JLM INDUSTRIES INC, 424B1, 1997-07-24

JLM INDUSTRIES INC
424B1, 1997-07-24
CHEMICALS & ALLIED PRODUCTS

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<PAGE> 1

FILED PURSUANT TO RULE 424(b)(1)
REGISTRATION STATEMENT NO. 333-27843

2,300,000 SHARES

JLM INDUSTRIES, INC.
JLM LOGO COMMON STOCK
---------------------

Of the 2,300,000 shares of common stock (the "Common Stock") offered
hereby, 2,156,000 shares are being sold by JLM Industries, Inc. ("JLM" or the
"Company"), and 144,000 shares are being sold by the Selling Stockholder (the
"Offering"). The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholder. See "Principal and Selling Stockholders."

Prior to the Offering, there has been no public market for the Common Stock
of the Company. The Common Stock has been approved for quotation on the Nasdaq
National Market under the symbol "JLMI".

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
---------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
=========================================================================================================================
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC(1) DISCOUNT(1) COMPANY(2) STOCKHOLDER
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................... $10.00 $.70 $9.30 $9.30
Total(3)..................... $23,000,000 $1,610,000 $20,050,800 $1,339,200
========================================================================================================================
</TABLE>

(1) See "Underwriting" for information concerning indemnification of the
Underwriters and for other information.

(2) Before deducting expenses of the Offering payable by the Company estimated
at $600,000.

(3) The Company has granted an option to the Underwriters exercisable within
45-days of the date hereof, to purchase up to 345,000 additional shares of
Common Stock for the purpose of covering over-allotments, if any. If the
Underwriters exercise such option in full, the total Price to Public,
Underwriting Discount, Proceeds to Company and Proceeds to Selling
Stockholder will be $26,450,000, $1,851,500, $23,259,300 and $1,339,200,
respectively. See "Underwriting."
---------------------

The shares of Common Stock offered hereby are offered severally by the
Underwriters when, as and if delivered to and accepted by them, subject to their
right to withdraw, cancel or reject orders in whole or in part and subject to
certain other conditions. It is expected that delivery of the certificates
representing the shares of Common Stock will be made against payment on or about
July 29, 1997, at the office of Oppenheimer & Co., Inc., Oppenheimer Tower,
World Financial Center, New York, NY 10281.
---------------------

OPPENHEIMER & CO., INC. A.G. EDWARDS & SONS, INC.

The date of this Prospectus is July 23, 1997.
<PAGE> 2

[TWO-PAGE MAP OF THE WORLD]

JLM INDUSTRIES, INC
WORLDWIDE SUPPLIER OF COMMODITY CHEMICALS

LEGEND INDICATING HEADQUARTERS, CURRENT OWNED AND JOINT VENTURE
MANUFACTURING FACILITIES, PLANNED JOINT VENTURE MANUFACTURING FACILITY,
TERMINALING FACILITIES, PLANNED JOINT VENTURE TERMINALING FACILITY, SALES
OFFICES.

DISTRIBUTED TO MORE THAN 600 CUSTOMERS WORLDWIDE

[PHOTO OF PHENOL AND ACETONE MANUFACTURING FACILITY, BLUE ISLAND, ILLINOIS]

[PHOTO OF MANUFACTURING JOINT VENTURE, MOUNT VERNON, INDIANA]

[PHOTO OF TERMINALING FACILITY, WILMINGTON, NORTH CAROLINA]

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF COMMON STOCK FOLLOWING THE
PRICING OF THE OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE COMMON STOCK,
OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, AND THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

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<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and related notes appearing
elsewhere in this Prospectus. Unless otherwise indicated, all information
presented in this Prospectus assumes that the Underwriters' over-allotment
option will not be exercised. Unless the context indicates otherwise, all
references in this Prospectus to "JLM" or the "Company" include JLM Industries,
Inc. and its consolidated subsidiaries and references to the "Selling
Stockholder" shall mean John L. Macdonald. All references in this Prospectus to
fiscal years are to the Company's fiscal years ended on December 31.

THE COMPANY

JLM is a leading marketer and distributor of certain commodity chemicals,
principally acetone and phenol. The Company believes it is the second largest
marketer of acetone and the fifth largest marketer of phenol in North America.
JLM is also a global distributor of olefins, principally propylene, as well as a
variety of other commodity and specialty chemicals. In order to provide stable
and reliable sources of supply for its products, the Company (i) maintains
long-established supplier relationships with several 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 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 600 customers, including Ashland
Chemical, Inc., B.F. Goodrich Co., Borden, Inc., Hoechst Celanese Corporation,
E.I. DuPont de Nemours and Company, Eli Lilly & Co., Georgia Pacific
Corporation, ICI Acrylics Inc., Minnesota Mining and Manufacturing Company,
Neste Resins Corporation, Rohm & Haas Company and Shell Chemicals Canada, Inc.
In 1996, sales to these customers accounted for approximately 21.0% of the
Company's revenues. No single customer accounted for more than 10% of the
Company's revenues in 1996.

Since its founding in 1986 as a distributor of excess co-product acetone,
JLM has grown rapidly by expanding its product sourcing arrangements and product
offerings, adding manufacturing capacity and providing superior customer service
and consistent product quality and availability. From 1992 to 1996, JLM's EBITDA
increased from $2.1 million to $13.5 million, a compound annual growth rate of
approximately 59.6% (see Footnote 2 to the Summary Consolidated Financial
Information.)

In order to support its worldwide marketing and distribution capabilities,
the Company continually seeks to acquire assets and establish relationships to
provide a consistent and reliable source of products. The Company acquired a
manufacturing facility in 1995 in Blue Island, Illinois (the "Blue Island
Plant") that produces phenol and acetone. In addition, in 1987, JLM entered into
a joint venture with General Electric Company and an affiliate of CITGO that
manufactures phenol and acetone in Mt. Vernon, Indiana (the "Mt. Vernon Plant").
In connection with the joint venture, the Company entered into a long-term
agreement to purchase all acetone produced at the Mt. Vernon Plant not used by
GE Petrochemicals, Inc. In 1996, the Blue Island Plant and the Mt. Vernon Plant
collectively supplied approximately 63.0% of the total acetone sold by JLM, and
the Blue Island Plant supplied approximately 74.0% of the total phenol sold by
JLM.

In addition to its manufacturing facility and joint venture, JLM sources
products through long-established supplier relationships with many of the
leaders in the worldwide chemical industry including ARCO Chemical Company,
Goodyear Tire & Rubber Co., Monsanto Company and Repsol, S.A. (Spain), one of
the largest chemical companies in Spain. The Company also has an exclusive
arrangement to distribute solvents in North America for Sasol Chemical
Industries (PTY) Ltd., one of the largest chemical companies in South Africa,
and recently entered into an agreement to become a U.S. distributor of styrene
for GE Petrochemicals, Inc.

To further enhance its product sourcing, marketing and distribution
capabilities, the Company has acquired terminaling and storage facilities in
Wilmington, North Carolina (the "JLM Terminal") and Bayport, Texas (the "OTC
Terminal"). The JLM Terminal consists of 10 storage tanks with a total capacity
of 15 million gallons and is capable of handling a broad range of products
including acetone, methanol, ethanol and propanol. The OTC Terminal is a joint
venture with an affiliate of Ultramar Diamond Shamrock that operates primarily
as an export facility for propylene manufactured in the U.S. The OTC Terminal
has an annual throughput capacity of
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<PAGE> 4

approximately 900 million pounds and a total storage capacity of approximately
22 million pounds. These terminaling and storage facilities give the Company the
ability to take immediate physical delivery of a substantial volume of product
which is of value to the Company's suppliers and ensures that the Company will
have product available for its customers. These facilities also give the Company
the ability to offer chemical storage, terminaling and logistics services, and
have allowed the Company to capitalize on a trend by many large chemical
producers to outsource these operations. The Company believes its ability to
multi-source products through its manufacturing facility, joint venture and
supplier relationships, as well as its ownership of terminaling and storage
facilities distinguish it from its competitors and enhance its ability to market
significant volumes of products.

Product sourcing and marketing efforts are handled principally by the
Company's sales team of 33 full time employees. JLM maintains offices in the
U.S., Canada, the Netherlands, Venezuela and Thailand and recently opened two
affiliate offices in India and an office in Colombia. JLM has also established
sales arrangements with companies in Spain, Italy, Brazil, Peru and Taiwan. In
addition, the Company recently purchased a 25.0% interest in SK Chemicals Asia
Pte. Ltd., a Singapore-based company ("SK Asia"), and has agreed to purchase a
12.7% interest in SK Chemical Trading Pte. Ltd., another Singapore-based company
("SK Trading"), both of which are participating in a Vietnamese joint venture
that intends to construct a chemical plant in Vietnam that will produce dioctyl
phthalate, a chemical used in the production of plastics such as polyvinyl
chloride ("PVC"). The Vietnamese joint venture also intends to construct
terminaling and storage facilities in Vietnam and Malaysia. See "Business
Strategy."

BUSINESS STRATEGY

The Company's principal objective is to continue to expand the number of
sources and breadth of its chemical products and the markets in which it
distributes these products to enhance its position as a leading supplier in the
worldwide chemical industry. JLM's continued growth is largely dependent on the
successful implementation of its business strategy. There can be no assurance
that the Company will be able to successfully implement its business strategy or
that, if implemented, such strategy will be successful. See "Risk Factors." Key
elements of the Company's business strategy include:

- Expand Sources of Supply through Joint Ventures, Acquisitions and
Strategic Relationships. The Company will continue to seek to identify
and pursue domestic and international opportunities to expand its sources
of supply for products in or consistent with its core business. These
opportunities may include additional joint ventures, acquisitions and
strategic relationships. Consistent with this strategy, the Company formed
the Mt. Vernon joint venture with General Electric Company and an
affiliate of CITGO in 1987, acquired the Blue Island Plant in 1995 and
established a long-term supplier relationship with Sasol Chemical
Industries (PTY), Ltd., a South African Company, in 1988. Certain phenol
producers have recently announced their intentions to add approximately 3
billion pounds of annual production capacity starting in the year 2000.
JLM currently is exploring opportunities to participate in certain of
these expansions in order to secure additional sources of phenol and
acetone.

- Increase Sales of Existing Products; Add New Products. The Company will
continue to develop its existing relationships and establish new
relationships to increase the overall volume and types of products it
distributes by (i) increasing the amount distributed by the Company of an
existing supplier's output of a given chemical, (ii) distributing
additional products for existing suppliers and (iii) adding new chemical
producers to its supplier base. During 1996, the Company entered into
agreements to distribute approximately 70 million additional pounds of
chemicals for both existing and new suppliers in 1997, including ARCO
Chemical Company, Goodyear Tire & Rubber Co. and Monsanto Company. In
addition, the Company recently expanded the product line it distributes
for Sasol Chemical Industries (PTY) Ltd. In 1997, the Company has entered
into new agreements with CONDEA Vista Company to distribute butanol and
with GE Petrochemicals, Inc. to become a distributor of styrene in the
U.S.

the growing chemical markets of Asia and South America. The Company
recently opened two affiliate offices in India and one in Colombia. In
addition, JLM recently purchased a minority interest in SK Asia and has
agreed to purchase a minority interest in SK Trading, both of which are
participating in a Vietnamese joint venture that intends to construct a
dioctyl phthalate chemical plant in Vietnam and terminaling and storage
facilities in Vietnam and Malaysia. The Company believes its indirect
participation in the Vietnamese joint venture will provide it with
increased access to the Asian market.

- Continue to Provide Superior Customer Service. JLM believes that its
continued success will be in large part due to its emphasis on providing
superior customer service. The Company believes it is well positioned to
take advantage of current trends within the chemical industry as chemical
producers continue to outsource their terminaling and logistics operations
and reduce the number of outside distributors used. The Company focuses on
providing sourcing, inventory and logistics solutions for its customers
and endeavors to provide both its customers and suppliers with a level of
service that is unmatched in the industry.

The Company was incorporated in 1986 as a Delaware corporation. Its
principal executive offices are located at 8675 Hidden River Parkway, Tampa,
Florida 33637, and its telephone number is (813) 632-3300.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company................. 2,156,000 shares
Common Stock offered by the Selling Stockholder..... 144,000 shares
Common Stock to be outstanding after the Offering... 6,899,936 shares(1)
Use of proceeds..................................... To repay approximately $15.3 million in
long-term debt, to fund working capital
and for general corporate purposes. See
"Use of Proceeds."
Nasdaq National Market symbol....................... "JLMI"
</TABLE>

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

(1) Excludes 459,200 shares of Common Stock issuable upon the exercise of stock
options or upon the vesting of shares of restricted stock which are to be
granted effective upon completion of the offering. See "Management -- Equity
Based Compensation Plans."
5
<PAGE> 6

SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- -------------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues........................ $199,751 $174,322 $218,570 $289,371 $ 236,521 $ 57,861 $ 80,518
Gross profit.................. 9,092 9,132 11,663 23,910 28,239 6,690 6,847
Operating income................ 1,764 1,956 2,383 8,734 11,001 2,675 2,929
Income from continuing
operations before discontinued
operations and extraordinary
item.......................... $ 1,397 $ 1,157 $ 1,109 $ 3,629 $ 4,357 $ 322 $ 1,560
INCOME PER SHARE:
Income from continuing
operations before discontinued
operations and extraordinary
item.......................... $ 0.28 $ 0.23 $ 0.22 $ 0.72 $ 0.89 $ 0.06 $ 0.33
Discontinued operations......... (0.05) (0.06) (0.05) (0.09) (0.09) (0.02) (0.02)
Extraordinary item.............. -- -- 0.03 -- -- -- --
-------- -------- -------- -------- --------- -------- ---------
Net income per share............ $ 0.23 $ 0.17 $ 0.20 $ 0.63 $ 0.80 $ 0.04 $ 0.31
======== ======== ======== ======== ========= ======== =========
Weighted average number of
shares outstanding............ 5,011 5,011 5,011 5,011 4,878 5,011 4,744
Pro forma income per share from
continuing operations before
discontinued operations and
extraordinary item(1)......... $ 0.80 $ 0.28
Pro forma shares
outstanding(1)................ 6,523 6,389
OTHER FINANCIAL DATA:
Depreciation and amortization
expense....................... $ 322 $ 352 $ 572 $ 1,522 $ 2,524 $ 532 $ 678

EBITDA(2)....................... 2,086 2,308 2,955 10,256 13,525 3,207 3,607
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................................... $ (825) $ 2,346
Total assets................................................ 108,745 108,272
Total debt.................................................. 38,602 24,302
Total stockholders' equity.................................. 14,736 29,222
</TABLE>

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

(1) The weighted average number of shares outstanding has been adjusted to
include the number of shares (1,645,161) that the Company would need to
issue at an assumed offering price per share of $10.00 (which results in
assumed net proceeds per share (after deducting underwriting discounts but
before deducting offering expenses) of $9.30) to repay the indebtedness
described in "Use of Proceeds."
(2) EBITDA represents the operating income of the Company plus depreciation and
amortization. EBITDA is not a measure of financial performance under
generally accepted accounting principles ("GAAP") and may not be comparable
to other similarly titled measures by other companies. EBITDA does not
represent net income or cash flows from operations as defined by GAAP and
does not necessarily indicate that cash flows will be sufficient to fund
cash needs. As a result, EBITDA should not be considered an alternative to
net income as an indicator of operating performance or to cash flows as a
measure of liquidity. EBITDA is included in this Prospectus because it is a
basis upon which the Company assesses its financial performance, and certain
covenants in the Company's borrowing arrangements are tied to similar
measures. Supplemental selected consolidated cash flow information is
included below:

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RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating the Company and its
business before purchasing the Common Stock offered by this Prospectus. The
following is not intended as, and should not be considered, an exhaustive list
of relevant factors. This Prospectus contains forward-looking statements. All
forward-looking statements included in this Prospectus are based on current
expectations and information available to the Company on the date hereof, and
the Company assumes no obligation to update any such forward-looking statements.
These forward-looking statements involve risks and uncertainties, including,
among others, those set forth below. The Company's actual results could differ
materially from those anticipated in such forward-looking statements.

CYCLICALITY OF THE WORLDWIDE CHEMICAL MARKETS; POSSIBLE EXCESS PRODUCTION
CAPACITY

The Company's activities include the manufacture and sale of phenol and
acetone and the marketing of propylene. In 1996, sales of acetone, phenol and
propylene accounted for approximately 39.0%, 18.0% and 8.0%, respectively, of
the Company's total revenues. The markets for acetone, phenol and propylene are
cyclical. This cyclicality primarily results from changes in the balance between
supply and demand, the price of feedstocks and the level of general economic
activity. Historically, these markets have experienced alternating periods of
tight supply resulting in generally rising prices and profit margins, followed
by periods of large capacity additions resulting in oversupply and generally
declining prices and profit margins. Although the markets for acetone, phenol
and propylene were favorable to the Company in 1996, there can be no assurance
that this will continue to be the case or that the Company would remain
profitable if a shift in the market was to cause prices to decline and profit
margins to shrink for these products.

According to industry sources, current world phenol and acetone capacity is
approximately 13.8 billion pounds and 8.5 billion pounds, respectively.
Approximately 80.0% of global acetone production is as a co-product in the
manufacture of phenol, and, as a result, phenol demand largely determines
acetone production levels. Certain phenol producers have announced their
intentions to add approximately 3 billion pounds of annual production capacity
starting in the year 2000. In the event that each of the announced capacity
additions is completed, the resulting increase in levels of phenol and acetone
production could exceed anticipated demand for such chemicals, resulting in
declining prices which could have a material adverse effect on the Company's
results of operations and financial condition. However, the Company believes
that some of the announced capacity additions may not be completed as scheduled
because estimated world demand would not justify such an increase in the level
of phenol and acetone production.

FLUCTUATIONS IN THE COST AND AVAILABILITY OF RAW MATERIALS

In 1996, approximately 12.5% of the Company's revenues and 62.0% of the
Company's operating income were derived from the sale of products manufactured
at the Blue Island Plant. An adequate supply of raw materials at competitive
prices is critical to the economic success of the Company's manufacturing
operations. JLM does not produce propylene and benzene, the key raw materials
used for the production of cumene, the primary feedstock for the production of
acetone and phenol. The Company generally obtains propylene via direct pipeline
from a single supplier under a long-term contract. The Company currently obtains
benzene from three suppliers under supply contracts at market rates. The Company
believes that there are a number of alternative sources of supply for propylene
and benzene. However, if the Company's current propylene supplier was unable to
meet its obligations or if the Company's propylene supply agreement could not be
renewed on terms substantially similar to those under the current agreement, the
Company would be required to incur increased costs for propylene which would
have a material adverse effect on the Company's results of operations and
financial condition.

The ability to pass on increases in raw material prices to the Company's
customers is, to a large extent, dependent on market conditions. There may be
periods of time in which increases in raw material prices are not recovered by
the Company due to an inability to increase the selling prices of its products
because of weakness in demand for, or oversupply of, such products. Therefore,
increases in raw material prices could have a material

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<PAGE> 8

adverse effect on the Company's results of operations and financial condition.
See "Business -- Manufacturing and Product Sourcing."

RISKS ASSOCIATED WITH DISTRIBUTION SUPPLY CONTRACTS

Certain products distributed by the Company are obtained through supply
relationships with other chemical producers. Typically, the Company's supply
contracts have one-year terms with evergreen provisions that automatically renew
the contracts for additional one year terms unless notice of termination is
provided (which notice may be, under certain agreements, as short as 30 days).
The Company has long-established relationships with many of its suppliers. There
can be no assurance, however, that the Company's relationships or agreements
with such suppliers will not be terminated and, if terminated, can be replaced.

Since 1994, the Company has sourced on average approximately 250 million
pounds of acetone annually from the Mt. Vernon Plant. In 1996, the amount of
acetone made available to JLM was reduced by approximately 15 million pounds and
it is anticipated that over the next four years the amount of acetone made
available to JLM will be further reduced by approximately 35 to 40 million
pounds. This reduction is the result of increased consumption of acetone by GE
Petrochemicals, Inc. See"Business -- Manufacturing and Sourcing."

Due to the cyclical nature of the prices of many of the commodity chemical
products the Company distributes, the Company endeavors to enter into
distribution agreements with its external suppliers that provide the Company a
fixed percentage profit per unit volume of product or otherwise reduce the
Company's exposure to fluctuations in the selling price of the products it
distributes for other manufacturers. There can be no assurance that in the
future the Company will be able to enter into contracts that provide it with
similar protection against price volatility. The inability to do so could have a
material adverse effect on the Company's results of operations and financial
condition. See "Business -- Sales and Marketing."

In addition, certain of the Company's agreements with its suppliers require
the Company to purchase a minimum amount of chemical product or to pay certain
agreed upon amounts for such minimum quantities if not taken by the Company.
These agreements involve financial risk to the Company and could require the
Company to expend significant amounts of capital without receiving corresponding
revenues which could have a material adverse effect on the Company's results of
operations and financial condition.

RISKS OF INTERNATIONAL SALES

In 1996, approximately 33.0% of the Company's revenues were attributable to
operations conducted abroad and to export sales. As part of its business
strategy, JLM intends to selectively pursue international expansion. In certain
countries where JLM currently operates or intends to expand its operations, the
Company could be subject to certain political and economic uncertainties,
including labor unrest, political instability, restrictions on transfers of
funds, high export duties and quotas, domestic and international customs and
tariffs, unexpected changes in regulatory environments and potentially adverse
tax consequences. There can be no assurance that these factors will not have a
material adverse effect on the Company's ability to increase or maintain its
international sales or on its results of operations and financial condition.

FOREIGN EXCHANGE FLUCTUATIONS

A portion of the Company's revenues is denominated in currencies other than
the U.S. dollar. Accordingly, the Company's results of operations and financial
condition may be effected by fluctuations in the rate of exchange between such
currencies and the U.S. dollar. Moreover, the Company may incur costs in
connection with conversions between currencies. Although the Company attempts to
monitor its exposure to currency fluctuations by continuously reviewing actual
and anticipated changes in exchange rates and general economic conditions in the
countries in which the Company operates, as well as its actual and anticipated
sources and uses of various foreign currencies, there can be no assurance that
exchange rate fluctuations will not have a material adverse effect on the
Company's results of operations and financial condition. For a further
discussion of the effect of foreign currency exchange fluctuations on the
Company's operations, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Effects of Inflation; Foreign Currency
Exchange Rates."

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<PAGE> 9

DEPENDENCE ON KEY CUSTOMERS

A small number of the Company's customers historically have accounted for a
significant percentage of the Company's sales of acetone and phenol. Loss of one
or more of these significant customers could have a material adverse effect on
the Company's results of operations and financial condition. In the past, the
Company has not experienced significant difficulties in replacing the sales
volumes accounted for by the periodic loss of significant customers. However,
there can be no assurance that the historic levels of business from current
customers will be maintained in the future or that such customers could be
replaced quickly enough to avoid adversely impacting revenues and profitability.

IMPLEMENTATION OF BUSINESS STRATEGY

The Company has experienced rapid growth since its inception. JLM's
continued growth is largely dependent on the successful implementation of its
business strategy. There can be no assurance that the Company will be able to
successfully implement its business strategy or that if implemented, such
strategy will be successful. If the Company is unable to implement its business
strategy, the Company's results of operations and financial condition could be
adversely affected. See "Business -- Business Strategy."

POTENTIAL COSTS OF ENVIRONMENTAL COMPLIANCE

The Company is subject to federal, state, local and foreign environmental
laws, rules, regulations, and ordinances concerning emissions and discharges,
and the generation, handling, storage, transportation, treatment, disposal and
import and export of hazardous materials ("Environmental Laws"). The operation
of chemical manufacturing and storage facilities and the distribution of
chemical products entail risks under Environmental Laws, many of which provide
for substantial remediation costs in the event of discharges of contaminants and
fines and criminal sanctions for violations. In addition, compliance with
existing and future Environmental Laws may require significant capital
expenditures by the Company. Although it is the Company's policy to comply with
all Environmental Laws and the Company believes that it is currently in material
compliance with all Environmental Laws, there can be no assurance that material
environmental liabilities will not be incurred by the Company or that compliance
with Environmental Laws will not require material capital expenditures by the
Company, each of which could have a material adverse effect on the Company's
results of operations and financial condition.

Elevated levels of contaminants, which may be the result of historical use
and/or migration from neighboring properties, have been detected at the JLM
Terminal and at the Blue Island Plant. Under the terms of the purchase of the
JLM Terminal, the Company is indemnified by Unocal, the prior owner of the
property, for up to $7.5 million in environmental liabilities which it will seek
to enforce if any liabilities for violating Environmental Laws arise at the JLM
Terminal. There can be no assurance, however, that a claim for indemnification
will be successful. The Company has no right to indemnification from the prior
owner of the Blue Island Plant. If the Company is required to conduct a
remediation of the Blue Island Plant or remediation for which it is not
indemnified at the JLM Terminal, the level of expenditure that may be required
to satisfy the Company's environmental liabilities could have a material adverse
effect on its financial condition or results of operations.

Levels of organic compounds slightly in excess of regulatory reporting
thresholds were detected in the ground water at the Company's Polychem facility.
The Company has been addressing the issues and the analytical data most recently
collected indicate very low levels of target contaminants. Accordingly, the
Company is presently investigating whether the site was initially properly
listed on the Hazardous Sites Inventory or whether the site can be removed from
the list. Costs for completion of any required remediation have not been
determined and there can be no assurance that if the Company is required to
complete further remediation at the Polychem facility that the costs would not
have a material adverse effect on the Company's financial condition or results
of operations. See "Business -- Environmental Regulation."

COMPETITION

The worldwide chemical market is intensely competitive. The Company faces
competition from a substantial number of global and regional competitors, many
of which have greater financial, production and other resources

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than the Company. Among the Company's competitors are some of the world's
largest chemical companies and major integrated petroleum companies that have
their own raw material resources. Barriers to entry in the industry, apart from
capital availability, may be low, particularly with respect to commodity
products. The entrance of new competitors in the industry, including companies
who currently serve as suppliers to the Company, may reduce the Company's
ability to maintain current sales or price levels. The Company's competitive
position is based principally on customer service and support, breadth of
product line, product quality, facility location and the selling prices of its
products. There can be no assurance that the Company will have sufficient
resources to maintain its current competitive position or market share. See
"Business -- Competition."

DEPENDENCE ON KEY PERSONNEL; ABILITY TO RECRUIT PERSONNEL

The future success of the Company is largely dependent on the efforts and
abilities of its senior management and certain other key personnel, particularly
John L. Macdonald, the Company's founder, President and Chief Executive Officer.
The Company's success will depend in large part on its ability to retain these
individuals and other current members of its senior management team and to
attract and retain qualified personnel in the future. All members of the
Company's senior management are employed by the Company on an "at-will" basis
and the Company has not entered into any employment agreement with any member of
its senior management. The Company does maintain a "key-person" life insurance
policy on Mr. Macdonald in the amount of $850,000. However, the loss of Mr.
Macdonald or other members of senior management or of certain other key
employees or the Company's inability to retain other qualified employees could
have an adverse impact on the Company's results of operations and financial
condition. See "Management."

VOTING CONTROL BY PRINCIPAL STOCKHOLDER

Immediately following completion of the Offering, John L. Macdonald,
President and Chief Executive Officer of the Company, will be the beneficial
owner of 4,371,648 shares of Common Stock, which represents approximately 63.4%
of the issued and outstanding shares of Common Stock (approximately 60.3% of the
issued and outstanding shares of Common Stock if the Underwriters'
over-allotment option is exercised in full). Mr. Macdonald has, and will
continue to have, sufficient voting power to elect the entire Board of Directors
of the Company and, in general, to determine (without the consent of the
Company's other stockholders) the outcome of any corporate transaction or other
matters submitted to the stockholders for approval. See "Management" and
"Principal and Selling Stockholders."

