10-K

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            -------------------------

                                    FORM 10-K

[x]   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934. For the fiscal year ended December 31, 1999

                                       OR

[  ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934.

           For the transition period from ___________ to ___________

                         Commission File Number: 0-14292

                                GTS DURATEK, INC.
             (Exact name of Registrant as specified in its charter)

             DELAWARE                                     22-2476180
   (State or other jurisdiction of                   (I.R.S. Employer
   incorporation or organization)                    Identification No.)

10100 OLD COLUMBIA ROAD, COLUMBIA, MARYLAND           21046
- -------------------------------------------           -----
(Address of principal executive offices)              (Zip Code)

Registrant's telephone number, including area code:   (410) 312-5100
                                                      --------------

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

Securities registered pursuant to Section 12(g) of
   the Act:                                           Common Stock, par value
                                                        $0.01 Per Share

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

Indicate by check mark if disclosure of delinquent files pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the Registrant's knowledge, in 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
          ---

As of March 16, 2000, the aggregate market value of the outstanding shares of
the Registrant's Common Stock, par value $0.01 per share, held by non-affiliates
was approximately $119,124,000 based on the average closing price of the Common
Stock as reported by the NASDAQ National Market on March 16, 2000. Determination
of affiliate status for this purpose is not a determination of affiliate status
for any other purpose.

Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the most recent practicable date.

                  Class                          Outstanding at March 16, 2000
                  -----                          -----------------------------
Common stock, par value $0.01 per share                 13,422,459 shares

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive Proxy Statement for its 2000 Annual
Meeting of Stockholders are incorporated by reference into Part III hereof.





                         FORM 10-K CROSS-REFERENCE SHEET


                                                                           PAGE
PART I
      Item 1.     Business....................................................1
      Item 2.     Properties.................................................19
      Item 3.     Legal Proceedings..........................................19
      Item 4.     Submission of Matters to a Vote of Security Holders........20

PART II
      Item 5.     Market for Registrant's Common Equity and
                     Related Stockholder Matters.............................21
      Item 6.     Selected Financial Data....................................22
      Item 7.     Management's Discussion and Analysis of
                     Financial Condition and Results of Operations...........23
      Item 7A. Quantitative and Qualitative Information About Market Risk....29
      Item 8.     Financial Statements and Supplementary Data................30
      Item 9.     Changes in and Disagreements with Accountants
                     on Accounting and Financial Disclosure..................60

PART III
      Item 10. Directors and Executive Officers of the Registrant*...........61
      Item 11. Executive Compensation*.......................................62
      Item 12. Security Ownership of Certain Beneficial Owners
                     and Management*.........................................62
      Item 13. Certain Relationships and Related Transactions*...............62

PART IV
      Item 14. Exhibits, Financial Statement Schedules and Reports
                     on Form 8-K.............................................63

Signatures...................................................................64


*  Incorporated by reference from registrant's definitive Proxy Statement for
   the Annual Meeting of Stockholders to be held May 16, 2000 which Proxy
   Statement will be filed not later than 120 days after the end of the fiscal
   year covered by this Annual Report on Form 10-K.


                                     PART I


ITEM 1.  BUSINESS

OVERVIEW

         GTS Duratek, Inc. (the "Company") provides waste treatment solutions
for radioactive, hazardous, mixed (i.e. intermingled radioactive and hazardous)
and other wastes. The Company combines proprietary technologies for treating
various waste streams with a staff of highly skilled personnel with significant
environmental experience to offer its customers a comprehensive approach to
their waste treatment needs that includes commercial waste processing services,
government waste processing services and technical support services. The
Company's strategy is to (i) provide the low cost solution to process
contaminated waste streams, (ii) combine its proprietary technologies and
technical support services to provide full-service waste treatment, and (iii)
team, where appropriate, with other companies with complementary expertise to
advance GTS Duratek's treatment solutions within its target markets and into new
markets.

         The Company conducts its commercial waste processing operations
principally at its Bear Creek Operations Facility located in Oak Ridge,
Tennessee. This facility is the largest commercial waste processing facility for
low-level radioactive waste in the United States and has the capacity to process
30 million pounds of radioactive waste per year. Generators of low-level
radioactive waste send their waste to this facility where the Company, utilizing
a combination of treatment technologies, processes the waste, achieving
significant volume and mass reduction, before sending it to a landfill for
disposal. Accordingly, the Company believes its customers benefit from
significant cost savings as compared to other commercially available
alternatives. The Company's waste treatment technologies utilized at the Bear
Creek Operations Facility include incineration, compaction, and metal
decontamination and recycling. Other technologies used by the Company in its
commercial waste processing operations include vitrification, steam reforming
and ion exchange. The Company's technologies can be used independently or in
tandem to process its customers' waste for long-term storage and disposal. The
Company's ability to integrate its waste treatment technologies enables it to
handle a diversity of waste streams in a cost-effective manner.

         The Company also provides on-site waste processing services on large
government projects for the United States Department of Energy ("DOE"). The
on-site waste processing services provided by the Company on DOE projects
include program development, waste characterization, on-site waste treatment,
facility operation, packaging and shipping of residual waste, profiling and
manifesting the processed waste and selected technical support services. In
November 1995, the Company and BNFL, Inc. ("BNFL"), the U.S. subsidiary of
British Nuclear Fuels plc, formed a strategic alliance, agreeing to team on five
major DOE environmental remediation projects. To date, the Company and BNFL have
been jointly awarded contracts from the DOE on two of such projects.

         The Company's technical support services encompass over 600 engineers,
consultants and technicians, some of whom are full-time employees and the
balance of whom are contract employees, who support and complement the Company's
commercial and government waste processing operations and also provide highly
specialized technical support services for the Company's customers. The
technical support services provide a consistent source of revenue and the
complementary expertise for the Company to expand and diversify its waste
treatment operations. The technical support services provided by the Company for
its customers include site decontamination and decommissioning, radiological
engineering services, staff augmentation and outage support (principally to
assist nuclear power plants during regular maintenance shutdowns), environmental
and computer consulting and environmental safety and health training. Having
these technical resources available has enabled the Company to move its
technologies from bench-scale

                                       1

laboratory testing to field operations and commercial application more rapidly
and to handle larger scope waste cleanup projects.

         The Company also provides transportation services for radioactive
wastes. The Company maintains a fleet of tractors, trailers and shipping
containers for transporting radioactive wastes from customers' sites for
processing and disposal.

         On June 30, 1999, the Company acquired 100% of the outstanding capital
stock of Frank W. Hake Associates, LLC ("Hake") from HakeTenn, Inc., a Delaware
corporation and an affiliate of the Hake Group of Philadelphia, Pennsylvania,
and two individuals for $12.9 million in cash, subject to a post closing
adjustment, and the assumption of certain liabilities. Hake is a specialist in
storage, transportation handling and processing of radioactive waste emanating
from nuclear power generation plants throughout the United States. Hake also
stores and services power generation equipment at its licensed facility in
Memphis, Tennessee.

         The Company has developed the following joint venture and collaborative
arrangements, among others, in order to advance the commercialization of its
waste treatment technologies and increase the number of markets that it serves:

         o    The Vitreous State Laboratory of The Catholic University of
              America in Washington, D.C. ("VSL"). The Company has an
              established research and development relationship with the VSL,
              one of the leading research centers in the world for glass
              technology, including vitrification of waste.

         o    BNFL, Inc. ("BNFL"). In November 1995, the Company formed a
              strategic alliance with BNFL to jointly pursue up to five major
              DOE environmental remediation projects. BNFL is the U.S.
              subsidiary of British Nuclear Fuels plc, one of the largest
              processors of radioactive waste in the world. To date, the Company
              and BNFL have agreed to jointly pursue three major DOE waste
              treatment projects and have been jointly awarded contracts from
              the DOE on two such projects, the Hanford Tank Waste Remediation
              System and the Idaho Advanced Mixed Waste Treatment Facility
              projects.

         o    The Carlyle Group ("Carlyle"). In January 1995, Carlyle, a
              Washington, D.C.-based private merchant bank, made a significant
              investment in the Company. Carlyle provided the Company with a
              significant capital infusion and, on a continuing basis, provides
              the Company with experience with companies that contract with the
              federal government.

         The Company seeks to utilize the complementary technical expertise or
commercial experience of the other parties in these collaborative arrangements
and, where possible, to develop additional collaborative arrangements, to pursue
its primary markets and expand into new markets.

RECENT EVENTS

         In February 2000, the Company completed the sale of its 80% interesest
in DuraTherm, Inc. to DuraTherm Group, Inc. for $8.0 million in cash and a
subordinated note for $355,000. Proceeds to the Company of $8.0 million were
used by the Company to pay down borrowings under its bank credit facility. The
note receivable bears interest at 14%, payable semi-annually during the first
year following the sale, and 18% during the second year following the sale with
the principal due in February 2002. The Company estimates that it will recognize
a pre-tax gain of approximately $1.5 million on the sale.

         On March 29, 2000, the Company announced that it has entered into a
definitive agreement to acquire the nuclear services business of Waste
Management, Inc. for up to $65 million in cash, consisting of $55 million in
cash at closing and up to $10 million additional cash consideration upon the
satisfaction of certain post-closing conditions. Waste Management Nuclear
Services ("WMNS") is a leader in providing low-level radioactive waste
management services for the commercial industry and the federal government. WMNS
consists primarily of three operating segments: (i) the Federal Services
Division which provides radioactive waste handling, transportation, treatment
packaging, storage, disposal, site cleanup, and project management services
primarily for the DOE and other federal agencies; (ii) the Commercial Services
Division which provides radioactive waste handling, transportation, licensing,
packing, disposal, and decontamination and decommissioning services primarily to
nuclear utilities; and (iii) the Commercial Disposal Division which operates a
commercial low-level radioactive waste disposal facility at Barnwell, South
Carolina. The proposed acquisition is subject to certain regulatory approvals
and other customary conditions. Closing of the transaction is targeted for the
second quarter of 2000.

                                       2

COMMERCIAL WASTE PROCESSING

         The Company conducts its commercial waste processing operations
principally at its Bear Creek Operations Facility located in Oak Ridge,
Tennessee. This facility is the largest commercial waste processing facility for
low-level radioactive waste in the United States and has the capacity to process
30 million pounds of radioactive waste per year. Generators of low-level
radioactive waste send their waste to this facility where the Company, utilizing
a combination of treatment technologies, processes the waste, achieving
significant volume and mass reduction, before sending it to a landfill for
disposal. Accordingly, the Company believes its customers benefit from
significant cost savings as compared to other commercially available
alternatives. The Company's waste treatment technologies utilized at the Bear
Creek Operations Facility include incineration, compaction and metal
decontamination and recycling.

         Other technologies used by the Company in its commercial waste
processing operations include vitrification, steam reforming and ion exchange.
The Company's technologies can be used independently or in tandem to process its
customers' waste for long-term storage and disposal. The Company's ability to
integrate its waste treatment technologies enables it to handle a diversity of
waste streams in a cost-effective manner.

         The Company has developed or acquired several waste treatment
technologies for use on a variety of radioactive, hazardous, mixed and other
waste streams. The following is a brief summary of the waste treatment
technologies that are being utilized by the Company.

         Vitrification. The Company's vitrification technology converts waste to
environmentally stable, leach-resistant glass through a patented
high-temperature melter system known as a DuraMelter(TM). The Company's
vitrification technology involves combining radioactive, hazardous, mixed and
other waste with glass-forming additives in a DuraMelter(TM) that reaches
temperatures of 1150(degree)C to 1450(degree)C (or 2100(degree)F to
2640(degree)F). The high temperatures of the DuraMelter(TM) cause the waste and
any additives to form a molten liquid that becomes solId glass as it cools. As
the molten liquid cools, the radioactive or hazardous atoms become chemically
bonded in the molecular structure of the glass for long-term storage or
disposal, thereby virtually eliminating contamination of the environment. For
certain waste streams, the Company's vitrification technology can achieve volume
reductions of up to 97%. The glass produced by the DuraMelter(TM) passes the
United States Environmental ProtectiOn Agency's Toxicity Characteristic Leachate
Procedure (TCLP), one of the most commonly used criteria for waste acceptance,
particularly hazardous and mixed waste, at land disposal facilities.

         The DuraMelter(TM) is a proprietary melter system within a
refractory-lined cavity incorporating submergEd electrodes which heat up the
materials within the cavity. Contaminated waste materials are deposited onto a
melt surface in either a liquid (slurry) or a solid form. Glass forming
additives are also introduced into the system and the amount of such additives
is dependent upon the characteristics of the waste stream. As the electrodes in
the DuraMelter(TM) raise the temperature above 600(degree)C, the waste and
additive mixture becomes eleCtrically conductive. Resistance to the passage of
electricity through the mixture causes further heating and maintains the waste
and additive mixture in a molten state. This process is known as "joule heating"
and typically requires temperatures of about 1150(degree)C. Within the
DuraMelter(TM), water evaporates and organic substances are oxidized forming
simple gases which are channeled into the patented off-gas treatment system. The
inorganic radioactive or hazardous substances in the waste are dissolved into
the molten glass mixture. The molten glass exits through a side opening near the
floor of the melting cavity and, depending upon the characteristics of the waste
stream, is either discharged in bulk or directed into the proprietary GTS
Duratek gem machine where it forms into beads, 1 to 2 centimeters in diameter,
for long-term storage. As the beads of molten mixture cool, the inorganic
radioactive or hazardous substances become chemically bonded or "locked" into
the molecular structure of the glass.

                                       3

         DuraMelters(TM) range in size from small bench-scale units used for
testing and characterization of wasTe streams to commercial sized melters
designed for large waste treatment and remediation projects. Currently, the
Company's largest commercial operating DuraMelters(TM) can process up to
approximately 400 cubic feet of waste pEr day. The design of the DuraMelter(TM)
can be modified depending upon the characteristics of the waste stream to Be
processed. To process waste streams that have a higher content of soil or sand,
the Company has designed a DuraMelter(TM) with higher temperature capability (up
to 1450(degree)C or 2640(degree)F). To process waste streamS that include a high
content of corrosive elements such as sulfates, phosphates, lead and nitrates,
the Company has designed a DuraMelter(TM) with multiple waste chambers to
protect the electrodes from the corrosiveness of the waste stream.

         INCINERATION. Incineration is the most cost-effective treatment for
most dry active waste and is the preferred waste treatment technology of many of
the Company's customers for nonhazardous waste oils and other waste liquids. The
Company's two incinerators at its Bear Creek Operations Facility are the only
two licensed commercial low-level radioactive waste incinerators in the United
States. Each of the Company's incinerators is capable of processing solid waste
at up to 1,600 pounds per hour and up to 30 gallons of radioactive, nonhazardous
waste oils simultaneously. The proprietary ash transport system of the Company's
incinerators mixes ash with air, resulting in complete burning of all
combustible material without excessive particulate carry-over common to most
incinerators. In addition, the secondary chamber utilizes two burners at up to
2200(degree)F to Ensure complete combustion of all volatile materials.
Incinerator ash and fly ash are compacted in the Company's UltraCompactor(TM) to
form a high-density, nondispersible solid which is packaged and shipped for
disposal. THe incinerators are also equipped with a combination of emission
control equipment and technology to maximize environmental and employee safety,
including a heat recovery boiler for off-gas temperature control, a baghouse
filter for particulate control, a dual HEPA bank for contamination control, a
wet scrubber for acid gas removal, an evaporator to concentrate and solidify
suspended and dissolved solids in the liquid from the scrubbers and a recycling
system so that water can be recycled for reuse or processed in the incinerator
which eliminates all liquid effluents.

         COMPACTION. Achieving maximum density is critical to cost-effective
radioactive waste disposal at most burial sites. The Company's
UltraCompactor(TM) at its Bear Creek Operations Facility is the world's largeSt
compactor available for low-level radioactive waste, capable of compacting both
drums and boxes (up to 38 cubic feet) with the force of 10 million pounds. The
UltraCompactor(TM) has a capacity of 70,000 cubic feet per montH. Average volume
reduction using the Company's compaction technology is approximately six times
for dry active waste and eight times for asbestos. Typically, the waste
processed utilizing this technology is dry active waste and includes paper,
plastic, asbestos, metals, woods and filters. Other items that have been
successfully volume reduced using the UltraCompactor(TM) include soils, motors,
pumps, pipes, valves and conduits. The Company also hAs a mobile compactor which
can be operated at the customer's site. The mobile compactor utilizes 2,200 tons
of compaction force, achieves volume reduction rates of 60% to 80% and is suited
for smaller-scale jobs on concrete, rubble, steel structures, valve bodies and
other hard-to-compact material near theoretical density.

         METAL DECONTAMINATION AND RECYCLING. The Company's metals processing
program at its Bear Creek Operations Facility provides a cost-effective solution
for radioactively contaminated metals utilizing its full-service capabilities of
surveying, decontaminating and melting. Upon arrival at the Company's Bear Creek
Operations Facility, the Company examines the metal and sorts it for processing
based on the contamination level of the metal to achieve the most cost-effective
process for recycling metal. If it is more cost-effective to dispose of it
rather than to recycle it, the Company will volume reduce the metal using its
UltraCompactor(TM) aNd send it to an appropriate burial site. If the metal can
be decontaminated and commercially recycled, the Company will employ its
decontamination technologies which incorporate chemical, abrasive grit/shot,
sponge and carbon dioxide processing. The Company's specialized decontamination
equipment allows

                                       4

multiple shapes and metal types to be successfully treated for commercial
recycling. For those metals that cannot be economically decontaminated to levels
low enough for free release, the Company will utilize its metal melting
technology. The Company's 20 ton, 7,200 kw electric induction furnace, the
largest available in the United States, operates exclusively for melting and
recycling radioactively contaminated metal. This furnace is capable of
processing various types of ferrous metals over a broad alloy spectrum and
copper and lead. All of the metal processed through the metal melt furnace is
recycled into shield blocks and provided to various high-energy physics projects
throughout the United States and Canada. The decontamination and/or recycling of
radioactively contaminated metal has two principal benefits, it eliminates the
liability for the original waste generator and it eliminates the cost of burial.

         STEAM REFORMING. The Company's steam reforming technology is designed
for processing the toughest wastes including mixed waste, waste requiring
segregation and waste exhibiting high activity levels. In particular, the
Company has successfully utilized this technology to process radiologically
contaminated medical and biological wastes. The system's compact size,
containment integrity, in-drum processing option and steam-based chemistry offer
significant safety and regulatory advantages over most incinerator or other
thermal destruction systems. The Company holds exclusive rights to this
proprietary technology, which first vaporizes organics in the waste, either in
liquid or solid forms, and then converts those gases to a dry, nonhazardous,
mineral-like solid residue with greater than 99.99% efficiency. Using its steam
reforming technology, the Company is able to achieve volume reductions of up to
100 times, depending on the type of waste.

         The steam reforming process is conducted in a steam-laden,
oxygen-deficient environment that converts organic and biochemical compounds to
carbon monoxide, hydrogen, carbon dioxide and water. The two-step process first
employs an evaporation phase (between 700(degree)F and 900(degree)F) which
breaks down and vaporizes Most organic compounds and water from the waste. The
waste solids are not exposed to higher temperatures which would tend to volatize
metals and other radionuclides from the residue. The volatized gases exit the
evaporator and are passed through a filter which removes any fine entrained
particles from the gases. Particulate-free gases exiting the filter are then
co-mixed with additional superheated steam and passed through a high-temperature
reformer. The gases, some of which are organic fractions of the original waste
material, are fully decomposed in the reformer at high destruction efficiencies.
The resulting products are simple gases and inert mineral-like residue.

         Because the Company's steam reforming technology does not use
combustion and because the secondary pollutants are not formed by the steam
reforming process, it is not classified as an incinerator by the United State
Environmental Protection Agency ("EPA") and is therefore easily permitted for
on-site operations. Accordingly, the Company can provide a compact mobile unit
for on-site processing at the customer's facility. For example, the Company
successfully processed high-level radioactive wastes at Portland General
Electric's Trojan Nuclear Plant. The project included sorting and packaging
spent fuel pool wastes submerged in 20 feet of water, removing wastes from the
fuel pool, destructing hydrogen bearing materials in the mobile steam reformer
and sealing the processed wastes in dry-storage capsules for long-term storage.

         ION EXCHANGE. The Company has developed a family of selective ion
exchange media, called DURASIL(R), whicH selectively targets and removes
specific radioactive, toxic or hazardous ions from wastewater while passing
benign ions. DURASIL(R) is formulated to separate specific contaminants from
liquid waste streams thereby allowinG radioactive and hazardous ions to be
removed and separated into their respective species. Since radioactive and
hazardous materials are regulated by two different government agencies, this
ability to separate mixed waste greatly simplifies its disposal. DURASIL(R) also
has physical characteristics that enable it to endure extremE wastewater
processing conditions. It is mechanically stable and nonflammable, does not
shrink or swell, is virtually immune to radiation damage and has no effect on
the pH

                                       5

of the waste stream. The Company has developed different DURASIL(R) ion exchange
media depending on thE characteristics of the liquid waste stream. The Company
manufactures and supplies highly specialized waste water purification systems
and the patented DURASIL(R) for commercial nuclear power plants, DOE facilities
and industriaL clients.

GOVERNMENT WASTE PROCESSING

         The Company provides on-site waste processing services on large
government projects for the DOE. The on-site waste processing services provided
by the Company on DOE projects include program development, waste
characterization, on-site waste treatment, facility operation, packaging and
shipping of residual waste, profiling and manifesting the processed waste and
selected technical support services. In November 1995, the Company and BNFL
formed a strategic alliance, agreeing to team on five major DOE environmental
remediation projects. To date, the Company and BNFL have agreed to jointly
pursue three major DOE waste projects and have been jointly awarded contracts
from the DOE on two of such projects, the Hanford River Protection Project
("RPP") and the Idaho Advanced Mixed Waste Treatment Project ("AMWTP").

         The Company is currently involved in several waste treatment projects
for the DOE. The following is a summary of the status of the Company's major
waste treatment projects with the DOE.

