                (11,034,007)      (3,289,299)      (1,464,171)
      Estimated loss on disposal                                       (23,692,380)      (1,483,229)              --
                                                                      ------------     ------------     ------------
           Total loss from discontinued operations                     (34,726,387)      (4,772,528)      (1,464,171)
                                                                      ------------     ------------     ------------

Extraordinary gain, net of tax and allocation to minority interest              --               --        9,373,813
                                                                      ------------     ------------     ------------

Net income (loss)                                                     $(31,141,588)    $ (5,989,643)    $ 12,043,779
                                                                      ============     ============     ============


Earnings (loss) per share - Basic:
      Continuing operations                                           $       0.24     $      (0.09)    $       0.29
      Discontinued operations                                         $      (2.36)    $      (0.33)    $      (0.10)
      Extraordinary gain                                              $         --     $         --     $       0.67
                                                                      ------------     ------------     ------------
           Total                                                      $      (2.12)    $      (0.42)    $       0.86
                                                                      ============     ============     ============

      Weighted average number of common shares used
        in computing basic earnings (loss) per share                    14,705,314       14,286,106       14,022,387
                                                                      ============     ============     ============

Earnings (loss) per share - Diluted:
      Continuing operations                                           $       0.23     $      (0.09)    $       0.27
      Discontinued operations                                         $      (2.26)    $      (0.33)    $      (0.10)
      Extraordinary gain                                              $         --     $         --     $       0.60
                                                                      ------------     ------------     ------------
           Total                                                      $      (2.03)    $      (0.42)    $       0.77
                                                                      ============     ============     ============
      Weighted average number of common shares and
        common share equivalents used in computing diluted
        earnings (loss) per share                                       15,330,787       14,286,106       15,561,125
                                                                      ============     ============     ============
</TABLE>


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

                                       30
<PAGE>
                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED FEBRUARY 28, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
                                                    Common Stock
                                                 -------------------     Additional    Accumulated
                                                 Shares       Shares       Paid-in      Earnings      Treasury
                                                 Issued       Amount       Capital      (Deficit)       Stock
                                                -----------------------------------------------------------------
<S>                                             <C>           <C>         <C>          <C>             <C>
Balance, February 28, 1997                      14,256,304    $ 142,563   $62,928,614  $ (4,906,417)   $ (706,401)

Exercise of options                                117,195        1,172       340,759            --            --
Exercise of warrants                               587,939        5,879     3,491,413            --            --
Deferred compensation accrual                           --           --       351,382            --            --
Tax effect of options and warrants                      --           --       654,000            --            --
ESOP third party loans                                  --           --        25,000            --            --
Settlements of notes receivable                         --           --            --            --      (703,000)
Net income                                              --           --            --    12,043,779            --
                                                -----------------------------------------------------------------
Balance, February 28, 1998                      14,961,438      149,614    67,791,168     7,137,362    (1,409,401)

Exercise of options                                 51,250          513       221,394            --            --
Exercise and issuance of warrants                    5,838           58       157,828            --            --
Deferred compensation accrual                           --           --       226,726            --            --
Tax effect of options and warrants                      --           --        48,000            --            --
Forgiveness of notes receivable                         --           --            --            --            --
Cash receipts                                           --           --            --            --            --
Transfer of note receivable to minority interests       --           --            --            --            --
Net loss                                                --           --            --    (5,989,643)           --
                                                -----------------------------------------------------------------
Balance, February 28, 1999                      15,018,526      150,185    68,445,116     1,147,719    (1,409,401)

Comprehensive loss:
  Net loss                                              --           --            --   (31,141,588)           --
  Unrealized gains on marketable securities             --           --            --            --            --
    Total comprehensive loss                            --           --            --            --            --
Exercise of options                                251,630        2,517        40,505            --            --
Deferred compensation accrual                           --           --       216,507            --            --
Forgiveness of notes receivable                         --           --            --            --            --
Cash receipts                                           --           --            --            --            --
Settlements of notes receivable                         --           --            --            --      (155,312)
                                                -----------------------------------------------------------------
Balance, February 28, 2000                      15,270,156    $ 152,702   $68,702,128 $ (29,993,869) $ (1,564,713)
                                                =================================================================
</TABLE>

<PAGE>

                               [RESTUBBED TABLE]
<TABLE>
<CAPTION>
                                                                           Accumulated
                                                                              Other
                                                   Notes       Deferred   Comprehensive
                                                 Receivable  Compensation     Income         Total
                                                 -----------------------------------------------------
<S>                                              <C>          <C>                   <C>    <C>
Balance, February 28, 1997                       $(7,960,313) $(3,330,976)          $ --   $46,167,070

Exercise of options                                       --           --             --       341,931
Exercise of warrants                                (262,000)          --             --     3,235,292
Deferred compensation accrual                             --      241,728             --       593,110
Tax effect of options and warrants                        --           --             --       654,000
ESOP third party loans                                    --           --             --        25,000
Settlements of notes receivable                    1,389,375           --             --       686,375
Net income                                                --           --             --    12,043,779
                                                 -----------------------------------------------------
Balance, February 28, 1998                        (6,832,938)  (3,089,248)            --    63,746,557
                                                                                      --
Exercise of options                                  (57,543)          --             --       164,364
Exercise and issuance of warrants                         --           --             --       157,886
Deferred compensation accrual                             --      451,310             --       678,036
Tax effect of options and warrants                        --           --             --        48,000
Forgiveness of notes receivable                      100,000           --             --       100,000
Cash receipts                                        275,000           --             --       275,000
Transfer of note receivable to minority interests  5,696,500           --             --     5,696,500
Net loss                                                  --           --             --    (5,989,643)
                                                 -----------------------------------------------------
Balance, February 28, 1999                          (818,981)  (2,637,938)            --    64,876,700

Comprehensive loss:
  Net loss                                                --           --             --   (31,141,588)
  Unrealized gains on marketable securities               --           --        686,625       686,625
                                                                                           -----------
    Total comprehensive loss                              --           --             --   (30,454,963)
                                                                                           -----------
Exercise of options                                       --           --             --        43,022
Deferred compensation accrual                             --      491,552             --       708,059
Forgiveness of notes receivable                      200,000           --             --       200,000
Cash receipts                                             --      630,000             --       630,000
Settlements of notes receivable                      155,312           --             --            --
                                                 -----------------------------------------------------
Balance, February 28, 2000                        $ (463,669) $(1,516,386)     $ 686,625   $36,002,818
                                                 =====================================================
</TABLE>






   The accompanying note are an integral part of these financial statements.


                                       31


<PAGE>
                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        FOR THE YEARS ENDED FEBRUARY 28,
<TABLE>
<CAPTION>
                                                                                      2000             1999              1998
                                                                                -------------     -------------     -------------
<S>                                                                             <C>               <C>               <C>
OPERATING ACTIVITIES:

Net income (loss) from continuing operations                                    $   3,584,799     $  (1,217,115)    $   4,134,137
Adjustments to reconcile net income (loss) from continuing operations to
   net cash provided by operating activities:
       Depreciation and amortization                                                1,744,719           178,473           176,342
       Deferred taxes                                                              (1,142,000)       (2,586,000)         (577,000)
       Non-cash charges                                                                    --                --            36,375
       Minority interest in partnership                                               555,497           546,766           567,646
       Common shares and warrants issued for services and donation                         --           120,000                --
       Amortization of deferred charges                                             2,158,218         1,106,776                --
       Amortization of deferred credits                                              (173,000)         (173,000)       (1,717,897)
       ESOP contribution                                                              708,059           678,036           593,109
       Tax benefit of stock options and warrants                                           --            48,000           654,000
       Loss on disposal of fixed assets                                                    --            30,788                --
       Changes in operating assets and liabilities:
          Net (increase) decrease in receivables                                   (9,504,167)       (3,536,124)          148,765
          Net (increase) decrease in notes receivable, other current assets,
             and other assets                                                      (1,288,129)       (5,063,145)        2,115,102
          Net increase (decrease) in accounts payable, accrued expenses,
             deferred revenue and long-term liabilities                             5,289,968        12,071,103          (194,686)
          Increase (decrease) in accrued taxes                                      2,535,682        (1,689,977)         (677,320)
                                                                                -------------     -------------     -------------

       NET CASH PROVIDED BY OPERATING ACTIVITIES OF
           CONTINUING OPERATIONS                                                    4,469,646           514,581         5,258,573
                                                                                -------------     -------------     -------------

       NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES OF
           DISCONTINUED OPERATIONS                                                  1,912,651        (2,375,800)       (4,279,280)
                                                                                -------------     -------------     -------------

INVESTING ACTIVITIES:
       Construction in progress                                                   (53,656,372)      (79,332,880)       (4,187,134)
       Deposits into cash in escrow                                               (17,074,364)     (124,612,000)               --
       Receipts from cash in escrow                                                53,831,154        77,432,463                --
       Purchase of marketable securities                                                   --          (159,279)               --
       Purchase of machinery and equipment                                           (650,987)         (418,122)         (222,985)
                                                                                -------------     -------------     -------------
       NET CASH USED IN INVESTING ACTIVITIES                                      (17,550,569)     (127,089,818)       (4,410,119)
                                                                                -------------     -------------     -------------

FINANCING ACTIVITIES:
       Amounts received from ESOP                                                     630,000                --                --
       Gross proceeds from Bond Financing                                                  --       150,000,000                --
       Payment of financing costs                                                    (294,669)       (7,982,251)               --
       Repayment of notes receivable                                                       --           275,000                --
       Payment of due to SBCC                                                              --                --        (2,750,000)
       Proceeds from exercise of stock options and warrants                            43,022           202,249           577,223
       Net change in minority interest in partnership                                      --        (2,211,113)        1,037,754
                                                                                -------------     -------------     -------------
       NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                            378,353       140,283,885        (1,135,023)
                                                                                -------------     -------------     -------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                  (10,789,919)       11,332,848        (4,565,849)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                     18,280,025         6,947,177        11,513,026
                                                                                -------------     -------------     -------------

CASH AND CASH EQUIVALENTS AT END OF YEAR                                        $   7,490,106     $  18,280,025     $   6,947,177
                                                                                =============     =============     =============
</TABLE>

<PAGE>

Non-cash investing and financing activities:

During fiscal 2000, a non-cash transaction of $155,312 occurred as a result of
35,000 shares that were given back to the Company by a former employee to pay
down a note.

