<DOCUMENT>
<TYPE>10-K/A
<SEQUENCE>1
<FILENAME>d10ka.txt
<DESCRIPTION>FORM 10-K/A AMENDMENT NO.2
<TEXT>

<PAGE>

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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               ----------------

                                   FORM 10-K/A
                                Amendment No. 2

                                 ANNUAL REPORT
                     PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended December 31, 2000

                          Commission File No. 1-12333

                               ----------------

                              JLM INDUSTRIES, INC.
            (Exact name of registrant as specified in its charter.)

                Delaware                               06-1163710
        (State of Incorporation)           (IRS Employer Identification No.)

                   8675 Hidden River Parkway, Tampa, FL 33637
                    (Address of principal executive office)

                                 (813) 632-3300
              (Registrant's telephone number, including area code)
                               ----------------

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

          Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.01 per share
                             (Title of each class)

                               ----------------

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

   Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K. Yes [_] No [X]

   The aggregate market value of common stock held by non-affiliates of the
registrant at April 10, 2001 was $4,052,785, based upon the last reported sale
price of the Common Stock as reported by the NASDAQ National Market. The number
of shares of the registrant's Common Stock outstanding at April 10, 2001 was
6,568,222.
--------------------------------------------------------------------------------
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<PAGE>

                                AMENDMENT NO. 2
                           TO THE FORM 10-K FILED BY

                     JLM INDUSTRIES, INC. ON APRIL 17, 2001

   Item 8 to the Form 10-K filed by JLM Industries Inc. on April 17, 2001 is
hereby amended and restated in its entirety as set forth below.


                                       2
<PAGE>

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   Index to Consolidated Financial Statements
                  As of December 31, 2000 and 1999 (Restated)
 And for the years ended December 31, 2000, 1999 (Restated) and 1998 (Restated)

<TABLE>
<S>                                                                            <C>
Independent Auditors' Report................................................   4
Consolidated Balance Sheets.................................................   5
Consolidated Statements of Operations and Comprehensive Income (Loss).......   6
Consolidated Statements of Changes in Stockholders' Equity..................   7
Consolidated Statements of Cash Flows.......................................   8
Notes to Consolidated Financial Statements..................................   9

                   Consolidated Financial Statement Schedule

Schedule II--Valuation and Qualifying Accounts..............................  30
</TABLE>

                                       3
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Stockholders and Board of Directors
JLM Industries, Inc.
Tampa, Florida

   We have audited the accompanying consolidated balance sheets of JLM
Industries, Inc. and subsidiaries (the "Company") as of December 31, 2000 and
1999, and the related consolidated statements of operations and comprehensive
((loss) income, of changes in stockholders' equity and of cash flows for each
of the three years in the period ended December 31, 2000. Our audits also
included the financial statement schedule listed in the Index at Item 8. These
financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and the financial statement schedule
based on our audits.

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

   In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
2000 and 1999, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, such 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.

   As discussed in Note 2 to the financial statements, in 2000 the Company
changed its method of accounting for certain inventories from the LIFO to the
FIFO method and, retroactively restated the 1999 and 1998 financial statements
for the change.

Deloitte & Touche LLP
Certified Public Accountants

Tampa, Florida
April 17, 2001

                                       4
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                  December 31,

<TABLE>
<CAPTION>
                                                                    Restated
                                                        2000          1999
                                                    ------------  ------------
<S>                                                 <C>           <C>
ASSETS
Current Assets:
 Cash and cash equivalents......................... $  6,873,221  $  1,419,568
 Accounts Receivable:
  Trade............................................   47,507,510    52,063,858
  Other............................................    5,406,089     2,431,145
 Inventories.......................................   24,507,901    22,524,047
 Prepaid expenses and other current assets.........    2,117,533     1,877,473
 Income tax receivable.............................          --      3,877,942
                                                    ------------  ------------
    Total current assets...........................   86,412,254    84,194,033
 Other investments.................................    6,021,923     6,725,834
 Property and equipment, net.......................   24,201,841    27,900,465
 Goodwill and other intangibles--net...............   12,051,583    11,692,139
 Other assets--net.................................    7,692,315     8,970,313
                                                    ------------  ------------
    Total assets................................... $136,379,916  $139,482,784
                                                    ============  ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
 Accounts payable and accrued expenses............. $ 76,984,627  $ 62,638,192
 Current portion of long-term debt.................    7,257,975     2,904,166
 Income taxes payable..............................    2,475,228           --
 Deferred revenue--current.........................      600,000       435,497
                                                    ------------  ------------
    Total current liabilities......................   87,317,830    65,977,855
 Long-term debt less current portion...............   14,155,851    24,872,156
 Deferred income taxes.............................    2,628,099     7,400,509
 Minority interest.................................      754,269       543,085
 Deferred revenue and other liabilities............    3,594,267     3,487,144
                                                    ------------  ------------
    Total liabilities..............................  108,450,316   102,280,749
                                                    ------------  ------------
Commitments and Contingencies (Note 11)
 Stockholders' Equity:
  Preferred stock--5,000,000 shares authorized;
   0 shares issued and outstanding.................          --            --
  Common stock--$.01 par value, 30,000,000 shares
   Authorized; 7,234,201 and 7,151,151 shares
    issued,
   Respectively....................................       72,342        71,511
  Additional paid-in capital.......................   21,768,656    21,550,453
  Retained earnings................................   11,300,653    19,597,060
  Accumulated other comprehensive loss.............   (1,942,602)     (985,820)
                                                    ------------  ------------
                                                      31,199,049    40,233,204
  Less treasury stock at cost--665,979 and 573,636
   Shares, respectively............................   (3,269,449)   (3,031,169)
                                                    ------------  ------------
    Total stockholders' equity.....................   27,929,600    37,202,035
                                                    ------------  ------------
    Total liabilities and stockholders' equity..... $136,379,916  $139,482,784
                                                    ============  ============
</TABLE>

                See notes to consolidated financial statements.

                                       5
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
                            Years Ended December 31,


<TABLE>
<CAPTION>
                                                       Restated      Restated
                                           2000          1999          1998
                                       ------------  ------------  ------------
<S>                                    <C>           <C>           <C>
Revenues.............................  $434,457,925  $332,697,833  $305,735,314
Cost of sales........................   412,788,160   311,257,954   271,028,839
                                       ------------  ------------  ------------
 Gross profit........................    21,669,765    21,439,879    34,706,475
Selling, general and administrative
 expenses............................    25,250,744    24,632,066    23,644,565
                                       ------------  ------------  ------------
 Operating (loss) income.............    (3,580,979)   (3,192,187)   11,061,910
Interest expense--net................    (2,948,526)   (1,676,036)   (1,300,161)
Other income (expense)--net..........    (5,123,162)      230,539      (160,412)
Foreign currency exchange (loss)--
 net.................................      (437,317)     (237,784)      (38,434)
                                       ------------  ------------  ------------
(Loss) income before minority
 interest and income
 Taxes...............................   (12,089,984)   (4,875,468)    9,562,903
Minority interest in income of
 subsidiaries........................      (211,184)     (287,218)     (255,867)
                                       ------------  ------------  ------------
(Loss) income from continuing
 operations before
 Income taxes and discontinued
  operations.........................   (12,301,168)   (5,162,686)    9,307,036
                                       ------------  ------------  ------------
Income tax provision (benefit)
 Current.............................       767,649    (4,075,746)    3,589,990
 Deferred............................    (4,772,410)    2,453,880       816,240
                                       ------------  ------------  ------------
 Total income tax (benefit)
  provision..........................    (4,004,761)   (1,621,866)    4,406,230
                                       ------------  ------------  ------------
(Loss) income from continuing
 operations before
 discontinued operations.............    (8,296,407)   (3,540,820)    4,900,806
Discontinued operations:
 Loss from operations (net of income
  tax benefit of $14,900)............           --            --        (19,129)
                                       ------------  ------------  ------------
(loss) income........................    (8,296,407)   (3,540,820)    4,881,677
Net Other comprehensive (loss)
 income..............................      (956,782)   (1,114,691)      149,614
                                       ------------  ------------  ------------
Comprehensive income (loss)..........  $ (9,253,189) $ (4,655,511) $  5,031,291
                                       ============  ============  ============
Basic (loss) earnings per share:
 (Loss) income from continuing
  operations before
  discontinued operations............  $      (1.26) $      (0.53) $       0.70
 Net (loss) income...................  $      (1.26) $      (0.53) $       0.70
Diluted (loss) earnings per share:
 (Loss) income from continuing
  operations before
  Discontinued operations............  $      (1.26) $      (0.53) $       0.70
 Net (loss) income...................  $      (1.26) $      (0.53) $       0.70
Weighted average shares outstanding..     6,568,042     6,664,580     7,038,321
Diluted weighted average shares
 outstanding.........................     6,568,042     6,664,580     7,038,321
</TABLE>

                See notes to consolidated financial statements.

