OVER FIVE BILLION DOLLARS OF PRESSURE TREATED LUMBER WERE SOLD IN 1998 It is no surprise to our shareholders that wood lumber is a multi-billion dollar industry in the United States. Pressure treated lumber makes up about 30% of all lumber sold. The market for pressure treated lumber in the United States alone in 1998 was in excess of five billion dollars. Globally, the market for pressure treated lumber may be as much as ten times the domestic market. Our recycled plastic lumber and composite lumber products compete directly with pressure treated lumber. It is a superior product in terms of quality and performance as well as being environmentally friendly. It is virtually maintenance free, does not split or crack, does not leach toxic chemicals into the environment, it is impervious to insect infestation, and easy to clean. More than 75% of wooden decks are fabricated from southern yellow pine, which is pressure treated with insecticides and other chemicals. As we enter the new millennium, the Company believes consumers in large numbers will shift from purchasing products which are not safe for the environment and require high maintenance. Some of the most popular selling products of our Company are the Carefree Decking System® and Smart Deck®. The overall deck market in the United States is estimated at $2 billion annually and growing at 8% per year. Non-wood alternative deck products have increased 25% per year in recent years. These products are beginning to receive wide acceptance from consumers due to their maintenance-free nature, aesthetic appeal, and longevity of use. As a result the national distribution of these products, through wholesale building supply companies and mass merchandising, has grown dramatically during the last twelve months. The Carefree Decking System® and Smart Deck® are used for much more than backyard decks on homes. They are being used for boardwalks, docks, dune over walks on beaches, and much more. The Multitude of uses are as diverse as the landscape of our country. BILLIONS MORE SOLD IN OTHER LUMBER PROFILES IN 1998 The diversity of lumber profiles manufactured by the Company allows for a wide range of uses. The applications of our plastic lumber are enormous and since the plastic lumber does not decay with the weather elements, the plastic lumber is a great alternative to wood in many applications, especially for purposes involving exterior uses. Some of these uses include railroad ties, flooring in tractor trailers, sea pilings, sea fenders, uses on the side boards of barbecue grills, trellises, seating in arenas, uses in fabricated products including playgrounds, park benches, trash receptacles, picnic tables, and many more. With the addition of the Eaglebrook companies in January 1999, the Company has become the largest plastic lumber manufacturer in the United States. One of the products Eaglebrook manufactures, which is a new market for our company, is plastic slip sheets. As the awareness of our products and the number of uses for which our products are suitable continues to grow, the Company hopes to see dramatic growth from our plastic lumber sales. The Company is in the right place at the right time within a relatively new industry, and as we are the largest recycled plastic lumber manufacturer in the United States, the Company believes the future looks bright for its shareholders. ARMY CORPS. OF ENGINEERS PROJECTS $5 BILLION TO BE SPENT ON DREDGING HARBORS IN METROPOLITAN AREA The Environmental Services Division has experienced significant growth in 1998. Our bio-remediation plant opened in the third quarter and has proved to be a large success from the day it opened. Our beneficial re-use of contaminated dredge materials started to take shape during 1998 as well. Government consensus estimates for this market are in excess of $5 billion over the next 20 years in the New York/New Jersey Harbor area alone. Our Company has agreements and regulatory approvals in place that will allow the Company to place millions of cubic yards of dredge material using a proprietary technology to reclaim strip mines in Pennsylvania. The Company’s process eliminates the contaminated dredge material from polluting the ocean, and once processed by the Company, our material caps the strip mines, stopping the pollution problem from strip mines from leaching into the rivers and aquifers. For applications requiring structural lumber, the Company owns two patents and has a worldwide exclusive license on a third patent for formulations of plastic with other composite materials that provides strength and stability to our plastic lumber. Currently, our structural lumber is being widely used for the substructure on decks and boardwalks. About U. S. Plastic Lumber || Letter to Shareholders Financial Highlights || Our Progress || Form 10-KSB Management's Discussion and Analysis|| Report of Independent Certified Public Accountants Consolidated Balance Sheets|| Consolidated Statements of Operations Consolidated Statements of Stockholders' Equity|| Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements|| Company Information