<PAGE>   1

                                  FORM 10-K

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                      
         [X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

                 FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1997

                                      OR

       [  ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
              SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from                 to
                               ---------------    -----------------------------

Commission file number:   0-2572

                          STEEL CITY PRODUCTS, INC.
            (Exact name of registrant as specified in its charter)

        DELAWARE                                              55-0437067      
State or other jurisdiction of                             (I.R.S. Employer    
 incorporation or organization                            Identification No.)  

1001 SANTERRE DRIVE, GRAND PRAIRIE, TEXAS                       75050       
(Address of principal executive offices)                      (Zip Code)       

      Registrant's telephone number, including area code: (214) 660-4499

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

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

                                                 Name of each exchange on which 
        Title of each class                                registered
---------------------------------------          -------------------------------
COMMON STOCK, $0.01 PAR VALUE PER SHARE                       NONE 


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

      Indicate by check mark if disclosure of delinquent filers pursuant to 
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [ X ]

Aggregate market value at June 1, 1997 of the voting stock held by
non-affiliates of the registrant: $164,152

At June 1, 1997, the registrant had 3,238,061 shares of Common Stock
outstanding.

                     DOCUMENTS INCORPORATED BY REFERENCE

                                     None

<PAGE>   2

                                    PART I

ITEM 1.  BUSINESS

BACKGROUND OF STEEL CITY PRODUCTS, INC.

     Steel City Products, Inc. ("SCPI" or "the Company") was incorporated in
West Virginia in 1959, and in 1963 became known as Heck's, Inc. In 1969, the
"Steel City Products" automotive distribution business was acquired. The
Company was reincorporated in Delaware under the name Hallwood Industries
Incorporated in 1990, and in January 1993 the Company changed its name to Steel
City Products, Inc.

     For many years prior to 1990, Heck's, Inc. operated a Retail Division
consisting of a chain of discount department stores. In September 1990, all of
the assets of the Retail Division were sold to Retail Acquisition Corp.
("RAC").

     Continuing operations of SCPI comprise the distribution of automotive
parts and accessories under the name "Steel City Products". In 1996, SCPI
established a division to distribute non-food pet supplies.

Formation of Oakhurst Company, Inc.

     Oakhurst Company, Inc. ("Oakhurst") was formed as part of a merger
transaction in July 1991, in which SCPI became a majority-owned subsidiary of
Oakhurst. In accordance with the merger agreement, Oakhurst owns 10% of the
outstanding common stock of SCPI and all of the SCPI Series A Preferred Stock,
with the result that the aggregate fair market value of SCPI's common stock and
Series A Preferred Stock owned by Oakhurst is equal to approximately 90% of the
aggregate fair market value of all the issued and outstanding capital stock of
SCPI; consequently, Oakhurst owns 90% of the voting stock of SCPI.

     Pursuant to the merger, SCPI became a special, limited purpose subsidiary
that concentrates on its historical distribution business, while any future
growth and expansion opportunities are expected to be pursued by Oakhurst or
its subsidiaries. Because Oakhurst's ownership of SCPI is primarily in the form
of preferred stock, Oakhurst retains the value of SCPI, and Oakhurst's income
from SCPI is determined by the Series A Preferred stock dividend. Oakhurst's
ownership of SCPI facilitates the preservation and utilization of SCPI's and
Oakhurst's net operating tax loss carryforwards, which amount to approximately
$150 million.

OPERATIONS

     SCPI primarily distributes automotive accessories. These products include
functional and decorative car and truck accessories (such as floor mats, seat
covers, mirrors, running boards and lights), car care products (including waxes
and paints), chemicals (such as antifreeze, windshield washer fluid and motor
oil) and car repair and maintenance items (including spark plugs, windshield
wipers, and air and oil filters). In fiscal 1996, the product selection was
expanded to include selected "hard parts" such as brake rotors, and in fiscal
1997, SCPI introduced non-food pet supplies to its merchandise selection, and
opened a new division ("Wing-Tech") that distributes automotive "wings" or
spoilers. Although pet supplies are not typical of SCPI's historical
merchandise mix, management determined that the availability of existing
customers which sell both pet supplies and automotive accessories, combined
with SCPI's distribution expertise and infrastructure, offered an opportunity
for increased sales, but there can be no assurance that this will lead to new
sales. SCPI's operations have been conducted from the same facility in
Pittsburgh for about twenty-six years. In June 1997, the Wing-Tech division was
sold to the buyer of Oakhurst's Puma Products subsidiary.

     Certain of SCPI's business is performed on a service basis, which involves
visits by its sales personnel to customers' stores to count and re-order
merchandise; generally, these re-orders are transmitted electronically to
SCPI's offices in Pittsburgh and shipments are either made directly to each of
the customers' stores or pre-packed for onward shipment to stores by the
retailers' own distribution centers. Certain customers electronically transmit
their orders to SCPI's headquarters. Because many orders are generated
electronically and are shipped within a few days of receipt, the size of SCPI's
order backlog is not relevant to an understanding of the business. SCPI also
provides price ticketing and associated services to those of its customers who
request such services.




                                     -1-
<PAGE>   3


Sources of Supply

     SCPI acquires its merchandise from a large number of suppliers, none of
which accounts for more than 15% of its revenues. Many of the products sold by
SCPI carry nationally-advertised brand names, but because of the diversity and
number of suppliers and products carried, the business is not generally
dependent on the continued availability of individual products or continued
dealings with existing supply sources. From time to time, market or seasonal
conditions may affect the availability of certain merchandise, but not to the
extent that the Company believes would materially impact its business.

     Steel City generally carries in inventory only those products that its
customers have identified as necessary for their own merchandising needs, and
does not acquire significant quantities of other merchandise.

Seasonality

     SCPI's automotive business is seasonal, being slower in the early winter
months than at other times of the year. In anticipation of higher sales volume
in the spring and summer, SCPI carries higher automotive inventories, beginning
in February. As is customary in the automotive industry, many suppliers allow
extended payment terms for such inventory build-ups and in turn, SCPI grants
extended payment terms to many of its customers to facilitate their inventory
build-ups.

     SCPI's pet supply business is expected to experience somewhat different
seasonal trends from its automotive business, but the effect of this is not
expected to be material until this business develops.

     SCPI's needs for working capital are affected by these seasonal
fluctuations (see Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources").

Customer Base

     SCPI's customers include general merchandise retail chains, automotive
specialty stores, supermarket chains, drug stores, hardware stores, variety
stores and other automotive accessory distributors. Most customers are based in
the northeastern United States, although stores operated by some customers are
located outside the northeastern states. There are no foreign sales.

     SCPI's customers are continually affected by changes in the retail
environment, including the recent competitive pressures facing regional mass
merchandisers and the growing influence of national automotive specialty
chains. These have led to fluctuations in the level of business that SCPI
enjoys with individual customers. In recent years, SCPI has lost some
significant customers and has suffered reductions in business as certain
customers have closed stores in the face of competition, have been forced into
bankruptcy, or have reduced their automotive merchandise selection.
Furthermore, some customers have changed their buying practices to acquire
certain merchandise direct from manufacturers rather than through distributors
such as Steel City Products. In its efforts to offset these trends, SCPI has
added new customers, expanded its product offerings to certain customers,
enlarged the territory that it serves and introduced new categories of
products.

     An example of the changes discussed above is SCPI's loss in fiscal 1996 of
two of its largest customers: Jamesway Corporation ("Jamesway") filed for
bankruptcy in October 1995 and shortly thereafter closed all its stores, and
Forest City Auto Parts, Inc. ("Forest City") informed management in November
1995 of its decision to change distributors (see table below).

     Although SCPI added several new customers during fiscal 1995, 1996 and
1997, and expanded sales to certain existing customers, it has not yet obtained
enough new business to offset all of the lost business and return sales to
historical levels. Management continually attempts to identify new customers,
but there can be no assurance that further customers will be secured. However,
based on present information, management anticipates that SCPI's sales in
fiscal 1998 will be more than those in fiscal 1997, primarily due to new
automotive business and pet supply customers added during the latter part of
fiscal 1997.



                                     -2-
<PAGE>   4


     The following table shows sales to each of SCPI's customers that
individually accounted for more than 10% of sales during any of the latest
three fiscal years (dollars in thousands):

<TABLE>          
<CAPTION>        
                     Fiscal Year Ended        Fiscal Year Ended         Fiscal Year Ended
                     February 28, 1997        February 29, 1996         February 28, 1995
                    -------------------      -------------------      ----------------------
                               % of                      % of                       % of
                    Sales   Total Sales      Sales   Total Sales      Sales      Total Sales
                    ----    -----------      -----   -----------      ------     -----------
<S>                <C>          <C>           <C>         <C>          <C>           <C>
Ames               $2,290       13%          $  780        3%             --         --
Forest City          --         --           $4,641       19%          $6,046        22%
Jamesway             --         --           $3,975       16%          $4,465        16%
</TABLE>         

     Jamesway filed for Chapter 11 bankruptcy protection in July 1993, emerged
in January 1995, and continued to be one of SCPI's largest customers until the
second quarter of fiscal 1996, when Jamesway began experiencing new financial
difficulties. In October 1995 Jamesway again filed for bankruptcy protection
and announced that it would close all of its stores.

     During the third quarter of fiscal 1996, Forest City informed SCPI that it
had decided to change its source of supply, and sales to Forest City ended in
January 1996.

     None of SCPI's business is based on government contracts, and there are no
long-term sales contracts with any customers.

Competition

     Both the automotive parts and accessories distribution industry and the
non-food pet supply industry are highly competitive, with several similar
companies operating in SCPI's market place, and many of SCPI's suppliers also
offer their products directly to retailers. Management is unable to quantify
SCPI's relative size in the distribution industry or in relation to its
competitors. SCPI competes on the basis of the breadth of merchandise offered,
price, level of service, order fill rates and order turnaround times.
Management believes that SCPI's long history, good reputation, experienced
management, product variety, pricing, service levels and high order fill rates
enable it to compete favorably with other distributors.

Regulation

     SCPI's management does not anticipate that existing or known pending
environmental legislation or other regulations will require major capital
expenditures or will affect its operations.

Employees

     SCPI employs approximately 55 persons, of whom about 45 are employed in
the headquarters office and distribution facility in Pittsburgh. Most of the
others are field personnel. Senior executives, including Bernard Frank (a
founder of Steel City Products in 1947), have many years of service with SCPI
and some are employed under long-term contracts.

     The warehouse and certain office employees of SCPI are represented by
Local 636 of the International Brotherhood of Teamsters. SCPI believes that it
has experienced generally good labor relations, and no significant labor
disputes have affected its business in recent years. Renewal negotiations
related to the union agreement have continued beyond its expiration in November
1995.


ITEM 2.   PROPERTIES

     SCPI operates its business from a 88,000 square-foot building owned by
SCPI in an industrial park in Pittsburgh, Pennsylvania. The original building
was constructed in 1970 and it has been expanded several times.





                                      -3-

<PAGE>   5
ITEM 3.   LEGAL PROCEEDINGS

     There are no material legal proceedings against the company.


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

     No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended February 28, 1997.




                                      -4-
<PAGE>   6

                                    PART II

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

     As a result of the merger transaction with Oakhurst in fiscal 1992 (see
Item 1, "Business - Formation of Oakhurst Company, Inc."), most of the
Company's value is vested in Oakhurst. As a result of the merger, the Company's
stock price fell below the Nasdaq minimum bid price of $1.00 per share and on
July 14, 1992 the Company's common stock was removed from listing by Nasdaq.

     No common stock dividends were paid by the Company during fiscal 1997 or
1996. Dividend payments are restricted by the covenants under the Company's
line of credit.

     Through its ownership of the Company, primarily in the form of Series A
Preferred Stock, Oakhurst controls the Company and receives substantially all
of the benefit of the Company's operations through preferred stock dividends,
which are required to be paid before any common stock dividends may be paid. In
fiscal 1995, the Board of Directors approved the declaration and payment of
Series A Preferred Stock dividends of approximately $2.8 million.

     There were approximately 3,800 holders of record of SCPI's common stock on
June 1, 1997.





                                     -5-
<PAGE>   7
ITEM 6.   SELECTED FINANCIAL DATA

     The following table sets forth selected financial and other data of Steel
City Products, Inc. and should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations, which
follows, and with the Financial Statements and related Notes.

