<PAGE>
                          SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549

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

                                      FORM 10-K


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

For the fiscal year ended May 31, 1998   Commission file number 1-7633


                               HI-SHEAR INDUSTRIES INC.


       A DELAWARE CORPORATION            I.R.S. EMPLOYER IDENTIFICATION
                                                NO. 11-2406878


                    3333 NEW HYDE PARK ROAD, NORTH HILLS, NY 11042


    REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (516) 627-8600

       SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:


                                                  NAME OF EACH EXCHANGE
         TITLE OF EACH CLASS                        ON WHICH REGISTERED
    ----------------------------                 -------------------------
    Common Stock, $.10 par value                 Over The Counter Exchange


   SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:  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 and (2) has been subject to such filing requirements for
the past 90 days.

Yes X    No

On August 18, 1998, 5,854,618 shares of the Registrant's Common Stock were 
outstanding.  Of these shares, 1,677,218 shares were held by persons who may 
be deemed to be affiliates. The aggregate market value (based on the average 
bid and ask price of these shares on the Over The Counter Exchange of $2.88 a 
share) of the 4,177,400 shares held by non-affiliates of the registrant was 
$12,010,000.

                         DOCUMENTS INCORPORATED BY REFERENCE

                                        None.
<PAGE>

                                        PART I

ITEM 1.  BUSINESS


     (a)  General Development of Business

     HI-SHEAR INDUSTRIES INC.("the Company"), a Delaware corporation 
organized in 1976, was engaged primarily in the manufacture and sale of high 
technology Aerospace Fastening Systems products through its wholly-owned 
subsidiary, Hi-Shear Corporation ("HSC") until February 26, 1996.

     During the fiscal year ended May 31, 1991, the Company adopted a plan to
discontinue the operations of Hi-Shear's Space and Defense segment, comprised of
Hi-Shear Technology Corp. ("HSTC") and Defense Systems Corporation ("DSC").  The
operation of DSC was terminated in March 1991 and in June 1993, the Company
completed the sale of HSTC to a group led by the management of the subsidiary.

     On February 26, 1996, the Company completed the sale of Hi-Shear 
Corporation and its subsidiaries which included Hi-Shear Automotive Corp., 
Hi-Shear Holdings Limited, and Hi-Shear Fasteners Europe Limited, to GFI 
Industries S.A. (GFI") of Belfort, France for $46 million.  With the 
completion of this sale the Company disposed of its last remaining operating 
assets and effectively ceased operations.

     (b)  Narrative Description of Business

     With the sale of its last remaining manufacturing operation on February 
26, 1996, the Company no longer conducts an operating business.  As outlined 
in the Company's "Notice Of Annual Meeting of Stockholders" dated January 8, 
1996, the Company currently anticipates that upon final resolution of its 
claims against the U.S. Navy, it will complete the distribution of its assets 
to stockholders and seek stockholder approval to dissolve the Company.

     The Company currently has four full-time employees.

ITEM 2. PROPERTIES

     The Company's corporate headquarters are located in an office building 
at North Hills, New York, where 2,475 square feet of space are leased at a 
current annual rental of approximately $61,000 under a lease which expires 
October 31, 2002.  

     HSI Properties, Inc., a wholly-owned subsidiary of the Company, owns 16 
acres of land in Saugus, California, with incidental structures (2,700 sq. 
ft.) currently being leased to a former subsidiary, Hi-Shear Technology 
Corp., for $97,344 per year.  The lease expires May 31, 1999.


                                          2
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

     In 1991, the U.S. Navy terminated for default two contracts held by a 
discontinued subsidiary of the Company and sought reimbursement of progress 
payments totaling $11.2 million made against these contracts.  The Company 
appealed the default terminations and on May 31, 1995 its appeal was 
sustained.  This decision effectively released the Company from any 
obligation to repay progress payments received under the contracts.  On 
January 31, 1996, the Company filed damage claims against the U.S. Navy 
totaling $62.9 million.  The government has audited these claims but has not 
expressed a willingness to negotiate a settlement of these claims with the 
Company.  As a result, on February 11, 1997, the Company filed an appeal 
before the Armed Services Board of Contract Appeals requesting an 
adjudication of this dispute.  The Board set a hearing date of August 3, 
1998, at the conclusion of which, the Board will consider the facts brought 
out at the hearing as well as briefs to be filed by both sides in determining 
the amount of claim damages to be awarded to the Company.  See COMMITMENTS 
AND CONTINGENCIES in the notes to consolidated financial statements.