During fiscal 2000, the Company transferred approximately $135,525,000 of
construction in progress to property, plant and equipment.

During fiscal 2000 and 1999, a non-cash transaction of $200,000 and $100,000,
respectively, occurred as a result of the forgiveness of a note to a former
employee.

During fiscal 1999, a non-cash transaction of $5,696,500 occurred as a result of
the transfer of a note receivable from the Chairman of the Company to the
minority interests.

During fiscal 1999 and 1998, the Company received $57,544 and $262,000 of notes
receivable - sale of common stock, respectively, for options exercised.

During fiscal 1998, a non-cash transaction of $3,000,000 occurred as a result of
the exercise of 500,000 warrants at $6 per share, and a non-cash transfer of
$1,000,000 of notes receivable to a nonconsolidated affiliate was recorded. In
addition, the Company received a stock payment in lieu of cash as payment of an
advance to an employee of $350,000 and a note receivable of $389,376.

During fiscal 1998, an advance distribution of $2,000,000 to RVA in a prior year
was offset against minority interest payable.

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

                                       32

<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       Nature of Business

         York Research Corporation ("York" or the "Company") is a developer,
owner and marketer of energy related projects and products through its
subsidiaries, partnerships, joint ventures and affiliates. The Company currently
operates in one segment of the energy business; Greenpower project development
and services, including cogeneration and renewable wind energy.

         The principal markets for the Company's products and services currently
are the United States and the Republic of Trinidad and Tobago.

2.       Liquidity

         North American Energy Conservation, Inc. ("NAEC") estimates that the
total third party obligations that would be subject of the Chapter 11
proceedings approximates $66 million, all of which have been accrued as of
February 28, 2000 (see Note 17). Of this amount approximately $25.6 million
represents liquidated damages alleged to be owed to certain gas suppliers. York
has guaranteed approximately $37 million of such $66 million total pre-petition
debt of NAEC. York and NAEC are conducting ongoing discussions with both the
guaranteed and non-guaranteed creditor groups in an effort to seek to arrive at
a consensual method of liquidating the liabilities. Accordingly the ultimate
amount to be realized by the creditors may differ significantly from the amounts
accrued. The Company is seeking to settle these obligations through a
combination of cash and equity securities.

         York retained Credit Suisse First Boston ("CSFB") to help explore
strategic financing alternatives for certain York domestic and international
power projects. If these efforts are successful, York expects to utilize a
portion of the net proceeds (after redeeming the existing $150,000,000 senior
secured portfolio bonds, see Note 11) to fund all or part of its NAEC related
liabilities, and the balance to fund continuing project development and for
general corporate purposes.

3.       Summary of Significant Accounting Policies

         Principles of Consolidation

         The consolidated financial statements include the accounts of York
Research Corporation and its subsidiaries and all majority owned partnerships
and limited liability companies (collectively "York" or the "Company"). All
material intercompany transactions and accounts have been eliminated in
consolidation. The accompanying consolidated financial statements reflect the
Company's former natural gas marketing and electric marketing businesses as
discontinued operations (see Note 17).

         Use of Estimates

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
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.




                                       33
<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         Cash and Cash Equivalents

         The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. Cash held in foreign
institutions amounted to approximately $292,000 as of February 28, 2000.

         Marketable Securities

         Investment in marketable securities consists solely of publicly traded
equity securities in a foreign corporation and is recorded at fair value based
on quoted market prices. Unrealized gains, net of taxes, are included in
comprehensive loss.

         Revenue Recognition

         The Company recognizes service revenues and energy sales in the period
in which the work is performed or the energy is delivered. Development fee
revenue is either amortized over the related development period, or recognized
as revenue, based on the nature of the fee.

         Construction in Progress

         Construction in progress includes all costs related to construction
such as sub-contractors, equipment, engineering, professional fees, and other
costs related to the projects under development. The Company follows the policy
of capitalizing interest expense as a component of construction in progress.
Interest capitalized amounted to approximately $13,513,000, and $4,149,000, for
the years ended February 28, 2000 and 1999, respectively. Certain internal costs
directly related to the construction of the power projects, including salaries
of certain employees are capitalized. Such costs amounted to approximately
$169,000, $536,000 and $531,000 for the years ended February 28, 2000,1999 and
1998, respectively. During the year ended February 28, 2000, approximately
$135,525,000 of construction in progress costs were transferred to property,
plant and equipment.

         Property, Plant and Equipment

         Property, plant and equipment are stated at cost and are being
depreciated or amortized on the straight-line method over their estimated useful
lives as follows:

                 ---------------------------------------------------
                 Plant                           30 years
                 ---------------------------------------------------
                 Machinery and equipment         5-10 years
                 ---------------------------------------------------
                 Furniture and fixtures          5-10 years
                 ---------------------------------------------------
                 Motor vehicles                  3 years
                 ---------------------------------------------------
                 Leasehold improvements          5-8 years
                 ---------------------------------------------------






                                       34
<PAGE>
                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



         Income Taxes

         The Company utilizes the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". Under SFAS
No. 109, deferred tax assets or liabilities are computed based on the difference
between the financial statement and income tax bases of assets and liabilities
including any net operating loss and alternative minimum and windpower tax
credit carry forwards, using the enacted marginal tax rate. Deferred income tax
expense or benefits are based on the changes in the asset or liability from
period to period. Deferred tax assets are recognized to the extent realization
of such benefits are more likely than not.

         Long-Term Receivables and Notes Receivable-WCTP

         The realizability of the long-term receivables and notes
receivable-Warbasse Cogeneration Technologies Partnership L.P. ("WCTP") is
evaluated by the Company by review of the present value of the currently
expected future cash flow from the Warbasse facility.

         Per Share Data

         Basic earnings per share excludes dilution and is computed by dividing
income available to common shareholders by the number of weighted-average common
shares outstanding for the period. Diluted earnings per share reflects the
number of weighted average common shares outstanding plus the potential dilutive
effect of securities or contracts which are in the money and convertible to
common shares, such as options and warrants, unless antidilutive based upon
income (loss) from continuing operations before extraordinary gain. The
following is a reconciliation of the number of shares used in the basic and
diluted computation of earnings per share for the years ended February 28, 2000,
1999 and 1998:

<TABLE>
<CAPTION>
                                                           Fiscal 2000            Fiscal 1999            Fiscal 1998
                                                        -----------------     ------------------     ------------------
<S>                                                           <C>                    <C>                    <C>
Weighted average number of
Common shares outstanding                                     15,020,015             14,881,280             14,776,882

Average of unreleased ESOP
Shares                                                         (314,701)              (595,174)              (754,495)
                                                        -----------------     ------------------     ------------------

Weighted average number of
Common shares outstanding - basic                             14,705,314             14,286,106             14,022,387

Dilution (warrants and options)                                  625,473             --                      1,538,738
                                                        -----------------     ------------------     ------------------

Weighted average number of common
Share and common share equivalents
outstanding - diluted                                         15,330,787             14,286,106             15,561,125
                                                        =================     ==================     ==================
</TABLE>

         The amounts shown as average of unreleased ESOP shares and dilution
(warrants and options) reflect the averages for the periods presented.

         The following chart summarizes the number of options and warrants not
included in the computation of diluted earnings per share for fiscal 2000, 1999
and 1998, as the results would have been antidilutive. The options and warrants
expire between April 2000 and April 2009.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
                                      Fiscal 2000             Fiscal 1999             Fiscal 1998
--------------------------------------------------------------------------------------------------
<S>                                     <C>                     <C>                       <C>
Options and Warrants                    1,696,992               3,141,256                 175,000
--------------------------------------------------------------------------------------------------
Price Range                       $5.88 to $11.00         $4.50 to $11.00        $9.63 to $11.000
--------------------------------------------------------------------------------------------------
</TABLE>

                                       35
<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         Fair Value of Financial Instruments

         The carrying amounts of cash and cash equivalents, marketable
securities, cash in escrow, accounts and other receivables, accrued expenses,
accounts payable and projects payable approximate fair value, principally
because of the short maturity of these items. The fair value for long-term
receivables and notes receivable-WCTP are not practical to estimate based on the
inability to estimate the exact maturity and cash flows of these receivables
(see Note 5 for terms). For minority interest in partnership (see Note 16 for
terms), there is no quoted market price, and a reasonable estimate of fair value
could not be made without incurring excessive costs. The project notes payable
are stated at fair value based on rates and terms currently available to the
Company.