<TABLE>
<CAPTION>

                                               FEBRUARY 28,    FEBRUARY 29,   FEBRUARY 28,    FEBRUARY 26,   FEBRUARY 27,
                                                 1997 (c)        1996 (c)         1995            1994          1993
                                               -----------     ----------      ----------      ----------    -----------
                                                           (Dollar amounts in thousands except per share data)
<S>                                            <C>             <C>             <C>             <C>            <C>
OPERATING RESULTS:
Sales....................................      $   18,031      $  24,647       $  27,335       $  32,003      $   33,584
                                               ==========      =========       =========       =========      ========== 

(Loss) income from continuing operations
       before income taxes...............      $     (153)          (206)      $   1,260       $   1,024      $    1,236

Current income tax (expense) benefit.....              (9)           136             (87)            (87)           (148)
Deferred income tax expense..............          (1,093)        (1,500)           (339)           (317)           (370)

                                               ----------      ---------       ---------       ---------      ---------- 
(Loss) income from continuing 
       operations........................          (1,255)        (1,570)            834             620             718

Income (loss) from
       discontinued operations (a).......               -             43              90               -             (44)
Series A Preferred Stock Dividends
       ($2,765 and $786 declared in
       fiscal 1995 and 1993, 
       respectively(b)...................          (1,014)        (1,016)         (1,019)         (1,135)         (1,983)
                                               ----------      ---------       ---------       ---------      ---------- 
Net loss attributable
          to common stockholders.........      $   (2,269)     $  (2,543)      $     (95)      $    (515)     $   (1,309)
                                               ==========      =========       =========       =========      ========== 

PER SHARE AMOUNTS:
Loss from continuing operations
       after preferred stock dividends...      $    (0.70)     $   (0.80)      $   (0.06)      $   (0.18)     $    (0.44)
Income (loss) from discontinued 
       operations........................               -           0.01            0.03               -           (0.02)
                                               ----------      ---------       ---------       ---------      ---------- 

Net loss attributable
       to common stockholders............      $    (0.70)     $   (0.79)      $   (0.03)      $   (0.18)     $    (0.46)
                                               ==========      =========       =========       =========      ========== 

BALANCE SHEET STATISTICS:
Total assets.............................      $   15,297      $  14,531       $  19,040       $  17,506      $   14,754
Long-term obligations....................      $    3,581      $   2,216       $   2,718       $   1,429      $    1,766
Series A Preferred Stock 
       face value (b)....................      $   10,135      $  10,135       $  10,135       $  11,379      $   12,002
</TABLE>


(a)  In fiscal 1991, SCPI sold its Retail Division to RAC as discussed in
     Note 8 to the Financial Statements. SCPI remained contingently liable for 
     most mortgage debt, and for many lease obligations of the Retail Division 
     following the sale. RAC was forced into bankruptcy in March 1991. RAC's 
     Reorganization Plan (the "RAC Plan") contained provision for releases in 
     favor of SCPI together with an injunction against further actions by 
     contingent creditors against SCPI. Accordingly, SCPI was released from 
     further liability except for payment of the Creditor Notes as further 
     described in Notes 5 and 8 of the Financial Statements.

(b)  The Series A Preferred Stock has a dividend rate of $0.5228 per share
     and is redeemable at SCPI's option at $5.2282 per share plus any
     cumulative dividends in arrears. Through fiscal 1997, dividends of
     approximately $6.2 million have accumulated since the effective date of
     the merger; of this amount, approximately $2.8 million and $786,000 were
     declared by the Company's Board of Directors in fiscal 1995 and 1993,
     respectively, and approximately $2.6 million of undeclared dividends in
     arrears are outstanding as of February 28, 1997. In accordance with the
     merger, revaluations of the Company were completed as of February 26, 1994
     and February 27, 1993 which resulted in reductions in the number of Series
     A Preferred shares outstanding. Revaluations as of February 28, 1995,
     February 29, 1996 and February 28, 1997, respectively, have not yet been
     completed. Management expects that the revaluations as of the end of the
     two most recent fiscal years, when complete, will result in further
     decreases in the valuation of SCPI, and that additional Series A preferred
     shares oustanding may be canceled once such valuations are complete. See
     Note 2 to the Financial Statements.

(c)  Results for fiscal 1997 and fiscal 1996 include non-cash deferred tax
     charges of $1.1 million and $1.5 million, respectively, relating to
     increases in the Company's valuation allowance of its deferred tax asset
     (see Note 7 to the Financial Statements).

                                      -6-


<PAGE>   8


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

OVERVIEW

     SCPI is a special, limited purpose, majority-owned subsidiary of Oakhurst.
SCPI is expected to concentrate on its historical distribution business, while
any future growth and expansion opportunities are expected to be pursued by one
or more subsidiaries of Oakhurst. Through Oakhurst's ownership of SCPI,
primarily in the form of preferred stock, Oakhurst retains substantially all
the value of SCPI, and receives substantially all of the benefit of operations
through dividends on the preferred stock. Oakhurst's ownership of SCPI is
designed to facilitate the preservation and utilization of SCPI's and
Oakhurst's net operating tax loss carryforwards which amount to approximately
$150 million.

SIGNIFICANT EVENTS AND TRENDS

     SCPI's customers are continually affected by changes in the retail
environment, including the recent competitive pressures facing regional mass
merchandisers and the growing influence of national automotive specialty
chains. These have led to fluctuations in the level of business that SCPI
enjoys with individual customers. In recent years, SCPI has lost some
significant customers and has suffered reductions in business as certain
customers have closed stores in the face of competition, have been forced into
bankruptcy, or have reduced their automotive merchandise selection.
Furthermore, some customers have changed their buying practices to acquire
certain merchandise direct from manufacturers rather than through distributors
such as SCPI.

     In fiscal 1993, SCPI's two then-largest customers filed for bankruptcy
protection. One of the customers closed all its stores in December 1993; the
other, Jamesway Corporation ("Jamesway") reorganized and emerged from Chapter
11 in January 1995. Jamesway continued to be one of SCPI's largest customers
until October 1995, when it again filed for protection under the U.S.
Bankruptcy Code, and shortly thereafter closed all its stores. SCPI's results
for fiscal 1996 include a write-off of approximately $150,000 in relation to
the balances due from Jamesway. In the first seven months of fiscal 1996, when
sales to Jamesway ended, SCPI's sales to this customer were approximately $4
million.

     In November 1995, Forest City Auto Parts, Inc. ("Forest City") informed
SCPI of its decision to change its source of supply; sales to Forest City
ceased in January 1996. In fiscal 1996, sales to Forest City were approximately
$4.6 million.

     In its efforts to offset these trends, SCPI strengthened its sales team to
help identify new customers and better serve existing customers, expanded its
product offerings to certain customers and enlarged the territory that it
serves. In fiscal 1996, SCPI began offering certain "hard parts" such as brake
rotors, and in fiscal 1997, SCPI introduced a new merchandise category of
non-food pet supplies, and began a new division ("Wing-Tech") to distribute
automotive wings (or spoilers). Although the pet supplies are not typical of
SCPI's historical merchandise mix, management determined that the availability
of existing customers which sell both pet supplies and automotive accessories,
combined with SCPI's distribution expertise and infrastructure, offered an
opportunity for increased sales. In June 1997, SCPI sold the Wing-Tech business
to the buyer of Oakhurst's Puma Products subsidiary.

     During fiscal 1996, SCPI added two new large customers (NHD and Ames) and
other new customers, and during fiscal 1997 added new customers and expanded
sales to certain other customers. However, the level of sales to such customers
is currently not sufficient to offset the loss of the Jamesway and Forest City
business. In reaction to the lower sales levels, management substantially
reduced its inventory levels and eliminated certain operating and overhead
expenses in fiscal 1997. During the latter part of fiscal 1997, SCPI began to
ship pet supplies to an existing significant automotive customer, Giant Eagle,
and added a supermarket chain, Kroger, as an automotive customer. In light of
these developments, management expects that sales in fiscal 1998 will exceed
those in fiscal 1997, but not in amounts sufficient to return SCPI to
historical levels of sales.





                                     -7-
<PAGE>   9

LIQUIDITY AND CAPITAL RESOURCES

FINANCING AND LINE OF CREDIT

     In addition to cash derived from operations, SCPI's liquidity and
financing requirements are determined principally by the working capital needed
to support its level of business, together with the need for capital
expenditures and the cash required to repay its debt. SCPI also receives cash
payments pursuant to a note receivable from Oakhurst. SCPI's working capital
needs fluctuate primarily in relation to the amounts of inventory it carries
which can change seasonally, the size and timeliness of payment of receivables
from its customers to which from time to time SCPI grants extended payment
terms for their seasonal inventory builds, and the amount of credit extended to
SCPI by its suppliers. At February 28, 1997, SCPI's debt primarily consisted of
a term loan secured by a mortgage on SCPI's real estate of approximately $1.3
million, and the Creditor Notes. SCPI also has revolving debt of $2.2 million
under a Credit Agreement that is cross collateralized with Oakhurst, which was
borrowed primarily to repay prior revolving debt of Oakhurst, and is largely
offset by receivables from Oakhurst for advances made by SCPI that bear
interest at the same rate as the revolving debt (see below).

     Historically, SCPI's operations were more profitable than in fiscal
1997 and 1996 and its cash flow was sufficient to fund working capital needs,
to repay the scheduled principal reductions required by the Creditor Notes and
term loan, and to pay dividends to, and make loans to, SCPI's parent, Oakhurst.
In fiscal 1997 and 1996, while there were net losses from continuing operations
of $1.3 million and $1.6 million, respectively, these losses resulted primarily
from adjustments of $1.1 million and $1.5 million, respectively, to the
valuation allowance of the deferred tax asset, which had no cash impact. SCPI
realized net decreases of approximately $1.8 million and $1.2 million, in
fiscal 1997 and fiscal 1996, respectively, in its levels of working capital for
those years as a result of lower levels of sales and aggressive management of
inventory levels.

     In March 1996, Oakhurst obtained financing from an institutional
lender, replacing its then existing credit arrangement, that provides a total
facility for Oakhurst and its subsidiaries of $9.5 million, comprising a new
SCPI term loan of $1.5 million (the "Fixed Asset Loan") and a maximum revolving
credit facility of $8 million (the "Revolver") (collectively, the "Credit
Facility"). The Credit Facility provides a significant increase in available
financing from the previous arrangement. The amounts outstanding under the
prior term loan and Oakhurst revolving credit agreement were repaid with part
of the proceeds of the refinancing. The Credit Facility requires that any loans
be made directly to Oakhurst's subsidiaries, including SCPI. The initial
funding of the Revolver resulted in a loan to SCPI of approximately $2.1
million. SCPI immediately advanced these funds to Oakhurst to enable it to
repay a portion of the amounts outstanding under the previous revolving debt.
The advance bears interest at the same rate as the Credit Facility. In
connection with the new financing, Oakhurst and its subsidiaries incurred loan
costs and fees of approximately $299,000, of which $126,000 were attributable
to SCPI.

     Like the term loan that it replaced, the Fixed Asset Loan is secured
by SCPI's building in Pittsburgh, but provides a more beneficial amortization
schedule of twenty-four monthly principal and interest payments of
approximately $32,000, with the remaining principal balance due on April 1,
1998. The Fixed Asset Loan provides for prepayment without penalty, and
contains a provision for the release of SCPI's building as collateral on the
Credit Facility in the event of a refinancing of the Fixed Asset Loan, subject
to a right of first refusal by the current lender to refinance the Fixed Asset
Loan on the same terms as offered by a new lender.

     Borrowings under the Credit Facility bear interest at the higher of
the Citibank N.A. base rate plus 1.5%, or $5,000 per month, and borrowings
under the Revolver are subject to a borrowing base that is calculated according
to defined levels of Oakhurst's subsidiaries' accounts receivable and
inventories. The Credit Facility has an initial term of two years, with
automatic renewal terms of one year each upon payment of a renewal fee of 0.5%
thereof, unless earlier terminated as provided for in the agreement, and
contains certain restrictive financial and non-financial covenants, including
the maintenance of defined subsidiary and consolidated tangible net worth
levels and consolidated current ratios, and limitations on common stock cash
dividends. The Credit Facility is secured by the accounts receivable,
inventories, and fixed assets of all of Oakhurst's subsidiaries.

     Primarily because of certain Oakhurst subsidiary disposals (see
below), at February 28, 1997 Oakhurst and SCPI did not meet certain
consolidated covenants under the Credit Agreement, and have received waivers
from the





                                     -8-
<PAGE>   10


lender with respect to such covenants. On June 12, 1997, Oakhurst and SCPI
entered into an agreement with the lender to reflect the subsidiary
dispositions that principally reduces the maximum amount available under the
Revolver to $7 million, and amends certain covenants, including the elimination
of the consolidated tangible net worth covenant.

     At February 28, 1997, SCPI held a promissory note receivable from Oakhurst
(the "Oakhurst Note") (see Note 3 to the financial statements) that was issued
in connection with acquisitions by Oakhurst, with a remaining aggregate balance
of approximately $1.3 million. The Oakhurst Note bears interest at the prime
rate plus 1.5% and provides for eight quarterly installments of principal and
interest of $96,000 each, with a balloon payment of approximately $1 million in
April 1998. The Oakhurst Note allows for a rescheduling of the April 1998
balloon payment, should a refinancing of the Fixed Asset Loan occur prior to
that time.

     The creditor notes that were issued by SCPI in connection with the
bankruptcy of Retail Acquisition Corp., (the "Creditor Notes") (see Note 8 to
the financial statements) are payable in six equal annual installments through
July 1998, subject to prepayment criteria in each of fiscal 1996 and 1997,
which SCPI did not meet in either year. The Creditor Notes have been discounted
using an imputed interest rate of 7.5%.

     Oakhurst's ability to repay advances from SCPI is dependent on the
operating results of Oakhurst's other subsidiaries and on financing available
to those subsidiaries. During fiscal 1997, certain of Oakhurst's other
subsidiaries have encountered operating losses, and although a third Oakhurst
subsidiary, Dowling's Fleet Service Co., Inc., has reflected improved results,
Oakhurst has not produced sufficient cash flow to satisfy its debt service
requirements, leading to higher working capital borrowings by SCPI, Oakhurst
and Oakhurst's other subsidiaries. Management believes that the Revolver will
provide adequate funding for SCPI's foreseeable working capital requirements
assuming no material deterioration in current sales or profit levels.
Oakhurst's continued ability to repay loans and advances from SCPI will depend
on an improvement in the results of operations of its other subsidiaries.

     In June 1997, Oakhurst reached an agreement to sell the capital stock of
Puma Products, Inc., and to sell or otherwise dispose of H&H Distributors, Inc.,
two of its subsidiaries that had been experiencing operating losses.

CAPITAL EXPENDITURES

     The Company has no outstanding commitments for significant capital
expenditures.

TAX LOSS CARRYFORWARDS

     At February 28, 1997, SCPI and Oakhurst had net operating tax loss
carryforwards (the "Tax Benefits") of approximately $150 million, which expire
in the years 2001 through 2011, and capital loss carryforwards of approximately
$4 million, which shelter most of SCPI's income from federal income taxes. A
change in control of SCPI or Oakhurst in any three-year period exceeding 50%
may lead to the loss of the majority of the Tax Benefits. In order to reduce
the likelihood of such a change of control occurring, SCPI's and Oakhurst's
Certificates of Incorporation include restrictions on the registration of
transfers of stock resulting in, or increasing, individual holdings exceeding
4.5% of each company's common stock.