BROAD MANAGEMENT DISCRETION IN USE OF PROCEEDS; RISKS ASSOCIATED WITH POTENTIAL
ACQUISITIONS

Except for the repayment of approximately $15.3 million of outstanding
indebtedness (see "Use of Proceeds"), the Company currently has no specific
plans for use of a significant portion of the net proceeds of the Offering.
Accordingly, management of the Company will have broad discretion with respect
to the use of these funds. In particular, the Company could use a portion of
these funds to acquire or invest in complementary businesses, products and
assets. Future acquisitions or joint venture investments by the Company may
result in potentially dilutive issuances of equity securities, the incurrence of
additional debt and amortization expenses related to goodwill and other
intangible assets, which could materially adversely affect the Company's
business and results of operations. In addition, acquisitions and joint ventures
involve numerous risks, including difficulties in the assimilation of the
operations, products and personnel of the acquired company, the diversion of
management's attention from other business concerns, risks of entering markets
in which the Company has no direct prior experience and the potential loss of
key employees. There can be no assurance that the Company will be able to
identify attractive or willing acquisition or joint venture candidates, or that
the Company will be able to complete an acquisition or joint venture investment
if such candidates are identified. The Company has no present agreements or
commitments with respect to any material acquisitions of other businesses,
products or assets, except for its commitment to acquire a 12.7% interest in SK
Trading. The Company is also investigating opportunities to participate in
certain recently announced phenol capacity expansions, although, it has not
reached any agreement or understanding with respect to any such participation.
See "Use of Proceeds."

10
<PAGE> 11

ABSENCE OF DIVIDENDS; RESTRICTIONS ON DIVIDENDS

The Company has never paid any cash dividends on the Common Stock and does
not anticipate cash dividends on the Common Stock at any time in the foreseeable
future. See "Dividend Policy." In addition, pursuant to certain of the Company's
credit agreements, the Company and its subsidiaries are restricted from paying
dividends.

NO PRIOR MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering there has been no public market for the Common Stock
and there can be no assurance that an active market will develop or be sustained
after the consummation of the Offering. Consequently, the initial public
offering price of the Common Stock offered hereby was determined by negotiations
among the Company, the Selling Stockholder and the Underwriters and may not be
indicative of future prices. See "Underwriting" for information relating to the
method of determining the initial public offering price.

The market price for the Common Stock may be significantly affected by such
factors as the Company's operating results, changes in any earnings estimates
publicly announced by the Company or by analysts, announcements of significant
business developments by the Company or its competitors and various factors
affecting the overall economic environment. In addition, the stock market has
experienced a high level of price and volume volatility, and market prices for
the stock of many companies, especially newly public companies, have experienced
wide price fluctuations not necessarily related to the fundamentals or operating
performance of such companies. These broad market fluctuations may adversely
affect the market price of the Company's Common Stock. See "Underwriting."

SHARES ELIGIBLE FOR FUTURE SALE

Future sales of a substantial number of shares of the Company's Common
Stock in the public market could adversely affect the market price of the Common
Stock and could impair the Company's ability to raise capital through the sale
of equity or equity-related securities. Upon completion of the Offering, the
Company will have 6,899,936 shares of Common Stock outstanding. Of such shares,
2,300,000 shares of Common Stock, representing approximately 33.3% of the issued
and outstanding shares of Common Stock (2,645,000 shares of Common Stock
representing 36.5% of the issued and outstanding shares of Common Stock if the
Underwriters' over-allotment option is exercised in full) will be freely
tradeable without restriction or further registration under the Securities Act,
unless purchased by "affiliates" of the Company as that term is defined in Rule
144 under the Securities Act ("Rule 144"). The remaining 4,599,936 shares of
Common Stock representing approximately 66.7% of the issued and outstanding
shares of Common Stock (approximately 63.5% of the issued and outstanding shares
of Common Stock if the Underwriters' over-allotment option is exercised in full)
are beneficially owned by affiliates of the Company and are therefore
"restricted securities" as that term is defined in Rule 144 and as such are
subject to certain holding period, volume limitations and other restrictions
prescribed by Rule 144. The Company, its officers, directors and certain
stockholders, who collectively hold all of such "restricted securities," have
agreed that they will not dispose of any shares of Common Stock for a period of
180 days after the date of the Underwriting Agreement relating to the Offering
without the written consent of the representatives of the Underwriters. Upon
expiration of such 180 day period, an aggregate of 228,288 shares will become
eligible for sale without restriction pursuant to Rule 144(k) under the
Securities Act and approximately 4,371,648 additional shares will be eligible
for sale subject to the timing, volume and manner of sale restrictions of Rule
144. See "Shares Eligible for Future Sale" and "Underwriting."

ANTI-TAKEOVER MEASURES

Certain provisions of the Company's Certificate of Incorporation and Bylaws
may be deemed to have anti-takeover effects and may delay, deter or prevent a
change in control of the Company that stockholders might otherwise consider in
their best interests. These provisions (i) allow only the Board of Directors,
the Chairman of the Board of Directors or the Chief Executive Officer of the
Company to call special meetings of the stockholders, (ii) establish certain
advance notice procedures for nomination of candidates for election as directors
and for stockholder proposals to be considered at stockholders' meetings, (iii)
generally authorize the

11
<PAGE> 12

issuance of one or more classes of "blank check" preferred stock, with such
designations, rights and preferences as may be determined from time to time by
the Board of Directors and (iv) require approval of holders of 80.0% of the
outstanding voting power to amend or repeal items (i), (ii) and (iv) above. See
"Description of Capital Stock."

IMMEDIATE AND SUBSTANTIAL DILUTION

The amount by which the initial public offering price per share of Common
Stock exceeds the pro forma net tangible book value per share of Common Stock
after the Offering constitutes dilution to investors in the Offering. Persons
purchasing in the Offering will experience an immediate dilution of net tangible
book value of $5.26 per share. See "Dilution."

USE OF PROCEEDS

The net proceeds to the Company from its sale of 2,156,000 shares of Common
Stock offered hereby, based on an initial public offering price of $10.00 per
share, after deducting estimated offering expenses and underwriting discounts,
are estimated to be approximately $19.5 million ($22.7 million if the
Underwriters' over-allotment option is exercised in full). The Company will use
approximately $15.3 million of the net proceeds to repay certain long-term debt
and will have the remaining $4.2 million available to use for working capital
and general corporate purposes. A portion of the net proceeds may also be used
to acquire or invest in complementary businesses or products. Except for its
commitment of $500,000 to acquire a 12.7% interest in SK Trading the Company has
no present agreements or commitments and is not currently engaged in any
definitive negotiations with respect to any such transactions. In addition,
while JLM is investigating opportunities to participate in certain recently
announced phenol capacity expansions, it has not reached any agreement or
understanding with respect to any such participation and any discussions, to
date, have been merely exploratory in nature.

The indebtedness expected to be repaid as of March 31, 1997, consists of
(i) approximately $14.4 million incurred to finance the acquisition of the Blue
Island Plant and related capital expenditures, which accrues interest on the
unpaid principal balance at LIBOR plus 3.5% (9.2% per annum as of March 31,
1997) and matures in June 2002 and (ii) approximately $0.9 million incurred to
finance the acquisition of the JLM Terminal which accrues interest on the unpaid
principal balance at 10.9% per annum and matures in June 2000. The above amounts
include prepayment penalties and accrued interest totaling $1.0 million as of
March 31, 1997.

Pending use of the net proceeds for the above purposes, the Company intends
to invest such funds in short-term, interest-bearing, investment grade
obligations.

The Company will not receive any proceeds from the sale of shares by the
Selling Stockholder.

DIVIDEND POLICY

The Company has never declared or paid cash dividends on its Common Stock
and does not anticipate that it will pay dividends in the foreseeable future.
The Company currently intends to retain future earnings, if any, for the future
operation and expansion of the Company's business. Any determination to pay
dividends in the future will be at the discretion of the Company's Board of
Directors and will be dependent upon the Company's results of operations,
financial restrictions, restrictions imposed by applicable law and other factors
deemed relevant by the Board of Directors. Furthermore, the Company and its
subsidiaries are restricted from paying dividends under certain credit
agreements to which they are a party. See "Risk Factors -- Absence of Dividends;
Restrictions on Dividends."

12
<PAGE> 13

CAPITALIZATION

The following table sets forth (i) the actual capitalization of the Company
as of March 31, 1997 and (ii) the capitalization of the Company as adjusted to
give effect to the Offering after deducting the estimated underwriting discount
and estimated offering expenses payable by the Company and the anticipated
application by the Company of the estimated net proceeds therefrom. See "Use of
Proceeds." The table should be read in conjunction with the Selected
Consolidated Financial Data and Consolidated Financial Statements of the Company
and Notes thereto included elsewhere herein.

<TABLE>
<CAPTION>
MARCH 31, 1997
---------------------
AS
ACTUAL ADJUSTED(2)
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Total short-term debt(1).................................... $22,276 $19,292
======= =======
Long-term debt, excluding current maturities:
Bank debt................................................. $15,421 $ 4,105
Loan payable to stockholder............................... 905 905
------- -------
Total long-term debt.............................. 16,326 5,010
Stockholders' equity:
Common stock.............................................. 50 69
Additional paid-in capital................................ 490 19,400
Retained earnings......................................... 14,870 14,657
Foreign currency translation adjustment................... (152) (152)
Treasury stock............................................ (522) --
------- -------
Total stockholders' equity........................ 14,736 33,974
------- -------
Total capitalization........................................ $31,062 $38,984
======= =======
</TABLE>

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

(1) Consists of the current portion of long-term debt and loans payable.
(2) Adjusted to give effect to the issuance of 2,156,000 shares of Common Stock
by the Company at an initial public offering price of $10.00 per share and
the application of a portion of the estimated net proceeds as of the
beginning of the period to repay certain indebtedness as described under
"Use of Proceeds." Also reflects the retirement of all shares of treasury
stock.

13
<PAGE> 14

DILUTION

As of March 31, 1997, the net tangible book value of the Company was
approximately $13.2 million, or $2.79 per share of outstanding Common Stock.
"Net tangible book value per share" represents the total amount of tangible
assets of the Company reduced by the amount of total liabilities and divided by
the number of shares of Common Stock outstanding after giving effect to the
stock split described in Note 18 of Notes to Consolidated Financial Statements.
After giving effect to the sale by the Company of the 2,156,000 shares of Common
Stock in the Offering at an initial public offering price of $10.00 per share
and after deducting estimated underwriting discounts and offering expenses, the
net tangible book value of the Company at March 31, 1997 would have been
approximately $32.7 million or $4.74 per share of Common Stock, representing an
immediate increase in net tangible book value of approximately $1.95 per share
of Common Stock to existing stockholders and an immediate dilution of
approximately $5.26 per share of Common Stock to new investors in the Offering.
Dilution per share represents the difference between the price per share paid by
new investors and the net tangible book value per share immediately after the
Offering. The following table illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $ 10.00
Net tangible book value per share at March 31, 1997....... $ 2.79
Increase in net tangible book value per share attributable
to new investors in the Offering....................... 1.95
-------
Net tangible book value per share after the Offering................. 4.74
-------
Net tangible book value per share dilution to new investors in the
Offering........................................................... $ 5.26
=======
</TABLE>

The following table sets forth the number of shares of Common Stock
purchased from the Company, the total consideration paid to the Company and the
average price per share of Common Stock paid by existing stockholders and by new
investors purchasing shares of Common Stock in the Offering:

<TABLE>
<CAPTION>
CONSIDERATION PAID
SHARES PURCHASED TO THE COMPANY AVERAGE
------------------- --------------------- PRICE PER
NUMBER(1) PERCENT AMOUNT PERCENT SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders................ 4,743,936 68.8% $ 540,000 2.4% $ 0.11
New investors........................ 2,156,000 31.2 21,560,000 97.6 10.00
--------- ----- ----------- -----
Total...................... 6,899,936 100.0% $22,100,000 100.0%
========= ===== =========== =====
</TABLE>

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

(1) Based on 6,899,936 shares of Common Stock outstanding as of March 31, 1997,
after giving effect to the Offering. Excludes 459,200 shares of Common Stock
issuable upon the exercise of outstanding stock options or upon the vesting
of shares of restricted stock which are to be granted effective upon
completion of the Offering.

14
<PAGE> 15

SELECTED CONSOLIDATED FINANCIAL DATA

Set forth below is certain selected consolidated historical financial
information of the Company and its subsidiaries as of December 31, 1992, 1993,
1994, 1995 and 1996 and for the years then ended and for the three months ended
March 31, 1996 and 1997. Such information has been derived from the Company's
Consolidated Financial Statements and related Notes thereto as of such dates and
with respect to such periods, which Consolidated Financial Statements have been
audited by Deloitte & Touche LLP, independent auditors. Such firm's report on
the Company's Consolidated Financial Statements as of December 31, 1995 and 1996
and for each of the three years ended December 31, 1994, 1995 and 1996, is
included elsewhere in this Prospectus. See the Consolidated Financial Statements
and related Notes included elsewhere in this Prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
selected consolidated financial data presented below as of and for the three
months ended March 31, 1996 and 1997 is unaudited and was prepared by management
of the Company on the same basis as the audited Consolidated Financial
Statements included elsewhere in this Prospectus and, in the opinion of
management of the Company, includes all adjustments necessary to present fairly
the information set forth therein.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues......................... $ 199,751 $ 174,322 $ 218,570 $ 289,371 $ 236,521 $ 57,861 $ 80,518
Cost of sales.................... 190,659 165,190 206,907 265,461 208,282 51,171 73,671
--------- --------- --------- --------- --------- -------- ---------
Gross profit................... 9,092 9,132 11,663 23,910 28,239 6,690 6,847
Selling, general and
administrative expenses........ 7,328 7,176 9,280 15,176 17,238 4,015 3,918
--------- --------- --------- --------- --------- -------- ---------
Operating income............... 1,764 1,956 2,383 8,734 11,001 2,675 2,929
Interest income
(expense) -- net............... 246 (128) (371) (1,757) (2,815) (641) (628)
Other income -- net.............. 126 318 453 152 197 64 41
Foreign currency exchange (loss)
gain -- net.................... -- -- (319) (1,075) (527) (799) 63
--------- --------- --------- --------- --------- -------- ---------
Income before minority interest
and income taxes............. 2,136 2,146 2,146 6,054 7,856 1,299 2,405
Minority interest in (loss)
income of subsidiaries......... (3) (20) (64) 5 (82) (7) (9)
--------- --------- --------- --------- --------- -------- ---------
Income from continuing
operations before income
taxes, discontinued
operations and extraordinary
item......................... 2,133 2,126 2,082 6,059 7,774 1,292 2,396
Income tax provision............. 736 969 973 2,430 3,417 970 836
--------- --------- --------- --------- --------- -------- ---------
Income from continuing
operations before
discontinued operations and
extraordinary item........... $ 1,397 $ 1,157 $ 1,109 $ 3,629 $ 4,357 $ 322 $ 1,560
========= ========= ========= ========= ========= ======== =========
Net income..................... $ 1,134 $ 858 $ 1,049 $ 3,182 $ 3,929 $ 239 $ 1,476
========= ========= ========= ========= ========= ======== =========
INCOME PER SHARE:
Income from continuing operations
before discontinued operations
and extraordinary item......... $ 0.28 $ 0.23 $ 0.22 $ 0.72 $ 0.89 $ 0.06 $ 0.33
Discontinued operations.......... (0.05) (0.06) (0.05) (0.09) (0.09) (0.02) (0.02)
Extraordinary item............... -- -- 0.03 -- -- -- --
--------- --------- --------- --------- --------- -------- ---------
Net income per share............. $ 0.23 $ 0.17 $ 0.20 $ 0.63 $ 0.80 $ 0.04 $ 0.31
========= ========= ========= ========= ========= ======== =========
Weighted average number of shares
outstanding.................... 5,011 5,011 5,011 5,011 4,878 5,011 4,744
Pro forma income per share from
continuing operations before
discontinued operations and
extraordinary item(1).......... $ 0.80 $ 0.28
Pro forma shares
outstanding(1)................. 6,523 6,389
OTHER FINANCIAL DATA:
Depreciation and amortization
expense........................ $ 322 $ 352 $ 572 $ 1,522 $ 2,524 $ 532 $ 678
EBITDA(2)........................ 2,086 2,308 2,955 10,256 13,525 3,207 3,607
</TABLE>

15
<PAGE> 16

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)........... $ 1,843 $ 1,047 $ 1,498 $ (274) $ (61) $ 5,119 $ (825)
Total assets........................ 37,642 35,945 55,031 86,498 87,292 81,455 108,745
Total debt.......................... 6,353 5,182 6,561 23,204 31,043 27,350 38,602
Total stockholders' equity.......... 6,295 6,462 7,411 10,519 13,444 10,618 14,736
</TABLE>

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

(1) The weighted average number of shares outstanding has been adjusted to
include the number of shares (1,645,161) that the Company would need to
issue at an offering price per share of $10.00 (which results in assumed net
proceeds per share (after deducting underwriting discounts but before
deducting offering expenses) of $9.30) to repay the indebtedness described
in "Use of Proceeds."
(2) EBITDA represents the operating income of the Company plus depreciation and
amortization. EBITDA is not a measure of financial performance under
generally accepted accounting principles ("GAAP") and may not be comparable
to other similarly titled measures by other companies. EBITDA does not
represent net income or cash flows from operations as defined by GAAP and
does not necessarily indicate that cash flows will be sufficient to fund
cash needs. As a result, EBITDA should not be considered an alternative to
net income as an indicator of operating performance or to cash flows as a
measure of liquidity. EBITDA is included in this Prospectus because it is a
basis upon which the Company assesses its financial performance, and certain
covenants of the Company's borrowing agreements are tied to similar
measures. Supplemental selected consolidated cash flow information is
included below:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in):
Operating activities................... $ (1,244) $ 3,487 $ 6,064 $ 2,746 $ 26 $(3,565) $ (5,894)
Investing activities................... (2,687) (3,229) (1,218) (4,661) (6,631) (1,480) (443)
Financing activities................... 4,900 (2,086) 85 (469) 6,705 4,411 7,485
Capital expenditures..................... 2,513 3,161 1,221 2,320 7,347 1,445 371
</TABLE>

16
<PAGE> 17

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with "Selected
Consolidated Financial Data" and the Consolidated Financial Statements of the
Company and the Notes thereto included in this Prospectus. In particular, for
information regarding the Company's operations in different industry segments
and geographic locations see Note 17 of Notes to Consolidated Financial
Statements.

This Prospectus contains forward-looking statements. All forward-looking
statements included in this Prospectus are based on current expectations and
information available to the Company on the date hereof, and the Company assumes
no obligation to update any such forward-looking statements. These
forward-looking statements involve risks and uncertainties including, among
others: (i) the cyclical nature of the worldwide chemical market, (ii) the
possibility of excess production capacity, (iii) fluctuations in the cost and
availability of raw material prices, (iv) the political and economic
uncertainties associated with international operations, (v) fluctuations in
foreign exchange, (vi) the risks associated with potential acquisitions and
(vii) the ability to successfully implement other features of the Company's
business strategy. See "Risk Factors." The Company's actual results could differ
materially from those anticipated in such forward-looking statements.

GENERAL

A majority of the Company's revenue is derived from the sale of commodity
chemicals, prices for which are subject to cyclical fluctuations. The Company
endeavors to enter into supply contracts that provide a fixed percentage profit
per unit of product sold. As a result, the Company believes that revenues may
not be an accurate indicator of the Company's overall financial performance.
Rather, revenues should be considered along with operating income and net income
to accurately measure the Company's financial performance. For example as
average acetone, phenol and propylene selling prices declined from 1995 to 1996,
the Company's revenues declined by approximately 18.3% over the same period.
However, in 1996 operating income and net income increased 26.0% and 23.5%,
respectively, in comparison to the prior year's results.

The Company's business consists of a manufacturing and a marketing segment.
The Company's manufacturing segment includes the operations of the Blue Island
Plant and the sale of acetone manufactured at the Mt. Vernon Plant. The
Company's marketing segment includes its distribution, storage and terminaling
operations and all other sourcing operations.

17
<PAGE> 18

Set forth below, for the periods indicated, is certain information
regarding the contributions by the manufacturing and marketing segments to the
Company's revenues, gross profit, operating income, gross margin and operating
margin. The marketing segment revenues include an assumed selling commission
determined in accordance with industry standards for the sale of products that
are manufactured at the Blue Island Plant. In addition, the marketing segment
operating income reflects the expenses associated with the sale of such
products. The marketing segment also includes an assumed allocation of revenues,
costs of goods sold and expenses associated with the sale of products sourced
from the Mt. Vernon Plant, which allocation has been determined on a basis
consistent with the assumed commission for sale of products manufactured at the
Blue Island Plant. Results for any one or more periods are not necessarily
indicative of annual results or continuing trends.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------ ---------------------------------
1994 1995 1996 1996 1997
---------------- ---------------- ---------------- --------------- ---------------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Marketing............. $193,836 88.7% $229,505 79.3% $176,274 74.5% $39,983 69.1% $64,186 79.7%
Manufacturing......... 24,734 11.3 59,866 20.7 60,247 25.5 17,878 30.9 16,332 20.3
-------- ----- -------- ----- -------- ----- ------- ----- ------- -----
Total revenues.......... $218,570 100.0% $289,371 100.0% $236,521 100.0% $57,861 100.0% $80,518 100.0%
Gross profit:
Marketing............. $ 8,919 76.5% $ 14,154 59.2% $ 15,241 54.0% $ 3,053 45.6% $ 3,265 47.7%
Manufacturing......... 2,744 23.5 9,756 40.8 12,998 46.0 3,637 54.4 3,582 52.3
-------- ----- -------- ----- -------- ----- ------- ----- ------- -----
Total gross profit...... $ 11,663 100.0% $ 23,910 100.0% $ 28,239 100.0% $ 6,690 100.0% $ 6,847 100.0%
Segment operating
income:
Marketing............. $ 4,045 86.7% $ 5,186 45.7% $ 5,011 39.8% $ 959 30.5% $ 1,367 39.0%
Manufacturing......... 621 13.3 6,164 54.3 7,586 60.2 2,186 69.5 2,137 61.0
-------- ----- -------- ----- -------- ----- ------- ----- ------- -----
Total segment operating
income................ $ 4,666 100.0% $ 11,350 100.0% $ 12,597 100.0% $ 3,145 100.0% $ 3,504 100.0%
Corporate expense....... (2,283) -- (2,616) -- (1,596) -- (470) -- (575) --
-------- ----- -------- ----- -------- ----- ------- ----- ------- -----
Total operating
income................ $ 2,383 100.0% $ 8,734 100.0% $ 11,001 100.0% $ 2,675 100.0% $ 2,929 100.0%

</TABLE>

<TABLE>
<CAPTION>
AS A PERCENTAGE OF SEGMENT REVENUES
--------------------------------------------------------------------------------
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------ -----------------------------
1994 1995 1996 1996 1997
-------------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross margin:
Marketing.................... 4.6% 6.2% 8.6% 7.6% 5.1%
Manufacturing................ 11.1 16.3 21.6 20.3 21.9
----- ----- ----- ----- -----
Total gross margin........... 5.3% 8.3% 11.9% 11.6% 8.5%
Segment operating margin:
Marketing.................... 2.1% 2.3% 2.8% 2.4% 2.1%
Manufacturing................ 2.5 10.3 12.6 12.2 13.1
----- ----- ----- ----- -----
Total segment operating
margin....................... 2.1% 3.9% 5.3% 5.4% 4.4%
</TABLE>

Marketing Segment

The marketing segment revenues are influenced largely by the volume of new
and existing products sold by the Company. The volume of products sold depends
on a number of factors, including growth in the homebuilding and automobile
sectors and the overall economic environment. The Company's supply agreements,
primarily relating to acetone, frequently contain a term providing for a fixed
percentage profit per unit of product sold. In addition, the Company's supplier
and customer contracts have a provision permitting the Company to purchase or
sell additional product at the Company's option, typically plus or minus 5.0% of
the contractual volume amount. As a result, during a period of pricing
volatility, the Company has the opportunity to improve its profitability by
exercising the appropriate option to either build inventory in a rising price
environment or to sell product for future delivery in a declining price
environment.

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<PAGE> 19

In 1995, the Company instituted changes in its shipping and handling of
olefins in order to increase its olefins marketing gross profit margins.
Specifically, the Company now attempts to secure free on board ("FOB") shipping
terms for its bulk commodity sales and, when unable to do so, attempts to
negotiate extended free time for unloading vessels at the port of destination.
By doing so, the Company has reduced the risks of incurring charges for delays
in unloading vessels at the port of destination. In 1995, as a result of the
implementation of these changes, the Company experienced lower revenues, but
improved gross margins, from its olefins marketing activities.

In May 1997, the Company and its joint venture partners agreed to
restructure their investments in Olefins Terminal Corporation ("OTC"). As a
result, the Company and Ultramar Diamond Shamrock ("UDS") bought out the
interest of a third joint venture partner and each became a 50% owner of OTC.
The Company accounts for its investment in OTC through the equity method of
accounting. (See Note 5 of Notes to Consolidated Financial Statements). As part
of the restructuring, OTC's $3.6 million of existing indebtedness was refinanced
and the take-or-pay terminaling agreement between OTC and the Company's olefins
marketing operations was cancelled and a new terminaling arrangement
implemented. The original take-or-pay terminaling agreement resulted in charges
to JLM's pre-tax income of $1.3 million in 1994, $1.3 million in 1995, and $1.4
million in 1996, and the Company did not generate significant revenues at the
terminaling facility to offset these charges. Under the new arrangement,
effective as of January 1, 1997, the Company will pay terminal throughput fees
only when it utilizes the terminaling facility thus generating offsetting
revenues. The Company expects that this arrangement should improve the Company's
gross profit potential (as compared to historical results) because the Company
will no longer be required to incur terminal fees without accompanying revenues.

The Company's Venezuelan operations, which accounted for 4.3% of 1996 total
revenues, expose it to the risk of hyperinflation and currency devaluation. In
accordance with Statement of Financial Accounting Standards ("SFAS") No. 52,
Foreign Currency Translation, the effects of fluctuations in exchange rates in
translating the net assets of the financial statements in a hyperinflationary
economy require any gains or losses to be included in current net income. During
the period 1994 through April 1996, exchange controls, followed by rapid
devaluation, created translation losses which were charged against earnings in
each of the respective accounting periods. In April 1996, exchange controls were
lifted and have contributed to stabilizing the currency. See "Effect of
Inflation; Foreign Currency Exchange Rates" below for a further discussion of
the impact of exchange rates on the Company's results of operations.

Manufacturing Segment

The results of operations of the Company's manufacturing segment are
influenced by a number of factors, including economic conditions, competition
and the cost of raw materials, principally propylene and benzene. The Company's
ability to pass along raw material price increases to its customers is limited
because the commodity nature of the chemicals manufactured at the Blue Island
Plant restricts the Company's ability to increase prices.

As a result of an anticipated propylene price increase, in 1996 the Company
entered into a financial hedging contract in order to minimize its exposure in
the first quarter of 1997 to fluctuations in the price of propylene. Gains and
losses for such contracts are recognized as an adjustment of cost of sales at
the time the finished products are sold. As a result, in the first quarter of
1997 the Company had a gain on the hedging contract of approximately $0.5
million, which reduced cost of sales for this period by a corresponding amount.