         Cash in Escrow

         Included in cash in escrow, current portion are amounts to be used to
pay construction payables as of February 28, 2000 and 1999. Included in cash in
escrow, long term are amounts related to construction of the Big
Spring and Trinidad projects and various reserves. Cash held in escrow in
foreign institutions amounted to approximately $2,976,000 as of February 28,
2000.

         Intangible Assets

         Included in Intangible Assets are deferred financing costs, finders'
fees, a power purchase agreement ("PPA") and other costs related to acquisition
and development of the projects. Such costs are being amortized over their
estimated useful lives.

         Reclassifications

         Certain amounts in the 1999 and 1998 consolidated financial statements
were reclassified to conform to the 2000 presentation. In addition, certain
amounts were reclassified between additional paid-in capital and deferred
compensation retroactively as of February 28, 1997 on the accompanying
consolidated statement of stockholders equity.


         Significant New Accounting Pronouncements

         In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities", ("SFAS 133")
which requires entities to recognize all derivatives in their financial
statements as either assets or liabilities measured at fair value. SFAS 133 also
specifies new methods of accounting for hedging transactions, prescribes the
items and transactions that may be hedged, and specifies detailed criteria to be
met to qualify for hedge accounting. SFAS 133 is effective for fiscal years
beginning after June 15, 2000. The Company is currently evaluating the impact
that SFAS 133 will have on the Company's consolidated financial statements and
disclosures.

4.       Brooklyn Navy Yard

         Brooklyn Navy Yard Cogeneration Partners, L.P. ("BNYLP") is owned
equally by a subsidiary of Edison Mission Energy ("Mission"), which is an
indirect wholly-owned subsidiary of Edison International, and B-41 Associates,
L.P. ("B-41LP"). BNYLP was formed to develop, construct, finance, own and
operate the 286 megawatt ("MW") natural-gas-fired, combined-cycle Brooklyn Navy
Yard ("BNY") facility.

         The BNY facility supplies Consolidated Edison Company of New York, Inc.
("Con Ed") with both electricity and steam under a 40 year contract. The
facility also supplies energy to the host industrial park and to an adjacent
waste water facility.

                                       36
<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

           The profit sharing and ownership percentages in the B-41LP
partnership agreement, as amended, are as follows:

           (1)  RV Associates L.P. ("RVA"), whose limited partner, RRR'S
                Ventures Ltd., ("RRR'S") and general partner are controlled by
                the Chairman of the Company, is a 5% general partner. B-41
                Management Corporation ("B-41MC"), a wholly owned subsidiary of
                York, is also a 5% general partner.

           (2)  RVA is also a 15% limited partner. RVA contributed a PPA
                totaling 40 MW.

           (3)  Cogeneration Technologies, Inc. ("Cogen"), a wholly owned
                subsidiary of York, is a 22% limited partner. Cogen contributed
                a PPA totaling 40 MW.

           (4)  York Cogen Partners L.P. ("YCP") is a 53% limited partner. RRR'S
                Ventures Ltd. is the 10% general partner of YCP, and York is the
                90% limited partner in YCP. YCP contributed a PPA totaling 90
                MW.

         The BNYLP partnership agreement, as amended, contains provisions, among
other things, with respect to the allocation of cash flow and tax depreciation
under various circumstances, profits and losses both before and after Mission's
advances have been repaid, management of the Partnership, and dispute
resolution. B-41LP and Mission have amended the partnership agreement to reflect
certain changes pertaining to funding obligations, management, and operations.

         Through February 28, 2000 BNYLP has incurred both book and tax losses.
Accordingly, since B-41LP accounts for its investment in BNYLP under the equity
method, and has no funding obligations to BNYLP, B-41LP has recorded no losses.

         The summarized financial information of BNYLP as of, and for the years
ending December 31, 1999 and 1998, which were audited by a firm other than the
Company's auditors, is as follows:


                                                1999             1998
                                                ----             ----


           Current Assets                   $ 27,235,000     $ 27,622,000
                                            ============     ============
           Non Current Assets               $460,103,000     $474,820,000
                                            ============     ============
           Current Liabilities              $ 31,886,000     $ 24,603,000
                                            ============     ============
           Non Current Liabilities          $507,544,000     $500,285,000
                                            ============     ============
           Partners' Deficiency             $(52,092,000)    $(22,446,000)
                                            ============     ============
           Total Revenues                   $129,691,000     $131,915,000
                                            ============     ============
           Net Loss                         $(29,647,000)    $(16,706,000)
                                            ============     ============






                                       37
<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         Long-term project financing for the BNY facility consists of $100
million aggregate principal amount of Senior Secured Bonds Due 2020 and $307
million aggregate principal amount of New York City Industrial Development
Agency Industrial Development Revenue Bonds due from 2022 to 2036. The Company
provided no guarantees with regard to this financing, and has no obligation to
provide funding of any sort. As a result of this financing, and as compensation
for services rendered, the Company received a fee of $6 million from Mission,
which was included in revenues in the fourth quarter of fiscal 1998. The Company
also expects to receive continuing general partner and other fees over the 40
year life of the project.

         In March 1997, the Company settled all of its obligations related to
this project with a financing entity for $2,750,000, plus other consideration
(see Note 5).

         In consideration for certain development services for the BNY facility
performed by the Company, RVA assumed the obligation for certain loans from
Mission totaling $6,750,000 which are repayable only from amounts received from
third party BNYLP financings or BNY facility operating cash flow. In addition,
RVA accepted a reduced share of development fees and reimbursements.

         In prior years, a commission revenue of $3,460,000 was deferred, which
represented one half of the nonrefundable commission deferred until the
equipment upon which the commission was earned was placed in service. In each of
fiscal 2000, 1999 and 1998, $173,000 was recognized as revenue. The deferred
balance will be recognized over the remaining estimated useful life of the
related equipment of twenty years.

         In accordance with the BNYLP partnership agreement, the Company
provides engineering services for BNYLP. During fiscal 2000, 1999, and 1998, the
Company performed engineering services of approximately $253,000, $444,000, and
$465,000, respectively, which are reflected in revenues and cost of revenues. At
February 28, 2000 and 1999, the Company had receivables from BNYLP of
approximately $37,000, and $88,000, respectively, related to engineering
services. These amounts are included in other receivables - related parties and
were fully collected subsequent to the respective year-ends.

         Commencing December 1, 1996 through December 31, 1997, BNYLP paid
general partner fees to B-41LP equal to 2.5% of gross monthly revenues of the
BNY project. B-41LP in turn paid a general partner fee of 1.25% of gross monthly
revenues to each of B-41MC and RVA. Pursuant to the amended partnership
agreement, the general partner fee was reduced to .5% of gross revenues for the
four years commencing January 1, 1998. In the years ended February 28, 2000,
1999 and 1998, B-41MC recognized general partner fees of approximately $336,000
$320,000, and $1,355,000 respectively, with receivables of approximately
$209,000 and $170,000 at February 28, 2000 and 1999, respectively, which were
fully collected subsequent to the respective year ends. Royalty fees of
approximately $6,047,000, $5,761,000 and $1,078,000 were recognized during
fiscal 2000, 1999 and 1998, respectively. These royalties, which are equal to
4.5% of gross revenues, commenced in January 1998, and will continue for four
years. RVA has agreed not to share in these royalties (see Note 16).

         In February 1997, the general contractor of the Brooklyn Navy Yard
facility brought an action in California against BNYLP seeking damages of $137
million for amounts owed under the turnkey contract and denying liability under
various claims. BNYLP responded to the complaint, denying all the allegations
contained therein and commenced an action in New York against the general
contractor denying any liability under the turnkey contract and seeking damages
in excess of $13 million pursuant to various counterclaims. In addition, BNYLP
has been named as one of the defendants in another action relating to the
construction activity of the Brooklyn Navy Yard facility. Although it is a
general partner of BNYLP, B-41LP was not served in these complaints and is not a
party to any of the actions. Mission has agreed to indemnify both BNYLP and
B-41LP against any costs resulting from the Contractor's action. B-41LP has
agreed to reimburse Mission for 25% of the excess over $10 million of such
costs, if any, with an aggregate limit of $10 million, payable solely out of
B-41LP's partnership fees and distributions and further limited to $1 million
per year for 1998, 1999 and 2000, and $2 million per year thereafter. As of

                                       38
<PAGE>
                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2000, Mission has not incurred any of the above-mentioned costs,
and therefore, no reimbursements have been required.

         On August 4, 1998, B41LP's right to receive distributions from BNYLP
was assigned to Brooklyn Navy Yard Power LLC, which is wholly owned by B41LP,
pursuant to the Portfolio Project Bond Financing (See Note 11).

         Like other large projects of this nature, the BNY facility is subject
to various risks. There can be no assurance that the facility, although
completed, will operate at sufficient levels to cover all operation and
maintenance expenses and debt service. The Company has no liability for any such
shortfalls, although if the shortfalls occur, they could impact the general
partner and royalty fees mentioned above.

5.       Warbasse Facility

         The Company, through an operations and maintenance agreement, operates
the Warbasse facility, supplying on a continuous basis all the thermal and
electric energy needs of the host, Amalgamated Warbasse Houses, Inc., and
supplying up to the full capacity requirements of its electric power contract
with Con Edison, when dispatched. During fiscal 2000, 1999, and 1998, the
Company recognized revenues and cost of revenues of approximately $7,700,000,
$5,500,000, and $7,200,000, respectively, for operations and maintenance
services. These revenues and cost of revenues include a reimbursement of general
and administrative expenses equal to 20% of direct costs incurred.