     Since the regulations governing the Tax Benefits are highly complex and
may be changed from time to time, and since SCPI's and Oakhurst's attempts to
reduce the likelihood of a change of control occurring may not be successful,
management is unable to determine the likelihood of the continued availability
of the Tax Benefits. However, management believes that the Tax Benefits are
currently available in full and intends to take all appropriate steps to help
ensure that they remain available. Should the Tax Benefits become unavailable
to SCPI or Oakhurst, most future income of SCPI and any consolidated affiliate
would not be shielded from federal taxation, thus reducing funds otherwise
available for corporate purposes (see Note 7 to the financial statements).

     In order to realize the net recorded tax benefit at February 28, 1997,
SCPI is required to generate approximately $2.9 million of federal taxable
income from operations and from tax planning strategies, including benefits
from a tax sharing agreement with Oakhurst, before the expiration of the net
operating tax loss carryforwards.





                                     -9-
<PAGE>   11


FORWARD LOOKING STATEMENTS

     From time to time the information provided by the Company or statements
made by its employees may contain so-called "forward looking" information that
involves risks and uncertainties. In particular, statements contained in Item 1
- "Business" and in this Item 7 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations," which are not historical facts
(including, but not limited to statements concerning anticipated sales, profit
levels, customers and cash flows) are forward looking statements. The Company's
actual future results may differ significantly from those stated in any forward
looking statements. Factors that may cause such differences include, but are
not limited to the factors discussed above as well as the accuracy of the
Company's internal estimates of revenue and operating expense levels. Each of
these factors and others are discussed from time to time in the Company's
Securities and Exchange Commission filings.


RESULTS OF OPERATIONS

     Continuing operations include the results of SCPI's operating division,
Steel City Products, a distributor of automotive parts and accessories and of
non-food pet supplies, based in Pittsburgh, Pennsylvania.

Fiscal Year Ended February 28, 1997 Compared with Fiscal Year Ended
February 29, 1996

     When compared to the prior year, sales decreased by approximately $6.6
million, primarily as a result of the loss of two large customers during the
prior year, as discussed above. These two customers accounted for a decrease in
sales in the current year of approximately $8.5 million. Sales to other
existing customers decreased by approximately $780,000. These reductions were
only partially offset by the addition of new customers and new product lines,
which together accounted for sales of approximately $2.7 million.

     Other income increased by $105,000 over the prior year, due to primarily
to higher interest income on advances to Oakhurst. However, this increase is
offset by higher interest expense.

     Compared to the prior year, gross profits decreased by approximately $1.2
million, attributable entirely to the sales decrease discussed above. Gross
profit margins were consistent with the prior year.

     Operating, selling and administrative expenses decreased by $769,000 when
compared to the prior year, and resulted principally from management's efforts
to reduce SCPI's work force and other expenses in reaction to the lower levels
of sales.

     There was a decrease of $445,000 in the provision for doubtful accounts
compared with the prior year, when the Company recorded provisions for the
bankruptcies of several customers, including one of its largest customers in
the second quarter.

     Interest expense reflected an increase over the prior year of $182,000,
primarily resulting from interest in connection with the Credit Facility.
However, interest on the Credit Facility is offset by interest earned on the
Oakhurst Notes and Oakhurst advances which is included in other income.

Fiscal Year Ended February 29, 1996 Compared with Fiscal Year Ended
February 28, 1995

     Compared with fiscal 1995, sales decreased by 10%, or $2.7 million,
with $2.2 million of the decrease occurring in the fourth quarter. Sales
increases aggregating approximately $3 million resulted primarily from the
addition of several new customers, together with higher sales to several
customers. These sales increases were offset by decreases of $5.7 million, with
a reduction in sales to Jamesway of approximately $490,000, following that
customer's bankruptcy in October 1995, a reduction of $1.4 million in sales to
Forest City, following that customer's decision during the third quarter to
change its source of supply, together with other sales decreases attributable
to SCPI's customers in the Northeast market and to certain other smaller
customers, which resulted from intense competitive pressures on those customers
and from reduced sales of spring product lines due to a rainy





                                     -10-
<PAGE>   12


spring season. The remainder of the decrease resulted from lower sales to
other customers that have downsized or eliminated their automotive departments,
have filed bankruptcy, or that have changed their source of supply.

     Other income decreased by approximately $190,000 compared with fiscal
1995, in which SCPI recovered $175,000 that had been placed into escrow as a
part of SCPI's predecessor's 1989 bankruptcy proceeding.

     Gross profit decreased by $938,000 compared with fiscal 1995, due to the
sales reduction and to lower gross margins, which resulted primarily from lower
average prices charged to many of SCPI's customers.

     Operating, selling and administrative expenses decreased by $115,000;
lower executive salaries, administrative and profit sharing expenses of
approximately $340,000 were partially offset by trade name royalty fees, and
higher corporate overhead expense.

     There was an increase in the provision for doubtful accounts of $415,000
when compared with fiscal 1995. The provision was increased by $150,000 in
connection with the balances due from Jamesway and by $265,000 to provide for
the bankruptcies of several of SCPI's small customers that occurred during
fiscal 1996, together with provisions for several other past due and disputed
accounts.

     Interest expense reflected an increase over the prior year of $38,000,
primarily resulting from interest in connection with the term loan. However,
interest on the term loan is offset by interest earned on the Oakhurst Notes
that is included in other income.

     Although there was a loss from continuing operations in fiscal 1996,
compared with income in the prior year, income tax expense increased by
$938,000 principally due to a charge to deferred tax expense of $1.5 million
that resulted from an increase in the valuation allowance of the deferred tax
asset.





                                     -11-
<PAGE>   13


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
         <S>                                                                                        <C>
         Independent Auditors' Report.......................................................        F-1

         Balance Sheets: February 28, 1997 and February 29, 1996............................        F-2

         Statements of Operations for the fiscal years ended
           February 28, 1997,  February 29, 1996 and February 28, 1995......................        F-3

         Statements of Stockholders' Equity for the fiscal years ended
           February 28, 1997,  February 29, 1996 and February 28, 1995 .....................        F-4

         Statements of Cash Flows for the fiscal years ended
            February 28, 1997,  February 29, 1996 and February 28, 1995 ....................        F-5

         Notes to Financial Statements......................................................        F-6

         Supplementary Financial Data:

           Selected Quarterly Financial Data (unaudited) for the fiscal years ended
             February 28, 1997 and February 29, 1996 .......................................        F-15

         Financial Statement Schedules for the fiscal years ended February 28,
             1997, February 29, 1996 and February 28, 1995:

             Schedule II - Valuation and Qualifying Accounts................................        F-16
</TABLE>


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

          NONE




                                     -12-
<PAGE>   14


                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The by-laws of the Company currently provide for such number of directors
(but no less than five) as is determined from time to time by the Board of
Directors. Certain vacancies arose in December 1995 and July 1996, and the
Board of Directors elected to set the number of directors at six. The following
table lists the names and ages of the directors, and the year in which each was
first elected a director of the Company or its predecessor.

<TABLE>
<CAPTION>
                                            DIRECTOR
NAME                          AGE             SINCE
----                          ---           --------                          
<S>                            <C>            <C> 
Bernard H. Frank               76             1993
John D. Abernathy              59             1996
Terrance W. Allan              43             1993
Mark Auerbach                  59             1996
Robert M. Davies               46             1989
Joel S. Lever                  45             1996
</TABLE>                  


BUSINESS HISTORY OF DIRECTORS

Messrs. Frank and Allan have been executives of the Company for more than
the last five years. Mr. Frank is a founder of the business and has been
associated with it for approximately 46 years. For more than the last five
years, Mr. Frank has been Chief Executive Officer and In May 1994, he was
elected Executive Vice President and Chief Operating Officer of the Company's
parent, Oakhurst Company, Inc. ("Oakhurst"). Mr. Allan has been with the
Company since 1987 and was elected Executive Vice President in January 1993.

Mr. Abernathy. Mr. Abernathy has been Executive Director of Patton Boggs,
L.L.P., a Washington DC law firm, since January 1995. From March 1991 to
February 1994 he was the Managing Director of Summit, Solomon & Feldesman, a
New York City law firm, and from July 1983 until June 1990, Mr. Abernathy was
Chairman and Chief Executive Partner of BDO Seidman, a public accounting firm.
Mr. Abernathy is a director of Barringer Technologies, Inc., a manufacturer of
high sensitivity analytical instruments for chemical sensing and Wahlco
Environmental Systems, Inc., an environmental equipment and services company,
and also serves as a director of Oakhurst.

Mr. Auerbach. Mr. Auerbach was Chairman, President and Chief Executive Officer
of Oakhurst from December 1995 to May 1997. He has been Chief Financial Officer
of the Company and of Oakhurst since December 1995. He has also been Senior
Vice President and Chief Financial Officer since April 1993 of Central Lewmar,
L.P., a fine paper merchant. From September 1992 until April 1993, he was a
partner of Marron Capital, L.P., an investment banking company. Prior to that,
he was President, Chief Executive Officer and Chairman of the Board of Implant
Technology, Inc., a manufacturer of artificial hip systems, from 1990 to 1992.
He is a director of Pharmaceutical Resources, Inc., a generic drug manufacturer
and continues to serve as a director of Oakhurst.

Mr. Davies. Mr. Davies has been Chairman, President and Chief Executive
Officer of Oakhurst since May 1997. Mr. Davies was a Vice President of Wexford
Capital Corporation, which acts as the investment manager to several private
investment funds from 1994 to March 1997. From November 1995 to March 1997 Mr.
Davies has also served as Executive Vice President of Wexford Management LLC, a
private investment management company. From September 1993 to May 1994 he was a
Managing Director of Steinhardt Enterprises, Inc., an investment banking
company, and from 1987 to August 1993, he was Executive Vice President of The
Hallwood Group Incorporated, a merchant banking firm.

Mr. Lever. Mr. Lever has been associated with the law firm of Kurzman &
Eisenberg or its predecessor since 1980, and became a member of the firm in
1984. Mr. Lever specializes in transactional business matters with particular
emphasis on fine arts publishing, distribution and investment, and the sale and
acquisition of commercial real estate entities. Prior to 1980, Mr. Lever was an
Assistant District Attorney for Kings County, New York.





                                     -13-
<PAGE>   15


SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities ("Insiders") to file reports of ownership
and certain changes in ownership with the Securities and Exchange Commission
and to furnish the Company with copies of those reports.

Based solely on a review of those reports and amendments thereto furnished to
the Company during its most recent fiscal year or written representations by
Insiders that no Forms 5 were required to be filed, the Company believes that
during the fiscal year ended February 28, 1997, all Section 16(a) filing
requirements applicable to the Company's Insiders were satisfied.


ITEM 11.  EXECUTIVE COMPENSATION

     This item contains information about compensation, stock options grants
and employment arrangements and other information concerning certain of the
executive officers and the directors of the Company.


SUMMARY COMPENSATION TABLE

The following table sets forth the compensation the Company paid or accrued for
services rendered in the Company's 1997, 1996 and 1995 fiscal years by the
Chief Executive Officer and the only other executive officer of the Company
whose compensation exceeded $100,000 in fiscal 1997 and who was serving at the
end of the 1997 fiscal year.

<TABLE>
<CAPTION>

                                                                                  Long Term Compensation
                                             Annual Compensation                          Awards
                                  -----------------------------------------   -----------------------------
                                                                    Other
                                                                    Annual      Securities         All
                                                                    Compen-     Underlying        Other
       Name and Principal                      Salary               sation       Options**     Compensation
            Position              Year           ($)    Bonus ($)    ($)*           (#)            ($)
---------------------------------------------------------------------------   -----------------------------
<S>                              <C>         <C>         <C>        <C>           <C>            <C>
Bernard H. Frank (1)             1997         50,243     16,000      --           68,327         13,908 (2)
Chairman & Chief Executive       1996         82,775       --        --             --           19,151
Officer                          1995        100,100     55,779      --           27,500         21,029

Terrance W. Allan                1997        126,490     14,000      --           24,333           --
Executive Vice President         1996        106,160       --        --            5,000          4,797
                                 1995        110,855     21,746      --            6,000          6,498
-----------------
</TABLE>

*   Excludes perquisites and other personal benefits if the aggregate amount
    of such items of compensation was less than the lesser of either $50,000 
    or 10% of the total annual salary and bonus of the named executive officer.

**  These options relate to shares of Oakhurst, not the Company.

(1) Mr. Frank, who is also Executive Vice President and Chief Operating
    Officer of Oakhurst, and Mr. Allan are compensated only by the Company 
    except with respect to stock options and stock awards.

(2) This amount consists of $6,504, $5,508 and $1,896 that Mr. Frank
    received under three substantially identical agreements amended in 1987 in
    consideration of the waiver by Mr. Frank of his bankruptcy claims for 
    annuity rights in the Company's predecessor's bankruptcy.





                                     -14-
<PAGE>   16


COMPENSATION AGREEMENTS

Mr. Frank and Mr. Allan. The Company has three-year employment agreements
with each of Messrs. Frank and Allan (sometimes hereinafter referred to as the
"executive") commencing September 1, 1993 that provide for base salaries of
$100,000 (Mr. Frank) and $96,200 increasing to $115,050 (Mr. Allan). The
agreements provide for the payment of annual management bonuses based upon the
defined profits of the Company's operating division, with Mr. Frank entitled to
a minimum bonus of fifteen percent of base salary. The aggregate amount of such
management bonuses payable each year to the executives and to all other
executives is not to exceed 8% of such defined profits and the allocation
thereof is made by the Compensation Committee of the Company based on
recommendations of Mr. Frank as Chief Executive Officer. Mr. Allan is also
entitled to an executive bonus calculated as a percentage of defined annual
profits of the Company that exceed $2,000,000.