                                       6
<PAGE>

                              JLM INDUSTRIES, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                  Years Ended December 31, 1998, 1999 and 2000

<TABLE>
<CAPTION>
                                                            Accumulated
                                  Additional  (Restated)       Other                      Total
                          Common    Paid-in    Retained    Comprehensive  Treasury    Stockholders'
                          Stock     Capital    Earnings    (Loss) Income    Stock        Equity
                         -------- ----------- -----------  ------------- -----------  -------------
<S>                      <C>      <C>         <C>          <C>           <C>          <C>
Balance at December 31,
 1997, as reported...... $ 71,051 $21,074,912 $17,709,397   $   (20,743) $       --   $ 38,834,617
Restatement of
 Inventories............                          546,806                                  546,806
                         -------- ----------- -----------   -----------  -----------  ------------
Balance at December 31,
 1997, as restated         71,051  21,074,912  18,256,203       (20,743)         --     39,381,423
Purchase of treasury
 shares.................      --          --          --            --    (2,317,927)   (2,317,927)
Sale of stock to
 employees..............       38      21,020         --            --           --         21,058
Issuance or restricted
 stock..................       99     234,777         --            --           --        234,876
Net income..............      --          --    4,881,677           --           --      4,881,677
Other Comprehensive
 Income.................      --          --          --        149,614          --        149,614
                         -------- ----------- -----------   -----------  -----------  ------------
Balance at December 31,
 1998...................   71,188  21,330,709  23,137,880       128,871   (2,317,927)   42,350,721
Purchase of treasury
 shares.................      --          --          --            --      (713,242)     (713,242)
Sale of stock to
 employees..............       10       2,543         --            --           --          2,553
Issuance of restricted
 stock..................      313     217,201         --            --           --        217,514
Net loss................      --          --   (3,540,820)          --           --     (3,540,820)
Other Comprehensive
 Loss...................      --          --          --     (1,114,691)         --     (1,114,691)
                         -------- ----------- -----------   -----------  -----------  ------------
Balance at December 31,
 1999...................   71,511  21,550,453  19,597,060      (985,820)  (3,031,169)   37,202,035
Purchase of treasury
 shares.................      --          --          --            --      (238,280)     (238,280)
Sale of stock to
 employees..............      651      68,221         --            --           --         68,872
Issuance of restricted
 stock..................      180     149,982         --            --           --        150,162
Net loss................      --          --   (8,296,407)          --           --     (8,296,407)
Other Comprehensive
 Loss...................      --          --          --       (956,782)         --       (956,782)
                         -------- ----------- -----------   -----------  -----------  ------------
Balance at December 31,
 2000................... $ 72,342 $21,768,656 $11,300,653   $(1,942,602) $(3,269,449) $ 27,929,600
                         ======== =========== ===========   ===========  ===========  ============
</TABLE>


                See notes to consolidated financial statements.

                                       7
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                            Years Ended December 31,

<TABLE>
<CAPTION>
                                                      (Restated)   (Restated)
                                            2000         1999         1998
                                         -----------  -----------  -----------
<S>                                      <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income....................... $(8,296,407) $(3,540,820) $ 4,881,677
Adjustments to reconcile net (loss)
 income to net cash provided
 by (used in) operating activities:
 Deferred income taxes..................  (4,772,410)   2,453,880      816,240
 Minority interest in income of
  subsidiaries..........................     211,184      287,218      255,867
 Loss on other investments..............         --        12,000      242,717
 Issuance of restricted stock...........     150,162          --       234,876
 Depreciation and amortization..........   3,893,142    4,045,626    3,671,452
 Loss (gain) on sale of assets..........    (320,614)     359,844      116,432
 Allowance for doubtful accounts........     263,048      286,248      270,902
 (Increase) decrease in assets:
  Accounts receivable...................   2,618,355  (16,708,686)  27,829,808
  Inventories...........................  (1,983,854)    (330,113)   2,412,553
  Prepaid expenses and other current
  assets................................    (240,060)  (1,936,166)    (213,733)
  Other assets..........................      13,652   (3,710,954)  (1,386,907)
  Other investments.....................   3,226,986   (4,528,553)         --
 Decrease (Increase) in liabilities:
  Accounts payable and accrued
  expenses..............................  14,346,436   22,136,056  (32,536,054)
  Income taxes (payable)/receivable.....   5,053,170   (3,395,258)    (878,866)
  Deferred revenue......................     476,458    3,919,477          --
  Other liabilities.....................    (204,832)       1,206     (524,519)
                                         -----------  -----------  -----------
  Net cash provided by (used in)
   operating activities.................  14,434,416     (648,995)   5,192,445
                                         -----------  -----------  -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Proceeds from sale of assets...........   2,579,410      653,624      155,115
 Acquisition of investments.............  (2,523,075)         --           --
 Capital expenditures...................  (1,548,413)  (2,203,571)  (1,102,192)
 Purchase of subsidiaries...............         --    (7,710,888)  (4,045,469)
                                         -----------  -----------  -----------
  Net cash used in investing
   activities...........................  (1,492,078)  (9,260,835)  (4,992,546)
                                         -----------  -----------  -----------
CASH FLOW FROM FINANCING ACTIVITIES:
 Net (repayments of) proceeds from loans
  payable...............................         --      (454,295)      72,708
 Net proceeds from long-term debt.......     291,917   58,044,321    3,531,500
 Principal payments of long-term debt...  (6,654,412) (46,915,814)  (4,890,483)
 Proceeds from sale stock...............      68,872        2,553       21,058
 Purchase of treasury shares............    (238,280)    (713,242)  (1,817,927)
                                         -----------  -----------  -----------
  Net cash (used in) provided by
   financing activities.................  (6,531,903)   9,963,523   (3,083,144)
                                         -----------  -----------  -----------
Effect of foreign exchange rates on
cash....................................    (956,782)  (1,114,691)     149,614
                                         -----------  -----------  -----------
  Net increase (decrease) in cash and
   cash equivalents.....................   5,453,653   (1,060,998)  (2,733,631)
Cash and cash equivalents, beginning of
 period.................................   1,419,568    2,480,566    5,214,197
                                         -----------  -----------  -----------
Cash and cash equivalents, end of
 period................................. $ 6,873,221  $ 1,419,568  $ 2,480,566
                                         ===========  ===========  ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
 INFORMATION:
Cash paid during the period for:
 Interest............................... $ 2,462,046  $ 1,425,071  $ 1,344,243
 Income taxes........................... $       --   $   249,456  $ 4,243,724
Noncash operating activities:
 Deferred tax asset adjustment.......... $   214,428  $   341,400  $       --
Noncash investing activities:
 Capital lease obligations.............. $   121,330  $    51,686  $   274,913
Noncash financing activities:
 Treasury stock acquired by satisfaction
  of accounts receivable................ $       --   $       --   $   500,000
</TABLE>

                See notes to consolidated financial statements.

                                       8
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  As of December 31, 2000 and 1999 (Restated)
                   And for the years ended December 31, 2000,
                      1999 (Restated) and 1998 (Restated)

1. Description of Business

   JLM Industries, Inc. and subsidiaries ("JLM" or the "Company") is a leading
marketer and distributor of certain commodity chemicals, principally acetone
and phenol. The Company believes that it is the second largest marketer of
acetone and the fifth largest supplier of phenol in North America. JLM is also
a global distributor of olefins, principally propylene, as well as a variety of
other commodity, inorganic and specialty chemicals. In order to provide stable
and reliable sources of supply for its products, the Company (i) maintains
established supplier relationships with major chemical companies, (ii)
manufactures phenol and acetone at its Blue Island Plant and (iii) sources
acetone from its joint venture manufacturing operation. The Company's principal
products, acetone, phenol and propylene, are used in the production of
adhesives, coatings, forest product resins, paints, pharmaceuticals, plastics,
solvents and synthetic rubbers. The Company sells its products worldwide to
over 1,000 customers.

2. Summary of Significant Accounting Policies

 Principles of Consolidation

   The consolidated financial statements include the accounts of JLM
Industries, Inc., its wholly owned subsidiaries and a 50.1% interest in
Inquinosa, S.A. , a Spanish company acquired in July 1998 (see Note 13). The
consolidated financial statements also included the accounts of JLM Industries
de Venezuela, C.A. through May 18, 2000, the date through which this entity was
a wholly owned subsidiary (see Note 4). The principal operating subsidiaries
are JLM Marketing, Inc. ("JLM Marketing"), JLM Chemicals, Inc. ("JLM
Chemicals"), JLM Terminals, Inc. (JLM Terminals"), JLM International, Inc., JLM
Industries (Europe) B.V., JLM Chemicals Canada, Inc. ("JLM Canada"), JLM
Chemicals Asia Pte. Ltd. and JLM Industries (South Africa) (Proprietary)
Limited. All material intercompany balances and transactions have been
eliminated in consolidation. Investments in which the Company has a 20% to 50%
ownership interest are accounted for using the equity method.

 Restatement

   In the third quarter of 2000, the Company reported a change in the
accounting principle used to account for JLM Marketing's inventory from the
last-in, first out (LIFO) method to the first-in, first-out (FIFO) method.
Accordingly, the Company's financial statements have been retroactively
restated to adjust for this change in accounting principle. The retroactive
restatement resulted in an adjustment to the Company's retained earnings as of
January 1, 1998, resulting in an increase of $546,806 over the originally
reported amount. In addition, net income was decreased by $833,673, net of tax,
for the year ended December 31, 1998. There was no impact from this change on
the results of operations for the year ended December 31, 1999.

 Cash and Cash Equivalents

   Cash and cash equivalents consist of highly liquid investments with original
maturities of three months or less.