         On July 27, 1994, B-41LP purchased from Sanwa Business Credit Corp.
("SBCC") the note obligation of WCTP to SBCC together with all related
collateral and ancillary rights owned by SBCC. In payment, SBCC would have
received a share of the cash flow (net of royalty and G.P. fees), if any, from
the BNY facility. The note obligation of WCTP to B-41LP (the "YCP Note") of
$28,522,000 has been included in Long-term note receivable - WCTP. This
obligation is payable from a portion of the net operating cash flow of the
Warbasse project. On December 1, 1996, this note was assigned to YCP by B-41LP.
The YCP Partnership Agreement was amended to provide that the amounts received
by YCP in respect of the note obligation shall be distributed 74.7% to York and
25.3% to RRR'S, its minority partner, which are the same distribution
percentages as were held by York and affiliates of RRR'S in B-41LP.

         In March 1997, B-41LP settled all its obligations to SBCC for a cash
payment of $2,750,000. SBCC, in exchange for this cash payment, gave up all its
interest in the future cash flow from the Brooklyn Navy Yard Project and has no
continuing interest in any of the Company's projects or assets. In settling this
obligation, B-41LP caused RVA and its partners to lose tax benefits that RVA
would have been able to utilize. Therefore, the Company compensated RVA for tax
benefits lost by RVA in the total amount of $4 million. The form of this
non-cash transaction with RVA and its partners was the exercise of 500,000
pre-existing warrants at $6 per share for a total of $3,000,000, and the
transfer of $1,000,000 of the Company's note receivable from the Chairman to a
nonconsolidated affiliate. This extinguishment of the SBCC liability resulted in
an extraordinary gain of approximately $9.4 million net of taxes of $7.4 million
and minority interest of approximately $5.8 million.

         On November 17, 1994, the YCP Note was restructured along with other
long-term debt of WCTP. Such other long-term debt of WCTP includes a note
payable to Tomen Power Corporation ("Tomen") and includes a note payable to
Cogen. The three notes will share in the net operating cash flow of WCTP, as
defined, pro rata in proportion to the principal balances of the notes, and
would share proportionately in the collateral of WCTP in the event of a default.
Management expects that all three notes will be paid from the operations of
WCTP, and each note carries an interest rate of LIBOR plus 2%. In addition, YCP
and Cogen will receive a restructuring fee of $3,000,000 each, to be paid the
year after the three notes are fully paid.



                                       39
<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         On August 1, 1996, the Warbasse facility was transferred by Cogen to
WCTP, in exchange for a note receivable of $28,808,535. The note receivable
represents the total construction cost of the facility, plus other amounts owed
by WCTP to the Company. Therefore, the caption Long-term notes receivable-WCTP
on the consolidated balance sheets consists of:

                          YCP Note                    $28,522,000
                          Cogen Note                   28,808,535
                                                      -----------
                                                      $57,330,535
                                                      ===========

         On August 4, 1998, the YCP Note was assigned to Warbasse Power II LLC,
a majority owned subsidiary of the Company, and the Cogen Note was assigned to
Warbasse Power I, LLC, a wholly owned subsidiary of the Company, pursuant to the
Portfolio Financing (see Note 11).

         Interest income on these notes amounted to approximately $4,411,000,
$4,344,000, and $4,510,000 for fiscal 2000, 1999, and 1998, respectively.

6.       Receivables - Related Parties

         Other receivables - related parties at February 28, 2000 and 1999
consist of the following:

                                                       2000            1999
                                                       ----            ----
Service and other receivables - WCTP                $2,493,124       $647,934
Engineering service and general
   partner and royalty fee receivables -BNYLP        2,131,919      1,784,979
                                                    -----------    ----------

Total                                               $4,625,043     $2,432,913
                                                    ===========    ==========

         Included in long-term receivables-WCTP are receivables related to
operations and maintenance services, interest income and certain advances. These
amounts are non-interest bearing.

7.       Property, Plant and Equipment

         Property, plant and equipment at February 28, 2000 and 1999 consist of
the following:

                                                          2000           1999
                                                          ----           ----
Plant                                              $ 135,525,409     $        -
Machinery and Equipment                                  449,560        812,559
Furniture and Fixtures                                   212,224        209,779
Motor Vehicles                                           225,421        374,573
Leasehold Improvements                                   531,906         50,731
                                                   -------------     ----------
                                                     136,944,520      1,447,642
Less: Accumulated depreciation and amortization       (2,132,836)    (1,106,707)
                                                   -------------     ----------
                                                   $ 134,811,684     $  340,935
                                                   =============    ===========

8.       Facilities and Projects

         a)       Big Spring Wind Energy Facility

         On October 21, 1997, York acquired 100% of the partnership interests in
New World Power Texas Renewable Energy Limited Partnership, whose significant
asset was a 15 year PPA with Texas Utilities Electric Company ("TU"), with two
five year renewal options. York achieved commercial operation of this windpower
project in May 1999 in accordance with the PPA.

                                       40
<PAGE>
                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         The facility has a capacity of 34 MW and includes 46 turbines,
including four 1,650 Kilowatt ("kW") wind turbines. At February 28, 2000, and
1999, the total costs capitalized related to the development and construction of
this project were approximately $43,914,000 and $29,416,000, respectively, which
are included in property, plant and equipment and construction in progress,
respectively.

         b)       Trinidad Power Project

         On February 12, 1998, InnCOGEN Limited ("InnCOGEN"), a wholly owned
indirect Trinidadian subsidiary of York, signed a 30 year PPA with Trinidad and
Tobago Electricity Commission ("T&TEC"), the government owned transmission and
distribution company, under which T&TEC will purchase the bulk of the project
output. The Company constructed a 225 MW natural gas fueled combustion turbine
project which began commercial operation in September 1999 in accordance with
the PPA. At February 28, 2000 and 1999, the total costs capitalized that relate
to the development and construction of this project were approximately
$91,612,000, and $68,734,000, respectively, which are included in property,
plant and equipment and construction in progress, respectively.

         Revenues from the Trinidad Power Project for fiscal 2000 were
approximately $9,300,000.

         c)       West Texas Project

         On February 26, 1999, West Texas Renewables Limited Partnership ("West
Texas L.P.") signed a PPA with Texas Utilities Electric Company ("TU Electric")
for 6.6MW of capacity from a wind energy facility located on property adjacent
to the Big Spring facility.

         The PPA requires TU Electric to buy all of the power generated by the
facility for 15 years plus options for two additional five year periods, in a
similar manner to the Big Spring facility.

         West Texas LP, is a partnership in which a subsidiary of York is a 1%
general partner and Primesouth Inc., a subsidiary of SCANA Corporation, is a 99%
limited partner. The Company accounts for its general partner interest on the
equity method. Primesouth, Inc. purchased its limited partnership interest for a
capital contribution which was used to fund York's construction of the wind
turbine facility, as well as to pay York for supervising construction and to
reimburse York for certain expenses incurred in developing the project. The
total amount earned during the year ended February 28, 2000 was approximately
$1,388,000. The West Texas Wind facility was completed in June 1999, achieved
commercial operation and was transferred to West Texas L.P.

9.       Intangible assets, net

         Intangible assets, net at February 28, 2000 and 1999 consist of the
following:



                                                2000              1999
                                                ----              ----
Deferred Financing Costs                    $ 8,434,264     $   8,213,604
Project Acquisition Costs                    11,214,862        11,214,862
Power Purchase Agreement                      1,500,000         1,500,000
                                           ------------     -------------
                                             21,149,126        20,928,466
Less: Accumulated amortization               (3,264,993)       (1,106,775)
                                           ------------     -------------
                                            $17,884,133     $  19,821,691
                                           ============     =============




                                       41
<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.      Accrued Expenses and Other Payables

         Accrued expenses and other payables at February 28, 2000 and 1999
include:

                                                           2000          1999
                                                           ----          ----
Accounts payable                                       $3,690,000    $  895,000
Professional fees                                         551,000     1,206,000
Accrued pension and payroll costs                         431,000       769,000
Interest payable to bondholders                         6,050,000     6,050,000
Other                                                   1,315,000       207,000
                                                     ------------    ----------
Total accrued expenses and other payables             $12,037,000    $9,127,000
                                                     ============    ==========

11.      Portfolio Project Bond Financing

         On August 4, 1998, a $150 million, 12%, portfolio project bond
financing due October 30, 2007 (the "Bond Financing") was completed by York
Power Funding (Cayman) Limited ("Funding Company"), a special purpose
unaffiliated limited liability company formed for the purpose of issuing the
Bonds. Through the issuance of project notes to the Funding Company,
approximately $102 million of the proceeds of the Bond Financing were used to
fund the balance of construction costs on the Big Spring and Trinidad power
projects. The remaining $48 million was used as follows: (a) $15 million was
placed in escrow to fund a debt service reserve fund, (b) $4.5 million was
placed in escrow to fund a contingency reserve subfund, (c) approximately $3.25
million was placed in escrow to fund interest during the construction period,
(d) $4.5 million was used to fund financing costs related to the offering, and
(e) $20.75 million was paid to the Company for general corporate purposes and
future development activities.

         The terms of the project notes are identical to the terms of the Bond
Financing. The Bond Financing is non-recourse to York and collateralized by all
of the assets and future cash flow of the 225MW Trinidad power project, and the
34 MW Big Spring windpower project and certain assets and cash flow related to
the Brooklyn Navy Yard and Warbasse projects. The book value of the
collateralized assets is approximately $193 million at February 28, 2000.