The development of financial instruments to hedge against changes in the
prices of propylene and benzene has only recently occurred and the Company has
just begun using such instruments. The Company may seek periodically in the
future, to the extent available, to enter into financial hedging contracts for
the purchase of propylene and benzene in an effort to manage its raw material
purchase costs (see Note 2 of Notes to Consolidated Financial Statements). There
can be no assurance that the use of such instruments by the Company will be
successful. The Company can be exposed to losses in connection with such
contracts equal to the amount by which the fixed hedge price on the contract is
above the market price for such chemicals at the time of purchase.

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<PAGE> 20

Since its acquisition in 1995, the Blue Island Plant has operated at or
near full capacity and, in order to economically expand its production capacity,
it would be necessary to increase its capacity to that of a worldscale facility.
However, physical limitations at the Blue Island Plant prohibit such an increase
and, as a result, the Company has no plans to expand the Blue Island Plant. In
1996, the first full year of ownership of the Blue Island Plant, approximately
60.2% of the Company's total segment operating income was derived from the
manufacturing segment.

Since 1994, the Company has sourced, on average, approximately 250 million
pounds annually of acetone from the Mt. Vernon Plant. The Company is required to
purchase all of the acetone produced at the Mt. Vernon Plant and not consumed by
GE Plastics. In 1996, the amount of acetone available to JLM was reduced by
approximately 15 million pounds and it is anticipated that over the next four
years the amount of acetone available to JLM will be further reduced by
approximately 35 to 40 million pounds. The reduction in the amount of acetone
sourced from the Mt. Vernon Plant is the result of increased consumption by GE
Plastics. In view of capacity limitations affecting the Blue Island Plant and
the anticipated reduction in product sourced from the Mt. Vernon Plant, the
Company anticipates any growth in the manufacturing segment will come as a
result of additional acquisitions or joint ventures.

Tax Matters

JLM accounts for income taxes on a consolidated basis and accrues for tax
liabilities based on its U.S. earnings. The Company's foreign subsidiaries file
tax returns in the country where incorporated. To the extent these subsidiaries
are profitable, taxes are payable based on that country's prevailing tax rate.
Upon repatriation of non-U.S. earnings, the U.S. allows a foreign tax credit to
be applied against the Company's U.S. consolidated return for the foreign taxes
paid by the Company's foreign subsidiaries. If losses are incurred, countries in
which the Company's foreign subsidiaries are incorporated generally allow the
losses to be carried forward and applied against income earned in subsequent
years. The Company's Venezuelan operation has incurred losses which have
generated net operating loss carryforwards ("NOL's") and, based on Venezuelan
tax guidelines, these NOL's may be carried forward for three years. However,
these losses are not deductible for U.S. federal income tax purposes and as a
result cannot be offset against U.S. pre-tax profits.

In an effort to reduce its U.S. federal and state income tax liability, in
1994 the Company established a foreign sales corporation ("FSC"). Under the
Internal Revenue Code, FSCs are granted tax incentives for exporting U.S.
produced goods overseas, and as such, there are specific tax benefits to the
Company for the products it exports. If specific conditions are met under the
Internal Revenue Code, up to 65.0% of the commission income earned by the FSC
from these export transactions may be exempted from U.S. taxation. Since the
formation of the FSC, the Company has met these requirements, thereby reducing
its taxable income.

Phenol, Acetone and Propylene Pricing and Volumes

Phenol, acetone and propylene are the principal commodity chemicals sold by
JLM and together accounted for approximately 65.0% of revenues in 1996. Set
forth below, for the periods indicated, is certain information regarding the
Company's quarterly average selling prices and volumes for acetone, phenol and
propylene. The Company believes that, for the periods indicated, its average
selling prices have generally followed market prices, which are driven by
changes in the balance between supply and demand, the price of feedstocks and
the level of general economic activity. Results for any one or more periods are
not necessarily indicative of annual results or continuing trends.

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<PAGE> 21

QUARTERLY SALES PRICE PER POUND AND VOLUME OF PRODUCT SOLD

<TABLE>
<CAPTION>
ACETONE PHENOL PROPYLENE
--------------- -------------- --------------
$ LBS $ LBS $ LBS
---- ----- ---- ---- ---- ----
(POUNDS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
1994
First quarter................................... 0.12 97.8 0.21 31.1 0.14 71.2
Second quarter.................................. 0.14 97.9 0.28 10.9 0.16 85.4
Third quarter................................... 0.16 97.6 0.27 9.8 0.24 38.9
Fourth quarter.................................. 0.24 77.6 0.31 8.1 0.30 56.6
1995
First quarter................................... 0.25 92.1 0.42 8.4 0.29 13.9
Second quarter.................................. 0.27 100.8 0.36 16.9 -- --
Third quarter................................... 0.30 93.6 0.33 30.3 0.20 5.5
Fourth quarter.................................. 0.30 101.7 0.30 33.6 0.13 9.2
1996
First quarter................................... 0.25 115.5 0.30 29.9 0.12 9.0
Second quarter.................................. 0.23 106.3 0.28 38.1 0.23 34.2
Third quarter................................... 0.20 110.0 0.34 30.1 0.22 12.4
Fourth quarter.................................. 0.19 92.1 0.36 31.9 0.20 42.1
1997
First quarter................................... 0.18 114.2 0.35 30.4 0.25 90.4
</TABLE>

Based upon information currently available to the Company, it is believed
that prices for acetone and phenol will strengthen during the remainder of 1997
and that propylene prices will show continued volatility. See
"Business -- Industry Overview."

RESULTS OF OPERATION

Three Months Ended March 31, 1997 Compared to Three Months Ended March 31,
1996

Revenues. Revenues increased $22.6 million to $80.5 million for the three
months ended March 31, 1997 from $57.9 million for the comparable period in
1996, an increase of 39.2%. Revenues for the marketing segment increased $24.2
million to $64.2 million for the three months ended March 31, 1997 from $40.0
million for the comparable period in 1996, an increase of 60.5%. The increase in
marketing segment revenues was principally the result of increased sales of
propylene, principally in Asia. Revenues for the manufacturing segment decreased
by $1.6 million to $16.3 million for the three months ended March 31, 1997 from
$17.9 million for the comparable period in 1996, a decrease of 8.6%. The
decrease in manufacturing segment revenues was principally the result of a
decline in selling prices for acetone, which was only partially offset by an
increase in selling prices for phenol. Sales volumes of acetone from the Mt.
Vernon Plant and acetone and phenol from the Blue Island Plant were
substantially the same for the three months ended March 31, 1997 and 1996.

Gross Profit. Gross profit increased $0.1 million to $6.8 million for the
three months ended March 31, 1997 from $6.7 million for the comparable period in
1996, an increase of 2.3%. As a percentage of revenues, gross profit decreased
to 8.5% for the three months ended March 31, 1997 from 11.6% for the comparable
period in 1996. Gross profit for the marketing segment increased $0.2 million to
$3.3 million for the three months ended March 31, 1997 from $3.1 million for the
comparable period in 1996, an increase of 6.9%, principally as a result of the
new terminaling arrangement with OTC (See Note 18 of Notes to Consolidated
Financial Statements). Gross profit for the manufacturing segment decreased by
$0.1 million to $3.6 million for the three months ended March 31, 1997 from $3.7
million for the comparable period in 1996, a decrease of 1.5%. The increase in
total gross profit was principally the result of increases in the selling prices
for phenol in the first quarter of 1997, reductions in manufacturing costs
associated with the successful implementation of a new manufacturing technique
in the production of cumene at the Blue Island Plant and a reduction in raw
material costs resulting from a successful hedge of its propylene purchases.
During the three months ended March 31, 1997, approximately 13 million pounds of
propylene purchases were covered by a fixed financial hedge for which the
Company had a gain of $492,970, which reduced its cost of sales for this period
by a corresponding amount. The reduction in cost of sales resulting from the
propylene hedge was partially offset by an increase in the cost of

21
<PAGE> 22

benzene, which the Company elected not to hedge. Gross profit in both the
manufacturing and marketing segments was also adversely impacted by decreases in
acetone selling prices.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $0.1 million to $3.9 million for the three
months ended March 31, 1997 from $4.0 million for the comparable period in 1996,
a decrease of 2.4%. This decrease was principally as a result of reduced
compensation cost associated with a reduction in sales personnel.

Operating Income. Operating income increased $0.2 million to $2.9 million
for the three months ended March 31, 1997 from $2.7 million for the comparable
period in 1996, an increase of 9.5%. This increase was principally the result of
the factors that increased gross profit discussed above together with the
reduction in selling, general and administrative expenses achieved in the first
three months of 1997.

Interest Expense -- Net. Interest expense decreased slightly by $13,000 to
$628,000 for the three months ended March 31, 1997 from $641,000 for the
comparable period in 1996, a decrease of 2.0%.

Foreign Currency Exchange (Loss) Gain. Foreign currency exchange increased
$862,000 to a gain of $63,000 for the three months ended March 31, 1997 from a
loss of $799,000 for the comparable period in 1996. This gain was principally
the result of the Company's activities in Venezuela.

Income Tax Provision. The Company's provision for income taxes decreased
$0.2 million to $0.8 million for the three months ended March 31, 1997 from $1.0
million for the comparable period in 1996, a decrease of 13.8%. The Company's
effective tax rate for the three months ended March 31, 1997 was 36.0% as
compared to 99.5% for the comparable period of 1996. The rate for 1997 was
significantly lower than that of prior periods due to the increased proportion
of international sales associated with the Company's foreign sales corporation.
Excluding Venezuelan operations, the effective tax rate for the three months
ended March 31, 1997 would have been approximately 35.3% compared to the
effective tax rate for the three months ended March 31, 1996 of 46.9%.

Net Income. Net income increased $1.3 million to $1.5 million for the
three months ended March 31, 1997 from $0.2 million for the comparable period in
1996. The increase in net income was due to the factors stated above.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Revenues. Revenues decreased $52.9 million to $236.5 million for the year
ended December 31, 1996 from $289.4 million for the prior year, a decrease of
18.3%. Revenues for the marketing segment decreased $53.2 million to $176.3
million for the year ended December 31, 1996 from $229.5 million for the prior
year, a decrease of 23.2%. Substantially all of the decrease was a result of
changes made by the Company in its olefins marketing strategy to reduce its
exposure to shipping and handling charges. To a lesser extent, the decrease was
also attributable to a decrease of $12.9 million in opportunistic sales of
certain products in 1995 that did not recur in 1996 and a decrease in revenues
of $6.8 million from Venezuelan operations primarily as a result of the
devaluation of the local currency. These decreases more than offset the increase
in revenues of $9.0 million from a full year of the Company's European
operations in 1996 as compared to nine months in 1995. Revenues for the
manufacturing segment increased $0.3 million to $60.2 million for the year ended
December 31, 1996, from $59.9 million for the prior year, an increase of 0.6%.
This increase was principally the result of a decline in sale of acetone from
the Mt. Vernon Plant which was offset by the $17.8 million increase in sales
resulting from a full year of the Blue Island Plant's operations in 1996
compared to seven months in 1995.

Gross Profit. Gross profit increased $4.3 million to $28.2 million for the
year ended December 31, 1996 from $23.9 million for the prior year, an increase
of 18.1%. As a percentage of revenues, total gross profit increased to 11.9% in
1996 compared to 8.3% for the prior year, primarily due to the full-year
contribution of higher gross margin products from the Blue Island Plant and
higher distribution margins. Gross profit for the marketing segment increased
$1.0 million to $15.2 million for the year ended December 31, 1996, from $14.2
million for the prior year, an increase of 7.7%. Despite generally lower selling
prices on many products, margins were significantly higher in 1996 as compared
to the prior year principally as a result of the exercise by the Company of its
options on certain acetone sales contracts. Gross profit for the manufacturing
segment increased

22
<PAGE> 23

$3.2 million to $13.0 million for the year ended December 31, 1996 from $9.8
million for the prior year, an increase of 33.2%, primarily as a result of
including a full year of operations of the Blue Island Plant which generally
carry higher gross margins.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $2.0 million to $17.2 million for the year
ended December 31, 1996 from $15.2 million for the prior year, an increase of
13.6%. The increase was primarily the result of including a full year of
operations of the Blue Island Plant. To a lesser extent, the marketing segment
experienced increased distribution costs in 1996 as compared to 1995, which more
than offset reduced compensation costs for this period.

Operating Income. Operating income increased $2.3 million to $11.0 million
for the year ended December 31, 1996 from $8.7 million for the prior year an
increase of 26.0%. The increase was principally the result of the increase in
gross profit, which was partially offset by the increase in selling, general and
administrative expenses.

Interest Expense -- Net. Interest expense increased $1.0 million to $2.8
million for the year ended December 31, 1996 from $1.8 million for the prior
year principally due to the additional interest expense associated with the
inclusion of the Blue Island Plant for the full year and to a lesser extent to
increased borrowings used to fund working capital requirements associated with
the Company's marketing segment.

Foreign Currency Exchange (Loss) Gain. Foreign currency exchange decreased
$0.6 million to a loss of $0.5 million for the year ended December 31, 1996 from
a loss of $1.1 million for the prior year. Substantially all of these losses
were the result of the Company's activities in Venezuela. In December 1995, the
Company began using the market rate, in accordance with SFAS No. 52, to
recognize foreign currency exchange gains and losses for its Venezuelan
subsidiary rather than using the official Venezuelan rate. The effect of using
the market rate resulted in an additional $0.4 million foreign exchange loss
during 1995. During the first quarter of 1996, the market rate for U.S. dollars
rose from 350 to 470 bolivars per dollar, at which time it stabilized for the
remainder of 1996. See "Effect of Inflation; Foreign Currency Exchange Rates"
discussed below.

Income Tax Provision. The Company's provision for income taxes increased
$1.0 million to $3.4 million for the year ended December 31, 1996 from $2.4
million for the prior year, an increase of 40.6%, principally as a result of the
Company's inability to apply $1.2 million of pre-tax losses from its Venezuelan
operations to reduce its U.S. taxable income. The Company's effective income tax
rate increased to 44.4% for 1996 as compared to 40.1% for 1995.

Net Income. Net income increased $0.7 million to $3.9 million for the year
ended December 31, 1996 from $3.2 million for the prior year, an increase of
23.5%, principally as a result of the factors discussed above.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Revenues. Revenues increased $70.8 million to $289.4 million for the year
ended December 31, 1995 from $218.6 million for the prior year, an increase of
32.4%. Revenues for the marketing segment increased $35.7 million to $229.5
million for the year ended December 31, 1995 from $193.8 million for the prior
year, an increase of 18.4%. The increase in the marketing segment's revenues
resulted primarily from the start-up of the Company's European subsidiary in
April 1995, and from the expansion of the Company's Venezuelan operations. In
addition, the marketing segment benefitted from higher sales volumes and selling
prices of its two largest products, acetone and phenol. Revenues for the
manufacturing segment increased $35.2 million to $59.9 million for the year
ended December 31, 1995 from $24.7 million for the prior year, an increase of
142.0%. The increase in manufacturing segment revenues was principally the
result of increased selling prices for acetone from the Mt. Vernon Plant and the
inclusion of seven months of operations of the Blue Island Plant after its
acquisition in June 1995.

Gross Profit. Gross profit increased $12.2 million to $23.9 million for
the year ended December 31, 1995 from $11.7 million for the prior year, an
increase of 105.0%. The marketing segment's gross profit increased $5.2 million
to $14.2 million for the year ended December 31, 1995 from $8.9 million for the
prior year, an increase of 58.7% as a result of increased revenues as explained
above and higher margins. As a percentage of revenues, total gross profit
increased to 8.3% in 1995 as compared to 5.3% for 1994 primarily as a result of
the higher gross

23
<PAGE> 24

margins of the Company's manufacturing segment and Venezuelan operations. The
manufacturing segment's gross profit increased $7.1 million to $9.8 million for
the year ended December 31, 1995 from $2.7 million for the prior year, an
increase of 255.5%, primarily resulting from including operations of the Blue
Island Plant for a portion of the year.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $5.9 million to $15.2 million for the year
ended December 31, 1995 from $9.3 million for the prior year, an increase of
63.5%, primarily as a result of including the expenses associated with the Blue
Island Plant and the expansion of JLM's international operations, principally in
Venezuela as described above.

Operating Income. Operating income increased $6.3 million to $8.7 million
for the year ended December 31, 1995 from $2.4 million for the prior year, an
increase of 266.5%. The increase was primarily due to including the operations
of the Blue Island Plant which more than offset the increase in selling, general
and administrative expenses.

Interest Expense -- Net. Interest expense increased $1.4 million to $1.8
million for the year ended December 31, 1995 from $0.4 million for the prior
year. The increase was principally the result of the borrowings made to effect
the acquisition of the Blue Island Plant and to a lesser extent the result of
increased borrowings used to fund working capital requirements associated with
the expanded marketing segment.

Foreign Currency Exchange (Loss) Gain. Foreign currency exchange increased
$0.8 million to a loss of $1.1 million for the year ended December 31, 1995 from
a loss of $0.3 million for the prior year. The loss was primarily due to
Venezuelan operations.

Income Taxes. The Company's provision for income taxes increased $1.4
million to $2.4 million for the year ended December 31, 1995 from $1.0 million
for the prior year, an increase of 149.7%, principally due to the increase in
income. The Company's effective income tax rate decreased to 40.1% in 1995 as
compared to 45.1% in 1994, as a result of the increase in foreign currency loss
which is not deductible for tax purposes.

Net Income. Net income increased $2.1 million to $3.2 million for the year
ended December 31, 1995 from $1.1 million for the prior year, an increase of
203.3%. The increase in net income was due to the factors stated above.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities increased $2.3 million to $5.9
million for the period ended March 31, 1997 from $3.6 million for the prior
period in 1996. This increase was primarily the result of increases in the
Company's working capital accounts which more than offset an increase in net
income of $1.2 million. Net cash used in investing activities decreased $1.1
million to $0.4 million for the period ended March 31, 1997 from $1.5 million
for the prior period in 1996.

Net cash provided by financing activities increased $3.1 million to $7.5
million for the period ended March 31, 1997 as compared to $4.4 million provided
in the prior period of 1996. As of March 31, 1997, the Company had net
borrowings on its loans payable and long-term debt of $7.6 million. For the
period ended March 31, 1997, Aurora and Phoenix made distributions to their
stockholders of $73,698. As of March 31, 1997, the Company had a borrowing
capacity of $21.0 million under various credit agreements as described in Note 7
of Notes to the Consolidated Financial Statements.

Net cash provided by operating activities decreased $2.7 million to $26,402
for the year ended December 31, 1996 as compared to $2.7 million in the prior
year. This decrease was primarily the result of changes in the Company's working
capital accounts which more than offset an increase in net income of $0.7
million. Net cash used in investing activities increased $1.9 million to $6.6
million for the year ended December 31, 1996 as compared to $4.7 million the
prior year. In 1996, $7.3 million of cash was used for capital expenditures as
compared to $2.3 million in the prior year. In 1996, $3.7 million of the capital
expenditures related to the zeolite efficiency upgrades at the Blue Island
Plant. The Company also received proceeds of $0.8 million in 1996 in connection
with the sale of certain assets held for sale.

24
<PAGE> 25

Net cash provided by financing activities increased $7.2 million to $6.7
million for the year ended December 31, 1996 compared to $0.5 million used in
the prior year. In 1996, the Company had net borrowings on its loans payable,
long-term debt and stockholder loans of $7.2 million. In addition, Aurora and
Phoenix made distributions to their stockholders of $0.5 million. As of December
31, 1996, the Company had a borrowing capacity of $38.2 million under various
credit agreements as described in Note 7 of Notes to the Consolidated Financial
Statements.

Concurrent with the Offering, the Company will repay $15.3 million of
outstanding indebtedness and expects to have available borrowing capacity of
$53.8 million under its credit agreements. The Company will also have $4.2
million of available cash on hand. For information regarding the material terms
of the Company's credit facilities, see Notes 7 and 8 to Notes to Consolidated
Financial Statements.

The Company is currently constructing an additional storage tank at the JLM
Terminal. The proposed storage tank will increase JLM's current storage capacity
at the JLM Terminal by 3 million pounds. The Company expects construction on the
storage tank to be completed in July 1997 with a total anticipated construction
cost of $0.6 million. Costs associated with evaluation, planning, design and
construction are ongoing and have been funded through the Company's current
credit facilities.

In April 1997, the Company entered into an agreement to purchase a 12.7%
interest in SK Chemical Trading Pte. Ltd. The agreement provides that upon
commencing construction of a chemical plant in Vietnam, the Company is required
to pay an additional $0.5 million as additional consideration for its ownership
interest in SK Chemical Trading Pte. Ltd. The Company expects to fund this
payment through the Company's current credit facilities. See
"Business -- Business Strategy."

JLM believes its liquidity and capital resources, including its ability to
borrow additional amounts under its credit agreements, are sufficient to meet
its needs through 1998 and to permit it to continue to implement its business
strategy.

ENVIRONMENTAL

It is the Company's policy to comply with all Environmental Laws and the
Company believes that it is currently in substantial compliance with all
applicable Environmental Laws pertaining to the operations of its facilities and
treatment of wastes that are generated by operations at those facilities. In
1996, the Company's expenditures relating to maintaining compliance with
Environmental Laws were approximately $0.7 million. In 1997, the Company has
budgeted approximately $1.2 million for environmental compliance costs
consisting of approximately $0.5 million for a one-time capital expenditure
relating to the installation of a thermal oxidizer at the Blue Island Plant in
response to new regulatory requirements and approximately $0.7 million of
expenditures relating to ongoing compliance with Environmental Laws. These
expenditures will be funded primarily from cash flow from operations. There can
be no assurance, however, that the actual levels of expenditures relating to
environmental compliance will not exceed the budgeted amounts either as a result
of changes in Environmental Laws to make them more stringent or the discovery of
any additional or unknown environmental confirmations relating to the Company's
operations. Any requirement compelling the Company to spend significant amounts
in excess of those budgeted for environmental compliance matters could have a
material adverse effect on the Company's financial condition or results of
operations.

Elevated levels of certain petroleum-related substances, organic chemicals
and metals, which the Company believes are a result of either use by the prior
owner of the site and/or migration from neighboring facilities, have been
detected in groundwater and/or soils at the JLM Terminal. The prior owner of the
site is currently implementing remedial work to address onsite petroleum
contamination and has agreed to indemnify the Company for up to $7.5 million for
environmental liabilities at the JLM Terminal. Low levels of various organic
compounds, which are the result of either historical use of the site prior to
the Company's acquisition thereof and/or migration from neighboring facilities
have also been detected in the soils and groundwater at the Blue Island Plant.
However the Company has not been required, and it does not believe that it will
be required, to plan, undertake, or fund any remedial activities at the Blue
Island Plant. Low levels of organic compounds slightly in excess of regulatory
reporting thresholds were detected in the ground water at the Company's Polychem
facility. The Company has been addressing the environmental issues that exist at
that facility and analytical data most

25
<PAGE> 26

recently collected indicate very low levels of target contaminants. The Company
is presently investigating whether the site should remain on the list of
Hazardous Sites Inventory.

The Company does not currently believe that a material amount of funds will
be required to complete remediation at any site. If the Company is required to
conduct remediation at the Blue Island Plant or remediation for which it is not
indemnified at the JLM Terminal or to complete remediation at the Polychem
facility, however, the level of expenditure that may be required to satisfy the
Company's environmental liabilities could have a material adverse effect on its
financial condition or results of operations. See "Business -- Environmental
Regulation."

EFFECT OF INFLATION; FOREIGN CURRENCY EXCHANGE RATES

Inflation generally affects the Company by increasing the cost of labor,
equipment and raw materials. The Company does not believe that inflation has had
any material effect on the Company's business over the last three years.

A portion of the Company's revenues are denominated in foreign currencies,
principally Venezuelan bolivars, Dutch gilders and Canadian dollars. As a
result, the Company's operations may be effected by exchange rate fluctuations.
If foreign currency denominated revenues are greater than costs, the translation
of foreign currency denominated costs and revenues into U.S. dollars will
improve profitability when the foreign currency strengthens against the U.S.
dollar and will reduce profitability when the foreign currency weakens. In
addition, the remeasurement of foreign currency denominated assets and
liabilities into U.S. dollars gives rise to foreign exchange gains or losses
which are included in the determination of net income. The Company attempts to
monitor its exposure to currency fluctuations by continuously reviewing actual
and anticipated changes in the exchange rate between the U.S. dollar and the
principal foreign currencies in which portions of the Company's revenues are
denominated. The Company also analyzes the actual and anticipated economic
condition in each of the foreign countries in which it has operations, as well
as its own actual and anticipated sources and uses of foreign currencies.

In instances where the Company has entered into an agreement either
obligating it to make a payment in a foreign currency or entitling it to receive
a payment in a foreign currency, the Company may enter into a forward currency
contract to eliminate the effect of foreign currency fluctuations on such
payables or receivables. The Company only enters into forward foreign exchange
contracts with respect to specific payables and receivables and such contracts
only involve amounts equal to the amount of such payables and receivables.
Accordingly, the Company generally does not realize any gain or loss on account
of such contracts.

In May 1994, the Venezuelan government, following a period of rapid
devaluation in their currency, the bolivar, implemented certain exchange
controls including a frozen exchange rate for converting the bolivar into other
currencies. This "official" rate was initially established at 170 bolivars per
U.S. dollar. In December 1995, the Venezuelan government changed the official
exchange rate to 290. In April 1996, the exchange controls were lifted, and the
exchange rate immediately rose to 470 bolivars per U.S. dollar, remaining in a
range of 470 to 480 through December 1996. These periods of devaluation in the
bolivar adversely impacted JLM's Venezuelan operating results by lowering profit
margins and generating foreign currency losses which are reported in the
Consolidated Financial Statements. As of the date hereof, the bolivar has
remained relatively stable during the last 12 months.

EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board recently issued SFAS No. 128,
Earnings Per Share. The objective of SFAS No. 128 is to simplify the computation
of earnings per share and to make the U.S. standard for computing earnings per
share more compatible with the earnings per share standards of other countries.
JLM does not anticipate that SFAS No. 128 will have a significant impact on pro
forma income per share.

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<PAGE> 27

BUSINESS

OVERVIEW

JLM 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 and specialty chemicals. In order to
provide stable and reliable sources of supply for its products, the Company (i)
maintains long-established supplier relationships with several 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 600 customers, including Ashland Chemical, Inc.
("Ashland"), B.F. Goodrich Co. ("B.F. Goodrich"), Borden, Inc. ("Borden"),
Hoechst Celanese Corporation, E.I. DuPont de Nemours and Company ("DuPont"),
Dutch State Mines ("DSM"), Eli Lilly & Co., Georgia Pacific Corporation
("Georgia Pacific"), ICI Acrylics Inc. ("ICI Acrylics"), Minnesota, Mining and
Manufacturing Company, Neste Resins Corporation ("Neste"), Rohm & Haas Company
("Rohm & Haas") and Shell Chemicals Canada, Inc. ("Shell Chemicals Canada"). In
1996, sales to the foregoing customers accounted for approximately 21.0% of the
Company's revenues. No single customer accounted for more than 10% of the
Company's revenues in 1996.