         HANFORD RIVER PROTECTION PROJECT ("RPP"). In September 1996, the team
led by BNFL, of which the Company is a key member, was awarded a contract for
the Hanford Tank Water cleanup at the DOE's site in Hanford, Washington. The
Hanford site is the single largest DOE facility and contains the largest amount
of high-level radioactive waste in the United States with approximately 54
million gallons of high-level radioactive waste and low-level radioactive waste
which is contained in 177 underground storage tanks.

         The Company will provide the technical and support services for
vitrifying both the high-level and low-level waste for the project. Part I of
the project is divided into two parts. Part IA, which was concluded in January
1998, consisted of completing the facility conceptual design, initiating the
environmental permitting process and submitting a proposal to the DOE for the
next phase. The Company completed its portion of Part IA by delivering the
conceptual design for high level waste (HLW) and low active waste (LAW) melters,
and by generating a cost estimate for the design and construction of these
systems. In addition during Part IA, glass formulation and validation testing on
a small scale was performed at the VSL.

         In July 1998, the DOE and BNFL reached an agreement for Part 1B of the
Hanford RPP contract. The two part contract, worth approximately $6.9 billion
to the team, will result in the safe immobilization of approximately 10% mass,
or 20 to 25% of the radioactivity in Hanford's 54 million gallons of tank waste
by 2018. Under the negotiated contract, the project will proceed in two parts.
The first part consists of a 24-month advance facility design phase that will
result in securing private project financing, filing regulatory permit
applications, preparing to begin construction, and establishing final fixed-unit
prices and a schedule for cleanup of the waste. The second part of the project
will provide for the construction of the facilities, followed by treatment and
immobilization of the high and low-level waste contained in the tanks as
determined in the first part and established according to the fixed-price.

         In preparation for beginning the detailed design of the demonstration
facility, BNFL funded $17 million to design, construct, own and operate a pilot
DuraMelter(TM) at the Company's headquarters. The pilot DuraMelteR(TM) commenced
startup in December 1998 and completed its initial phase of testing in September
1999. The melter processed non-hazardous, non-radioactive test materials using
the Company's proven vitrification technology for fusing contaminants in
durable, ecologically safe glass. The melter, a 3.3 ton-per-day vitrification
system, is a one-third scale version of one of the 10 ton-per-day LAW melters to

                                       6

be built at the RPP facility. During the testing, the pilot melter demonstrated
that the full-scale LAW melter configuration achieved and sustained a glass
production rate of one ton of glass per day per square meter of glass surface
area.

         According to DOE estimates, the total Phase I contract is estimated to
be worth $6.9 billion over 18 years. Phase II of the cleanup, to convert all the
tank waste to glass, is expected to take 20 to 30 years to complete. The total
project is estimated by the DOE to cost in excess of $40 billion. The Company's
portion of the total contract is undetermined at this point. See "Joint Venture
and Collaborative Arrangements - BNFL."

         IDAHO ADVANCED MIXED WASTE TREATMENT PROJECT ("AMWTP"). In December
1996, the team led by BNFL, of which the Company is a key member, was awarded
the sole contract by the DOE for AMWTP in Idaho Falls, Idaho. Under the
contract, the team will finance, construct and operate a treatment facility for
mixed radioactive and toxic wastes at the DOE's Idaho National Engineering and
Environmental Laboratory ("INEEL"). The facility will treat and package for
disposal approximately 65,000 cubic meters of mixed and transuranic waste now
stored or buried at INEEL. The contract also provides an option for the team to
treat an additional 120,000 cubic meters of mixed waste generated by future
cleanup operations at INEEL or other DOE sites.

         The BNFL-led team originally planned to utilize vitrification and
incineration technologies developed by the Company in the INEEL project. In June
1998, the team changed the technical process and has proposed the ash from the
incineration process to be micro-encapsulated (in cement) in lieu of vitrified
(melted into glass). This change in process is being explored due to changes in
the waste acceptance criteria of the Waste Isolation Pilot Project ("WIPP"),
which is less restrictive. The acceptability of this change has not yet been
agreed to by the State of Idaho and the EPA. Even though the Company's
vitrification technology may not be utilized in this project, the Company will
retain a major role in the project with responsibility for all the thermal
processes. In addition, the Company's scope has been expanded to include other
ancillary processes.

         The Company will be responsible for the design, development,
procurement, and construction supervision of the waste processing systems. The
AMWTP is split into three phases with the intention of meeting important and
aggressive milestones agreed to by the DOE and the State of Idaho. The Company
completed its Phase I activities with the submission of its conceptual design
for the waste processing systems to BNFL in January 1998. BNFL began the
environmental permitting process in January 1998 with the submission of the
permit applications to the State of Idaho. Phase II includes the design and
construction of the facility and operational testing for a duration of up to
three years. Phase III includes the retrieval of the waste and operation of the
facility with an approximate duration of 12 years. After the completion of these
phases, there will be a decommissioning of the facility anticipated to take six
months. The total contract is estimated to be worth approximately $1 billion.
The Company's portion of the total contract is undetermined at this point. See
"Joint Venture and Collaborative Arrangements - BNFL."

TECHNICAL SUPPORT SERVICES

         The Company's technical support services encompass over 600 engineers,
consultants and technicians, some of whom are full-time employees and the
balance of whom are contract employees, who support and complement the Company's
commercial and government waste processing operations and also provide highly
specialized technical support services for the Company's customers. The
technical support services provide a consistent source of revenue and the
complementary expertise for the Company to expand and diversify its waste
treatment operations. The technical support services provided by the Company for
its customers include site decontamination and decommissioning, radiological
engineering services, staff

                                       7

augmentation and outage support (principally to assist nuclear power plants
during regular maintenance shutdowns), environmental and computer consulting and
environmental safety and health training. The Company provides these technical
support services either as a prime contractor or as a subcontractor to a diverse
group of electric utilities, industrial facilities, commercial businesses and
government agencies including Duke Power Company, Southern Nuclear Operating
Company, Vermont Yankee Nuclear Power Corporation and the DOE. Having these
technical resources available has enabled the Company to move its technologies
from bench-scale laboratory testing to field operations and commercial
application more rapidly and to handle larger scope waste cleanup projects.

         SITE DECONTAMINATION AND DECOMMISSIONING. The Company has performed
decontamination and decommissioning services at over 60 facilities worldwide,
including major scopes of work at two nuclear power plants which have been
completely decommissioned to United States Nuclear Regulatory Commission ("NRC")
requirements. The Company has performed decontamination and decommissioning
services at the following commercial nuclear power plants: Fort St. Vrain
Nuclear Generating Station, Humboldt Bay Power Plant Unit 3, Shoreham Nuclear
Power Station, Rancho Seco Nuclear Station, Trojan Nuclear Power Plant and is
currently performing decontamination and decommissioning services under
contracts for Connecticut Yankee's Haddam Nuclear Power Station, Consumers
Energy Big Rock Point Nuclear Power Plant and Maine Yankee Atomic Power Company.
Decontamination and decommissioning services provided by the Company include
site radiological surveys, waste characterization, decommissioning planning,
remediation, health physics support, radwaste services and final surveys. The
Company has the technical personnel, who have developed project techniques
accepted by the NRC, programs, procedures, equipment and instrumentation to
handle projects involving small hot cells to large nuclear power stations. In
addition, through its transportation and commercial waste processing operations,
the Company offers its customers a comprehensive solution to their site
decontamination and decommissioning problems.

         RADIOLOGICAL ENGINEERING SERVICES. The Company's technical personnel
provide commercial and government customers with a variety of radiological
engineering services including development of health physics and emergency
preparedness programs, MORT analysis, licensing procurement, instrumentation and
radiological training. Most of the Company's senior technical personnel
providing radiological engineering services are fully certified and have
extensive operating plant as well as NRC and DOE experience.

         STAFF AUGMENTATION AND OUTAGE SUPPORT SERVICES. The Company provides
trained personnel to assist nuclear power plants undergoing periodic refueling,
maintenance outages, construction or decommissioning. There are 119 nuclear
power generating units in the United States, of which 108 are operational. To
control costs, utilities maintain their permanent staffs at the level needed for
steady-state power operations. They supplement their full-time staffs during
refueling and maintenance outages with skilled contract personnel. Every 12 to
24 months, nuclear power plants are shut down for scheduled maintenance that
typically takes 30 to 90 days. This shutdown and maintenance operation costs the
nuclear power facility on average $1 million for every day it is closed.
Accordingly, there is a strong economic incentive for the nuclear power
facilities to hire trained and experienced personnel for these maintenance
operations in order to complete the servicing as quickly and efficiently as
possible. The Company's trained technicians and personnel are experienced in
outage support procedures and are effective at helping to minimize the cost of
the power facilities' down time.

         The offering of services for operating nuclear power plants provides a
considerable market for the Company, despite the fact that no new plants have
been ordered in over 10 years. The demand for the Company's services results
from the extensive overhaul required to extend the life of aging plants,
replacement of major components of existing plants, startup of plants recovering
from long-term shutdown, modifications to the plants resulting from changing
legislation and the decommissioning of plants that have reached the end of their
useful lives.

                                       8

         The Company's largest customer for staff augmentation services is Duke
Power Company, which accounted for approximately 7% and 5% of the Company's
total revenues in 1998 and 1999, respectively. Duke Power currently has seven
nuclear power units at three sites. The Company provides a group of technicians
to the Duke Power system year-round and provides additional personnel to Duke
Power during planned maintenance outages. Other nuclear power utilities to which
the Company provides augmentation and outage support services include Southern
Nuclear Operating Company and Vermont Yankee Nuclear Power Corporation.

         ENVIRONMENTAL AND COMPUTER CONSULTING SERVICES. The Company provides
extensive environmental consulting services to clients in the areas of
environmental remediation, facility decommissioning, Occupational Safety and
Health Act ("OSHA") and EPA compliance audits, site characterization, licensing
and permitting and air quality and emission studies. The Company either supplies
professionals and technical personnel to supplement client staffs or assumes
responsibility for entire projects. Included among the Company's available
personnel for such environmental consulting projects are chemical, civil and
environmental engineers, certified health physicists, chemists, toxicologists,
safety and health experts, regulatory compliance specialists, remediation
experts, radiological control technicians, hazardous material technicians,
decontamination experts and others. The Company also supplies professionals and
technical specialists in a wide range of scientific, engineering, data
processing and communications disciplines. These individuals perform computer
consulting services such as program assessment and development, computer
software development and testing, networking, web site development, quality
assurance audits, non-destructive examination and computer training for a broad
base of clients.

         ENVIRONMENTAL SAFETY AND HEALTH TRAINING. The Company provides
radiation protection and hazardous waste training services nationwide. The
Company's training specialists prepare candidates, consisting of health physics
technicians and professionals from nuclear power plants, universities and
laboratories nationwide, for the National Registry of Radiation Protection
Technologists and American Board of Health Physics certification examinations.
The Company's training programs enable customers to realize cost savings through
increased worker competence and productivity, enhanced workplace safety and
improved compliance with regulatory requirements.

         TRANSPORTATION SERVICES. As part of its technical support services, the
Company provides certain complementary services to its customers including
transportation services. Through a wholly owned subsidiary, Hittman Transport
Services, Inc. ("Hittman"), the Company maintains a fleet of tractors, trailers
and shipping containers for transporting radioactive waste and radioactively
contaminated equipment for processing and disposal. All of Hittman's vehicles
are constantly monitored via satellite to optimize waste pickup and delivery
scheduling. Hittman maintains terminal locations around the country that are
conveniently located to 90% of the commercial nuclear power plants in the United
States.

JOINT VENTURE AND COLLABORATIVE ARRANGEMENTS

         In order to commercialize its technologies more rapidly and
cost-effectively, the Company has developed several important joint venture and
collaborative arrangements. The following is a summary of certain of these
relationships.

         VSL

         The Company has established a research and development relationship
with the VSL of The Catholic University in Washington, D.C. pursuant to which
the VSL provides ongoing research and development capabilities and technical
services in support of the Company's waste treatment projects, particularly its
government waste processing operations. In this complementary relationship, the
VSL provides the necessary technology and research and development support while
the Company advances the technology to commercial application.

                                       9

         The VSL, a research facility with a staff of 90 researchers, is one of
the leading research centers in the world for glass technology, including
vitrification. The laboratories at the VSL are equipped with highly
sophisticated analytical tools which enable the researchers to perform a
comprehensive array of analyses. The VSL's research and development capabilities
include waste characterization, testing of radioactive waste-loaded glasses to
evaluate glass durability, processability and leachability, glass dissolution
computer modeling, batch melting and the study of ion exchange media for
removing specific contaminants from liquid waste streams. Various DuraMelter(TM)
models have been designed and constructed at the VSL for use by the staff of the
VSL in its researCh and analytical work. In addition, the facility is fully
licensed for radioactive and hazardous materials research. The VSL is led by
Pedro B. Macedo, Ph.D. and Theodore A. Litovitz, Ph.D. who are the inventors and
owners of the technology licensed exclusively to the Company for ion exchange
and the vitrification of radioactive, hazardous, mixed and other wastes. See
"Business - Patents and Other Intellectual Property Rights."

         In addition to being the source of the vitrification technologies used
by the Company, the VSL provides ongoing services to the Company in support of
its waste treatment projects, particularly its government waste processing
operations. The VSL conducts expert waste composition and glass treatability
studies before any project is commenced, assists in the initial test melt phase
of each project and works with the Company's engineers in the design adaptation
of the DuraMelter(TM) technology to fit the waste characteristics of each nEw
cleanup project. In addition, the VSL conducts ongoing research and development
into improvements in the existing vitrification technologies and into entirely
new vitrification techniques, serving in effect as the research and development
arm of the Company. The primary advantage to the Company from its relationship
with the VSL is the access to leading vitrification technologies and ongoing
vitrification research without having to incur the ongoing overhead and
administrative expenses if such capabilities were in house.

         In return, the Company provides ongoing funding for research conducted
at the VSL on behalf of the Company. During 1998, the Company paid $530,000 in
research and development funding to the VSL. No funding was provided during
1999. For Company waste cleanup projects in which the VSL's technical services
are utilized by the Company, the Company pays the VSL on a time and expense
basis and includes the estimated cost for such services in its formal bid
proposal. The VSL is a not-for-profit institution so it does not include extra
fees or percentage profits in its cost estimates.

         BNFL

         In November 1995, the Company and BNFL entered into a strategic
alliance agreement. BNFL is the U.S. subsidiary of British Nuclear Fuels plc, a
United Kingdom-based company with annual revenues of approximately $2 billion
worldwide. British Nuclear Fuels plc is one of the largest processors of
radioactive waste in the world and is one of only two companies worldwide with
commercial experience in processing and stabilizing high-level radioactive
wastes. BNFL has been active in the U.S. radioactive waste market for the past
five years, including being selected as a member of the team to manage the DOE's
nuclear waste facility in Rocky Flats, Colorado. Pursuant to the terms of the
strategic alliance, the Company will receive a $1.0 million teaming fee for each
time that BNFL and the Company agree to jointly pursue a major DOE environmental
remediation project. To date, the Company and BNFL have agreed to jointly pursue
three major DOE environmental remediation projects and have been jointly awarded
contracts from the DOE on two of such projects.

         As part of the strategic alliance, BNFL invested $10.0 million in the
Company in the form of a convertible debenture. The debenture accrues non-cash
interest through November 2000 at the one-year London Interbank Offered Rate
(LIBOR) and is convertible at the option of BNFL into 1,381,575 shares of the
Common Stock prior to November 7, 2000. BNFL also agreed to provide the Company
with research and development funding of at least $500,000 per year over five
years. The two parties mutually agree on

                                       10

how the research and development funding will be spent, but the Company will
retain the rights to the vitrification processes that it develops through this
funding. The Company has agreed as part of the strategic alliance to sublicense
its radioactive waste vitrification technologies to BNFL for use only in the
United Kingdom.

         BNFL has funded $17 million to design, construct, own and operate a
pilot DuraMelter(TM) at the Company's headquarters. The pilot DuraMelter(TM)
commenced startup in December 1998 and completed its initial phase of testiNg in
September 1999. The melter processed non-hazardous, non-radioactive test
materials using the Company's proven vitrification technology for fusing
contaminants in durable, ecologically safe glass. The melter, a 3.3 ton-per-day
vitrification system, is a one-third scale version of one of the 10 ton-per-day
LAW melters to be built at the RPP facility. During the testing, the pilot
melter demonstrated that the full-scale LAW melter configuration achieved and
sustained a glass production rate of one ton of glass per day per square meter
of glass surface area.

         DURACHEM

         In September 1994, the Company formed a joint venture with Chem-Nuclear
Systems, Inc. ("Chem-Nuclear"), a subsidiary of Waste Management, Inc., to
design, construct and operate vitrification facilities to process commercial
radioactive waste for disposal, including low-level radioactive wastes from
nuclear power plants, hospitals, research laboratories and industrial
facilities. The joint venture entity, called DuraChem, is 55% owned by
Chem-Nuclear and 45% by the Company. The joint venture represents the
combination of the Company's proprietary vitrification technology and
Chem-Nuclear's 23 years of experience in providing radioactive waste handling
and processing services. DuraChem will pursue the disposal market for ion
exchange resins which are generated by nuclear power plants and contaminated
wastes from hospitals and laboratories. The vitrification facility of this joint
venture is located at Chem-Nuclear's waste processing center at Barnwell, South
Carolina. The DuraChem facility is located adjacent to the Barnwell landfill,
one of the few facilities in the United States permitted to accept commercially
generated low-level radioactive waste. The Company believes that DuraChem's
location is advantageous because of its proximity to the nation's primary
facility for handling low-level radioactive waste.

         In 1995, the Company and Chem-Nuclear constructed a vitrification
facility at Chem-Nuclear's radioactive waste processing center at Barnwell,
South Carolina. The Company designed and constructed a new DuraMelter(TM) At the
facility and is responsible for the vitrification operations. Chem-Nuclear
manages the overall facility and is responsible for procuring all required
operating permits, obtaining the low-level radioactive waste from its customers,
transporting the waste to the facility and removing the waste for ultimate
disposal once it has been vitrified. The need for the services provided by
DuraChem was created by the closure of nationally accessible low-level
radioactive waste disposal sites and the delay by state compacts in opening new
regional sites. The high cost of disposal of certain low-level radioactive waste
materials has caused commercial generators of low-level radioactive waste, in
some instances, to store their waste at their facilities until regional sites
are opened or other low-cost disposal alternatives become available. The
DuraChem facility was expected to begin commercial operations in 1997; however,
as a result of the Company focusing its management and capital resources on (i)
restarting the M-Area melter, (ii) successfully and rapidly incorporating SEG's
business following the acquisition and (iii) meeting commitments to the DOE
privatization cleanups in Hanford, Washington and Idaho Falls, Idaho, the
Company announced in April 1997, that it would reduce the priority of, and
capital commitments to, other projects which have higher levels of marketplace
uncertainty or have longer-term financial prospects including the DuraChem joint
venture. The Company's management anticipates commencement of the facility
within the next two years, however, changes in market conditions or other
factors could result in additional delays.

                                       11

         VITRITEK

         Through a joint venture with Vitritek Holdings Company, L.L.C.,
("Vitritek Holdings") a privately held entity, the Company has extended its
vitrification technology to non-radioactive wastes. The joint venture entity,
called Vitritek, is 50% owned by each of the Company and Vitritek Holdings. The
joint venture, formed in December 1993, represents the consolidation of
co-licensing rights to non-radioactive vitrification technologies previously
acquired by the Company and Vitritek Holdings. Under the terms of the joint
venture arrangement, all funding requirements and all profits are shared
equally. The Company expects the joint venture to have limited operations during
2000.

CUSTOMERS

         In its commercial waste processing operations, the Company derives
revenues from the processing and treatment of customer waste streams and from
related waste transportation services. Customers of the Company's commercial
waste processing services include electric utilities, government agencies,
industrial facilities, laboratories, hospitals and others. Revenues derived from
commercial waste processing operations represented approximately 45.6% and 49.4%
of the Company's total revenues in 1998 and 1999, respectively.

         In its government waste processing operations, the Company derives
revenues related to its proprietary vitrification technologies principally
through subcontracts with a combination of DOE contractors and subcontractors
including BNFL. Revenues derived from DOE-related subcontracts represented
approximately 19.7% and 21.0% of the Company's total revenues during 1998 and
1999, respectively.

         The Company provides technical support services to a diverse group of
government agencies and utilities. Customers include the DOE, the United States
Department of Defense ("DOD"), the EPA, state environmental protection agencies,
Duke Power Company and Southern Nuclear Operating Company. Revenues derived from
technical support services represented approximately 34.7% and 29.6% of the
Company's total revenues during 1998 and 1999, respectively.

         Revenues from Duke Power accounted for 7% and 5% of the Company's
revenues for 1998 and 1999, respectively. Revenues from BNFL accounted for
approximately 10.6% and 13.6% of the Company's revenues for 1998 and 1999,
respectively. No other customer accounted for more than 5% of the Company's
total revenues during 1998 or 1999.

SALES AND MARKETING STRATEGY

         The Company's operations to date, including the commercial waste
processing operations acquired in April 1997, have provided it with extensive
knowledge of commercial and DOE waste stream composition and the factors that
influence the remediation of those waste streams. The Company's internal sales
force uses and will continue to use that knowledge and operating experience to
strengthen the Company's competitive position when pursuing commercial and DOE
waste remediation projects. In addition, through its collaborative arrangements,
the Company will seek to utilize complementary technical expertise, marketing
resources and commercial experience of the other parties to develop additional
business in its primary markets, expand its capabilities in handling a greater
diversity of waste streams and replicate its operating model to pursue
international markets. The Company pursues markets where it can be the most
cost-effective processor of the waste due to its technologies, geographical
proximity to a waste stream, government regulation or its ability to provide a
comprehensive approach to its customers' waste treatment needs.