In the event of non-renewal of the agreements, the executive is entitled to an
aliquot portion of the bonuses he would have earned during the year of
non-renewal, since the contract year does not coincide with the fiscal year of
the Company. The agreements also provide that if the executive's employment
terminates by reason of his death or disability, he is entitled to the greater
of two years' salary (one year for Mr. Allan) or the salary for the balance of
the term of the agreement and the minimum bonus for such period in the case of
Mr. Frank and the management bonus that would otherwise have been paid in the
case of Mr. Allan. If the executive's employment is otherwise terminated
without cause, he is entitled to his salary and bonuses for the greater of one
year or the balance of the term of the agreement.

The agreements provide for car allowances, and the executives are eligible to
participate in all defined contribution plans, survivor and supplemental
benefits, short and long-term disability benefits, and all other benefit plans
and perquisites available now or in the future to the senior executives of the
Company.

The agreements also provide for certain termination rights in the event of a
change in control of the Company. Change in control is defined to include
certain changes in the make-up of the Company's board of directors or a sale of
the Company's assets or business. Each executive has the right to terminate his
employment within a defined period (ranging up to one year) following a change
in control and (i) to be paid his base salary for a period of up to 24 months
following such termination; (ii) to continue to receive for a like period the
benefits that he is entitled to receive under his agreement and (iii) to be
paid 25% of base salary in lieu of all bonus entitlement. The agreements also
provide for substantially the same payments and benefits in the event the
executive's employment is terminated by the Company without cause as a result
of a change in control. In the event of any termination other than for cause,
or voluntary resignation in the absence of a change in control, the executive's
options become fully exercisable for a period of seven months following
termination. If a change in control had occurred on June 1, 1997, and if each
of Messrs. Frank and Allan had exercised his rights of termination, payments by
the Company would have been approximately $525,000 in the aggregate.

Mr. Frank. Mr. Frank also receives compensation of $13,908 per year, in
the aggregate, under three substantially identical agreements amended in 1987
in consideration of the waiver by Mr. Frank of his bankruptcy claims for
annuity rights in the Company's predecessor's bankruptcy. The amended
agreements provide for payments to be made for a period of fifteen years
subsequent to January 1988 of $6,504, $5,508 and $1,896 per year for the three
agreements, respectively.

STOCK OPTION GRANTS. During fiscal 1997, no option grants relating to the
Company's shares were made to any of the named executives officers. Oakhurst
made option grants to Messrs. Frank and Allan covering 20,000 shares and 10,000
shares of Oakhurst common stock, respectively, at an exercise price of $1.25
per share.

AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES

During fiscal 1997, no options were exercised by any of the named executive
officers.

The following table sets forth certain information at February 28, 1997, the
Company's fiscal year end, based upon (i) the average of the bid and asked
price per share of the Company's common stock ($0.06) on that date, and (ii)
the closing price per share of Oakhurst's common stock, ($1.125) on that date,
as they relate to stock options held





                                     -15-
<PAGE>   17


at that date by each of the individuals named in the Summary Compensation
Table. The "value" of unexercised in-the-money options is the difference
between the market value of the common stock subject to the options at February
28, 1997 and the exercise (purchase) price of the option shares.

<TABLE>
<CAPTION>
                                         Number of Securities                Value of Unexercised
                                        Underlying Unexercised              in-the-Money Options at
                                      Options at Fiscal Year End                Fiscal Year End
   Name                               Exercisable      Unexercisable        Exercisable   Unexercisable
   ----                               -----------      -------------        -----------   -------------
<S>                                      <C>              <C>                   <C>            <C>
THE COMPANY'S COMMON STOCK
Bernard H. Frank...............          23,141            --                   --             --
Terrance W. Allan..............           9,257            --                   --             --

OAKHURST COMMON STOCK
Bernard H. Frank...............          68,327            --                   --             --
Terrance W. Allan..............          26,581           2,750                 --             --

</TABLE>

REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION FOR THE FISCAL
YEAR ENDED FEBRUARY 28, 1997.

This report has been prepared by the Compensation Committee of the Board of
Directors of the Company and addresses the Company's compensation policies with
respect to the Chief Executive Officer and executive officers of the Company in
general for the 1997 fiscal year. Except for Mr. Frank, each member of the
Committee is a non-employee director.


COMPENSATION POLICY

The overall intent of the Committee in respect of executive officers is to
establish levels of compensation that provide appropriate incentives in order
to command high levels of individual performance and thereby increase the value
of the Company to its stockholders, and that are sufficiently competitive to
retain and attract the skills required for the success and profitability of the
Company. The principal components of executive compensation are salary, bonus
and stock options.


CHIEF EXECUTIVE OFFICER'S COMPENSATION

The chief executive officer's salary was determined in the same manner as Mr.
Allan's, described below.


OTHER EXECUTIVE OFFICERS

Each executive is compensated under a written employment agreement. The
agreement was reviewed by Oakhurst's Compensation Committee and approved by the
Company's Compensation Committee with Mr. Frank abstaining from voting on his
own agreement.


MESSRS. FRANK AND ALLAN

Salary. Both executives are long term employees of the Company and its
predecessor, and Mr. Frank is a founder of the original business. Accordingly,
the salary of each executive was based on the level of his prior salary and the
subjective judgement of the members of the Committee as to the value of the
executive's past contribution and potential future contribution to the
profitability of the business.

Bonuses. Bonus were paid pursuant to each executive officer's employment
agreement described above under the heading "Compensation Agreements," above.

Stock Options. No stock options relating to the Company's common stock were
granted to the executive officers during or on account of individual or Company
performance in fiscal 1997. The Committee believes that it is important in
aligning management's and stockholders' interests in the enhancement of
stockholder value over the long term. Accordingly, the Stock Plans Committee of
Oakhurst granted options to Messrs. Frank and Allan in fiscal 1997. The
exercise price of stock options granted by Oakhurst is equal to the market
price of the Common Stock on the date of grant. The stock option grants were
made in recognition of their services to the Company during the year and prior
years and were in amounts deemed in the subjective judgement of Oakhurst's
Stock Plans Committee to be appropriate.





                                     -16-
<PAGE>   18


Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the
Internal Revenue Code (enacted in 1993) generally disallows a tax deduction to
public companies for compensation over $1 million paid to its chief executive
officer and its four other most highly compensated executives. The Company's
compensation payable to any one executive officer (including potential income
from outstanding stock options) is currently and for the foreseeable future
unlikely to reach that threshold. In addition, because of the significant net
operating loss carryforwards of the Company, the deductibility of compensation
payments is not currently an issue. However, should circumstances change, the
Compensation Committee will study the matter and make recommendations to the
Board of Directors.


The Compensation Committee:         Robert M. Davies
                                    Joel S. Lever
                                    Bernard H. Frank


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Frank is a director, executive officer and employee of the Company and
a director and executive officer of Oakhurst. Messrs. Abernathy, Auerbach,
Davies and Lever also serve as directors of Oakhurst.


DIRECTORS' COMPENSATION

No fees are paid to directors for attendance at board or committee meetings.
However, board members are entitled to reimbursement of out-of-pocket expenses
incurred in attending such meetings.

The Performance Graph and the Report of the Compensation Committee on Executive
Compensation in this Item 11 are not and shall not be deemed incorporated by
reference into any filings of the Company with the Securities and Exchange
Commission by implication or by any reference in any such filings to this Proxy
Statement.

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




                                     -17-

<PAGE>   19


Performance Graph

The following graph assumes an investment of $100 on February 29, 1992 and
compares annual changes thereafter in the market price of the Company's Common
Stock with (i) the Dow Jones Global US Market Index (a broad market index), and
(ii) the Dow Jones Retailers - Other Specialty Index, a group of companies
whose marketing strategy is focused on a limited product line, such as
automotive parts. Both indices are published in the Wall Street Journal.

                                    [GRAPH]

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                               1993      1994     1995    1996     1997
<S>                           <C>       <C>       <C>    <C>      <C>
Steel City Products, Inc.     100.00     80.00    30.40   19.20    19.20
DJ Global US                  100.00    107.87    91.16  129.76   177.93    
Dow Jones Retailers - Other   100.00     97.39    87.62   92.05   123.37 
</TABLE>
--------------------------------------------------------------------------------





                                     -18-
<PAGE>   20


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information regarding beneficial
ownership of the Common Stock at June 1, 1997 by (i) each person known by the
Company to own beneficially more than 5% of the outstanding Common Stock; (ii)
each of the directors of the Company; (iii) the executive officers named in the
Summary Compensation Table, in Item 11, above; and (iv) all directors and
executive officers as a group. Except as otherwise indicated in the footnotes,
the Company believes that the beneficial owners of the Common Stock listed
below, based on information furnished by such owners, have sole investment and
voting power with respect to the shares of Common Stock shown as beneficially
owned by them.

<TABLE>                      
<CAPTION>                    
                             
Name and Address                 Number of Shares of            Percentage of
of Beneficial Owner           Series A Preferred Stock               Class
-------------------           ------------------------          -------------
<S>                                   <C>                            <C> 
Oakhurst Company, Inc.                1,938,526                      100%
1001 Santerre Drive          
Grand Prairie, Texas  75050  
                             
Name and Address                 Number of Shares of             Percentage of
of Beneficial Owner                 Common Stock                      Class
-------------------           ------------------------          -------------
Oakhurst Company, Inc.                  286,955                     10.0%
1001 Santerre Drive          
Grand Prairie, Texas  75050  
                             
Special Situations                      200,000                      6.2%
Fund, L.P.  (1)              
625 Madison Avenue           
New York, New York  10022    
</TABLE>                     

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

(1)      By agreement with the Company dated June 25, 1990, as amended, Special
         Situations Fund, LLP agreed not to increase its beneficial ownership
         of the Common Stock of the Company or Oakhurst above 8.2% of the then
         outstanding shares except in transactions to which the Company or
         Oakhurst, as the case may be, is a party or under certain other
         circumstances.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth information regarding beneficial ownership of
the Company's Common Stock (including Common Stock issuable upon exercise of
outstanding options) by each director, each executive officer named in the
"Summary Compensation Table," below, and by all directors and executive
officers of the Company as a group. The information has been furnished by the
directors and officers of the Company themselves. No director or officer owns
any shares of Preferred Stock of the Company.

<TABLE>
<CAPTION>

Name and Address                                     Number of Shares          Percentage of
of Beneficial Owner                                   of Common Stock              Class
-------------------                                  ----------------          -------------
<S>                                                     <C>                         <C>
Bernard H. Frank.....................................    23,141 (1)                  *
Terrance W. Allan....................................     9,257 (1)                  *
John D. Abernathy ...................................        -0-                    --
Mark Auerbach .......................................        -0-                    --
Joel S. Lever .......................................    40,819                   19.3%
Robert M. Davies.....................................        -0-                    --
                                              
All directors and....................................
executive officers as a group, 6 persons.............   216,389 (1)                6.9%
</TABLE>                                      

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

*  Less than 1%




                                     -19-
<PAGE>   21
(1) These shares are purchasable under outstanding stock options,
    exercisable at $0.625 per share.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Reference is made to "Compensation of Directors" and "Compensation
Committee Interlocks and Insider Participation" in Item 11, above.





                                     -20-
<PAGE>   22

                                    PART IV

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

(a)  Documents filed as a part of this report.

     1.   Financial Statements:

          Independent Auditors' Report

          Balance Sheets: February 28, 1997 and February 29, 1996

          Statements of Operations for the fiscal years ended February 28, 1997,
              February 29, 1996, and February 28, 1995

          Statements of Stockholders' Equity for the fiscal years ended February
              28, 1997, February 29, 1996, and February 28, 1995

          Statements of Cash Flows for the fiscal years ended February 28, 1997,
              February 29, 1996, and February 28, 1995

          Notes to Financial Statements

          Supplementary Financial Data:

              Selected Quarterly Financial Data (unaudited) for the fiscal
              years ended February 28, 1997 and February 29, 1996

     2.   The following Financial Statement Schedules for the fiscal years ended
          February 28, 1997, February 29, 1996, and February 28, 1995 are
          submitted herewith:

          Schedule II - Valuation and Qualifying Accounts
              All other schedules are omitted because they are not applicable
              or the required information is shown in the financial statements
              or the notes thereto.

     3.   Exhibits.

<TABLE>
<CAPTION>

Exhibit No.           Description

      <S>             <C>
      2.1             Heck's, Inc. Second Amended Joint Plan of Reorganization
                      and Disclosure Statement (filed as Exhibits 2(a) and (b)
                      to the Company's Annual Report on Form 10-K for the
                      fiscal year ended February 25, 1989).

      2.2             Agreement and Plan of Merger dated as of May 20, 1991 
                      (filed as Appendix A to the Proxy Statement/Prospectus 
                      of Steel City Products, Inc. and the Company the dated 
                      April 16, 1991).

      3.1             Restated Certificate of Incorporation (filed as Exhibit 
                      3(a) to the Company's Annual Report on Form 10-K for the 
                      fiscal year ended February 27, 1993).

      3.2             By-laws of the Company as amended through May 17, 1993 
                      (filed as Exhibit 3.2 to the Company's Annual Report of 
                      Form 10-K for the fiscal year ended February 26, 1994).
</TABLE>




                                     -21-
<PAGE>   23

<TABLE>
   <S>                <C>
   *10.1              Employment Agreement with Bernard H. Frank dated as of 
                      September 1, 1993 (filed as Exhibit 10.1 to the Company's
                      Annual Report of Form 10-K for the fiscal year ended 
                      February 26, 1994).