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

     None




                                       PART II


ITEM 5.   MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

     The Company's Common Stock had, until August 1, 1996, been traded on the 
New York Stock Exchange ("NYSE") under the symbol "HSI."  On August 1, 1996, 
the Company made an initial liquidating distribution of approximately $23.4 
million ($4.00 per share).  Prior to that the Company had not paid a dividend 
on common stock since August 1990.  Concurrent with this distribution, the 
NYSE suspended trading in the Company's common stock and made application to 
delist the issue. The following table sets forth the high and low prices per 
share of the Company's Common Stock, as reported on the NYSE Composite Tape 
for the periods indicated through August 1, 1996.  The high and low prices 
per share for the periods included subsequent to August 1, 1996 were derived 
from trades executed on the Over-The-Counter Exchange. 


                                          3
<PAGE>

                                                    PER COMMON SHARE
                                                      MARKET PRICE  
                                                    ----------------
                                                    HIGH       LOW
                                                    -----     -----
Quarter Ended
  August 1997.........................              $2.45     $2.25
  November 1997.......................               2.25      2.00
  February 1998.......................               2.50      2.00
  May 1998............................               2.63      2.00

Fiscal Year Ended May 31, 1998                      $2.63     $2.00
                                                    =====     =====
  Quarter Ended
  August 1996.........................              $6.50     $2.50
  November 1996.......................               2.88      2.38
  February 1997.......................               2.63      2.38
  May 1997............................               2.91      2.38

Fiscal Year Ended May 31, 1997                      $6.50     $2.38
                                                    =====     =====

     As of August 18, 1998 there were approximately 700 holders of record of the
Company's Common Stock.


ITEM 6.  SELECTED FINANCIAL DATA

     The following table sets forth selected financial information of the 
Company and its subsidiaries for the five years ended May 31, 1998.  This 
selected financial information should be read in conjunction with the 
Consolidated Financial Statements and notes thereto, and Management's 
Discussion and Analysis of Results of Operations and Financial Condition 
included elsewhere herein.

<TABLE>
<CAPTION>
                                          FOR THE FISCAL YEAR ENDED MAY 31,
                                   1998      1997      1996      1995     1994
                                 -------   -------   -------   -------   -------
                                   (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S>                              <C>       <C>       <C>       <C>       <C>    
SELECTED STATEMENT OF
  OPERATIONS DATA:
Revenues from operations(A)      $     -   $     -   $46,400   $58,639   $56,465
                                                     =======   =======   =======
Income (loss) before    
 discontinued operations         $(1,161)  $(1,283)  $ 1,106   $  (545)  $(2,974)
Loss from discontinued  
 operations(B)                         -        -          -         -    (2,616)
                                 -------   -------   -------   -------   -------
Net income (loss)                $(1,161)  $(1,283)  $ 1,106   $  (545)  $(5,590)
                                 =======   =======   =======   =======   =======
Weighted Average Shares
  Outstanding                      5,855     5,855     5,855     5,855     5,855
                                 =======   =======   =======   =======   =======
Per Common Share Data:
Income (loss) before 
 discontinued operations(A)      $  (.20)   $ (.22)  $   .19   $  (.09)  $  (.51)
Loss from discontinued 
 operations (B)                        -         -         -        -       (.45)
                                 -------   -------   -------   -------   -------
Net income (loss)                $  (.20)  $  (.22)  $   .19   $  (.09)  $  (.96)
                                 =======   =======   =======   =======   =======
</TABLE>


                                       4
<PAGE>

<TABLE>
<CAPTION>
                                                  AS OF MAY 31,
                                   1998      1997      1996      1995      1994
                                 -------   -------   -------   -------   -------
                                             (DOLLARS IN THOUSANDS)
<S>                              <C>       <C>       <C>       <C>       <C>    
Selected Balance Sheet Data:
Current assets                   $ 2,308   $ 5,105   $31,103   $34,846   $35,659
Current liabilities                  382       640     1,131    12,563    12,013
Working capital                    1,926     4,465    29,972    22,283    23,646
Total assets                       6,288     7,555    32,748    49,514    49,115
Long-term debt                         -         -         -     9,872     9,953
Stockholders' equity               5,754     6,915    31,617    27,079    27,149

</TABLE>

(A) Includes revenues and income (loss) from operations of HSC through 
February 26, 1996 at which date HSC was sold.  With the completion of this 
sale, the Company disposed of its last remaining operating assets and 
effectively ceased operations.

(B) The loss from discontinued operations in fiscal 1994 includes additional 
expenses, legal costs and an unexpected shortfall in amounts realized from 
the sale of material and equipment of a discontinued operation.