                                       12

         In its technical support services business, GTS Duratek will seek to
strengthen its relationships with its large utility customers, such as Duke
Power Company, Southern Nuclear Operating Company and Vermont Yankee Nuclear
Power Corporation. The Company is also pursuing opportunities with utilities
that are downsizing and outsourcing service work as well as DOE sites that are
privatizing departments such as training and radiological controls. To enhance
the overall profitability of the technical support services business, the
Company is focusing on increasing market share in decontamination and
decommissioning services, environmental and computer consulting, radiation
instrument services and environmental health and safety training, all of which
generate relatively higher profit margins than staff augmentation and outage
support. Decontamination and decommissioning services provided to nuclear
facilities encompasses services from initial site characterization to project
completion.

ENVIRONMENTAL MATTERS

         ENVIRONMENTAL LAWS AND REGULATIONS CREATING A DEMAND FOR THE COMPANY'S
         WASTE TREATMENT TECHNOLOGIES

         Various environmental protection laws have been enacted and amended
during recent decades in response to public concern over the environment. The
operations of the Company's customers are subject to these evolving laws and the
implementing regulations. The Company believes that the obligations to comply
with the requirements of the following laws contribute to the demand for its
services.

         The Atomic Energy Act of 1954 ("AEA") and the Energy Reorganization Act
of 1974 (the "ERA") authorize the Nuclear Regulatory Commission ("NRC") to
regulate the receipt, possession, use and transfer of radioactive materials,
including "source material," "special nuclear material," and "byproduct
material." Pursuant to its authority under the AEA, the NRC has adopted
regulations that address the management, treatment and disposal of low-level
radioactive waste and that require the licensing of low-level radioactive waste
disposal sites by NRC or NRC Agreement States.

         The processing, storage and disposal of high-level nuclear waste are
subject to the requirements of the Nuclear Waste Policy Act, as amended by the
Nuclear Waste Policy Act Amendments. These statutes regulate the disposal of
high-level nuclear waste by establishing procedures and schedules for siting
geologic repositories for such waste. The statutes also direct the EPA to
promulgate environmental standards for the disposal of high-level nuclear waste,
and require the NRC to promulgate standards covering the licensing of waste
repositories. The NRC has issued regulations that address the storage and
disposal of high-level nuclear waste.

         The Uranium Mill Tailings Radiation Control Act ("UMTRCA") and the
Uranium Mill Tailings Remedial Action Amendments Act are intended to protect
public health and the environment from hazards associated with uranium ore
milling wastes at active and inactive uranium mills. UMTRCA designates specific
inactive mill sites for remedial action, and gives the DOE the responsibility
for carrying out remedial actions at these sites.

         The Low-Level Radioactive Waste Policy Act of 1980 ("LLRWPA") and the
Low-Level Radioactive Waste Policy Amendments Act of 1985 ("LLRWPA Amendments")
address the siting of new low-level radioactive waste disposal facilities. Each
state is responsible for providing capacity for commercial low-level radioactive
waste generated within its borders. The LLRWPA also encourages groups of states
to enter into compacts providing for the development and operation of low-level
radioactive waste disposal facilities. At the present time, no new radioactive
waste disposal facilities have been opened by state compacts and none are
expected to open in the near future.

                                       13

         The Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended
by the Hazardous and Solid Waste Amendments of 1984 ("HSWA"), provides a
comprehensive framework for the regulation of the generation, transportation,
treatment, storage and disposal of hazardous waste. The intent of RCRA is to
control hazardous wastes from the time they are generated until they are
properly recycled or treated and disposed. RCRA prohibits improper hazardous
waste disposal and imposes criminal and civil liability for failure to comply
with its requirements. RCRA requires that hazardous waste generators,
transporters and operators of hazardous waste treatment, storage and disposal
facilities meet strict standards set by government agencies. In certain
circumstances, RCRA also requires operators of treatment, storage and disposal
facilities to obtain and comply with RCRA permits. The Land Disposal
Restrictions developed under the HSWA prohibit land disposal of specified wastes
unless these wastes meet or are treated to meet Best Demonstrated Available
Technology ("BDAT") treatment standards, unless certain exemptions apply.

         The Toxic Substances Control Act ("TSCA") provides the EPA with the
authority to regulate over 60,000 commercially produced chemical substances. The
EPA may impose requirements involving manufacturing, record keeping, reporting,
importing and exporting. The TSCA also established a comprehensive regulatory
program for PCBs which is analogous to the RCRA program for hazardous waste.

         The Clean Water Act, as amended, establishes standards, permits and
procedures for controlling the discharge of pollutants from wastewater sources.

         The Clean Air Act of 1970, as amended (the "Clean Air Act"), empowers
the EPA and the states to establish and enforce ambient air quality standards
and limits of emissions of pollutants from facilities. This has resulted in
tight control over emissions from technologies like incineration.

         The Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA" or "Superfund"), and subsequent amendments under the
Superfund Amendments and Reauthorization Act ("SARA"), as implemented by the
National Contingency Plan, provide for the investigation and remediation of
sites containing hazardous substances. The Superfund program's regulations
require that any remediation of hazardous substances meet applicable and
relevant and/or appropriate regulatory requirements. Superfund also establishes
strict and retroactive liability for parties who generated, stored, handled,
managed or transported hazardous substances or owned and operated the sites
containing them. This creates a strong incentive for proper management and
disposal of hazardous waste.

         The Emergency Planning and Community Right to Know Act ("EPCRA") of
1986 requires companies to submit emergency and hazardous inventory forms to
state and local agencies for all materials requiring a material safety data
sheet under OSHA. EPCRA requires full disclosure of environmental releases to
the public and contributes to public awareness and activism regarding corporate
environmental management issues. To the extent a generator's waste can be
reported as being recycled, public pressure may be eliminated or significantly
reduced.

         The Pollution Prevention Act of 1990 establishes pollution prevention
as a national objective, naming it a primary goal wherever feasible. The act
states that if pollution cannot be prevented, materials should be recycled in an
environmentally safe manner.

         Under the mandate of the Federal Facility Compliance Act ("FFCA"), the
DOE is currently engaged in a program to treat and dispose of the mixed waste
currently stored at its facilities. The FFCA required DOE to develop and comply
with treatment and disposal plans for each of its facilities and charges DOE
with developing treatment and disposal capacity for these wastes where it does
not currently exist. The plans must also address the need to treat and dispose
of mixed wastes generated from the remediation of contaminated DOE sites.

                                       14

         ENVIRONMENTAL LAWS AND REGULATIONS AFFECTING THE USE OF THE COMPANY'S
         WASTE TREATMENT TECHNOLOGIES

         To the extent that the Company is engaged in the storage, processing or
disposal of mixed waste, the radioactive components are subject to the NRC
regulations promulgated under the AEA, while the hazardous components of the
waste are regulated by the EPA under RCRA. To the extent that these regulations
have been delegated to the states, the state may also regulate mixed waste.

         Pursuant to the mandate of the AEA and the ERA, NRC regulations and
guidance address the classification and management of low-level radioactive
waste. The NRC regulations also govern the technical, monitoring and
safety-related aspects of developing and operating low-level radioactive waste
disposal facilities. Pursuant to its authority under the AEA, the NRC also has
established licensing requirements and operating procedures for such facilities.
The NRC requirements address siting criteria, site stability, the development
and implementation of institutional controls for the facility (e.g., access
restrictions, environmental monitoring and site maintenance), facility
operation, financial assurance, closure, and site stabilization.

         Under RCRA, wastes are classified as hazardous either because they are
specifically listed as such or because they display certain hazardous
characteristics. Under current regulations, waste residues derived from listed
hazardous wastes are considered hazardous wastes unless they are delisted
through a formal rulemaking process that may last a few months to several years.
For this reason, waste residue that is generated by the treatment of listed
hazardous wastes such as waste treated with the Company's vitrification
technologies, may be considered a hazardous waste without regard to the fact
that this waste residue may be environmentally benign. Subsequent management of
such waste residue would be subject to full RCRA regulation, including the
prohibition against land disposal without treatment in compliance with BDAT. In
some cases, there is no current technology to treat mixed wastes, although EPA
policy places these wastes on a low enforcement priority. The RCRA regulation
classifying such waste residue as hazardous has been overturned by the U.S.
Court of Appeals for the District of Columbia Circuit, but has been temporarily
reinstated until 2001 when the EPA is under court order to develop a revised
regulatory approach which would allow listed wastes to leave the hazardous waste
regulatory system if they met specified concentration limits. The Company's
ownership and operation of treatment facilities also exposes the Company to
potential liability for cleanup of releases of hazardous wastes under RCRA.

         Operators of hazardous waste treatment, storage and disposal facilities
are required to obtain RCRA Part-B permits from the EPA or from states
authorized to implement the RCRA program. Obtaining such permits is a lengthy
and costly process that requires regulatory inspection and approval of, among
other things, the facility design, equipment and operating plans and procedures.
In addition, applicants for a RCRA permit for a treatment, storage or disposal
facility must submit detailed information regarding all past waste management
practices at that facility and may be required to undertake corrective action
for past contamination of the site. The Company's facility in Oak Ridge,
Tennessee, is a RCRA Part-B permitted facility. The Company has developed
procedures to ensure compliance with RCRA permit provisions at the Bear Creek
Operations facility, including procedures for ensuring appropriate waste
acceptance and scheduling, waste tracking, manifesting and reporting, and
employee training.

         If the Company engages in the transportation of hazardous materials,
such as radioactive materials, it will be subject to the requirements of the
Hazardous Materials Transportation Act, as amended by the Hazardous Materials
Transportation Uniform Safety Act. Pursuant to these statutes, the United States
Department of Transportation regulates the transportation of hazardous materials
in commerce. Shippers and carriers of radioactive materials must comply with
both the general requirements for hazardous materials transportation and with
specific requirements for the transportation of radioactive materials. If the
Company

                                       15

engages in the storage and disposal of high-level nuclear waste it may be
subject to the Nuclear Waste Policy Act, as amended by the Nuclear Waste Policy
Act Amendments.

         CERCLA effectively imposes strict, joint and several retroactive
liability upon owners or operators of facilities where a release of hazardous
substances has occurred on parties who generated hazardous substances that were
released at such facilities and on parties who arranged for the transportation
of hazardous substances to such facilities. The Company's ownership and
operation of vitrification, storage and incineration facilities on-site expose
the Company to potential liability under CERCLA for releases of hazardous
substances into the environment at those sites. In the event that off-site
storage or disposal facilities utilized by the Company for final disposition of
the glass and other residues from the Company's vitrification, incineration and
other treatment processes are targeted for investigation and cleanup under
CERCLA, the Company could incur liability as a generator of such materials or by
virtue of having arranged for their transportation and disposal. The Company
designs its DuraMelters(TM) and other processes to minimize the potential for
release of hazardous substances inTo the environment. In addition, the Company
has developed plans to manage and minimize the risk of CERCLA or RCRA liability,
including the training of operators, use of operational controls, and
structuring of its relationships with the entities responsible for the handling
of waste materials and by-products.

         Company facilities may have to obtain permits under the Clean Water
Act, the Clean Air Act, and corresponding state statutes. The necessity to
obtain such permits depends upon the facility's location and the expected
emissions from the facility. Additional state licenses or approvals may also be
required.

         The Clean Air Act imposes strict requirements upon owners and operators
of facilities which emit pollutants into the air. Although the Company believes
that its treatment systems effectively trap particulates and prevents hazardous
emissions from being released into the air, which releases would violate the
Clean Air Act, the Clean Air Act may require permits prior to the construction
and operation of the Company's facilities, and may require additional emission
controls and restrictions on materials stored, used and incinerated at existing
or proposed facilities.

         The Clean Water Act establishes standards, permits and procedures for
controlling the discharge of pollutants from wastewater sources. The Company
believes that DuraMelters(TM) generally will not be subject to tHe water
pollution control requirements of the Clean Water Act because DuraMelters(TM)
are designed to have no residuAl wastewater discharge. However, the Clean Water
Act's standard permits and procedures are potentially applicable to all other
water discharged from, or reused at, facilities owned or operated by the
Company.

         OSHA provides for the establishment of standards governing workplace
safety and health requirements, including setting permissible exposure levels
for hazardous chemicals which may be present in mixed wastes. The Company is
required to follow OSHA standards, including the preparation of material safety
data sheets, hazardous response training and process safety management. The NRC
has set regulatory standards for worker protection and public exposure to
radioactive materials or wastes.

COMPETITION

         The market for the Company's waste treatment services is characterized
as the treatment and stabilization of certain radioactive, hazardous, mixed and
other wastes. The Company is aware of some competition from several large
companies and numerous small companies. Any of such companies may possess or
develop technologies superior to those of the Company. While the Company is
aware of competition from companies with similar waste treatment technologies,
the primary competition comes from companies which provide waste treatment and
disposal services. The predominant waste treatment and disposal methods include
landfilling, deep-well injection, on-site containment and incineration or other

                                       16

thermal treatment methods. Competition is based primarily on cost, regulatory
and permit restrictions, technical performance, dependability and environmental
integrity. The Company believes that it will be able to compete favorably on the
basis of these factors. The Company also believes that it has several
competitive advantages over its competitors including its proprietary waste
treatment technologies, its comprehensive approach to waste treatment,
demonstrated commercial success of its technologies, reputation for providing
quality service to its customers and strategic alliances. Many of the Company's
competitors have substantially greater financial and technical resources than
the Company and there can be no assurance that one or more of the Company's
competitors do not possess or will not develop waste treatment technologies that
are superior to those of the Company.

         In its technical support services business, the Company's competitors
range from major national and regional environmental service and consulting
firms which have large environmental remediation staffs to small local firms.
Many of the major national and regional environmental service and consulting
firms have greater financial, management and marketing resources than the
Company. The availability of skilled technical personnel, quality of
performance, safety, diversity of services and price are the key competitive
factors.

RESEARCH AND DEVELOPMENT ACTIVITIES

         The Company's research and development activities are conducted
primarily by the VSL for the enhancement of the Company's existing vitrification
and ion exchange technologies or the introduction of new vitrification
technologies. During 1997 and 1998, research and development activities were
conducted at the VSL under contracts totaling $255,000 and $530,000,
respectively. No funding was provided in 1999. The Company did not incur any
additional research and development costs during those years. In connection with
various Company contracts or subcontracts, the VSL conducts research and
development under fixed-price and cost-plus-fixed fee contracts. Under these
contracts, the research is supervised by Drs. Macedo and Litovitz and all
inventions and discoveries are owned by them and licensed to the Company under
the exclusive license agreement. The Company expects to spend a significant
portion of the research and development funding provided by BNFL with the VSL.
See "Business - Joint Venture and Collaborative Arrangements - VSL and -BNFL."

PATENTS AND OTHER INTELLECTUAL PROPERTY RIGHTS

         The Company licenses all of the patent and other intellectual property
rights to its proprietary vitrification and other waste treatment technologies
from the inventors of such technologies. Drs. Macedo and Litovitz, the inventors
of the Company's vitrification and ion exchange technologies, license the
patents and proprietary rights to such technologies to the Company under an
exclusive license agreement. The exclusive license agreement with Drs. Macedo
and Litovitz expires upon the expiration of the last patent covered by the
license agreement which is currently in the year 2012. The exclusive license
agreement, which currently encompasses 22 patents and one patent application,
also includes any process patents or technology rights related to the licensed
field which is subsequently developed by the VSL or Drs. Macedo and Litovitz.
Dr. Macedo and Litovitz own all of the vitrification and ion exchange patents
relating to the research and development work conducted by them at the VSL. The
Catholic University of America has agreed that all patents and technologies
developed at the VSL belong to Drs. Macedo and Litovitz and not to the
University. In turn, Drs. Macedo and Litovitz exclusively license the
vitrification technology rights and process patents developed by them at the VSL
to the Company.

                                       17

         The Company has all patents and related trademarks and copyright
pertaining to the detection, storage, decontamination, processing and handling
of radioactive and hazardous waste materials that are necessary in its business.
Specifically, the issued and active patents held by the Company relate to the
steam reforming, incineration, ultracompaction and vitrification technologies
used in its commercial waste processing operations. As a result of the
acquisition of SEG, the Company acquired rights in 48 U.S. patents, 11 pending
U.S. patent applications, 118 foreign patents and 35 pending foreign patent
applications. Pursuant to the purchase agreement with Westinghouse, the Company
has granted Westinghouse a non-exclusive royalty-free license to practice the
technologies covered by certain of the patents acquired by the Company.

         From time to time, the Company acquires or licenses technologies from
third parties that complement its existing waste processing technologies. In
November 1997, the Company acquired a joint interest in several patents
pertaining to the gasification and vitrification of organic materials from
Proler Environmental Services, Inc. ("Proler"). The Company now owns Proler's
interest in these patents jointly with Hylsa SA, a company located and doing
business in Mexico.

         The Company requires each of its employees to enter into standard
agreements pursuant to which the employee agrees to keep confidential all
proprietary information of the Company and to assign to the Company all rights
in any proprietary information or technology developed by the employee during
his or her employment or made thereafter as a result of any inventions conceived
or work done during such employment. Despite these precautions, it may be
possible for a third party to copy or otherwise obtain and use the company's
technology without authorization or to develop similar technology independently.
In addition, effective patent and trade secret protection may be unavailable or
limited in certain foreign countries.

         DURASIL(R) is a registered trademark held by the Company and
DuraMelter(TM) and DuraGem(TM) are comMon law trademarks.

EMPLOYEES

         As of December 31, 1999, the Company employed 1,020 employees,
including 308 temporary field-assigned employees performing services for
clients, 471 full-time technical personnel and 241 in administration and support
personnel. The Company contracts with most of the field-assigned personnel on an
as-needed basis and such personnel are not full-time employees of the Company.
Due to the seasonality of the technical support services business of the
Company, the number of temporary field-assigned employees generally increases to
approximately 600 during the fall peak outage season at the nation's nuclear
power plants. To date, the Company has been successful in attracting and
retaining qualified technical personnel, although there can be no assurance that
this success will continue. None of the Company's employees are subject to a
collective bargaining agreement. The Company has never experienced a work
stoppage and believes that its relations with its employees are good.

ITEM 2.  PROPERTIES

         The Company leases approximately 35,000 square feet of office space in
Columbia, Maryland which it uses as its administration and general corporate
offices. The initial lease term expires December 31, 2006.

         The Company owns real property assets, including approximately 50 acres
of land in Oak Ridge, Tennessee, upon which the primary waste processing
operations are located and an additional 50 acre parcel in Oak Ridge, Tennessee,
at which additional waste processing operations are conducted. The Company also
owns a 13,500 square foot building in Richland, Washington, which houses certain
technical services operations.

                                       18

         In June 1999, the Company acquired certain real property assets in
connection with its acquisition of Hake, including approximately 13.5 acres of
land in Memphis, Tennessee, upon which the operations are located.

ITEM 3.  LEGAL PROCEEDINGS

         On February 3, 1998, the Company's wholly owned subsidiary, Scientific
Ecology Group, Inc. (now named GTS Duratek Bear Creek , Inc. ("SEG"), was sued
in federal district court in Boston, Massachusetts. The suit alleges that
statements made in press releases by Molten Metals Technology, Inc. ("MMT") were
fraudulent and misleading under federal securities laws and state common law
fraud theories. These statements concerned a joint venture between SEG and MMT
and some of these statements were made in press releases which MMT issued
jointly with SEG. The complaint seeks to hold SEG liable for all of these
statements. The defendant moved to dismiss the complaint, the plaintiffs chose
to amend their pleading, and the defendant moved to dismiss the amended
complaint. At the present time the Company is unable to express a view on the
probable ultimate outcome of the litigation. In addition, the Company may have
rights of indemnity against CBS Corporation ("CBS"), the successor to
Westinghouse Electric Corporation ("Westinghouse") which was the parent of SEG
at the time the allegedly misleading statements were made, if, among other
things, certain representations and warranties made by CBS in the definitive
purchase agreement pursuant to which the Company purchased SEG were breached.
CBS has agreed to assume all litigation costs associated with the defense of the
case, but has reserved the right to challenge the Company's claim for
indemnification for any settlement or judgment that may arise from the case.

         On or about February 25, 1999, Synthetica Technologies, Inc.
("Synthetica") served the Company with a complaint filed in the Superior Court
of California, County of San Francisco. In addition to the Company, the
complaint named SEG, Westinghouse, and two former SEG executives as defendants.
The complaint alleged that SEG was required by a license agreement and a
subsequent asset purchase agreement to make certain payments to Synthetica in
exchange for the right to develop and commercialize Synthetica's waste disposal
technology. Synthetica claimed that SEG did not make allegedly required payments
and did not comply with other alleged provisions of the contracts between SEG
and Synthetica. Both the alleged license agreement and alleged asset purchase
agreement predate the Company's acquisition of SEG. Synthetica advanced claims
of fraud in the inducement, constructive fraud, actual fraud, breach of written
contract, breach of implied covenant of good faith and fair dealing, intentional
interference with contractual relations, intentional interference with economic
relations, negligent interference, negligent misrepresentation and breach of
fiduciary duty and trade secret misappropriation. The complaint sought
compensatory and exemplary damages in an unspecified amount and an injunction
against further trade secret misappropriation by the former SEG executives. The
defendants removed the action to the United States District for the Northern
District of California and then moved to dismiss the case. The plaintiff chose
to amend its pleading, dropping the individual defendants and eliminating three
claims. The remaining defendants sought to dismiss the amended complaint. On
October 27, 1999, the court dismissed the amended complaint in its entirety, but
permitted the plaintiff to replead certain claims. On November 29, 1999, the
plaintiff filed an amended complaint alleging fraud and conspiracy to defraud,
breach of implied covenant of good faith and fair dealing and breach of
contract. The claims in the amended complaint relate only to the asset purchase
agreement and revolved around the claim that SEG failed to develop and
commercialize Synthetica's waste disposal technology as required by that
agreement. On January 3, 2000, the court dismissed the Company as a party to the
case, leaving SEG as one of the remaining defendants along with CBS and
dismissed certain claims against the remaining defendants. While the Company and
SEG believe that SEG has meritorious defenses to the claims alleged against it
by Synthetica, the Company cannot make a determination as to the likelihood or
the extent of any liability arising from this matter.