         Pursuant to the terms of the Bond Financing, an aggregate of 10% of the
net equity distributions, if any, to be received by certain York subsidiaries
from the projects that pledged cash flow or assets as collateral for the Bond
Financing will be paid to the bondholders. In addition, York entered into a
covenant agreement with the bond trustee, whereby York agreed to certain
limitations, as long as the bonds are outstanding, on incurring new debt,
granting of new liens, declaring cash dividends in excess of $.01 per share, and
continuing a business or activity that incurs net losses, as defined. Pursuant
to the Bond Financing, the Funding Company was obligated to register the bonds.
Failure to register the bonds could result in an additional .5% interest on the
bonds and the project notes payable.

         As a result of the Bond Financing, approximately $8,434,000 of deferred
financing costs were incurred. These deferred financing costs are being
amortized over the life of the Bond Financing. Amortization for the years ended
February 28, 2000 and 1999 was $769,000 and $447,000, respectively.



                                       42
<PAGE>
                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.      Stockholders' Equity

         Common Stock

         The Company has authorized 50,000,000 shares of common stock. In
addition, the Company has authorized 10,000,000 shares of Class A common stock,
none of which have been issued. Each Class A common share has one/hundredth of a
vote as compared with the regular common stock and is entitled to a $.20
dividend priority before any dividends are payable on the full voting common
stock.

         Incentive Stock Option ("ISO") Plan

         In 1982, the Company authorized 1,400,000 qualified stock options,
which have all been granted. The 1982 Plan expired on April 26, 1992. In
September 1993, the Company adopted the 1993 ISO Plan, authorizing a total of
3,000,000 qualified and nonqualified stock options, of which 2,632,500 qualified
stock options were granted to employees, and 37,400 nonqualified stock options
were granted to two consultants to the Company. In July 1999, the Company
adopted the 1999 ISO Plan, authorizing a total of 2,500,000 qualified and
non-qualified stock options, of which 120,000 qualified stock options were
granted to employees. In September 1998, 470,000 options previously granted to
certain employees were cancelled, and new options were issued at the fair market
value on that date.

         Options granted under these plans may not be granted at a price less
than the fair market value of the common stock on the date of grant (or 110% of
fair market value in the case of persons holding 10% or more of the voting stock
of the Company). Options granted under the stock option plans will expire not
more than ten years from the date of grant. The exercise price of the options is
equal to the fair market value of the common stock at the date of the grant.
These options vest over a three or five year period.










                                       43
<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


          The Company has adopted only the disclosure provisions of Financial
Accounting Standard No. 123, Accounting for Stock Based Compensation ("FAS
123"). It applies APB Opinion No. 25, Accounting for Stock Issued to Employees,
and related interpretations in accounting for its plans and does not recognize
compensation expense for its stock based compensation plans. If the Company had
elected to recognize compensation expense based upon the fair value at the grant
date for awards under these plans, consistent with the methodology prescribed by
FAS 123, the Company's net income and income per share would be decreased to the
pro forma amounts indicated below for the years ended February 28, 2000, 1999,
and 1998:
<TABLE>
<CAPTION>


Year ended February 28, 2000                                   As Reported                Pro forma
----------------------------                                   -----------                ---------
<S>                                                            <C>                       <C>
Income (loss):
    Income from continuing operations                          $   3,584,799             $  2,752,774
    Net loss                                                   $( 31,141,588)            $(31,973,613)
Income (loss) Per Share:
Basic:
    Income from continuing operations                                  $0.24                    $0.19
    Net loss                                                          $(2.12)                  $(2.17)

Diluted:
    Income from continuing operations                                  $0.23                   $ 0.18
    Net loss                                                          $(2.03)                  $(2.09)


Year ended February 28, 1999:
Loss:
     Loss from continuing operations                           $  (1,217,115)            $ (2,350,782)
     Net loss                                                  $  (5,989,643)            $ (7,123,310)
Loss Per Share:
Basic:
    Loss from continuing operations                                   $(0.09)                  $(0.16)
    Net loss                                                          $(0.42)                  $(0.50)

Diluted:
    Loss from continuing operations                                   $(0.09)                  $(0.16)
    Net loss                                                          $(0.42)                  $(0.50)


Year Ended February 28, 1998
Income:
     Income from continuing operations                         $   4,134,137             $  3,541,840
     Net income                                                $  12,043,779             $ 11,451,582
Income Per Share
Basic:
      Income from continuing operations                                $0.29                    $0.25
      Net income                                                       $0.86                    $0.82

Diluted:
      Income from continuing operations                                $0.27                    $0.23
      Net income                                                       $0.77                    $0.74
</TABLE>

         These pro forma amounts may not be representative of future disclosures
because they do not take into effect pro forma compensation expense related to
grants made before March 1, 1995. The fair value of these options was estimated
at the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions for the years ended February 28, 2000,
1999, and 1998:


                                       44
<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                    For the Year Ended February 28,
                                          2000                  1999                     1998
                                          ----                  ----                     ----
<S>                                        <C>                   <C>                      <C>
Volatility                                 53%                   51%                      71%
Risk Free Rate                            5.54%                 5.11%                    6.77%
Expected Life                           10 years              10 years                 10 years
Forfeiture Rate                             0%                    0%                       8%
</TABLE>

         The weighted average fair value of options granted during fiscal 1999,
1998 and 1997, for which the exercise price equals the market price on the grant
date, was $3.25, $2.25, and $5.61, respectively, and the weighted average
exercise price was $4.64, $3.31, and $6.88, respectively.

         Stock option  activity  during fiscal 2000, 1999 and 1998 is summarized
below:
<TABLE>
<CAPTION>
                                                                                       Weighted-Average
                                                                 Options                Exercise Price
                                                                 -------               ----------------
<S>                                                            <C>                          <C>
                 Balance, February 28, 1997                     1,745,827                    4.90
                 Granted                                          451,500                    6.88
                 Exercised                                       (154,219)                   4.36
                 Canceled                                        ( 40,000)                   7.44
                                                                ---------
                 Balance, February 28, 1998                     2,003,108
                 Granted                                        1,270,000                    3.31
                 Exercised                                       ( 49,850)                   4.13
                 Canceled                                        (690,000)                   7.05
                                                                ---------
                 Balance, February 28, 1999                     2,533,258
                 Granted                                           125,000                   4.64
                 Exercised                                        (251,630)                  3.13
                 Cancelled                                        (288,122)                  3.07
                                                                ---------
                 Balance, February 28, 2000                     2,118,506
                                                                =========
</TABLE>

         At February 28, 2000, 1999, and 1998, 1,474,006, 1,853,125, and
1,460,980, options, respectively, were exercisable.

         The following table summarizes information concerning currently
outstanding and exercisable stock options:
<TABLE>
<CAPTION>
                                                 Weighted-
                                                   Average
            Range of                             Remaining           Weighted-                              Weighted-
            Exercise               Number      Contractual             Average              Number            Average
              Prices          Outstanding     Life (Years)      Exercise Price         Exercisable     Exercise Price
        ------------          -----------     ------------      --------------         -----------     --------------
<S>                           <C>                   <C>                <C>               <C>                   <C>
         $3.00-$4.50            1,482,223             7.99               $3.29             983,223               3.27
         $4.51-$6.75              469,983             1.97               $3.80             357,483               4.99
        $6.76-$10.00              166,300             4.05               $7.44             133,300               7.58
                                ---------                                                ---------
                                2,118,506                                                1,474,006
                                =========                                                =========
</TABLE>



                                       45
<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Warrants

         All warrants are exercisable upon grant, although the underlying shares
may not necessarily be registered, and the warrants expire up to ten years from
date of grant. The exercise prices of the warrants are the NASDAQ closing prices
of the Company's common stock at the dates of grant.

         The following table summarizes information concerning currently
outstanding stock warrants:

<TABLE>
<CAPTION>
                                         Issued Year Ended February 28,
                                                                                   Warrants
                                                                                   Outstanding at
      Issued to                         1998            1999           2000        February 28, 2000
                                        ----            ----           ----        -----------------
<S>                                   <C>             <C>          <C>                <C>
      Robert M. Beningson                  ---             ---            ---               700,000
      Stanley Weinstein                 20,000          20,000            ---                60,000
      Howard Sommer                     20,000          20,000            ---                40,000
      Harvey Schultz                       ---          20,000            ---                20,000
      Frederic S. Berman                   ---          20,000            ---                20,000
                                        ------         -------           -----            ---------
      Total Directors                   40,000          80,000            ---               840,000
      Other Consultants and
      former Directors                     ---          50,000            ---             1,328,711
                                        ------         -------           -----            ---------
      Totals                            40,000         130,000            ---             2,168,711
                                        ======         =======           =====            =========
</TABLE>

         The above warrants were granted at prices ranging from $3.313 to
$11.00, and expire from April, 2000 through December, 2008. For fiscal 1999, the
Company recorded an expense of $120,000 relating to the issuance or modification
of warrants issued to consultants.