   *10.2              Employment Agreement with Terrance W. Allan dated as of 
                      September 1, 1993 (filed as Exhibit 10.3 to the Company's
                      Annual Report of Form 10-K for the fiscal year ended 
                      February 26, 1994).

    10.3              Agreement dated June 11, 1991 with Prudential-Bache 
                      Special Situations Fund (filed as Exhibit 10(q) to the 
                      Company's Annual Report on Form 10-K for the fiscal year 
                      ended March 3, 1990).

   *10.4              Form of Option Agreement dated August 29, 1991 with 
                      directors and executive officers (filed as Exhibit 10(t) 
                      to the Company's Annual report on Form 10-K for the 
                      fiscal year ended February 29, 1992).

    10.5              Credit Agreement by and between Steel City Products, Inc. 
                      and Integra Bank Pittsburgh (filed as Exhibit 10.1 to the
                      Company's Quarterly Report on Form 10-Q for the period 
                      ended August 27, 1994).

    10.6              Mortgage and Security Agreement by and between Steel City
                      Products, Inc. and Integra Bank Pittsburgh (filed as 
                      Exhibit 10.2 to the Company's Quarterly Report on Form 
                      10-Q for the period ended August 27, 1994).

    10.7              Note Agreements with William T. Apgar, Liquidating
                      Trustee for the Retail Acquisition Corp. Amended Plan of
                      Reorganization, (filed as Exhibit 10(w) the Company's
                      Annual Report on Form 10-K for the fiscal year ended
                      February 27, 1993).

    10.8              Letter agreement dated January 3, 1996 between SCPI and 
                      Integra Bank Pittsburgh amending the Credit Agreement, 
                      dated August 1, 1994 between SCPI and Integra, (filed as 
                      exhibit #10.17 to Oakhurst's Registration Statement on 
                      Form S-1, file number #333-00173, filed on January 12, 
                      1996).

    10.9              Letter agreement dated January 3, 1996 between Oakhurst 
                      and Integra Bank Pittsburgh amending the Credit Agreement,
                      dated August 1, 1994 between Oakhurst and Integra, (filed
                      as exhibit #10.16 to Oakhurst's Registration Statement on 
                      Form S-1, file number #333-00173, filed on January 12, 
                      1996).

    10.10             Open-End Mortgage between Steel City Products, Inc. and 
                      FINOVA Capital Corporation dated March 28, 1996, (filed 
                      as exhibit #10.10 to the Company's Annual Report on 
                      Form 10-K for the fiscal year ended February 29, 1996).

    10.11             Combined and Amended Promissory Note between Steel City
                      Products, Inc. and Oakhurst Company, Inc., dated March
                      28, 1996, (filed as exhibit #10.11 to the Company's
                      Annual Report on Form 10-K for the fiscal year ended
                      February 29, 1996).

    10.12             Trademark & Trade Name License Agreement between Oakhurst
                      Holdings, Inc. and Steel City Products, Inc., dated
                      August 16, 1995, (filed as exhibit #10.12 to the
                      Company's Annual Report on Form 10-K for the fiscal year
                      ended February 29, 1996).

    10.13             Corporate Services Agreement between Steel City Products,
                      Inc. and Oakhurst Management Corporation dated June 1, 
                      1995, (filed as exhibit #10.13 to the Company's Annual 
                      Report on Form 10-K for the fiscal year ended February 29,
                      1996).

    11                Statement re-computation of per-share earnings - filed 
                      herewith.
</TABLE>




                                     -22-
<PAGE>   24

<TABLE>

    <S>               <C>
    27                Financial Data Schedule (EDGAR transmission only) - filed 
                      herewith.

</TABLE>

-----------------
*    Management contract or compensatory plan or arrangement.

(b)  Reports on Form 8-K:

     No Reports on Form 8-K were filed during the last quarter of the fiscal
year ended February 28, 1997.




                                     -23-
<PAGE>   25


                                   SIGNATURES

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

                                     STEEL CITY PRODUCTS, INC.


Dated:  June 12, 1997                By: /s/ Bernard H. Frank
                                         -------------------------------------
                                     Bernard H. Frank, Chief Executive Officer
                                     (duly authorized officer)


     KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints each of Bernard H. Frank, Robert Davies,
and Roger M. Barzun jointly and severally his true and lawful attorneys-in-fact
and agent with full powers of substitution for him and in his name, place and
stead in any and all capacities to sign on his behalf, individually and in each
capacity stated below and to file any and all amendments to this Annual Report
on Form 10-K with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises as fully as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their substitute or substitutes may lawfully do or cause to be done by
virtue thereof.

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

<TABLE>
<CAPTION>
         SIGNATURES                            TITLES                 DATE
         ----------                            ------                 ---- 
<S>                                   <C>                          <C> 
    /s/ Bernard H. Frank              Chairman of the Board,       June 12, 1997
--------------------------------      Chief Executive Officer     
        Bernard H. Frank              and Director                
                                                                  
                                                                  
    /s/ Mark Auerbach                 Chief Financial Officer      June 12, 1997
--------------------------------      (principal financial and    
        Mark Auerbach                   accounting officer)       
                                                                  
                                                                  
    /s/ Terrance W. Allan             Executive Vice President     June 12, 1997
--------------------------------      Director                    
        Terrance W. Allan                                         
                                                                  
                                                                  
    /s/ Robert M. Davies              Director                     June 12, 1997
--------------------------------                                  
        Robert M. Davies                                          
                                                                  
                                                                  
    /s/ John D. Abernathy             Director                     June 12, 1997
--------------------------------                                  
        John D. Abernathy                                         
                                                                  
                                                                  
    /s/ Joel S. Lever                 Director                     June 12, 1997
--------------------------------                                  
        Joel S. Lever                                             
                                                                  
</TABLE>




                                     -24-

<PAGE>   26

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Steel City Products, Inc.:


We have audited the accompanying balance sheets of Steel City Products, Inc. as
of February 28, 1997 and  February 29, 1996, and the related statements of
operations, stockholders' equity, and cash flows for the years ended February
28, 1997, February 29, 1996 and February 28, 1995.  Our audits also included
the financial statement schedule listed in the Index at Item 14(a)(2).  These
financial statements and financial statement schedule are the responsibility of
the Company's management.  Our responsibility is to express an opinion on the
financial statements and financial statement schedule based on our audits.

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

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Steel City Products, Inc. as of February
28, 1997 and February 29, 1996, and the results of their operations and their
cash flows for the years ended February 28, 1997, February 29, 1996, and
February 28, 1995 in conformity with generally accepted accounting principles. 
Also, in our opinion, the financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.




/s/ Deloitte & Touche LLP  
-------------------------
Deloitte & Touche LLP

Pittsburgh, Pennsylvania
June 12, 1997





                                      -F1-
<PAGE>   27
                           STEEL CITY PRODUCTS, INC.
                                 BALANCE SHEETS
                (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                 ASSETS                                           FEBRUARY 28,    FEBRUARY 29,
                                                                                     1997            1996
                                                                                  ------------    -----------
<S>                                                                              <C>             <C>
Current assets:
  Cash..........................................................................     $      2      $      3
  Trade accounts receivable, less allowance of $389 and $419, respectively......        2,558         2,512
  Notes receivable - Oakhurst Company, Inc......................................          275           249
  Inventories...................................................................        3,327         4,493
  Other.........................................................................          145           287
                                                                                     --------      --------         
            Total current assets................................................        6,307         7,544
                                                                                     --------      --------         
Property and equipment, at cost.................................................        2,005         1,998
  Less accumulated depreciation.................................................         (951)         (752)
                                                                                     --------      --------         
                                                                                        1,054         1,246
                                                                                     --------      --------         
Deferred tax asset, less valuation allowance                                          
  of $51,300 and $48,300, respectively..........................................        1,000         2,093
Notes receivable - Oakhurst Company, Inc., long-term portion....................        1,008         1,282
Advances to Oakhurst Company, Inc...............................................        5,400         2,051
Other assets....................................................................          528           315
                                                                                     --------      --------         
                                                                                        7,936         5,741
                                                                                     --------      --------         
                                                                                     $ 15,297      $ 14,531
                                                                                     ========      ========         
                 LIABILITIES AND STOCKHOLDERS' EQUITY                                               
                                                                                                    
Current liabilities:                                                                                
  Accounts payable..............................................................     $  4,085      $  3,650
  Accrued compensation..........................................................          271           272
  Current maturities of long-term obligations...................................          755           646
  Due to affiliate..............................................................          284            97
  Other.........................................................................          180           254
                                                                                     --------      --------         
            Total current liabilities...........................................        5,575         4,919
                                                                                     --------      --------         
                                                                                                    
Long-term obligations:                                                                              
  Long-term debt................................................................        3,499         2,106
  Other long-term obligations...................................................           82           110
                                                                                     --------      --------         
                                                                                        3,581         2,216
                                                                                     --------      --------         
Commitments and contingencies...................................................                    
                                                                                                    
Stockholders' equity:                                                                               
  Preferred stock, par value $0.01 per share; authorized                                            
     5,000,000 shares, issued 1,938,526 shares;                                                     
     liquidation preference $10,135.............................................           19            19
  Common stock, par value $0.01 per share; authorized                                               
     5,000,000 shares; issued 3,238,061 shares..................................           32            32
  Additional paid-in capital....................................................       43,824        43,824
  Deficit (Reorganized on August 26, 1989)......................................      (37,733)      (36,478)
  Treasury stock, at cost, 207 common shares....................................           (1)           (1)
                                                                                     --------      --------         
            Total stockholders' equity..........................................        6,141         7,396
                                                                                     --------      --------         
                                                                                     $ 15,297      $ 14,531
                                                                                     ========      ========

</TABLE>

  The accompanying notes are an integral part of these financial statements.



                                     -F2-



<PAGE>   28

                           STEEL CITY PRODUCTS, INC.
                            STATEMENTS OF OPERATIONS
              (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                         FISCAL            FISCAL            FISCAL
                                                       YEAR ENDED        YEAR ENDED        YEAR ENDED
                                                      FEBRUARY 28,      FEBRUARY 29,      FEBRUARY 28,
                                                          1997              1996              1995  
                                                      ------------      ------------      ------------
<S>                                                    <C>               <C>                <C>
  Sales.........................................        $  18,031         $  24,647         $  27,335
  Other income..................................              613               508               778
                                                        ---------         ---------         ---------
                                                           18,644            25,155            28,113
                                                        ---------         ---------         ---------
  Cost of goods sold, including occupancy and                                                
    buying expenses.............................           14,621            20,024            21,774
  Operating, selling and administrative expenses            3,951             4,720             4,835
  Provision for doubtful accounts, net of                                                    
    recoveries..................................              (30)              415                 -
  Interest expense..............................              464               282               244
                                                        ---------         ---------         ---------
                                                           19,006            25,441            26,853
                                                        ---------         ---------         ---------
                                                                                             
  (Loss) income from continuing operations                                                   
    before undistributed earnings of                                                         
    investment in affiliate and income taxes....             (362)             (286)            1,260
                                                        ---------         ---------         ---------
  Undistributed earnings of investment in                                                    
    affiliate...................................              209                80                 -
                                                        ---------         ---------         ---------
                                                                                             
  Income taxes:                                                                              
    Current income tax benefit (expense).........              (9)              136               (87)
    Deferred income tax expense..................          (1,093)           (1,500)             (339)
                                                        ---------         ---------         ---------
                                                           (1,102)           (1,364)             (426)
                                                        ---------         ---------         ---------
                                                                                             
  (Loss) income from continuing operations......           (1,255)           (1,570)              834
                                                                                             
  Discontinued operations:                                                                   
    Income on disposal, less income tax expense                                              
     of $22 and $46 in fiscal 1996 and 1995,                                                 
     respectively...............................                -                43                90
                                                        ---------         ---------         ---------
  Net (loss) income ............................           (1,255)           (1,527)              924
                                                                                             
  Effect of Series A Preferred Stock dividends                                               
    ($2,765 declared in fiscal 1995)............           (1,014)           (1,016)           (1,019)
                                                        ---------         ---------         ---------
  Net loss attributable to common stockholders..        $  (2,269)        $  (2,543)        $     (95)
                                                        =========         =========         =========
                                                                                             
  Per share amounts:                                                                         
    Net loss from continuing operations                                                      
      after preferred stock dividends...........        $   (0.70)        $   (0.80)        $   (0.06)
    Income from discontinued operations.........                -              0.01              0.03
                                                        ---------         ---------         ---------
    Net loss attributable to common                                                          
      stockholders after preferred stock                                                     
      dividends.................................        $   (0.70)        $   (0.79)        $   (0.03)
                                                        =========         =========         =========
                                                         
  Weighted average number of shares outstanding          
    used in computing per share amounts.........        3,238,061         3,238,061         3,028,725
                                                        =========         =========         =========
</TABLE>


   The accompanying notes are an integral part of these financial statements.