                                       19

         On December 2, 1999, the Company's wholly owned subsidiary, SEG, was
named as a defendant in an adversary proceeding in the United States Bankruptcy
court for the District of Massachusetts. The Chapter 11 Trustee, on behalf of
the debtor MMT and its creditors, filed an adversary "Complaint to Avoid
Fraudulent Transfer" naming as defendants CBS and SEG. The complaint alleges
that the sale of CBS's interest in a joint venture to MMT resulted in a
fraudulent conveyance. The primary allegations against SEG are that MMT's
release of SEG from obligations to pay $8 million to equalize capital
expenditures and additional amounts for MMT's share of profits, and MMT's
assumption of at least $1.5 million of SEG's liabilities, are avoidable because
MMT did not receive reasonably equivalent value for the transfers. The Company
intends to vigorously contest MMT's allegations on the basis that MMT did in
fact receive reasonably equivalent value for its transfers. In addition, the
Company may have a right of indemnification from CBS pursuant to the relevant
purchasing agreements. It is too early in the litigation to provide an accurate
assessment of the Company's liability. CBS has agreed to assume all litigation
costs associated with the defense of the case, but has reserved the right to
challenge the Company's claim for indemnification for any settlement or judgment
that may arise from the case.

         In addition, from time to time the Company is a party to litigation or
administrative proceedings relating to claims arising from its operations in the
normal course of business. Management of the Company, on the advice of counsel,
believes that the ultimate resolution of such litigation or administrative
proceedings currently pending against the Company is unlikely, either
individually or in the aggregate, to have a material adverse effect on the
Company's results of operations or financial condition.

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

         Not Applicable.

                                       20


PART II

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

         The Company's Common Stock is quoted on the NASDAQ National Market
under the symbol "DRTK". The following table sets forth, for the periods
indicated, the high and low sale prices of the Common Stock. The last reported
sale price of the Common Stock on the NASDAQ National Market on March 16, 2000
was $8.875.

                                         PRICE RANGE
                                       OF COMMON STOCK
                                       ----------------
                                       HIGH       LOW
                                       ----       ---
Year ended December 31, 1997:
   1st quarter                         14-5/8     4-7/8
   2nd quarter                         10-1/2     7-7/8
   3rd quarter                         15-3/8     9-1/2
   4th quarter                         15         9-3/4

Year ended December 31, 1998:
   1st quarter                         14        13-3/8
   2nd quarter                         12-3/4    10
   3rd quarter                         12-3/8     5-3/8
   4th quarter                          8-1/8     3-7/8

Year ended December 31, 1999:
   1st quarter                          7-1/2     5-1/8
   2nd quarter                          6-5/8     4-1/2
   3rd quarter                          7-3/4     6-1/8
   4th quarter                         8-7/16     7-7/8

         As of March 16, 2000, there were 1,126 holders of record of the Common
Stock and the Company estimates that there were approximately 6,000 beneficial
holders.

         The Company has never declared or paid a cash dividend on its Common
Stock and is currently prohibited from paying dividends under its revolving line
of credit with its principal lender. The Company will pay dividends on the 8%
Cumulative Convertible Redeemable Preferred Stock (the "Convertible Preferred
Stock") out of funds legally available therefore in accordance with the terms of
the Convertible Preferred Stock which require the payment of quarterly dividends
of $320,000 or $2.00 per share. The Company may not pay dividends on any of the
Common Stock unless the Company has paid all accumulated dividends on all of the
outstanding shares of Convertible Preferred Stock. To date, the Company has paid
all dividends on all of the outstanding shares of the Convertible Preferred
Stock. Except with respect to the dividends on the Convertible Preferred Stock,
the Company currently intends to retain earnings primarily for working capital
and development of waste treatment technologies and therefore does not
anticipate paying any cash dividends in the foreseeable future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."

                                       21

ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



                                                                      YEARS ENDED DECEMBER 31,
                                                  ----------------------------------------------------------------------
                                                     1995          1996          1997           1998           1999
                                                  -----------  -------------  ------------   ------------  -------------
                                                                                           
STATEMENT OF OPERATIONS DATA:
    Revenues                                    $     40,418  $      44,285  $    136,553  $     160,313  $     177,196
    Cost of revenues                                  32,220         35,198       120,814        123,839        128,719
                                                  -----------  -------------  ------------   ------------  -------------
           Gross profit                                8,198          9,087        15,739         36,474         48,477
    Selling, general and administrative expenses       5,876          7,455        15,725         26,613         27,723
    Charge for asset impairment                           --             --            --          9,224             --
                                                  -----------  -------------  ------------   ------------  -------------
           Income (loss) from operations               2,322          1,632            14            637         20,754
    Interest income (expense), net                        57          1,239           571           (545)        (2,297)
                                                  -----------  -------------  ------------   ------------  -------------

           Income (loss) before income taxes
             and proportionate share of losses
             by joint ventures                         2,379          2,871           585             92         18,457
    Income taxes                                         101            649           716            627          6,855
                                                  -----------  -------------  ------------   ------------  -------------

           Income (loss) before proportionate
             share of losses by joint ventures         2,278          2,222          (131)          (535)        11,602
    Proportionate share of losses by
      joint ventures                                    (824)          (165)         (150)        (1,474)          (122)
                                                  -----------  -------------  ------------   ------------  -------------

           Net income (loss) before cumulative
             effect of change in accounting
             principle                                 1,454          2,057          (281)        (2,009)        11,480

    Cumulative effect of change in accounting
      principle                                           --             --            --           (420)            --
                                                  -----------  -------------  ------------   ------------  -------------

           Net income (loss) and comprehensive
             income (loss)                             1,454          2,057          (281)        (2,429)        11,480

    Preferred stock dividends and charges
      for accretion                                   (1,394)        (1,500)       (1,503)        (1,507)        (1,510)
                                                  -----------  -------------  ------------   ------------  -------------

           Net income (loss) attributable to
             common stockholders                $         60 $          557 $      (1,784)$       (3,936)$        9,970
                                                  ===========  =============  ============   ============  =============

    Net income (loss) per share before
      cumulative effect of change in accounting
      principle:
        Basic                                    $      0.01 $         0.05 $       (0.14)$        (0.27)$         0.75
                                                  ===========  =============  ============   ============  =============

        Diluted                                  $      0.01 $         0.04 $       (0.14)$        (0.27)$         0.58
                                                  ===========  =============  ============   ============  =============

    Net income (loss) per share:
        Basic                                    $      0.01 $         0.05 $       (0.14)$        (0.30)$         0.75
                                                  ===========  =============  ============   ============  =============

        Diluted                                  $      0.01 $         0.04 $       (0.14)$        (0.30)$         0.58
                                                  ===========  =============  ============   ============  =============

    Basic weighted average common stock
      outstanding                                      8,820         11,460        12,619         13,137         13,351
                                                  ===========  =============  ============   ============  =============

    Diluted weighted average common stock
      and dilutive securities outstanding             11,213         13,404        12,619         13,137         20,316
                                                  ===========  =============  ============   ============  =============

                                                                             AS OF DECEMBER 31,
                                                  ----------------------------------------------------------------------
                                                     1995          1996          1997           1998           1999
                                                  -----------  -------------  ------------   ------------  -------------
BALANCE SHEET DATA:
    Working capital                             $     24,114  $      62,161  $      8,363  $      15,359  $      20,983
    Total assets                                      38,660         85,199       132,298        134,245        157,588
    Long-term debt, convertible debenture
      and capital lease obligation                    10,123         10,939        11,557         13,102         30,492
    Redeemable convertible preferred stock            14,609         14,829        15,052         15,279         15,509
    Stockholders' equity                               9,257         55,147        56,429         55,022         61,395



                                       22


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

OVERVIEW

         GTS Duratek, Inc. (the "Company") derives substantially all of its
revenues from commercial and government waste processing operations, and from
technical support services to electric utilities, industrial facilities,
commercial businesses and government agencies. Commercial waste processing
operations are provided primarily at the Company's Bear Creek low-level
radioactive waste processing facility located in Oak Ridge, Tennessee. The
Company also provides on-site waste processing services on large government
projects for the United States Department of Energy ("DOE"). Technical support
services are generally provided pursuant to multi-year time and materials
contracts. Revenues are recognized as costs are incurred according to
predetermined rates. The contract costs primarily include direct labor,
materials and the indirect costs related to contract performance.

         On June 30, 1999, the Company acquired 100% of the outstanding capital
stock of Frank W. Hake Associates, LLC ("Hake") from HakeTenn, Inc., a Delaware
corporation and an affiliate of the Hake Group of Philadelphia, Pennsylvania,
and two individuals for $12.9 million in cash, subject to a post-closing
adjustment, and the assumption of certain liabilities. Hake is a specialist in
storage, transportation handling and processing of radioactive waste emanating
from nuclear power generation plants throughout the United States. Hake also
stores and services power generation equipment at its licensed facility in
Memphis, Tennessee. The acquisition was accounted for under the purchase method
of accounting and, accordingly, the Company's results of operations for the year
ended December 31, 1999 reflect the operating results of Hake from the date of
the acquisition. In addition, the Company's results of operations for the year
ended December 31, 1999 reflect the operating results of DuraTherm, Inc.
("DuraTherm"), which was sold by the Company on February 7, 2000.

         The following sets forth certain consolidated statement of operations
information as a percentage of revenues for the years ended December 31:

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

Revenues                                      100.0%       100.0%       100.0%
Loss on M-Area contract                        (5.3)        (1.1)          --
Other costs of revenues                       (83.2)       (76.1)       (72.6)
                                          ----------    ---------    ---------
              Gross profit                     11.5         22.8         27.4

Selling, general and administrative
   expenses                                   (11.5)       (16.6)       (15.6)
Charge for asset impairment                      --         (5.8)          --
                                          ----------    ---------    ---------
              Income from operations             --%         0.4%        11.8%
                                          ==========    =========    =========


                                       23

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1999.

         Revenues increased by $16.9 million, or 10.5%, from $160.3 million in
1998 to $177.2 million in 1999. The increase was primarily attributable to a
$9.5 million increase in commercial waste processing services at the Company's
waste processing facilities located in Tennessee (which includes the Bear Creek
Operations facility and Hake), a $5.1 million increase in waste processing
revenues at the Company's DuraTherm hazardous waste treatment facility located
in San Leon, Texas, and a $5.6 million increase in government waste processing
services, offset by a $3.3 million decrease in technical support service
revenues. The increase in revenues at the Tennessee waste processing facilities
was primarily the result of increased waste processing during 1999 as compared
to 1998, and to a lesser extent to the acquisition of Hake which generated
revenue of $3.4 million during the second half of 1999. Revenues from DuraTherm
increased as a result of increased waste processing during 1999 as compared to
the prior year. The increase in government waste processing services was
primarily the result of more work performed on the Hanford River Protection
Project and the Idaho Advanced Mixed Waste Treatment Project during 1999 as
compared to 1998. The decrease in technical support service revenues was
primarily attributable to a decrease in consulting services in 1999 as compared
to the prior year.

         Gross profit increased by $12.0 million, or 32.9%, from $36.5 million
in 1998 to $48.5 million in 1999. As a percentage of revenues, gross profit
increased from 22.8% in 1998 to 27.4% in 1999. The Tennessee waste processing
facilities, government waste processing and DuraTherm accounted for increases in
gross profit of $5.4 million, $5.0 million and $1.8 million, respectively. The
increases were slightly offset by a $200,000 decrease in gross profit from
technical support services. The increase in gross profit at both the Tennessee
and DuraTherm waste processing facilities was primarily the result of increased
waste processing over the prior year as well as the continued efforts to reduce
fixed and variable operating costs. The increase in gross profit from government
waste processing was the result of the increase in revenues from the Hanford
River Protection Project and the Idaho Advanced Mixed Waste Treatment Project
contracts. In addition, the loss recorded on the M-Area project at the DOE's
Savannah River site of $1.8 million in 1998 also contributed to this increase.
The M-Area project was completed in 1999. The decrease in gross profit from
technical support services was the result of the decrease in consulting service
revenues described above.

         Selling, general and administrative expenses increased by $1.1 million,
or 4.2%, from $26.6 million in 1998 to $27.7 million in 1999. As a percentage of
revenues, selling, general and administrative expenses decreased from 16.6% in
1998 to 15.6% in 1999. The increase in selling, general and administrative
expenses was primarily attributable to higher operating costs for the Bear Creek
facility and government waste processing services as a result of business growth
in these areas.

         Interest expense, net increased by $1.8 million from 1998 to 1999. The
increase was the result of increased borrowings to fund working capital needs
and the acquisition of Hake.

         Income taxes increased by $6.2 million from 1998 to 1999 as a result of
the significant increase in income before income taxes. The Company's effective
tax rate for 1999 was 37.1%. During 1999, the Company reversed $256,000 of
valuation allowances previously established for certain state net operating
losses and other deductible temporary differences.

                                       24

         Proportionate share of losses by joint ventures decreased from
$1,474,000 in 1998 to $122,000 in 1999. The decrease in the loss relates
principally to the 1998 charge, net of tax benefits, taken by the Company for
the proportionate share of its 45% owned joint venture, DuraChem, which adopted
Statement of Position 98-5 "Reporting on Costs of Start-up Activities" (SOP
98-5), which requires start-up costs to be expensed as incurred. The Company's
proportionate share in the loss of its 50% owned joint venture, Vitritek,
decreased from $200,000 in 1998 to $122,000 in 1999. The Company expects
Vitritek to have limited operations in 2000.

         In the fourth quarter of 1998, the Company also adopted the provisions
of SOP 98-5. The cumulative, after tax effect of adoption was $420,000. The
adoption of SOP 98-5 by DuraChem and the Company reduced the Company's loss
before proportionate share of losses by joint ventures by approximately $78,000,
increased the net loss before cumulative effect of a change in accounting
principle by approximately $1.2 million, increased the net loss by approximately
$1.6 million, increased the per share net loss attributable to common
stockholders before cumulative effect of a change in accounting principle by
$0.09 per share and increased the per share net loss attributable to common
stockholders by $0.12 per share.

         The Company's net income increased by $13.9 million from a loss of $2.4
million in 1998 to income of $11.5 million in 1999. Results for 1998 were
adversely impacted by the after-tax losses on the M-Area contract and related
asset impairment charge of approximately $6.6 million and the adoption of SOP
98-5 of approximately $1.6 million. Excluding the impact of the M-Area charges
and the adoption of SOP 98-5 on the Company's 1998 results, the Company's 1999
net income increased by approximately $5.7 million, or 98%, over the prior year.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1998.

         Revenues increased by $23.7 million, or 17.4%, from $136.6 million in
1997 to $160.3 million in 1998. The increase was primarily attributable to a
$15.6 million increase in government waste processing services, a $4.4 million
increase in commercial waste processing services at the Company's Bear Creek
low-level radioactive waste processing facility located in Oak Ridge, Tennessee,
a $2.8 million increase in technical support service revenues, and a $900,000
increase in waste processing revenues at the Company's DuraTherm hazardous waste
treatment facility located in San Leon, Texas. The increase in revenues in
government waste processing services was primarily the result of work performed
on the Hanford Tank Waste Remediation System contract awarded by BNFL to build
and operate a pilot melter at the Company's Columbia, Maryland headquarters and
performance on a project at Idaho Falls, Idaho. The increase in revenues at the
Bear Creek facility was primarily the result of increased waste processing
during 1998 as compared to 1997. The increase in revenues from technical support
services was primarily the result of more work performed on site decontamination
and decommissioning contracts and an increase in revenues from radiological
engineering services. Revenues from DuraTherm increased as a result of increased
waste processing during 1998 as compared to 1997.

         In March 1997, the Company decided to temporarily suspend processing of
radioactive waste and initiate an unscheduled controlled cool down of its glass
melter at its M-Area processing plant located at the DOE's Savannah River site.
After an extensive inspection of the condition of the melter at the Savannah
River site, the Company's management made the decision to undertake more
extensive repairs and modification of the facility, including melter box
replacement, before resumption of radioactive waste processing. The
modifications were made so that the Company could more efficiently meet its
obligations under the existing contract as well as prepare the facility for
additional waste streams. The M-Area facility resumed radioactive waste
processing operations during the fourth quarter of 1997. As a result of the
necessary repairs and the delay in completing the waste processing required by
the contract, the Company recorded losses of $7.2 million on the M-Area contract
in 1997 which included the estimated costs of repairs to the melter and
estimated losses to complete the fixed price contract. During 1998, the Company
recorded a

                                       25

$1.8 million charge for additional costs to be incurred to complete and close
out the contract. As of February 1999, the Company successfully completed the
contract to vitrify 660,000 gallons of mixed waste sludge at the DOE's Savannah
River Site.

         As part of the M-Area contract, the Company constructed a $9.2 million
fixed facility at the DOE's Savannah River Site. This facility is capable of
processing additional waste streams present at this site and the melter
potentially has years of additional life. As a result of a change in the site's
waste treatment priorities at the site, no additional waste processing contracts
were awarded to the Company. Therefore, the Company recorded a one-time asset
impairment charge of $9.2 million in 1998 to write off the Company's remaining
investment in this facility.

         Gross profit increased by $20.7 million, or 131.7%, from $15.7 million
in 1997 to $36.4 million in 1998. Government waste processing services and the
Bear Creek facility accounted for increases in gross profit of $8.7 and $6.7
million, respectively. Additionally, technical support services and the
DuraTherm facility accounted for increases in gross profit of $4.5 million and
$800,000 respectively. The increase in gross profit from government waste
processing principally relates to the loss recorded on the M-Area project in
1997 and the increase in gross profit in 1998 from government waste processing
attributable to the increase in revenues from the Hanford Tank Waste Remediation
System contract and performance on the project at Idaho Falls, Idaho previously
mentioned. The increase in gross profit at the Bear Creek facility was the
result of increased waste processing over the prior year in addition to measures
taken in the third quarter to reduce fixed and variable operating costs. The
increase in gross profit from technical support services was the result of a
shift in mix toward performance on higher margin site decontamination and
decommissioning contracts and radiological engineering services. The increase in
gross profit at the DuraTherm facility was the result of increased waste
processing over the prior year in addition to the Company's continued efforts to
reduce fixed and variable operating costs. As a percentage of revenues, gross
profit increased from 11.5% in 1997 to 22.8% in 1998 for the reasons previously
mentioned.

         Selling, general and administrative expenses increased by $10.9
million, or 69.2%, from $15.7 million in 1997 to $26.6 million in 1998. As a
percentage of revenues, selling, general and administrative expenses increased
from 11.5% in 1997 to 16.6% in 1998. The increase in selling, general and
administrative expenses was primarily attributable to the operations of SEG,
which was acquired by the Company effective April 1, 1997, higher than expected
costs incurred on proposals for two major commercial nuclear power plant
decommissioning projects, severance charges associated with the re-engineering
of the processing methods at the Bear Creek facility, and higher operating costs
for government waste processing services as a result of business growth in this
area.

         Interest income (expense), net changed from income of $571,000 in 1997
to an expense of $545,000 in 1998. The change was the result of the decrease in
cash due to the purchase of SEG in April of 1997 and interest on short-term
borrowings required to fund working capital needs.

         Income tax expense was $716,000 in 1997 and $627,000 in 1998. The
effective tax rate for 1997 and 1998 was adversely impacted by state income
taxes on income in certain states which could not be offset by losses in others
and a valuation allowance established with respect to a portion of the Company's
decontamination and decommissioning accruals.

         Proportionate share of losses by joint ventures increased from $150,000
in 1997 to $1,474,000 in 1998. The increase in the loss relates principally to
the charge, net of tax benefits, taken by the Company for the proportionate
share of its 45% owned joint venture, DuraChem, which adopted SOP 98-5. The
Company's proportionate share in the loss of its 50% owned joint venture,
Vitritek, increased from $150,000 in 1997 to $200,000 in 1998.

                                       26

         The Company's net loss increased by $2.1 million from a loss of
$281,000 in 1997 to a loss of $2.4 million in 1998. Results for 1998 were
adversely impacted by the after-tax losses on the M-Area contract and related
assets impairment charge of approximately $6.6 million and the adoption of SOP
98-5 of approximately $1.6 million.

LIQUIDITY AND CAPITAL RESOURCES

         During 1999, the Company generated $10.0 million in cash flows from
operating activities. The Company's cash flow from operating activities was
generated by income from operations before depreciation and amortization of
$26.4 million less cash interest expenses of $1.7 million, cash payments for
income taxes of $4.1 million and the increased investment in working capital of
$10.6 million.

         During 1999, the Company used approximately $24.2 million in cash flows
for investing activities of including approximately $13.1 million used for the
acquisition of Hake and $8.8 million used for purchases of plant and equipment.

         Cash flows used in investing activities were funded by the $10.0
million provided by operating activities, $8.3 million in cash from financing
activities and $5.9 million of cash. Cash flows from financing activities
included $17.2 million of long-term borrowings, net of repayments, and $1.8
million from the exercise of common stock options. During 1999, the Company also
purchased 1,036,700 shares of its common stock for $6.3 million.

         The Company has a backlog of orders of approximately $217.1 million at
December 31, 1999, of which approximately $121.5 million is expected to be
completed in 2000.

         The Company has a $60 million bank credit facility which includes (i) a
$35 million revolving line of credit, based on eligible accounts receivable (as
defined in the credit agreement), to fund working capital requirements, (ii) a
$20 million line of credit to finance acquisitions or stock repurchases, and
(iii) a $5 million line of credit to finance up to 75% of new equipment
purchases. Substantially all of the Company's assets, excluding real property
and inventory, have been pledged as collateral. Borrowings outstanding under the
revolving line of credit bear interest at either the bank's base rate, as
defined, plus .5% (9.00% at December 31, 1999), or the London Interbank Offered
Rate (LIBOR) plus 1.75% (7.94% at December 31, 1999). The credit facility has a
five-year term. At December 31, 1999, total borrowings of $26.2 million were
outstanding under the facility and the Company had available borrowings of $26.0
million to fund working capital needs.

