SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549


                                  FORM 10-QSB/A


(MARK ONE)

     [_]  QUARTERLY  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
          EXCHANGE ACT OF 1934

          FOR THE QUARTERLY PERIOD ENDED _________________


                                       OR

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

          FOR THE TRANSITION PERIOD FROM SEPTEMBER 1, 1998 TO DECEMBER 31, 1998



                         Commission File Number 0-17594


                             USA Biomass Corporation
             (Exact name of registrant as specified in its charter)


               DELAWARE                               33-0329559
   (State or other jurisdiction of                 (I.R.S. Employer
    incorporation or organization)                Identification No.)


      7314 SCOUT AVENUE, BELL GARDENS, CALIFORNIA         90201
      (Address of principal executive offices)          (Zip Code)

                                (562) 928-9900
             (Registrant's telephone number, including area code)


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


    The number of shares  outstanding  of issuer's  only class of Common  Stock,
$.002 par value, was 7,737,135 on March 10, 1999.



<PAGE>



                    PART I.  FINANCIAL INFORMATION



Item 1. Financial Statements



Introduction

     The  consolidated  financial  statements  have been prepared by USA Biomass
Corporation ("Company"), without audit, pursuant to the rules and regulations of
the  Securities  and  Exchange  Commission.  Certain  information  and  footnote
disclosures  normally  included in financial  statements  prepared in accordance
with generally  accepted  accounting  principles  have been condensed or omitted
pursuant to such rules and  regulations.  The Company  believes that the disclo-
sures are adequate to make the information presented not misleading when read in
conjunction with the Company's  consolidated  financial  statements for the year
ended  August  31,  1998.  The  financial  information  presented  reflects  all
adjustments,  consisting only of normal recurring adjustments, which are, in the
opinion of  management,  necessary  for a fair  statement of the results for the
periods presented.



<PAGE>



                           USA Biomass Corporation
                     (Formerly AMCOR Capital Corporation)



                Index to the Consolidated Financial Statements
                    As of December 31 and August 31, 1998
          And For the Four Months Ended December 31, 1998 and 1997
            And the Three Months Ended December 31, 1998 and 1997






     Consolidated Financial Statements for USA Biomass Corporation:

        Balance Sheets  . . . . . . . . . . . . . . . . . . . . . . F-2

        Statements of Operations  . . . . . . . . . . . . . . . . . F-5

        Statements of Shareholders' Equity    . . . . . . . . . . . F-7

        Statements of Cash Flows   . . . . . . . . . . . . . . . .  F-11

     Notes to the Financial  Statements . . . . . . . . . . . . . . F-15


<PAGE>



                           USA Biomass Corporation
                     (Formerly AMCOR Capital Corporation)

                         Consolidated Balance Sheets
                     December 31, 1998 and August 31, 1998

                            (Amounts in Thousands)

                                    ASSETS

                                                    (Unaudited)
                                                    December 31,   August 31,
                                                         1998          1998
                                                    -----------   -----------
Current assets:

  Cash and equivalents                                    $767          $828

  Accounts receivable                                      526           336

  Due from officers and directors                          --            914

  Income taxes recoverable                                 293           293

  Other current assets                                     423           168

  Net current assets of discontinued
   operations                                            8,338         7,399
                                                    -----------   -----------
     Total current assets                               10,347         9,938

Property and equipment, net                              9,104         3,795

Note receivable, noncurrent                              6,462         7,250

Other assets                                               128            30

Intangible assets, net                                     442          458
                                                    -----------   -----------
Total assets                                           $26,483       $21,471
                                                    ===========   ===========









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



                                       F-2
<PAGE>



                             USA Biomass Corporation
                      (Formerly AMCOR Capital Corporation)

                           Consolidated Balance Sheets

                      December 31, 1998 and August 31, 1998

                             (Amounts in Thousands)

                      LIABILITIES AND SHAREHOLDERS' EQUITY

                                                    (Unaudited)
                                                    December 31,   August 31,
                                                         1998          1998
                                                    -----------   -----------
Current liabilities:
  Accounts payable:
   Officers and directors                                  --            $90
   Others                                               $1,944         1,266
  Payroll taxes payable                                    891         1,065
  Accrued remediation costs                                507           507
  Line of credit                                           875           250
  Payable to affiliates                                    521
  Notes payable:
    Related parties                                      2,268         1,867
    Other                                                  979           837
  Capitalized lease obligations                            682           360
  Income taxes payable                                     335             3
  Accrued interest                                         284           163
                                                    -----------   -----------
     Total current liabilities                           9,286         6,408

Notes payable, net of current portion:
   Related parties                                         597         1,196
   Officers and directors                                  --            955
   Other                                                 6,262           471
Capitalized lease obligations, net of current
 portion                                                 3,516           932
Net noncurrent liabilities of discontinued
 operations (Note 3)                                       --          2,654
                                                    -----------   -----------
Total liabilities                                       19,661        12,616

Commitments and contingencies






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



                                       F-3
<PAGE>



                           USA Biomass Corporation
                     (Formerly AMCOR Capital Corporation)
                         Consolidated Balance Sheets

                     December 31, 1998 and August 31, 1998

                            (Amounts in Thousands)

               LIABILITIES AND SHAREHOLDERS' EQUITY, CONTINUED

                                                    (Unaudited)
                                                    December 31,   August 31,
                                                         1998          1998
                                                    -----------   -----------
Shareholders' equity:

  Preferred Stock (2,000,000 shares authorized):

   Series  A, 9%  Convertible  Preferred  Stock,
   $0.01  par  value;  cumulative nonvoting,
   $7,475,000  aggregate  liquidation  preference;
   812,500  shares authorized, 747,500 shares
   issued and outstanding.                                  $7            $7

   Series  B,  6%  Convertible  Preferred  Stock,
   $0.01 par  value;   cumulative nonvoting,
   $4,044,140  aggregate  liquidation  preference;
   750,000  shares authorized, 394,414 shares
   issued and outstanding.                                   4             4

   Common  stock,  $0.002 par value;  25,000,000
   shares  authorized,  7,761,385 shares issued,
   7,737,135 shares outstanding at December 31,
   and August 31, 1998.                                     16            16

   Additional paid-in capital                           21,970        21,970
   Accumulated earnings (deficit)                      (15,057)      (13,024)
   Treasury stock, at cost (24,250) common shares
    at December 31 and August 31, 1998)                   (118)         (118)
                                                    -----------   -----------
      Total shareholders' equity                         6,822         8,855
                                                    -----------   -----------
   Total liabilities and shareholders' equity          $26,483        $21,471
                                                    ===========   ===========