In 1977, John L. Macdonald, the Chief Executive Officer and President of
the Company, co-founded Gill and Duffus Chemicals, Inc., the domestic chemical
trading operation of the London-based Gill and Duffus Holding PLC. As part of a
management buy-out in 1982, Mr. Macdonald purchased Gill and Duffus Chemicals,
Inc., and subsequently merged into Steuber Company, Inc., the domestic
operations of the Steuber Group, a worldwide chemical distribution company. In
1986, Mr. Macdonald purchased the U.S. assets of the Steuber Group and formed
JLM as the successor.

Since 1986, the Company has grown rapidly by expanding its product sourcing
arrangements and product offerings, acquiring manufacturing and terminaling
facilities and providing superior customer service and product quality and
availability. Among the Company's most significant corporate milestones are (i)
its investment in 1987 in the Mt. Vernon Partnership, (ii) the formation in 1992
of OTC, (iii) the acquisition of the JLM Terminal in 1992 and (iv) the
acquisition of Blue Island Plant in 1995. In addition, the Company entered into
its first exclusive marketing agreement with Sasol Chemical Industries (PTY)
Ltd. (South Africa) ("SasolChem") in 1987 and began its expansion into the
international markets with the opening of offices in Canada in 1987, Venezuela
in 1992 and Europe in 1995.

INDUSTRY OVERVIEW

Phenol

Phenol is produced through the oxidation of cumene, which is produced from
propylene and benzene. Acetone is produced as a co-product during this
manufacturing process in the approximate ratio of 0.6 pounds of acetone for
every 1.0 pound of phenol. Approximately 80.0% of global acetone production is
produced as a co-product in the manufacture of phenol, and, as a result, phenol
demand largely determines acetone production levels. The markets for phenol and
acetone are cyclical and sensitive to changes in the balance between supply and
demand, the price of feedstocks and the level of general economic activity.

According to industry sources, current world phenol capacity is
approximately 13.8 billion pounds (4.5 billion pounds in North America). The two
largest end markets for phenol are phenolic resins, which is the Company's only
market for phenol, and bisphenol A ("BPA"). Phenolic resins are used extensively
as bonding agents and adhesives for wood products such as plywood and granulated
wood panels, and account for approximately 37.0% of total phenol demand. BPA is
used as a raw material in the manufacture of high performance plastics such as
those used in automobiles, household appliances, electronics and protective
coatings applications. BPA, the fastest growing application for phenol,
currently accounts for approximately 28.0% of phenol demand and is expected to
grow to approximately 33.0% by the year 2000. Phenol for the production of

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<PAGE> 28

BPA requires a greater degree of purification and is produced almost exclusively
by manufacturers of BPA for their internal consumption. Any phenol not consumed
internally by such manufacturers generally is sold to other end users. The
Company believes sales of excess phenol by BPA producers will be relatively
limited as the demand for BPA continues to increase, which should have a
positive effect on phenol prices generally.

Phenol selling prices and margins were at cyclical highs during 1995 and
1996. The Company expects worldwide and North American phenol demand to grow by
approximately 3.2% and 2.5% per year, respectively, through 1999. The growth in
demand is anticipated to be highest in Southeast Asia and, to a lesser extent,
the United States. The Company also expects there to be little change in the
levels of phenol production through 1998. As a result, production utilization
rates should remain relatively high. Capacity expansions by several major phenol
producers of approximately 3 billion pounds worldwide (1.2 billion pounds in the
U.S.) starting in the year 2000 have recently been announced. It is unclear how
many of these projects will ultimately be completed and the Company believes
that it is possible that some of these announced capacity additions will not be
built as scheduled.

Acetone

The largest end market for acetone is as a raw material in the production
of methyl methacrylate ("MMA"), which is used as a chemical intermediate to
produce acrylic sheeting and other chemical products, and as an ingredient for
surface coating resins for the automotive and construction markets. Acetone is
also used as a raw material in the production of BPA and as an industrial
solvent.

The U.S. Federal government has recently exempted acetone from all
regulations as a volatile organic compound ("VOC"). To date, 32 states have
followed the Federal government's ruling and the Company expects acetone to be
exempted from VOC regulation by all 50 states in the near future. The Company
believes that the exemption of acetone from VOC regulation will lead to
increased demand for acetone based coatings and solvents.

According to industry sources, current world acetone production capacity is
approximately 8.5 billion pounds (2.9 billion pounds in North America). Selling
prices and margins for acetone were at cyclical highs in 1995 and early 1996,
similar to those for phenol, driven by growth in the use of acetone for the
production of MMA, BPA (for engineering plastics), and a rejuvenated market for
acetone based solvents. World demand is expected to grow approximately 2.5%
annually through 1999. Recently announced capacity additions in Europe and the
U.S. for phenol, if completed, would increase the capability for acetone
production, which could be partially offset by closure of on-purpose production
over the next few years. The Company expects acetone demand in North America to
grow approximately 2.8% annually through 1999, driven primarily by growth in the
BPA market of approximately 4.9% annually, renewed growth in acetone-based
solvents of 3.0% annually, and a continued recovery in the MMA market.

Propylene

According to industry sources, current world propylene capacity is
approximately 100 billion pounds with global demand for propylene expected to
grow approximately 5.0% per year through 1999. North American capacity is
currently approximately 30 billion pounds with North American demand expected to
grow approximately 2.5% per year through 1999. The U.S. is expected to take a
significant role in producing and sourcing propylene to international consumers.

Over 50.0% of globally produced propylene is used in the manufacture of
polypropylene which, in turn, is used primarily in plastic film and molded parts
in consumer items, including automobile components, brushes, carpeting, rope and
tape.

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<PAGE> 29

BUSINESS STRATEGY

- Expand Sources of Supply through Joint Ventures, Acquisitions and
Strategic Relationships. The Company will continue to seek to identify
and pursue domestic and international opportunities to expand its sources
of supply for products in or consistent with its core business. These
opportunities may include additional joint ventures, acquisitions and
strategic relationships. Consistent with this strategy, the Company formed
the Mt. Vernon joint venture with General Electric Company ("GE ") and an
affiliate of CITGO in 1987, acquired the Blue Island Plant in 1995 and
established a long term supplier relationship with SasolChem in 1988.
Certain phenol producers have recently announced their intentions to add
approximately 3 billion pounds of annual production capacity starting in
the year 2000. JLM is currently exploring opportunities to participate in
certain of these expansions in order to secure additional sources of
phenol and acetone.

- Increase Sales of Existing Products; Add New Products. The Company will
continue to develop its existing relationships and establish new
relationships to increase the overall volume and types of products it
distributes by (i) increasing the amount distributed by the Company of an
existing supplier's output of a given chemical, (ii) distributing
additional products for existing suppliers and (iii) adding new chemical
producers to its supplier base. During 1996, the Company entered into
agreements to distribute approximately 70 million additional pounds of
chemicals for both existing and new suppliers in 1997, including ARCO
Chemical Company ("ARCO Chemical"), Goodyear Tire & Rubber Co.
("Goodyear") and Monsanto Company ("Monsanto"). In addition, the Company
recently expanded the product line it distributes for SasolChem. To date
in 1997, the Company has entered into agreements with CONDEA Vista Company
("CONDEA Vista") to distribute butanol and with GE Plastics to become a
U.S. distributor of styrene.

- Continue International Expansion. The Company currently has
international operations in South America, Europe and Asia. JLM intends to
continue to utilize its chemical market experience, distribution and
logistics capabilities and industry relationships to increase its
international presence, particularly in the growing chemical markets of
Asia and South America. JLM recently purchased a minority interest in SK
Asia and has agreed to purchase a minority interest in SK Trading, both of
which are participating in a Vietnamese joint venture that intends to
construct a chemical plant in Vietnam that will produce dioctyl phthlate,
a chemical used in the manufacture of plastics such as PVC. The Vietnamese
joint venture also intends to construct terminaling and storage facilities
in Vietnam and Malaysia. The Company believes that its indirect
participation in the Vietnamese joint venture also will provide it with
increased access to the Asian market.

PRODUCTS AND CUSTOMERS

JLM markets more than 50 chemical products to over 600 customers worldwide.
In 1996, sales of acetone, phenol and propylene accounted for approximately
65.0% of the Company's total revenues. Set forth below is certain information
about the Company's sales of acetone, phenol, propylene and certain other
products, including representative customers for such products.

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<PAGE> 30

Acetone

In 1996, JLM distributed approximately 424 million pounds of acetone, of
which approximately 63.0% was sourced from the Blue Island Plant and the Mt.
Vernon Plant. The largest end market application of acetone is as a raw material
in the production of MMA, an important chemical intermediate used to make
aircraft windows, lighting fixtures, medical/dental parts, storm doors and
taillight lenses. Additional end market applications for acetone include
adhesives, pharmaceuticals, solvents, paints and plastics. JLM's acetone
customers include Ashland, B.F. Goodrich, DuPont, ICI Acrylics and Rohm & Haas.

Phenol

In 1996, the Company distributed approximately 130 million pounds of
phenol, of which approximately 74.0% was sourced from the Blue Island Plant. The
two largest end market applications for phenol are phenolic resins, which are
used in adhesives and bonding agents in plywood and other forest products, and
BPA. JLM's phenol customers include Borden, Georgia Pacific and Neste.

Propylene

In 1996, the Company distributed approximately 98 million pounds of
propylene. The largest end market application for propylene is as a raw material
in the production of polypropylene which is used in the manufacture of appliance
parts, automobile components, brushes, carpeting, rope and tape. Propylene is
also used in the production of foams for furniture, insulation, elastomers,
molded goods and pharmaceuticals. The Company also markets other olefins,
including butadiene and ethylene. The Company's olefins customers include
Dupont, Exxon Corporation ("Exxon"), GE and Goodyear. JLM's propylene customers
include Borealis Exploration Limited, DSM and The Dow Chemical Corporation ("Dow
Chemical").

Other Products

In addition to acetone, phenol and propylene, the Company markets and
distributes other commodity and specialty chemicals including acetophenone,
benzoic acid, butadiene, cumene, DDVP, esters, ethylene, fumaric acid, ketones,
lindane and methanol. Some of JLM's customers for these products include BASF
Corp., Dow Chemical, DSM, Goodyear, Lilly Industries Inc., PPG Industries Inc.,
Repsol, S.A. (Spain) ("Repsol") and Shell Chemicals Canada.

During each of the past three years, no single distribution relationship,
customer or group of affiliated customers has accounted for more than 10.0% of
the Company's revenues.

MANUFACTURING AND PRODUCT SOURCING

In order to support its worldwide marketing and distribution capabilities,
the Company continually seeks to acquire assets and establish relationships to
provide consistent and reliable sources of products. JLM sources a majority of
its products from its Blue Island Plant and the Mt. Vernon Plant. In 1996, the
Blue Island Plant and Mt. Vernon Plant collectively supplied approximately 63.0%
of the total acetone sold by JLM and the Blue Island Plant supplied
approximately 74.0% of the total phenol sold by JLM.

Blue Island

The Company manufactures cumene, phenol, acetone and certain co-products
including alpha methyl styrene ("AMS") and acetophenone at the Blue Island
Plant. The Blue Island Plant has an annual manufacturing capacity of
approximately 145 million pounds of cumene, 95 million pounds of phenol, 58
million pounds of acetone, 5 million pounds of AMS and 1 million pounds of
acetophenone. The phenol produced at the Blue Island Plant can only be used in
the production of phenolic resins and not in the production of BPA.

The Blue Island Plant is strategically located south of Chicago, Illinois,
near primary barge and rail transportation terminals that facilitate economic
and efficient delivery of raw materials and shipment of finished products. In
addition, this location affords the Company significant freight cost advantages
in servicing its

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<PAGE> 31

customer base (which is primarily located in the Midwest) in comparison to
competitors located on the U.S. Gulf Coast.

The Blue Island Plant utilizes a newly installed state-of-the-art UOP
zeolite catalyst to produce cumene, the key raw material used to manufacture
phenol and acetone. This process has improved the efficiency, profitability and
quality of the cumene production and has eliminated the need to purchase
supplemental cumene from outside sources. Additionally, the new technology has
improved the purity of the Company's AMS and, as a result, the Company's average
margin for AMS has increased significantly.

The raw materials required for the production of cumene are propylene and
benzene. The Company, under a long-term supply agreement which expires in 2005,
obtains propylene via direct pipeline from the Clark Oil refinery located
adjacent to the Blue Island Plant. The Company believes that the terms of its
propylene supply contract provide it with a significant raw material cost
advantage over many of its competitors, in part because the Company does not
have to pay for any transportation costs for the propylene purchased under the
supply agreement. The Company purchases benzene from three major petrochemical
producers, generally under supply contracts at market rates.

Currently, the Blue Island Plant is operating at full capacity and in order
to economically expand production capacity, it would be necessary to increase
its capacity to that of a worldscale facility. However, physical limitations at
the Blue Island Plant prohibit such an increase and as a result the Company has
no plans to expand the Blue Island Plant. The Company is continually exploring
opportunities to expand its manufacturing capabilities through acquisitions or
joint ventures. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity."

Mt. Vernon Partnership

In addition to its ownership of the Blue Island Plant, JLM participates in
a manufacturing joint venture with GE and an affiliate of CITGO (the "Mt. Vernon
Partnership") which owns and operates the Mt. Vernon Plant. The Company owns a
2.0% partnership interest in the Mt. Vernon Partnership, an Indiana limited
partnership, that was formed to purchase the Mt. Vernon Plant from GE in
November 1987. The Company's principal purpose for entering into the partnership
was to secure a long-term source of supply for acetone. In 1988, the Company
entered into a long-term acetone sales agreement with the Mt. Vernon
Partnership. Under the terms of the acetone agreement, the Company is obligated
through the year 2002, and thereafter unless the agreement is terminated upon
prior notice, to purchase all of the acetone produced at the Mt. Vernon Plant
and not consumed by GE Petrochemicals, Inc. ("GE Plastics"). The agreement
further provides that the Mt. Vernon Partnership cannot terminate the agreement
as long as JLM is a partner in the Mt. Vernon Partnership. The initial term of
this agreement expires in 2002 and continues thereafter for successive one-year
terms unless one year's notice is otherwise provided by either party.

The Company has been since 1988 and believes that it will in the future be
able to continue to profitably market all the acetone offered to it under this
agreement. Since 1994, the Company has sourced on average approximately 250
million pounds of acetone annually from the Mt. Vernon Plant. In 1996, the
amount of acetone available to JLM from the Mt. Vernon Plant was reduced by
approximately 15 million pounds and it is anticipated over the next four years
that the amount of acetone available to JLM will be further reduced by
approximately 35 to 40 million pounds as a result of increased consumption by GE
Plastics.

Under the terms of the partnership agreement for the Mt. Vernon
Partnership, the management of the business and affairs of the partnership is
controlled by the partners owning at least 66.0% of the partnership interests.
The Mt. Vernon Partnership has entered into an operation and maintenance
agreement with GE pursuant to which GE manages, operates and maintains the Mt.
Vernon Plant. The partnership agreement generally provides GE with the right at
any time to require the sale of JLM's interest in the Mt. Vernon Partnership to
a third party selected by GE and the right after December 31, 2008 to directly
purchase JLM's interest in the partnership.

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<PAGE> 32

Supplier Relationships

In addition to its manufacturing facility and joint venture, JLM sources
its products through long-established supplier relationships with many of the
largest and most well-known chemical companies worldwide. Suppliers to JLM
include ARCO Chemicals, Goodyear, Monsanto, Repsol and SasolChem. The structure
of the Company's long-term relationships with its outside suppliers helps the
Company mitigate the impact of cyclical market fluctuations in product supply
and price to which typical spot traders or distributors are exposed. In a
majority of JLM's supply contracts, the purchase price paid by JLM is not
determined until after JLM sells the product, and is generally based on a fixed
percentage profit per unit of product sold. In contrast, the typical spot trader
or distributor may agree to a fixed purchase price prior to the sale, taking the
market risk of effecting a successful resale of the product. In addition, spot
traders do not typically enter into long-term supply contracts or relationships,
thereby reducing their ability to service the needs of both customers and
suppliers.

In 1988, the Company entered into an agreement to purchase acetone from
SasolChem, which was to remain in effect until either party gave six months
notice of termination. In 1992, the Company entered into new agreements with
SasolChem to purchase additional quantities of acetone, methyl-ethyl ketone and
n-propanol. These new agreements are on terms substantially similar to its
existing acetone agreement with SasolChem. The Company has since expanded its
relationship with SasolChem to include the purchase and distribution of methyl-
isobutyl ketone and ethanol in North America.

The Company has recently entered into an agreement to distribute styrene
monomer for GE Plastics. Styrene is the primary component used in the production
of synthetic rubbers and plastics. Additionally, the Company has entered into
agreements with ARCO Chemical Company, CONDEA Vista and Monsanto to distribute
n-propanol, butanol and ethyl acetate, respectively.

TERMINALING AND STORAGE

The Company, with an affiliate of UDS, participates in a joint venture
which owns and operates the OTC Terminal at the mouth of the Houston, Texas ship
channel in Bayport, Texas. The facility is located on 2.4 acres of land and has
throughput capacity of approximately 900 million pounds. The facility includes
twin storage spheres with a total capacity of approximately 22 million pounds of
propylene and is capable of handling and storing gaseous products at a full
range of temperature and pressure conditions. The OTC Terminal is believed to be
the only independent propylene export terminal in the U.S. and its Gulf Coast
location is well suited to enable U.S. producers to place their products into
the global market. See "Properties."

The OTC Terminal is operated by Baytank (Houston) Inc. ("Baytank"), a major
terminal owner and operator, under a long-term contract. OTC also leases from
Baytank the land upon which the OTC Terminal is located. The Company has been
engaged by OTC to provide certain administrative and managerial services to OTC,
including on-site supervision of terminal operations and certain bookkeeping and
administrative matters.

The Company has additional terminal and storage facilities located at the
JLM Terminal on the Cape Fear River in Wilmington, North Carolina. The JLM
Terminal is located on 14 acres of land, is accessible to ship, barge, rail and
truck, is capable of handling a broad range of products including methanol,
oxygenated solvents and inorganic chemicals, and has a total capacity of 15
million gallons. The facility includes three tank truck loading bays, six
loading bays for jumbo rail cars, laboratory services and a computerized weigh
scale. Of the total storage capacity at the JLM Terminal, approximately 2.5
million gallons of capacity are used by the Company and the remainder are
subject to long-term leases to third parties expiring from 1998 to 2002. See
"Properties."

The Company maintains inventory at approximately 15 locations across North
America and in a number of locations in Europe and South America. In addition to
the Company's owned terminal and storage facilities located at the JLM Terminal
and OTC Terminal, the Company has approximately 3.5 million gallons of liquid
storage capacity and approximately 500,000 pounds of palletized storage capacity
pursuant to short-term leases at various locations in the U.S. The Company
believes its storage facilities are adequate for the Company's current and
anticipated near-term needs. Should the need arise for substantial amounts of
additional storage facilities in the future, the Company does not currently
anticipate any material difficulties in obtaining sufficient new storage
facilities through purchase or lease at prevailing commercially reasonable
rates. The Company operates a fleet of

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more than 100 rail cars and has long-term working relationships with a number of
national barge lines and tank truck carriers. See "Properties."

SALES AND MARKETING

The Company focuses on bulk quantity sales (generally not smaller than
truck load lots) of commodity chemicals to over 600 customers worldwide in a
broad range of industries. Product sourcing and marketing efforts are handled
principally by the Company's sales team of 33 full time employees. Individual
salespersons are assigned principal responsibility for specific supplier or
customer relationships and for specific products. In addition, each salesperson
is required to be familiar with all of the Company's products, suppliers and
customers. As a result, the Company believes it is able to respond to customer
and supplier needs as well as to take advantage of changing market conditions
more effectively than its competitors.

JLM maintains offices in the U.S., Canada, the Netherlands, Venezuela and
Thailand and recently opened two affiliate offices in India and one in Columbia.
JLM also has an alliance with a distributor in Spain and operates through agency
relationships in Italy, Brazil, Peru and Taiwan. In addition, the Company
recently purchased a 25.0% interest in SK Asia, and has agreed to purchase a
12.7% interest in SK Trading, two Singapore-based companies participating in a
Vietnamese joint venture. The Vietnamese joint venture intends to construct a
chemical plant in Vietnam that will produce dioctyl phthlate, a chemical used in
the production of plastics such as PVC. The Vietnamese joint venture also
intends to construct terminaling and storage facilities in Vietnam and Malaysia.

Approximately 2.7% of the Company's revenues in 1996 were from sales of
specialty chemicals. Prices for specialty chemicals are generally subject to
smaller fluctuations than are those for commodity chemicals and specialty
chemical sales generally carry higher gross margins. In establishing supply and
distribution relationships in specialty chemicals, the Company attempts to
leverage existing relationships and knowledge of the needs and objectives of
both suppliers and customers.

The Company's position as a large volume marketer, combined with JLM's
knowledge of customer and supplier needs and objectives, affords it
opportunities to effect product exchanges. Engaging in product exchange
transactions allows the Company to solve customer or supplier problems and take
profitable advantage of identified market trends. The Company's ability to
engage in swap transactions is enhanced by its terminal and storage capabilities
which also enable the Company to accumulate inventory to take advantage of
market trends.

In its olefins marketing activities, JLM focuses on the international
marketing of olefin petrochemical gases which require specialized shipping,
handling and storage. The Company's olefins marketing activities to date have
been largely trading oriented. However, the Company believes that its long-term
relationships with key industry participants and its access to terminal and
storage facilities will enable the Company to become a large volume marketer of
olefins. The Company has long-term supply and sales contracts with a number of
major olefins producers and consumers in North America, South America, Europe
and Asia. For example, the Company has supply relationships with Repsol and
Copene-Petroquimica do Nordeste S.A. to source butadiene for the U.S. and with
UDS, Exxon and Lyondell Petrochemical Company to export propylene from the U.S.
Some of the Company's significant olefins customers include DuPont, Exxon, GE
and Goodyear.

COMPETITION

The Company operates in a highly competitive industry. Many of the
Company's competitors have significantly greater financial, production and other
resources than the Company. Many of the Company's competitors are large,
integrated chemical manufacturers, some of whom have their own basic raw
material resources. The Company competes to a lesser extent with certain
chemical distribution companies and chemical traders.

The Company competes in its marketing and distribution activities by
providing superior customer service. In the opinion of the Company, the key
elements of effective customer service include reliable and timely delivery of
products, satisfying customer needs for quality and quantity and competitive
pricing. The Company's long-term supplier relationships, terminal and storage
facilities, transportation capabilities and industry and

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product knowledge support the Company's efforts to provide superior customer
service. In addition, the Blue Island Plant's Midwest location gives it
significant freight cost advantages in selling to its customers in the Midwest
over its competitors' production facilities located in the Southeast.

EMPLOYEES

As of March 31, 1997, the Company and its consolidated subsidiaries had
approximately 161 full-time employees. Of these, 82 employees were in management
and administration, 33 in sales and marketing and 46 were in production and
distribution. Approximately 27 of the Company's domestic employees at the Blue
Island Plant are covered by a collective bargaining agreement with the Oil,
Chemical and Atomic Workers Union. This agreement expires on October 31, 1998.
The Company considers its relations with both its union and non-union employees
to be satisfactory.

PROPERTIES

The following table sets forth certain information as of March 31, 1997,
relating to the Company's principal facilities:

<TABLE>
<CAPTION>
APPROXIMATE
FACILITY PRINCIPAL ACTIVITIES; LOCATION SQUARE FEET OWNED/LEASED
- -------- ------------------------------ ----------- ------------
<S> <C> <C> <C>
Corporate Headquarters Administration Headquarters; 25,000 Owned
Tampa, Florida
Blue Island Plant Manufacturing; 958,000 Owned
Blue Island, Illinois
OTC Terminal Terminaling and Storage; 104,000 Co-owned
Houston, Texas
JLM Terminal Terminaling and Storage; 609,000 Owned
Wilmington, North Carolina
North America Sales Offices Blue Island, Illinois * Owned
Houston, Texas * Owned
Wilmington, North Carolina * Owned
Toronto, Canada * Leased
International Sales Offices Rotterdam, Netherlands * Leased
Caracas, Venezuela * Leased
Maracaibo, Venezuela * Leased
Valencia, Venezuela * Leased
</TABLE>

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

* Less than 25,000 square feet

ENVIRONMENTAL REGULATION

The Company and its operations are 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 ("Environmental Laws"). Compliance with such
Environmental Laws may result in significant capital expenditures by the
Company. Moreover, under certain Environmental Laws, the Company may be liable
for remediation of contamination at certain of its current and former
properties. For example, under the Comprehensive Environmental Response,
Compensation and Liability Act of 1990, as amended ("CERCLA") and similar state
laws, the Company and prior owners and operators of the Company's properties may
be liable for the costs of removal or remediation of certain hazardous or toxic
materials on, under or emanating from the properties, regardless of their
knowledge of, or responsibility for, the presence of such materials. CERCLA and
similar state laws also impose liability for investigation, cleanup costs and
damage to natural resources on persons who dispose of or arrange for the
disposal of hazardous substances at third-party sites. In addition, under the
Resource Conservation and Recovery Act of 1976 ("RCRA"), the holder of a permit
to treat or store hazardous waste can

34
<PAGE> 35

be required to remediate environmental pollution from solid waste management
areas at the permitted facility regardless of when the contamination occurred.

Although it is impossible to predict precisely what effect Environmental
Laws will have on the Company in the future, the Company believes, based on past
experience and Management's best assessment of future events, that any
environmental liabilities will be determined and incurred over an extended
period of time, allowing the Company to fund them through its operating cash
flow and mitigating their impact on the Company's results of operations.
Accordingly, the Company further believes that the effect of any such
environmental liabilities would not be material in relation to the Company's
consolidated financial position at December 31, 1995 and 1996 and March 31,
1997. Depending on future operating results, however, the environmental
liabilities to be recorded in a given annual or quarterly period may result in
charges that materially affect the Company's results of operations for that
period.

Although elevated levels of certain petroleum-related substances, organic
chemicals and metals have been detected in groundwater and/or soils at the
Company's Wilmington, North Carolina terminal facilities, the Company believes
that the presence of such substances is the result of either historical use
prior to the Company's acquisition of the site from Union Oil Company of
California ("Unocal") in 1992 and/or migration from neighboring facilities
(including an adjacent Superfund site that is currently being remediated).
Unocal, the prior owner of the site, is currently implementing a state approved
Remedial Action Plan ("RAP") to address onsite petroleum contamination. The
Company is not subject to any requirements under the RAP and believes that the
prior owner or the owners of the neighboring properties bear responsibility for
any additional remediation of petroleum-related contaminants. Except for the
ongoing remediation, no significant cleanup activities have been conducted at
the JLM Terminal since it was acquired by the Company in 1992. Should remedial
activities be conducted to address contaminants that are not petroleum-related,
the Company has insufficient information regarding the types, concentrations,
and possible cleanup levels of onsite contaminants to reasonably estimate costs
that may be associated with such remediation. In addition, the Company may be
entitled to be indemnified for such costs under the 1992 Asset Purchase
Agreement between the Company and Unocal. Pursuant to indemnification provisions
set forth in the agreement, Unocal agreed to indemnify the Company up to $7.5
million for environmental liabilities at the JLM Terminal.

The Company believes that the low levels of various organic compounds
detected in soils and groundwater at the Blue Island plant are the result of
historical use of the site prior to its acquisition by the Company in 1995
and/or migration from neighboring facilities. The concentrations of some of
these compounds exceed established state groundwater standards and/or cleanup
objectives. However, the Company 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. To date, the
Company has not been required to plan, undertake, or fund any remedial
activities.