         In February 2000, the Company completed the sale of its 80% interest in
DuraTherm, Inc. to DuraTherm Group, Inc. for $8.0 million in cash and a
subordinated note for $355,000. Proceeds to the Company of $8.0 million were
used by the Company to pay down borrowings under its bank credit facility. The
note receivables bears interest at 14%, payable semi-annually during the first
year following the sale, and 18% during the second year following the sale, with
the principal due in February 2002. The Company estimates that it will recognize
a pre-tax gain of approximately $1.5 million on the sale.

         The Company believes cash flows from operations, proceeds from the sale
of DuraTherm and, if necessary, borrowings available under the credit facility
will be sufficient to meet its operating needs, including the quarterly
preferred dividend requirement of $320,000 for at least the next twelve months.

                                       27

NEW ACCOUNTING PRONOUNCEMENTS

         During 2001, the Company will adopt the provisions of Statements of
Financial Accounting Standards No. 133 Accounting for Derivative Instruments and
Hedging Activities. The Company does not expect that the new pronouncement will
have a material effect on the Company's financial condition or results of
operations.

INFORMATION SYSTEMS AND THE IMPACT OF THE YEAR 2000 ISSUE

         During 1999, the Company executed a program to address the Year 2000
issue with respect to (i) the Company's information systems, (ii) the Company's
non-information systems, and (iii) certain systems for the Company's major
customers and suppliers. The Company has not experienced any disruptions in
operations as a result of the Year 2000 issue. Management will continue to
monitor its information systems and those of its significant customers and
vendors throughout 2000.

FORWARD LOOKING INFORMATION

         IN RESPONSE TO THE "SAFE HARBOR" PROVISIONS CONTAINED IN THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995, THE COMPANY IS INCLUDING IN THIS
ANNUAL REPORT ON FORM 10-K THE FOLLOWING CAUTIONARY STATEMENTS WHICH ARE
INTENDED TO IDENTIFY CERTAIN IMPORTANT FACTORS THAT COULD CAUSE THE COMPANY'S
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED IN FORWARD-LOOKING
STATEMENTS OF THE COMPANY MADE BY OR ON BEHALF OF THE COMPANY. MANY OF THESE
FACTORS HAVE BEEN DISCUSSED IN PRIOR FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION.

         The Company significant growth in revenues during 1998 and 1999 and
significant growth in earnings during 1999. The Company's future operating
results are largely dependent upon the Company's ability to manage its
commercial waste processing operations, including obtaining commercial waste
processing contracts and processing the waste under such contracts in a timely
and cost-effective manner. In addition, the Company's future operating results
are dependent upon the timing and awarding of contracts by the DOE for the
cleanup of other waste sites administered by it. The timing and award of such
contracts by the DOE is directly related to the response of governmental
authorities to public concerns over the treatment and disposal of radioactive,
hazardous, mixed and other wastes. The lessening of public concern in this area
or other changes in the political environment could adversely affect the
availability and timing of government funding for the cleanup of DOE and other
sites containing radioactive and mixed wastes. Additionally, revenues from
technical support services have in the past and continue to account for a
substantial portion of the Company's revenues and loss of one or more technical
support service contracts could adversely affect the Company's future operating
results.

         The Company's future operating results may fluctuate due to factors
such as: the timing of new commercial waste processing contracts and duration of
and amount of waste to be processed pursuant to those contracts; the acceptance
and implementation of the Company's waste treatment technologies in the
government and commercial sectors; the evaluation by the DOE and commercial
customers of the Company's technologies versus other competing technologies as
well as conventional storage and disposal alternatives; the timing of new
government waste processing projects, including those pursued jointly with BNFL,
the duration of such projects; and the timing of outage support projects and
other large technical support services projects at its customers' facilities.

         A primary element of the Company's growth strategy is to continue to
pursue strategic acquisitions that expand and complement the Company's business,
technologies and service offerings. As a result, the Company' future operating
results may be affected by the costs and timing of completion and integration of
such acquisitions.

                                       28

ITEM 7A. QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK

         The Company's major market risk is to changing interest rates. As of
December 31, 1999, the Company had floating rate debt of $9.0 million bearing
interest at the bank's base rate plus .5% (9.00%) and $17.2 million bearing
interest at LIBOR plus 1.75% (7.94%) outstanding under its bank credit facility.
Average borrowings under the Company's bank credit facility during 1999 were
$7.0 million. The average interest rate on such borrowings was 9.08%.

         The Company has not purchased any interest rate derivative instruments
but may do so in the future. In addition, the Company does not have any foreign
currency or commodity market risk.

                                       29


ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                       GTS DURATEK, INC. AND SUBSIDIARIES

                                Table of Contents


                                                                           Page

Independent Auditors' Report                                                 31

Consolidated Balance Sheets at December 31, 1998 and 1999                    32

Consolidated Statements of Operations for the years ended
    December 31, 1997, 1998 and 1999                                         34

Consolidated Statements of Stockholders' Equity for the years
    ended December 31, 1997, 1998 and 1999                                   35

Consolidated Statements of Cash Flows for the years ended
    December 31, 1997, 1998 and 1999                                         36

Notes to Consolidated Financial Statements                                   38

                                       30


                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
    GTS Duratek, Inc.:


We have audited the consolidated financial statements of GTS Duratek, Inc. and
subsidiaries as listed in the accompanying index. In connection with our audits
of the consolidated financial statements, we have also audited the consolidated
financial statement schedule listed under Item 14(a)(2). These consolidated
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of GTS Duratek, Inc.
and subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles. Also in our opinion, the related consolidated financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.


                                                       KPMG LLP


Baltimore, Maryland
March 10, 2000, except for
    the second paragraph of
    Note 23, which is as of
    March 29, 2000


                                       31


                       GTS DURATEK, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheets

                           December 31, 1998 and 1999



                                                                                         1998               1999
                                                                                   -----------------  ------------------
                                            ASSETS
                                                                                               
Current assets:
    Cash and cash equivalents                                                   $         5,944,274  $           59,525
    Receivables, less allowance for doubtful accounts of
       of $571,441 in 1998 and $571,136 in 1999                                          35,350,150          33,309,141
    Other accounts receivable                                                             2,216,034           6,292,606
    Cost and estimated earnings in excess of billings
       on uncompleted contracts                                                           9,964,741          15,924,413
    Prepaid expenses and other current assets                                             3,676,937           2,800,698
    Net assets held for sale                                                                     --           6,618,836
    Deferred income taxes                                                                 1,006,066             359,366
                                                                                   -----------------  ------------------
            Total current assets                                                         58,158,202          65,364,585

Property, plant and equipment, net                                                       54,270,744          63,417,307
Investments in and advances to joint ventures, net                                        4,266,406           4,183,773
Goodwill and other intangible assets, net                                                13,658,521          23,391,192
Other assets                                                                                804,933           1,231,506
Deferred income taxes                                                                     3,085,976                  --
                                                                                   -----------------  ------------------
                                                                                $       134,244,782  $      157,588,363
                                                                                   =================  ==================
                             LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Short-term borrowings                                                       $        10,947,148  $        9,000,000
    Current portion of long-term debt                                                            --           4,000,000
    Accounts payable                                                                     12,837,623          15,529,048
    Accrued expenses and other current liabilities                                        5,856,300           5,269,875
    Unearned revenues                                                                     9,090,627           6,672,699
    Waste processing and disposal liabilities                                             4,202,561           3,910,155
                                                                                   -----------------  ------------------
            Total current liabilities                                                    42,934,259          44,381,777

Long-term debt                                                                                   --          13,200,000
Convertible debentures                                                                   11,821,582          12,334,813
Facility and equipment decontamination and
    decommissioning liabilities                                                           7,824,447           8,507,641
Other noncurrent liabilities                                                              1,363,822           1,957,797
Deferred income taxes                                                                            --             302,187
                                                                                   -----------------  ------------------
            Total liabilities                                                            63,944,110          80,684,215
                                                                                   -----------------  ------------------

8% Cumulative Convertible Redeemable Preferred Stock,
       $.01 par value; 160,000 shares authorized, issued and
       outstanding (liquidation value $16,320,000)                                       15,279,085          15,509,438
                                                                                   -----------------  ------------------

                                                                                                             (Continued)

                                       32

                       GTS DURATEK, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheets

                           December 31, 1998 and 1999



                                                                                         1998               1999
                                                                                   -----------------  ------------------
                                                                                                     
Stockholders' equity:
    Preferred stock - $.01 par value; authorized 4,840,000 shares;
       none issued                                                              $                --  $               --
    Common stock - $.01 par value; authorized 35,000,000
       shares; issued 14,225,750 in 1998 and 14,823,850 in 1999                             142,257             148,238
    Capital in excess of par value                                                       72,513,024          75,207,177
    Accumulated deficit                                                                 (14,742,524)         (4,772,979)
    Treasury stock at cost, 485,258 shares in 1998 and 1,521,958 shares
       in 1999                                                                           (2,891,170)         (9,187,726)
                                                                                   -----------------  ------------------
            Total stockholders' equity                                                   55,021,587          61,394,710
                                                                                   -----------------  ------------------

Commitments and contingencies
                                                                                   -----------------  ------------------
                                                                                $       134,244,782  $      157,588,363
                                                                                   =================  ==================



See accompanying notes to consolidated financial statements.

                                       33

                       GTS DURATEK, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations

                  Years ended December 31, 1997, 1998 and 1999


                                                                       1997               1998               1999
                                                                 -----------------  -----------------  -----------------
                                                                                             
Revenues                                                       $      136,552,821  $     160,313,077  $     177,195,546
Cost of revenues                                                      120,814,140        123,839,031        128,719,021
                                                                 -----------------  -----------------  -----------------
            Gross profit                                               15,738,681         36,474,046         48,476,525
Selling, general and administrative expenses                           15,724,895         26,613,548         27,722,569
Charge for asset impairment                                                    --          9,223,948                 --
                                                                 -----------------  -----------------  -----------------
            Income from operations                                         13,786            636,550         20,753,956
Interest income (expense), net                                            570,795           (544,902)        (2,297,105)
                                                                 -----------------  -----------------  -----------------

            Income before income taxes and proportionate
               share of losses of joint ventures                          584,581             91,648         18,456,851
Income taxes                                                              716,000            627,000          6,854,500
                                                                 -----------------  -----------------  -----------------

            Income (loss) before proportionate share of
               losses of joint ventures                                  (131,419)          (535,352)        11,602,351
Proportionate share of losses of joint ventures                          (149,620)        (1,474,000)          (122,633)
                                                                 -----------------  -----------------  -----------------

            Net income (loss) before cumulative effect
               of change in accounting principle                         (281,039)        (2,009,352)        11,479,718
Cumulative effect of change in accounting principle                            --           (420,000)                --
                                                                 -----------------  -----------------  -----------------
            Net income (loss) and comprehensive
               income (loss)                                             (281,039)        (2,429,352)        11,479,718
Preferred stock dividends and charges for accretion                    (1,503,393)        (1,506,754)        (1,510,173)
                                                                 -----------------  -----------------  -----------------

            Net income (loss) attributable to common
               stockholders                                    $       (1,784,432) $      (3,936,106) $       9,969,545
                                                                 =================  =================  =================

Net income (loss) per share before cumulative effect
    of change in accounting principle:
               Basic                                           $            (0.14)$            (0.27)$             0.75
                                                                 =================  =================  =================
               Diluted                                         $            (0.14)$            (0.27)$             0.58
                                                                 =================  =================  =================

Net income (loss) per share:
               Basic                                           $            (0.14)$            (0.30)$             0.75
                                                                 =================  =================  =================
               Diluted                                         $            (0.14)$            (0.30)$             0.58
                                                                 =================  =================  =================



See accompanying notes to consolidated financial statements.

                                       34

                       GTS DURATEK, INC. AND SUBSIDIARIES

                 Consolidated Statements of Stockholders' Equity

                  Years ended December 31, 1997, 1998 and 1999


                                       COMMON STOCK         CAPITAL IN                                    TOTAL STOCK-
                                 -------------------------   EXCESS OF      ACCUMULATED     TREASURY        HOLDERS'
                                    SHARES       AMOUNT      PAR VALUE       DEFICIT         STOCK           EQUITY
                                 -------------  ----------  ------------  --------------  -------------  ---------------
                                                                                    
Balance, December 31, 1996         12,419,231  $  124,191  $ 64,216,440  $   (9,021,986) $    (171,777) $    55,146,868

Net loss                                   --          --            --        (281,039)            --         (281,039)

Exercise of options and warrants      302,015       3,021     1,037,757              --             --        1,040,778

Income tax benefit from exercise
    of non-qualified stock options         --          --       827,000              --             --          827,000

Other issuances of common
    stock                                 825           8         6,489              --             --            6,497

Issuance of common stock in
    acquisition of The Scientific
    Ecology Group, Inc.               156,986       1,570     1,191,053              --             --        1,192,623

Preferred stock dividend and
    charges for accretion                  --          --            --      (1,503,393)            --       (1,503,393)
                                 -------------  ----------  ------------  --------------  -------------  ---------------
Balance, December 31, 1997         12,879,057     128,790    67,278,739     (10,806,418)      (171,777)      56,429,334

Net loss                                   --          --            --      (2,429,352)            --       (2,429,352)

Exercise of options and warrants    1,346,693      13,467     4,994,285              --             --        5,007,752

Income tax benefit from exercise
    of non-qualified stock options         --          --       240,000              --             --          240,000

Treasury stock purchases                   --          --            --              --     (2,719,393)      (2,719,393)

Preferred stock dividend and
    charges for accretion                  --          --            --      (1,506,754)            --       (1,506,754)
                                 -------------  ----------  ------------  --------------  -------------  ---------------
Balance, December 31, 1998         14,225,750     142,257    72,513,024     (14,742,524)    (2,891,170)      55,021,587

Net income                                 --          --            --      11,479,718             --       11,479,718

Exercise of options and warrants      598,100       5,981     1,831,859              --             --        1,837,840

Income tax benefit from exercise
    of non-qualified stock options         --          --       862,294              --             --          862,294

Treasury stock purchases                   --          --            --              --     (6,296,556)      (6,296,556)

Preferred stock dividend and
    charges for accretion                  --          --            --      (1,510,173)            --       (1,510,173)
                                 -------------  ----------  ------------  --------------  -------------  ---------------
Balance, December 31, 1999         14,823,850  $  148,238  $ 75,207,177  $   (4,772,979) $  (9,187,726) $    61,394,710
                                 =============  ==========  ============  ==============  =============  ===============


See accompanying notes to consolidated financial statements.

                                       35

                       GTS DURATEK, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                  Years ended December 31, 1997, 1998 and 1999


                                                                       1997               1998               1999
                                                                  ----------------   ----------------   ----------------
                                                                                             
Cash flows from operating activities:
    Net income (loss)                                          $         (281,039) $      (2,429,352) $      11,479,718
    Adjustments to reconcile net income (loss) to net
       cash provided by (used in) operating activities:
          Depreciation and amortization                                 3,721,239          4,798,933          5,664,405
          Accrued interest on convertible debenture                       666,028            472,657            513,231
          Proportionate share of losses of joint ventures                 149,620          2,289,000            122,633
          Charge for asset impairment                                          --          9,223,948                 --
          Cumulative effect of change in accounting
            principle                                                          --            688,879                 --
          Deferred income tax benefit                                    (357,581)        (3,040,604)         4,034,863
          Income tax benefit from exercise of
            non-qualified stock options                                   827,000            240,000            862,294
          Changes in operating items, net of effects from
            businesses acquired in 1997 and 1999:
               Receivables                                             (8,933,233)        (6,995,960)           136,902
               Costs and estimated earnings in excess of
                  billings on uncompleted contracts                     1,811,372          4,818,237         (5,959,672)
               Prepaid expenses and other current assets                1,074,154         (2,008,999)        (1,007,061)
               Accounts payable, accrued expenses and
                  other current liabilities                            (1,537,425)        (6,002,251)        (1,442,845)
               Unearned revenues                                       (6,866,459)        (4,876,064)        (2,270,998)
               Waste processing and disposal liabilities                3,026,900         (4,478,541)        (2,927,563)
               Facility and equipment decontamination
                  and decommissioning liabilities                       1,550,408            553,766            746,006
               Other                                                     (293,482)           592,490              8,745
                                                                  ----------------   ----------------   ----------------

            Net cash provided by (used in) operating
               activities                                              (5,442,498)        (6,153,861)         9,960,658
                                                                  ----------------   ----------------   ----------------

Cash flows from investing activities:
    Additions to property, plant and equipment                        (10,995,723)        (6,137,279)        (8,758,521)
    Additions to intangible assets                                             --                 --           (739,796)
    Acquisitions of businesses, net of cash acquired                  (22,330,427)                --        (13,143,724)
    Advances to joint ventures                                           (551,162)           (57,880)           (40,000)
    Repayments from (advances to) employees, net                          322,701           (419,249)        (1,356,413)
    Other                                                                 (31,866)           191,179            (89,513)
                                                                  ----------------   ----------------   ----------------
            Net cash used in investing activities                     (33,586,477)        (6,423,229)       (24,127,967)
                                                                  ----------------   ----------------   ----------------
                                                                                                            (Continued)


                                       36

                       GTS DURATEK, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                  Years ended December 31, 1997, 1998 and 1999




                                                                       1997               1998               1999
                                                                  ----------------   ----------------   ----------------
                                                                                             
Cash flows from financing activities:
    Net proceeds from (repayments of) short-term
       borrowings                                              $               --  $      10,947,148  $      (1,947,148)
    Proceeds from long-term debt borrowings                                    --                 --         20,000,000
    Repayments of long-term debt                                               --                 --         (2,800,000)
    Repayments of capital lease obligations                               (48,177)          (135,392)          (228,966)
    Preferred stock dividends paid                                     (1,280,000)        (1,280,000)        (1,280,000)
    Proceeds from issuance of common stock                              1,047,275          5,007,752          1,837,740
    Treasury stock purchases                                                   --         (2,719,393)        (6,296,556)
    Deferred financing costs                                                   --           (325,000)        (1,002,510)
                                                                  ----------------   ----------------   ----------------

            Net cash provided by (used in) financing
                  activities                                             (280,902)        11,495,115          8,282,560
                                                                  ----------------   ----------------   ----------------
            Net decrease in cash and cash equivalents                 (39,309,877)        (1,081,975)        (5,884,749)

Cash and cash equivalents, beginning of year                           46,336,126          7,026,249          5,944,274
                                                                  ----------------   ----------------   ----------------
Cash and cash equivalents, end of year                         $        7,026,249  $       5,944,274  $          59,525
                                                                  ================   ================   ================



See accompanying notes to consolidated financial statements.

                                       37


                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999


(1)    ORGANIZATION, DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

       GTS Duratek, Inc. (GTS or the Company) is an environmental services
       company that provides waste treatment solutions for radioactive,
       hazardous, mixed (i.e. intermingled radioactive and hazardous) and other
       wastes. The Company combines proprietary technologies for treating
       various waste streams with a staff of highly skilled personnel with
       significant environmental experience to offer its customers a
       comprehensive approach to their waste treatment needs that includes
       commercial waste processing services, government waste processing
       services and technical support services. The Company's proprietary
       technologies include vitrification, incineration, compaction, metal
       decontamination and recycling and ion exchange used independently or in
       tandem to process its customers waste for long-term storage and disposal.
       The Company has a staff of engineers, consultants and technicians who
       implement the Company's waste treatment technologies and provide highly
       specialized technical support services for its customers. The technical
       support services provided by the Company include site decontamination and
       decommissioning, radiological engineering services, staff augmentation
       and outage support to assist nuclear power plants during maintenance
       shutdowns and environmental and computer consulting and environmental
       safety and health training.


(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

       (a)    PRINCIPLES OF CONSOLIDATION

              The consolidated financial statements include the accounts of the
              Company and its subsidiaries, all of which are wholly owned except
              for DuraTherm, Inc. which is 80% owned. All significant
              intercompany balances and transactions have been eliminated in
              consolidation. Investments in subsidiaries and joint ventures in
              which the Company does not have control or majority ownership are
              accounted for under the equity method.

       (b)    CASH AND CASH EQUIVALENTS

              The Company considers all highly liquid investments with initial
              maturities of three months or less to be cash equivalents. Cash
              equivalents, consisting principally of overnight repurchase
              agreements, were $5,944,274 at December 31, 1998.

       (c)    PROPERTY, PLANT, AND EQUIPMENT

              Property, plant and equipment are carried at cost. Replacements,
              maintenance and repairs which do not extend the lives of the
              assets are expensed as incurred. The Company provides for
              depreciation of property, plant, and equipment when such assets
              become operational, primarily on a straight-line basis over useful
              lives of three to ten years. Leasehold improvements are amortized
              over the shorter of the asset life or the term of the lease.

                                       38                           (Continued)

                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999


       (d)    IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE
              DISPOSED OF

              The Company reviews long-lived assets and certain identifiable
              intangibles for impairment whenever events or changes in
              circumstances indicate that the carrying amount of an asset may
              not be recoverable. Recoverability of assets to be held and used
              is measured by a comparison of the carrying amount of an asset to
              future undiscounted net cash flows expected to be generated by the
              asset. If such assets are considered to be impaired, the
              impairment to be recognized is measured by the amount by which the
              carrying amount of assets exceed the fair value of the assets.
              Assets to be disposed of are reported at the lower of the carrying
              amount or fair value less costs to sell.

       (e)    GOODWILL AND OTHER INTANGIBLE ASSETS

              Goodwill is attributable to the acquisition of The Scientific
              Ecology Group, Inc. (SEG) during 1997 and Frank W. Hake
              Associates, L.L.C. (Hake) during 1999 (see note 3). Goodwill is
              being amortized on a straight-line basis over a 30-year period.
              Other intangibles consist principally of amounts assigned to
              covenants not-to-compete and costs incurred to obtain and maintain
              patents. Covenant and patent amounts are being amortized over 10
              and 17 years, respectively, on a straight-line basis.

              The Company assesses the recoverability of goodwill by determining
              whether amortization of the goodwill balance over its remaining
              life can be recovered through undiscounted cash flows of the
              acquired entities. The amount of impairment, if any, is measured
              based on projected discounted cash flows using a discount rate
              reflecting the Company's average cost of funds. The assessment of
              the recoverability of goodwill will be impacted if estimated
              future operating cash flows are not achieved.