                                     -F3-
<PAGE>   29
                           STEEL CITY PRODUCTS, INC.
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                         (DOLLAR AMOUNTS IN THOUSANDS)





<TABLE>
<CAPTION>
                                                               ADDITIONAL    RETAINED
                                           PREFERRED  COMMON    PAID-IN      EARNINGS     TREASURY
                                            STOCK     STOCK     CAPITAL      (DEFICIT)     STOCK      TOTALS
                                           ---------  ------   ----------    ---------    --------    ------
<S>                                        <C>        <C>       <C>         <C>            <C>        <C>
BALANCE AT FEBRUARY 26, 1994.............    $22       $29      $43,791      $(33,110)     $(1)       $10,731 
                                                                                                              
Net income...............................                                         924                     924 
Oakhurst Company, Inc. Preferred stock                                                                        
  cancellation pursuant to the merger                                                                         
  agreement (see Note 2).................     (3)                     3                                     - 
Exercise of warrants.....................                3           30                                    33 
Additional common shares issued to                                                                            
  Oakhurst Company, Inc. resulting                                                                            
  from the exercise of warrants..........                *                                                  * 
Series A Preferred Stock dividend                                                                             
  paid to Oakhurst Company, Inc..........                                      (2,765)                 (2,765)
                                             ---       ---      -------      --------      ---        -------
BALANCE AT FEBRUARY 28, 1995.............     19        32       43,824       (34,951)      (1)         8,923 
                                                                                                              
Net loss.................................                                      (1,527)                 (1,527)
                                             ---       ---      -------      --------      ---        -------
BALANCE AT FEBRUARY 29, 1996.............     19        32       43,824       (36,478)      (1)         7,396 
                                                                                                              
Net loss.................................                                      (1,255)                 (1,255)
                                             ---       ---      -------      --------      ---        -------
BALANCE AT FEBRUARY 28, 1997.............    $19       $32      $43,824      $(37,733)     $(1)       $ 6,141 
                                             ===       ===      =======      ========      ===        =======
</TABLE>

    * Rounds to less than $1,000





   The accompanying notes are an integral part of these financial statements.



                                     -F4-

<PAGE>   30
                           STEEL CITY PRODUCTS, INC.
                            STATEMENTS OF CASH FLOWS
                         (DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                      FISCAL             FISCAL        FISCAL
                                                                     YEAR ENDED        YEAR ENDED    YEAR ENDED
                                                                    FEBRUARY 28,       FEBRUARY 29,  FEBRUARY 28,
                                                                        1997               1996          1995
                                                                    ------------       ------------  ------------
 <S>                                                                   <C>                <C>           <C>
 Cash flows from operating activities:                          
   (Loss) income from continuing operations...................         $(1,255)           $(1,570)      $   834
   Adjustments to reconcile (loss) income from continuing                                                
     operations to net cash provided by operating activities:                                            
        Depreciation and amortization.........................             276                194           186
        Loss on retirement of property and equipment..........               -                 26             -
        Deferred tax expense..................................           1,093              1,522           385
        Undistributed earnings of investment in affiliate.....            (209)               (80)            -
   Other changes in operating assets and liabilities:                                                    
        Accounts receivable...................................             (46)             1,518          (460)
        Inventories...........................................           1,166              1,878          (406)
        Accounts payable......................................             435             (2,027)        1,122
        Other.................................................             299               (175)          277
                                                                       -------            -------       -------
 Net cash provided by (used in) operating activities of:                                                 
   Continuing operations......................................           1,759              1,286         1,938
   Discontinued operations....................................            (255)              (304)         (161)
                                                                       -------            -------       -------
 Net cash provided by operating activities....................           1,504                982         1,777
                                                                       -------            -------       -------
                                                                                                         
 Cash flows from investing activities:                                                                   
   Advances to Oakhurst Company, Inc..........................          (3,349)              (985)         (670)
   Issuance of note receivable - Oakhurst Company, Inc........               -                  -        (1,450)
   Collection of note receivable - Oakhurst Company, Inc......             248                675           494
   Additions to property and equipment........................              (7)               (96)         (330)
   Other......................................................               -                  -           (17)
                                                                       -------            -------       -------
 Net cash used in investing activities........................          (3,108)              (406)       (1,973)
                                                                       -------            -------       -------
                                                                                                         
 Cash flows from financing activities:                                                                   
   Net borrowings under revolving credit agreement............           2,150                  -             -
   Proceeds from long-term borrowings.........................           1,500                  -         2,560
   Principal payments on long-term obligations................          (1,921)              (602)         (378)
   Deferred loan costs........................................            (126)                 -             -
   Series A Preferred Stock dividends paid to                                                            
      Oakhurst Company, Inc...................................               -                  -        (2,765)
   Exercise of warrants.......................................               -                  -            33
                                                                       -------            -------       -------
 Net cash provided by (used in) financing activities..........           1,603               (602)         (550)
                                                                       -------            -------       -------
 Net decrease in cash.........................................              (1)               (26)         (746)
 Cash at beginning of period..................................               3                 29           775
                                                                       -------            -------       -------
 Cash at end of period........................................         $     2            $     3       $    29
                                                                       =======            =======       ======= 
                                                                                                         
 Supplemental disclosures of cash flow information:                                                      
   Cash paid during the period for:                                                                      
      Interest................................................         $   439            $   282       $   253
                                                                       =======            =======       ======= 
      Income taxes, net of refunds............................         $    15            $   (93)      $     -
                                                                       =======            =======       ======= 
                                                                                                         
 Supplemental schedule of non-cash financing activities:                                                 
      Capital leases obligations incurred for new equipment...         $     -            $    79       $     -
                                                                       =======            =======       ======= 
</TABLE>                                                        

 The accompanying notes are an integral part of these financial statements.



                                     -F5-






<PAGE>   31
                           STEEL CITY PRODUCTS, INC.
                         NOTES TO FINANCIAL STATEMENTS

1.  SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

   Business Activities:

         Steel City Products, Inc. ("SCPI" or "the Company") is a wholesale
distributor, operating under the trade name Steel City Products, selling
primarily to discount retail chains, hardware, drug and supermarket retailers
and to automotive specialty stores, based principally in the Northeastern
United States.  SCPI is a majority-owned subsidiary of Oakhurst Company, Inc.,
("Oakhurst") (see Note 2).

   Use of Estimates:

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

   Fiscal Year:

         The Company's fiscal year ends on the last day of February.

   Inventories:

         Inventories are stated at the lower of cost or market.  Cost is
determined by the last in, first out method (LIFO).  Had all of the inventories
been valued using the first-in, first-out (FIFO) method, inventories would have
been approximately $292,000 and $388,000 higher than reported at February 28,
1997 and February 29, 1996, respectively.

   Property and Equipment:

         Depreciation and amortization are computed using the straight-line
method.  Estimated useful lives used for computing depreciation and
amortization are: buildings, 15-40 years; building improvements, 5-20 years;
and office furniture and equipment, 3-10 years.  Depreciation expense was
approximately $199,000, $190,000 and $185,000 in fiscal 1997, 1996 and 1995,
respectively.

   Other Assets:

         Other assets include goodwill associated with the acquisition in 1969
of Steel City Products, which is being amortized over a 40 year period.  The
unamortized values at February 28, 1997 and February 29, 1996 are approximately
$160,000 and $167,000, respectively.

         In fiscal 1997, the Company adopted the Financial Accounting Standards
Board Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of", which established accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used, and for long-lived assets and certain
identifiable intangibles to be disposed of.  In accordance with SFAS No. 121,
SCPI assesses whether its excess of costs over net assets acquired and other
long-lived assets are impaired at each balance sheet date based upon an
evaluation of undiscounted projected cash flow through the remaining
amortization period.  If an impairment is determined, the amount of such
impairment is calculated based upon the estimated fair value of the asset.  The
adoption of SFAS No. 121 did not have an impact on the Company's carrying value
of such assets.





                                      -F6-
<PAGE>   32
   Revenue Recognition:

         Revenues are recognized at the time products are shipped.

   Federal Income Taxes:

         SCPI accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes".  The standard requires an asset and liability
approach to accounting for income taxes.  Deferred tax liabilities and assets
are recognized for the future tax consequences of events that have already been
recognized in the financial statements or tax returns.  Net deferred tax assets
are recognized to the extent that management believes that realization of such
benefits is more likely than not.  Changes in enacted tax rates or laws may
result in adjustments to the recorded deferred tax assets or liabilities in the
period that the tax law is enacted (see Note 7).

         SCPI is included in the consolidated federal income tax return of
Oakhurst.  For financial reporting purposes, income taxes are calculated on a
stand alone basis.

   Earnings Per Share:

         Income per share amounts attributable to common stockholders are
computed on the basis of the weighted average number of outstanding common
shares and common stock equivalents determined by applying the treasury stock
method to stock options and warrants outstanding.  Loss per share amounts do
not include common stock equivalents since that would reduce the net loss per
share.

         In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share",
which establishes standards for computing and presenting earnings per share and
applies to entities with publicly held common stock or potential common stock.
This Statement is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods; earlier application is not
permitted.  This Statement requires restatement of all prior period earnings
per share presented.  The basic earnings per share and diluted earnings per
share as defined by SFAS No. 128 approximates the historically presented
earnings per share.

   Stock Based Compensation:

         The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations.

   Reclassifications:

         Certain reclassifications have been made to the prior year financial
statements to conform to the fiscal 1997 presentation.

2.  CORPORATE REORGANIZATION

         In accordance with a merger transaction in July 1991, SCPI issued to
Oakhurst shares of its common stock and Series A Preferred Stock so that the
aggregate fair market value of such stock owned by Oakhurst totaled
approximately 90% of the aggregate fair market value of SCPI.  Accordingly,




                                      -F7-
<PAGE>   33

Oakhurst controls approximately 90% of the outstanding voting power of SCPI and
receives substantially all of the benefit of operations through dividends on
the preferred stock.

         Under the merger transaction, SCPI is required for a period of five
years following the merger to issue to Oakhurst (or cancel) such number of
shares of Series A Preferred Stock and/or common stock as shall be necessary,
in accordance with periodic determinations, to maintain Oakhurst's aggregate
stock ownership of SCPI at 90%.  Revaluations of the Company as of February 28,
1997, February 29, 1996 and February 28, 1995, respectively, have not yet been
completed.  Management expects that the revaluations as of the end of the two
most recent fiscal years, when complete, will result in a decrease in the
valuation of the Company because of changes in the business climate and SCPI's
customer bases that occurred during fiscal 1997 and fiscal 1996.  Accordingly,
Series A Preferred shares outstanding may be canceled once such valuations are
complete.

         The Series A Preferred Stock carries a dividend rate of $0.5228 per
share and has a redemption price and liquidation preference of $5.2282 per
share plus any accumulated dividends in arrears.  Through February 28, 1997,
dividends of approximately $6.2 million have accumulated since the effective
date of the merger; of this amount, approximately $3.6 million has been
declared by SCPI's Board of Directors and paid.  Approximately $2.6 million of
undeclared dividends in arrears was outstanding at February 28, 1997.

3.  NOTES RECEIVABLE, ADVANCES AND DIVIDENDS PAID - OAKHURST COMPANY, INC.

         Prior to the year ended February 29, 1996, SCPI advanced to Oakhurst
$2,700,000 evidenced by promissory notes (collectively, the "Oakhurst Notes")
to facilitate acquisitions by Oakhurst of two subsidiaries, H&H Distributors,
d/b/a Harry Survis ("H&H") and Dowling's Fleet Service, Co., Inc.
("Dowling's").  In connection with the Dowling's acquisition, the Series A
Preferred stock dividends outstanding as of August 1, 1994 were declared by
SCPI's Board of Directors and were paid to Oakhurst.

         The Oakhurst Notes carried an interest rate of 9.25% and were
repayable quarterly through 1998.  In consideration for SCPI's agreement to the
acceleration of the maturity of the Term Loan (see Note 5), Oakhurst agreed in
January 1996 to accelerate the maturity dates of the Oakhurst Notes to July 31,
1996, or until such time that a refinancing of the Term Loan occurred, when the
agreement allowed a similar rescheduling of the Oakhurst Notes with essentially
like terms as the refinanced Term Loan.  The Term Loan was refinanced on March
28, 1996 by the Fixed Asset Loan, and accordingly, the Oakhurst Notes were
rescheduled on such date, and have been presented in SCPI's balance sheets
reflecting the terms of such rescheduling.

         The rescheduling of the Oakhurst Notes reflected the combination of
the outstanding balances of the Oakhurst Notes into one new note (the "Oakhurst
Note") that bears interest at the prime rate plus 1.5% and provides for eight
quarterly principal and interest installments of $96,000, with a balloon
payment of approximately $1 million in April 1998.  The Oakhurst Note allows
for a rescheduling of the April 1998 balloon payment, should a similar
refinancing of the Fixed Asset Loan occur prior to that time, using essentially
like terms as any such refinancing.  The Oakhurst Note is secured by the
capital stock of Dowling's.

         SCPI participates in a cash concentration system together with all the
subsidiaries of Oakhurst.  Available cash that has been transferred to Oakhurst
has been reflected as an addition to the advances to Oakhurst.  Advances to
Oakhurst have been classified as a long-term asset as repayment is not
anticipated prior to February 28, 1998.





                                      -F8-
<PAGE>   34
4.  PROPERTY AND EQUIPMENT

         Property and equipment are summarized as follows (in thousands):
<TABLE>
<CAPTION>
                                                   FEBRUARY 28,     FEBRUARY 29,
                                                       1997             1996    
                                                  -------------     ------------
        <S>                                          <C>              <C>
        Land   . . . . . . . . . . . . . . . .       $  170           $  170
        Buildings  . . . . . . . . . . . . . .          830              830
        Building improvements  . . . . . . . .          370              370
        Office furniture and equipment   . . .          635              628 
                                                     ------           ------
                                                      2,005            1,998
        Less accumulated depreciation  . . . .         (951)            (752)
                                                     ------           ------
                                                     $1,054           $1,246 
                                                     ======           ======
</TABLE>

5.  LONG-TERM OBLIGATIONS AND OAKHURST LINE OF CREDIT

         Long-term obligations, including the present value of the Creditor
Notes (see Note 8), consist of the following (in thousands):
<TABLE>
<CAPTION>
                                                                        FEBRUARY 28,  FEBRUARY 29,
                                                                             1997        1996     
                                                                        ------------  ------------
<S>                                                                         <C>         <C>
Term loan, due monthly through                                     
      April 1998   . . . . . . . . . . . . . . . . . . . . . . . .          $1,268      $1,663
Revolving Credit Agreement due in                                  
      April 1998   . . . . . . . . . . . . . . . . . . . . . . . .           2,150          --
Creditor Notes due annually through July 1998 . . . . . . . . . .              809       1,064
Capital lease obligations for computer and warehouse equipment,    
      due monthly through August 2001  . . . . . . . . . . . . . .              43          62
Other  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              66          73
                                                                            ------      ------
                                                                             4,336       2,862
Less current portion . . . . . . . . . . . . . . . . . . . . . . .             755         646
                                                                            ------      ------
                                                                            $3,581      $2,216
                                                                            ======      ======
</TABLE>

         In fiscal 1995, SCPI obtained a four year term loan in the amount of
$2,560,000 (the "Term Loan"), issued in connection with an acquisition by
Oakhurst.  The Term Loan was secured by a mortgage on SCPI's real estate,
guaranteed by Oakhurst and its subsidiaries, and was supported by a pledge of
the capital stock of Oakhurst's subsidiaries.  The Term Loan provided for
monthly repayments beginning in September 1994 and interest at a fixed rate of
9.25%.