                                          5
<PAGE>

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

On February 26, 1996, the Company sold its last remaining operating entity, 
Hi-Shear Corporation and its subsidiaries and effectively ceased operations. 
The Company had previously disposed of its business activities dealing with 
space and defense in June 1993 and had since that time been reporting their 
operating activities as discontinued operations.  The results of operations 
of the Company include the operating activities of Hi-Shear Corporation and 
subsidiaries through February 26, 1996.

RESULTS OF OPERATIONS

The Company had no operating activities subsequent to the sale of Hi-Shear 
Corporation during fiscal 1996.  The $1.3 million and $1.8 million of general 
and administrative costs incurred in fiscal 1998 and 1997, respectively, 
include professional and other costs associated with the dispute over price 
adjustment on the sale of Hi-Shear Corporation as well as the ongoing costs 
necessary to pursue the settlement of the Company's dispute with the U.S. 
Navy.

The interest income reported in fiscal 1998, 1997 and 1996 was due to 
interest earned on the investment of the proceeds from the sale of Hi-Shear 
Corporation. The investable proceeds declined considerably after the initial 
liquidating distribution to shareholders of approximately $23.4 million on 
August 1, 1996. The decline in interest expense is due to the repayment of 
amounts outstanding on the Company's loan agreements with the proceeds from 
the sale of Hi-Shear Corporation.

The Company did not record a provision or benefit for federal income taxes 
due to it's tax loss carryforward position.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal sources of liquidity have consisted of cash provided 
by operating activities and, until the sale of Hi-Shear Corporation, bank 
financing.  On February 26, 1996, the Company completed the sale of Hi-Shear 
Corporation to GFI Industries S.A. for a total purchase price of $46 million 
generating net proceeds from the sale, after deducting transaction costs, of 
$44.4 million.  Of that amount, approximately $13 million was used to repay 
all amounts outstanding under the Company's loan agreements and the remaining 
balance was deposited in short term investment accounts.  With the sale of 
Hi-Shear Corporation the Company no longer had operating businesses and 
announced its intention to liquidate and distribute the proceeds from the 
sale of Hi-Shear Corporation as well as any settlement received from the 
resolution of the 






                                          6
<PAGE>

Company's long standing dispute with the U.S. Navy.  In this regard, the 
Company made an initial liquidating distribution to shareholders of 
approximately $23.4 million ($4.00 per share) on August 1, 1996.  Under the 
terms of the agreement for the sale of Hi-Shear Corporation, the Company was 
required to maintain working capital of not less than $3,000,000 through 
March 31, 1997.  Subsequent to that date there are no restrictions on Company 
distributions.  At May 31, 1998 the Company had $2.3 million remaining in 
cash and cash equivalents.

On May 31, 1995 the Company learned that its appeal of the default 
terminations filed by the Navy with regard to the two contracts being held by 
a subsidiary, Defense Systems Corporation had been sustained and converted to 
termination for the convenience of the government.  On January 31, 1996 the 
Company filed damage claims against the U.S. Navy totaling $62.9 million.  
The government has audited these claims but has not expressed a willingness 
to negotiate a settlement of these claims with the Company.  As a result, on 
February 11, 1997, the Company filed an appeal before the Armed Services 
Board of Contract Appeals requesting an adjudication of this dispute.  The 
Board has set a hearing date of August 3, 1998.  The hearing is expected to 
last several weeks after which the Board will render a decision as to the 
amount of claim damages to be awarded to the Company.  It is not certain at 
this time how long it will take the ASBCA to render its decision or whether 
the government will try to appeal the Boards decision.  Therefore the total 
amount or timing of the ultimate recovery cannot be predicted at this time.

The Company's cash requirements include ongoing costs relating to pursuing 
the settlement of the Company's dispute with the U.S. Navy and normal 
recurring general and administrative expenses.  The Company anticipates that 
existing cash and cash equivalents  will be sufficient to satisfy the 
Company's cash requirements through the time of settlement with the U.S. Navy 
 and final liquidation of the Company.  Although management and its legal 
counsel cannot currently estimate when these situations will be resolved, the 
Company has retained what it considers sufficient funds to allow it to pursue 
equitable settlements with regard to all open matters currently pending.  
However, should this situation continue beyond a reasonable period of time, 
the Company believes it has the ability to acquire additional capital if 
necessary.

IMPACT OF THE YEAR 2000 ISSUE

The Year 2000 Issue is the result of computer programs being written using 
two digits rather than four to define the applicable year thus causing 
date-sensitive software to recognize a date using "00" as the year 1900 
rather than the year 2000.  Since the Company no longer has operating 
activities, management believes that the Year 2000 Issue will not have a 
material impact on the financial position, operation or cash flows of the 
Company.  