 Inventories

   Inventories are valued at the lower of cost or market. The Company's
inventory has been determined using the FIFO method.

   JLM enters into contracts whereby parties to the contracts agree to exchange
various quantities of inventory over a specified period of time. JLM records
these exchanges of inventory at the lower of cost or market. As of December 31,
2000 and 1999, JLM was owed approximately $148,000 and $718,000, respectively,
under these contracts which are included in inventory.

                                       9
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


2. Summary of Significant Accounting Policies--Continued

 Other Investments

   Other investments include investments in partnerships and marketable
securities. JLM accounts for certain of its investments in partnerships on the
equity basis and, accordingly, records its respective share of profits and
losses that are allocated in accordance with the partnership agreements.
Marketable securities are primarily held for trading purposes, and changes in
market value are recognized in operations when incurred.

 Property and Equipment

   Property and equipment are stated at cost net of accumulated depreciation
and amortization. Depreciation and amortization are computed using the
straight-line method over the shorter of the lease term or the estimated useful
lives.

   A summary of the lives used for computing depreciation is as follows:

<TABLE>
     <S>                                                      <C>
     Buildings............................................... 15 and 31.5 years
     Vehicles and airplane................................... 2 to 10 years
     Equipment............................................... 5 to 10 years
     Furniture and fixtures.................................. 3 to 5 years
     Leasehold improvements.................................. Life of lease
</TABLE>

 Other Assets

   Other assets consist primarily of the cash surrender values of life
insurance policies held on key employees, license fees and development costs
associated with land held for investment purposes.

   On December 12, 1996, JLM entered into consulting and non-competition
agreements (the "Agreements") with two independent third parties. The terms of
the Agreements require that the Company make payments of $230,000 per year,
payable semi-annually beginning January 1, 1997 through December 31, 2002, and
$470,000 on January 1, 2003. The Agreements cover the period from January 1,
1997 through December 31, 2006. The payments were capitalized and amortized
over the lives of the respective agreements. In 1999, the Agreements were
terminated, and unamortized payments of approximately $470,000 and $200,000
were written off December 31, 2000 and December 31, 1999, respectively.

 Goodwill and Other Intangibles

   Goodwill and other intangibles resulting from business acquisitions (see
Note 13), comprising cost in excess of net assets of businesses acquired,
customer lists, employee contracts and distribution rights are being amortized
over their estimated lives which range from 3 to 40 years.

 Deferred Financing Costs

   The costs incurred to obtain financing have been capitalized and are being
amortized to interest expense over the life of the related financing agreement
using the straight-line method, which approximates the effective interest
method. Amortization expense related to deferred financing costs was $60,149,
$36,111 and $8,333 during 2000, 1999 and 1998, respectively.

 Income Taxes

   JLM accounts for income taxes under the asset and liability method as
required by SFAS No. 109, Accounting for Income Taxes. Under this method,
deferred income taxes are recognized for the tax consequences of "temporary
differences" by applying enacted statutory tax rates applicable to future years
to differences between the financial statement carrying amounts and the tax
basis of existing assets and liabilities. The effect of a tax rate change on
deferred taxes is recognized in operations in the period that the change in the
rate is enacted.

                                      10
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


2. Summary of Significant Accounting Policies--Continued

 Other Comprehensive Income (Loss)

   Other comprehensive (loss) income includes foreign currency translation
adjustments. Assets and liabilities of foreign subsidiaries are translated at
year-end exchange rates. Results of operations are translated at weighted
average rates for the year. The effects of exchange rate changes in translating
foreign financial statements are presented as a separate component of
stockholders' equity.

 Foreign Exchange Contracts

   From time to time, JLM enters into foreign exchange contracts as a hedge
against foreign accounts payable and receivables. Market value gains and losses
are recognized and the resulting credit or debit offsets foreign exchange gains
and losses on these payables and receivables. At December 31, 2000 and 1999,
JLM had no open foreign exchange contracts.

 Stock-Based Compensation

   As permitted by SFAS No. 123, Accounting for Stock-Based Compensation, JLM
has elected to recognize stock-based compensation under Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, and to disclose
in the consolidated financial statements the effects of SFAS No. 123 as if its
fair value recognition provisions were adopted. See Note 14 for additional
information on the Company's stock-based compensation.

 Income (Loss) Per Share

   Basic income (loss) per share is computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding
during the period. Diluted income (loss) per share reflects the potential
dilutive effect of securities (which can consist of stock options and
restricted stocks) that could share in earnings of the Company, unless the
inclusion of these potential dilutive effects results in antidilution. The
average market price of the Company's common stock was less than the exercise
price of the options throughout the majority of 2000, 1999 and 1998. During
each of the years ended 2000, 1999 and 1998, the effect of these securities was
antidilutive.

 Revenue Recognition

   The Company recognizes revenue from product sales upon shipment and passage
of title. The Company estimates and records provisions for quantity rebates and
sales allowances, if necessary, in the period the sale is reported.

   In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin 101, "Revenue Recognition in Financial Statements." This
pronouncement summarizes certain of the SEC staff's views on applying generally
accepted accounting principles to revenue recognition. The Company was required
to conform its income recognition policies to SAB 101 for the fiscal year ended
December 31, 2000. Compliance with the requirements of SAB 101 did not have a
material impact on the Company's results of operations, financial position or
cash flows.

 Uses of Estimates

   The preparation of the consolidated financial statements, in conformity with
accounting principles generally accepted in the United States of America,
requires management to make estimates and assumptions

                                      11
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


2. Summary of Significant Accounting Policies--Continued

that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimated.

 Fair Value of Financial Instruments

   The estimated fair value of amounts reported in the consolidated financial
statements have been determined by using available market information and
appropriate valuation methodologies. The carrying value of all current assets
and current liabilities approximate their fair value because of their short-
term nature. The fair value of long-term debt approximates its carrying value
based on management's estimates for similar issues, giving consideration to
quality, interest rates, maturity and other significant characteristics.

 Impairment of Long-Lived Assets

   The carrying values of long-lived assets, including property and equipment,
goodwill and other intangibles, and investments, are reviewed for impairment
whenever events or changes in circumstances indicate that the recorded value
cannot be recovered from undiscounted future cash flows.

 Concentration of Credit Risk

   Financial instruments which potentially subject the Company to a
concentration of credit risk principally consist of trade accounts receivable.
Credit risk with respect to trade accounts receivable is generally diversified
due to the large number of entities comprising the Company's customer base and
their dispersion across many different geographic regions. The Company performs
ongoing credit evaluations of its customers' financial condition and requires
collateral, such as letters of credit or business insurance, in certain
circumstances.

 Impact of Recently Issued Accounting Standards

   Statement of Financial Accounting Standards ("SFAS No. 133"), "Accounting
for Derivative Instruments and Hedging Activities", is effective for all fiscal
years beginning after June 15, 2000. SFAS 133, as amended, establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts and for hedging
activities. Under SFAS 133, certain contracts that were not formerly considered
derivatives may now meet the definition of a derivative. The Company will adopt
SFAS 133 effective January 1, 2001. The adoption of SFAS 133 did not have a
significant impact on the Company's financial position, results of operations,
or cash flows.

   In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation", which further clarifies APB
Opinion No. 25, "Accounting for Stock Issued to Employees". This interpretation
did not have a material impact on the Company's financial position or its
results of operations.

 Reclassifications

   Certain amounts in the 1999 and 1998 consolidated financial statements have
been reclassified to conform to the 2000 presentation.

                                      12
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


3. Property and Equipment

   Property and equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                          2000         1999
                                                       -----------  -----------
<S>                                                    <C>          <C>
Land and building..................................... $ 8,466,199  $ 4,882,836
Vehicles..............................................     574,072      693,556
Airplane..............................................         --     2,475,939
Equipment.............................................  26,017,178   28,819,320
Leased equipment--capital leases......................   1,319,663    1,188,122
Furniture and fixtures................................   1,421,251    1,490,823
Leasehold improvements................................     656,011      627,079
                                                       -----------  -----------
                                                        38,454,374   40,177,675
Less accumulated depreciation and amortization........ (14,252,533) (12,277,210)
                                                       -----------  -----------
                                                       $24,201,841  $27,900,465
                                                       ===========  ===========
</TABLE>

   Depreciation and amortization expense for property and equipment was
approximately $2,970,126, $3,040,000 and 2,834,000, for the years ended
December 31, 2000, 1999 and 1998, respectively. Future minimum capital lease
payments for each of the years 2001 through 2005 are approximately $95,000,
$55,000, $51,000, $40,000 and $16,000, respectively.