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


                                       F-4

<PAGE>



                           USA Biomass Corporation
                     (Formerly AMCOR Capital Corporation)

                     Consolidated Statements of Operations
              For the Four Months Ended December 31, 1998 and 1997

                            (Amounts in Thousands)


                                                    (Unaudited)    (Unaudited)
                                                         1998          1997
                                                    -----------   -----------

Revenues                                                $2,025          $406

Costs and expenses:
  Cost of revenues                                       1,694           634
  General and administrative expenses                    1,153           678
  Other expense                                              4           --
  Interest expense, net of interest income                 389            86
                                                    -----------   -----------
                                                         3,240         1,398
                                                    -----------   -----------
Loss from continuing operations
 before income taxes                                    (1,215)         (992)
(Expense)/benefit from income taxes                         (3)          334
                                                    -----------   -----------
Loss from continuing operations                         (1,218)         (658)
                                                    -----------   -----------
Discontinued operations:
  Loss from disposal of discontinued asset                 815           --
  Income from discontinued operations                      --             12
                                                    -----------   -----------
Net loss                                               $(2,033)        $(646)
                                                    ===========   ===========



Loss from continuing operations per common
 share, basic and diluted                               $(0.20)       $(0.12)
                                                        ======        ======
Net loss per common share,
 basic and diluted                                      $(0.31)       $(0.12)
                                                        ======        ======






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

                                       F-5

<PAGE>



                           USA Biomass Corporation
                     (Formerly AMCOR Capital Corporation)

                     Consolidated Statements of Operations
              For the Three Months Ended December 31, 1998 and 1997

                            (Amounts in Thousands)


                                                        (Unaudited)  (Unaudited)
                                                           1998          1997
                                                          -------       -------

Revenues                                                  $ 1,714       $   361

Costs and expenses:
  Cost of revenues                                          1,315           304
  General and administrative expenses                         857           437
  Other (income) expense                                      (93)           --
 Interest expense, net of interest income                     430            60
                                                          -------       -------
                                                            2,509           801
                                                          -------       -------
Loss from continuing operations
 before income taxes                                         (795)         (440)
(Expense) Benefit from income taxes                            (3)          147
                                                          -------       -------
Loss from continuing operations                              (798)         (293)
                                                          -------       -------
Discontinued operations:
  Loss from disposal of discontinue asset                     815            --
  Income from discontinued operations                          --             6
                                                          -------       -------
Net loss                                                  $(1,613)      $  (287)
                                                          =======       =======



Loss from continuing operations per common
 share, basic and diluted                                 $ (0.24)      $ (0.06)
                                                          =======       =======
Net loss per common share,
 basic and diluted                                        $ (0.35)      $ (0.06)
                                                          =======       =======








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

                                       F-6

<PAGE>



                           USA Biomass Corporation
                     (Formerly AMCOR Capital Corporation)

              Consolidated Statements of Shareholders' Equity
              For the Year Ended August 31, 1998 and the Four
                 Months ended December 31, 1998 (Unaudited)




                                       Series A       Series B
                                      Preferred      Preferred         Common
                                        Shares         Shares          Shares
                                      ----------     ----------      ----------
Balance, August 31, 1997                      --        404,414       7,172,974
Issuance of Series A
   9% Convertible
   Preferred Stock                       747,500             --              --
Shares issued upon
   exercise of options                        --             --          31,250
Shares issued in
   payment of debt                            --             --          14,927
Shares issued for the
   acquisition of
   TransPacific
   Environmental, Inc.                        --             --         406,109
Shares issued in
   settlement of
   litigation                                 --             --         144,000
Options on Common
   Stock granted to
   nonemployees for
   consulting and other
   services                                   --             --              --
Treasury shares
   acquired                                   --             --              --
Shares reacquired
   and retired                                --             --          (7,875)
Series A Preferred
   Stock dividends                            --             --              --
Net loss                                      --             --              --
                                      ----------     ----------      ----------
Balance, August 31, 1998                 747,500        404,414       7,761,385

Share cancellation                            --        (10,000)             --
Net loss                                      --             --              --
                                      ----------     ----------      ----------
Balance, December 31, 1998               747,500        394,414       7,761,385
                                      ==========     ==========      ==========


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

                                       F-7


<PAGE>



                           USA Biomass Corporation
                     (Formerly AMCOR Capital Corporation)

         Consolidated Statements of Shareholders' Equity, Continued
              For the Year Ended August 31, 1998 and the Four
                 Months ended December 31, 1998 (Unaudited)




                                             Common      Series A     Series B
                                            Treasury     Preferred    Preferred
                                             Shares        Shares       Shares
                                            -------       -------      -------

                                                          (Amounts in Thousands)
Balance, August 31, 1997                         --            --      $     4
Issuance of Series A
   9% Convertible
   Preferred Stock                               --       $     7           --
Shares issued upon
   exercise of options                           --            --           --
Shares issued in
   payment of debt                               --            --           --
Shares issued for the
   acquisition of
   TransPacific
   Environmental, Inc.                           --            --           --
Shares issued in
   settlement of
   litigation                                    --            --           --
Options on Common
   Stock granted to
   nonemployees for
   consulting and other
   services                                      --            --           --
Treasury shares
   acquired                                 (24,250)           --           --
Shares reacquired
   and retired                                   --            --           --
Series A Preferred
   Stock dividends                               --            --           --
Net loss                                         --            --           --
                                            -------       -------      -------
Balance, August 31, 1998                    (24,250)            7            4

Share cancellation                               --            --           --
Net loss                                         --            --           --
                                            -------       -------      -------
Balance, December 31, 1998                  (24,250)      $     7      $     4
                                            =======       =======      =======

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

                                       F-8

<PAGE>



                           USA Biomass Corporation
                     (Formerly AMCOR Capital Corporation)

         Consolidated Statements of Shareholders' Equity, Continued
              For the Year Ended August 31, 1998 and the Four
                 Months ended December 31, 1998 (Unaudited)

                            (Amounts in Thousands)


                                                        Treasury      Additional
                                           Common        Common        Paid-in
                                            Stock         Stock         Capital
                                          --------      --------       --------