                                          7
<PAGE>

RECENT ACCOUNTING STANDARDS

In June 1997, the Financial Accounting Standards Board("FASB") issued SFAS 
130, "Reporting Comprehensive Income", which established standards for 
reporting and display of comprehensive income and its components.  SFAS 130 
requires a separate statement to report the components for comprehensive 
income for each period reported.  The provisions of this statement are 
effective for fiscal years beginning after December 15, 1997.  Management 
believes this statement will not have a significant effect on the Company's 
financial statements.

In June 1997, the FASB also issued SFAS 131, "Disclosure About Segments of an 
Enterprise and Related Information".  The standard requires that companies 
disclose "operating segments" based on the way management disaggregates the 
company for making internal operating decisions.  The provisions of this 
statement are effective for fiscal years beginning after December 15, 1997. 
Management of the Company anticipates that, due to its lack of operating 
segments, the adoption of SFAS 131 will not have a significant effect on the 
Company's financial statements.

In June 1998, the FASB issued SFAS 133, "Accounting for Derivative 
Instruments and Hedging Activities".  This statement requires that all 
derivative instruments be recorded on the balance sheet at their fair value.  
Changes in the fair value of derivatives are recorded each period in current 
earnings or other comprehensive income, depending on whether a derivative is 
designated as part of a hedge transaction and, if it is, the type of hedge 
transaction.  The provisions of the statement are effective for all fiscal 
quarters of all fiscal years beginning after June 15, 1999.  Management of 
the Company anticipates that the adoption of SFAS 133 will not have a 
significant effect on the Company's results of operations or its financial 
position.

FORWARD LOOKING STATEMENTS

The statements in this Management's Discussion and Analysis which are not 
historical fact are forward looking statements that are made pursuant to the 
Safe Harbor provisions of the Private Securities Litigation Reform Act of 
1995. The statements are subject to risks and uncertainties, including, but 
not limited to uncertainties surrounding the Company's dispute with the U.S. 
Navy which could cause actual results to vary materially from those discussed 
herein.


                                          8
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                      INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                      HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES


                                                                       PAGE

Report of Independent Accountants.....................                  10
Consolidated Balance Sheets...........................                  11
Consolidated Statements of Operations.................                  12
Consolidated Statements of Stockholders' Equity.......                  13
Consolidated Statements of Cash Flows.................                  14
Notes to Consolidated Financial Statements............                  15















                                          9
<PAGE>

                          REPORT OF INDEPENDENT ACCOUNTANTS


Board of Directors and Stockholders
Hi-Shear Industries Inc.
North Hills, New York


     In our opinion, the accompanying consolidated balance sheets and the 
related consolidated statements of operations, stockholders' equity and cash 
flows present fairly, in all material respects, the financial position of 
Hi-Shear Industries Inc. and its subsidiaries at May 31, 1998 and 1997, and 
the results of their operations and their cash flows for each of the three 
years in the period ended May 31, 1998 in conformity with generally accepted 
accounting principles. These financial statements are the responsibility of 
the Company's management; our responsibility is to express an opinion on 
these financial statements based on our audits.   We conducted our audits of 
these statements in accordance with generally accepted auditing standards 
which 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, assessing 
the accounting principles used and significant estimates made by management, 
and evaluating the overall financial statement presentation. We believe that 
our audits provide a reasonable basis for the opinion expressed above.

     As discussed in the Commitments and Contingencies note to Consolidated 
Financial Statements, the Company is involved in a dispute with the U.S. Navy 
regarding the termination of certain contracts.  The Company has filed damage 
claims totaling $62.9 million against the Navy with respect to these 
contracts, however, a settlement has not been reached and the claims are 
being contested by the Navy.  Therefore, the amount or timing of the recovery 
cannot be predicted at this time and no recognition of income related to this 
claim has been made in the consolidated financial statements.

     The accompanying financial statements have been prepared assuming that 
the Company will continue as a going concern. As discussed in Summary of 
Significant Accounting Policies Note to Consolidated Financial Statements, on 
February 26, 1996, the Company sold its last operating asset and effectively 
ceased operations. Since that date the Company has suffered recurring losses 
and cash flow deficit from operations that raise substantial doubt about its 
ability to continue as a going concern. The Company is presently in the 
process of liquidation, and management's plans in regard to this matter are 
further discussed in the Summary of Significant Accounting Policies Note to 
Consolidated Financial Statements. The financial statements do not include 
any adjustments that might result from the outcome of this uncertainty.