4. Other Investments

   Investments in partnerships at December 31, 2000 and 1999, consisted
principally of the following:

 Quimicos La Barraca, C.A. ("Quibarca")

   On May 19, 2000, the Company discontinued its operations conducted through
its subsidiary JLM Venezuela. As a subsidiary, JLM Venezuela's accounts and
results of operations were included in the accompanying consolidated financial
statements through May 18, 2000. Concurrently with the discontinuation of JLM
Venezuela and in order for the Company to maintain a presence in Venezuela, the
Company entered into a joint venture agreement with Inversiones 253-34, C.A. to
acquire a 49% minority equity interest in Quibarca, a distribution business
which was a direct competitor of JLM Venezuela in the Venezuelan market. The
Company believed that joining forces would not only reduce competition, but
would also allow the new entity to take advantage of cost synergies which, under
normal circumstances, would not be available. Significant terms of the agreement
included that each partner would (a) transfer selective assets into the joint
venture and (b) guarantee the solvency of the debtors owing accounts receivable
balances contributed by the respective partners to the joint venture. The
Company, in exchange for its 49% interest, contributed the net assets remaining
from JLM Venezuela which had an agreed upon fair market value of approximately
$2,500,000 (which equaled the Company's carrying value of the assets) and cash
of approximately $400,000. The investment is accounted for using the equity
method, and the Company's equity in earnings during the year ended December 31,
2000 was approximately $129,000. As of December 31, 2000, the Company's
investment in Quibarca totaled approximately $3,000,000.

 Phenol Plant Partnership

   The Company holds a 2% interest in Mt. Vernon Phenol Plant Partnership
through its wholly owned subsidiary JLM (Ind), Inc., an Indiana corporation.
The plant converts cumene into phenol that is marketed under contractual
agreements with GE Plastics. JLM has an exclusive agreement through 2002, and
thereafter,

                                      13
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


4. Other Investments--Continued

unless the agreement is terminated upon prior notice, to purchase all acetone
not used internally by GE Plastics produced at the Mt. Vernon Phenol Plant.
Based on its percentage ownership, JLM accounts for this investment using the
cost method. As of December 31, 2000 and 1999, the amount of this investment
was approximately $496,000. During 2000 and 1999, JLM did not contribute to the
partnership or receive any distributions.

 Asian Partnership

   In 1997, the Company purchased a 25.0% interest in SK Asia and a 12.7%
interest in SK Trading, two Singapore-based companies participating in a
Vietnamese joint venture. The Vietnamese joint venture intended to construct a
chemical plant in Vietnam to produce dioctyl phthlate, a chemical used in the
production of plastics such as PVC. The Vietnamese joint venture also intended
to construct terminalling and storage facilities in Vietnam and Malaysia. In
January 2000, the Company exchanged its 25% interest in SK Asia and its 12.7%
interest in SK Trading, for a 49% interest in an existing terminal facility
which was named Siam JLM. In the first quarter of fiscal 2001, the Company has
recently made the decision to wind down the operations of JLM Siam. During
2000, the Company has estimated that the anticipated future undiscounted cash
flows will be insufficient to recover the carrying value of the Company's
investment, and, accordingly, wrote off this investment.

 Real Estate Partnerships

   During 1999 and 1998, the Company held a 99% limited partnership interest in
Len-Kel Realty Limited Partnership ("Len-Kel"). The investment was accounted
for using the equity method. As of December 31, 1998, the carrying value of
this investment was approximately $948,000. During the year ended December 31,
1998, the Company's portion of Len-Kel's loss was $48,000, which is reflected in
the accompanying consolidated statement of operations. In 1999, the investment
property was sold for approximately $600,000, resulting in a loss of
approximately $336,000 during the year ended December 31, 1999.

 Other Investments

   As of December 31, 2000 and 1999, JLM's other investments totaled
approximately $217,000 and $485,000, respectively. Of these amounts,
approximately $161,000 and $410,000, respectively, are accounted for using the
cost method and approximately $56,000 and $75,000, respectively, are accounted
for using the equity method in the accompanying consolidated balance sheet.

 Polyform

   During 1999, the Company entered into a $3,000,000 loan agreement with
Polyform USA, LLC, with the objective of acquiring an equity interest in a
plastics manufacturing facility in Greece. In addition to a promissory note
from Polyform USA, LLC, the Company received a Guarantee and a Fiduciary
Transfer Agreement from Polyform MEPE, the owner of the plant facility in
Greece, pledging certain enumerated equipment located in Greece as security for
the promissory note. Polyform USA defaulted on the promissory note on January
27, 2000. The Company has filed suit in Florida to recover on the promissory
note and in Greece to enforce the guarantee and the Fiduciary Transfer
Agreement. The litigation in Florida is in discovery. The trial court in
Komotini, Greece has issued an order enforcing the Fiduciary Transfer
Agreement. Polyform MEPE has filed an appeal of this judgment. The Company has
also obtained an order from a court in Athens, Greece freezing all of Polyform
MEPE's assets in Greece pending the outcome of the litigation on the guarantee.
Management has evaluated the collectibility of this receivable and has reduced
the $3,000,000 note receivable to its estimated fair market value and recorded
a loss of $1,500,000 during the year ended December 31, 2000.

                                      14
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Marketable Securities

   JLM's marketable securities held for trading purposes were approximately
$378,000 and $1,239,000, at December 31, 2000 and 1999, respectively. The
Company incurred losses of approximately $835,000 during the year ended
December 31, 2000, and gains of approximately $615,000 and $0 during the years
ended December 31, 1999 and 1998, respectively.

5. Olefins Terminal Corporation

   Olefins Terminal Corporation (OTC) is a polymer grade propylene export
facility in Bayport, Texas. OTC is 50% owned by JLM and is accounted for on the
equity method. For the years ended December 31, 2000, 1999 and 1998, OTC had
net losses of approximately $2,422,331, $1,891,000 and $2,261,000,
respectively. During 1997, the Company's investment in OTC was reduced to zero
due to the recognition of the Company's pro rata share of OTC's operating
losses. As the Company has no current financial commitments to OTC and does not
intend to make further investments, the Company will not record additional
losses on its investment until future operating income from OTC surpasses the
cumulative unrecorded operating losses or until any contingent payment
obligations are required. As of December 31, 2000, the Company had cumulative
unrecorded operating losses from OTC of approximately $3,244,000.

   JLM provides OTC with financial and management services for a fee of
approximately $16,000 per month. JLM recorded management fees of approximately
$196,000 for each of the years ended December 31, 2000, 1999 and 1998.

   The following summarizes the assets, liabilities and stockholders' equity of
OTC at December 31:


<TABLE>
<CAPTION>
                                                            2000        1999
                                                         ----------  ----------
<S>                                                      <C>         <C>
Assets
  Current............................................... $  720,340  $1,047,641
  Noncurrent............................................  3,412,874   5,477,867
                                                         ----------  ----------
Total assets............................................ $4,133,214  $6,525,508
                                                         ==========  ==========
Liabilities and Stockholders' Deficiency
  Current liabilities................................... $  506,422  $  476,385
  Noncurrent liabilities................................  7,300,000   7,300,000
  Stockholders' deficiency.............................. (3,673,208) (1,250,877)
                                                         ----------  ----------
Total liabilities and stockholders deficiency........... $4,133,214  $6,525,508
                                                         ==========  ==========
</TABLE>

6. Accounts Payable and Accrued Expenses

   Accounts payable and accrued expenses consist of the following at December
31:
<TABLE>
<CAPTION>
                                                            2000        1999
                                                         ----------- -----------
<S>                                                      <C>         <C>
Accounts payable........................................ $64,398,555 $44,589,833
Accrued expenses........................................  12,586,072  18,048,359
                                                         ----------- -----------
                                                         $76,984,627 $62,638,192
                                                         =========== ===========
</TABLE>


                                       15
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

7. Long-term Debt

   Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
                                                         2000         1999
                                                      -----------  -----------
<S>                                                   <C>          <C>
Notes payable to shareholders due in June 2002.
 Interest is Payable monthly at 10.0%, per annum. ..  $ 1,250,000  $ 1,250,000
Mortgage payable due in equal monthly installments
 through June 2004. Interest is payable monthly at
 9.59%, per annum...................................    1,316,124    1,413,018
Secured loan payable due in 2006. Interest is
 payable monthly at rates between 8%--9.68%, per
 annum..............................................          --     1,337,095
Acquisition line of credit payable due in November
 2004. Interest is payable monthly at prime rate
 plus 1.75%, The prime rate was 9.5% and 5.25%,
 respectively.......................................    9,787,763   14,500,000
Secured loans payable due May 19, 2005. Interest is
 Monthly at 14.4%, per annum................               88,624          --
Promissory note to a corporation. Interest rate is
 8%. Annual installments of $18,750 plus Interest
 are due December 6, 2001 and December 6, 2002......       37,500          --
Note payable due in semi-annual installments through
 November 2000 with a balloon payment due May 2001.
 Interest is payable semi-annually at LIBOR plus one
 point for all payments except for the last one
 which the rate is LIBOR plus three points. LIBOR
 was 5.04% and 5.75%, respectively. ................    1,800,000    1,800,000
Note payable due in semi-annual installments through
 March 2002. The note is non-interest bearing.
 Interest has been Imputed at the Company's weighted
 average borrowing rate of 7.37%....................      899,388    1,248,272
Secured loans payable due in November 2002. Interest
 is payable monthly at prime plus 1.25%. The prime
 rate was 9.5% and 7.25%, respectively..............    6,045,000    5,995,208
Capital lease obligations due in equal monthly
 installments through August 2003. Interest is
 payable monthly at rates between 4.83%--16.99%.....      189,427      232,729
    Total...........................................   21,413,826   27,776,322
                                                      -----------  -----------
    Less current portion............................   (7,257,975)  (2,904,166)
                                                      -----------  -----------
    Long-term portion-term portion..................  $14,155,851  $24,872,156
                                                      ===========  ===========
</TABLE>

Long-term debt becoming due during subsequent fiscal years ending on December
31 is approximately as follows:

<TABLE>
      <S>                                                             <C>
      2001........................................................... $  7,257,975
      2002...........................................................    8,074,406
      2003...........................................................      155,439
      2004...........................................................    5,926,006
                                                                      ------------
                                                                      $ 21,413,826
                                                                      ============
</TABLE>


                                       16
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


7. Long-term Debt--Continued

   The long-term debt is secured by substantially all of JLM's property and
equipment.