Levels of organic compounds slightly in excess of regulatory reporting
thresholds were detected in groundwater at the Polychem plant owned by the
Company. The Company has been addressing the problem, and recent analytical
results show that the levels of contaminants have decreased to acceptable
levels. Accordingly, the Company has requested that state authorities permit
closure of the remediation at the site.

The Company does not believe that a material amount of funds will be
required to complete remediation at any site.

LEGAL PROCEEDINGS

The Company is not a party to any legal proceedings, other than claims and
lawsuits arising in the normal course of the Company's business. The Company
does not believe that such claims and lawsuits, individually or in the
aggregate, will have a material adverse effect on its business.

The Internal Revenue Service (the "IRS") has concluded a federal income tax
examination of the Company's 1988, 1989 and 1990 tax years and has proposed
adjustments for such years. The Company has filed a protest of the proposed
adjustments and is awaiting a determination by the Service with respect to the

35
<PAGE> 36

Company's protest. The Company believes that the outcome of the examination will
not have a material adverse effect on the financial condition or results of
operations of the Company.

The IRS has also commenced a federal income tax examination for the
Company's 1992, 1993 and 1994 tax years. The examination is in its final stages,
and the Service has not asserted any income tax deficiencies or definitively
indicated all the issues that will be involved in the examination. The issues
that have been raised by the Service thus far do not indicate that any impact on
the taxable years at issue would be material. However, there can be no assurance
that additional issues impacting future taxable years will not be raised and
resolved adversely to the Company during the course of the examination or
subsequent proceedings.

36
<PAGE> 37

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The Company's Board of Directors is composed of four members. Upon the
completion of the Offering, the size of the Board of Directors will be increased
to seven members and three additional directors will be named to fill the
additional positions. Directors generally serve for one-year terms and until
their successors are duly elected and qualified. Upon consummation of the
Offering, the Certificate of Incorporation and Bylaws of the Company will
provide that the size of the Board of Directors may be changed (but not to fewer
than three or more than nine members) by resolution adopted by the Board of
Directors of the Company.

The following table sets forth certain information regarding the Company's
existing directors, executive officers, the three nominees who will be elected
as additional directors effective upon the consummation of the Offering and a
key employee of the Company. Each of the nominees for director named below has
agreed to serve as a director of the Company upon his election to the Board.

<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS AGE POSITIONS
- -------------------------------- --- ---------
<S> <C> <C>
John L. Macdonald............................ 53 President, Chief Executive Officer and Director
Thaddeus J. Lelek............................ 48 Vice President and Director
Wilfred J. Kimball........................... 58 Vice President and Director
Frank A. Musto............................... 40 Vice President, Chief Financial Officer and
Director
John T. White................................ 66 Vice President and General Counsel
Michael J. Molina............................ 45 Vice President -- Tax and Audit and Secretary
Linda L. Sato................................ 36 Vice President and Treasurer
NOMINEES FOR DIRECTORS
- ----------------------
Roger C. Kahn................................ 45 Director
J. Robert Mehall............................. 55 Director
Jerry L. Weinstein........................... 61 Director
KEY EMPLOYEE
- ------------
Thomas Johannes van der Weijde............... 46 Vice President, JLM International, Inc.
</TABLE>

John L. Macdonald founded the Company in April 1986 and has served as the
President, Chief Executive Officer and a director of the Company throughout its
history. Mr. Macdonald also co-founded Gill and Duffus Chemical, Inc., in 1978
and served as its President and Chief Executive Officer until the conclusion of
a leveraged buyout in 1983 in which Gill and Duffus Chemical, Inc., merged with
the Steuber Company, Inc. Mr. Macdonald received a B.A. from Colorado College
and has more than 28 years experience in the chemical industry.

Thaddeus J. Lelek has been with the Company since its formation in 1986,
serving in a variety of senior marketing positions. In 1986 he was elected as
Vice President of JLM Marketing. Mr. Lelek has more than 27 years of experience
in the chemical industry. Mr. Lelek is principally responsible for formulating
and implementing the Company's marketing strategies and programs for North
American sales. From 1983 to 1986, Mr. Lelek was also responsible for marketing
in North America for Steuber Company, Inc. and from 1980 to 1983, Mr. Lelek
headed up the national sales effort for distribution for Gill and Duffus
Chemicals, Inc. Mr. Lelek was also employed in various capacities, including
National Sales Manager for certain products, for Gulf Oil Chemicals, Inc., from
1970 to 1979. Mr. Lelek graduated with a B.S. in Chemical Engineering from
Worchester Polytechnic Institute.

Wilfred J. Kimball was hired as Vice President of JLM Chemicals and Vice
President of the Company following the acquisition by the Company in 1995 of the
Blue Island Plant from BTL Specialty Resins Corp. ("BTL Corporation"). Mr.
Kimball is primarily responsible for the operation of the Company's Blue Island
Plant. In addition, he is responsible for the operations of JLM Terminal and the
day to day direction of certain of the Company's sales force and support staff.
From 1990 to 1995 Mr. Kimball was President of BTL Corporation and in this
capacity was primarily responsible for the Blue Island Plant. From 1985 to 1990,
Mr. Kimball served

37
<PAGE> 38

in various executive capacities with BTL Corporation, including Vice President
of Manufacturing and Engineering and President of Plyophen Chemicals, a division
of BTL Corporation. Prior to 1985, Mr. Kimball served for 22 years in various
capacities with Union Carbide Canada LTD. Mr. Kimball received a B.S. in
Chemical Engineering from the University of Brunswick.

Frank A. Musto has been with the Company since its formation in 1986. Mr.
Musto was elected as Vice President and Chief Financial Officer in 1994. Mr.
Musto is principally responsible for the Company's banking relationships,
current cash management systems and investment of excess funds. Prior to joining
the Company, from 1979 to 1981, and from 1983 to 1985, Mr. Musto was the Marine
Accountant, Controller and Treasurer for the Steuber Company, Inc. From 1981 to
1982, Mr. Musto was the controller for Amerpol International, New York City, a
custom house broker, freight forwarder and agent for the government controlled
fishing fleet in Poland. Mr. Musto graduated from Bernard M. Baruch College with
a B.B.A. in Accounting.

John T. White has served as Vice President and General Counsel of the
Company since 1990. Mr. White is the Company's chief legal officer and is
principally responsible for the legal affairs of the Company and its
consolidated subsidiaries. From 1987 to 1989, Mr. White was Senior Vice
President for Paribas Corporation, a North American investment banking firm.
From 1970 to 1987, Mr. White was a partner with the New York City law firm of
Wender, Murase & White, and from 1962 to 1970 Mr. White was a partner in the
international law firm of Baker & McKenzie, resident in the firm's New York City
office. Mr. White received a bachelor's degree from Harvard College, a Juris
Doctorate from Columbia and a L.L.M. from New York University.

Michael J. Molina joined the Company in 1986 as controller. In 1995, he was
promoted to his current position as Vice President -- Tax and Audit. Mr. Molina
is primarily responsible for taxes, audits and management information systems.
From 1992 to 1995, Mr. Molina served as Vice President of Administration. Mr.
Molina received a B.A. from Johns Hopkins University and a M.B.A. from Pace
University.

Linda L. Sato has been employed by the Company since 1986 when she was
hired as the Company's Assistant Controller. In 1994 she was designated as Vice
President and Controller. In 1996, Ms. Sato was promoted to Vice President and
Treasurer. Ms. Sato graduated from the University of Connecticut with a B.A. in
Accounting.

Roger C. Kahn has been a Managing Director of Oppenheimer & Co., Inc. in
investment banking since 1989 and is currently the head of its Industrial
Products Group.

J. Robert Mehall has been Executive Vice President -- Corporate
Development, Petrochemicals/NGLs and Crude Oil Supply for Ultramar Diamond
Shamrock since 1996. From 1982 to 1996 Mr. Mehall was Executive Vice President
and Senior Vice President of Diamond Shamrock, Inc.

Jerry L. Weinstein has been Vice President of Owens Corning -- Specialty &
Foam Products Division since 1994. From 1980 until 1994, Mr. Weinstein was
President and Chief Executive Officer of UC Industries, Inc., an independent
manufacturer of plastic products for the building materials industry.

Thomas Johannes van der Weijde has been employed by the Company since
January 1995 when he was hired as Vice President of JLM International, Inc. Mr.
van der Weijde is principally responsible for directing the Company's
international sales operations (other than for olefins). From 1988 to 1995, Mr.
van der Weijde was employed by Repsol, the Spanish state oil company, as
Managing Director -- Europe. From 1979 to 1988, Mr. van der Weijde was employed
by Carless Refining and Marketing B.V. Rotterdam, initially as the European
Sales Manager and later as Managing Director. Mr. van der Weijde received a
Bachelors degree in Physics from the University of Amsterdam.

None of the executive officers or directors are related to one another.
Executive officers are elected by and serve at the discretion of the Board of
Directors.

DIRECTORS COMPENSATION

Directors who are not employees of the Company ("Non-Employee Directors")
will receive an annual retainer fee of $10,000 and an automatic grant of options
to purchase 1,000 shares of Common Stock each year in accordance with the
Company's Non-Employee Directors' Stock Plan (the "Directors' Plan").

38
<PAGE> 39

COMMITTEES OF THE BOARD OF DIRECTORS

Upon the consummation of the Offering, the Board of Directors will create
an Audit Committee and Compensation Committee.

The Audit Committee's principal responsibilities will be to recommend
annually a firm of independent auditors to the Board of Directors, to review the
annual audit of the Company's Consolidated Financial Statements and to meet with
the independent auditors of the Company from time to time in order to review the
Company's general policies and procedures with respect to audits and accounting
and financial controls.

The principal responsibilities of the Compensation Committee will include
the establishment of compensation policies for the executive officers of the
Company and administration of any stock-based compensation plans.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth all compensation awarded to, earned by, or
paid for services rendered to the Company in all capacities during the year
ended December 31, 1996 for each of the named executive officers (as defined
under applicable Securities and Exchange Commission Rules) of the Company (the
"Named Executive Officers"):

<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
-------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2)
- --------------------------- ---- -------- -------- ---------------
<S> <C> <C> <C> <C>
John L. Macdonald 1996 $168,486 $250,000 $ 9,486
President and CEO
Thaddeus J. Lelek 1996 108,333 10,000 --
Vice President
Wilfred J. Kimball 1996 135,483 15,000 39,141
Vice President
Frank A. Musto 1996 91,683 26,000 9,500
Vice President and
Chief Financial Officer
John T. White 1996 113,866 27,500 --
Vice President and
General Counsel
</TABLE>

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

(1) The Company was not subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended, in 1995 or 1994. Accordingly, information
with respect to 1995 or 1994 is not required to be disclosed. Other Annual
Compensation consisting of perquisites does not exceed the minimum amounts
required to be reported pursuant to Securities and Exchange Commission Rules
and the column has therefore been deleted. No options, SARs or other
long-term compensation awards were granted in 1996.
(2) For Mr. Macdonald and Mr. Musto consists of the amounts contributed by the
Company to the Company's Defined Contribution Plan. For Mr. Kimball consists
of $9,500 contributed by the Company to the Company's Deferred Plan, $26,641
of relocation compensation and $3,000 of car allowance.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors has not previously had a compensation committee and
the functions of the compensation committee historically have been performed by
the Board of Directors the sole member of which was John L. Macdonald, the
Company's Chief Executive Officer and President. The Board of Directors will
establish a compensation committee effective upon completion of the Offering.
See "Committees of the Board of Directors."

EQUITY BASED COMPENSATION PLANS

JLM will adopt the 1997 Employee Stock Purchase Plan (the "Stock Purchase
Plan"), the Long-Term Incentive Plan (the "JLM LTIP") and the Directors' Plan.
The Compensation Committee will administer the

39
<PAGE> 40

Stock Purchase Plan and the JLM LTIP and make the determination as to the grant
of awards, options and/or rights under the respective plans. No member of the
Compensation Committee may receive grants or awards under the plans. The Board
of Directors of JLM will administer the Directors' Plan.

Stock Purchase Plan. An aggregate of 75,000 shares of Common Stock are
reserved for issuance under the plan. Under the Stock Purchase Plan, all
employees will be given the opportunity to purchase shares of JLM Common Stock
two times a year at a price equal to 85.0% of the market price of the stock
immediately prior to the beginning of each offering period. The Stock Purchase
Plan provides for two offering periods, the months of March and September, in
each of the years 1997-2006.

JLM LTIP. An aggregate of 750,000 shares of Common Stock are reserved for
issuance under the plan. Under the JLM LTIP, restricted stock, incentive stock
options, nonqualified stock options and stock appreciation rights or any
combination thereof may be granted to JLM employees. In general, the exercise
price of the options granted under the plan will be determined at the discretion
of the committee administering the plan, which price may not be less than the
market price of JLM Common Stock on the date the option is granted. Options will
normally vest 33 1/3% each year after issuance over a period of three years and
will expire after 10 years. The committee may condition awards of restricted
stock and stock appreciation rights upon satisfaction of performance criteria or
other conditions.

Director's Plan. An aggregate of 25,000 shares of Common Stock are
reserved for issuance under the plan. Each year Non-Employee Directors who are
elected or continuing as Non-Employee Directors as of the conclusion of the
Company's annual meeting of stockholders will receive options to purchase 1,000
shares of Common Stock. The exercise price of the Options will vest fully at the
end of one year and will expire after five years.

CERTAIN TRANSACTIONS

JLM Stables, Inc., a subsidiary of the Company, operated a horse farm in
Ocala, Florida and in connection therewith, leased from John L. Macdonald, 100
acres of land consisting of riding areas and grazing pasture, a stable building
and farm manager's house. Pursuant to the lease, JLM Stables, Inc. paid certain
costs associated with owning and operating the leased property including
utilities, maintenance and insurance. In 1994, 1995 and 1996, the Company's
total rental payments to Mr. Macdonald were $48,000 per year. Effective November
1, 1996, the Company entered into a new three-year lease with Mr. Macdonald,
providing for rental payments of $4,000 per month. During the three month period
ended March 31, 1997, the Company paid to Mr. Macdonald $12,000 in connection
with this lease. In December 1996, the Company made a decision to terminate its
involvement with the horse farm business, and is taking steps to sell all assets
used in those activities. In connection with the termination of the horse farm
operations, Mr. Macdonald purchased certain horses from the Company for an
aggregate purchase price of approximately $324,000 and terminated the lease
effective April 30, 1997.

On November 19, 1996, Mr. Macdonald loaned the Company approximately
$941,000. The loan is unsecured, bears interest at the prime rate, currently
8.5%, compounded annually and matures on January 1, 1999. As March 31, 1997, the
unpaid principal balance of the loan was approximately $905,000. During 1994,
1995 and 1996, the Company was indebted to Mr. Macdonald on an open account
basis for approximately $605,000, $886,000 and $905,000, respectively. All such
indebtedness was repaid prior to entering into the November loan transaction.

In 1995 and 1996, the Company purchased approximately $479,000 and
$319,000, respectively, of chemical products from Kemlink JV, a New York joint
venture partnership owned 50.0% by Kemlink, L.L.C., a Delaware limited liability
company of which Mr. Macdonald is a 97.0% owner. All purchases in 1995 and 1996
were at prices comparable to those paid to unrelated parties. In addition,
during these years, the Company sold approximately $1.6 million and $1.3
million, respectively, of chemical products to Kemlink JV. The Company did not
purchase from or sell any chemicals to Kemlink in 1994. Effective December 31,
1996, the Company ceased doing business with Kemlink JV, which was terminated by
its partners, and Kemlink, L.L.C.

40
<PAGE> 41

The Company's Spanish distributor is Chemical Trading, S.L. ("CTSL"), which
is owned 100.0% by Eduardo Delgadillo, a stockholder of the Company. The Company
and CTSL have an arrangement pursuant to which the Company pays CTSL's operating
expenses. The Company treats the difference between such payments and the amount
of commissions and other amounts due to CTSL as a loan. Under such arrangement
CTSL was indebted to the Company for approximately $140,000, $569,000 and
$322,000, as of December 31, 1994, 1995 and 1996, respectively, and
approximately $421,000 as of March 31, 1997. Such indebtedness is carried on an
open account basis and during 1996, approximately $522,000 was repaid without
interest through the sale at fair market value to the Company by Mr. Delgadillo
of 48 shares (267,264 shares after giving effect to the stock split in July
1997) of the Company's Common Stock (representing approximately 5.1% of the
issued and outstanding shares of Common Stock at such date) owned by him. During
the period from 1994 to 1996, Mr. Delgadillo was the beneficial owner of between
9.9% and 4.8% of the Company's outstanding Common Stock.

In 1994, 1995, 1996 and 1997, the Company leased certain office space from
Aurora, a Texas corporation of which John L. Macdonald is an 80% stockholder.
Aurora markets certain solvent chemicals, primarily phenol, benzene, and
acetone. The lease is on a month to month basis with a rental of $2,100 per
month. In 1994, 1995, 1996 and for the period ending March 31, 1997, lease
payments were approximately $18,000, $25,000, $25,000 and $6,300, respectively.
The lease with Aurora was terminated upon consummation of the purchase by the
Company of all of the common stock of Aurora. In 1994, 1995, 1996 and for the
period ending March 31, 1997, the Company sold approximately $3.0 million, $5.6
million, $1.4 million and $0.2 million, respectively, of chemical products to
Aurora.

The Company entered into an Agreement for Sale and Purchase of Common Stock
held by Mr. Macdonald and an unrelated third party to purchase for a total
purchase price of approximately $1.25 million all of the issued and outstanding
shares of Aurora. Under the terms of the agreement, the Company purchased Mr.
Macdonald's ownership interest in Aurora for a $1.0 million promissory note that
matures on June 1, 2002 and bears interest at a rate of 10.0% per annum. The
other shareholder received consideration of $250,000 for the purchase of his
ownership interest. Of such amount, $150,000 was paid at closing in cash and
$100,000 was paid by a three year promissory note which bears interest at the
prime rate and is payable in three equal annual installments.

In 1994, 1995, 1996 and 1997, the Company leased chemical tank railcars
from Phoenix, a Connecticut corporation of which the sole stockholder is John L.
Macdonald. The Company made payments in 1994, 1995, 1996 and for the period
ending March 31, 1997 to Phoenix in respect of such leases of approximately
$160,000, $162,000, $203,000 and $6,000, respectively. The Company entered into
an Agreement for Sale and Purchase of Common Stock with Mr. Macdonald to
purchase for a total purchase price of $500,000 all of the issued and
outstanding shares of Phoenix. Under the terms of the agreement, the Company
purchased Mr. Macdonald's ownership interest in Phoenix for $500,000, of which
$250,000 was offset against advances owed to the Company by Mr. Macdonald and
$250,000 paid by means of a promissory note that matures on June 1, 2002 and
bears interest at a rate of 10.0% per annum.

The Company believes that each of the certain transactions described above
were on terms no less favorable to the Company than those which could have been
obtained in arm's length transactions with unaffiliated third parties. However,
except as indicated above, the Company did not obtain independent objective
information to support its belief in this respect. After the consummation of the
Offering, the Company will not enter into any transaction with any officer,
director or stockholder except on terms that are no less favorable to the
Company than those which could be obtained in an arm-length transaction with an
unaffiliated party unless the approval of a majority of disinterested directors
is obtained.

41
<PAGE> 42

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of the date of the
Prospectus and as adjusted to reflect the sale of shares offered hereby,
assuming no exercise of the Underwriters' over-allotment option, by (i) each
person known by the Company to own beneficially more than 5.0% of the
outstanding Common Stock, (ii) each director and each nominee for director of
the Company, (iii) each of the Named Executive Officers, (iv) all officers,
directors and nominees for directors as a group, and (v) the Selling
Stockholder. The persons named in the table have sole voting and investment
powers with respect to all shares of Common Stock shown as beneficially owned by
them. For purposes of the table, a person or group of persons is deemed to have
"beneficial ownership" of any shares as of a given date which such person has
the right to acquire within 60 days after such date.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING(1)(2) SHARES AFTER THE OFFERING(1)
--------------------------- OFFERED -----------------------
NUMBER PERCENTAGE FOR SALE NUMBER PERCENTAGE
----------- ------------ -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
John L. Macdonald(3)........... 4,515,648 95.2% 144,000 4,371,648 63.4
8675 Hidden River Parkway
Tampa, Florida 33627
Thaddeus J. Lelek.............. -- -- -- -- --
Wilfred J. Kimball............. -- -- -- -- --
Frank A. Musto................. -- -- -- -- --
John T. White.................. -- -- -- -- --
Roger C. Kahn.................. -- -- -- -- --
J. Robert Mehall............... -- -- -- -- --
Jerry L. Weinstein............. -- -- -- -- --
All Directors, Nominees for
Directors and Executive
Officers As a Group (10
persons)..................... 4,515,648 95.2% -- 4,371,648 63.4
</TABLE>

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

(1) Does not include an aggregate of 258,000 shares of Common Stock issuable to
the Company's directors and executive officers upon the exercise of stock
options to be granted to such persons effective upon the completion of the
Offering. Such options will have an exercise price equal to the price on the
date of grant and will vest in equal one-third increments in arrears over
three years from the date of grant. Also does not include an aggregate of
47,000 shares of restricted Common Stock to be awarded to five executive
officers, effective upon the completion of the Offering. Such shares of
restricted Common Stock will be subject to a substantial risk of forfeiture
that will lapse in equal one-fourth increments in arrears over four years
from the date of award.
(2) Does not include 228,288 shares (4.8%) of Common Stock owned by the
Company's minority stockholder.
(3) The Selling Stockholder, John L. Macdonald, serves as the Company's
President and Chief Executive Officer. Mr. Macdonald also serves as a
director of the Company. Includes 167,040 shares of Common Stock held by two
irrevocable trusts created for the benefit of Mr. Macdonald's children for
which Mr. Macdonald disclaims beneficial ownership.

DESCRIPTION OF CAPITAL STOCK

GENERAL

The following description of the Company's capital stock is qualified in
its entirety by reference to the Certificate of Incorporation and Bylaws of the
Company, which are included as exhibits to the Registration Statement of which
this Prospectus forms a part.

AUTHORIZED CAPITAL STOCK

The total number of shares of all classes of stock that the Company has
authority to issue under its Certificate of Incorporation is 35,000,000 shares,
of which 30,000,000 shares represent shares of Common Stock and 5,000,000 shares
represent shares of Preferred Stock (the "Preferred Stock").

42
<PAGE> 43

COMMON STOCK

As of July 3, 1997, there were 4,743,936 shares of Common Stock
outstanding. Subject to any preferential rights of any Preferred Stock created
by the Board of Directors, each outstanding share of Common Stock will be
entitled to such dividends, if any, as may be declared from time to time by the
Board out of funds legally available therefor. See "Dividend Policy." Each
outstanding share is entitled to one vote on all matters submitted to a vote of
stockholders except on matters which are required to be voted exclusively by
holders of Preferred Stock or any class of shares of Preferred Stock. In the
event of liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to receive on a pro rata basis any assets remaining
after provision for payment of creditors and after payment of any liquidation
preferences to holders of Preferred Stock. There are no redemption provisions
applicable to the Common Stock. All outstanding shares of Common Stock are fully
paid and non-assessable and the shares of Common Stock to be issued upon
completion of the Offering will be fully paid and non-assessable.

PREFERRED STOCK

The Company's Certificate of Incorporation authorizes 5,000,000 shares of
Preferred Stock. The Board has the authority to prescribe for each series of
Preferred Stock it establishes the number of shares in that series, the voting
rights (if any) to which such shares in that series are entitled, the
consideration for such shares in that series and the designations, powers,
preferences and relative, participating, optional or other special rights, and
such qualifications, limitations or restrictions of the shares in that series,
without further action or vote by the Stockholders. Depending upon the rights of
such Preferred Stock, the issuance of Preferred Stock could have an adverse
effect on holders of Common Stock by delaying or preventing a change in control
of the Company, making removal of the present management of the Company more
difficult or resulting in restrictions upon the payment of dividends and other
distributions to the holders of Common Stock. The issuance of Preferred Stock
with voting and conversion rights may adversely affect the voting power of the
holders of Common Stock, including the loss of voting control to others. At
present, the Company has no plans to issue any of the Preferred Stock.

CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED CAPITAL STOCK

Under the Company's Certificate of Incorporation, upon consummation of this
Offering, assuming no exercise of the Underwriters' over-allotment option, there
will be 22,250,064 shares of Common Stock available for future issuance without
stockholder approval. These additional shares may be used for a variety of
corporate purposes, including future public offerings to raise additional
capital or to facilitate corporate acquisitions. In addition, the Board has the
authority to issue shares of Preferred Stock.

One of the effects of the existence of unissued and unreserved Common Stock
or Preferred Stock may be to enable the Board to issue shares to persons
friendly to current management, which issuance could render more difficult or
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or otherwise, and thereby protect the continuity of
the Company's management and possibly deprive the stockholders of opportunities
to sell their shares of Common Stock at prices higher than prevailing market
prices. Such additional shares also could be used to dilute the stock ownership
of persons seeking to obtain control of the Company. The Company currently does
not have any plans to issue additional shares of Common Stock or Preferred Stock
other than in connection with employee compensation plans.

NO PREEMPTIVE RIGHTS

No holder of any class of stock of the Company authorized at the time of
the Offering will have any preemptive or conversion rights of any other right to
subscribe to any securities of the Company of any kind or class.

CERTAIN PROVISIONS OF THE DELAWARE GENERAL CORPORATION LAW

The Company is subject to Section 203 of the Delaware General Corporation
Law ("DGCL"). Pursuant to Section 203, with certain exceptions, a Delaware
corporation may not engage in any of a broad range of business

43
<PAGE> 44

combinations, such as mergers, consolidations and sales of assets, with an
"interested stockholder" for a period of three years from the date that such
person became an interested stockholder unless (a) the transaction that results
in the person's becoming an interested stockholder or the business combination
is approved by the board of directors of the corporation before the person
becomes an interested stockholder, (b) upon consummation of the transaction
which results in the stockholder becoming an interested stockholder, the
interested stockholder owns 85.0% or more of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding shares owned by
persons who are directors and also officers and shares owned by certain employee
stock plans or (c) on or after the date the person becomes an interested
stockholder, the business combination is approved by the corporation's board of
directors and by holders of at least two-thirds of the corporation's outstanding
voting stock, excluding shares owned by the interested stockholder, at a meeting
of stockholders. Under Section 203, an "interested stockholder" is defined as
any person, other than the corporation and any direct or indirect majority-owned
subsidiary, that is (a) the owner of 15.0% or more of the outstanding voting
stock of the corporation or (b) an affiliate or associate of the corporation and
was the owner of 15.0% or more of the outstanding voting stock of the
corporation at any time within the three-year period immediately prior to the
date on which it is sought to be determined whether such person is an interested
stockholder. Section 203 does not apply to a corporation that so provides in an
amendment to its certificate of incorporation or Bylaws passed by a majority of
its outstanding shares, but such stockholder action does not become effective
for 12 months following its adoption and would not apply to persons who were
already interested stockholders at the time of the amendment. The Company's
Certificate of Incorporation does not exclude the Company from the restrictions
imposed under Section 203.

Under certain circumstances, Section 203 makes it more difficult for a
person who would be an "interested stockholder" to effect various business
combinations with a corporation for a three-year period. The provisions of
Section 203 may encourage companies interested in acquiring the Company to
negotiate in advance with the Company's Board of Directors, because the
stockholder approval requirement would be avoided if the Board of Directors
approves either the business combination or the transaction which results in the
stockholder becoming an interested stockholder. Such provisions also may have
the effect of preventing changes in the Board. It is further possible that such
provisions could make it more difficult to accomplish transactions which
stockholders may otherwise deem to be in their best interests.