       (f)    FACILITY AND EQUIPMENT DECONTAMINATION AND DECOMMISSIONING

              The Company accrues decontamination and decommissioning (D&D)
              costs for facilities and equipment ratable over the period to the
              estimated date of site closure (see note 14).

       (g)    REVENUE RECOGNITION

              Revenue from the Company's commercial waste processing facilities
              is recognized when waste is processed. Generally, the Company
              processes customer wastes under fixed-unit-price contracts which
              allow for additional billings for burial price increases occurring
              within a set period of time following the Company's receipt of the
              waste, or if the waste differs from contract specifications. The
              Company is responsible for placing processed waste in containers
              and in a form that meets disposal site criteria. The Company
              delivers reports to customers confirming that their waste has been
              processed and buried in accordance with the terms of its
              contracts. Upon completion of processing, the Company accrues for
              burial and secondary waste processing costs. Unearned revenues
              relate principally to progress billings for customer waste
              received and not yet processed.

                                       39           (Continued)

                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999

              Revenue from long-term waste treatment projects and technical
              support services is generated under fixed-price and
              time-and-materials contracts. Revenue from contracts is recognized
              on the percentage-of-completion method as costs are incurred and
              includes estimated fees at predetermined rates as measured by the
              cost-to-cost method. Contract costs includes all direct labor,
              material costs and the indirect costs related to contract
              performance. Differences between recorded costs, estimated
              earnings and final billings are recognized in the period in which
              they become determinable. Costs and estimated earnings in excess
              of billings on uncompleted contracts are recorded as assets.
              Billings in excess of costs and estimated earnings on uncompleted
              contracts are recorded as liabilities. Retainages, amounts subject
              to future negotiation and amounts related to claims are not
              material.

       (h)    INCOME TAXES

              Deferred tax assets and liabilities are recognized for the
              estimated future tax consequences of temporary differences between
              the financial reporting and tax bases of assets and liabilities
              based on enacted tax rates in effect when such amounts are
              expected to be realized based on consideration of available
              evidence, including tax planning strategies and other factors. The
              effects of changes in tax laws or rates on deferred tax assets and
              liabilities are recognized in the period that includes the
              enactment date.

       (i)    START-UP COSTS

              Prior to 1998, the Company's 45% owned subsidiary DuraChem
              capitalized certain costs of starting-up its processing facility
              in Barnwell, South Carolina. In addition, the Company capitalized
              certain costs in developing employee records and documenting
              credentials for personnel in its technical services segment. In
              April 1998, the AICPA issued Statement of Position 98-5 Reporting
              on Costs of Start-up Activities (SOP 98-5), which requires such
              costs be expensed as incurred. During 1998, the Company and
              DuraChem adopted the provisions of SOP 98-5. The Company's
              proportionate share of the cumulative, after tax effect of
              DuraChem's adoption of SOP 98-5 of $1.3 million was recognized in
              the 1998 consolidated statement of operations as a proportionate
              share of losses by joint ventures. The Company's cumulative, after
              tax effect of adoption of SOP 98-5 was $420,000. The adoption of
              SOP 98-5 reduced the Company's loss before proportionate share of
              losses by joint ventures by approximately $78,000, increased the
              net loss before cumulative effect of a change in accounting
              principle by approximately $1.2 million, increased the net loss by
              approximately $1.6 million, increased the per share net loss
              attributable to common stockholders before cumulative effect of a
              change in accounting principle by $0.09 per share and increased
              the per share net loss attributable to common stockholders by
              $0.12 per share.

                                                                     (Continued)
                                       40

                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999

       (j)    STOCK OPTION PLAN

              The Company accounts for stock options using the intrinsic value
              method prescribed by Accounting Principles Board ("APB") Opinion
              No. 25, Accounting for Stock Issued to Employees, and related
              interpretations, with proforma disclosures of net income (loss)
              and net income (loss) per share as if the fair value based method
              prescribed by Statement of Financial Accounting Standards ("SFAS")
              No. 123, Accounting for Stock-Based Compensation, had been used.

       (k)    NET INCOME PER SHARE

              Basic earnings per share (EPS) is computed by dividing income
              available to common stockholders by the weighted-average number of
              common shares outstanding for the period. Weighted average shares
              used in computing basic EPS were 12,619,000, 13,137,000 and
              13,351,000 for the years ended December 31, 1997, 1998 and 1999,
              respectively. Diluted EPS reflects the potential dilution that
              could occur if securities or 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 earnings of the
              entity. Weighted average shares used in computing diluted EPS were
              12,619,000, 13,137,000 and 20,323,000 for the years ended December
              31, 1997, 1998 and 1999, respectively. The difference between
              basic and diluted weighted average shares relates to the dilutive
              effect of stock options and warrants where the exercise price is
              less than the average market value of the Company's common stock
              for the year of calculation and to the assumed conversion of the
              Company's convertible debentures and preferred stock. Conversion
              of the Company's convertible debentures and preferred stock is not
              included in the calculation of diluted EPS in 1997 and 1998, as
              such conversion was anti-dilutive. The diluted EPS amount for 1999
              is based on net income adjusted for the after tax impact of the
              interest expense on the Company's convertible debentures of
              $308,000.

       (l)    FAIR VALUE OF FINANCIAL INSTRUMENTS

              The estimated fair value of financial instruments, including
              accounts receivable, accounts payable and long-term debt,
              approximate carrying values.

       (m)    USE OF ESTIMATES

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

              Significant estimates and judgments made by management include:
              (i) the recovery of investments in and advances to joint ventures
              (see note 6), (ii) the amount of waste processing and disposal
              liabilities (see note 11) and (iii) the cost to decommission and
              decontaminate the commercial waste processing facilities and
              equipment (see note 14).

                                       41                            (Continued)


                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999

       (n)    RECLASSIFICATIONS

              Certain amounts for 1997 and 1998 have been reclassified to
              conform to the presentation for 1999.


(3)    ACQUISITIONS

       (a)    THE SCIENTIFIC ECOLOGY GROUP, INC.

              On April 18, 1997, the Company acquired 100% of the outstanding
              capital stock of SEG, since renamed GTS Duratek-Bear Creek, Inc.,
              from Westinghouse Electric Corporation (Westinghouse) for
              approximately $22.4 million in cash including transaction costs
              and 156,986 shares of the Company's common stock. The Company paid
              the cash portion of the purchase price out of available cash. SEG,
              which is based in Oak Ridge, Tennessee, is the largest commercial
              radioactive waste processing company in the United States,
              offering an extensive range of waste processing services and
              technologies including incineration, compaction and metal
              decontamination and recycling to commercial generators of
              radioactive wastes. SEG also provides site decontamination and
              decommissioning and other technical support services to clients
              including government facilities, commercial facilities and
              university/research/test facilities. In addition, SEG provides
              transportation services of radioactive wastes, maintaining a fleet
              of tractors, trailers and shipping containers for transporting
              radioactive wastes.

              The acquisition was effective as of April 1, 1997 and,
              accordingly, the Company's results of operations for the year
              ended December 31, 1997 reflect the operating results of SEG from
              such date. The Company has accounted for the transaction under the
              purchase method of accounting. The aggregate purchase price of
              $72.7 million, which includes liabilities assumed and transaction
              costs, exceeded the estimated fair value of SEG's tangible assets
              by approximately $13.9 million. Such amount has been allocated to
              intangible assets, principally goodwill, and is being amortized
              over 30 years.

       (b)    FRANK W. HAKE ASSOCIATES, L.L.C.

              On June 30, 1999, the Company acquired 100% of the outstanding
              capital stock of Hake from HakeTenn, Inc., a Delaware corporation
              and an affiliate of the Hake Group of Philadelphia, Pennsylvania,
              and two individuals for $12.9 million in cash, subject to a post
              closing adjustment, and the assumption of certain liabilities. The
              Company paid the cash portion of the purchase price out of
              available cash, principally from its credit facility with its
              bank. In 2000, the Company received $2.2 million with respect to
              the post closing adjustment. Hake is a specialist in the storage,
              transportation handling and processing of radioactive waste
              emanating from nuclear power generation plants throughout the
              United States. Hake also stores and services power generation
              equipment at its licensed facility in Memphis, Tennessee.

                                       42                           (Continued)

                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999


              The acquisition was effective as of June 30, 1999. The Company has
              accounted for the transaction under the purchase method of
              accounting. The aggregate purchase price of approximately $20.4
              million, which includes liabilities assumed and transaction costs,
              exceeded the fair value of Hake's tangible assets by approximately
              $9.8 million. Such amount has been allocated to intangible assets,
              principally goodwill, and is being amortized over 30 years.

              Assuming the Hake acquisition had been consummated on January 1,
              1998, revenues, net income (loss) attributable to common
              stockholders, basic net income (loss) per share and diluted net
              income (loss) per share would have been as follows for the years
              ended December 31, 1998 and 1999.



                                                                             1998               1999
                                                                       ----------------   ----------------
                                                                                  
              Revenues                                                $     175,480,976 $      185,595,546
                                                                       ================   ================
              Net income (loss) attributable to common stockholders   $      (4,994,197)$        7,711,133
                                                                       ================   ================
              Basic net income (loss) per share                       $           (0.38)$             0.58
                                                                       ================   ================
              Diluted net income (loss) per share                     $           (0.38)$             0.47
                                                                       ================   ================




(4)    Other Accounts Receivable

       Other accounts receivable, at December 31, 1998, include loans of
       $465,000 and $275,000 to two of the Company's executive officers. Other
       accounts receivable, at December 31, 1999, includes loans of $463,000 and
       $312,000 to two of the Company's executive officers. The loans bear
       interest at market rates and are due by December 31, 2000.

                                       43                           (Continued)

                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999

(5)    PROPERTY, PLANT AND EQUIPMENT

       Property, plant and equipment at December 31 consists of the following:


                                                                   1998             1999
                                                             ---------------  ---------------
                                                                       
       Land and land improvements                          $        560,000  $       560,000
       Buildings                                                 15,376,383       24,225,162
       Machinery and equipment                                   37,220,299       42,748,068
       Leasehold improvements, furniture and fixtures            11,195,977        6,444,329
       Construction in progress                                   1,629,747        4,279,106
                                                            ---------------  ---------------
                                                                 65,982,406       78,256,665

       Less accumulated depreciation and amortization            11,711,662       14,839,358
                                                            ---------------  ---------------
                                                           $     54,270,744  $    63,417,307
                                                            ===============  ===============


(6)    INVESTMENTS IN AND ADVANCES TO JOINT VENTURES

       The Company has investments in and advances to each of its 50% or less
       owned joint ventures. A description of each is as follows:

       (a)    DURACHEM

              The Company and Chem-Nuclear Systems, Inc. (Chem-Nuclear), a
              subsidiary of Waste Management, Inc., have formed DuraChem to
              design, build and operate vitrification facilities to process
              commercial radioactive waste for disposal. Under the joint venture
              agreement, the Company contributes 45% of the facility
              construction costs and shares proportionately in DuraChem's
              results of operations. Management of Chem-Nuclear and the Company
              temporarily suspended construction of the project. The Company's
              management anticipates commencement of the facility within the
              next two years, however, changes in market conditions or other
              factors could result in additional delays (see note 23).

              The Company's investment in, and advances to, DuraChem at December
              31, 1998 and 1999 of $3,253,885, related to construction costs of
              the facility in Barnwell, South Carolina. For the year ended
              December 31, 1998, DuraChem's net loss of approximately $4,642,000
              related entirely to the adoption of SOP 98-5 (see note 2). After
              the adoption of SOP 98-5, DuraChem had total assets of $4,281,000
              at December 31, 1998 and 1999 consisting exclusively of fixed
              assets.

                                       44                            (Continued)

                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999


       (b)    VITRITEK ENVIRONMENTAL, INC. ("VITRITEK")

              Through Vitritek, the Company has extended its vitrification
              technology to non-radioactive hazardous waste such as asbestos,
              fly ash and medical waste. Vitritek is owned equally by the
              Company and Vitritek Holdings LLC. Formed in December 1993,
              Vitritek represents the consolidation of co-licensing rights to
              non-radioactive vitrification technologies previously acquired by
              the Company and Vitritek Holdings LLC. Under the terms of the
              joint venture arrangement, all funding requirements and all
              profits are shared equally.

              The Company's investment in, and advance to, Vitritek at December
              31, 1998 and 1999, were $877,521 and $794,888, respectively. For
              the years ended December 31, 1997, 1998 and 1999, Vitritek had net
              losses of $649,240, $750,000, and $595,266, respectively. For the
              years ended December 31, 1997, 1998 and 1999, the Company
              recognized its proportionate share of the loss in the consolidated
              statements of operations after intercompany eliminations. Vitritek
              had fixed assets and total assets of $718,464 and $1,443,464,
              respectively, at December 31, 1999.


(7)    GOODWILL AND OTHER INTANGIBLE ASSETS

       Goodwill and other intangible assets at December 31 consist of the
       following:

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

       Goodwill                           $     13,924,000  $    23,735,546
       Other intangible assets                   1,540,735        2,280,366
                                           ---------------  ---------------
                                               15,464,735       26,015,912

       Less accumulated amortization             1,806,214        2,624,720
                                           ---------------  ---------------
                                         $     13,658,521  $    23,391,192
                                           ===============  ===============

                                       45                        (Continued)

                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999

(8)    DOE SAVANNAH RIVER M-AREA PROJECT

       In November 1993, the Company received a contract to process 90,000 cubic
       feet of low-level mixed waste sludge stored at the DOE's Savannah River
       site in Aiken, South Carolina. To meet its obligations under the
       contract, the Company constructed a glass melter and began processing
       waste in October 1996. In March 1997, the Company decided to temporarily
       suspend processing of radioactive waste and initiate an unscheduled
       controlled cool down of its glass melter at its M-Area processing plant
       located at the DOE's Savannah River site. After an extensive inspection
       of the condition of the melter at the Savannah River site, the Company's
       management made the decision to undertake more extensive repairs and
       modification of the facility, including melter box replacement, before
       resumption of radioactive waste processing. The modifications were made
       so that the Company could more efficiently meet is obligations under an
       existing contact as well as prepare the facility for additional waste
       streams. The M-Area facility resumed radioactive waste processing
       operations during the fourth quarter of 1997. As a result of the
       necessary repairs and the delay in completing the waste processing
       required by the contract, the Company recorded losses of $7.2 million on
       the M-Area contract in 1997 which included the estimated costs of repairs
       to the melter and for the estimated losses to complete the fixed price
       contract. During the fourth quarter of 1998, the Company recorded a $1.8
       million charge for additional costs to be incurred to complete and close
       out the contract.

       At the time of modifying the glass melter and throughout 1998, the
       Company's believed, based on discussions with DOE and Savannah River
       officials, that contracts for processing additional waste streams would
       be awarded to the Company. Since completion of the existing contract, the
       Company requested that additional waste streams be awarded, however, as a
       result of a change in the site's waste treatment priorities, no
       additional waste processing contracts were awarded to the Company.
       Accordingly, in the fourth quarter 1998, the Company recorded an asset
       impairment charge of $9.2 million related to the carrying value of the
       glass melter which was abandoned.


(9)    SHORT-TERM BORROWINGS

       The Company has a $60 million bank credit facility which includes (i) a
       $35 million revolving line of credit, based on eligible accounts
       receivable (as defined in the credit agreement), to fund working capital
       requirements, (ii) a $20.0 million line of credit to finance acquisitions
       or stock purchases, and (iii) a $5 million line of credit to finance up
       to 75% of new equipment purchases. Substantially all of the Company's
       assets, excluding real property and inventory, have been pledged as
       collateral. Borrowings outstanding under the revolving line of credit
       bear interest at either the bank's base rate, as defined, plus applicable
       margin (9.0% at December 31, 1999) or the London Interbank Offered Rate
       (LIBOR) rate plus applicable margin (7.94% at December 31, 1999). The
       interest rate is subject to adjustment, depending upon the Company's
       ratio of debt to operating income. The credit facility has a five-year
       term. The Company had available additional borrowings of approximately
       $26.0 million to fund working capital needs at December 31, 1999.

                                       46                         (Continued)

                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999


       The Company paid interest expense of $8,701, $443,962 and $1,666,590
       during the years ended December 31, 1997, 1998 and 1999, respectively.


(10)   ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

       Accrued expenses and other current liabilities at December 31 consist of
       the following:


                                                              1998             1999
                                                          -------------   --------------
                                                                   
       Salaries and related expenses                     $    2,134,585  $     2,365,567
       Preferred stock dividend payable                         320,000          320,000
       Income taxes payable                                   1,965,319               --
       Current portion of capital lease obligations             357,329          290,268
       Other accrued expenses                                 1,079,067        2,294,040
                                                          -------------   --------------
                                                         $    5,856,300  $     5,269,875
                                                          =============   ==============


(11)   WASTE PROCESSING AND DISPOSAL LIABILITIES

       During customer waste processing at the Company's Oak Ridge, Tennessee
       facility, the Company creates waste by-products (secondary waste) which
       become the Company's responsibility to process and send to burial.
       Management evaluates the content of this waste and accrues the estimated
       costs of processing and disposal based on anticipated processing methods
       and current disposal sites and rates. The ultimate cost of processing and
       disposal, however, will depend on the actual contamination of the waste,
       the amount of processing, volume reduction and disposal density. At
       December 31, 1998 and 1999, the Company has accrued $1,801,762 and
       $2,743,019 related to such waste, respectively.

       In addition, the Company has accrued $2,400,799 and $1,167,136 for
       processed customer waste awaiting burial at December 31, 1998 and 1999,
       respectively. The Company ships a significant portion of waste to a
       single burial site, at a cost significantly lower than waste shipped to
       other available alternatives. The accompanying consolidated financial
       statements reflect various accruals and estimates assuming the single
       burial site continues to be a viable disposal site at rates presently in
       effect. If the site's licenses are not renewed or at some future date if
       the site's rate structure were to change significantly, the Company's
       costs to dispose of waste would likely increase. Management has not
       determined the impact, if any, either of these scenarios would have on
       the Company's liabilities or future operating costs.

                                       47                           (Continued)

                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999


(12)   Long-Term Debt

       As discussed in note 9, the Company has a $60 million bank credit
       facility which includes, among other things, a $20 million line of credit
       to finance acquisitions or stock repurchases (Term Loan A) and a $5
       million line of credit to finance up to 75% of the Company's acquisition
       cost of new equipment purchases (Term Loan B). Borrowings under these
       lines of credit are converted into term facilities to be repaid in equal
       quarterly installments. Term Loan A is to be repaid in quarterly
       installments equal to $1 million. The Company may also be required to
       prepay the term loans in the amount equal to 50% of excess cash flow, as
       defined. Excess cash flow is measured annually on the Company's fiscal
       year. The Company did not meet the excess cash flow criteria at December
       31, 1999. At December 31, 1999, $17,200,000 was outstanding under the
       Term Loan A of which $4,000,000 is payable during each of the years ended
       December 31, 2000, 2001, 2002 and 2003, with the balance due on 2004. The
       bank credit facility requires the Company to maintain certain financial
       ratios and restricts the payment of dividends on the Company's common
       stock.


(13)   Convertible Debenture

       In November 1995, in connection with the formation of the strategic
       alliance, the Company received proceeds of $9,830,280, net of debt issue
       costs, from the issuance of a $10 million convertible debenture to BNFL.
       The debenture accrues interest during the first five years at the
       one-year London Interbank Offered Rate (LIBOR). The debenture and the
       accrued interest are convertible into 1,381,575 shares of the Company's
       common stock on or before November 7, 2000. The debenture is to be repaid
       in annual installments over a five-year period commencing on November 7,
       2001. The conversion and repayment dates can be extended under certain
       circumstances. At December 31, 1998 and 1999, the balance due BNFL of
       $11,821,582 and $12,334,813 included accrued interest of $1,821,582 and
       $2,334,813, respectively.

       The estimated fair value of the convertible debentures at December 31,
       1999 approximated its carrying value.


(14)   Facility and Equipment Decontamination and Decommissioning (D&D)

       The Company has estimated the current costs to decontaminate and
       decommission (D&D) its commercial waste processing facilities and
       equipment to be approximately $17.9 million. Based on the current market
       and projections for the demand for future waste processing, the Company
       estimates it will operate at its Tennessee facilities for at least the
       next 27 years. Accordingly, the Company is accruing the expected D&D
       costs plus an amount for inflation over such period. Management is unable
       to estimate the effects of changes in technology, future increases in
       burial rates and the timing of D&D activities on the estimated D&D costs.
       Uncertainties related to any of these factors could have a significant
       impact on the Company's estimated D&D costs. Management updates the D&D
       estimates on an annual basis. During the years ended December 31, 1998
       and 1999, the Company accrued D&D costs of $473,000 and $746,000,
       respectively.

                                       48                           (Continued)

                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999

       The Company has purchased insurance to fund the Company's obligation to
       clean and remediate its Tennessee facilities upon closure.


(15)   8% CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED STOCK

       In January 1995, the Company issued for $16 million, 160,000 shares of 8%
       Cumulative Convertible Redeemable Preferred Stock, par value $.01 per
       share (the "Convertible Preferred Stock") and an option (the "Carlyle
       Option") to purchase up to an additional 1.25 million shares of the
       Company's common stock, at any time prior to January 24, 1999 for $3.75
       per share to investment partnerships sponsored and controlled by The
       Carlyle Group ("Carlyle"). During 1998, Carlyle exercised its option to
       purchase 1,206,809 shares for $4,525,534. The Convertible Preferred Stock
       is initially convertible into the Company's common stock at a conversion
       price of $3 per share and, if not previously converted, the Company is
       required to redeem the outstanding Convertible Preferred Stock on January
       24, 2002 for $100 per share plus accrued and unpaid dividends. The
       Company is required to pay quarterly dividends on the Convertible
       Preferred Stock of $320,000.