   The loans payable are collateralized by substantially all of JLM's inventory
and accounts receivable. As of December 31, 2000, JLM had a total of
approximately $51,500,000 of credit facilities available with various financial
institutions of which approximately $18,400,000 was unused. Additionally, as of
December 31, 2000 and 1999, JLM had guaranteed vendor letters of credit of
approximately $33,100,000 and $22,638,000, respectively. Certain provisions of
the loans payable to restrict the Company's ability to pay dividends.

   In November 1999, the Company entered into the Amended and Restated Credit
Agreement with Citizens Bank of Massachusetts ("Citizens") (f/k/a State Street
Bank and Trust) (the "Credit Agreement") which restructured its unsecured $30
million acquisition line of credit, replacing it with a $34.5 million line of
credit. Under the terms of the restructuring, $14.5 million is a five year
secured term loan which will expire on November 1, 2004 and the remaining $20.0
million, which will be used to fund working capital needs, has terms that will
expire on November 1, 2001.

   The Credit Agreement contains certain financial covenants which if not
complied with by the Company will be deemed a default under the agreement. The
Company was not in compliance with the minimum consolidated net income levels,
minimum current ratio and leverage ratio required under the Amended and
Restated Credit Agreement during the first and second quarters of 2000. In a
letter dated August 11, 2000, Citizens agreed to waive compliance with such
covenants up to and including September 30, 2000.

   In the third quarter of 2000, the Company gave notice to Citizens that it
would not meet financial covenants contained in the Credit Agreement for the
periods ending September 30, 2000 and December 31, 2000. On April 17, 2001, the
Company and Citizens entered into the First Amendment to Amended and Restated
Credit Agreement (the "First Amendment"), which waived compliance, up through
and including December 31, 2000, with the financial covenants contained in the
Credit Agreement. The First Amendment also contained provisions that provided
for the following:

  .  Payment of an amendment fee in the amount of $300,000.

  .  Granting to Citizens of a first mortgage lien encumbering the Blue
     Island Plant.

  .  Restrictions on the renewal of certain existing letters of credit
     outstanding as of the date of signing the First Amendment.

  .  A prohibition against issuance of new letters of credit after the
     signing date of the First Amendment.

  .  A prohibition against purchasing the Company's common stock from public
     stockholders or otherwise.

  .  Mandatory prepayment of the term loan by no later than June 15, 2001 to
     an amount outstanding not to exceed $5.3 million.

  .  Repayment of the existing mortgage on the Company's corporate
     headquarters in Tampa, FL by no later than June 15, 2001.


                                       17
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

7. Long-term Debt--Continued

  .  A reduction in the maximum amount available under the revolving credit
     commitment to $12.5 million.

  .  Repayment of the revolving credit commitment by no later than June 15,
     2001.

  .  Repayment of all remaining obligations, including the term debt, by no
     later than October 1, 2001.

  .  Issuance of a warrant to Citizens to purchase 250,000 of the Company's
     common stock at an exercise price equal to the market price on the date
     of issuance of the warrant. The First Amendment further provides that
     the number of shares subject to purchase shall be reduced to 125,000
     shares if all obligations under the Credit Agreement are paid in full by
     October 1, 2001, and no event of default has occurred.

  .  Elimination of the Eurodollar Loan option under the Credit Agreement and
     an increase in the rate of interest to a variable rate per annum equal
     to the Prime rate plus three (3%) percent.

  .  Elimination of the financial covenants requiring minimum quarterly and
     annual levels of Consolidated Net Income.

  .  Elimination of the current ratio covenant.

  .  Elimination of the leverage ratio covenant.

  .  A decrease in the Debt Service Coverage Ratio.

  .  Introduction of a new covenant requiring a minimum level of EBITDA in
     the amount of $1.0 million per quarter.

  .  Introduction of a new covenant requiring Minimum Consolidated Net Worth
     of $27.0 million.

  .  Additional financial reporting requirements.

   The First Amendment contains customary events of default and conditions to
effectiveness.

 Refinancing Commitments

   The Company has received financing commitments sufficient to meet the
obligations to refinance the Company's credit facilities within the timelines
established under the First Amendment. The Company has received the following
financing commitments:

  .  On April 17, 2001, the Company entered into a commitment with Congress
     Financial Corporation, a division of First Union Bank, to provide a
     secured, revolving credit facility up to a maximum amount of $20.0
     million. The proceeds of this facility will be used to refinance the
     revolving credit commitments pursuant to the First Amendment.

                                       18
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

7. Long-term Debt--Continued

  .  On April 11, 2001, Phoenix Enterprises LLC entered into a commitment to
     purchase or cause its designees to purchase $2.5 million of the Company's
     common stock at a price of $1.15 per share by no later than June 15, 2001.
     The proceeds from the sale will be utilized for the prepayment of the term
     debt facility required under the First Amendment.

  .  On February 9, 2001, the Company entered into a commitment with
     SouthTrust Bank to provide $1.9 million in financing for repayment of
     the existing mortgage on the Company's corporate headquarters in Tampa,
     FL.

   Each of the financing commitments is subject to definitive documentation
which will include customary terms and closing conditions. Although the Company
expects to close within the timeframes prescribed in the First Amendment, there
can be no assurance that such financings will close or will close within
required deadlines.

8. Related Party Transactions

   The Company has a balance receivable of approximately $1,369,000, net of a
$905,148 loan payable, owed by the majority stockholder at December 31, 2000.
These items are included with other assets in the accompanying consolidated
balance sheet.

9. Income Taxes

   The significant components of the deferred tax assets and liabilities were
as follows at December 31:

<TABLE>
<CAPTION>
                                                         2000         1999
                                                      -----------  -----------
<S>                                                   <C>          <C>
Deferred tax assets:
  Foreign intangible assets.......................... $   202,552  $   318,318
  Foreign reserves...................................         --       304,351
  Foreign net operating loss and other
   carryforwards.....................................   2,449,019    1,415,328
Tax loss carryforwards...............................   3,865,887      478,682
  Minimum tax credit carryforward....................   1,052,991      400,000
  Write down of asset to fair market value...........     584,100          --
  Other..............................................     418,905      190,551
                                                      -----------  -----------
                                                        8,573,454    3,107,230
  Valuation allowance................................  (2,651,571)  (2,037,997)
                                                      -----------  -----------
    Total deferred tax assets........................   5,921,883    1,069,233
                                                      -----------  -----------
Deferred tax liabilities:
  Property...........................................  (5,974,385)  (5,959,904)
  Nonconsolidated investments........................    (589,534)    (521,561)
  Foreign prepaid expenses...........................    (643,758)    (669,085)
  Foreign reserves and other.........................  (1,319,192)  (1,319,192)
  Other..............................................     (23,113)         --
                                                      -----------  -----------
    Total deferred tax liabilities...................  (8,549,982)  (8,469,742)
                                                      -----------  -----------
    Net deferred tax liability....................... $(2,628,099) $(7,400,509)
                                                      ===========  ===========
</TABLE>

                                       19
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


9. Income Taxes--Continued

   The current year net deferred tax liability resulted from the impact of taxes
payable in foreign tax jurisdictions and the receipt of an overpayment of a
refund from the Internal Revenue Service.

   The valuation allowance for deferred tax assets as of December 31, 2000 was
$2,651,571, which serves to offset the potential tax benefits to be derived from
net operating losses ("NOL's) in foreign tax jurisdictions. The net change in
the total valuation allowance for the year ended December 31, 2000 was an
increase of $613,574.

   Current and deferred income tax provision (benefit) consisted of the
following at December 31:

<TABLE>
<CAPTION>
                                              2000         1999         1998
                                           -----------  -----------  ----------
<S>                                        <C>          <C>          <C>
Current
  Federal................................. $  (233,351) $(4,502,282) $2,820,534
  State and local.........................     (12,280)     (26,385)    561,776
  Foreign.................................   1,013,280      452,921     192,780
                                           -----------  -----------  ----------
    Total Current.........................     767,649   (4,075,746)  3,575,090
Deferred..................................  (4,772,410)   2,453,880     816,240
                                           -----------  -----------  ----------
Total income tax (benefit) provision...... $(4,004,761) $(1,621,866) $4,391,330
                                           ===========  ===========  ==========
</TABLE>

   The income tax provision reflected above includes the income tax (benefit)
expense associated with discontinued operations.

   At December 31, 2000 and 1999, there were Venezuelan NOLs of approximately
$2,250,000 and $1,960,000, respectively, available to offset future foreign
taxable income. These net operating losses expire in various years after 2001.
At December 31, 2000 and 1999, there were Holland NOLs of approximately
$4,800,000 and $2,140,000, respectively, that may be carried forward
indefinitely.