CERTAIN PROVISIONS OF CERTIFICATE OF INCORPORATION AND BYLAWS AFFECTING CHANGE
IN CONTROL

Certain provisions of the Certificate of Incorporation and Bylaws may delay
or make more difficult unsolicited acquisitions or changes of control of the
Company. It is believed that such provisions will enable the Company to develop
its business in a manner that will foster its long-term growth without
disruption caused by the threat of a takeover not deemed by its Board of
Directors to be in the best interests of the Company and its stockholders. Such
provisions could have the effect of discouraging third parties from making
proposals involving an unsolicited acquisition or change of control of the
Company, although such proposals, if made, might be considered desirable by a
majority of the Company's stockholders. Such provisions may also have the effect
of making it more difficult for third parties to cause the replacement of the
current Board. These provisions include (i) the availability of capital stock
for issuance from time to time at the discretion of the Board of Directors (see
"Authorized but Unissued Capital Stock"), (ii) prohibitions against stockholders
calling a special meeting of stockholders, (iii) requirements for advance notice
for raising business or making nominations at stockholders' meetings, (iv) the
ability of the Board of Directors to increase the size of the board and to
appoint directors to newly created directorships and (v) higher than majority
requirements to make certain amendments to the Bylaws and Certificate of
Incorporation.

Special Meetings

The Certificate of Incorporation and Bylaws also provide that special
meetings of the stockholders can be called only by the Chairman of the Board of
Directors, the Chief Executive Officer of the Company or by a vote of the
majority of the Board of Directors. Furthermore, the Bylaws of the Company
provide that only such business as is specified in the notice of any such
special meeting of stockholders may come before such meeting.

44
<PAGE> 45

Advance Notice for Raising Business or Making Nominations at Meetings

The Bylaws of the Company establish an advance notice procedure for
stockholder proposals to be brought before an annual meeting of stockholders and
for nominations by stockholders of candidates for election as directors at an
annual or special meeting at which directors are to be elected. Only such
business may be conducted at an annual meeting of stockholders as has been
brought before the meeting by, or at the direction of, the Chairman of the Board
of Directors, or by a stockholder of the Company who is entitled to vote at the
meeting who has given to the Secretary of the Company timely written notice, in
proper form, of the stockholder's intention to bring that business before the
meeting. The chairman of such meeting has the authority to make such
determinations. Only persons who are nominated by, or at the direction of, the
Chairman of the Board of Directors, or who are nominated by a stockholder who
has given timely written notice, in proper form, to the Secretary prior to a
meeting at which directors are to be elected will be eligible for election as
directors of the Company.

To be timely, a stockholder's notice of business to be brought before an
annual meeting and nominations of candidates for election as directors at any
annual meeting shall be delivered to the Secretary of the Company at the
principal executive offices of the Company not less than 70 days nor more than
90 days prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is
advanced by more than 20 days, or delayed by more than 70 days, from such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the ninetieth day prior to such annual meeting and not later
than the close of business on the later of the seventieth day prior to such
annual meeting or the tenth day following the day on which public announcement
of the date of such meeting is first made.

To be timely, a stockholder's notice of nominations of persons for election
to the Board of Directors may be made at such a special meeting of stockholders
if the stockholder's notice shall be delivered to the Secretary of the Company
at the principal executive offices of the Company not earlier than the ninetieth
day prior to such special meeting and not later than the close of business on
the later of the seventieth day prior to such special meeting or the tenth day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.

The notice of any nomination for election as a director must set forth the
name and address of, and the class and number of shares of the Company held by,
the stockholder who intends to make the nomination and the beneficial owner, if
any, on whose behalf the nomination is being made; the name and address of the
person or persons to be nominated; a representation that the stockholder is a
holder of record of stock of the Company entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; such other information regarding
each nominee proposed by such stockholder as would have been required to be
included in a proxy statement filed pursuant to the proxy rules of the SEC had
each nominee been nominated, or intended to be nominated, by the Board of
Directors; and the consent of each nominee to serve as a director if so elected.

Number of Directors; Filling of Vacancies

The Certificate of Incorporation and Bylaws provide that newly created
directorships resulting from any increase in the authorized number of directors
(or any vacancy) may be filled by a vote of a majority of directors then in
office. Accordingly, the Board may be able to prevent any stockholder from
obtaining majority representation on the Board of Directors by increasing the
size of the board and filling the newly created directorships with its own
nominees.

Amendments to the Bylaws

The Certificate of Incorporation provides that the affirmative vote of the
holders of at least 80.0% in voting power of all the shares of the Company
entitled to vote generally in the election of directors, voting together as a
single class, shall be required in order for the stockholders to alter, amend or
repeal any provision of the Bylaws which is to the same effect as provisions
contained in the Certificate of Incorporation relating to (i) the

45
<PAGE> 46

amendment of the Bylaws, (ii) the filling of director vacancies and (iii)
calling and taking actions at meetings of stockholders.

Amendments to the Certificate of Incorporation

Certificate of Incorporation requires the affirmative vote of the holders
of at least 80.0% in voting power of all the shares of the Company entitled to
vote generally in the election of directors, voting together as a single class,
to alter, amend or repeal provisions of the Certificate of Incorporation
relating to (i) the amendment of the Certificate of Incorporation and/or the
Bylaws, (ii) the filling of director vacancies and (iii) calling and taking
actions at meetings of stockholders.

INDEMNIFICATION AND LIMITATION OF LIABILITY FOR DIRECTORS AND OFFICERS

The Company's Bylaws provide that the Company may indemnify directors and
officers to the fullest extent permitted by the laws of the State of Delaware.
The Company has entered into indemnification agreements with its directors
creating certain indemnification obligations on the Company's part in favor of
the directors and, as permitted by applicable law, these indemnification
agreements clarify and expand the circumstances under which a director will be
indemnified. The Certificate of Incorporation also provides that a director of
the Company shall not be liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except to the
extent such exemption from liability or limitation thereof is not permitted
under the General Corporation Law of the State of Delaware as the same exists or
may hereafter be amended.

The indemnification rights conferred by the Certificate of Incorporation of
the Company are not exclusive of any other right to which a person seeking
indemnification may otherwise be entitled. The Company will also provide
liability insurance for the directors and officers for certain losses arising
from claims or charges made against them while acting in their capacities as
directors or officers.

The effect of such indemnification arrangements may be to exempt or limit
the liability of such directors to the Company or its stockholders for monetary
damages for breach of fiduciary duty to the Company, except to the extent such
exemption or limitation is not permitted under applicable law.

TRANSFER AGENT

The transfer agent and registrar of the Company's Common Stock is State
Street Bank and Trust Company.

SHARES ELIGIBLE FOR FUTURE SALE

Upon the consummation of the Offering, the Company will have 6,899,936
shares of Common Stock outstanding. Of such shares the 2,300,000 shares offered
hereby will be freely tradeable by persons other than affiliates of the Company,
without restriction under the Securities Act of 1933, as amended (the
"Securities Act"). As defined in Rule 144, an "affiliate" of an issuer is a
person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such issuer.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an "affiliate" as that term is defined
above, who has paid for shares is entitled, beginning one year from the later of
the date of acquisition of the shares from the Company or from an affiliate of
the Company, to sell within any three-month period up to that number of shares
that does not exceed the greater of 1.0% of the then outstanding shares or the
average weekly trading volume of the then outstanding shares during the four
calendar weeks preceding each such sale. A person (or persons whose shares are
aggregated) who is not deemed an affiliate of the Company and who has paid for
his shares is entitled, beginning two years from the later of the date of the
acquisition from the Company or from an affiliate of the Company, to sell such
shares under Rule 144(k) without regard to the volume limitations described
above. Affiliates continue to be subject to such volume limitations after the
two year holding period.

The Company, its officers and directors and certain of its other current
stockholders, who collectively hold 4,599,936 shares of Common Stock, have
agreed that they will not dispose of any shares of Common Stock, or

46
<PAGE> 47

any securities convertible or exchangeable for shares of Common Stock, for a
period of 180 days after the date of the Underwriting Agreement without the
written consent of Oppenheimer & Co., Inc., on behalf of the Representatives.
See "Underwriting." Upon expiration of such 180 day period, an aggregate of
228,288 shares will become eligible for sale without restriction pursuant to
Rule 144(k) under the Securities Act.

Following the effectives of the Registration Statement filed in connection
with the Offering, the Company intends to file a registration statement on Form
S-8 under the Securities Act to register 850,000 shares of Common Stock issuable
upon the exercise of stock options granted under the Option Plans. Shares of
Common Stock issued upon the exercise of stock options after the effective date
of such registration statement generally will be available for sale in the open
market. Immediately following the Offering, however, no options to purchase
Common Stock will be exercisable under the Option Plans.

47
<PAGE> 48

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among the Company, the Selling Stockholder and
Oppenheimer & Co., Inc., and A.G. Edwards & Sons, Inc., as representatives (the
"Representatives") of the underwriters of the Offering (the "Underwriters"), the
Company and the Selling Stockholder have agreed to sell to the Underwriters, and
the Underwriters have severally agreed to purchase from the Company and the
Selling Stockholder, the number of shares of Common Stock set forth opposite
their names below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------ ---------
<S> <C>
Oppenheimer & Co., Inc...................................... 750,000
A.G. Edwards & Sons, Inc.................................... 750,000
Robert W. Baird & Co. Incorporated.......................... 50,000
William Blair & Company, L.L.C.............................. 50,000
J.C. Bradford & Co.......................................... 50,000
EVEREN Securities, Inc...................................... 50,000
First of Michigan Corporation............................... 50,000
Furman Selz LLC............................................. 50,000
Legg Mason Wood Walker, Incorporated........................ 50,000
McDonald & Company Securities, Inc.......................... 50,000
Paribas Corporation......................................... 50,000
Pennsylvania Merchant Group Ltd............................. 50,000
Piper Jaffray Inc........................................... 50,000
Raymond James & Associates, Inc............................. 50,000
The Robinson-Humphrey Company, Inc.......................... 50,000
Scott & Stringfellow, Inc................................... 50,000
Tucker Anthony Incorporated................................. 50,000
Wheat, First Securities, Inc................................ 50,000
---------
Total............................................. 2,300,000
=========
</TABLE>

The Underwriters propose to offer the Common Stock directly to the public
at the public offering price set forth on the cover page of this Prospectus, and
at such price less a concession not in excess of $.35 per share of Common Stock
to certain securities dealers, of which a concession not in excess of $.10 per
share of Common Stock may be reallowed to certain other securities dealers.
After the Offering, the offering price and other selling terms may be changed by
the Underwriters.

In order to facilitate the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may over-allot in connection with
the Offering, creating a short position in the Common Stock for their own
account. In addition, to cover over-allotments or to stabilize the price of the
Common Stock, the Underwriters may bid for and purchase, shares of Common Stock
in the open market. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an underwriter or a dealer for distributing the Common
Stock in the Offering, if the syndicate repurchases previously distributed
Common Stock in transactions to cover syndicate short provisions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.

The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligations is such that they are committed to purchase and pay for all of the
above shares of Common Stock if any are purchased.

The Company has granted an option to the Underwriters execercisable within
45 days after the date of this Prospectus, to purchase from the Company up to an
aggregate of 345,000 additional shares of Common Stock, to

48
<PAGE> 49

cover over-allotments, if any, at the initial public offering price less the
underwriting discount set forth on the cover pages of this Prospectus. If the
Underwriters exercise their over-allotment option to purchase any of the
additional 345,000 shares of Common Stock, each of the Underwriters has
severally agreed, subject to certain conditions, to purchase approximately the
same percentage as the number of shares of Common Stock to be purchased by each
of them bears to the 2,300,000 shares of Common Stock offered hereby. The
Company will be obligated, pursuant to the over-allotment option, to sell Common
Stock to the Underwriters to the extent such over-allotment option is exercised.

The Company and each of its officers and directors and certain stockholders
have agreed that without the consent of Oppenheimer & Co., Inc., on behalf of
the Representatives, they will not, for a period of 180 days after the date of
the Underwriting Agreement (i) offer, pledge, sell, distribute, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
(ii) enter into any swap or similar agreement that transfers, in whole or in
part, the economic risk of ownership of the Common Stock, subject to certain
limited exceptions, including the sale by the Company and the Selling
Stockholder of shares of Common Stock in the Offering. The Company also may
grant options, restricted stock, stock appreciation rights or other units of
stock-based incentive compensation under the JLM LTIP.

The Company, the Selling Stockholder and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.

The Representatives do not intend to confirm sales of the Common Stock to
accounts over which they exercise discretionary authority.

Prior to the Offering, there has been no public market for the Common
Stock. There can be no assurance that any active trading market will develop for
the Common Stock or as to the price at which the Common Stock may trade in the
public market from time to time subsequent to the offering made hereby. The
initial price to the public for shares of Common Stock offered hereby will be
negotiated between the Company and the Representatives. Among the factors to be
considered in determining the initial price to the public are (i) the history of
and prospects for the industry in which the Company competes, (ii) the ability
of the Company's management, (iii) the past and present operations of the
Company, (iv) the historical results of operations of the Company, (v) the
prospects for future earnings and business potential of the Company, (vi) the
general condition of the securities markets at the time of the Offering, (vii)
the recent market prices of securities of generally comparable companies, (viii)
the market capitalizations and stages of development of other companies which
the Company and Representatives believe to be comparable to the Company and (ix)
other factors deemed relevant.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis,
Professional Association, Tampa, Florida, and for the Underwriters by Rogers &
Wells, New York, New York.

EXPERTS

The Consolidated Financial Statements of JLM and the Statement of Revenues
and Direct Costs of the Blue Island, Illinois, location of BTL Specialty Resins
Corp. included in this Prospectus and the Registration Statement have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports appearing herein, and are included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (together with all
amendments, exhibits and schedules, the "Registration Statement") under the
Securities Act with respect to the shares of Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the

49
<PAGE> 50

Company, reference is hereby made to the Registration Statement. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and in each such instance reference is
made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. As a result of the Offering, the Company will become subject to
the informational requirements of the Exchange Act, and in accordance therewith
will file reports, proxy statements and other information with the Commission.
The Registration Statement, as well as all periodic reports and other
information to be filed by the Company pursuant to the Exchange Act, may be
inspected without charge and copied upon payment of fees prescribed by the
Commission at the public reference facilities maintained by the Commission in
Room 1024, 450 Fifth Street NW, Washington, D.C. 20549, and at the Commission's
regional offices located at Seven World Trade Center, 7th Floor, New York, New
York 10048 and Citicorp Center, 500 Madison Street, Suite 1400, Chicago,
Illinois 60661. The Commission maintains a worldwide web site at
(http:/www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.

The Company intends to furnish its stockholders with annual reports
containing consolidated audited financial statements which have been certified
by its independent public accountant, and quarterly reports containing unaudited
summary consolidated financial information for each of the first three quarters
of each fiscal year.

50
<PAGE> 51

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS OF JLM INDUSTRIES, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets -- December 31, 1995 and 1996
and (Unaudited) March 31, 1997............................ F-3
Consolidated Statements of Income -- Years Ended December
31, 1994, 1995 and 1996 and (Unaudited) Three Months Ended
March 31, 1996 and 1997................................... F-4
Consolidated Statements of Changes in Stockholders'
Equity -- Years Ended December 31, 1994, 1995 and 1996 and
(Unaudited) Three Months Ended March 31, 1997............. F-5
Consolidated Statements of Cash Flows -- Years Ended
December 31, 1994, 1995 and 1996 and (Unaudited) Three
Months Ended March 31, 1996 and 1997...................... F-6
Notes to Consolidated Financial Statements.................. F-7

CONSOLIDATED SUPPLEMENTAL SCHEDULE
Independent Auditors' Report................................ F-23
Supplemental Schedule....................................... F-24
</TABLE>

STATEMENT OF REVENUES AND DIRECT COSTS OF THE BLUE ISLAND, ILLINOIS LOCATION OF
BTL SPECIALTY RESINS CORP.

<TABLE>
<S> <C>
Independent Auditors' Report................................ F-25
Statement of Revenues and Direct Costs for the Period From
April 1, 1995 through June 7, 1995........................ F-26
Notes to Statement of Revenues and Direct Costs............. F-27
</TABLE>

F-1
<PAGE> 52

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying consolidated balance sheets of JLM
Industries, Inc. and subsidiaries (the "Company") as of December 31, 1995 and
1996, and the related consolidated statements of income, changes in
stockholders' equity and of cash flows for each of the three years in the period
ended December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated 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 consolidated financial position of JLM Industries,
Inc. and subsidiaries as of December 31, 1995 and 1996 and the consolidated
results of their operations and their consolidated cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.

DELOITTE & TOUCHE LLP

Tampa, Florida
February 19, 1997
(July 3, 1997 as to Note 18)

F-2
<PAGE> 53

JLM INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996 AND (UNAUDITED) MARCH 31, 1997

<TABLE>
<CAPTION>
PRO FORMA
MARCH 31, MARCH 31,
1995 1996 1997 1997
----------- ----------- ------------ -----------
(UNAUDITED)
(UNAUDITED) (NOTE 19)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................ $ 4,710,483 $ 4,792,473 $ 5,829,482 $ 5,679,482
Accounts receivable:
Trade................................. 29,514,825 25,721,911 44,078,475
Other................................. 3,234,256 2,769,232 3,533,148 3,283,148
Inventories.............................. 14,193,219 13,283,576 14,615,456
Prepaid expenses and other current
assets................................ 1,925,022 3,699,913 3,754,210
Assets held for sale..................... 2,626,594 1,924,394 1,866,746
----------- ----------- ------------
Total current assets............. 56,204,399 52,191,499 73,677,517
Other investments.......................... 1,876,118 1,881,066 1,935,535
Note receivable from Olefins Terminal
Corporation.............................. 2,752,356 2,320,313 2,406,797
Property and equipment -- net.............. 24,711,397 29,368,360 29,206,372
Other assets -- net........................ 953,681 1,530,565 1,519,139
----------- ----------- ------------
Total assets..................... $86,497,951 $87,291,803 $108,745,360
=========== =========== ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses.... $50,929,882 $39,590,106 $ 51,692,849
Current portion of long-term debt........ 3,044,064 3,962,385 4,696,652 4,729,985
Loans payable............................ 2,132,079 8,366,520 17,578,930
Income taxes payable..................... 352,461 33,322 513,605
Deferred revenue......................... 20,400 300,475 20,000
----------- ----------- ------------
Total current liabilities........ 56,478,886 52,252,808 74,502,036
Long-term debt, less current portion....... 17,018,214 17,808,872 15,420,991 16,737,658
Deferred income taxes...................... 1,195,131 2,538,980 2,826,487
Loan payable to stockholder................ 1,009,960 905,148 905,148
Minority interest.......................... 55,699 137,802 146,470
Other liabilities.......................... 220,688 203,761 208,901
----------- ----------- ------------
Total liabilities................ 75,978,578 73,847,371 94,010,033
----------- ----------- ------------
Commitments and Contingencies (Note 12)
Stockholders' Equity:
Preferred stock -- authorized 5,000,000
shares, issued and outstanding 0
shares................................ -- -- --
Common stock -- $.01 par value,
authorized 30,000,000 shares, issued
and outstanding 5,011,200 shares...... 50,112 50,112 50,112
Additional paid-in capital............... 489,888 489,888 489,888
Retained earnings........................ 10,002,182 13,467,898 14,869,776 13,269,776
Foreign currency translation
adjustment............................ (22,809) (41,266) (152,249)
----------- ----------- ------------
10,519,373 13,966,632 15,257,527
Less treasury stock at cost -- 267,264
shares................................ -- (522,200) (522,200)
----------- ----------- ------------
Total stockholders' equity....... 10,519,373 13,444,432 14,735,327
----------- ----------- ------------
Total liabilities and
stockholders' equity........... $86,497,951 $87,291,803 $108,745,360
=========== =========== ============
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 54

JLM INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1996 AND 1997

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues.............................. $218,569,604 $289,370,945 $236,521,183 $57,861,298 $80,517,783
Cost of sales......................... 206,906,758 265,460,931 208,281,667 51,171,163 73,671,162
------------ ------------ ------------ ----------- -----------
Gross profit........................ 11,662,846 23,910,014 28,239,516 6,690,135 6,846,621
Selling, general and administrative
expenses............................ 9,280,280 15,175,815 17,237,736 4,015,203 3,917,669
------------ ------------ ------------ ----------- -----------
Operating income.................... 2,382,566 8,734,199 11,001,780 2,674,932 2,928,952
Interest expense -- net............... (369,899) (1,757,326) (2,814,667) (641,486) (627,910)
Other income -- net................... 453,025 152,320 196,896 64,082 40,769
Foreign currency exchange (loss)
gain -- net......................... (319,303) (1,074,974) (527,652) (799,015) 62,908
------------ ------------ ------------ ----------- -----------
Income before minority interest and
income taxes...................... 2,146,389 6,054,219 7,856,357 1,298,513 2,404,719
Minority interest in (income) loss of
subsidiaries........................ (63,821) 4,670 (82,103) (7,362) (8,668)
------------ ------------ ------------ ----------- -----------
Income from continuing operations
before income taxes, discontinued
operations and extraordinary
item.............................. 2,082,568 6,058,889 7,774,254 1,291,151 2,396,051
------------ ------------ ------------ ----------- -----------
Income tax provision:
Current............................. 924,218 2,093,004 2,073,586 598,745 548,289
Deferred............................ 48,982 336,793 1,343,849 370,705 287,507
------------ ------------ ------------ ----------- -----------
Total income tax provision.......... 973,200 2,429,797 3,417,435 969,450 835,796
------------ ------------ ------------ ----------- -----------
Income from continuing operations
before discontinued operations and
extraordinary item................ 1,109,368 3,629,092 4,356,819 321,701 1,560,255
Discontinued operations:
Loss from operations of discontinued
operations (net of income tax
benefit of $214,115, $217,155,
$279,312, $54,847 and $56,452,
respectively)..................... (229,060) (325,728) (419,215) (82,270) (84,679)
Loss on disposal of discontinued
operations (net of income tax
benefit of $81,049 and $3,620,
respectively)..................... -- (121,574) (9,050) -- --
------------ ------------ ------------ ----------- -----------
Income before extraordinary item.... 880,308 3,181,790 3,928,554 239,431 1,475,576
Extraordinary gain on share of
partnership forgiveness of debt (net
of income tax expense of
$103,620)........................... 169,064 -- -- -- --
------------ ------------ ------------ ----------- -----------
Net income.......................... $ 1,049,372 $ 3,181,790 $ 3,928,554 $ 239,431 $ 1,475,576
============ ============ ============ =========== ===========
Income per share:
Income from continuing operations
before discontinued operations and
extraordinary item.................. $ 0.22 $ 0.72 $ 0.89 $ 0.06 $ 0.33
Discontinued operations............... (0.05) (0.09) (0.09) (0.02) (0.02)
Extraordinary item.................... 0.03 -- -- -- --
------------ ------------ ------------ ----------- -----------
Net income per share.................. $ 0.20 $ 0.63 $ 0.80 $ 0.04 $ 0.31
============ ============ ============ =========== ===========
Weighted average number of shares
outstanding......................... 5,011,200 5,011,200 4,877,568 5,011,200 4,743,936
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 55

JLM INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1997

<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY
PREFERRED COMMON PAID-IN RETAINED TRANSLATION TREASURY STOCKHOLDERS'
STOCK STOCK CAPITAL EARNINGS ADJUSTMENT STOCK EQUITY
--------- ------- ---------- ----------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1994............... $ -- $50,112 $489,888 $ 5,971,664 $ (49,320) $ -- $ 6,462,344
Stockholder
distributions...... -- -- -- (53,564) -- -- (53,564)
Net income........... -- -- -- 1,049,372 -- -- 1,049,372
Currency translation
adjustment......... -- -- -- -- (47,166) -- (47,166)
----- ------- -------- ----------- --------- --------- -----------
Balance at December
31, 1994........... -- 50,112 489,888 6,967,472 (96,486) -- 7,410,986
Stockholder
distributions...... -- -- -- (147,080) -- -- (147,080)
Net income........... -- -- -- 3,181,790 -- -- 3,181,790
Currency translation
adjustment......... -- -- -- -- 73,677 -- 73,677
----- ------- -------- ----------- --------- --------- -----------
Balance at December
31, 1995........... -- 50,112 489,888 10,002,182 (22,809) -- 10,519,373
Stockholder
distributions...... -- -- -- (462,838) -- -- (462,838)
Net income........... -- -- -- 3,928,554 -- -- 3,928,554
Purchase of treasury
stock.............. -- -- -- -- -- (522,200) (522,200)
Currency translation
adjustment......... -- -- -- -- (18,457) -- (18,457)
----- ------- -------- ----------- --------- --------- -----------
Balance at December
31, 1996........... -- 50,112 489,888 13,467,898 (41,266) (522,200) 13,444,432
Stockholder
distributions
(unaudited)........ -- -- -- (73,698) -- -- (73,698)
Net income
(unaudited)........ -- -- -- 1,475,576 -- -- 1,475,576
Currency translation
adjustment
(unaudited)........ -- -- -- -- (110,983) -- (110,983)
----- ------- -------- ----------- --------- --------- -----------
Balance at March 31,
1997 (unaudited)... $ -- $50,112 $489,888 $14,869,776 $(152,249) $(522,200) $14,735,327
===== ======= ======== =========== ========= ========= ===========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 56