Balance, August 31, 1997                  $     14            --       $ 14,242
Issuance of Series A
   9% Convertible
   Preferred Stock                              --            --          6,162
Shares issued upon
   exercise of options                          --            --             62
Shares issued in
   payment of debt                              --            --             71
Shares issued for the
   acquisition of
   TransPacific
   Environmental, Inc.                           1            --          1,195
Shares issued in
   settlement of
   litigation                                   --            --             83
Options on Common
   Stock granted to
   nonemployees for
   consulting and other
   services                                     --            --            188
Treasury shares
   acquired                                     --      $   (118)            --
Shares reacquired
   and retired                                  --            --            (33)
Series A Preferred
   Stock dividends                              --            --             --
Net loss                                        --            --             --
                                          --------      --------       --------
Balance, August 31, 1998                        16          (118)        21,970

Share cancellation                              --            --             --

Net loss                                        --            --             --
                                          --------      --------       --------
Balance, December 31, 1998                $     16      $   (118)      $ 21,970
                                          ========      ========       ========

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

                                       F-9

<PAGE>



                           USA Biomass Corporation
                     (Formerly AMCOR Capital Corporation)

         Consolidated Statements of Shareholders' Equity, Continued
              For the Year Ended August 31, 1998 and the Four
                 Months ended December 31, 1998 (Unaudited)

                               (Amounts in Thousands)


                                                   Accumulated
                                                 Earnings(Deficit)       Total
                                                 ----------------      --------
Balance, August 31, 1997                             $  3,259          $ 17,520
Issuance of Series A
   9% Convertible
   Preferred Stock                                         --             6,169
Shares issued upon
   exercise of options                                     --                63
Shares issued in
   payment of debt                                         --                71
Shares issued for the
   acquisition of
   TransPacific
   Environmental, Inc.                                     --             1,196
Shares issued in
   settlement of
   litigation                                              --                83
Options on Common
   Stock granted to
   nonemployees for
   consulting and other
   services                                                --               188
Treasury shares
   acquired                                                --              (118)
Shares reacquired
   and retired                                             --               (33)
Series A Preferred
   Stock dividends                                       (497)             (497)
Net loss                                              (15,786)          (15,786)
                                                     --------          --------
Balance, August 31, 1998                              (13,024)            8,855

Share cancellation                                         --                --
Net loss                                               (2,033)           (2,033)
                                                     --------          --------
Balance, December 31, 1998                           $(15,057)         $  6,822
                                                     ========          ========


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

                                      F-10

<PAGE>



                           USA Biomass Corporation
                     (Formerly AMCOR Capital Corporation)
                  Consolidated Statements of Cash Flows

              For the Year  Ended  August  31,  1998 and the  Four
Months  ended December 31, 1998 (Unaudited)
                           (Amounts in Thousands)


                                                       December 31,   August 31,
                                                           1998         1998
                                                         --------     --------
Cash flows from operating activities:
 Net income (loss)                                       $ (2,033)    $(15,786)
 Add loss (deduct income) from discontinued
  operations                                                   --        9,947
                                                         --------     --------
 Net loss from continuing operations                       (2,033)      (5,839)
 Adjustments to reconcile net loss to net cash
  used in operating activities:
   Depreciation and amortization                              285          358
   Uncollectible receivables                                   15           --
   Loss on impairment of assets                                --        1,971
   Loss on sale of assets                                      --          366
   Provision for settlement expense                            --          112
   Stock options granted to nonemployees for
    consulting and other services                              --          188
 Decrease (increase) in assets, net of effect of
  acquisition of TransPacific Environmental, Inc.:
   Accounts receivable                                       (205)         (98)
   Income taxes recoverable                                    --         (293)
   Other current assets                                      (178)         710
   Due from related parties                                    --          240
   Other assets                                               (98)           3
 Increase (decrease) in liabilities,
  net of effect of acquisition of
  TransPacific Environmental, Inc.:
   Accounts payable                                           678         (401)
   Payroll taxes payable                                     (174)          88
   Income taxes payable                                        --       (1,033)
   Accrued interest payable                                   121         (182)
   Deferred taxes                                              --          (56)
   Payable to affiliates                                      (11)          --
                                                         --------     --------

 Net cash used in operating
  activities of continuing operations                        (664)      (3,866)
 Net cash used in operating
  activities of discontinued operations                      (406)      (6,105)
                                                         --------     --------
Cash used in operating activities                          (1,675)      (9,971)
                                                         --------     --------



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

                                      F-11


<PAGE>


                           USA Biomass Corporation
                     (Formerly AMCOR Capital Corporation)

              Forthe Year  Ended  August  31,  1998 and the  Four  Months  ended
                 December 31, 1998 (Unaudited)




                                                       December 31,  August 31,
                                                           1998        1998
                                                         -------    -------
Cash flows provided by (used in)
 investing activities:
 Purchases of property and equipment                     $  (166)   $  (143)
 Sales of property and equipment                              --        101
 Acquisition of TransPacific Environmental, Inc.,
  net of cash acquired                                        --       (398)
                                                         -------    -------
Net cash used in investing
 activities of continuing operations                        (166)      (440)
Net cash provided by investing
 activities of discontinued operations                        --      4,199
                                                         -------    -------
Cash provided by (used in) investing operations             (166)     3,759
                                                         -------    -------
Cash flows provided by (used in) financing activities:
 Proceeds from line of credit                                625        250
 Proceeds from notes and loans                             1,570      2,229
 Repayment of notes and loans                               (374)    (3,541)
 Dividends paid on Series A Preferred Stock                   --       (497)
 Acquisition of treasury shares                               --       (118)
 Net proceeds from issuance of Series A
  Preferred Stock                                             --      6,169
 Purchase and retirement of common stock                      --        (33)
 Exercise of stock options                                    --         62
                                                         -------    -------
Net cash provided by financing activities
 of continuing operations                                  1,781      4,521
Net cash provided by (used in) financing
 activities of discontinued operations                        --      2,339
                                                         -------    -------
Cash provided by financing activities                      1,781      6,860
                                                         -------    -------
Net increase (decrease) in cash                              (60)       648

Cash and equivalents at beginning of year                    828        180
                                                         -------    -------
Cash and equivalents at end of year                      $   767    $   828
                                                         =======    =======

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

                                      F-12

<PAGE>



                           USA Biomass Corporation
                     (Formerly AMCOR Capital Corporation)

                  Consolidated Statements of Cash Flows
              For the Year Ended August 31, 1998 and the Four
                 Months ended December 31, 1998 (Unaudited)