   JLM's effective tax rate differs as follows from the statutory federal
income tax rate of 34% for the fiscal years ended December 31:

<TABLE>
<CAPTION>
                                                        2000     1999    1998
                                                       ------   ------   -----
<S>                                                    <C>      <C>      <C>
Statutory federal income tax rate....................  (34.00)% (34.00)% 34.00%
State and local income taxes, net of federal income
 tax bit.............................................   (3.55)   (4.45)   3.44
Difference arising from transactions with, and profit
 and
 loss of, foreign subsidiaries not deductible or
 includible for U.S. tax purposes....................    1.85     7.93    9.64
Other................................................    3.14    (0.90)   0.46
                                                       ------   ------   -----
Effective income tax rate............................  (32.56)% (31.42)% 47.54%
                                                       ======   ======   =====
</TABLE>

   The Company intends to indefinitely reinvest the earnings of its non-U.S.
subsidiaries, which reflect full provision for non-U.S. income taxes, to expand
its international operations. Accordingly, no provision has been made for U.S.
income taxes that might be payable upon repatriation of such earnings of
approximately $6,200,000. In the event any earnings of non-U.S. subsidiaries
are repatriated, the Company will provide U.S. income taxes upon repatriation
of such earnings which will be offset by applicable foreign tax credits,
subject to certain limitations.




                                       20
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

10. Treasury Stock

   Effective January 1, 2000, 1999 and 1998 the Company purchased 5,040, 6,090
and 3,290 shares, respectively, of common stock from certain officers of the
Company valued at approximately $17,000, $30,500 and $72,000. The Company
entered into the transactions in order to assume certain tax liabilities
related to the vested portion of restricted stock received by the officers.

   On October 16, 1998, the Company's Board of Directors approved a Stock
Repurchase Program (the "Program") whereby the Company can purchase up to
['500,000 shares of its common stock. On September 6, 2000, the Company's Board
of Directors approved another Stock Purchase Program whereby the Company was
authorized to purchase up to 100,000 shares of its common stock. During 2000,
1999 and 1998, the Company purchased approximately 92,000, 149,000 and 330,000
shares of its common stock for approximately $238,000, $713,000 and $1,818,000,
respectively, under the Programs.

11. Commitments and Contingencies

   JLM is obligated under operating leases with remaining non-cancelable terms
of a year or more for office equipment, storage facilities and automobiles. The
approximate minimum annual rentals under these leases at December 31, 2000, are
as follows:

<TABLE>
   <S>                                                               <C>
   2001............................................................. $2,083,000
   2002.............................................................  1,674,000
   2003.............................................................  1,146,000
   2004.............................................................    683,000
   2005 and thereafter..............................................    448,000
                                                                     ----------
   Total minimum lease payments..................................... $6,034,000
                                                                     ==========
</TABLE>

   Total rental expenses for all operating leases approximated $2,682,000,
$1,914,000 and $1,588,000 for the years ended December 31, 2000, 1999 and 1998,
respectively.

   JLM is subject to federal, state, local and foreign environmental laws,
rules, regulations and ordinances concerning emissions to the air, discharges
to surface and subsurface waters, and the generation, handling, storage,
transportation, treatment, disposal and import and export of hazardous
materials. JLM has engaged environmental counsel for four of their facilities:
the JLM Chemicals, Blue Island, Illinois facility; the JLM Terminals facility;
and the JLM Real Estate property. Regarding the JLM Chemicals facility, JLM
believes that the low levels of various organic compounds detected in the soil
and groundwater at the facility are the result of historical use of the
facility prior to the acquisition by JLM and/or migration from neighboring
facilities. JLM also believes that the likelihood of either state or federal
environmental regulatory agencies seeking remediation in the near term is low,
based on the location of the facility, the character of the area (each of which
are factors in assessing risk) and the fact that the site is pending removal
from the federal list of contaminated sites. Regarding the JLM Terminals, Inc.
facility and the JLM Realty property, JLM believes that ultimate liability for
remediation of soil and groundwater contamination rests with the previous owner
of the facility and/or a neighboring facility.

                                      21


<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


11. Commitments and Contingencies--Conmtinued

   In 1998, the Company assumed from the previous owner of both the JLM
Terminals facility and the JLM Real Estate property, the implementation of
state approved Remedial Action Plans ("RAPs") to address onsite petroleum
contamination at the sites. Compliance with the RAPs does not foreseeably
require any capital expenditures and the Company believes that the owners of
the neighboring properties may bear a significant portion of the responsibility
or any additional remediation. JLM does not believe that a material amount of
funds will be required to complete remediation at either site. Accordingly, the
Company has not accrued any amounts related to the remediation.

   On May 26, 1999, the Company entered into an Option Agreement (the
"Option"), for $1,100,000, to acquire 85% of the outstanding common shares of
GZ Holdings Inc. at a purchase price of $15,000,000. The Option was originally
scheduled to expire March 31, 2000. The Company had not exercised its option as
of December 31, 1999. In March 2000, the parties extended the option expiration
date to March 31, 2001 and amended the purchase price to $20,000,000. The
Company elected not to exercise this option and has written off the $1,100,000
in the fourth quarter of 2000.

   During 1999, the Company entered into a sales contract with a third party to
sell phenol on a formula based price. Upon entering the contract, the Company
received $4,160,000 as a prepayment towards future purchases by the third
party. Volume commitments by the third party were 18 million pounds in 1999, 30
million pounds annually for each of the years 2000 through 2008. The prepayment
was recorded as deferred revenue and is being applied against purchases over
the agreement term. Sales exceeding the yearly volume under the contract will
be sold at market price. Additionally, the third party, over the agreement
term, has an option to increase the volume up to 45 million pounds in 2002 for
an additional prepayment of $1,700,000 by December 31, 2001. In March 2000, the
parties amended the agreement, which revised the formula based price. In
return, the Company received an additional $1,000,000 from the third party.

12. Profit-Sharing Plan

   The Company has a defined contribution profit-sharing plan covering
substantially all of its employees. The Company's contribution rate is
determined annually at the beginning of each plan year. In 1999 and 1998 the
Company matched 100% of the contribution of eligible employees, up to a maximum
amount of 6% of the employees' compensation. In 2000, there was no Company
contribution for non-union employees, but the Company made matching
contribution of 100% of the amount contributed by union employees up to a
maximum amount of 6% of the employees' compensation in accordance with their
collective bargaining agreement. The costs for this plan were approximately
$81,000, $376,000 and $395,000 in 2000, 1999 and 1998, respectively.

13. Acquisitions

   In September 1999, JLM acquired Colours and Industrial Chemicals Division of
ICI South Africa and the majority shareholdings in ICI South Africa Mozambique
Limitada (collectively "ICI") for $5.4 million, which was accounted for under
the purchase method of accounting. ICI is a distributor of bulk and packaged
organic and inorganic industrial chemicals. Operating with approximately 60
employees from offices in Durban, Johannesburg, Capetown and Port Elizabeth in
South Africa and Maputo, Mozambique, the business markets a broad range of
surface coatings, textiles, chemical manufacturing, refractory and rigid
packaging. Operating results of ICI for the four months ended December 31,
1999, are included in the accompanying consolidated statement of operations.
The excess purchase price of $451,000 was recorded as goodwill and is being
amortized over 20 years.

                                      22
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


13. Acquisitions--Continued

   In November 1999, JLM acquired Sofecia USA ("Sofecia"), a wholly owned and
unincorporated operating division of Societe Financiere d'Entreposage et de
Commerce International de l'Alcool, S.A., for $2,300,000, which was accounted
for under the purchase method of accounting. The original terms of the
agreement called for additional annual payments equal to the greater of $50,000
or 25% of a defined net profit amount paid over a five year period beginning in
2000. In 2000 and 1999, the excess purchase price of $285,000 and $280,000,
respectively, were capitalized to goodwill and are being amortized over 20
years. Sofecia is a manufacturer and distributor of various formulations of
ethyl alcohol for industrial use and of grain neutral spirits for beverage use
in the United States. Operating results of Sofecia for the two months ended
December 31, 1999 are included in the accompanying consolidated statement of
operations.

   The fair value of the assets acquired and liabilities assumed recorded in
conjunction with the above purchase transactions are presented below:

<TABLE>
<CAPTION>
                                                  ICI       Sofecia     Total
                                               ----------  ---------- ----------
<S>                                            <C>         <C>        <C>
Accounts receivable........................... $4,189,436  $  969,042 $5,158,478
Inventory.....................................  3,101,290   1,025,690  4,126,980
Prepaid expenses..............................     24,316         --      24,316
Other assets..................................    254,005         --     254,005
Property and equipment........................    291,300      36,969    328,269
Goodwill......................................    451,460     284,985    736,445
Accounts payable and accrued expenses......... (2,917,605)        --  (2,917,605)
                                               ----------  ---------- ----------
  Fair value of assets acquired, net of
   Liabilities assumed........................ $5,394,202  $2,316,686 $7,710,888
                                               ==========  ========== ==========
</TABLE>

   The proforma effects of the 1999 acquisitions on the 1998 and 1999 operating
results of the Company were insignificant.