JLM INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1996 AND 1997

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1994 1995 1996 1996 1997
----------- ----------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................. $ 1,049,372 $ 3,181,790 $ 3,928,554 $ 239,430 $ 1,475,576
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Deferred income taxes................................. 48,982 336,793 1,343,849 370,705 287,507
Minority interest in income (loss) of subsidiaries.... 63,821 (172,950) 82,103 7,362 8,668
Loss on disposal of assets............................ 155,625 177,942 379,067 -- --
Loss on disposal of discontinued operations -- net.... -- 121,574 9,050 -- --
Extraordinary gain on share of partnership forgiveness
of debt -- net...................................... (169,064) -- -- -- --
Depreciation and amortization......................... 572,226 1,522,282 2,524,187 531,993 678,042
Loss from partnerships................................ 48,000 41,697 48,000 12,000 12,000
(Income) loss from investment in Olefins Terminal
Corporation -- net.................................. (205,155) (82,500) 55,169 47,941 6,924
Noncash management fee and interest income from
Olefins Terminal Corporation........................ (338,768) (297,706) (334,578) (67,324) (86,484)
Allowance for doubtful accounts....................... -- 44,537 383,662 -- --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable.......... (9,649,574) (3,720,019) 4,081,252 414,325 (19,120,480)
(Increase) decrease in inventories.................. (15,267) (6,703,960) 510,593 6,290,069 (1,331,880)
Decrease (increase) in prepaid expenses and other
current assets.................................... 2,138 (397,739) (1,774,891) (979,902) (54,297)
(Increase) decrease in income tax receivable........ (499,954) 396,334 -- -- --
(Increase) decrease in assets held for sale......... -- (2,476,594) 1,101,250 (360,973) --
Increase in other assets............................ (275,686) (33,351) (906,048) -- (77,443)
Increase (decrease) in accounts payable and accrued
expenses.......................................... 15,374,780 10,642,880 (11,345,206) (11,001,784) 12,102,743
Increase (decrease) in income taxes payable......... 52,738 78,740 (322,759) 162,855 480,283
Increase (decrease) in deferred revenue............. -- 20,400 280,075 786,600 (280,475)
(Decrease) increase in other liabilities............ (150,000) 65,627 (16,927) (18,121) 5,148
----------- ----------- ------------ ------------ ------------
Net cash provided by (used in) operating
activities....................................... 6,064,214 2,745,777 26,402 (3,564,824) (5,894,168)
----------- ----------- ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets held for sale.............. 1,034,000 -- 786,535 -- 1,090
Proceeds from sale of Polychem Ltd., Inc................ -- 882,337 -- -- --
Capital expenditures.................................... (1,220,974) (2,319,890) (7,346,658) (1,444,976) (370,633)
Capitalized acquisition costs........................... (127,700) -- -- -- --
Purchase of net assets, net of cash acquired............ (900,000) (3,223,084) -- -- --
Other investments....................................... (3,481) -- (70,672) (35,310) (73,393)
----------- ----------- ------------ ------------ ------------
Net cash used in investing activities............. (1,218,155) (4,660,637) (6,630,795) (1,480,286) (442,936)
----------- ----------- ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) proceeds of loans payable.............. (1,952,917) 797,140 6,234,441 4,854,812 9,212,410
Proceeds from long-term debt............................ 3,188,962 7,699,613 4,279,312 2,616,308 50,333
Repayments of long-term debt............................ (1,640,676) (9,223,825) (3,241,263) (2,813,836) (1,703,949)
Proceeds from shareholder loan.......................... 605,000 402,380 -- -- --
Distributions to shareholders........................... (53,564) (147,080) (462,838) (140,337) (73,698)
(Repayments) borrowings of shareholder loan............. (61,769) 2,580 (104,812) (105,945) --
----------- ----------- ------------ ------------ ------------
Net cash provided by (used in) financing activities... 85,036 (469,192) 6,704,840 4,411,002 7,485,096
----------- ----------- ------------ ------------ ------------
Effect of foreign exchange rates on cash................. (47,166) 73,677 (18,457) (826) (110,983)
----------- ----------- ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents......................................... 4,883,929 (2,310,375) 81,990 (634,934) 1,037,009
Cash and cash equivalents, beginning of period........... 2,136,929 7,020,858 4,710,483 4,710,483 4,792,473
----------- ----------- ------------ ------------ ------------
Cash and cash equivalents, end of period................. $ 7,020,858 $ 4,710,483 $ 4,792,473 $ 4,075,549 $ 5,829,482
=========== =========== ============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.............................................. $ 592,987 $ 2,000,005 $ 2,928,671 $ 554,035 $ 698,251
=========== =========== ============ ============ ============
Income taxes.......................................... $ 1,129,356 $ 1,131,857 $ 2,113,975 $ 252,217 $ 65,826
=========== =========== ============ ============ ============
Noncash investing activities:
Capital lease obligations............................. $ 149,331 $ 121,135 $ 106,391 $ -- $ 50,335
=========== =========== ============ ============ ============
Noncash financing activities:
Treasury stock purchased by satisfaction of accounts
receivable.......................................... $ -- $ -- $ 522,200 $ -- $ --
=========== =========== ============ ============ ============
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE> 57

JLM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND THE
(UNAUDITED) THREE MONTHS ENDED MARCH 31, 1996 AND 1997

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. JLM is headquartered in Tampa, Florida.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation -- The consolidated financial statements
include the accounts of JLM and its wholly-owned subsidiaries. JLM's principal
operating subsidiaries are JLM Marketing, Inc., JLM Chemicals, Inc., JLM
Terminals, Inc., JLM International, Inc., Olefins Marketing, Inc., JLM
Industries (Europe) B.V., JLM Chemicals Canada, Inc., JLM Industries de
Venezuela, C.A., Aurora Chemicals, Inc. ("Aurora") and Phoenix Tank Car
Corporation ("Phoenix"). All material intercompany balances and transactions
have been eliminated in consolidation. Included in the 1994 consolidation is the
80% owned subsidiary, Olefins Marketing Inc. and the 95% owned subsidiary,
Polychem Ltd., Inc. ("Polychem"). In 1995, a former employee assigned his 20%
minority interest in Olefins Marketing Inc. to JLM in conjunction with his
severance agreement. Pursuant to the severance agreement, the former employee
received severance compensation and indemnification against future liabilities
arising out of the ownership of such shares. The resulting decrease in minority
interest of $177,620 was included in other income. Also, in 1995 Polychem was
sold (see Note 16). Included in the 1995, 1996 and 1997 consolidation is the 55%
owned subsidiary, JLM Europe (B.V.).

Unaudited Interim Information -- In the opinion of management, all
adjustments necessary for a fair presentation of the unaudited interim
consolidated financial statements as of March 31, 1997 and for the three months
ended March 31, 1996 and 1997 have been included. Such adjustments consist only
of normal recurring items. Interim results are not necessarily indicative of
results for a full year.

Consolidated Statements of Cash Flows -- Cash equivalents consist of highly
liquid investments with original maturities from purchase date of three months
or less.

Inventories -- Inventories are valued at the lower of cost or market. The
costs of JLM Marketing, Inc.'s inventories are determined on the last-in,
first-out (LIFO) method. As of December 31, 1996 and March 31, 1997, JLM
Marketing Inc.'s inventory was approximately 22% and 33%, respectively, of total
inventory. The costs of remaining inventories are determined on the first-in,
first out (FIFO) method. In the year ended December 31, 1996, there was a
decrease of LIFO inventory quantities and an increase in the price index,
resulting in a decrease in the LIFO reserve. In the three months ended March 31,
1997, there was an increase of LIFO inventory quantities with no change in the
price index, resulting in no change in the LIFO reserve. If LIFO inventories
were valued at current costs, operating income would have been $1,006,000,
$623,000, $(13,000), $0 and $0 higher (lower) than those reported for the years
ended December 31, 1994, 1995 and 1996, and the three months ended March 31,
1996 and 1997, respectively. The excess of replacement cost over the value of
inventories based upon the LIFO method was $1,629,000, and $1,616,000 as of
December 31, 1995 and 1996. There was no change in the excess of replacement
cost over the value of inventories based upon the LIFO method from December 31,
1996 to March 31, 1997.

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, 1995 and 1996 and March 31, 1997, JLM owed approximately
$1,360,000, $1,378,000 and $755,700, respectively, under these contracts which
are included in inventory.

In 1996, JLM entered into a fixed price financial hedging contract in order
to minimize its exposure in the three months ended March 31, 1997 to the
fluctuations in the price of propylene, one of the two key raw materials used by
JLM. The purpose of the financial hedging contract was to secure an acceptable
purchase price for JLM's propylene requirements in the three months ended March
31, 1997. The contract was for 13 million pounds of

F-7
<PAGE> 58

JLM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

propylene at $.1225 per pound. In accordance with Statement of Financial
Accounting Standards ("SFAS") No. 80, Accounting for Futures Contracts, gains
and losses for such contracts are recognized as an adjustment to cost of sales
at the time the finished goods are sold by JLM. During the three months ended
March 31, 1997, JLM purchased and sold substantially all of the 13 million
pounds of propylene covered under the hedging contract. As a result, in the
three months ended March 31, 1997, JLM recognized a gain of $492,970, which
reduced cost of sales for this period. JLM can be exposed to losses in
connection with such contracts, generally the amount by which the fixed hedged
price on the contract is above the market price for such chemicals at the time
of purchase.

Prepaid Expenses and Other Current Assets -- Prepaid expenses and other
current assets include marketable securities and stock issuance costs.
Marketable securities are stated at cost, adjusted for unrealized gains or
losses, in accordance with SFAS No. 115, Accounting for Certain Investments in
Debt and Equity Securities. Stock issuance costs relate to JLM's proposed
initial public offering. Upon successful completion of the offering, such costs
will be netted against the proceeds. In the event that the offering is not
successful, JLM will expense these costs.

Assets Held for Sale -- Assets held for sale are stated at cost which
approximates market value.

Other Investments -- Other investments include JLM's investments in
partnerships and the investment in Olefins Terminal Corporation ("OTC"). JLM
accounts for certain of its investments in partnerships on an equity basis, and
accordingly, records its respective share of profits and losses which are
allocated in accordance with the partnership agreements. Except for OTC, JLM has
no obligation to make any contributions beyond its initial investments. See
further discussion of OTC in Note 5.

Property and Equipment -- Property and equipment are stated at cost.
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>
Building.................................................... 31.5 years
Vehicles and airplanes...................................... 2 to 10 years
Equipment................................................... 5 to 10 years
Furniture and fixtures...................................... 3 to 5 years
Leasehold improvements...................................... Life of lease
</TABLE>

Other Assets -- As of December 31, 1995 and 1996 and March 31, 1997, other
assets consist primarily of the cash surrender values of life insurance policies
held on key employees and deferred acquisition costs. In addition to the above,
as of December 31, 1996 and March 31, 1997 other assets included license fees,
certain development costs and advances on consulting and non-competition
agreements (see Note 12). These costs are amortized on a straight-line basis
from 2 to 10 years. Accumulated amortization on other assets as of December 31,
1995 and 1996 and March 31, 1997 was $208,434, $578,029 and $666,898,
respectively.

Deferred Revenue -- JLM accounts for amounts received from customers in
advance of shipments of inventory as deferred revenue.

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 on deferred taxes
of a tax rate change is recognized in income in the period that the rate change
is enacted.

Aurora and Phoenix have elected to be treated as S corporations for federal
income tax purposes, with profits and losses generally reportable by the
stockholders in their individual income tax returns. Any tax liability related
to either Aurora or Phoenix prior to their acquisition by JLM will be the
responsibility of their shareholders.

F-8
<PAGE> 59

JLM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Accordingly, JLM has recorded no tax liability for such periods. On a pro forma
basis the tax liability for Aurora and Phoenix would be immaterial.

Translation of Foreign Currency Financial Statements -- Assets and
liabilities of foreign subsidiaries are translated at period-end exchange rates.
Results of operations are translated at weighted average rates for the period.
The effects of exchange rate changes in translating foreign financial statements
are presented as a separate component of stockholders' equity, except for the
Venezuelan subsidiary which operates in a hyperinflationary economy for which
the translation gains and losses are included in net income currently.

Foreign Exchange Contracts -- JLM enters into foreign exchange contracts as
a hedge against foreign accounts payable and receivable. Market value gains and
losses are recognized, and the resulting credit or debit offsets foreign
exchange gains or losses on these payables and receivables. At December 31, 1996
and March 31, 1997, JLM had no open foreign exchange contracts

Stock-Based Compensation -- In October 1995, the Financial Accounting
Standards Board issued SFAS No. 123, Accounting for Stock-Based Compensation
("SFAS No. 123"), which is effective for fiscal years beginning after December
15, 1995. Under SFAS No. 123, JLM may elect to recognize stock-based
compensation expense based on the fair value of the awards or continue to
account for stock-based compensation under Accounting Principles Board Opinion
No. 25 Accounting for Stock Issued to Employees and disclose in the financial
statements the effects of SFAS No. 123 as if the recognition provisions were
adopted. JLM does not currently have a stock-based compensation plan.

Stockholders' Equity -- Effective May 22, 1997, the Company amended its
Certificate of Incorporation and increased the number of shares of common stock
authorized to 30,000,000 and changed the par value from no par to $.01 per
share. Additionally, this amendment provided for 5,000,000 authorized shares of
a new class of preferred stock. All share and per share amounts in the
accompanying consolidated financial statements have been retroactively adjusted
for the amendment.

Income per Share -- The income per share is based on the weighted average
number of common shares outstanding during each period adjusted for actual
shares issued during the period.

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.

Use of Estimates -- The preparation of the consolidated financial
statements, in conformity with generally accepted accounting principles,
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the 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 approximates the
fair value because of their short-term nature. The fair value of long-term debt
approximates its carrying value.

Concentration of Credit Risk -- Financial instruments which potentially
subject JLM 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 JLM's
customer base and their dispersion

F-9
<PAGE> 60

JLM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

across many different geographies. JLM performs ongoing credit evaluations of
its customers' financial condition and requires collateral, such as letters of
credit, or business insurance in certain circumstances.

3. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
MARCH 31,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Land and building............................... $ 6,090,504 $ 6,168,690 $ 6,168,690
Vehicles........................................ 1,040,360 378,894 361,893
Airplane........................................ -- 2,090,071 2,090,071
Equipment....................................... 17,896,185 22,493,073 22,781,904
Leased equipment -- capital lease............... 1,121,135 1,188,122 1,188,122
Furniture and fixtures.......................... 849,545 850,708 859,492
Leasehold improvements.......................... 172,701 318,066 450,186
----------- ----------- -----------
27,170,430 33,487,624 33,900,358
Less accumulated depreciation and
amortization.................................. (2,459,033) (4,119,264) (4,693,986)
----------- ----------- -----------
$24,711,397 $29,368,360 $29,206,372
=========== =========== ===========
</TABLE>

Depreciation and amortization expense for property and equipment was
$452,075, $1,335,500, $2,241,584, $499,741 and $574,722 for the years ended
December 31, 1994, 1995 and 1996 and the three months ended March 31, 1996 and
1997, respectively. The leased equipment consists of several capital leases,
which expire through June 1999, with a $189,318 option to purchase at the end of
the lease period. Future minimum capital lease payments for the years 1997
through 2001 are $266,563, $281,534, $331,767, $3,448, and $1,253, respectively.
Interest payments on such capital leases for the years 1997 through 2000 are
$72,232, $47,020, $13,670 and $440, respectively.

4. INVESTMENTS IN JOINT VENTURES AND PARTNERSHIPS

Investments in partnerships at December 31, 1995 and 1996 and March 31,
1997 consist principally of the following:

Phenol Plant Partnership -- JLM holds a 2% interest in the Mt. Vernon
Phenol Plant Partnership via its wholly owned subsidiary JLM (Ind), Inc., an
Indiana Corporation. The plant converts cumene into phenol which is marketed
under contractual agreements to GE Plastics. JLM has a long-term exclusive
agreement through 2002, and thereafter 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 of ownership,
JLM accounts for this investment using the cost method. As of December 31, 1995
and 1996 and March 31, 1997, the amount of this investment was approximately
$492,000. No contributions or distributions were made in 1995, 1996 or 1997.

Real Estate Partnerships -- JLM holds a 99% interest in Len-Kel Realty
Limited Partnership ("Len-Kel"). During 1987 and 1988, Len-Kel acquired 28 units
in a development project converting historical buildings into residential use.
The units are currently operated as rental property. JLM is a limited partner in
Len-Kel and cannot exert control over the partnership. Accordingly, the
investment is carried on the equity method. As of December 31, 1995 and 1996 and
March 31, 1997, the amount of this investment was approximately $957,000,
$909,000 and $897,000, respectively.

JLM holds other investments through limited partnerships. The amount of
these partnerships totaled approximately $133,000, $47,000 and $47,000 at
December 31, 1995 and 1996 and March 31, 1997, respectively.

F-10
<PAGE> 61

JLM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During the years ended December 31, 1994, 1995 and 1996 and the three
months ended March 31, 1996 and 1997, JLM recorded income (losses) from
partnership investments of $224,684, ($41,697), $(48,000), $(12,000) and
$(12,000), respectively. The 1994 recorded income of $224,684 is comprised of a
loss of $48,000 from partnership operating activities and an extraordinary gain
of $272,684 from partnership forgiveness of debt. Income tax expense of $103,620
has been allocated to the extraordinary gain, for an extraordinary gain net of
applicable taxes of $169,064. Losses do not require cash contributions by JLM.
As a limited partner, JLM has no obligation to make any contributions beyond its
initial investment.

5. OLEFINS TERMINAL CORPORATION

During 1991, JLM formed a 100% owned subsidiary, OTC, to design and
construct a polymer grade propylene export facility in Bayport, Texas. On August
15, 1991, OTC issued common stock and common stock warrants to other investors
which reduced JLM's ownership to 49% (32% on a fully diluted basis).
Construction was completed in July 1992. JLM accounts for its investment in OTC
on the equity basis. During the years ended December 31, 1994, 1995 and 1996 and
the three months ended March 31, 1996 and 1997, income (loss) from the
investment in OTC of $205,155, $82,500, $(55,169), $(47,941) and $(15,641),
respectively, was recorded. As of December 31, 1995 and 1996 and March 31, 1997,
the amount of this investment was approximately $297,000, $280,000 and $295,000,
respectively.

JLM provides OTC with financial and management services for a fee of 2.5%
on certain sales, as defined. JLM recorded management fees of $188,768,
$147,706, $139,321, $29,824 and $0 for the years ended December 31, 1994, 1995
and 1996 and the three months ended March 31, 1996 and 1997, respectively, under
this agreement. No payment of management fees had been made to JLM as of March
31, 1997 as these amounts were subordinated to OTC's senior indebtedness. As of
December 31, 1996 and March 31, 1997, JLM has recorded approximately $729,000 in
management fees due from OTC in accounts receivable-other.

As of December 31, 1995 and 1996 and March 31, 1997, JLM has a non-current
note receivable, including accrued interest, from OTC in the amount of
$2,752,356, $2,320,313 and $2,406,797, respectively. The note bears interest at
the rate of 10% per annum.

JLM is under contract through August 1997 to ship 5,000 metric tons per
month through OTC's terminal. JLM pays $113,200 each month for these terminaling
privileges. If JLM ships less than 5,000 metric tons in a month, the difference
can be carried over to subsequent months. These carryover rights, however,
expire at the end of each subsequent contract year. JLM recorded no prepaid
terminaling fees as of December 31, 1996 as there was no guarantee that such
amounts could be utilized by JLM in 1997.

See Note 18 regarding the OTC refinancing of their long-term debt.

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

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997
------------ ------------ -----------
<S> <C> <C> <C>
ASSETS:
Current....................................... $ 2,204,142 $ 2,154,737 $ 3,131,227
Noncurrent.................................... 14,697,600 12,095,787 11,355,334
----------- ----------- -----------
$16,901,742 $14,250,524 $14,486,561
=========== =========== ===========
LIABILITIES:
Current liabilities........................... $ 5,397,487 $ 4,292,927 $ 4,184,299
Noncurrent liabilities........................ 10,611,211 9,230,060 9,553,953
Stockholders' equity.......................... 893,044 727,537 748,309
----------- ----------- -----------
$16,901,742 $14,250,524 $14,486,561
=========== =========== ===========
</TABLE>

F-11
<PAGE> 62

JLM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

OTC had net income (loss) of $621,682, $250,035, $(165,507), $(145,276) and
$20,772 for the years ended December 31, 1994, 1995 and 1996 and the three
months ended March 31, 1996 and 1997, respectively.

6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997
------------ ------------ -----------
<S> <C> <C> <C>
Accounts payable................................ $48,116,089 $35,886,152 $45,843,678
Accrued expenses................................ 2,813,793 3,703,954 5,849,171
----------- ----------- -----------
$50,929,882 $39,590,106 $51,692,849
=========== =========== ===========
</TABLE>

7. LOANS PAYABLE

Loans payable consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997
------------ ------------ -----------
<S> <C> <C> <C>
Secured revolving loan agreements expiring in June 1997
and April 2000. The loan agreement expiring in June
1997 has been extended to August 31, 1997. Interest is
payable monthly at prime and prime plus 1.75% (prime
was 8.25% and 8.5% as of December 31, 1996 and March
31, 1997, respectively)................................ $ -- $5,915,336 $ 8,410,854
Secured loans payable associated with Venezuelan
operations due on demand. Interest is payable monthly
at 37.2% and between 21% -- 23% as of December 31, 1996
and March 31, 1997, respectively....................... 29,354 1,013,655 1,087,507
Secured loans payable due on demand. Interest is payable
monthly at rates between 8.3% -- 10.0% as of December
31, 1996 and March 31, 1997............................ 2,102,725 1,437,529 8,080,569
---------- ---------- -----------
Total loans payable............................ $2,132,079 $8,366,520 $17,578,930
========== ========== ===========
</TABLE>

The loans payable are collateralized by virtually all of JLM's inventory
and accounts receivable. As of December 31, 1996 and March 31, 1997, JLM had a
total of approximately $52,800,000 of credit facilities available with various
financial institutions of which approximately $38,213,917 and $20,968,524,
respectively, was unused. Additionally, as of December 31, 1996 and March 31,
1997, JLM had guaranteed vendor letters of credit in the amount of $6,219,563
and $14,252,546, respectively.

JLM's loans payable also contain certain financial covenants which must be
met with respect to, among other things, tangible net worth, cash flow coverage,
earnings and capital expenditures. JLM was not in compliance the tangible net
worth and the cash flow coverage covenants as of December 31, 1996, and
accordingly, received waivers with respect to such covenants from its financial
institutions. There can be no assurance that JLM will not require additional
waivers in the future or, if required, that the financial institutions will
grant them. Additionally, certain provisions of the loans payable to which JLM
is subject restrict JLM's ability to pay dividends.

F-12
<PAGE> 63

JLM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997
------------ ------------ -----------
<S> <C> <C> <C>
Secured term loan payable due in equal quarterly
installments through June 2002. Interest is
payable quarterly at LIBOR plus 3.5% (LIBOR
was 5.375% and 5.688% as of December 31, 1996
and March 31, 1997, respectively)............. $14,864,177 $12,507,619 $11,293,334
Secured term loan payable due in June 2002.
Interest is payable monthly at 8.875% and
9.063% as of December 31, 1996 and March 31,
1997, respectively............................ -- 2,300,000 2,200,000
Mortgage payable due in equal monthly
installments through June 2004. Interest is
payable monthly at 9.59% as of December 31,
1996 and March 31, 1997....................... 1,800,587 1,703,694 1,679,471
Secured loans payable due in 2006. Interest is
payable at rates between 8%-9.68% as of
December 31, 1996 and March 31, 1997.......... 113,108 1,838,215 1,808,929
Secured loan payable due in variable monthly
installments through June 2000. Interest is
payable monthly at 10.9% as of December 31,
1996 and March 31, 1997....................... 1,129,167 929,167 866,667
Secured loan payable due in 1998, payable in a
$74,000 installment in 1997 and the balance
due in 1998. Interest is payable monthly at
the prime rate plus 1% (prime was 8.25% and
8.50% as of December 31, 1996 and March 31,
1997, respectively)........................... 1,052,400 978,400 904,400
Secured installment loan payable due in
September 1999, payable in quarterly
installments of $50,000. Interest is payable
quarterly at the prime rate plus 2% (prime was
8.25% and 8.50% as of December 31, 1996 and
March 31, 1997, respectively)................. -- 564,339 464,339
Secured loans payable due in equal monthly
installments through 1999. Interest is payable
monthly at rates between 10.13%-13.47% as of
December 31, 1996 and March 31, 1997.......... 93,821 65,258 99,894
Capital lease obligations due in equal monthly
installments through April 2001. Interest is
payable monthly at rates between 9.93%-16.99%
as of December 31, 1996 and March 31, 1997.... $ 1,009,018 $ 884,565 $ 800,610
----------- ----------- -----------
Total................................. 20,062,278 21,771,257 20,117,643
Less current portion.................. (3,044,064) (3,962,385) (4,696,652)
----------- ----------- -----------
Long-term portion..................... $17,018,214 $17,808,872 $15,420,991
=========== =========== ===========

</TABLE>

F-13
<PAGE> 64

JLM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

<TABLE>
<S> <C>
1997........................................................ $ 3,962,385
1998........................................................ 4,724,810
1999........................................................ 3,802,765
2000........................................................ 3,147,303
2001........................................................ 3,320,577
Thereafter.................................................. 2,813,417
-----------
Total............................................. 21,771,257
Less current portion.............................. (3,962,385)
-----------
Long-term portion................................. $17,808,872
===========
</TABLE>

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

9. LOAN PAYABLE TO STOCKHOLDER AND RELATED PARTY TRANSACTIONS

JLM has loans payable to its majority stockholder in the amount of
$1,009,960, $905,148 and $905,148 at December 31, 1995 and 1996 and March 31,
1997, respectively. The loan payable as of December 31, 1996 and March 31, 1997
bears interest at the prime rate, which was 8.25%, and matures on January 1,
1999. In 1995 and 1996, JLM purchased $479,400 and $318,600 of chemical products
from a joint venture partnership owned 50.0% by Kemlink, L.L.C., a Delaware
limited Liability company of which the majority stockholder is a 97.0% owner.
All purchases in 1995 and 1996 were at prices comparable to those paid to
unrelated parties. In addition, during 1995 and 1996, JLM sold $1,588,900 and
$1,260,000, respectively, of chemical products to Kemlink J.V. JLM did not
purchase from or sell any chemicals to Kemlink J.V. in 1994. Effective December
31, 1996, the Company ceased doing business with Kemlink J.V., which was
terminated by its partners, and Kemlink, L.L.C.

10. INCOME TAXES

JLM's current and deferred income tax provision consists of the following:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- -------------------
1994 1995 1996 1996 1997
-------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Current:
Federal........................ $366,645 $1,333,030 $1,350,848 $330,438 $336,630
State and local................ 48,826 212,427 182,528 45,215 59,305
Foreign........................ 398,252 249,343 257,278 168,245 95,902
Deferred......................... 48,982 336,793 1,343,849 370,705 287,507
-------- ---------- ---------- -------- --------
$862,705 $2,131,593 $3,134,503 $914,603 $779,344
======== ========== ========== ======== ========
</TABLE>

The income tax provision reflected above includes the income tax
expense/benefit associated with discontinued operations and extraordinary gain.

F-14
<PAGE> 65

JLM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The significant components of the deferred tax assets and liabilities are
as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Deferred tax assets:
Foreign net operating loss................. $ 77,000 $ 415,000 $ 430,000
Minimum tax credit carryforward............ -- 283,400 283,400
----------- ----------- -----------
77,000 698,400 713,400
Valuation allowance........................ (77,000) (415,000) (430,000)
----------- ----------- -----------
Total deferred tax assets.......... -- 283,400 283,400
----------- ----------- -----------
Deferred tax liabilities:
Property................................... (289,451) (1,953,133) (2,252,040)
Investment in partnership.................. (866,571) (817,974) (806,574)
Other...................................... (39,109) (51,273) (51,273)
----------- ----------- -----------
Total deferred tax liabilities..... (1,195,131) (2,822,380) (3,109,887)
----------- ----------- -----------
Net deferred tax liability......... $(1,195,131) $(2,538,980) $(2,826,487)
=========== =========== ===========
</TABLE>

The net change in the total valuation allowance for the year ended December
31, 1996 and the three months ended March 31, 1997 was an increase of $338,000
and $15,000, respectively. The valuation allowance represents the deferred tax
assets booked for foreign net operating losses generated from Venezuelan
operations.

At December 31, 1996 and March 31, 1997, there are foreign net operating
losses of approximately $1,220,000 and $1,270,000, respectively, available to
offset future foreign taxable income. These net operating losses expire in
various years ending in 2000.

JLM's effective income tax rate differs from the statutory federal income
tax rate of 34% as follows:

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
----------------------- --------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Statutory federal income tax rate.......... 34.00% 34.00% 34.00% 34.00% 34.00%
State and local income taxes............... 2.55 4.00 2.58 4.92 2.74
Foreign income taxes, net of federal income
tax benefit.............................. 6.55 2.12 3.80 17.53 2.42
Valuation allowance -- foreign net
operating loss........................... -- -- 4.79 38.10 .67
Foreign Sales Corporation benefit.......... -- -- (2.05) (1.69) (4.45)
Other...................................... 2.02 0.00 1.25 6.61 .62
----- ----- ----- ----- -----
Effective income tax rate.................. 45.12% 40.12% 44.37% 99.47% 36.00%
===== ===== ===== ===== =====
</TABLE>

Undistributed earnings (accumulated deficit) of non-U.S. subsidiaries
included in consolidated retained earnings amounted to $542,794, $(284,069) and
$(256,467) as of December 31, 1995 and 1996 and March 31, 1997, respectively.
JLM intends to continue to indefinitely reinvest these earnings, 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. In the event any earnings
of non-U.S. subsidiaries are repatriated, JLM will provide for U.S. income taxes
upon repatriation of such earnings which will be offset by applicable foreign
tax credits, subject to certain limitations.