              Supplemental Disclosures of Cash Flow Information


                                                December 31,      August 31,
                                                   1998             1998
                                                 --------         --------
Cash paid during the year for:
  Interest:
   Continuing operations                         $    189         $    838
   Discontinued operations                            384              521
                                                 --------         --------
                                                 $    573         $  1,359
                                                 ========         ========
  Income taxes                                         --          332,589
                                                 ========         ========






                           Supplemental Schedule of
      Non-Cash Investing and Financing Activities of Continuing Operations



Assets acquired (disposed of) in non-cash transactions:
  Assets acquired                                      5,486,636    $ 1,141,225
  Receivables from related parties incurred            2,905,733        815,184
  Capital lease obligations incurred                   2,580,903       (727,610)
  Liabilities incurred                                        --       (413,615)
  Liability to officer incurred                               --       (815,184)

Satisfaction of debt through issuance of stock:
  Liabilities satisfied                                       --    $    70,899
  Common stock issued                                         --        (70,899)





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

                                      F-13

<PAGE>


                             USA Biomass Corporation
                      (Formerly AMCOR Capital Corporation)

                      Consolidated Statements of Cash Flows

                 For the Year Ended August 31, 1998 and the Four
                   Months ended December 31, 1998 (Unaudited)





                           Supplemental Schedule of
     Non-Cash Investing and Financing Activities of Continuing Operations,
                                 Continued


                                                    December 31,   August 31,
                                                         1998          1998
                                                    -----------   -----------

Settlement liability and related party receivable:
 Liability to estate of former officer incurred          --       $  (283,388)
 Receivable from related party incurred                  --           283,388


Purchase of all the capital stock of TransPacific
 Environmental, Inc.:

 Fair value of assets acquired                           --       $ 2,260,933
 Cash paid                                               --          (411,207)
 Common stock issued                                     --        (1,195,842)
                                                         --       -----------
 Liabilities assumed                                     --       $  (653,884)
                                                         --       ===========


Included in the net liabilities  assumed were the following operating assets and
 liabilities:

Cash                                                     --       $    13,053
Accounts receivable                                      --           116,235
Other current assets                                     --            48,531
Other assets                                             --             2,230
Accounts payable                                         --          (679,283)
Notes payable                                            --          (154,650)







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

                                      F-14

<PAGE>



                           USA Biomass Corporation
                     (Formerly AMCOR Capital Corporation)

                Notes to the Consolidated Financial Statements
                     For the Year Ended August 31, 1998
            and the Four Months Ended December 31, 1998 (Unaudited)

1.   Description of the Company's Business

The continuing operations of USA Biomass Corporation (the "Company"), a Delaware
corporation,  consist of tree trimming services and clean green waste processing
conducted by TransPacific Environmental, Inc. ("TPE"), which was acquired by the
Company in November 1997 ("biomass"). In order to focus on expanding its biomass
operation and its waste transport operation,  which commenced in September 1998,
the Company's Board of Directors  adopted a plan to discontinue its agribusiness
and real estate  activities on December 23, 1998. As a result,  the agribusiness
and real estate activities have been presented as discontinued operations in the
consolidated financial statements.

During the year ended August 31, 1998,  the Company  changed its name from AMCOR
Capital Corporation to USA Biomass Corporation.

In  January  1999,  the  Company's  Board of  Directors  elected  to change  the
Company's year end to December 31.

2.   Summary of Significant Accounting Policies

     Principles of Consolidation

The  consolidated  financial  statements  include  the  accounts  of USA Biomass
Corporation and  subsidiaries.  TPE and AMCOR Biomass Farms, LLC (99% owned) are
the Company's continuing operating subsidiaries.  Sun Goddess Farms, Inc., AMCOR
Properties,  Inc., Las Palomas  Country Club Estates,  LLC (99% owned) and AMCOR
Builders,  LLC  (99%  owned)  are  discontinued   operations.   All  significant
intercompany transactions have been eliminated.

On December 23, 1998, the Company adopted a plan to discontinue its agribusiness
and  real  estate  operations  and  to  sell  the  related  assets.   Assets  of
discontinued  operations  are  recorded  at the  lower  of cost or  market  (net
realizable value).

     Revenue Recognition

Biomass  revenues are  recognized on the accrual  method at the time the related
services are performed.

     Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

                                      F-15


<PAGE>


2.   Summary of Significant Accounting Policies, Continued

     Cash and Equivalents

Cash and equivalents include short-term, highly liquid instruments with original
maturities of three months or less.

     Property and Equipment

Property  and  equipment  are  recorded  at cost and are  depreciated  using the
straight-line method over the expected useful lives noted below.

                                                            Estimated Useful
                                                                   Life
                                                           ----------------
     Vehicles and equipment                                    3-10 years
     Office furniture and equipment                            3-10 years
     Buildings                                                   30 years

Leasehold  improvements are amortized over the shorter of the life of the assets
or the life of the related lease.

     Intangible Assets

Intangible   assets  include  licenses  and  agreements,   customer  lists,  and
contracts. Intangible assets are amortized using the straight line method over a
period of 10 years.  Regularly,  the Company assesses the intangible  assets for
impairment  based  on  recoverability  of  the  balances  from  expected  future
operating cash flows on an undiscounted basis.

     Long Lived Assets

Long-lived  assets  held and used by the  Company are  reviewed  for  impairment
whenever events or changes in circumstances indicate that the carrying amount of
an  asset  may  not  be  recoverable.  The  estimated  undiscounted  cash  flows
associated with the assets are compared to the carrying  amounts to determine if
a writedown to fair value is required.

     Stock Based Compensation

The Company  accounts for  stock-based  compensation  using the intrinsic  value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to  Employees".  Compensation  cost for stock  options,  if any, is
measured as the excess of the quoted market price of the Company's  stock at the
date of grant  over the  amount  an  employee  must pay to  acquire  the  stock.
Compensation  cost is recorded over the requisite  vesting  periods based on the
market value on the date of grant.

Statements of Financial  Accounting  Standards ("SFAS") No. 123, "Accounting for
Stock-Based  Compensation,"  established accounting and disclosure  requirements
using a fair-value-based  method of accounting for stock-based employee and non-
employee  compensation  plans.  The Company has elected to remain on its current
method of accounting as described above for employee compensation plans, and has
adopted the disclosure requirements of SFAS No. 123.