   Effective April 1, 1998, the Company completed the purchase of all of the
assets of Browning for $9.5 million. The purchase price consisted of an initial
payment of $7.5 million cash and a $2 million non-interest bearing promissory
note to be paid in equal installments over four years (see Note 7). Browning
was founded in 1948, and is a major marketer of inorganic chemicals, with a
diversified product range serving both industrial and food processing markets
throughout the United States.

   Effective April 1, 1998, JLM completed the acquisition of Tolson Transport
B.V., a Dutch company, Tolson Holland B.V., ("Holdings") a Dutch company, and
Tolson Asia Pte., Ltd, a Singapore company through the purchase of all of the
outstanding shares of capital stock of the three companies, collectively the
Tolson Group, from their parent Tolson Holding, B.V., a Dutch company. The
total purchase price paid to Holdings for the Acquired Companies was $5.75
million, including the execution of a $2.9 million promissory note, subject to
certain adjustments as described below. The Tolson Group is a global
distributor and trader of methanol, solvents, aromatics and olefins. The
acquisition expanded the Company's international chemical business especially
in Asia and Europe including an office in Russia.

                                      23
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

13. Acquisitions

   The purchase price of the Tolson Group was determined based on a closing
valuation date of March 31, 1998, less excluded receivables as defined in the
Share Purchase Agreement and the execution of a $2.9 million promissory note
that accrues interest at the LIBOR rate plus 1%. The promissory note is payable
in five semi-annual installments of $350,000 with a lump-sum payment of $1.1
million due in May 2001 (see Note 7). Based on the combined negative
shareholders' equity of the Tolson Group as of March 31, 1998, Tolson Holding.
B.V. contributed approximately $7.4 million to bring the combined negative
equity of the Tolson Group to zero. The Company is currently a plaintiff in a
litigation matter against Tolson for alleged misrepresentations made in
connection with the terms of the purchase agreement. Accordingly, the Company
did not make any payments to Tolson under the note during 2000.

   The purchase of the Tolson Group excluded certain receivables, as defined in
the Share Purchase Agreement. For such excluded receivables, JLM will collect
such receivables on a best efforts basis and JLM will receive a commission, as
defined in the Share Purchase Agreement, for actual collections made. In 2000
and 1999, goodwill was reduced by approximately $214,000 and $341,000 to
reflect the reversal of a valuation allowance on a deferred tax asset which was
realized in 2000 and 1999.

   On July 3, 1998, the Company acquired 50.1%, of the outstanding common stock
of Inquinosa, a Spanish company. The purchase price for Inquinosa was $450,000
plus an estimated $1.35 million to be funded through a three-year earn-out
period based on a formula as defined in the agreement. The 2000 and 1999
payment was approximately $453,000 and $689,000, respectively. The effective
date of the acquisition was July 1, 1998. Inquinosa is a worldwide marketer of
the pesticide lindane. Lindane is a preferred seed-treating pesticide that
prevents insect damage during the critical pre-germination stage for wheat,
other grains and canola.

   All of the above acquisitions were accounted for under the purchase method
of accounting.

   The fair value of the assets acquired and liabilities assumed recorded in
conjunction with the 1998 purchase transactions are presented below:

<TABLE>
<CAPTION>
                                 Tolson      Browning   Inquinosa      Total
                               -----------  ----------  ----------  -----------
<S>                            <C>          <C>         <C>         <C>
Accounts receivable..........  $28,567,623  $4,164,426  $1,476,581  $34,208,630
Inventories..................    2,728,339   1,928,027     390,653    5,047,019
Prepaid and other current
 assets......................        4,379      14,026     150,665      169,070
Property and equipment.......      348,313      57,440         --       405,753
Goodwill and other intangible
 assets:
 Distribution rights (15 year
  useful life)...............          --          --      450,000      450,000
 Tax credit carryforward (19
  year useful life)..........    1,574,163         --          --     1,574,163
 Customer lists (15 year
  useful life)...............    2,690,367   1,470,000         --     4,160,367
 Employee contracts (3 year
  useful life)...............          --      194,492         --       194,492
 Non-compete agreements (3
  year useful life)..........          --      183,439         --       183,439
 Goodwill (40 year useful
  life)......................    2,046,752   4,154,802         --     6,201,554
Other long-term assets.......          --       20,430      21,779       42,209
Accounts payable and accrued
 expenses....................  (31,598,387) (2,858,135) (1,734,948) (36,191,470)
Long-term debt incurred......   (2,889,730) (9,205,297)        --   (12,095,027)
Other long-term liabilities..          --          --     (304,730)    (304,730)
                               -----------  ----------  ----------  -----------
 Fair value of assets
  acquired, net of
  liabilities assumed........  $ 3,471,819  $  123,650  $  450,000  $ 4,045,469
                               ===========  ==========  ==========  ===========
</TABLE>


                                      24
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


13. Acquisitions--Continued

   The pro forma income before extraordinary item and discontinued operations
and pro forma net income for 1998 include adjustments for the amortization of
goodwill and other intangibles of approximately and $750,000, and approximately
$600,000 of interest expense that relate to the above acquisitions.

   The following unaudited pro forma consolidated financial information for the
Company gives effect to the above acquisitions as if they had occurred on
January 1, 1998. These unaudited pro forma results have been prepared for
comparative purposes only and do not purport to be indicative of the results of
operations that actually would have resulted had the acquisitions occurred on
the date indicated, or that may result in the future.

<TABLE>
<CAPTION>
                                                                      1998
                                                                  ------------
      <S>                                                         <C>
      Revenues................................................... $357,966,000
      Income before extraordinary item and Discontinued
       operations................................................    7,603,497
      Net Income.................................................    7,603,497
      Basic income per share.....................................         1.14
      Basic shares outstanding...................................    6,678,317
</TABLE>

   The pro forma basic income per share data also reflects the historical
weighted average number of shares outstanding adjusted to include the following
items as if they had occurred at the beginning of each period presented 1)
2,156,000 shares issued during the Company's initial public offering, 2) the
190,000 shares purchased by the Underwriters of the Company's initial public
offering to cover over-allotments, 3) 3,415 shares purchased by employees of
the Company under the Company's employee stock purchase plan and 4) 420,909
treasury shares repurchased by the Company under the Company's Stock Repurchase
Plan and from a shareholder (see Note 10).

14. Stock-Based Compensation

   The Company has a long-term incentive plan ("LTIP") whereby 750,000 shares
of Common Stock are reserved for issuance under the LTIP. Under the LTIP,
restricted stock, incentive stock options, nonqualified stock options and stock
appreciation rights or any combination thereof may be granted to JLM employees.

   On July 23, 1997, the Company granted 411,500 options under the LTIP at an
exercise price of $10 per share. During 2000, 1999 and 1998, the Company
granted additional options of 104,000, 100,000 and 6,000 with an exercise price
ranging from $3.00-$3.30, $5.00-$5.50, and $10.50-$11.00, respectively. Of
these options, 399,300 shares, reduced by employee turnover, were still
outstanding at December 31, 2000. The average market price of the Company's
common stock was less than the exercise price of the options throughout 2000.

                                      25
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


14. Stock-Based Compensation--Continued

   The following table illustrates information concerning the options issued
under the Company's Long-Term Incentive Plan for the years ended December 31,

<TABLE>
<CAPTION>
                                                          2000    1999    1998
                                                         ------- ------- -------
     <S>                                                 <C>     <C>     <C>
     Options granted.................................... 104,000 100,000   6,000
     Options vested.....................................     --  116,713 129,399
     Options exercised..................................     --      --      --
     Options cancelled.................................. 148,532  26,333  43,935
     Options expired....................................     --      --      --
</TABLE>

   The Company has adopted the disclosure-only provisions of SFAS No. 123.
Accordingly, no compensation cost has been recognized for the options in the
accompanying consolidated statements of (loss) income. Had compensation cost
for the options been determined based on the fair value at the grant date for
awards in 2000, 1999, and 1998, consistent with the provisions of SFAS No. 123,
JLM's net (loss) income and (loss) income per share for the years ended
December 31, 2000, 1999, and 1998 would have been reduced to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
                                              2000         1999         1998
                                           -----------  -----------  ----------
     <S>                                   <C>          <C>          <C>
     As reported:
      Net (loss) income..................  ($8,296,407) ($3,540,820) $4,881,677
      Basic net (loss) income per share..        (1.26)       (0.53)       0.70
      Diluted net (loss) income per
       share.............................        (1.26)       (0.53)       0.70
     Proforma:
      Net (loss) income..................   (8,489,559)  (3,942,123)  3,959,370
      Basic net (loss) income per share..        (1.29)       (0.59)       0.56
      Diluted net (loss) income per
       share.............................        (1.29)       (0.59)       0.56
</TABLE>

   The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-
average assumptions used for grants in 2000, 1999, and 1998, respectively:
expected volatility of 54.0%, 65.4% and 67.0%; risk-free interest rate of
6.39%, 6.34% and 4.69%; and expected lives of 3.5 years, 10 years and 10 years.

   Concurrent with the initial public offering, the Company awarded 47,000
shares of restricted stock, with a four-year vesting period to certain officers
and employees. In 1999, the Company issued 40,000 shares of restricted stock to
an officer of the Company, of which 10,000 shares were vested immediately, and
the remainder vests over three years. The Company recognizes compensation
expense related to the issuance of such restricted stock ratably over the
vesting period.