         In fiscal 1995, Oakhurst entered into a two year revolving credit
agreement (the "Oakhurst Credit Agreement") that, until its amendment, carried
a floating interest rate of prime plus 1% and provided for maximum borrowings
of $3 million.  The Oakhurst Credit Agreement allowed Oakhurst to make advances
to its subsidiaries, including SCPI.  The Term Loan and the Oakhurst Credit
Agreement were cross-collateralized.

         On March 28, 1996, Oakhurst obtained replacement financing from an
institutional lender that provides for a total facility for Oakhurst and its
subsidiaries of $9.5 million, comprising a new SCPI term loan of $1.5 million
(the "Fixed Asset Loan") and a maximum revolving credit facility of $8 million
(the "Revolver") (collectively, the "Credit Facility"), and the amounts
outstanding under the Term Loan and Oakhurst Credit Agreement were repaid.

         Borrowings under the Credit Facility bear interest at the higher of
the Citibank N.A. base rate plus 1.5%, or $5,000 per month, and borrowings
under the Revolver are subject to a borrowing base that is calculated according
to defined levels of Oakhurst's subsidiaries' accounts receivable and
inventories.  The





                                      -F9-
<PAGE>   35
Credit Facility has an initial term of two years, with automatic renewal terms
of one year each upon payment of a renewal fee of 0.5% thereof, unless earlier
terminated as provided for in the agreement, and contains restrictive financial
covenants, including among other things, the maintenance of defined subsidiary
and consolidated tangible net worth levels and consolidated current ratio, and
limitations on annual cash dividends.

         At February 28, 1997, Oakhurst and its subsidiaries did not meet
certain of the covenants.  Oakhurst has received waivers from the lender with
respect to its compliance with such covenants.  On June 12, 1997, Oakhurst and
SCPI entered into an agreement with the lender to amend the Credit Facility  to
reflect certain subsidiary dispositions by Oakhurst.  The agreement principally
reduces the total amount available under the Revolver to $7 million, and amends
certain financial covenants, including the elimination of the consolidated
tangible net worth covenant.

         The Credit Facility is secured by the accounts receivable,
inventories, and fixed assets of Oakhurst and its subsidiaries, including SCPI,
contains certain Revolver prepayment penalties, and provides for the payment of
loan management fees, unused Revolver facility fees and examination fees.

         The Fixed Asset Loan provides for twenty-four monthly principal and
interest payments based on a five year amortization schedule, with the
remaining principal balance due on April 1, 1998.  The Fixed Asset Loan
provides for prepayment without penalty, and contains a provision for the
release of SCPI's building as collateral on the Credit Facility in the event of
a refinancing of the Fixed Asset Loan, subject to a right of first refusal by
the current lender to refinance the Fixed Asset Loan on the same terms as
offered by a new lender.

         Long-term obligations, mature during each fiscal year as follows (in
thousands):


<TABLE>
<CAPTION>
             FISCAL
             ------
             <S>                                        <C>
             1998   . . . . . . . . . . . .              $  755
             1999   . . . . . . . . . . . .               3,518
             2000   . . . . . . . . . . . .                  19
             2001   . . . . . . . . . . . .                  12
             2002   . . . . . . . . . . . .                  12
             Thereafter   . . . . . . . . .                  20
                                                         ------
                                                         $4,336
                                                         ======
</TABLE>

6.   FINANCIAL INSTRUMENTS

         Financial instruments at February 28, 1997 consists of the following
(in thousands):

<TABLE>
<CAPTION>
                                                  CARRYING          FAIR
                                                    VALUE           VALUE  
                                                  --------          -----
    <S>                                            <C>             <C>
    Cash  . . . . . . . . . . . . . . . . .        $    2          $    2
    Oakhurst Notes  . . . . . . . . . . . .        $1,283          $1,283
    Creditor Notes  . . . . . . . . . . . .        $  809          $  812
    Term Loan   . . . . . . . . . . . . . .        $1,268          $1,268
</TABLE>

         The fair values of the instruments were based upon the rate available
to the Company for instruments of the same maturities.  The Creditor Notes,
which are non-interest bearing, were discounted using a current market rate of
11.75% to determine current fair value.





                                     -F10-
<PAGE>   36
7.   INCOME TAXES AND DEFERRED TAX ASSET

         As of February 28, 1997, SCPI and Oakhurst had, for tax reporting
purposes, net operating tax loss carry-forwards of approximately $150 million
which expire in the years 2001 through 2011, and capital tax losses of
approximately $4 million.  Under SFAS No. 109, SCPI records as an asset the
future benefit of its net operating tax loss carry-forwards and other tax
benefits.

         Fluctuations in market conditions and trends warrant periodic
management reviews of the recorded valuation allowance to determine if an
increase or decrease in such allowance would be appropriate. During the year
ended February 29, 1996, SCPI experienced significant changes in its customer
base.  As a result, management undertook an extensive review and strategic
evaluation of SCPI's operations to determine the impact of this lost business
on SCPI's future levels of revenues and profits, and to evaluate future
customer and product opportunities.  These efforts, combined with management's
consideration of current trends and  historical operations, led management to
conclude that the current impact of these events warranted an increase of $1.5
million in the deferred tax asset valuation allowance, with a corresponding
charge to deferred tax expense.

         Subsequent to the year ended February 28, 1997, the Board of Directors
of Oakhurst made the decision to dispose of two of its subsidiaries, which led
to a further increase of approximately $1.1 million in the valuation allowance
of the deferred tax asset, primarily due to the loss of potential revenues
pursuant to a tax sharing agreement between SCPI and Oakhurst.  If future
profit levels exceed current expectations, and economic or business changes
warrant upward revisions in the estimate of the realizable value of net
operating tax loss carry-forwards, the consequent reduction in the valuation
allowance would result in a corresponding deferred tax benefit in future
results of operations to the extent of the aggregates charges of $2.6 million
to deferred tax expense for fiscal 1996 and fiscal 1997, and any benefit in
excess of such charge would be reflected as an addition to paid-in capital.
The accounting treatment to increase paid-in capital results from SCPI's
quasi-reorganization accounting in 1990.  Any subsequent utilization of the net
operating tax loss carry-forwards is accounted for as a reduction in the
deferred tax asset.

         In order to realize the net recorded tax benefit at February 28, 1997,
SCPI is required to generate approximately $2.9 million of federal taxable
income from operations and from tax planning strategies, including the tax
sharing agreement with Oakhurst, before the expiration of the net operating tax
loss carry-forwards.

         The deferred tax effects of temporary differences are not significant,
and current income taxes payable represent state income taxes.

         Income tax expense consists of the following (in thousands):

<TABLE>
<CAPTION>
                                             FISCAL       FISCAL       FISCAL
                                           YEAR ENDED   YEAR ENDED   YEAR ENDED
                                          FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
                                              1997         1996         1995    
                                          ------------ ------------ ------------
<S>                                        <C>           <C>            <C>
Current tax expense (benefit) . . . . . .   $    9       $ (136)        $426
Current tax benefit from utilization of                                 
  net operating tax loss carryforwards  .       --          --          (339)
                                            ------       ------         ----
                                                 9         (136)          87
 Increase in valuation allowance                                        
   of the deferred tax asset  . . . . . .    1,217        1,500          --
 Deferred tax (benefit) expense . . . . .     (124)         --           339 
                                            ------       ------         ----
 Income tax expense . . . . . . . . . . .   $1,102       $1,364         $426 
                                            ======       ======         ====
</TABLE>





                                     -F11-
<PAGE>   37
         During the year ended February 29, 1996, SCPI settled a dispute over a
tax refund claimed from the state of Kentucky by SCPI's predecessor, and
accordingly, recorded a refund of approximately $142,000, including
approximately $35,000 of interest.

         The income tax provision differs from the amount using the statutory
federal income tax rate of 34% applied to income or loss from continuing
operations for the following reasons (in thousands):


<TABLE>
<CAPTION>
                                            FISCAL       FISCAL       FISCAL
                                          YEAR ENDED   YEAR ENDED   YEAR ENDED
                                         FEBRUARY 28,  FEBRUARY 29, FEBRUARY 28,
                                              1997        1996         1995  
                                         ------------ ------------  ------------
<S>                                         <C>        <C>             <C>
Tax (benefit) expense based on the                                 
  U.S. federal statutory rate  . . . . .    $  (52)     $  (70)        $429
State income tax expense (benefit),                                
  net of refunds and federal benefit . .         6         (90)          58
Undistributed investment income  . . . .       (71)        (27)          --
Increase in deferred tax asset                                     
  valuation allowance  . . . . . . . . .     1,217       1,500           --
Non-deductible costs . . . . . . . . . .         2          51           --
Non-taxable escrow refund  . . . . . . .        --          --          (61)
                                            ------      ------         ----
     Income tax expense  . . . . . . . .    $1,102      $1,364         $426
                                            ======      ======         ====
</TABLE>                                


         The availability of the net operating tax loss carry-forwards may be
adversely affected by future ownership changes of SCPI or Oakhurst; at this
time, such changes cannot be predicted.  SCPI's and Oakhurst's estimated
operating tax loss carry-forwards at February 28, 1997 expire as follows (in
thousands):


                <TABLE>       
                <S>                      <C>
                2001  . . . . . . . . .   $ 12,000
                2002  . . . . . . . . .     52,000
                2003  . . . . . . . . .     22,000
                2004  . . . . . . . . .     49,000
                2005  . . . . . . . . .     13,000
                2010  . . . . . . . . .      1,500
                2011  . . . . . . . . .        500
                                          --------
                                          $150,000
                                          ========
</TABLE>


8.  DISCONTINUED RETAIL OPERATIONS

        SCPI disposed of its former Retail Division to an unrelated company,
Retail Acquisition Corp. ("RAC") in September 1990 when RAC acquired
substantially all the assets of the former division and assumed substantially
all of its liabilities.  SCPI remained contingently liable for certain of these
liabilities.  In early 1991, SCPI received notices of default in respect of the
leased properties that SCPI had transferred to RAC.  In March 1991, RAC was
forced into bankruptcy by a group of creditors which included SCPI.  Pursuant
to RAC's bankruptcy reorganization plan (the "RAC Plan"), which became
effective in September 1992, SCPI participated in a global settlement pursuant
to which SCPI issued $2.5 million of non-interest bearing notes (the "Creditor
Notes") solely for the benefit of contingent creditors.  In return, SCPI and
Oakhurst were relieved of any further obligations to contingent creditors,
except for payment on the Creditor Notes.





                                     -F12-
<PAGE>   38
        The Creditor Notes, which are non-interest bearing, are payable in
equal annual installments through July 1998, subject to a prepayment provision
whereby if defined cash flow exceeds $1,000,000 and $1,100,000 in fiscal 1996
and 1997, respectively, holders of Creditor Notes may tender for prepayment a
portion thereof in the amount of the defined excess cash flow, but not to
exceed approximately $400,000 per annum.  In fiscal 1996 and in fiscal 1997,
SCPI did not meet the defined criteria for such prepayment.  The Creditor Notes
have been discounted using an imputed interest rate of 7.5%. Imputed interest
expense of approximately $56,000, $76,000 and $96,000 is included in results of
continuing operations for fiscal 1997, 1996 and 1995, respectively.

        The accompanying statements of operations and cash flows reflect any
income or loss associated with the disposal of the former Retail Division as
discontinued operations. Income from discontinued operations of $43,000 for the
period ended February 29, 1996 primarily reflected a decrease in SCPI's reserve
for contingent liabilities relating to the former retail division, net of an
income tax provision of $22,000.


9.  STOCK OPTIONS

         In fiscal 1992, the Board of Directors granted options to purchase
215,986 shares of common stock to key employees and to members of the Board of
Directors.  The exercise price of the options, which was equal to the market
value of the stock at the date of the grant, is $0.625.  As of February 28,
1997, no options had been exercised; all options are fully vested and will
remain exercisable through 2001.

         In connection with SCPI's predecessor's emergence in fiscal 1990 from
Chapter 11 bankruptcy proceedings, warrants to purchase 366,837 shares of
common stock were issued and were exercisable at a price of $1.00 per share
through September 28, 1994.   As a result of the merger (see Note 2), the
warrant holders, upon exercise, were entitled to one share each of SCPI's and
Oakhurst's common stock for the aggregate purchase price of $1.00.  During the
year ended February 28, 1995, 331,622 shares were purchased pursuant to these
warrants and 35,215 warrants expired.


10.  EMPLOYEE PENSION PLAN

         Steel City Products maintains a defined contribution profit-sharing
retirement plan ("the Plan") covering substantially all its employees, whereby
employees may contribute a percentage of compensation, limited to maximum
allowed amounts under the Internal Revenue Code.  Through fiscal 1995, the Plan
provided for a 25% matching employer contribution and an annual discretionary
contribution determined by SCPI's Board of Directors.