                                      F-16

<PAGE>


     Earnings per Common Share

In 1997 the Financial Accounting Standards Board issued SFAS No. 128 - "Earnings
Per Share".  This  pronouncement  replaced the previously  reported  primary and
fully  diluted  earnings  per share with basic and diluted  earnings  per share,
respectively.  Earnings per share for the three and four months  ended  December
31, 1997 and 1998 have been calculated in accordance with this pronouncement.

2.   Summary of Significant Accounting Policies, Continued

     Earnings per Common Share, Continued

Basic  earnings  per share is computed by dividing  income  available  to common
shareholders by the weighted average number of common shares outstanding for the
year.  Diluted  earnings per share  reflects the  potential  dilution that could
occur if dilutive  securities  and other  contracts  to issue  common stock were
exercised or  converted  into common stock or resulted in the issuance of common
stock that then shared in the Company's earnings.

     Significant Accounting Policies Specific to Discontinued Operations

     Revenue Recognition

Revenues from the Company's discontinued agribusiness and real estate operations
are generated through management service and development fees charged to various
partnerships  engaged in agribusiness  and real estate.  Management  service fee
income,  primarily due from affiliates,  is recognized when  contractually  due,
which approximates the time that services are performed.  Crop sales, other farm
income and real estate sales,  are  recognized by the accrual method at the time
of sale.

     Inventories - Real Estate

All direct and indirect costs of real estate  development  are  accumulated  and
valued at the lower of cost or net realizable value.

     Investment

The Company uses the equity method of accounting for its 50% investment interest
in PS III Farms, LLC, an Oregon limited liability company.

3.   Discontinued Operations

On December 22, 1998, the Company adopted a formal plan to discontinue its agri-
business and real estate  operations  and to sell the related  assets and assign
related  liabilities  in order to focus on its biomass and waste  transportation
segments.  The  Company  plans to dispose of its  agribusiness  and real  estate
operations  by November 30, 1999. As a result,  the financial  statements of the
Company  reflect the net assets and operating  results of the  agribusiness  and
real estate segments as discontinued operations.


                                      F-17

<PAGE>



4.   Due from Officers and Directors

Amounts due from officers and directors  relate to the  activities of a partner-
ship, Enterprise Packing Company ("EPC"), the partners of which are two officers
who are also shareholders and directors of the Company.  The amount due from the
partnership  represents the net of advances to and other  transactions  with the
partnership.

     Facility Lease

EPC owns the rights to the use of a packing  facility  during the grape  harvest
cycle and the  annual use of  related  office  space in  Coachella  Valley.  The
Company sub-leases these facilities on a month to month basis for use in its now
discontinued  agribusiness operations and its corporate offices for $156,000 per
year.

5.   Note Receivable

The note receivable at December 31, 1998, resulted from sale of a portion of the
Company's discontinued  operations.  In August 1999, the Company sold this note.
The terms of this sale  provide for the  Company to receive up to an  additional
$500,000 if the note is paid by August 2000. This amount decreases monthly until
July 2002. If the note is paid after July 2002, the Company will not realize any
additional  amounts.  Any additional amounts received will be recorded as income
when received.


                                      F-18

<PAGE>



5.  Deferred Income Taxes


The components of the provision for income taxes are as follows:

                                                    (Amounts in Thousands)


                                                    December 31,    August 31,
                                                        1998          1998
                                                    -----------   -----------

Current tax expense (benefit):
  Federal                                                     --    $   (996)
  State                                                 $      3           3
                                                        --------    --------
                                                               3        (993)
                                                        --------    --------
Deferred tax expense (benefit):
  Federal                                                     --        (240)
  State                                                       --         184
                                                        --------    --------
                                                              --         (56)
                                                        --------    --------
Total provision (benefit)                               $      3    $ (1,049)
                                                        ========    ========


Reconciliation of the effective tax rate to the U.S. federal statutory income
tax rate is as follows:

                                                       December 31,  August 31,
                                                            1998        1998
                                                        --------    --------
U.S. federal statutory income tax rate                     (34.0)%      34.0%
State tax provision                                          0.3        (0.7)
Nondeductible writedowns related to
 discontinued operations                                    (2.7)
Other                                                         --        (1.0)
Change in valuation allowance                               34.0       (23.4)
                                                        --------    --------
  Effective income tax rate                                  0.3         6.2%
                                                        ========    ========





                                      F-19

<PAGE>



5.   Deferred Income Taxes, Continued

The Company has a state tax credit  carryforward  of  $250,462  that  expires in
2010.  The Company will carry back  $2,929,129 of the federal net operating loss
to receive a refund of $292,639 for the year ended August 31, 1996 and offset an
unpaid tax liability of $703,266 for the year ended August 31, 1997. The Company
also has federal and state net operating  loss  carryforwards  of $4,214,963 and
$3,570,846,  respectively.  The federal and state net operating  losses begin to
expire in 2018 and 2003, respectively.

6.   Stock Based Compensation Plans

A summary of the  activity  relating to the  Company's  stock option plans as of
December  31 and August 31,  1998,  and  changes  during the years then ended is
presented below:

                                       December 31, 1998       August 31, 1998
                                     --------------------   -------------------
                                                 Weighted              Weighted
                                                  Average               Average
                                                 Exercise              Exercise
                                       Shares      Price      Shares     Price
                                      -------    ---------   -------   --------

 Outstanding at beginning of year    1,012,883      $2.43    656,633     $1.65
 Exercised                                  --         --    (31,250)     2.00
 Granted                                    --         --    555,000      3.97
 Returned/repriced                      30,000         --   (150,000)     4.60
 Forfeited                                  --         --    (17,500)     3.14
                                    ----------      -----  ---------     -----
 Outstanding at end of year            982,883       2.43  1,012,883      2.43
                                    ==========      =====  =========     =====


The following table summarizes  information  about stock options  outstanding at
December 31, 1998:

                                         Weighted Average
    Range of       Outstanding at      Remaining contractual   Exercisable at
 Exercise Prices December 31, 1998       Life (in Years)     December 31, 1998
 ---------------  ---------------      ---------------------   ---------------

     $1.30             87,500                     6                  87,500
      1.60            454,133                     2                 454,133
      2.00             56,250                     9                  17,102
      3.00            255,000                    10                   -
      4.00             10,000                     9                   7,500
      5.00            120,000                    10                  37,500
                  -----------                                     ---------
  1.30 to 5.00        982,883                                       603,735
                  ===========                                     =========





                                      F-20


<PAGE>


6.   Stock Based Compensation Plans, Continued


The Company continues to account for stock-based  compensation using the intrin-
sic value method  prescribed by the Accounting  Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees".  Therefore,  under the principles of
APB Opinion No. 25, the Company does not  recognize  compensation  expense asso-
ciated  with the  granting  of stock  options.  SFAS No.  123,  "Accounting  for
Stock-Based Compensation",  requires the use of option valuation models to prov-
ide  supplemental  information  regarding  options granted after 1994. Pro forma
information  regarding  net income and earnings per share shown below was deter-
mined as if the Company had accounted  for its employee  stock options under the
fair value method of that statement.