         The Company issued common stock purchase warrants in connection with
the settlement of litigation in 1993. As of February 28, 2000 and 1999, there
were outstanding Class B Warrants evidencing the right to purchase 101,980 and
117,907 shares, respectively, which had the following attributes: (i) an
exercise price of $6.15; and (ii) the Company had the right to reduce the
exercise price at any time. Pursuant to an agreement dated October 31, 1997, the
Company redeemed 10% of outstanding B Warrants in April, 1998 at $11.50 per
warrant, and an additional 10% on April 1, 1999 and the balance was to be
redeemed on April 1, 2000 at $11.50 per warrant (this has been extended to
November 1, 2000 at $12.00 per warrant). The redemption obligation is secured by
a 17.5% limited partnership interest in BNYLP, held by B-41LP. The Company is
accreting the redemption obligation from the period of the revised settlement
through the final redemption dates. During the years ended February 28, 2000,
1999 and 1998, the Company recorded expenses of approximately $464,000, $683,000
and $301,000, respectively, relating to this redemption.

         At February 28, 1998, there were also outstanding Class C Warrants
evidencing the right to purchase 91,834 shares at an exercise price of $6.50 per
share, which Warrants expired, and had no redemption provisions.

         In connection with the settlement of the shareholder litigation, in
1993, the Company issued Class A Warrants, which were surrendered under a letter
of credit posted by Mission. Total amounts drawn on the letter of credit
amounted to approximately $6.9 million, which will be repaid only from future
operating and financing cash flows of BNYLP.


                                       46
<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13.      Employee Benefit Plans

         Employee Savings Plan

         The Company maintains a 401(k) plan which allows employees of the
Company to defer a portion of their earnings on a pre-tax basis through
contributions to the 401(k) plan up to limits specified by the IRS. The Company,
may at its discretion, make a contribution to the 401(k) plan. To date, the
Company has elected not to contribute to the 401(k) plan.

         Defined Benefit Plan

         The Company has a defined benefit pension plan covering substantially
all employees not covered by a collective bargaining agreement. The benefits are
based on years of service and the highest consecutive five years of the
employees' compensation. The Company's funding policy is to contribute annually
the amount necessary to satisfy the Internal Revenue Service's funding
standards. Contributions are intended to provide, not only for benefits
attributed to service to date, but also for those expected to be earned in the
future.

         Pension cost for the years ended February 28, 2000, 1999, and 1998
include the following components:

<TABLE>
<CAPTION>
                                                           2000                       1999                        1998
                                                           ----                       ----                        ----
<S>                                                      <C>                       <C>                          <C>
Service cost - benefits earned
during the current period                                $51,876                   $ 51,099                     $33,967

Interest cost on projected benefit
obligation                                                80,388                     94,837                     109,857


Expected return on plan assets                           (36,059)                   (71,245)                    (78,495)


Net amortization and deferral                             47,962                     32,992                      30,076
                                                        --------                   --------                     -------

Net pension cost                                        $144,167                   $107,683                     $95,405
                                                        ========                   ========                     =======
</TABLE>

         For all periods presented, the weighted average discount rate was 8.5%
and the rate of increase in future compensation levels was 3%, which were used
in determining the actuarial present value of the projected benefit obligation.
The expected long-term rate of return on plan assets is 8.5%.

         The following tables set forth the plan's benefit obligations and
change in plan assets as of February 28, 2000 and 1999:





                                       47
<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                            2000                           1999
                                                                            ----                           ----
<S>                                                                         <C>                          <C>
Change in benefit obligation:
Benefit obligation at beginning of year                                     $945,739                     $1,115,731

Service cost                                                                  51,876                         51,099

Interest cost                                                                 80,388                         94,837

Actuarial gain                                                                31,232                        150,950

Benefits paid                                                                (26,497)                      (466,878)
                                                                           ---------                      ---------

Benefit obligation at end of year                                          1,082,738                        945,739
                                                                           ----------                     ---------

Change in plan assets:
Fair value of plan assets at beginning of year                               375,365                        693,325

Actual return on plan assets                                                  15,960                         18,436

Employer contribution                                                        165,446                        130,482

Benefits paid                                                                (26,497)                      (466,878)
                                                                           ---------                      ---------

Fair value of plan assets at end of year                                     530,274                        375,365
                                                                           ---------                      ---------

Funded status                                                              (552,464)                      (570,374)

Unrecognized net actuarial loss                                              305,985                        288,108

Unrecognized transition amount                                                68,422                         82,931
                                                                           ---------                      ---------

Accrued benefit cost                                                       $(178,056)                     $(199,335)
                                                                           =========                      =========

</TABLE>

         Employee Stock Ownership Plan

         During 1988, the Company adopted an Employee Stock Ownership Plan
("ESOP") that covers substantially all employees. The Company utilizes the
provisions of Statement of Position 93-6, "Employers' Accounting for Employee
Stock Ownership Plans" ("SOP 93-6"). The following table presents the number of
shares of common stock, which were unregistered at the time and subsequently
registered, that the ESOP purchased from the Company, at prices which
represented 70% of the NASDAQ closing prices at the date of purchase:

<TABLE>
<CAPTION>

      Purchased in Fiscal Year                   # Shares Purchased                 Purchase Price
      ------------------------                   ------------------                 --------------
<S>   <C>                                              <C>                            <C>
      1996                                             288,500                        $ 1,092,219

      1993 and prior                                 3,500,000                         13,370,000
                                                     ---------                        -----------

                                                     3,788,500                        $14,462,219
                                                     =========                        ===========
</TABLE>


                                       48
<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         Management believes the valuation represented the fair market value of
the unregistered shares on those dates.

         The Company contributed approximately $708,000, $678,000 and $593,000,
to the ESOP during fiscal 2000, 1999, and 1998, respectively. The Company makes
annual contributions to the ESOP as determined by the Board of Directors and
subject to certain limitations dictated by tax regulations.

         To purchase the shares from the Company, the ESOP borrowed funds from
the Company. Repayment of these loans has been and is expected from employer
contributions, borrowing by the ESOP from third parties, and by sale of
unreleased ESOP shares to third parties. The Company has recorded all amounts
loaned to the ESOP as deferred compensation, a contra-equity account, and has
included the third party loans to the ESOP in other long-term liabilities.
Certain of the unreleased ESOP shares are used as collateral for a third party
loan to the ESOP which was repaid in full subsequent to February 28, 2000.

         During the quarter ended August 31, 1993, the ESOP borrowed $1,150,000
from third parties. These funds, along with an additional $12,987,000 generated
through February 28, 2000 by the sale of the Company's stock owned by the ESOP,
were used to repay the demand purchase money loans due to the Company. The
$1,150,000 initially borrowed by the ESOP was included in other long-term
liabilities and as deferred compensation, a contra-equity account, and had a
balance of approximately $601,000 at February 28, 2000 and 1999 as a result of
repayments by the ESOP.

         ESOP shares are released and allocated to participant accounts based
upon Company contributions and certain payments made to reduce ESOP debt to the
Company. The Company reports compensation expense as shares are committed to be
released equal to the current market price of the shares, and the shares then
become outstanding for earnings-per-share ("EPS") computations.

         A summary of the ESOP shares, at February 28, 2000 and 1999 is as
follows:


                                                      2000          1999
                                                      ----          ----
           Allocated shares                          714,428       575,027

           Shares released for allocation            151,519       139,401

           Unreleased shares                         282,737       558,129
                                                  ----------    ----------
                                                   1,148,684     1,272,557
                                                  ==========    ==========
           Fair value of unreleased shares        $  901,224    $2,511,581
                                                  ==========    ==========





                                       49
<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


14.      Income Taxes

         The provision for income taxes, for each of the three years in the
period ended February 28, 2000 is as follows:

<TABLE>
<CAPTION>
                                               2000                  1999                1998
                                               ----                  ----                ----
<S>                                        <C>                  <C>                  <C>
Current:
Federal                                    $  (457,000)         $  (309,841)         $ 1,734,000
State and local                              1,599,000              290,288              898,000
                                           -----------          -----------          -----------
                                             1,142,000              (19,553)           2,632,000
                                           -----------          -----------          -----------
Deferred:
Federal                                        694,000             (412,825)            (621,059)
State and Local                             (1,836,000)            (871,432)              14,000
Foreign                                           --               (105,000)                --
                                           -----------          -----------          -----------
                                           $(1,142,000)         $(1,389,257)         $  (607,059)
                                           -----------          -----------          -----------
Tax benefits allocated directly to
  additional paid-in capital:
Federal                                           --                 34,000              590,000
State and local                                   --                 14,000               64,000
                                           -----------          -----------          -----------
                                                  --                 48,000              654,000
                                           -----------          -----------          -----------
Provision                                        $ -0-          $(1,360,810)         $ 2,678,941
                                           ===========          ===========          ===========
</TABLE>

         The Government of Trinidad and Tobago granted InnCOGEN a tax holiday,
which includes relief from corporation income and certain other taxes for 8
years after September 9, 1999.

         At February 28, 2000, the Company has a net operating loss
carryforward, for Federal income tax purposes, of approximately $53 million
which expires through February 28, 2020. After carrybacks to the fiscal years
ended February 28, 1997 and 1998, the Company has approximately a $40 million
alternative minimum tax net operating loss carryforward, which also expires
through February 28, 2020. The difference between the loss carryforward amounts
is attributable to adjustments required in the alternative minimum tax
computation.

         Internal Revenue Code Section 382 places a limitation on the
utilization of carryforwards when an ownership change, as defined in the tax
law, occurs. Generally, an ownership change occurs when there is a greater than
50 percent change in ownership. If such a change should occur, the actual
utilization of carryforwards, for tax purposes, would be limited annually to a
percentage of the fair market value of the Company at the time of such change.