                                   PRICEWATERHOUSECOOPERS LLP


Los Angeles, California
July 8, 1998

                                          10
<PAGE>

                  HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS

                                                                May 31,
                                                        ----------------------
                                                          1998          1997
                                                        --------      --------
                                                             (000 Omitted)
    ASSETS
Current assets:
  Cash and equivalents                                   $  2,254      $  4,952
  Other                                                        54           153
                                                         --------      --------
    Total current assets                                    2,308         5,105

Property and equipment, at cost:
  Land                                                         80            80
  Equipment and fixtures                                      155           126
                                                         --------      --------
                                                              235           206
  Less, accumulated depreciation and amortization            (110)          (91)
                                                         --------      --------
                                                              125           115
Other assets                                                3,703         2,335
                                                         --------      --------
           Total assets                                  $  6,136      $  7,555
                                                         ========      ========

    LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:  
  Accrued income taxes                                   $     25      $     40
  Other accrued expenses                                      357           600
                                                         --------      --------
    Total current liabilities                                 382           640

Commitments and contingencies

Stockholders' equity:
  Capital stock:  
  Preferred stock, $1 par value: authorized 500,000   
     shares; none issued                                        -             -
  Common stock, $.10 par value: authorized 10,000,000   
    shares; issued 6,139,756 shares                           614           614
  Paid-in capital                                          11,153        11,153
  Accumulated deficit                                      (3,309)       (2,148)
  Less treasury stock, at cost (285,138 shares)            (2,704)       (2,704)
                                                         --------      --------
                                                            5,754         6,915
                                                         --------      --------
    Total liabilities and stockholders' equity           $  6,136      $  7,555
                                                         ========      ========

                See notes to consolidated financial statements.


                                       11
<PAGE>

                   HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                    Years ended May 31,
                                              ---------------------------------
                                                1998        1997        1996
                                              ---------   ---------   ---------
                                             (000 Omitted except per share data)
Revenues:
  Net sales                                   $       -   $       -   $  45,268
  Other                                               -           -       1,132
                                              ---------   ---------   ---------
                                                      -           -      46,400
                                              ---------   ---------   ---------
Cost of goods sold                                    -           -      37,316
Selling, general and administrative expenses      1,322       1,773       8,870
                                              ---------   ---------   ---------
                                                  1,322       1,773      46,186
                                              ---------   ---------   ---------

    Operating income (loss)                      (1,322)     (1,773)        214

Gain on sale of subsidiary                            -           -       1,768
Interest income                                     181         515         434
Interest expense                                      -          (1)     (1,071)
                                              ---------   ---------   ---------

    Income (loss) before income taxes            (1,141)     (1,259)      1,345

Provision for income taxes                           20          24         239
                                              ---------   ---------   ---------
     Net income (loss)                        $  (1,161)  $  (1,283)  $   1,106
                                              =========   =========   =========
Weighted average Common shares
  outstanding                                     5,855       5,855       5,855
                                              ---------   ---------   ---------

    Basic net income (loss) per share         $   (0.20)  $   (0.22)  $    0.19
                                              =========   =========   =========

               See notes to consolidated financial statements.


                                       12
<PAGE>

                    HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES         
                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY     
                      Years ended May 31, 1998, 1997 and 1996         
<TABLE>
<CAPTION>
                                                                                                Cumulative
                                                         Common Stock                           translation,    Treasury Stock
                                                      ------------------              Retained  pension and  -------------------
                                                                            Paid-in   earnings     other
                                                       Shares     Amount    capital   (deficit) adjustments   Shares     Amount
                                                      --------   --------   --------   -------- -----------  --------   --------
                                                                                    (000 Omitted)
                                                      <C>        <C>        <C>        <C>        <C>        <C>        <C>
Balance, May 31, 1995                                    6,140   $    614   $ 34,572   $ (1,971)  $ (3,432)      (285)  $ (2,704)
Unrealized foreign currency translation adjustments          -          -          -          -       (265)         -          -
Realized foreign currency translation and pension
   adjustments upon sale of subsidiary                       -          -          -          -      3,697          -          -
Net Income                                                   -          -          -      1,106          -          -          -
                                                      --------   --------   --------   --------   --------   --------   --------
Balance, May 31, 1996                                    6,140        614     34,572       (865)         -       (285)    (2,704)
Distribution to Stockholders                                 -          -    (23,419)         -          -          -          -
Net Loss                                                     -          -          -     (1,283)         -          -          -
                                                      --------   --------   --------   --------   --------   --------   --------
Balance, May 31, 1997                                    6,140        614     11,153     (2,148)         -       (285)    (2,704)
Net Loss                                                     -          -          -     (1,161)         -          -          -
                                                      --------   --------   --------   --------   --------   --------   --------
Balance, May 31, 1998                                    6,140   $    614   $ 11,153   $ (3,309)  $      -       (285)  $ (2,704)
                                                      ========   ========   ========   ========   ========   ========   ========
</TABLE>