The fair value of each option  granted was  estimated at the date of grant using
the Black-Scholes  option pricing model (the "BSOPM") with the following weight-
ed average assumptions used for grants in 1998 and 1997, respectively:  dividend
yield of 0% for both  years,  expected  volatility  of 0.971 to 1.17,  risk-free
interest rate at 4.90% to 5.26%,  and expected  contractual life of 10 years for
both years.  The weighted  average fair value of options granted during 1998 and
1997 was $3.07 and $2.76, respectively.

The BSOPM was developed for use in estimating the fair value of traded  options.
The Company's employee stock options have characteristics  significantly differ-
ent from those of traded  options,  such as vesting  restrictions  and extremely
limited  transferability.  In addition, the assumptions used in option valuation
models are highly  subjective,  particularly the expected stock price volatility
of the underlying  stock.  Because changes in these subjective input assumptions
can materially  affect the fair value  estimate,  in management's  opinion,  the
existing  models do not provide a reliable  single  measure of the fair value of
employee stock options.

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized  over the  options'  vesting  periods.  The pro forma effect on net
income for 1998 and 1997 is not  representative  of the pro forma  effect on net
income in future  years  because it does not take into  consideration  pro forma
compensation  expense  related to grants made prior to 1994.  Pro forma informa-
tion in future years will reflect the  amortization  of a larger number of stock
options granted in several  succeeding  years.  The Company's pro forma informa-
tion is as follows:


                                                         1998          1997
                                                    -----------   -----------
 Net income (loss), as reported                     $(2,033,064)    $(658,000)
 Net income (loss), pro forma                       $(2,069,014)    $(663,125)
 Basic earnings (loss) per share, as reported            $(0.31)       $(0.12)
 Basic earnings (loss) per share, pro forma              $(0.31)       $(0.12)

Common  stock  warrants  issued in 1998 and 1997 to  non-employees  for services
rendered  primarily under  consulting  agreements are accounted for based on the
fair  value  of the  consideration  received  or the fair  value  of the  equity
instrument issued, whichever is more reliably measurable.


                                      F-21

<PAGE>



6.   Stock Based Compensation Plans, Continued



A summary of the  activity  relating to  warrants  as of  December  31, 1998 and
August 31, 1998 and changes during the periods then ended is presented below:



                                     December 31, 1998       August 31, 1998
                                     and 4 Months Ended     and 12 Months Ended
                                     December 31, 1998       August 31, 1998
                                    ---------------------  --------------------
                                                 Weighted              Weighted
                                                  Average               Average
                                                 Exercise              Exercise
                                     Warrants      Price    Warrants     Price
                                     --------    --------   --------   --------

 Outstanding at beginning of year     479,500       $3.29    362,500      $1.66
 Granted                                   --          --    117,000      $1.63
                                     --------     -------   --------   --------
 Outstanding at end of year           479,500        3.29    479,500       3.29
                                     ========     =======   ========   ========



The range of exercise  prices of warrants  outstanding  at December 31, 1998 was
$2.00 to $6.67.  The weighted average fair value of warrants granted during 1998
and 1997 was $3.25 and $2.08, respectively.

The  following  table  summarizes  information  about  warrants  outstanding  at
December 31, 1998:


                                                                      Estimated
                              Volatility    Dividend    Risk Free       Lives
                                Factor       Yield    Interest Rates  (In Years)
- -----------------------     ----------    --------  --------------  ----------
1998 warrant grants               .032         0%        5.20%           5
1997 warrant grants           1.08 to 1.184    0%        5.34%           3





                                      F-22

<PAGE>



7. Income (loss) Per Common Share

  In 1998,  the Company  adopted SFAS 128,  "Earnings  Per Share."  Earnings per
  common share have been calculated in accordance with this statement.

  Basic and  diluted  earnings  (loss) per common  share have been  computed  by
  dividing the income (loss)  available to common  stockholders  by the weighted
  average  number of common shares for the period.  Income  (loss)  available to
  common  stockholders is income (loss) after deducting from income or adding to
  the (loss) any preferred stock dividend  requirements.  The additional  common
  shares  that would be  issuable  for  options  and  warrants  outstanding  are
  ignored,  as to include them in the calculation of diluted  earnings per share
  would be antidilutive.

  The  computations  of basic  and  diluted  earnings  per  common  share are as
  follows:

                                                    4 Months Ended  December 31,
                                                        1998          1997
                                                    -----------     -----------
Loss from continuing operations                     $(1,218,514)    $  (658,000)
Add:  dividends on preferred shares -
       declared                                               0        (168,000)
Add:  dividends on preferred shares -
       cumulative, not declared                        (297,133)              0
                                                    -----------     -----------
Loss to common shareholders                          (1,515,647)       (906,000)
Income (loss) from discontinued operations             (814,550)         12,000
                                                    -----------     -----------
Net (loss) available to common
 shareholders                                       $(2,330,197)    $  (894,000)
                                                    ===========     ===========
Weighted average shares - basic and
 diluted                                              7,737,135       7,319,507
                                                    ===========     ===========

Loss per share from continuing operations           $     (0.20)    $     (0.12)
                                                    -----------     -----------
Net (loss) per share available to common
 shareholders                                       $     (0.31)    $     (0.12)
                                                    ===========     ===========

The effect of the  potentially  dilutive  securities  were not  included  in the
computation  of  diluted  earnings  per share  because  to do so would have been
antidilutive for the periods presented.

                                      F-23


<PAGE>



7.   Income (loss) Per Common Share, Continued

     During  1998,  the  Company  had  747,500  shares of  Series A  convertible
     preferred  stock  (entitled  to a 9% per  share  cumulative  dividend)  and
     404,414 shares of Series B convertible  preferred stock  outstanding.  Each
     share of preferred stock is convertible into one share of common stock. The
     convertible  preferred stock was not included in the computation of diluted
     earnings per share because the effect of conversion  would be antidilutive.
     The Series A convertible  preferred stock was still  outstanding at May 31,
     1998.