       The proceeds, net of offering expenses of $1,309,974, from the issuance
       of the Convertible Preferred Stock and Carlyle Option were $14,690,026,
       of which $14,410,026 was allocated to the Convertible Preferred Stock and
       $280,000 was allocated to the fair value of the Carlyle Option. The
       difference between the carrying value of the Convertible Preferred Stock
       and the redemption value is being accreted through charges to
       stockholders' equity over a six-year period to January 24, 2002.

       The estimated fair value of the Convertible Preferred Stock at December
       31, 1999 was approximately $25.5 million.


(16)   STOCKHOLDERS' EQUITY

       During the years ended December 31, 1997, 1998 and 1999, the Company
       received compensation deductions, for income tax purposes, upon exercise
       of non-qualified stock options by employees. The benefits of such
       deductions, which are included in stockholders' equity, were $827,000,
       $240,000 and $862,000 for the years ended December 31, 1997, 1998 and
       1999, respectively.

       During 1998 and 1999, the Company repurchased 414,800 and 1,036,700
       shares of its common stock, respectively. The repurchased shares are
       reflected as treasury stock in the consolidated balance sheet.


(17)   STOCK OPTION PLANS AND WARRANTS

       The Company has a non-qualified Stock Option Plan (the "Plan") which
       authorizes a committee of the Board of Directors to grant options to
       purchase shares of the Company's common stock to directors, officers and
       employees of the Company. The exercise price of such options may not be
       less than 85% of the fair market value of the common stock on the date of
       grant and the exercise period may not be more than ten years after such
       date.

                                       49                            (Continued)

                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999


       At December 31,1999, there were 186,400 additional shares available for
       grant under the Plan.

       The per share weighted-average fair value of stock options granted during
       1997, 1998 and 1999 were $5.92, $5.22 and $5.64, respectively, on the
       date of grant using the Black Scholes option-pricing model with the
       following weighted-average assumptions: expected dividend yield 0%,
       risk-fee interest rate of 6.6%, expected volatility of 64% (73% in 1998
       and 69% in 1997), and an expected life of four years.

       The Company applies APB Opinion No. 25 in accounting for its Plan and,
       accordingly, no compensation cost has been recognized for its stock
       options in the financial statements. Had the Company determined
       compensation cost based on the fair value at the grant date for its stock
       options under SFAS No. 123, the Company's net income (loss) attributable
       to common stockholders and net income (loss) per share on a diluted
       basis, would have been ($2,524,000) and ($0.20), ($4,208,000) and ($0.32)
       and $7,371,000 and $0.36 for the years ended December 31, 1997, 1998 and
       1999, respectively.

       Pro forma results reflect only options granted since January 1995.
       Therefore, the full impact of calculating compensation cost for stock
       options under SFAS No. 123 is not reflected in the pro forma net income
       amounts presented above because compensation cost is reflected over the
       options' vesting period of five years and compensation cost for options
       granted prior to January 1, 1995 is not considered.

       Changes in options and warrants outstanding, options and warrants
       exercisable and shares reserved for issuance are as follows:

                                      WEIGHTED
                                       AVERAGE
                                      EXERCISE        NUMBER OF
                                        PRICE           SHARES
                                       -------        ---------

       December 31, 1996               $  3.74        2,826,715
       Granted                           10.46          144,500
       Exercised                          3.45         (302,015)
                                       -------        ---------

       December 31, 1997                  4.15        2,669,200
       Granted                            8.78          167,000
       Exercised                          3.72       (1,346,693)
                                       -------        ---------

       December 31, 1998                  5.06        1,489,507
       Granted                            5.78          428,500
       Exercised                          3.07         (597,950)
       Terminated and expired             3.41         (503,257)
                                       -------        ---------

       December 31, 1999               $  7.91          816,800
                                      ========        =========

                                       50                            (Continued)

                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999


       At December 31, 1999, the Company has reserved 7,718,108 shares for
       issuance of options, warrants and securities convertible into the
       Company's common stock. The following table summarizes information about
       outstanding and exercisable options and warrants at December 31, 1999:


                            OUTSTANDING                                                    EXERCISABLE
- -----------------------------------------------------------------------------    --------------------------------
                                                WEIGHTED
                                                 AVERAGE          WEIGHTED                            WEIGHTED
      RANGE OF                                  REMAINING         AVERAGE                             AVERAGE
      EXERCISE                NUMBER           CONTRACTUAL        EXERCISE           NUMBER           EXERCISE
        PRICE               OUTSTANDING           LIFE             PRICE          EXERCISABLE          PRICE
- ----------------------    ----------------    --------------    -------------    ---------------    -------------
                                                                                           
  5.50 - $   5.88                 488,500       4.6 years               5.75             15,000             5.50
 10.13 - $  10.63                 251,300       2.9 years              10.53             98,900            10.51
 12.75 - $  13.75                  77,000       1.0 years              12.91             57,750            12.91
                          ----------------                                       ---------------
                                  816,800                                               171,650
                          ================                                       ===============


(18)   INCOME TAXES

       The provision (benefit) for income taxes for the years ended December 31
       consist of the following:

                              1997             1998             1999
                          --------------  ---------------  ---------------
Current:
    State               $       400,000 $        741,945 $        567,354
    Federal                     673,581        1,841,780        2,252,283
                          --------------  ---------------  ---------------
                              1,073,581        2,583,725        2,819,637
                          --------------  ---------------  ---------------
Deferred:
    State                       (53,637)        (339,808)         593,585
    Federal                    (303,944)      (2,700,796)       3,441,278
                          --------------  ---------------  ---------------
                               (357,581)      (3,040,604)       4,034,863
                          --------------  ---------------  ---------------
                        $       716,000 $       (456,879)$      6,854,500
                          ==============  ===============  ===============




                                       51                            (Continued)

                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999


       The provision (benefit) for the years ended December 31 is allocated as
       follows:


                                                                       1997           1998            1999
                                                                   -------------  -------------  ---------------
                                                                                      
Continuing operations                                            $      716,000 $      627,000 $      6,854,500
Proportionate share of losses of joint ventures                              --       (815,000)              --
Cumulative effect of change in accounting principle                          --       (268,879)              --
                                                                   -------------  -------------  ---------------
                                                                 $      716,000 $     (456,879)$      6,854,500
                                                                   =============  =============  ===============


       The provision for income taxes for the years ended December 31, 1997,
       1998, and 1999 is reconciled to the amount computed by applying the
       statutory Federal income tax rate to income before income taxes and
       proportionate share of losses of joint ventures as follows:


                                                                           1997           1998           1999
                                                                       -------------  -------------  --------------
                                                                                          
Federal income tax at statutory rate                                 $      199,000 $       31,000 $     6,460,000
State income taxes, net of Federal tax benefit                              228,599        405,000         756,000
Valuation allowance                                                         269,000        356,000        (256,640)
Other                                                                        19,401       (165,000)       (104,860)
                                                                       -------------  -------------  --------------
                                                                     $      716,000 $      627,000 $     6,854,500
                                                                       =============  =============  ==============


       The tax effects of temporary differences that give rise to significant
       portions of the deferred tax assets and liabilities at December 31
       consist of the following:


                                                                   1998             1999
                                                              ---------------   --------------
                                                                        
Allowance for doubtful accounts                             $        222,878  $       247,355
Capitalized inventory costs                                           56,414           57,751
Reserve for contract loss                                            344,395               --
Charge for asset impairment                                        3,597,598               --
Write-off of start-up costs                                          394,954          260,679
Loss of joint venture                                                815,000          834,075
Facility and equipment decontamination and
     decommissioning liabilities                                     963,405        1,270,808
Net operating loss carryforwards                                          --          835,724
Alternative minimum tax                                            1,419,042        1,100,353
Accelerated depreciation                                          (2,813,796)      (4,106,921)
Other                                                               (282,848)         (74,285)
                                                              ---------------   --------------
                                                                   4,717,042          425,539

Less valuation allowance                                             625,000          368,360
                                                              ---------------   --------------
                                                            $      4,092,042  $        57,179
                                                              ===============   ==============



                                       52                           (Continued)


                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999


       In assessing the realizability of deferred tax assets, management
       considered whether it was more likely than not that some portion or all
       of the deferred tax assets will be realized. The ultimate realization of
       the deferred tax assets is dependent upon the generation of future
       taxable income during periods in which temporary differences become
       deductible. Management considered income taxes paid during the previous
       three years and projected future taxable income in making this
       assessment. Based upon the level of historical taxable income and
       projections for future taxable income over the periods in which the
       temporary differences are deductible, management has deemed a valuation
       allowance of $368,360 is necessary at December 31, 1999.

       The Company paid income taxes of $334,067, $427,550 and $4,086,669 in the
       years ended December 31, 1997, 1998 and 1999.


(19)   PROFIT INVESTMENT AND DEFERRED COMPENSATION PLANS

       The Company maintains a Profit Investment Plan for employees who have
       completed one year of service with the Company. The Plan permits pre-tax
       contributions to the Plan by participants pursuant to Section 401(k) of
       the Internal Revenue Code of 1% to 14% of base compensation. The Company
       matches 25% of the participants' eligible contributions based on a
       formula set forth in the Plan and may make additional matching
       contributions. Employer contributions vest at a rate of 20% per year of
       service. The Company's matching contributions were $466,485, $466,495 and
       $757,535 for the years ended December 31, 1997, 1998 and 1999,
       respectively.


(20)   RELATED PARTY TRANSACTIONS

       As part of a strategic alliance, BNFL has agreed to provide the Company
       with certain research and development funding. For the year ended
       December 31, 1998, BNFL provided research and development funding of
       $530,000. No funding was provided during 1999. In addition, the Company
       earned approximately $17 million and $24 million during 1998 and 1999,
       respectively, under subcontracts with BNFL related to their work
       performed on the Hanford River Protection and the Idaho Advanced Mixed
       Waste Treatment Projects.

                                       53                           (Continued)

                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999


(21)   SEGMENT REPORTING

       The Company has three primary segments (i) commercial waste processing,
       (ii) government waste processing and (iii) technical services. Below is a
       brief description of each of the segments:

              1.  Commercial Waste Processing (CWP) -- The Company conducts its
                  commercial waste processing operations principally at its Bear
                  Creek Operations Facility located in Oak Ridge, TN. The
                  Company's waste treatment technologies include: incineration;
                  compaction; metal decontamination and recycling;
                  vitrification; steam reforming; thermal desorption; and ion
                  exchange. Commercial waste processing customers primarily
                  include commercial nuclear utilities and petrochemical
                  companies.

              2.  Government Waste Processing (GWP)-- The Company provides
                  on-site waste processing services on large government projects
                  for the DOE. The on-site waste processing services provided by
                  the Company on DOE projects include program development, waste
                  characterization, on-site waste treatment, facility operation,
                  packaging and shipping of residual waste, profiling and
                  manifesting the processed waste and selected technical support
                  services. The Company is currently involved in several waste
                  treatment projects for the DOE including: Hanford Tank Waste
                  Remediation System project, Idaho Advanced Mixed Waste
                  Treatment Project and Rocky Mountain Remediation Services
                  Project.

              3.  Technical Services (TS) -- The Company's technical support
                  services encompass approximately 600 employees, consultants
                  and technicians, some of whom are full-time employees and the
                  balance of whom are contract employees, who support and
                  complement the Company's commercial and government waste
                  processing operations and also provides highly specialized
                  technical support services for the Company's customers. The
                  Company provides these technical support services either as a
                  prime contractor or as a subcontractor to a diverse group of
                  government agencies, electric utilities, industrial facilities
                  and commercial businesses including Duke Power Company,
                  Southern Nuclear Operating Company and Vermont Yankee Nuclear
                  Power Corporation.

                                       54                           (Continued)

                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999

       The accounting policies of the operating divisions are the same as those
       described in the summary of significant accounting policies. The
       Company's segment information is as follows:




                                                                   1999
                              -----------------------------------------------------------------------------------
                                                                                 Unallocated
                                   CWP               GWP             TS             Items        Consolidated
                              ---------------   --------------  --------------   -------------   ----------------
                                                                               
Revenues from external
    customers               $     87,559,271 $     37,238,438 $    52,397,837 $            -- $      177,195,546
Income from operations
    operations                    14,163,048        4,308,814       2,282,094              --         20,753,956
Interest expense                          --               --              --       2,297,106          2,297,106
Depreciation and
    amortization expense           4,618,681          408,218         637,506              --          5,664,405
Proportionate share of
    losses of joint ventures              --               --              --        (122,633)          (122,633)
Income tax expense                        --               --              --       6,854,500          6,854,500
Investments in and
    advances to joint
    ventures                              --               --              --       4,048,773          4,048,773
Capital expenditure for
    additions to
    long-lived assets              6,708,406          886,599          66,899       1,096,617          8,758,521
Total assets                     105,392,912       15,851,390      24,182,052      12,162,009        157,588,363




                                                                    1998
                               ----------------------------------------------------------------------------------
                                                                                 Unallocated
                                    CWP              GWP              TS            Items        Consolidated
                               --------------   --------------   -------------   -------------   ----------------
                                                                               
Revenues from external
    customers                $    73,019,423 $     31,644,340 $    55,649,314 $            -- $      160,313,077
Income (loss) from
    operations                     8,147,733       (8,140,543)        629,360              --            636,550
Interest income                           --               --              --         371,717            371,717
Interest expense                          --               --              --        (916,619)          (916,619)
Depreciation and
    amortization expense           3,940,692          286,206         572,035              --          4,798,933
Proportionate share of
    losses of joint ventures              --               --              --      (1,474,000)        (1,474,000)
Income tax expense                        --               --              --         627,000            627,000
Investments in and
    advances to joint
    ventures                              --               --              --       4,131,406          4,131,406
Capital expenditure for
    additions to
    long-lived assets              3,373,311          487,047       1,611,394         665,527          6,137,279
Total assets                      71,077,591       21,731,656      16,191,189      19,534,196        128,534,632





                                       55                           (Continued)

                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999




                                                                     1997
                               ----------------------------------------------------------------------------------
                                                                                 Unallocated
                                    CWP              GWP              TS            Items        Consolidated
                               --------------   --------------   -------------   -------------   ----------------
                                                                               
Revenues from external
    customers                $    67,675,574 $     16,051,707 $    52,825,540 $            -- $      136,552,821
Income (loss) from
    operations                     4,154,479       (6,310,587)      2,169,894              --             13,786
Interest income                           --               --              --       1,245,875          1,245,875
Interest expense                          --               --              --        (675,080)          (675,080)
Depreciation and
    amortization expense           2,974,682          402,638         343,919              --          3,721,239
Proportionate share of
    losses of joint ventures              --               --              --        (149,620)          (149,620)
Income tax expense                        --               --              --         716,000            716,000
Investments in and
    advances to joint
    ventures                              --               --              --       6,362,526          6,362,526
Capital expenditure for
    additions to
    long-lived assets                516,493        4,803,503         633,517         342,210          6,295,723
Total assets                      69,494,873       17,456,086      26,778,335      18,568,887        132,298,181



       The Company's revenues are derived primarily from utilities and through
       subcontracts from a combination of DOE contractors and subcontractors. In
       1997, one customer comprised 12.0% of the Company's annual revenue. In
       1998, one customer comprised 10.6% of the Company's annual revenues. In
       1999, one customer comprised 13.6% of the Company's annual revenues.

       Accounts receivable and costs and estimated earnings in excess of billing
       on uncompleted contracts relating to DOE contractors and subcontractors
       amounted to $15,429,393 and $3,055,158 at December 31, 1998 and
       $9,274,720 and $2,349,624 at December 31, 1999, respectively. The Company
       estimates an allowance for doubtful accounts based on the credit
       worthiness of its customers as well as general economic conditions.
       Consequently, an adverse change in those factors could affect the
       Company's estimate of its bad debts.


(22)   COMMITMENTS AND CONTINGENCIES

       (a)    ROYALTY AGREEMENTS

              The Company has entered into an exclusive licensing agreement with
              the inventors of the vitrification technology, pursuant to which
              the inventors have granted to the Company the exclusive license
              and rights to all vitrification technology and process patents
              which they develop. The exclusive license agreement expires 17
              years after the last licensed patent is granted, which at this
              time will be in 2012. The agreement provides for a guaranteed
              minimum royalty of $100,000 per year throughout the term of the
              agreement. Royalty expense was $100,000, $141,000 and $288,000 for
              the years ended December 31, 1997, 1998 and 1999, respectively.


                                       56                          (Continued)

                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999

       (b)    LEASES

              The Company has several noncancellable leases which cover real
              property, machinery and equipment and certain manufacturing
              facilities. Such leases expire at various dates with, in some
              cases, options to extend their terms. Several of the leases
              contain provisions for rent escalation based primarily on
              increases in real estate taxes and through operating costs
              incurred by the lessor. Rent expense approximated $2,317,000,
              $1,978,000 and $1,830,000 for the years ended December 31, 1997,
              1998 and 1999, respectively.

              The following is a schedule of future minimum annual lease
              payments for all long-term operating leases for the year ending
              December 31, 1999:


                                                                         OPERATIONS        CAPITAL
                                                                       ---------------  --------------
                                                                              
               2000                                                   $        906,000 $       340,000
               2001                                                            799,000         290,000
               2002                                                            623,000         290,000
               2003                                                            475,000         126,000
               2004                                                            475,000              --
               Thereafter                                                      949,000              --
                                                                        ---------------  --------------
                    Future minimum lease payments                      $      4,227,000       1,046,000
                                                                        ===============
              Less portion representing interest                                                 89,435
            Less current portion of capital lease obligation                                    290,268
                                                                                          --------------
                    Long-term portion of capital lease obligation                        $       666,297
                                                                                          ==============


              During 1998, the Company entered into several new capital lease
              obligations valued at $1,207,395.

       (c)    LEGAL PROCEEDINGS

              On February 3, 1998, the Company's wholly owned subsidiary,
              Scientific Ecology Group, Inc. (now named GTS Duratek Bear Creek ,
              Inc. ("SEG"), was sued in federal district court in Boston,
              Massachusetts. The suit alleges that statements made in press
              releases by Molten Metals Technology, Inc. ("MMT") were fraudulent
              and misleading under federal securities laws and state common law
              fraud theories. These statements concerned a joint venture between
              SEG and MMT and some of these statements were made in press
              releases which MMT issued jointly with SEG. The complaint seeks to
              hold SEG liable for all of these statements. The defendant moved
              to dismiss the complaint, the plaintiffs chose to amend their
              pleading, and the defendant moved to dismiss the amended
              complaint. At the present time the Company is unable to express a
              view on the probable ultimate outcome of the litigation. In
              addition, the Company may have rights of indemnity against CBS
              Corporation ("CBS"), the successor to Westinghouse Electric
              Corporation ("Westinghouse") which was the parent of SEG at the
              time the allegedly misleading statements

                                       57                           (Continued)

                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999


              were made, if, among other things, certain representations and
              warranties made by CBS in the definitive purchase agreement
              pursuant to which the Company purchased SEG were breached. CBS has
              agreed to assume all litigation costs associated with the defense
              of the case, but has reserved the right to challenge the Company's
              claim for indemnification for any settlement or judgment that may
              arise from the case.

              On or about February 25, 1999, Synthetica Technologies, Inc.
              ("Synthetica") served the Company with a complaint filed in the
              Superior Court of California, County of San Francisco. In addition
              to the Company, the complaint named SEG, Westinghouse, and two
              former SEG executives as defendants. The complaint alleged that
              SEG was required by a license agreement and a subsequent asset
              purchase agreement to make certain payments to Synthetica in
              exchange for the right to develop and commercialize Synthetica's
              waste disposal technology. Synthetica claimed that SEG did not
              make allegedly required payments and did not comply with other
              alleged provisions of the contracts between SEG and Synthetica.
              Both the alleged license agreement and alleged asset purchase
              agreement predate the Company's acquisition of SEG. Synthetica
              advanced claims of fraud in the inducement, constructive fraud,
              actual fraud, breach of written contract, breach of implied
              covenant of good faith and fair dealing, intentional interference
              with contractual relations, intentional interference with economic
              relations, negligent interference, negligent misrepresentation and
              breach of fiduciary duty and trade secret misappropriation. The
              complaint sought compensatory and exemplary damages in an
              unspecified amount and an injunction against further trade secret
              misappropriation by the former SEG executives. The defendants
              removed the action to the United States District for the Northern
              District of California and then moved to dismiss the case. The
              plaintiff chose to amend its pleading, dropping the individual
              defendants and eliminating three claims. The remaining defendants
              sought to dismiss the amended complaint. On October 27, 1999, the
              court dismissed the amended complaint in its entirety, but
              permitted the plaintiff to replead certain claims. On November 29,
              1999, the plaintiff filed an amended complaint alleging fraud and
              conspiracy to defraud, breach of implied covenant of good faith
              and fair dealing and breach of contract. The claims in the amended
              complaint relate only to the asset purchase agreement and revolved
              around the claim that SEG failed to develop and commercialize
              Synthetica's waste disposal technology as required by that
              agreement. On January 3, 2000, the court dismissed the Company as
              a party to the case, leaving SEG as one of the remaining
              defendants along with CBS and dismissed certain claims against the
              remaining defendants. While the Company and SEG believe that SEG
              has meritorious defenses to the claims alleged against it by
              Synthetica, the Company cannot make a determination as to the
              likelihood or the extent of any liability arising from this
              matter.

              On December 2, 1999, the Company's wholly owned subsidiary, SEG,
              was named as a defendant in an adversary proceeding in the United
              States Bankruptcy court for the District of Massachusetts. The
              Chapter 11 Trustee, on behalf of the debtor MMT and its creditors,
              filed an adversary "Complaint to Avoid Fraudulent Transfer" naming
              as defendants CBS and SEG. The complaint alleges that the sale of
              CBS's interest in a joint venture to MMT resulted in a fraudulent
              conveyance. The primary allegations against SEG are that MMT's
              release of SEG from obligations to pay $8 million to equalize
              capital expenditures and additional amounts for MMT's share of
              profits, and MMT's assumption of at least $1.5 million of SEG's
              liabilities, are

                                       58                           (Continued)

                       GTS DURATEK, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1999



              avoidable because MMT did not receive reasonably equivalent value
              for the transfers. The Company intends to vigorously contest MMT's
              allegations on the basis that MMT did in fact receive reasonably
              equivalent value for its transfers. In addition, the company may
              have a right of indemnification from CBS pursuant to the relevant
              purchasing agreements. It is too early in the litigation to
              provide an accurate assessment of the Company's liability. CBS has
              agreed to assume all litigation costs associated with the defense
              of the case, but has reserved the right to challenge the Company's
              claim for indemnification for any settlement or judgment that may
              arise from the case.