See notes to consolidated financial statements





                                       13
<PAGE>

            HI-SHEAR INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                Years ended May 31,
                                                          ---------------------------------
                                                            1998        1997        1996
                                                          ---------   ---------   ---------
                                                                    (000 Omitted)
<S>                                                       <C>         <C>         <C>
Cash flows from operating activities:
Net income (loss)                                         $  (1,161)  $  (1,283)  $   1,106
Adjustments to reconcile net income (loss) to net
 cash used for operating activities:
    Net gain on sale of subsidiary                                -           -      (1,768)
    Depreciation and amortization                                19          13       1,789
    Increase in accounts receivable                               -           -      (1,181)
    Decrease in inventories                                       -           -         693
    Increase in other assets                                 (1,269)       (752)       (842)
    Increase (decrease) in accrued income taxes                 (15)         (3)         95
    Decrease in accounts payable, accrued
      salaries and wages and other accrued expenses            (243)       (488)     (1,295)
                                                          ---------   ---------   ---------
     Net cash used for operating activities                  (2,669)     (2,513)     (1,403)
                                                          ---------   ---------   ---------
Cash flows from investing activities:
 Capital expenditures                                           (29)        (30)     (3,344)
 Net proceeds from sale of subsidiary                             -           -      45,397
 Proceeds from sale of property and equipment                     -           -          83
                                                          ---------   ---------   ---------
     Net cash provided by (used for) investing activities       (29)        (30)     42,136
                                                          ---------   ---------   ---------
Cash flows from financing activities:
 Liquidating distribution                                         -     (23,419)          -
 Proceeds from (payment of) short-term debt                       -           -        (409)
 Proceeds from long-term debt                                     -           -      39,141
 Payment of long-term debt                                        -           -     (49,188)
                                                          ---------   ---------   ---------
      Net cash used for financing activities                      -     (23,419)    (10,456)
                                                          ---------   ---------   ---------
Effect of exchange rate changes on cash                           -           -           1
                                                          ---------   ---------   ---------
Net increase (decrease) in cash and cash equivalents         (2,698)    (25,962)     30,278
Cash and cash equivalents - beginning of year                 4,952      30,914         636
                                                          ---------   ---------   ---------
Cash and cash equivalents - end of year                   $   2,254   $   4,952   $  30,914

Supplemental disclosures of cash flow information
  Cash paid during the year for:
    Interest                                                    $53          $1      $1,049
    Income taxes                                                 37          27         341

</TABLE>

See notes to consolidated financial statements


                                       14
<PAGE>

                     HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The significant accounting policies followed in the preparation of the 
accompanying consolidated financial statements of Hi-Shear Industries Inc. 
and Subsidiaries (the "Company") are summarized below:

     Basis of Presentation.  The financial statements reflect the operating 
results of Hi-Shear Corporation and Subsidiaries ("HSC") until its sale on 
February 26, 1996. With the sale of HSC, the Company no longer conducts an
operating business. The Company currently anticipates that upon final 
resolution of its claims against the U.S. Navy, it will complete the 
distribution of its assets to stockholders and seek stockholder approval to 
dissolve the Company. Until that time, management's plans to continue as a 
going concern include reducing expenses, the possible sale of certain 
property and banks or stockholders' loans, if required.


     Principles of Consolidation.  The consolidated financial statements 
include the accounts of Hi-Shear Industries Inc. and its majority-owned 
subsidiaries. All intercompany accounts and transactions have been eliminated 
in consolidation.

     Use of Estimates and Assumptions.  The preparation of financial 
statements in conformity with generally accepted accounting principles 
requires management to make estimates and assumptions that affect the 
reported amounts of assets and liabilities and disclosure of contingent 
assets and liabilities at the dates of the financial statements and the 
reported amounts of revenues and expenses during the reporting periods.  
Actual results could differ from those estimates.

     Cash and Equivalents.  The Company considers all highly liquid 
investments with an original maturity of three months or less to be cash 
equivalents.  The cash balances on deposit are held principally at one 
financial institution and exceed insurable amounts.  The Company believes it 
mitigates its risks by investing in or through a major financial institution. 
 Cash and cash equivalents are reflected in the accompanying consolidated 
balance sheet at amounts considered by management to reasonably approximate 
fair value.

     Property and Equipment.  Land, equipment and fixtures are carried at 
cost. For financial reporting purposes, depreciation expense is provided on a 
straight line basis, using estimated useful lives of 3 to 10 years for 
equipment and fixtures.  Accelerated methods have been used for tax purposes 
where permitted. Upon disposition, the cost and related accumulated 
depreciation are removed from the accounts and the resulting gain or loss is 
reflected in earnings for the period.