15. Employee Stock Purchase Plan

   On July 2, 1997, the Company approved an employee stock purchase plan (the
"Purchase Plan") whereby an aggregate of 75,000 shares of Common Stock are
reserved for issuance under the Purchase Plan. Under the Purchase Plan, all
employees will be given an opportunity to purchase shares of JLM Common Stock
two times a year at a price equal to 85% of the market price of the Common
Stock immediately prior to the beginning of each offering period. The Purchase
Plan provides for two offering periods, the months of March and September, in
each of the years 1997 through 2006. During 2000, 1999, and 1998, employees of
the Company purchased 26,020, 590 and 1,960 shares, respectively, of the
Company's common stock under the Purchase Plan, yielding proceeds to the
Company of $68,872, $2,553 and $21,058, respectively.

                                      26
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


16. Segment Reporting

   JLM's business consists of a marketing and a manufacturing segment. JLM's
marketing segment includes its distribution, storage and terminalling
operations and all other sourcing operations. Marketing segment revenues
include an assumed selling commission determined in accordance with industry
standards for the sale of products manufactured at JLM Chemicals.

   The following schedule presents information about JLM's continuing
operations in these segments and geographic locations for the years ended
December 31:

<TABLE>
<CAPTION>
                                           2000          1999          1998
Industry Segment                       ------------  ------------  ------------
<S>                                    <C>           <C>           <C>
Revenues:
 Marketing............................ $410,524,343  $313,442,329  $275,653,516
 Manufacturing........................   23,933,582    19,255,504    30,081,798
                                       ------------  ------------  ------------
                                       $434,457,925  $332,697,833  $305,735,314
                                       ============  ============  ============
Operating (Loss) Income:
 Marketing............................ $  2,910,368  $  2,026,219  $  1,470,178
 Manufacturing........................   (2,116,152)   (2,847,746)   11,902,754
 Corporate............................   (4,375,195)   (2,370,660)  ( 2,311,022)
                                       ------------  ------------  ------------
                                       $(3,580,979)  $ (3,192,187) $ 11,061,910
                                       ============  ============  ============
Capital Expenditures:
 Marketing............................ $  1,036,037  $    921,754  $    669,768
 Manufacturing........................      512,376     1,276,817       368,165
 Corporate............................          --          5,000        64,259
                                       ------------  ------------  ------------
                                         $1,548,413  $  2,203,571  $  1,102,192
                                       ============  ============  ============
Depreciation and Amortization:
 Marketing............................ $  1,987,325  $  1,945,414  $  1,458,007
 Manufacturing........................    1,760,127     1,703,281     1,691,783
 Corporate............................      145,690       396,931       521,662
                                       ------------  ------------  ------------
                                       $  3,893,142  $  4,045,626  $  3,671,452
                                       ============  ============  ============
Identifiable Assets:
 Marketing............................ $121,471,177  $102,198,980  $ 66,471,762
 Manufacturing........................    2,466,907    24,174,644    26,437,814
 Corporate............................   12,441,832    13,109,160     9,816,520
                                       ------------  ------------  ------------
                                       $136,379,916  $139,482,784  $102,726,096
                                       ============  ============  ============
</TABLE>


                                      27
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


16. Segment Reporting--Continued

<TABLE>
<CAPTION>
                                           2000          1999          1998
Geographic Location                    ------------  ------------  ------------
<S>                                    <C>           <C>           <C>
Revenues:
 United States........................ $150,699,157  $137,870,521  $187,075,834
 Venezuela............................    1,673,624     6,779,238     8,606,942
 Holland..............................  131,611,851    93,714,583    52,530,545
 Singapore............................  111,568,490    73,212,683    46,992,874
 South Africa.........................   23,392,630     7,338,330           --
 Other nations........................   15,512,173    13,782,478    10,529,119
                                       ------------  ------------  ------------
                                       $434,457,925  $332,697,833  $305,735,314
                                       ============  ============  ============
Operating (Loss) Income:
 United States........................ $ (2,169,502) $ (4,656,413) $ 13,142,088
 Venezuela............................     (537,510)     (360,738)     (818,268)
 Holland..............................      672,770     1,695,458      (655,637)
 Singapore............................    1,414,023     1,403,464       454,072
 South Africa.........................       93,861      (148,553)          --
 Other nations........................    1,320,574     1,245,255     1,250,677
 Corporate............................   (4,375,195)   (2,370,660)   (2,311,022)
                                       ------------  ------------  ------------
                                       $(3,580,979)  $ (3,192,187) $ 11,061,910
                                       ============  ============  ============
Identifiable Assets:
 United States........................ $ 68,752,786  $ 81,950,564  $ 73,625,649
 Venezuela............................    5,659,945     3,862,645       469,690
 Holland..............................   17,041,868    23,931,789    15,759,658
 Singapore............................   28,715,830    13,438,680     7,510,211
 South Africa.........................    9,256,293     8,952,621           --
 Other nations........................    6,953,194     7,346,485     5,360,888
                                       ------------  ------------  ------------
                                       $136,379,916  $139,482,784  $102,726,096
                                       ============  ============  ============
</TABLE>

                                      28
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


17. Recent Developments

   On November 22, 2000, the Company received notice from the Nasdaq National
Market that its common stock had failed to maintain a minimum market value of
public float of $5,000,000 over the previous 30 consecutive trading days as
required by Nasdaq Marketplace Rule 4450(a)(2). Nasdaq Staff notified the
Company that its common stock would be subject to delisting from the Nasdaq
National Market unless the market value of public float was at least $5,000,000
for a minimum of ten consecutive trading days in the 90 days prior to February
20, 2001.

   The Company requested a hearing, which was held on March 30, 2001, before a
Nasdaq Listing Qualifications Panel (the "Panel") to determine compliance with
the ongoing maintenance standards for the Nasdaq National Market. The Company
has not yet received the determination of the Panel. If the Company is
unsuccessful in its attempt to retain its listing on the Nasdaq National Market
System, it will either apply to list its common stock on the Nasdaq SmallCap
Market or its common stock will be available for quotation on the NASD-
regulated OTC Bulletin Board.

18. Quarterly Financial Data (Unaudited)

<TABLE>
<CAPTION>
                                           Quarter Ended
                         -----------------------------------------------------
                           Mar 31        Jun 30       Sept 30        Dec 31
                         -----------  ------------  ------------  ------------
<S>                      <C>          <C>           <C>           <C>
Fiscal 2000
  Revenues.............. $87,406,578  $110,943,829  $117,918,095  $118,189,423
  Gross profit..........   3,523,442     5,480,363     5,881,874  $  6,784,086
  Net loss..............  (1,492,100)     (869,299)     (848,666) $ (5,086,342)
  Net loss per share-
   basic................ $     (0.23) $      (0.13) $      (0.13) $      (0.77)
  Net loss per share-
   diluted.............. $     (0.23) $      (0.14) $      (0.13) $      (0.77)
</TABLE>

<TABLE>
<CAPTION>
                             Mar 31        Jun 30      Sept 30       Dec 31
                           -----------  ------------ ------------ ------------
<S>                        <C>          <C>          <C>          <C>
Fiscal 1999
  Revenues................ $65,837,540   $82,114,998  $84,052,181 $100,693,114
  Gross profit............   5,272,653     6,362,985    6,377,921    3,426,320
  Net (loss) income.......    (856,634)      376,861      458,196   (3,519,243)
  Net (loss) income per
   share-basic............ $     (0.13) $       0.06 $       0.07 $      (1.26)
  Net (loss) income per
   share-diluted.......... $     (0.13) $       0.06 $       0.07 $      (1.26)
</TABLE>

                                      29
<PAGE>

                     JLM INDUSTRIES, INC. AND SUBSIDIARIES
                                  SCHEDULE II
                       VALUATION AND QUALIFYING ACCOUNTS
                  Years Ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                                      Balance at
                              Balance at     Charged to                 End of
                           Beginning of Year  Expenses  Deductions       Year
                           ----------------- ---------- ----------    ----------
<S>                        <C>               <C>        <C>           <C>
Year ended December 31,
 2000
  Accumulated amortization
   (1)....................    $2,790,542     $  923,017       --      $3,713,559
  Allowance for doubtful
   accounts...............     1,105,149        263,048 1,080,443(2)     287,754

Year ended December 31,
 1999
  Accumulated amortization
   (1)....................     1,784,476      1,006,066       --       2,790,542
  Allowance for doubtful
   accounts...............       818,901        286,248       --       1,105,149

Year ended December 31,
 1998
  Accumulated amortization
   (1)....................       947,366        837,110       --       1,784,476
  Allowance for doubtful
   accounts...............       547,999        270,902       --         818,901
</TABLE>
--------
(1) Represents the accumulated amortization of goodwill, deferred acquisition
    costs, license fees, certain development costs and advances on non-
    competition agreements.
(2) Represents transfer of Venezuela's net assets (See Note 4)

                                      30
<PAGE>


   Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this Amendment No.2 to the Annual Report of Form 10-
K/A to be signed on its behalf by the undersigned, thereto duly authorized.

                                          JLM Industries, Inc.


Date: July 19, 2001                                /s/ Michael E. Hayes
                                          By: _________________________________
                                                     Michael E. Hayes
                                            Vice President and Chief Financial
                                                          Officer

                                       31
</TEXT>
</DOCUMENT>