F-15
<PAGE> 66

JLM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. TREASURY STOCK

Chemical Trading, S.L. ("Trading"), JLM's Spanish distributor, was indebted
to JLM pursuant to an arrangement in which JLM pays the distributor's operating
expenses. JLM treats the difference between such payments made by JLM and the
amount of commissions and other amounts due to the distributor in respect of his
activities on behalf of JLM as a loan by JLM to the distributor. Such
indebtedness was carried on an open account basis and in July 1996, $522,200 was
repaid without interest through the sale to JLM at fair market value of 48
shares (267,264 after giving effect to the stock split in July 1997) of common
stock owned by Trading's owner. See Note 18 regarding the stock split and
retirement of treasury stock. Included in accounts receivable-other as of
December 31, 1995 and 1996 and March 31, 1997 are amounts owed to JLM by Trading
in the amount of $568,633, $322,350 and $420,944, respectively.

12. COMMITMENTS AND CONTINGENCIES

JLM is obligated under operating leases with remaining noncancelable terms
of a year or more for office equipment and automobiles. The approximate minimum
annual rentals under these leases at December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997........................................................ $ 829,306
1998........................................................ 592,128
1999........................................................ 371,174
2000........................................................ 186,583
2001........................................................ 33,370
----------
Total minimum lease payments...................... $2,012,561
==========
</TABLE>

Total rental expenses for all operating leases approximated $1,533,000,
$1,605,300, $1,875,000, $469,000 and $286,000 for the years ended December 31,
1994, 1995 and 1996 and the three months ended March 31, 1996 and 1997,
respectively.

JLM is also obligated under a license agreement at December 31, 1996 to
make future minimum payments as follows:

<TABLE>
<S> <C>
1997........................................................ $115,750
1998........................................................ 115,750
1999........................................................ 115,650
--------
Total............................................. $347,150
========
</TABLE>

The Internal Revenue Service (the "IRS") has concluded a federal income tax
examination of JLM's 1988, 1989 and 1990 tax years and has proposed adjustments
for such years. JLM has filed a protest of the proposed adjustments and is
awaiting a determination by the IRS with respect to the JLM protest. JLM
believes that the outcome of the examination will not have a material adverse
effect on the financial condition or results of operations of JLM.

The IRS has also commenced a federal income tax examination for JLM's 1992,
1993 an 1994 tax years. The examination is in its final stages, and the IRS has
not asserted any income tax deficiencies or definitively indicated all the
issues that will be involved in the examination. The issues that have been
raised by the IRS thus far do not indicate that any impact on the taxable years
at issue would be material. However, there can be no assurance that additional
issues impacting future taxable years will not be raised and resolved adversely
to JLM during the course of the examination or subsequent proceedings.

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

F-16
<PAGE> 67

JLM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

environmental counsel for three of their facilities: the JLM Chemicals, Inc.
Blue Island, Illinois facility, the JLM Terminals, Inc. facility and the
Polychem facility. Regarding the JLM Chemicals, Inc. facility, JLM believes that
the low levels of various organic compounds detected in soil and groundwater at
the facility are the result of historical use of the facility prior to its
acquisition by JLM (see Note 15) 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,
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. The previous owner is currently implementing a state approved Remedial
Action Plan ("RAP"). The Company is not subject to any requirements under the
RAP. Regarding the Polychem facility, levels of organic compounds slightly in
excess of regulatory thresholds were detected in the ground water. JLM has been
addressing the problem and recent analytical results show that the levels of
contaminants have decreased to acceptable levels. Accordingly, JLM has requested
that state authorities permit closure of the remediation of the Polychem
facility. JLM does not believe that a material amount of funds will be required
to complete remediation at any site. Accordingly, the Company has not accrued
any amounts related to the remediation of any sites.

On December 12, 1996, JLM entered into consulting and non-competition
agreements with two independent third parties. The terms of the consulting
agreements are from January 3, 1997 through December 31, 2003 and JLM is
committed to pay $130,000 per year, payable semi-annually beginning January 1,
1997 through December 31, 2002 and $200,000 on January 1, 2003. The terms of the
non-competition agreements will be from January 1, 1997 through December 31,
2006 and JLM is committed to pay $100,000 per year, payable semi-annually from
July 1, 1997 through December 31, 2002 and $270,000 on January 1, 2003. As of
December 31, 1996 and March 31, 1997, JLM has advanced $470,000 to the third
parties and, in conjunction with entering into the consulting and
non-competition agreements, these amounts shall be satisfied by setting them off
against the amounts owed by the third parties to JLM. As of December 31, 1996
and March 31, 1997, the $240,000 advance has been recorded in other assets-net
and the remaining $230,000 advance is recorded in prepaid expenses and other
current assets in the accompanying consolidated balance sheet. On October 24,
1996, the third parties signed promissory notes aggregating $470,000 and bearing
no interest for the monies that had been advanced.

13. PROFIT-SHARING PLAN

JLM has a defined contribution profit-sharing plan covering substantially
all of its employees. Prior to July 1995, JLM was contributing an amount equal
to 50% of the contribution of eligible employees, limited to the lesser of 3% of
the employees' compensation or $1,000. Effective July 1995, JLM changed its
contribution amount from the above to 100% of the contribution of eligible
employees, limited to a maximum amount of 6% of the employees' compensation.
JLM's contribution rate is determined annually at the beginning of each plan
year. The costs for this plan were approximately $15,000, $130,000, $278,000,
$64,000 and $65,000 for the years ended December 31, 1994, 1995 and 1996 and the
three months ended March 31, 1996 and 1997, respectively.

Included in selling, general and administrative expenses are discretionary
profit-sharing bonuses paid to employees based on performance or formulas. The
bonuses of JLM were approximately $447,000, $326,000, $581,000, $150,000 and
$100,000 for the years ended December 31, 1994, 1995 and 1996, and the three
months ended March 31, 1996 and 1997, respectively.

14. POLYCHEM LTD., INC.

During 1994, JLM formed and held 95% ownership of a new subsidiary, JLM
Acquisition, Inc. On August 8, 1994, JLM Acquisition, Inc. purchased
substantially all the business assets of Polychem, a chemical dyes distributor
in Dalton, Georgia, for $900,000 in cash and a promissory note for $1,240,000
payable in semi-

F-17
<PAGE> 68

JLM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

annual installments over five years. The acquisition was accounted for as a
purchase transaction and, accordingly, the purchase price was allocated to the
assets on the basis of estimated fair market value on the date of purchase. The
excess of purchase price over the fair value of the tangible assets acquired was
$1,515,000. See Note 16 for discussions of the discontinued operations of
Polychem.

15. JLM CHEMICALS, INC.

During 1995, JLM formed a new wholly-owned subsidiary, JLM Chemicals, Inc.
On June 8, 1995, JLM Chemicals, Inc. purchased certain of the business assets
and assumed certain liabilities of BTL Specialty Resins, Corp., a phenol and
acetone producer located in Blue Island, Illinois. The acquisition has been
accounted for as a purchase transaction and, accordingly, the purchase price was
allocated to the assets and liabilities on the basis of estimated fair market
value on the date of purchase. The fair value of the assets and liabilities, at
the date of acquisition, recorded in conjunction with the transaction are
presented below:

<TABLE>
<S> <C>
Inventories................................................. $ 2,983,555
Prepaid expenses and other current assets................... 598,505
Property and equipment...................................... 18,583,845
Other assets................................................ 325,000
Accounts payable and accrued expenses....................... (1,146,686)
Debt........................................................ (18,121,135)
------------
Net assets acquired, excluding cash............... 3,223,084
Cash........................................................ 1,776,916
------------
Net assets acquired............................... $ 5,000,000
============
</TABLE>

16. DISCONTINUED OPERATIONS

During 1995 and 1996, JLM's Board of Directors adopted formal plans to sell
the non-core business segments, consisting of Polychem, MAC Enterprises, Inc.
("Enterprises") and JLM Stables, Inc. ("Stables") (collectively the "Segments"),
as part of JLM's strategic focus on marketing and manufacturing of commodity and
specialty chemicals. The Segments have been accounted for as discontinued
operations in the accompanying consolidated financial statements, which requires
the plan of disposal to be carried out within one year.

On October 26, 1995, JLM completed the sale of substantially all the
operating assets of Polychem for cash of $882,237 and the assumption of related
liabilities. The purchaser has an irrevocable option for a period of three years
to buy the Polychem real property for $1; however, Polychem has retained title
to this real property. In conjunction with the sale of Polychem, JLM guaranteed
the payment of the note payable that was assumed by the purchaser of Polychem.

In December 1996, JLM entered into a plan to sell the assets of both
Enterprises and Stables. Based on management's review of the assumptions used in
determining the estimated gain or loss from the disposals of Enterprises and
Stables, JLM recorded a provision of $9,050, net of income taxes, for the loss
on disposal during 1996. The Company does not allocate any corporate overhead to
either Enterprises or Stables.

F-18
<PAGE> 69

JLM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The operating results of the discontinued operations, which includes
interest expense associated with Enterprises and Stables, are summarized as
follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------- ---------------------
1994 1995 1996 1996 1997
---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Sales.......................... $1,927,003 $4,004,431 $ 244,909 $ 81,773 $ 65,853
Loss from discontinued
operations before income
taxes........................ (443,175) (745,506) (711,197) (137,117) (141,131)
Income tax benefit............. 214,115 298,204 282,932 54,847 56,452
Net loss....................... (229,060) (447,302) (428,265) (82,270) (84,679)
</TABLE>

The net liabilities of discontinued operations are summarized as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------ ----------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Current assets................................. $3,542,884 $2,227,636 $2,257,197
Property and equipment, net.................... 330,062 4,735 2,706
Current liabilities............................ 3,705,882 2,712,711 3,733,189
Net liabilities of discontinued operations..... 936,333 1,384,741 1,473,286
</TABLE>

Current assets of discontinued operations as of December 31, 1995 and 1996
and March 31, 1997 includes assets held for sale of $2,246,594, $1,817,394 and
$1,759,746, respectively.

17. SEGMENT REPORTING

JLM's business consists of a marketing and a manufacturing segment. JLM's
manufacturing segment includes the operations of JLM Chemicals, Inc. and the
sale of acetone manufactured at the Mount Vernon Phenol Plant. JLM's marketing
segment includes its distribution, storage and terminaling 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, Inc. The marketing segment also includes
an assumed allocation of revenues, costs of goods sold and expenses associated
with the sale of products sourced from the Mt. Vernon Phenol Plant, which
allocation is determined on a basis consistent with the commission for sale of
products manufactured at JLM Chemicals, Inc.

F-19
<PAGE> 70

JLM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following schedule presents information about JLM's continuing
operations in these segments and geographic locations for:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------------------ -----------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
INDUSTRY SEGMENT
Revenues:
Marketing.......... $193,835,542 $229,504,506 $176,274,489 $ 39,983,334 $ 64,186,446
Manufacturing...... 24,734,062 59,866,439 60,246,694 17,877,964 16,331,337
------------ ------------ ------------ ------------ ------------
$218,569,604 $289,370,945 $236,521,183 $ 57,861,298 $ 80,517,783
============ ============ ============ ============ ============
Operating Income:
Marketing.......... $ 4,045,205 $ 5,186,059 $ 5,011,196 $ 958,652 $ 1,367,147
Manufacturing...... 620,667 6,164,010 7,586,128 2,185,771 2,137,056
Corporate.......... (2,283,306) (2,615,870) (1,595,544) (469,491) (575,251)
------------ ------------ ------------ ------------ ------------
$ 2,382,566 $ 8,734,199 $ 11,001,780 $ 2,674,932 $ 2,928,952
============ ============ ============ ============ ============
Capital Expenditures:
Marketing.......... $ 1,220,974 $ 1,390,899 $ 592,422 $ 369,906 $ 211,986
Manufacturing...... -- 928,991 4,398,480 1,075,070 197,306
Corporate.......... -- -- 2,355,756 -- --
------------ ------------ ------------ ------------ ------------
$ 1,220,974 $ 2,319,890 $ 7,346,658 $ 1,444,976 $ 409,292
============ ============ ============ ============ ============
Depreciation and
Amortization:
Marketing.......... $ 518,244 $ 839,890 $ 794,031 $ 177,625 $ 183,062
Manufacturing...... -- 667,745 1,652,809 352,294 421,933
Corporate.......... 53,982 14,647 77,347 2,074 73,047
------------ ------------ ------------ ------------ ------------
$ 572,226 $ 1,522,282 $ 2,524,187 $ 531,993 $ 678,042
============ ============ ============ ============ ============
Identifiable Assets:
Marketing.......... $ 46,233,226 $ 49,865,521 $ 43,303,972 $ 64,752,440
Manufacturing...... 2,773,350 28,092,298 31,871,092 30,982,300
Corporate.......... 6,024,597 8,540,132 12,116,739 13,010,620
------------ ------------ ------------ ------------
$ 55,031,173 $ 86,497,951 $ 87,291,803 $108,745,360
============ ============ ============ ============
</TABLE>

F-20
<PAGE> 71

JLM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------------------ -----------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
GEOGRAPHIC
LOCATION
Revenues:
United States...... $206,962,650 $244,864,754 $191,382,570 $ 44,403,519 $ 66,296,031
Venezuela.......... 4,440,499 14,491,443 10,068,395 2,499,996 1,917,923
Holland............ -- 21,248,933 29,201,763 9,163,401 11,219,960
Other nations...... 7,166,455 8,765,815 5,868,455 1,794,382 1,083,869
------------ ------------ ------------ ------------ ------------
$218,569,604 $289,370,945 $236,521,183 $ 57,861,298 $ 80,517,783
============ ============ ============ ============ ============
Operating Income
(Loss):
United States...... $ 3,452,127 $ 9,324,264 $ 12,204,002 $ 3,114,977 $ 3,390,214
Venezuela.......... 922,201 1,290,877 (414,554) (189,797) (69,001)
Holland............ -- 117,666 571,046 70,378 83,682
Other nations...... 291,544 617,261 236,830 148,865 99,308
Corporate.......... (2,283,306) (2,615,869) (1,595,544) (469,491) (575,251)
------------ ------------ ------------ ------------ ------------
$ 2,382,566 $ 8,734,199 $ 11,001,780 $ 2,674,932 $ 2,928,952
============ ============ ============ ============ ============
Identifiable Assets:
United States...... $ 52,758,912 $ 74,896,376 $ 73,683,268 $ 68,792,586 $ 89,391,327
Venezuela.......... 1,069,341 4,233,208 6,112,667 6,176,157 5,570,842
Holland............ -- 5,374,039 6,169,386 4,905,991 12,582,697
Other nations...... 1,202,920 1,994,328 1,326,482 1,580,439 1,200,494
------------ ------------ ------------ ------------ ------------
$ 55,031,173 $ 86,497,951 $ 87,291,803 $ 81,455,173 $108,745,360
============ ============ ============ ============ ============
</TABLE>

18. SUBSEQUENT EVENTS

In April 1997, JLM entered into an agreement to purchase 25% of the common
stock of S. K. Chemicals Asia Pte. Ltd. ("S.K. Chemicals"), an international
petrochemical distributor, for $500,000 cash. As of December 31, 1996 and March
31, 1997, JLM has made a refundable deposit of $50,000 to S. K. Chemicals and
has recorded this deposit in other investments in the accompanying consolidated
balance sheet. In addition, in April 1997, JLM entered into an agreement to
purchase for $500,000 a 12.7% interest in S.K. Chemical Trading Pte ("S.K.
Trading"), a joint venture that intends to construct a petrochemical plant in
Vietnam. The agreements for S.K. Chemicals and S.K. Trading, collectively,
require up to an additional $500,000 over the following four years given certain
earnings, as defined.

On May 1, 1997, JLM entered into a three-year cancelable exclusive
marketing agreement with one of its suppliers. JLM has agreed to purchase 100%
of the supplier's excess styrene after the supplier has serviced its internal
needs, the needs of its affiliate businesses and those of its existing customer
base. If JLM purchases less than the agreed upon amounts, JLM shall pay a
percentage of the difference between the price contracted for and any lesser
price at which the supplier sells the unpurchased product.

On May 7, 1997, OTC refinanced their existing long-term debt and replaced
it with an unsecured term loan (the "Term Loan"). The proceeds from the Term
Loan will, among other items, be used to repay all of OTC's existing long-term
debt, to purchase all outstanding stock warrants, and to pay for management fees
outstanding to JLM. After the purchase of the stock warrants is complete, OTC
will be owned 50% by JLM and will continue to be accounted for on the equity
basis. In conjunction with the refinancing, JLM's terminaling contract was
canceled and a new, one year terminaling arrangement, which is effective January
1, 1997, was entered into. The

F-21
<PAGE> 72

JLM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

new terminaling contract, which has no minimum throughput requirements, requires
JLM to pay for throughput at $16 per metric ton during the one year term and it
cancels the carryover rights from the old terminaling contract. Also in
conjunction with the refinancing, JLM's non-current note receivable, including
accrued interest, was converted to an investment in OTC and JLM's account
payable to OTC was forgiven and accounted for as a reduction in JLM's investment
in OTC. The amount of the account payable to OTC as of December 31, 1996 and
March 31, 1997 was approximately $2,000,000 and $2,500,000, respectively. In
addition, JLM has pledged its ownership interest in OTC to the other 50% owner
as security for certain contingent payment obligations required to be made
equally by JLM and the other 50% owner of OTC, if OTC has inadequate operating
funds.

On May 9, 1997, the Company completed the sale of the majority of the
assets of Enterprises for $1,075,000 cash. The sale resulted in an immaterial
loss and the proceeds of the sale were used to repay the entire outstanding loan
balance of Enterprises of approximately $905,000.

On May 22, 1997, the Company entered into agreements to purchase the 45%
minority interest of its European subsidiary, JLM (Europe) B.V. The Company will
purchase such minority interest based upon the net book value of the subsidiary
as of April 30, 1997. The purchase price of the minority interest is $98,000
cash.

In June 1997, JLM closed the purchase of all of the outstanding stock of
Aurora and Phoenix for $1,750,000 from the stockholders of these two companies.
The purchase price represented the fair market value of Aurora and Phoenix.
Aurora markets certain solvent chemicals, primarily phenol, benzene and acetone
and is owned 80% by the majority stockholder of JLM and 20% by an unrelated
third party. Phoenix leases railcars for use in the transportation of bulk
liquid chemicals and is owned 100% by the majority stockholder of JLM. The
transaction described above has been accounted for as a combination of entities
under common control using historical amounts and all consolidated financial
statements presented herein have been restated to give retroactive effect to the
"as if pooling" transaction referred to above for the applicable periods
presented. As such, $150,000 of accounts receivable -- trade of Aurora and
Phoenix are included in the consolidated balance sheet as of March 31, 1997. The
excess of the purchase price paid to the majority stockholder of JLM and the net
book value of the assets and liabilities of Aurora and Phoenix is approximately
$1,600,000 and will be accounted for as a deemed distribution by JLM. During the
years ended 1994, 1995 and 1996, and the three months ended March 31, 1996 and
1997, Aurora and Phoenix distributed $53,564, $147,080, $462,838, $140,337 and
$73,698 respectively, of its retained earnings to its stockholders.

On July 3, 1997, JLM approved the retirement of the shares of common stock
held in treasury by the Company and a stock split resulting in an exchange of 1
share for 5,568 shares of common stock issued and outstanding. All share and per
share amounts have been retroactively adjusted for this split.

19. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET INFORMATION

The unaudited pro forma consolidated balance sheet information as of March
31, 1997 reflects the purchase of both Aurora and Phoenix, as described in Note
18, as if the transactions had occurred on March 31, 1997. The excess of the
purchase price over the net book values of both Aurora and Phoenix of $1,600,000
is treated as a deemed distribution to the former stockholders of Aurora and
Phoenix and therefore a reduction in retained earnings in the unaudited pro
forma consolidated balance sheet information. The unaudited pro forma
consolidated balance sheet information also includes the payment of $150,000 to
the minority stockholder of Aurora, a reduction of "accounts
receivable -- other" of $250,000 to reflect the set off of advances made to the
majority stockholder of JLM and the issuance of notes payables to the former
stockholders of Aurora and Phoenix of $1,350,000. The unaudited pro forma
consolidated balance sheet information reflects only those balances that are
impacted by the pro forma presentation of the transactions described above.

F-22
<PAGE> 73

INDEPENDENT AUDITORS' REPORT

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

We have audited the consolidated balance sheets of JLM Industries, Inc. and
subsidiaries (the "Company") as of December 31, 1995 and 1996 and the related
consolidated statements of income, changes in stockholders' equity and of cash
flows for each of the three years in the period ended December 31, 1996 and have
issued our report thereon dated February 19, 1997 (July 3, 1997 as to Note 18)
(included in this Form S-1). Our audits also included the accompanying
consolidated financial statement schedule. This consolidated financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. 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 herein.

DELOITTE & TOUCHE LLP

Tampa, Florida
February 19, 1997
(July 3, 1997 as to Note 18)

F-23
<PAGE> 74

JLM INDUSTRIES, INC. AND SUBSIDIARIES

SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1996 AND 1997

<TABLE>
<CAPTION>
BALANCE AT
BEGINNING CHARGED TO BALANCE AT
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS END OF YEAR
----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1994:
Accumulated amortization(2)................. $ 65,452 $ 82,245 $ -- $147,697
Allowance for doubtful accounts............. 25,661 -- -- --
Year Ended December 31, 1995:
Accumulated amortization(2)................. 147,697 104,925 (44,188)(1) 208,434
Allowance for doubtful accounts............. 25,661 44,637 -- 70,198
Year Ended December 31, 1996:
Accumulated amortization(2)................. 208,434 389,595 -- 578,029
Allowance for doubtful accounts............. 70,198 383,662 -- 453,660
(Unaudited) Three Months Ended March 31, 1996:
Accumulated amortization(2)................. 208,434 32,252 -- 240,686
Allowance for doubtful accounts............. 70,198 -- -- 70,198
(Unaudited) Three Months Ended March 31, 1997:
Accumulated amortization(2)................. 578,029 86,869 -- 566,898
Allowance for doubtful accounts............. 453,860 -- -- 453,860
</TABLE>

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

(1) Represents the disposal of the goodwill for Polychem Ltd., Inc. in October
1995.
(2) Represents accumulated amortization of goodwill, deferred acquisition costs,
license fees, certain development costs and advances on non-competition
agreements.

F-24
<PAGE> 75

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying statement of revenues and direct costs of
the Blue Island, Illinois, location of BTL Specialty Resins Corp. ("Blue
Island"), for the period from April 1, 1995 through June 7, 1995. The statement
of revenues and direct costs is the responsibility of Blue Island's management.
Our responsibility is to express an opinion on the statement of revenues and
direct costs based on our audit.

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

In our opinion, the statement of revenues and direct costs presents fairly,
in all material respects, the results of revenues and direct costs of Blue
Island for the period from April 1, 1995 through June 7, 1995 in conformity with
generally accepted accounting principles.

As more fully described in Note 2 to the statement of revenues and direct
costs, Blue Island has been operated as a location of BTL Specialty Resins Corp.
As a result, certain expense allocations have not been made in the accompanying
statement of revenues and direct costs.

DELOITTE & TOUCHE LLP

Tampa, Florida

January 29, 1997

F-25
<PAGE> 76

BLUE ISLAND, ILLINOIS
LOCATION OF BTL SPECIALTY RESINS CORP.

STATEMENT OF REVENUES AND DIRECT COSTS
FOR THE PERIOD FROM APRIL 1, 1995 THROUGH JUNE 7, 1995
(IN THOUSANDS)

<TABLE>
<S> <C>
Net sales................................................... $8,522
Cost of goods sold.......................................... 6,227
------
Gross profit.............................................. 2,295
Direct selling, general and administrative expenses......... 208
------
Excess of revenues over direct costs...................... $2,087
======
</TABLE>

See notes to statement of revenues and direct costs.

F-26
<PAGE> 77

BLUE ISLAND, ILLINOIS
LOCATION OF BTL SPECIALTY RESINS CORP.

NOTES TO STATEMENT OF REVENUES AND DIRECT COSTS
FOR THE PERIOD FROM APRIL 1, 1995 THROUGH JUNE 7, 1995
(IN THOUSANDS)

1. DESCRIPTION OF BUSINESS

On June 8, 1995, JLM Chemicals, Inc., a wholly-owned subsidiary of JLM
Industries, Inc., acquired substantially all of the business assets of the Blue
Island, Illinois location of BTL Specialty Resins Corp. ("Blue Island") for
$19,175. Blue Island is a manufacturer of phenol and acetone.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation -- The accompanying statement of revenues and direct
costs reflects the operations of Blue Island, operating as a location of BTL
Specialty Resins, Corp., and may not necessarily be indicative of the financial
results had Blue Island been operating as a separate entity. Allocations for
certain expenses such as interest, corporate overhead and income taxes have not
been made as Blue Island could not determine a reasonable methodology for
allocation and Blue Island believes that any allocation may not be indicative of
the actual costs incurred by Blue Island.

Plant and Equipment -- Provision is made for depreciation primarily on the
straight-line method based on estimates of useful lives ranging form 12 to 20
years. Leasehold improvements and capital leases are amortized over the life of
the respective lease. Depreciation and amortization expense was approximately
$386 for the period from April 1, 1995 through June 7, 1995.

Inventories -- Inventories are valued at the lower of cost (first-in,
first-out) or market.

Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of revenues and
direct costs during the reporting period. Actual operating results could differ
from those estimated.

Revenue Recognition -- Blue Island recognizes revenue when products are
shipped.

3. COMMITMENTS AND CONTINGENCIES

Blue Island leases certain machinery, equipment and facilities under
non-cancelable lease agreements which expire at various dates through 2000.
These leases generally contain renewal options and require Blue Island to pay
taxes, insurance, maintenance and other expenses in addition to the minimum base
rentals.

The following is a schedule by year of future minimum lease payments
required under operating leases that have non-cancelable terms in excess of one
year as of June 7, 1995:

Rental expense under operating leases was approximately $45 for the period
from April 1, 1995 through June 7, 1995.

F-27
<PAGE> 78

[PHOTO OF OLEFINS MARKETING JOINT VENTURE, BAYPORT, TEXAS]

[PHOTO RAIL CAR STORAGE AND TRANSPORTATION]
<PAGE> 79

======================================================

NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 12
Dividend Policy....................... 12
Capitalization........................ 13
Dilution.............................. 14
Selected Consolidated Financial
Data................................ 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 27
Management............................ 37
Certain Transactions.................. 40
Principal and Selling Stockholders.... 42
Description of Capital Stock.......... 42
Shares Eligible for Future Sale....... 46
Underwriting.......................... 48
Legal Matters......................... 49
Experts............................... 49
Additional Information................ 49
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

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

UNTIL AUGUST 18, 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

======================================================

2,300,000 SHARES

[JLM LOGO]

JLM INDUSTRIES, INC.

COMMON STOCK

-------------------------
PROSPECTUS
-------------------------

OPPENHEIMER & CO., INC.

A.G. EDWARDS & SONS, INC.

JULY 23, 1997

======================================================