                                          15
<PAGE>

                     HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


     Income Taxes.  The Company and its subsidiaries file consolidated 
federal and state income tax returns.  Deferred provision is made for income 
taxes resulting from timing differences in the recognition of income and 
expense for tax and financial reporting purposes.  Effective June 1, 1993 the 
Company adopted Statement of Financial Standards No. 109 "Accounting for 
Income Taxes" which requires recognition of deferred tax assets and 
liabilities for temporary differences and net operating loss (NOL) and tax 
credit carryforwards.  Under this statement, deferred income taxes are 
established based on enacted tax rates expected to be in effect when 
temporary differences are scheduled to reverse and NOL and tax credit 
carryforwards are expected to be utilized.  A valuation allowance is provided 
when it is more likely than not that some portion or all of the deferred tax 
assets will not be realized.

     Earnings Per Share.  In February 1997, the FASB issued SFAS No. 
128,"Earnings Per Share."  SFAS No. 128 supersedes and simplified the 
previous computational guidelines under APB Opinion No. 15, "Earnings Per 
Share."  Among other changes, SFAS No. 128 eliminates the presentation of 
primary EPS and replaces it with basic EPS for which common stock equivalents 
are not considered in the computation.  It also revises the computation of 
diluted EPS.  Basic net income (loss) per share is computed by dividing the 
net income (loss) attributable to common shareholders by the weighted average 
number of common shares outstanding during the period.  Diluted net income 
(loss) per share is computed by dividing the net income (loss) attributable 
to common shareholders by the weighted average number of common and common 
equivalent shares outstanding during the period.  The Company did not have 
any common equivalent shares outstanding during the years ended May 31, 1998, 
1997 and 1996.  Net income (loss) per share and weighted-average shares 
outstanding for the  years ended May 31, 1997 and 1996 have been restated in 
acordance with SFAS No. 128.  

     Recent Accounting Standards.  In June 1997, the Financial Accounting 
Standards Board("FASB") issued SFAS 130, "Reporting Comprehensive Income", 
which established standards for reporting and display of comprehensive income 
and its components.  SFAS 130 requires a separate statement to report the 
components for comprehensive income for each period reported.  The provisions 
of this statement are effective for fiscal years beginning after December 15, 
1997.  Management believes this statement will not have a significant effect 
on the Company's financial statements.

     In June 1997, the FASB also issued SFAS 131, "Disclosure About Segments 
of an Enterprise and Related Information ".  The standard requires that 
companies disclose "operating segments" based on the way management 
disaggregates the company for making internal operating decisions.  The 
provisions of this statement are effective for fiscal years beginning after 
December 15, 1997. Management of the Company anticipates that, due to its 
lack of 


                                          16
<PAGE>

                     HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


operating segments, the adoption of SFAS 131 will not have a significant 
effect of the Company's financial statements.

     In June 1998, the FASB issued SFAS 133, "Accounting for Derivative 
Instruments and Hedging Activities".  This statement requires that all 
derivative instruments be recorded on the balance sheet at their fair value. 
Changes in the fair value of derivatives are recorded each period in current 
earnings or other comprehensive income, depending on whether a derivative is 
designated as part of a hedge transaction and, if it is, the type of hedge 
transaction.  The provisions of the statement are effective for all fiscal 
quarters of all fiscal years beginning after June 15, 1999.  Management of 
the Company anticipates that the adoption of SFAS 133 will not have a 
significant effect on the Company's results of operations or its financial 
position.

SALE OF SUBSIDIARY

     On February 26, 1996, pursuant to approval received at the Annual 
Meeting of Shareholders on February 23, 1996, the Company sold its aerospace 
fastener subsidiary Hi-Shear Corporation and its subsidiaries to GFI 
Industries S.A. of Belfort, France for $46 million in cash.  The sale was 
treated as a sale of stock for accounting purposes.  As a result, the Company 
recognized a gain of approximately $1.8 million in its statement of 
operations and the related balance sheet accounts of Hi-Shear Corporation and 
its affiliated companies were removed from the Company's consolidated balance 
sheet.  The sales price was subject to adjustment based upon a review of the 
closing balance sheet of Hi-Shear Corporation and verification by GFI of the 
net asset value as required under the terms of the sale.  The Company and GFI 
were unable to reach an agreement on the net asset value with GFI requesting 
downward adjustments to the sales price totaling $6.4 million.  The 
disagreement was submitted to arbitration as required under the Stock 
Purchase Agreement.  After reviewing material submitted by both parties, the 
arbitrator decided in favor of the Company and essentially finalized the 
purchase price at $46 million. Additionally, under the terms of the agreement 
for the sale of HSC, the Company was restricted from distributing to its 
stockholders, by means of dividend or otherwise, at least $3.0 million of the 
purchase price through March 31, 1997. Subsequent to that date, the Company 
may distribute all remaining funds.