8.   Amendment to Financial Statements

     The Company  has amended its  December  31, 1998  financial  statements  to
     reflect an increase in the loss on the disposal of an asset in discontinued
     operations.




















                                      F-30


<PAGE>



Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operation


  Overview

Following the Company's acquisition of TransPacific Environmental,  Inc. ("TPE")
in November  1997,  the  Company's  focus  shifted  from  agribusiness  and land
planning/development  to  biomass.  Subsequently,  in  June  1998,  the  Company
broadened  its new focus to include solid waste  transportation  and developed a
strategic   alliance  with  Waste   Management  of  California,   Inc.   ("Waste
Management"). In light of the Company's strategic alliance with Waste Management
and  related  actual and  potential  biomass and solid  waste  trans-  portation
opportunities,  the Company's  Board of Directors  determined that the Company's
shift in focus from  agribusiness and land  planning/development  to solid waste
transportation and biomass should be complete and permanent.  Consequently,  the
Board of Directors approved the Company's name change effective August 31, 1998,
and  subsequently,  on  December  22,  1998,  adopted  a  Plan  of  Discontinued
Operations  (the "Plan"),  pursuant to which the Company  intends to discontinue
its agribusiness and land planning/development  activities by December 22, 1999,
and focus on its solid waste transportation and biomass activities.

Implementation  of the Plan is in process  and has had a material  impact on the
presentation of the Company's financial statements.  The operations,  cash flows
and net assets of these  operations  for both  fiscal  1999 and fiscal 1998 have
been reclassified as discontinued operations, and the assets of these operations
were  reduced  to the  lower  of cost or net  realizable  value.  The  Company's
agribusiness and land planning/development operations have been accounted for as
discontinued  operations  and  the  results  thereof  have  been  excluded  from
continuing operations in the Company's  consolidated  financial statements.  The
Company had no biomass activities prior to fiscal 1997.

As outlined below, the Company's overall financial  condition as of December 31,
1998,  as compared to August 31,  1998,  has not  improved,  but the Company has
determined that with the continued growth of waste  transportation  and biomass,
financed  by  the  liquidation  of  assets  from  discontinued  operations,  its
conditions  should  improve  considerably  in fiscal  1999.  Total  assets  have
increased  32%  to $28  million,  due  principally  to  the  acquisition  of the
equipment and facility for the transportation  division, while total liabilities
increased  62% to $20  million  due to debt  related to the  acquisition  of the
equipment  and  facility  for  the  transportation  division,  as well as the $4
million loan obtained in December 1998. The net effect of this event resulted in
shareholders' equity decreasing 11% to $8 million.

The Company's current ratio decreased to 1.25 at December 31, 1998, from 1.55 at
August 31, 1998, primarily due to long term debt converting to short term.

Revenues for the three months ending  December 31, 1998,  of $1,714,000  were up
from  $365,000 for the three months  ending  December 31, 1997,  and revenues of
$2,025,000  were also up from $406,000 for the  comparable  four month period in
1997  due to  the  start-up  of the  transportation  division,  which  generated
$894,000 in revenue,  and increased revenues in biomass.  This resulted in a net
loss of $1,613,000  for the three months ending  December 31, 1998,


<PAGE>



compared to net loss of $646,000 for the three months ending  December 31, 1997,
and a net loss of  $2,033,000  for the four  months  ended  December  31,  1998,
compared to a $646,000 loss in the comparable four month period in 1997.

However,  the Company expects revenues to continue to increase in fiscal 1999 as
the  transportation  division  revenues grow and the Company expands its biomass
operations through internal growth.  Overall,  fiscal 1999 revenues are expected
to be considerably higher than revenues from continuing operations during fiscal
1998.


  Results of Operations

The Company's  continuing  operations consist of solid waste  transportation and
biomass  activities,  which include green waste processing and tree maintenance.
The Company has entered  into an agreement  to sell its  unprofitable  municipal
tree operations during March 1999. The Company's discontinued operations consist
of  agribusiness  and  land/planning/development.  A discussion  of the material
factors that affected the Company's results of continuing  operations and, where
applicable, the results of its discontinued operations, are presented separately
below.

  Results of Continuing Operations

  Revenues

The Company's  revenues  from  continuing  operations  for three and four months
ended December 31, 1998,  reflect  principally its biomass  activities and waste
transport  revenue.  While revenues for the three and four months ended December
31, 1997,  reflect only biomass  activities as the waste transport  contract did
not commence until October 1998.

For the three months ended December 31, 1998,  total revenues of $1,714,000 were
up $1,353,000  (374%) from the comparable three month period ending December 31,
1997,  and for the four  months  ended  December  31,  1998,  total  revenues of
$2,025,000 were up $1,619,000 (398%) from the comparable 1997 period, mainly due
to commencing the waste transport  agreement ($894,000 in revenues for the three
months ended December 31, 1998) and the internal growth of the Company's biomass
business.

  Cost of Revenues

Cost of revenues of  $1,315,000  for the three months  ended  December 31, 1998,
increased  $1,101,000  (333%)  from the  comparable  three month  period  ending
December 31, 1997,  and for the four months  ended  December 31, 1998,  costs of
revenues of $1,694,000  increased  $1,060,000  (167%) from the  comparable  1997
period  mainly  due to the  implementation  of the  waste  transport  agreement,
internal growth in biomass, and the inclusion of TPE for the complete period.

In October 1998,  the Company  experienced a fire at its green waste  processing
site in Fontana.  As a result of this fire, the Company  experienced  $75,000 in
one-time only expenses related to the clean-up and the diversion of the incoming
green waste to other processors to continue  servicing the Company's  customers,
as well as a decrease in sales of $100,000 (at 20% gross margin) from October 15
through  December 31, 1998.  The customer  representing  this  decrease in sales
resumed diversion of its green waste to the Company in January 1999.


<PAGE>



  General and Administrative Expenses

For the three months  ended  December 31,  1998,  total  general  administrative
expenses of  $857,000  were up $420,000  (97%) from the  comparable  three month
period  ending  December  31, 1997,  and for the four months ended  December 31,
1998, general administrative  expenses of $1,153,000 were up $475,000 (70%) from
the  comparable  1997  period,  mainly  due to  starting-up  the  transportation
division,  the  addition of  management  personnel  for future  growth,  and the
overhead from TPE.