                                       50
<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         The reconciliation between the effective tax rate and the statutory
Federal income tax rate for each of the three years in the period ended February
28, 2000 is as follows:

<TABLE>
<CAPTION>
                                                                   2000              1999               1998
                                                                   ----              ----               ----
<S>                                                             <C>                   <C>                <C>
   Amount computed using the statutory rate                     $1,219,000        ($876,495)         $2,316,000

   Increase (reduction) in taxes resulting from:

   Wind tax credit                                              (1,553,000)           --                 --

   Imputed interest on loans                                        --               56,000             (4,000)

   Nondeductible expenses                                           --              989,000            391,000

   Canadian subsidiary                                              --           (1,147,000)            80,000

   Intangibles                                                      --             (102,000)            49,000

   Valuation allowances on other temporary
   differences                                                      --                --              (658,000)

   State and local taxes, net of federal
   tax benefit and state loss carryforwards                        273,000         (428,000)            644,000

   Alternative minimum tax                                          --                --                20,000

   Other                                                            61,000          147,685            (159,059)
                                                                ----------      -----------          ----------

                                                                    -0-         ($1,360,810)         $2,678,941
                                                                ==========      ===========          ==========


</TABLE>





                                       51



<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         The components of the net current deferred tax asset and long-term
deferred tax asset (liability) at February 28, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>


Deferred tax assets (liabilities) - Current                 2000                 1999
-------------------------------------------                 ----                 ----
<S>                                                   <C>                   <C>
Loss carryforwards                                            --            $  5,716,000
Marketable Securities                                 $   (353,800)                 --
Credit carryovers                                             --                 539,000
Accrued expenses                                         8,568,000               579,000
Other                                                         --                   2,000
                                                      ------------          ------------
                                                         8,214,200             6,836,000
                                                      ------------          ------------
Deferred tax assets (liabilities) Non-current
---------------------------------------------
Loss carryforwards                                      22,019,000                  --
Credit carryovers                                        2,092,000                  --
Long-term note receivable -WCTP                         (8,491,100)           (8,491,100)
Partnership items                                         (402,000)             (488,000)
Depreciation and amortization                           (6,631,900)           (2,524,000)
                                                      ------------          ------------
                                                         8,586,000           (11,503,100)
                                                      ------------          ------------

                                                        16,800,200            (4,667,100)
Valuation allowance                                     (2,584,000)                 --
                                                      ------------          ------------
Net deferred tax asset (liability)                    $ 14,216,200          $ (4,667,100)
                                                      ============          ============


             The Company paid income taxes for:
             Year ended February 28, 2000               $  157,000
             Year ended February 28, 1999               $1,547,000
             Year ended February 28, 1998               $1,192,000

</TABLE>

15.      Lease Obligations

         The Company has a lease for its office space which expires on June 30,
2003. On July 1, 1998, the Company exercised an option to increase its space to
16,700 square feet.

         The Company has entered into land leases (the "Big Spring Project
Leases") with three land owners who own the land on which the Big Spring
facility was constructed and is being operated. Each of the Big Spring Project
Leases has an initial term of 15 years, commencing on the Big Spring Commercial
Operations date, as defined in the leases, and may be extended for two
additional periods of five years each.

         The Company has also entered into a separate infrastructure agreement
with one of the land owners which provides for additional rights beyond those
conveyed pursuant to the lease (the "Infrastructure Agreement"). The term of the
infrastructure agreement is for twenty-five years, commencing with the
Commercial Operations date, as defined in the agreement.


                                       52

<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         All rental payments on the leases are calculated as the greater of the
leases' minimum payment or a percentage of the gross revenues derived from the
wind turbines.

         In June 1998, InnCOGEN entered into a lease to sublease the land on
which the Trinidad Project was built. The sublease has an original term of 32
years. The rent is $.40 per square meter per year for the first five years and
$.50 per square meter per year for the second five years. Total square meters
leased is approximately 33,000. Thereafter, the rent is to be adjusted in
five-year intervals based on the consumer price index. However, the rent cannot
be less than the rent for the preceding five-year period or increase by more
than 10%.

         Total rent expense for operating leases was approximately $720,000 in
fiscal 2000, $641,000 in fiscal 1999, and $367,000 in fiscal 1998.

         Future minimum annual rental payments for operating leases having terms
of more than one year at February 28, 2000 are as follows:


                                                   Operating
                                                     Leases
                                                   ---------
                 2001                               $828,000
                 2002                                805,000
                 2003                                795,000
                 2004                                680,000
                 2005                                681,000
                 Thereafter                        2,382,000
                                                   ---------
                 Total minimum lease payments     $6,171,000
                                                  ==========


16.      Related Party Transactions

         In fiscal 2000, 1999, and 1998, the Company paid Mr. Weinstein $24,000
per year for directors fees, and in each of fiscal 1999 and 1998, granted
warrants to purchase 20,000 shares per year of the Company's common stock at
$3.31 and $7.31 per share, respectively. During fiscal 2000, 1999 and 1998, the
Company paid Mr. Sommer $24,000, $24,000 and $10,000, respectively, for
directors fees, and granted warrants to purchase 20,000 shares of the Company's
common stock in each of fiscal 1999 and 1998 at $3.31 and $7.31 per share,
respectively. During fiscal 2000 and 1999, the Company paid $24,000 and $6,000,
respectively, to Mr. Schultz, and in fiscal 1999 and 1998, granted warrants to
purchase 20,000 shares of the Company's common stock at $3.81 and $3.56 per
share, respectively. During fiscal 2000 and 1999, the Company paid $24,000 and
$4,000 to Mr. Berman and in fiscal 1999 and 1998 granted warrants to purchase
20,000 shares of the Company's common stock at $3.81 and $3.56 per share,
respectively.

         Mr. Beningson, the Chairman and Chief Executive Officer of the Company,
is President and a stockholder of RRR'S, which is a 25% general partner of WCTP,
limited partner of RVA, and a 10% general partner of YCP. In fiscal 2000, 1999,
and 1998, RVA was allocated approximately $555,000, $547,000 and $568,000,
respectively, of the interest income on the YCP Note (see Note 5). In fiscal
1993, RVA received an advance distribution of $2,000,000 from B-41LP, which was
charged against capital, concurrent with the allocation of income during fiscal
1998.




                                       53
<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         As discussed in Note 5, WCTP contracted with the Company to procure,
construct, design and place in operation a cogeneration facility. The Company's
Chairman and the Company's Chief Financial Officer are shareholders of the
general partner of WCTP, which receives a general partners fee of 1% of WCTP
revenues and an administrative services payment of 4% of WCTP revenues. In
fiscal 2000, 1999, 1998, the general partner of WCTP received from WCTP
approximately $495,000, $491,000, and $529,000, respectively, for general
partner and administrative fees. The Company's Chief Financial Officer received
an aggregate of $90,000, $86,000 and $72,000 in fiscal 2000, 1999 and 1998,
respectively, from RRR'S and WCTP. The limited partners of WCTP are not related
parties to the Company. The general partner may have the potential for
substantial future distributions from WCTP but not until all senior debt has
been paid.

         At February 28, 2000 and 1999 no amounts were owed to the Company by
Mr. Beningson. At February 28, 1998 Mr. Beningson owed the Company $5,971,500
related to the exercise of warrants. On May 31, 1998 the Chairman paid $275,000
of the long-term note he owed to the Company. Also on May 31, 1998, an agreement
was reached to facilitate and maximize the Bond Financing. The agreement was
between the Company, YCP and the minority interests in YCP and B-41LP. Pursuant
to this agreement, the minority interests have agreed to assign and subordinate
their interests in various cash flows from the Brooklyn Navy Yard and Warbasse
facilities to the bondholders.

         In addition, the minority interests in B-41LP have agreed as of January
1, 1998 to forego completely their 25.3% interest in the royalty to be received
from the BNY facility. This royalty will continue through December 31, 2001 at a
projected total amount of approximately $24 million, which is approximately $6
million per year.

         In exchange, the Company transferred the balance of the note due from
the Chairman of $5,696,500 to a minority interest. This transfer resulted in a
deferred charge on the Company's balance sheet. The deferred charge is being
amortized partially over the life of the Bond Financing, and the balance over
the remaining term of the BNY royalty agreement. Amortization for fiscal 2000
and 1999 was approximately $1,143,000 and $651,000, respectively.

17.      Discontinued Operations

         A.       Natural Gas Marketing

         As of February 28, 2000, NAEC discontinued its natural gas marketing
business. On March 2, 2000, NAEC filed a voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code with the United States
Bankruptcy Court for the Southern District of New York. NAEC ceased the
wholesale natural gas business as of February 28, 2000, but continued its retail
natural gas business until it sold the retail business to Amerada Hess
Corporation on April 20, 2000 for $250,000 payable between July 1, 2000 and
December 31, 2000. Amerada Hess assumed all obligations in connection with the
Syracuse office and equipment leases and hired all Syracuse personnel. The
filing of Chapter 11 was necessitated by an extreme credit crunch which rendered
NAEC unable to purchase natural gas to meet its commitments and unable to pay
its creditors for natural gas previously delivered. (See Note 2).

         As of February 28, 2000, the Company accounted for the NAEC wholesale
and retail natural gas marketing business as a discontinued operation, as well
as the electric marketing business, which was discontinued previously.