              In addition, from time to time the Company is a party to
              litigation or administrative proceedings relating to claims
              arising from its operations in the normal course of business.
              Management of the Company, on the advice of counsel, believes that
              the ultimate resolution of such litigation or administrative
              proceedings currently pending against the Company is unlikely,
              either individually or in the aggregate, to have a material
              adverse effect on the Company's results of operations or financial
              condition.


(23)   SUBSEQUENT EVENTS

       In February 2000, the Company completed the sale of its 80% interest in
       DuraTherm, Inc. to DuraTherm Group, Inc. for $8.0 million in cash and a
       subordinated note for $355,000. Proceeds to the Company of $8.0 million
       net were used by the Company to pay down borrowings under its bank credit
       facility. The note receivable bears interest at 14%, payable
       semi-annually during the first year following the sale, and 18% during
       the second year following the sale with the principal due in February
       2002. The Company estimates that it will recognize a pre-tax gain of
       approximately $1.5 million on the sale.

       On March 29, 2000, the Company announced that it has entered into a
       definitive agreement to acquire the nuclear services business of Waste
       Management, Inc. for up to $65 million in cash, consisting of $55 million
       at closing and up to an additional $10 million upon satisfaction of
       certain post-closing conditions. The acquisition is expected to close
       during the second quarter of 2000. As a result of this acquisition, the
       Company expects to acquire the 55% interest in DuraChem held by a
       subsidiary of Waste Management, Inc. (see note 6).

                                       59




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

         None.


                                       60


                                    Part III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The following table sets forth the names of the executive officers of
the Company, their positions with the Company and their principal business
experience for the last five years:



Name                      Age     Position                               Principal Business Experience
- ------------------------------------------------------------------------------------------------------------------------
                                                                
Daniel A. D'Aniello        53     Chairman of the Board of Directors     Managing  Director,  The  Carlyle  Group since
                                                                         1987.  Chairman  of the  Board of the  Company
                                                                         since January 1995.

Robert E. Prince           52     President, Chief Executive Officer     President and Chief  Executive  Officer of the
                                  and Director                           Company  since   November  1990  and  director
                                                                         since  1991;   Founder  of  General  Technical
                                                                         Services,   Inc.   (GTS)  in   October   1984;
                                                                         President and Chief  Executive  Officer of GTS
                                                                         from 1987 to 1992.

Robert F. Shawver          43     Executive Vice President and Chief     Executive  Vice President of the Company since
                                  Financial Officer                      May 1993;  Chief  Financial  Officer and Chief
                                                                         Administrative Officer of the Company since
                                                                         1987; Vice President of the Company from 1987
                                                                         to 1993.

Craig T. Bartlett          37     Treasurer                              Treasurer of the Company since  February 1996;
                                                                         Controller  of  the  Company  since   February
                                                                         1993;  Director,  Financial  Operations of the
                                                                         Company   from   1991   to   1993;   Assistant
                                                                         Controller of the Company from 1988 to 1991.

C. Paul Delete             51     Senior Vice President, Technology      Senior Vice  President of Technology  Services
                                  Services and Operations                and  Operations  and  Support  of the  Company
                                                                         since  January  1996;  President of Analytical
                                                                         Resources,  Inc. (an environmental  consulting
                                                                         firm  acquired  by the  Company  in 1996) from
                                                                         1984 to January 1996.

Diane L. Leviski           39     Vice President, Human Resources        Vice  President  of  Human  Resources  of  the
                                                                         Company  since  February  1996;   Director  of
                                                                         Human Resources from 1988 to 1996;  Manager of
                                                                         Human  Resources  of the Company  from 1985 to
                                                                         1988.

Leslie M. Hill             44     President, Bear Creek Operations       President of Bear Creek  Operations  since May
                                                                         1997. Mr. Hill held several senior  management
                                                                         positions  with New York Power  Authority from
                                                                         January 1982 to April 1997.

Ian S. Howard              45     Vice President, Radiological           Group   Vice    President   of    Radiological
                                  Engineering and Field Services         Engineering  and Field Services since December
                                                                         1998.  Deputy Director,  Bear Creek Operations
                                                                         from  April  1997 to  December  1998.  Project
                                                                         Director of the Company from 1985 to 1997.

Willis W. Bixby, Jr.       53     Vice President, Strategic Business     Vice President of the Company since October 1999.
                                  Development                            Vice President of Scientech, Inc. from 1997 to
                                                                         1999. Mr Bixby held several senior management
                                                                         positions with the Department of Energy from 1978
                                                                         to 1997.


                                       61


         Information regarding the Company's Board of Directors is incorporated
by reference from the text and tables under "Election of Board of Directors" in
the Company's definitive Proxy Statement for the Annual Meeting of Stockholders
to be held May 16, 2000 (the "2000 Proxy Statement"), which Proxy Statement will
be filed not later than 120 days after the end of the fiscal year covered by
this Annual Report on Form 10-K.


ITEM 11. EXECUTIVE COMPENSATION

         The text and tables under "Executive Compensation" in the Company's
2000 Proxy Statement are incorporated herein by reference.


Item 12. Security Ownership of Certain Beneficial Owners and Management

         (a)      Except as indicated in the 2000 Proxy Statement, the Company
                  knows of no person who on March 16, 2000, owned beneficially
                  more than 5% of its Common Stock.

         (b)      The stock ownership information contained in the text and
                  tables under "Securities Beneficially Owned" in the Company's
                  2000 Proxy Statement is incorporated herein by reference.

         (c)      The Company knows of no  arrangements  the operation of which
                  may at a subsequent  date result in a change of control of
                  the Company.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The text under "Executive Compensation" and "Certain Transactions with
Management and Others" in the Company's 2000 Proxy Statement is incorporated
herein by reference.

                                       62


                                     PART IV

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

         (a)      (1) The following consolidated financial statements of GTS
                  Duratek and its subsidiaries are included in Item 8:

         Independent Auditors' Report

         Consolidated Balance Sheets at December 31, 1998 and December 31, 1999

         Consolidated Statements of Operations for the years ended December 31,
         1997, 1998 and 1999

         Consolidated Statements of Stockholders' Equity for the years ended
         December 31, 1997, 1998 and 1999

         Consolidated Statements of Cash Flows for the years ended December 31,
         1997, 1998 and 1999

         Notes to Consolidated Financial Statements

         (a)(2)   The following is a list of all financial statement
                  schedules for the years ended December 31, 1997, 1998 and 1999
                  filed as part of this Report:

      Schedule II -- Valuation and Qualifying Accounts

Schedules other than those listed above have been omitted because they are not
required or are not applicable, or the required information has been included in
the Consolidated Financial Statements or the Notes thereto.

      (a) (3)  See accompanying Index to Exhibits...........................67

         (b)      Reports on Form 8-K.

                  No reports on Form 8-K were filed during the last quarter of
1999.

         (c)      The following is a list of exhibits filed herewith:

         Exhibit No.                        Document
         -----------                        --------

              21.1                  Subsidiaries of the Registrant
              23.1                  Consent of KPMG LLP
              27.1                  Financial Data Schedule

         (d)      The following is a list of financial statement schedules filed
                  herewith:

                  Schedule II -- Valuation and Qualifying Accounts

                                       63


SIGNATURES

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

                                           GTS DURATEK, INC.

Dated:  March 27, 2000

                                    By: /s/ ROBERT E. PRINCE
                                        ----------------------------------------
                                           Robert E. Prince
                                           President and Chief Executive Officer

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

                                         Principal Executive Officer:

March 27, 2000
                                        /s/ ROBERT E. PRINCE
                                        ----------------------------------------
                                           Robert E. Prince
                                           President and Chief Executive Officer

                                           Principal Financial Officer:

March 27, 2000
                                        /s/ ROBERT F. SHAWVER
                                        ----------------------------------------
                                           Robert F. Shawver
                                           Executive Vice President and
                                           Chief Financial Officer

                                           Principal Accounting Officer:

March 27, 2000
                                        /s/ CRAIG T. BARTLETT
                                        ----------------------------------------
                                           Craig T. Bartlett
                                           Treasurer

                                           The Board of Directors:

March 27, 2000
                                        /s/ DANIEL A. D'ANIELLO
                                        ----------------------------------------
                                           Daniel A. D'Aniello

March 27, 2000
                                        /s/ J. A. FRED BROTHERS
                                        ----------------------------------------
                                           J. A. Fred Brothers

March 27, 2000
                                        /s/ EARLE C. WILLIAMS
                                        ----------------------------------------
                                           Earle C. Williams


                                       64


March 27, 2000
                                        /s/ DR. FRANCIS J. HARVEY
                                        ----------------------------------------
                                           Dr. Francis J. Harvey

March 27, 2000
                                        /s/ ADMIRAL JAMES D. WATKINS
                                        ----------------------------------------
                                           Admiral James D. Watkins

March 27, 2000
                                        /s/ GEORGE V. MCGOWAN
                                        ----------------------------------------
                                           George V. McGowan

March 27, 2000
                                        /s/ ROBERT E. PRINCE
                                        ----------------------------------------
                                           Robert E. Prince

                                       65


                       GTS DURATEK, INC. AND SUBSIDIARIES

                        Valuation and Qualifying Accounts

                                   Schedule II



                                                               CHARGES        CHARGES                         BALANCE
                                               BALANCE AT     TO COSTS       TO OTHER                         AT END
                                                BEGINNING        AND        ACCOUNTS -      DEDUCTIONS -        OF
                                                OF PERIOD      EXPENSES    DESCRIBE (A)     DESCRIBE (B)      PERIOD
                                              -------------- ----------------------------- ---------------- ------------
                                                                                                
Allowance for doubtful accounts:
      Year ended December 31, 1999         $        571,441      149,123          (41,030)        (108,398)     571,136
      Year ended December 31, 1998         $        487,905      483,477               --         (399,941)     571,441
      Year ended December 31, 1997         $        107,964       48,000          334,615           (2,674)     487,905
                                              ============== ============ ================ ================ ============


(a)   Charges to other accounts in 1997 represent allowance for doubtful
      accounts related to SEG at the date of acquisition. Charges to other
      accounts in 1999 represent the beginning of the year allowance for
      doubtful accounts balance related to DuraTherm, Inc. that is presented in
      the consolidated balance sheet on the net assets held for sale line item.

(b)   Deductions represent write-offs of specifically identified accounts.


                                       66


EXHIBITS INDEX


Exhibit
No.
- ---

3.1         Amended and Restated Certificate of Incorporation of the Registrant.
            Incorporated herein by reference to Exhibit 3.1 of the Registrant's
            Quarterly Report on Form 10-Q for the quarter ended March 31, 1996
            (File No. 0-14292).

3.2         By-Laws of the Registrant. Incorporated herein by reference to
            Exhibit 3.3 of the Registrant's Registration Statement on Form S-1
            (File No. 33-2062).

4.1         Certificate of Designations of the 8% Cumulative Convertible
            Redeemable Preferred Stock dated January 23, 1995. Incorporated
            herein by reference to Exhibit 4.1 of the Registrant's Current
            Report on Form 8-K filed on February 1, 1995 (File No. 0-14292).

4.2         Stock Purchase Agreement among Carlyle Partners II, L.P., Carlyle
            International Partners II, L.P., Carlyle International Partners III,
            L.P., C/S International Partners, Carlyle-GTSD Partners, L.P.,
            Carlyle-GTSD Partners II, L.P. and GTS Duratek, Inc. and National
            Patent Development Corporation dated as of January 24, 1995.
            Incorporated herein by reference to Exhibit 4.2 of the Registrant's
            Current Report on Form 8-K filed on February 1, 1995 (File No.
            0-14292).

4.3         Stockholders Agreement by and among GTS Duratek, Inc., Carlyle
            Partners II, L.P., Carlyle International Partners II, L.P., Carlyle
            International Partners III, L.P., C/S International Partners,
            Carlyle-GTSD Partners, L.P., Carlyle-GTSD Partners II, L.P. and GTS
            Duratek, Inc. and National Patent Development Corporation dated as
            of January 24, 1995. Incorporated herein by reference to Exhibit 4.3
            of the Registrant's Current Report on Form 8-K filed on February 1,
            1995 (File No. 0-14292).

4.4         Registration Rights Agreement by and among GTS Duratek, Inc.,
            Carlyle Partners II, L.P., Carlyle International Partners II, L.P.,
            Carlyle-International Partners III, L.P., C/S International
            Partners, Carlyle-GTSD Partners, L.P., Carlyle-GTSD Partners II,
            L.P. and GTS Duratek, Inc. and National Patent Development
            Corporation dated as of January 24, 1995. Incorporated herein by
            reference to Exhibit 4.4 of the Registrant's Current Report on Form
            8-K filed on February 1, 1995 (File No. 0-14292).

4.5         Convertible Debenture issued by GTS Duratek, Inc., General Technical
            Services, Inc., GTS Instrument Services Incorporated to BNFL Inc.
            dated November 7, 1995. Incorporated herein by reference to Exhibit
            10.20 of the Registrant's Quarterly Report on Form 10-Q for the
            quarter ended September 30, 1995 (File No. 0-14292).

10.1        1984 Duratek Corporation Stock Option Plan, as amended. Incorporated
            herein by reference to Exhibit 10.9 of the Registrant's Annual
            Report on Form 10-K for the year ended December 31, 1990 (File No.
            0-14292).

                                       67


10.2        Asset Purchase Agreement dated August 20, 1990 between Chem-Nuclear
            Systems, Inc. and Duratek Corporation. Incorporated herein by
            reference to Exhibit 1 to the Registrant's Current Report on Form
            8-K filed on August 20, 1990 (File No. 0-14292).

10.3        License Agreement dated as of August 17, 1992 between GTS Duratek,
            Inc. and Dr. Theodore Aaron Litovitz and Dr. Pedro Buarque de
            Macedo. Incorporated herein by reference to Exhibit 10.9 of the
            Registrant's Annual Report on Form 10-K for the year ended December
            31, 1992. (File No. 0-14292).

10.4        Stockholders' Agreement dated December 28, 1993 between GTS Duratek,
            Inc. and Vitritek Holdings, L.L.C. Incorporated herein by reference
            to Exhibit 3 of the Registrant's Current Report on Form 8-K dated
            December 22, 1993. (File No. 0-14292).

10.5        Agreement dated January 14, 1994 between GTS Duratek, Inc. and
            Westinghouse Savannah River Company. Incorporated herein by
            reference to Exhibit 10.17 of the Registrant's Annual Report on Form
            10-K for the year ended December 31, 1993. (File No. 0-14292).

10.6        Agreement dated September 15, 1994 between DuraChem Limited
            Partnership, a Maryland limited partnership, by and among CNSI Sub,
            Inc. and GTSD Sub, Inc., as the General Partners, and Chemical Waste
            Management, Inc. and GTS Duratek, Inc., as the Limited Partners.
            Incorporated herein by reference to Exhibit 10.19 of the
            Registrant's Annual Report on Form 10-K for the year ended December
            31, 1994. (File No. 0-14292).

10.7        Teaming Agreement by and between GTS Duratek, Inc. and BNFL Inc.
            dated November 7, 1995. Incorporated herein by reference to Exhibit
            10.20 of the Registrant's Quarterly Report on Form 10-Q for the
            quarter ended September 30, 1995. (File No. 0-14292).

10.8        Sublicense Agreement by and between GTS Duratek, Inc. and BNFL Inc.
            dated November 7, 1995. Incorporated herein by reference to Exhibit
            10.21 of the Registrant's Quarterly Report on Form 10-Q for the
            quarter ended September 30, 1995. (File No. 0-14292).

10.9        GTS Duratek, Inc. Executive Compensation Plan. Incorporated herein
            by reference to Exhibit 10.19 of the Registrant's Quarterly Report
            on Form 10-Q for the quarter ended September 30, 1997. (File No.
            0-14292).

10.10       Amended and Restated Credit Agreement as of February 1, 1999 between
            GTS Duratek, Inc., GTS Duratek Bear Creek, Inc., GTS Duratek
            Colorado, Inc., Hittman Transport Services, Inc., GTS Instrument
            Services, Incorporated, General Technical Services, Inc., Analytical
            Resources, Inc., GTSD Sub III, Inc. and First Union National Bank,
            First Union Commercial Corporation, Wachovia Bank, N.A. and National
            Bank of Canada. Incorporated herein by reference to Exhibit 2 of the
            Registrant's Current Report on Form 8-K dated February 1, 1999.
            (File No. 0-14292).


                                       68


10.11       Amended and Restated Security Agreement dated as of February 1, 1999
            between GTS Duratek, Inc., GTS Duratek Bear Creek, Inc., GTS Duratek
            Colorado, Inc., Hittman Transport Services, Inc., GTS Instrument
            Services, Incorporated, General Technical Services, Inc., Analytical
            Resources, Inc., GTSD Sub III, Inc. and First Union National Bank,
            First Union Commercial Corporation, Wachovia Bank, N.A. and National
            Bank of Canada. Incorporated herein by reference to Exhibit 3 of the
            Registrant's Current Report on Form 8-K dated February 1, 1999.
            (File No. 0-14292).

10.12       Stock Purchase Agreement between HakeTenn, Inc., George T. Hamilton
            and Richard Wilson and GTS Duratek, Inc. dated as of June 30, 1999.
            Incorporated herein by reference to Exhibit (c)(2) of the
            Registrant's Current Report on Form 8-K filed on July 13, 1999.
            (File No. 0-14292).

10.13       Stock Purchase Agreement between DuraTherm Group, Inc. and GTSD Sub
            III, Inc. dated February 7, 2000. Incorporated herein by reference
            to Exhibit 99.2 of the Registrant's Current Report on Form 8-K filed
            on February 22, 2000. (File No. 0-14292).

21.1        Subsidiaries of the Registrant. (Filed herewith).

23.1        Consent of KPMG LLP. (Filed herewith).

27.1        Financial Data Schedule. (Filed herewith).


                                       69

EX-21.1

                                                                EXHIBIT 21.1

SUBSIDIARIES OF GTS DURATEK, INC.

General Technical Services, Inc. (dba GTS Duratek)                (Maryland)
GTS Instrument Services, Incorporated                             (Maryland)
GTSD Sub, Inc.                                                    (Maryland)
GTSD Sub III, Inc.                                                (Delaware)
Analytical Resources, Inc.                                    (Pennsylvania)
DuraTherm, Inc.                                                   (Maryland)
GTS Duratek Bear Creek, Inc.                                     (Tennessee)
Hittman Transport Services, Inc.                                  (Delaware)
GTS Duratek Colorado, Inc.                                        (Delaware)
SEG Nevada, Inc.                                                  (Delaware)
SEG Equity Holdings, Inc.                                         (Delaware)

                                       70

EX-23.1

                                                                    EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS


The Board of Directors
GTS Duratek, Inc.:


We consent to incorporation by reference in the Registration Statement on Form
S-8 (No. 33-60075) of GTS Duratek, Inc. our report dated March 10, 2000,
relating to the consolidated balance sheets of GTS Duratek, Inc. and
subsidiaries as of December 31, 1998 and 1999 and the related consolidated
statements of operations, stockholders' equity, and cash flows and related
schedule for each of the years in the three-year period ended December 31, 1999,
which report appears in the December 31, 1999 annual report on Form 10-K of GTS
Duratek, Inc.





Baltimore, Maryland
March 27, 2000


                                       71

EX-27

 


<ARTICLE> 5
<LEGEND>
THIS SCEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1998 AND 1999 AND THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998 AND
1999 OF GTS DURATEK, INC. AND SUBSIDIARIES, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.


                                                  
<PERIOD-TYPE>                   12-MOS                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1998             DEC-31-1999
<PERIOD-START>                             JAN-01-1998             JAN-01-1999
<PERIOD-END>                               DEC-31-1998             DEC-31-1999
<CASH>                                       5,944,274                  59,525
<SECURITIES>                                         0                       0
<RECEIVABLES>                               42,527,216              56,097,296
<ALLOWANCES>                                 (571,441)               (571,136)
<INVENTORY>                                  2,405,961                       0
<CURRENT-ASSETS>                            52,583,052              65,364,585
<PP&E>                                      65,982,406              78,256,665
<DEPRECIATION>                            (11,711,662)            (14,839,358)
<TOTAL-ASSETS>                             128,534,632             157,588,363
<CURRENT-LIABILITIES>                       37,224,109              44,381,177
<BONDS>                                     11,821,582              12,334,813
<PREFERRED-MANDATORY>                       15,279,085              15,509,438
<PREFERRED>                                          0                       0
<COMMON>                                       142,257                 148,238
<OTHER-SE>                                  54,879,330              61,246,472
<TOTAL-LIABILITY-AND-EQUITY>               128,534,632             157,588,363
<SALES>                                              0                       0
<TOTAL-REVENUES>                           160,313,077             177,195,546
<CGS>                                                0                       0
<TOTAL-COSTS>                              123,839,031             128,719,021
<OTHER-EXPENSES>                            35,753,960              27,722,569
<LOSS-PROVISION>                                83,536                       0
<INTEREST-EXPENSE>                             544,902               2,297,105
<INCOME-PRETAX>                                 91,648              18,456,851
<INCOME-TAX>                                   627,000               6,854,500
<INCOME-CONTINUING>                        (2,009,352)              11,479,718
<DISCONTINUED>                                       0                       0
<EXTRAORDINARY>                                      0                       0
<CHANGES>                                    (420,000)                       0
<NET-INCOME>                               (2,429,352)              11,479,718
<EPS-BASIC>                                      (.30)                     .75
<EPS-DILUTED>                                    (.30)                     .58