  Interest Expense

For the three months  ended  December  31,  1998,  interest  expense of $430,000
increased $370,000 (617%) from the comparable three month period ending December
31, 1997, and for the four months ended December 31, 1998,  interest  expense of
$389,000 increased  $303,000 (352%) from the comparable 1997 period,  mainly due
new debt  incurred  to finance  the  transport  segment  and  ongoing  corporate
interest.

  Loss from Continuing Operations

For the three months ended December 31, 1998, loss from continuing operations of
$798,000  increased $358,000 (81%) from the comparable three month period ending
December  31,1998,  which  offset  the  profitability  of  the  waste  transport
contract,  and for the four months ended December 31, 1998, loss from continuing
operations of  $1,218,000  increased  $560,000  (85%) from the  comparable  1997
period, mainly due to the $683,000 of losses in municipal tree maintenance.

  Results of Discontinued Operations

For the three and four months ended December 31, 1998, the loss from disposal of
discontinued  operations  increased  $815,000 from the comparable three and four
month period  ended  December  31, 1997 due to the  adjustment  of the net value
realized on the sale of a certain asset of discontinued operations.

For the  three  months  ended  December  31,  1998,  results  from  discontinued
operations  of $0.00  decreased  $6,000 (100%) from the  comparable  three month
period  ending  December  31, 1997,  and for the four months ended  December 31,
1998,  results from  discontinued  operations of $0.00 decreased $12,000 (100%),
from the  comparable  1997  period,  mainly due to the accrual of all  operating
losses for discontinued operations at August 31, 1998.

  Liquidity and Capital Resources

Despite the significant  loss in the period ending December 31, 1998,  liquidity
at December 31, 1998, is improved from August 31, 1998. This  improvement is due
primarily to the  reclassification of the net assets of discontinued  operations
as current  assets,  as they are expected to be liquidated  within one year, and
the pending sale by the Company of its  municipal  tree  maintenance  operations
(which lost $638,000 in the four months ended  December 31, 1998).  In addition,
liquidity  has improved as a result of the  following:  (i)  management  of cash
flow; (ii) in October 1998, the Company obtained a $5.0 million  equipment lease
line from a national financial institution, (about $4.1 million of this line was
used to  acquire 40 trucks  and 16  trailers,  which are being used in the solid
waste transportation activities, and which are expected to be sufficient to meet
the requirements of these  activities for fiscal 1999);  (iii) in December 1998,
the Company  obtained a $4 million loan


<PAGE>



collateralized  by the $10 million  note  receivable  related to the sale of the
Rancho California  property (the loan accrues interest at 12.25%,  with interest
and  principal  due at the  time  the $10  million  note  receivable  is due and
payable,  and the net  proceeds  which  were used to repay a $2.5  million  note
payable and to reduce accounts  payable by about $1 million);  and (iv) on March
6, 1999,  the Company  obtained a commitment to borrow an additional $1 million,
collateralized by the $10 million note receivable from the same lender. However,
the Company had current  liabilities  of $9.0 million at December 31, 1998,  and
$8.5 million at February 15, 1999,  including  delinquent  payroll taxes of $1.0
million  and  $1.2  million  at  December  31,  1998,  and  February  15,  1999,
respectively.

The Company has an oral agreement with an equipment  financing source to provide
equipment  financing in addition to that  obtained in October 1998  required for
new solid waste transportation or biomass contracts.

The Company  believes that the combination of the $4.0 million loan entered into
in December 1998 (plus an additional $1 million to be funded in March 1999), the
financing for equipment that may be needed for additional growth,  combined with
expected  asset sales,  are  sufficient to meet its liquidity  requirements  for
fiscal 1999.

  Year 2000 Compliance

Management of the Company  believes that its  computerized  information  systems
currently in use and expected to be in use prior to the year 2000 are compliant.
The Company has formed a task force to assess the  effect,  if any,  the Company
may encounter in dealing with vendors and outside service  entities who may have
year 2000  exposure.  Management  does not expect that the  financial  impact of
required modifications to the Company's systems, if any, will be material to the
Company's financial  position,  cash flows or results of operations in any given
year.


                           PART II - OTHER INFORMATION


Item 1. Legal Proceedings

On January 22,  1999,  Gus  Franklin and Susan  Franklin  ("Franklins")  filed a
compliant in Orange County Superior Court, Case No. 804714,  seeking damages for
breach  of  employment  contract,  breach  of  covenant  of good  faith and fair
dealing,  fraud and wrongful  termination  of  employment in violation of public
policy in  connection  with the  termination  by the  Company of the  Franklins'
employment  agreements  with the Company.  The  Franklins  are seeking  damages,
according to proof,  including for lost salaries,  cash and stock bonuses, stock
options and other wages and  employment  benefits,  together with other expenses
and losses.  In addition,  the  Franklins  are seeking  punitive  and  exemplary
damages in connection with certain of the causes of action. To date, the Company
has not filed an  answer to the  lawsuit.  The  Company  plans to file an answer
denying any wrongdoing.  However, no assurances can be given with respect to the
outcome of this proceeding and the effect such outcome may have on the Company.

The Company is not involved in any other pending legal  proceedings,  other than
legal proceedings occurring in the ordinary course of business. Such other


<PAGE>



legal proceedings in the aggregate are believed by management to be immaterial.

Item 2. Change in Securities

None


Item 3. Defaults Upon Senior Securities

Due to recent operating  losses,  the Company has no earnings legally  available
for the payment of  dividends.  On March 5, 1999,  the total  amount of dividend
arrearages  on the Series A  Preferred  Stock and Series B  Preferred  Stock was
$336,735 and $248,648 respectively.


Item 4. Submission of Matters to a Vote of Security Holders

Not Applicable


Item 5. Other Information

Not Applicable


Item 6. Exhibits and Reports of Form 8-K

     (a)  Exhibits

          27- Financial Data Schedule

     (b)  Reports on Form 8-K

Form 8-K,  dated January 12, 1999,  as filed with the  Commission on January 27,
1999,  reporting  on Item 8,  Change  in Fiscal  Year,  in  connection  with the
Company's Board of Directors'  decision to change the Company's  fiscal year end
from August 31 to December 31,  commencing  with the calendar  year/fiscal  year
ended December 31, 1998.






Pursuant  to the  requirement  of the  Securities  Exchange  Act  of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


Date: April 14, 2000                           USA BIOMASS CORPORATION

                                               /S/EUGENE W. TIDGEWELL
                                               -----------------------
                                               Eugene W. Tidgewell,
                                               Chief Financial Officer