         The natural gas marketing operations of NAEC are reflected as a
discontinued operation for all periods presented. The operating results of the
discontinued operation are summarized as follows:


                                       54
<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                                                                       For the Year Ended February 28,
                                                                       -------------------------------
                                                            2000                    1999                    1998
                                                            ----                    ----                    ----
<S>                                                    <C>                     <C>                      <C>
    Revenues                                          $1,025,741,170           $967,829,511            $627,040,192
    Income (loss) before tax benefit                     (16,761,841)            10,384,366              (1,051,456)
    Tax provision (benefit)                               (5,727,834)             4,315,087                (424,788)
    Net Income (loss)                                   ($11,034,007)            $6,069,279               ($626,668)
</TABLE>
         B.       Electric Marketing

         During the quarter ended August 31, 1998, unprecedented turmoil in the
electric marketing business was caused in part by widely reported failures of
certain suppliers to deliver contracted power to a multitude of utilities and
marketers, including York's subsidiary, NAEC. NAEC and many others were required
to immediately meet existing fixed price commitments. The resulting turmoil
caused prices to immediately increase from normal prices in the range of $30 per
megawatt hour to as much as $7,000 per megawatt hour.

         Repercussions from the suppliers' failures caused continuing
instability throughout the summer, as market participants found themselves with
unbalanced portfolios and a shortage of available sources. NAEC met many of its
commitments at substantially increased cost.

         As a result, in August 1998, York determined that NAEC should
discontinue the electric marketing business due to the volatility, lack of
liquidity and unacceptable risk parameters. Operations ceased in December 1999,
when all commitments were met.

         The electric marketing operations of NAEC are reflected as a
discontinued operation for all periods presented. The operating results of the
discontinued operation are summarized as follows:
<TABLE>
<CAPTION>
                                                       For the Year Ended February 28,
                                          2000                     1999                    1998
                                          ----                     ----                    ----
<S>                                    <C>                     <C>                     <C>
Revenues                               $61,664,756             $242,903,270            $137,847,253
Loss before tax benefit                (10,337,843)             (17,527,807)             (1,405,206)
Tax benefit                             (3,520,522)             ( 6,686,000)               (567,703)
Net loss                               $(6,817,321)            $(10,841,807)           $   (837,503)
</TABLE>

         C.       Net Assets (Liabilities) of discontinued operations

         As of February 28, 2000 and 1999 net assets and net liabilities of
discontinued operations consisted mainly of trade accounts receivable and trade
accounts payable.

         At February 28, 2000 and 1999, included in net assets (liabilities)
from discontinued operations is a net amount receivable of approximately $3.6
million. NAEC is suing the debtor to recover the amounts receivable, and NAEC is
being countersued by the debtor for matters relating to the obligation to
deliver power. Management believes the amounts are fully recoverable, and no
additional amounts are expected to be paid under the countersuit.

         In addition NAEC also maintains a line of credit that is collateralized
by all of the assets of NAEC and is guaranteed by the Company. The line of
credit bears interest at 1/2% per annum over the prime rate. NAEC has paid the
line down to approximately $1,300,000 from collections of accounts receivable
through May 31, 2000. Amounts outstanding as of February 28, 2000 and 1999 were
approximately $11,800,000 and, $18,150,000, respectively.


                                       55
<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         D.       Summary of Significant Accounting Policies

         The company recognized revenues from energy sales in the period in
which the commodity was delivered. Inventory consists of natural gas held in
storage. The Company accounts for its natural gas inventory using lower of cost
or market, cost being determined using the average cost method.

18.      Quarterly Financial Data (Unaudited)

        The following is a summary of the unaudited quarterly results of
operations for fiscal 2000 and 1999 and reflect the natural gas and electric
marketing operations as discontinued operations (in thousands of dollars except
per share data).
<TABLE>
<CAPTION>
                                                              For the Quarter Ended

Fiscal 2000                               May 31      August 31     November 30  February 28      Full Year
-----------                               ------     ----------    ------------  ------------     ---------
<S>                                     <C>           <C>           <C>           <C>            <C>
Total revenue                           $   3,465     $   3,138     $   7,195     $    8,735     $   22,533
                                        =========     =========     =========     ==========     ==========
Gross profit                                1,981         1,443         4,530          3,761         11,715
                                        =========     =========     =========     ==========     ==========
Income from continuing
 operations                                   575           558         2,169            283          3,585
Loss from discontinued
 operations                                  (100)       (5,133)       (3,185)       (26,308)       (34,726)
                                        ---------     ---------     ---------     ----------     ----------
Net income (loss)                       $     475     $  (4,575)    $  (1,016)    $  (26,025)    $  (31,141)
                                        =========     =========     =========     ==========     ==========

Earnings (loss) per share-Basic:
Continuing operations                   $    0.04     $    0.04     $    0.15     $     0.01     $     0.24
Discontinued operations                     (0.01)        (0.35)        (0.22)         (1.78)         (2.36)
                                        ---------     ---------     ---------     ----------     ----------
Net income (loss)                       $    0.03     $   (0.31)    $   (0.07)    $    (1.77)    $    (2.12)
                                        =========     =========     =========     ==========     ==========

Earnings (loss) per share - Diluted:
Continuing operations                   $    0.04     $    0.04     $    0.14     $     0.01     $     0.23
Discontinued operations                     (0.01)        (0.33)        (0.21)         (1.71)         (2.26)
                                        ---------     ---------     ---------     ----------     ----------
Net income (loss)                       $    0.03     $   (0.29)    $   (0.07)    $    (1.70)    $    (2.03)
                                        =========     =========     =========     ==========     ==========

                                                       For the Quarter Ended

Fiscal 1999                             May 31        August 31     November 30   February 28    Full Year
-----------                             ------        ---------     -----------   -----------    ---------

Total revenues                          $   1,394     $   1,709     $   1,610     $    1,525     $    6,238
                                        =========     =========     =========     ==========     ==========
Gross profit                                   29             1            (7)           207            230
                                        =========     =========     =========     ==========     ==========
Income (loss) from continuing
    operations                                369           284          (823)        (1,047)        (1,217)
Income (loss) from discontinued
   operations                                 334        (6,694)         (868)         2,455         (4,773)
                                        ---------     ---------     ---------     ----------     ----------
Net income (loss)                       $     703     $  (6,410)    $  (1,691)    $    1,408     $   (5,990)
                                        =========     =========     =========     ==========     ==========

Earnings (loss) per share - Basic:
Continuing operations                   $    0.03     $    0.02     $   (0.06)    $    (0.07)    $    (0.09)
Discontinued operations                      0.02         (0.47)        (0.06)          0.17          (0.33)
                                        ---------     ---------     ---------     ----------     ----------
Net income (loss)                       $    0.05     $   (0.45)    $   (0.12)    $     0.10     $    (0.42)
                                        =========     =========     =========     ==========     ==========

Earnings (loss) per share - Diluted
Continuing operations                   $    0.03     $    0.02     $   (0.06)    $    (0.07)    $    (0.09)
Discontinued operations                      0.02         (0.47)        (0.06)          0.17          (0.33)
                                        ---------     ---------     ---------     ----------     ----------
Net income (loss)                       $    0.05    ($    0.45)    $   (0.12)    $     0.10     $    (0.42)
                                        =========     =========     =========     ==========     ==========
</TABLE>


                                       56
<PAGE>

                   YORK RESEARCH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19.      Significant Customers and Contracts, Commitments and Contingencies

             Each of the power projects is dependent on one customer, typically
a utility, for substantially all of its revenue.

             The Company has entered into an employment agreement with the Chief
Executive Officer, which expires May 2004. Such agreement requires a minimum
annual base salary and sets bonuses tied to pre-tax operating income.

             Three creditors of NAEC have instituted litigation against the
Company, as follows:

             1. CNG Field Services Company and CNG Transmission Corporation,
Plaintiffs against York Research Corp., Defendant, pending in the Supreme Court
of the State of New York, County of New York, claiming damages of $3,416,686.99,
plus interest.

             2. PG&E Energy Trading - Gas Corporation vs. York Research
Corporation, in the District Court of Harris Texas, 133rd Judicial District. The
Complaint does not allege any specific amount of damages, but claims actual
damages, attorneys' fees, interest and court costs.

             3. El Paso Merchant Energy - Gas L.P., Plaintiff vs. York Research
Corporation Defendant, in the District Court of Harris County, Texas, 157th
Judicial District, claiming damages of $4,790,934.29 plus interest, attorney's
fees and court costs.

             Included in NAEC's estimate of its total pre-petition obligations
(see Note 2), NAEC has accrued its estimate of the maximum liability to these
creditors. The actions have been stayed pending the NAEC Chapter 11 proceeding.
The ultimate outcome of these litigations cannot be determined at this time.





                                       57
<PAGE>


                                   SIGNATURES


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


YORK RESEARCH CORPORATION
      (Registrant)


/s/Robert M. Beningson                           /s/Michael Trachtenberg
----------------------                           -----------------------
Robert M. Beningson                              Michael Trachtenberg
President, Chief Executive Officer               Executive Vice President
Chairman of the Board                            Chief Financial and Accounting
June 9, 2000                                     Officer, Secretary
                                                 June 9, 2000

         Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant in the capacities and on the dates indicated.


/s/ Robert M. Beningson                          /s/ Harvey W. Schultz
---------------------------                      ---------------------
Robert M. Beningson                              Harvey W. Schultz
Director                                         Director
June 9, 2000                                     June 9, 2000


/s/ Stanley Weinstein                            /s/ Frederic S. Berman
---------------------                            ----------------------
Stanley Weinstein                                Frederic S. Berman
Director                                         Director
June 9, 2000                                     June 9, 2000


 /s/ Howard Sommer
------------------
Howard Sommer
Director
June 9, 2000


                                       58