         In October 1995, SCPI's 25% matching employer contribution was
suspended until further notice, and discretionary contributions were not made
for the years ending February 28, 1997 and February 29, 1996.  Total expenses
related to the Plan was $150,000 for the year ended February 28, 1995.

         On June 1, 1995, by amendment to the Plan, Oakhurst and one of its
subsidiaries were incorporated into the Plan, the Plan was renamed the Oakhurst
Company Profit Sharing Plan (the "Profit Sharing Plan"), and on January 1, 1996
two of Oakhurst's other subsidiaries were incorporated into the Profit Sharing
Plan, with one such subsidiary merging its assets and liabilities into the
Profit Sharing Plan.  The Profit Sharing Plan now provides for discretionary
employer contributions, the level of which, if any, is to be determined
annually by each company's Board of Directors.





                                     -F13-
<PAGE>   39
11.  COMMITMENTS AND CONTINGENCIES

         SCPI has employment agreements with two senior executives that provide
termination rights in the event of a change in control of SCPI, as defined.
The rights include payments ranging from six to twenty-four months of the
executives' base salaries, along with continuation of benefits and certain
other payments to each executive.  Each agreement also provides for
substantially the same provisions in the event that the executive's employment
were to be terminated by SCPI without cause.  The agreements were extended in
August 1996 on a year to year basis, and will continue under the same terms
unless a notice of non-renewal is given by either party 90 days prior to the
anniversary date of such renewal.

         Management is unaware of any other significant contingencies.


12.  MAJOR CUSTOMERS

         Sales to each of those major customers representing individually more
than 10% of sales were as follows (in thousands):

<TABLE>
<CAPTION>
            Fiscal Year Ended    Fiscal Year Ended     Fiscal Year Ended
            February 28, 1997    February 29, 1996     February 28, 1995
            ------------------   ------------------    ------------------  
                      % of                 % of                   % of
            Sales  Total Sales   Sales  Total Sales    Sales  Total Sales
            -----  -----------   -----  -----------    -----  -----------
<S>         <C>       <C>         <C>        <C>       <C>       <C>
Customer A  $2,290     13%        $  780       3%          --      --
Customer B      --     --         $4,641      19%      $6,046      22%
Customer C      --     --         $3,975      16%      $4,465      16%
</TABLE>

         During the third quarter of fiscal 1996, customer B informed SCPI that
it had decided to change its source of supply, and sales to customer B ended in
January 1996.

         In July 1993, one of SCPI's then-largest customers (customer C) filed
for protection under Chapter 11 of the United States Bankruptcy Code.  This
customer reorganized and emerged from Chapter 11 in January 1995.  Customer C
continued to be one of SCPI's largest customers throughout this period until
the second quarter of fiscal 1996, when management curtailed the level of
credit allowed to such customer after becoming aware that it was experiencing
new financial difficulties.  In October 1995, customer C again filed for
protection under the U.S. Bankruptcy Code and announced that it would close all
its stores; the fiscal 1996 provision for doubtful accounts contains a
write-off of approximately $150,000 relating to this customer.


13.  RELATED PARTY TRANSACTIONS

         During fiscal 1996, SCPI transferred the rights to its Steel City
Products trademark and trade name to Oakhurst Holdings, Inc. ("OHI") in
exchange for 460 shares of stock, representing a 45.6% investment interest in
OHI.  In August 1995, SCPI entered into a trademark and trade name license
agreement with OHI whereby OHI granted SCPI the exclusive right to use the
trade name in transacting its business.  The agreement provides for a quarterly
license fee equal to 1% of gross sales.  This fee was approximately $186,000
and $97,000 for fiscal 1997 and fiscal 1996, respectively.  SCPI's investment
income from OHI was approximately $209,000 and $80,000 in fiscal 1997 and
fiscal 1996, respectively.

         In June 1995, SCPI engaged Oakhurst Management Corporation ("OMC"), a
wholly-owned subsidiary of Oakhurst, to provide certain legal, management,
investor relations, accounting, and tax services.  SCPI's results for the years
ended February 28, 1997 and February 29, 1996 include charges of approximately
$461,000 and $365,000, respectively, for these services.





                                     -F14-
<PAGE>   40
14.  PREDECESSOR BANKRUPTCY

         During fiscal 1995, SCPI recovered funds placed into escrow in prior
years as a part of SCPI's predecessor's bankruptcy in the amount of
approximately $175,000, which amount is included in other income for such year.
SCPI's predecessor emerged from bankruptcy in 1990.

15.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(Dollar amounts in thousands, except per share data)

<TABLE>
<CAPTION>                  
FISCAL 1997                                         FIRST     SECOND        THIRD        FOURTH     
-----------                                         -----     ------        -----        ------     
<S>                                               <C>         <C>         <C>          <C>         
Sales . . . . . . . . . . . . . . . . . . . . .  $   5,096   $   4,941    $   4,264    $   3,730   
Gross profit  . . . . . . . . . . . . . . . . .        934         984          705          787   
Net (loss) income . . . . . . . . . . . . . . .        (29)         47         (207)      (1,066)  
Series A Preferred Stock dividends  . . . . . .       (253)       (253)        (253)        (255)  
Net loss available                                                                                 
  to common stockholders  . . . . . . . . . . .       (282)       (206)        (460)      (1,321)  
                                                                                                   
Per share:                                                                                         
 Net loss attributable to common                                                                   
  stockholders after preferred stock dividends.  $    (.09)  $    (.06)   $    (.14)   $    (.41)  
Average number of shares outstanding  . . . . .  3,238,061   3,238,061    3,238,061    3,238,061   
                                                                                                              
</TABLE> 

<TABLE>
<CAPTION>
FISCAL 1996                                         FIRST      SECOND       THIRD        FOURTH 
-----------                                         -----      ------       -----        ------ 
<S>                                              <C>         <C>          <C>              <C>     
Sales . . . . . . . . . . . . . . . . . . . . .  $   7,836   $   7,078    $   5,958    $   3,775
Gross profit  . . . . . . . . . . . . . . . . .      1,572       1,423        1,078          550
Income (loss) from continuing operations  . . .        211          86       (1,507)        (360)
Income from discontinued operations . . . . . .        --           --           --           43
Net income (loss) . . . . . . . . . . . . . . .        211          86       (1,507)        (317)
Series A Preferred Stock dividends  . . . . . .       (253)       (253)        (253)        (257)
Net loss available                                                                             
  to common stockholders  . . . . . . . . . . .        (42)       (167)      (1,760)        (574)
                                                                                               
Per share:                                                                                     
  Loss from continuing operations                                                              
    after preferred stock dividends              $    (.01)  $    (.05)   $    (.54)   $    (.19)
  Net loss attributable to common                                                              
     stockholders after preferred stock                                                        
     dividends  . . . . . . . . . . . . . . . .  $    (.01)  $    (.05)   $    (.54)   $    (.18)
Average number of shares outstanding  . . . . .  3,238,061   3,238,061    3,238,061    3,238,061
                                                                                                              
</TABLE>

         The net loss in fourth quarter of fiscal 1997 was caused by a deferred
tax charge of $1.1 million related to an increase in the valuation allowance of
the deferred tax asset (see Note 7).

         The net loss in third quarter of fiscal 1996 was primarily caused by a
deferred tax charge of $1.5 million related to an increase in the valuation
allowance of the deferred tax asset, and by reduced sales and profit levels due
to the loss of a major customer that filed bankruptcy.  The loss in the fourth
quarter of fiscal 1996 was principally due to the loss of certain other
customers and to increases in the provision for doubtful accounts.

         During fiscal 1996, the previous estimate to provide for the disposal
of the discontinued Retail Division was reduced.





                                     -F15-
<PAGE>   41
                                                                     SCHEDULE II

                           STEEL CITY PRODUCTS, INC.
                       VALUATION AND QUALIFYING ACCOUNTS
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------    
COLUMN A                            COLUMN B        COLUMN C                              COLUMN D          COLUMN E     
---------------------------------------------------------------------------------------------------------------------    
                                    BALANCE AT        CHARGED          CHARGES TO                            BALANCE     
                                    BEGINNING        TO COSTS        OTHER ACCOUNTS       DEDUCTIONS         AT END      
DESCRIPTION                         OF PERIOD      AND EXPENSES        - DESCRIBE         - DESCRIBE        OF PERIOD    
=====================================================================================================================    
<S>                                 <C>            <C>                 <C>                <C>               <C>          
Allowance for doubtful accounts                                                                                          
  deducted from trade accounts                                                                                           
  receivable:                                                                                                            
                                                                                                                         
Years ended:                                                                                                             
   February 28, 1997.............     $419              $(30)             $  -             $  - (A)            $389        
                                      ====              ====              ====             ====                ====      
   February 29, 1996.............     $194              $415              $  -             $190 (A)            $419        
                                      ====              ====              ====             ====                ====      
   February 28, 1995.............     $320              $  -              $  -             $126 (A)            $194        
                                      ====              ====              ====             ====                ====      
                                                                                                                         
</TABLE>





(A)  Amounts were deemed uncollectible.




                                    -F16-
<PAGE>   42


                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
Exhibit No.           Description
-----------           -----------
     <S>              <C>    
     2.1              Heck's, Inc. Second Amended Joint Plan of Reorganization
                      and Disclosure Statement (filed as Exhibits 2(a) and (b)
                      to the Company's Annual Report on Form 10-K for the
                      fiscal year ended February 25, 1989).
         
     2.2              Agreement and Plan of Merger dated as of May 20, 1991 
                      (filed as Appendix A to the Proxy Statement/Prospectus 
                      of Steel City Products, Inc. and the Company the dated 
                      April 16, 1991).
         
     3.1              Restated Certificate of Incorporation (filed as Exhibit 
                      3(a) to the Company's Annual Report on Form 10-K for the 
                      fiscal year ended February 27, 1993).

     3.2              By-laws of the Company as amended through May 17, 1993 
                      (filed as Exhibit 3.2 to the Company's Annual Report of 
                      Form 10-K for the fiscal year ended February 26, 1994).

   *10.1              Employment Agreement with Bernard H. Frank dated as of 
                      September 1, 1993 (filed as Exhibit 10.1 to the Company's 
                      Annual Report of Form 10-K for the fiscal year ended 
                      February 26, 1994).

   *10.2              Employment Agreement with Terrance W. Allan dated as of 
                      September 1, 1993 (filed as Exhibit 10.3 to the Company's 
                      Annual Report of Form 10-K for the fiscal year ended 
                      February 26, 1994).

    10.3              Agreement dated June 11, 1991 with Prudential-Bache 
                      Special Situations Fund (filed as Exhibit 10(q) to the 
                      Company's Annual Report on Form 10-K for the fiscal year 
                      ended March 3, 1990).

   *10.4              Form of Option Agreement dated August 29, 1991 with 
                      directors and executive officers (filed as Exhibit 10(t) 
                      to the Company's Annual report on Form 10-K for the 
                      fiscal year ended February 29, 1992).

    10.5              Credit Agreement by and between Steel City Products, Inc.
                      and Integra Bank Pittsburgh (filed as Exhibit 10.1 to the
                      Company's Quarterly Report on Form 10-Q for the period 
                      ended August 27, 1994).

    10.6              Mortgage and Security Agreement by and between Steel City 
                      Products, Inc. and Integra Bank Pittsburgh (filed as 
                      Exhibit 10.2 to the Company's Quarterly Report on Form 
                      10-Q for the period ended August 27, 1994).

    10.7              Note Agreements with William T. Apgar, Liquidating
                      Trustee for the Retail Acquisition Corp. Amended Plan of
                      Reorganization, (filed as Exhibit 10(w) the Company's
                      Annual Report on Form 10-K for the fiscal year ended
                      February 27, 1993).

    10.8              Letter agreement dated January 3, 1996 between SCPI and 
                      Integra Bank Pittsburgh amending the Credit Agreement, 
                      dated August 1, 1994 between SCPI and Integra, (filed 
                      as exhibit #10.17 to Oakhurst's Registration Statement 
                      on Form S-1, file number #333-00173, filed on January 12, 
                      1996).

    10.9              Letter agreement dated January 3, 1996 between Oakhurst 
                      and Integra Bank Pittsburgh amending the Credit Agreement, 
                      dated August 1, 1994 between Oakhurst and Integra, 
                      (filed as exhibit #10.16 to Oakhurst's Registration 
                      Statement on Form S-1, file number #333-00173, filed on 
                      January 12, 1996).
</TABLE>

<PAGE>   43

<TABLE>

    <S>               <C>
    10.10             Open-End Mortgage between Steel City Products, Inc. and 
                      FINOVA Capital Corporation dated March 28, 1996, (filed 
                      as exhibit #10.10 to the Company's Annual Report on Form 
                      10-K for the fiscal year ended February 29, 1996).

    10.11             Combined and Amended Promissory Note between Steel City
                      Products, Inc. and Oakhurst Company, Inc., dated March
                      28, 1996, (filed as exhibit #10.11 to the Company's
                      Annual Report on Form 10-K for the fiscal year ended
                      February 29, 1996).

    10.12             Trademark & Trade Name License Agreement between Oakhurst
                      Holdings, Inc. and Steel City Products, Inc., dated
                      August 16, 1995, (filed as exhibit #10.12 to the
                      Company's Annual Report on Form 10-K for the fiscal year
                      ended February 29, 1996).

    10.13             Corporate Services Agreement between Steel City Products,
                      Inc. and Oakhurst Management Corporation dated June 1, 
                      1995, (filed as exhibit #10.13 to the Company's Annual 
                      Report on Form 10-K for the fiscal year ended February 29,
                      1996).

    11                Statement re-computation of per-share earnings - filed 
                      herewith.

    27                Financial Data Schedule (EDGAR transmission only) - filed 
                      herewith.
</TABLE>
-----------------
          *  Management contract or compensatory plan or arrangement.