                                          17
<PAGE>


                     HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


PROVISION FOR INCOME TAXES 

     The components of the income tax provision are summarized as follows:

                                             YEARS ENDED MAY 31,  
                                            1998     1997     1996 
                                           -------  -------  ------
                                                 (000 OMITTED)
   Current:
        Domestic:
             Federal...................    $     -  $     -  $  160
             State and local...........         20       24      58
        Foreign.......................           -        -      21
                                           -------  -------  ------
       Total income tax provision ...      $    20  $    24  $  239
                                           =======  =======  ======

     The components included in determining the provision for income taxes are
shown below:

                                             YEARS ENDED MAY 31,  
                                            1998     1997     1996 
                                           -------  -------  ------
                                                 (000 OMITTED)
Tax provision at federal income tax
  statutory rate.....................      $  (388) $  (428) $  457
Increase (decrease) in taxes
  resulting from:
    Alternative minimum tax..........            -        -     177
    Benefit of operating loss
      carryforwards                              -        -    (457)
    Unrecognized tax benefit                   388      430       -
    State and local taxes on income,     
      net of federal tax benefit.....           16       16      38
    Other............................            4        6      24
                                           -------  -------  ------
Income tax provision per consolidated
   statements of operations..........      $    20  $    24  $  239
                                           =======  =======  ======

     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes, and the amounts used for income tax purposes.  The major components of
deferred tax liabilities and assets as of May 31, 1998 and 1997 were as follows:

                                                           MAY 31,   
                                                      1998          1997 
                                                    -------       -------
                                                        (000 Omitted)
  Assets
    Federal net operating loss carryforwards        $ 4,084       $ 3,081
    State net operating loss caryforwards               613           321
    Alternative minimum tax credit carryforwards        273           369
    Other                                               142           142
                                                    -------       -------
          Total deferred tax assets                   5,112         3,913
                                                    -------       -------
    Valuation allowance                              (5,112)       (3,913)
                                                    -------       -------
    Net deferred taxes                              $     -       $     -
                                                    =======       =======



                                          18
<PAGE>

                     HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


     As of May 31, 1998, the Company had a federal net operating loss
carryforward of approximately $12,000,000 which expires between 2006 and 2013,
state net operating loss carryforwards of approximately $10,100,000 expiring
between 1999 and 2013 and alternative minimum tax credit carryforward of
$273,000 with no expiration.

PENSION AND INCENTIVE COMPENSATION PLANS

     Prior to February 26, 1996, the Company maintained a defined benefit
pension plan and deferred investment profit sharing plan covering substantially
all of its eligible domestic employees.  The Company also had contractual
arrangements with certain key employees which provided for supplemental
retirement benefits.  The Company's policy was to fund pension costs annually
based on accrued amounts and to amortize past service pension costs over a
thirty-year period.  Effective with the sale of HSC on February 26, 1996, these
plans and related liabilities and assets were assumed by the purchaser of HSC. 
For the fiscal year ended May 31, 1996, the Company incurred total pension costs
of approximately $365,000.  

     HSC had a discretionary incentive compensation plan which provided current
and deferred compensation to various employees based upon the achievement of
specific levels of operational earnings and other financial performance
criteria.  There were no amounts charged to expense under these plans for the
year ended May 31, 1996.

     Pension coverage for employees of Hi-Shear Corporation's foreign subsidary
was provided through a separate plan.  Obligations under this plan were provided
for by depositing funds with a trustee.  The 1996 pension cost for the plan was
$150,000. 

     Contributions to Hi-Shear Corporation's Deferred Investment Profit Sharing
Plan under Section 401(k) of the Internal Revenue Code were $285,000 for the
year ended May 31, 1996.  Subsequent to the sale of HSC, the Company transferred
the balances of its corporate employees who participated in this plan to a new
Hi-Shear Industries Inc. 401(k) Profit Sharing Plan.  Company contributions to
this Plan were $9,000 and $12,000 for the years ended May 31, 1998 and 1997,
respectively.

CAPITAL STOCK

     Common stock outstanding at May 31, 1998 does not include 284,222 shares
reserved under the Company's stock option incentive plan.  At May 31, 1998,
there were no options outstanding under this plan.


                                          19
<PAGE>

                     HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


OPERATING SEGMENT INFORMATION AND CONCENTRATION OF CREDIT RISK

Prior to the sale of Hi-Shear Corporation on February 26, 1996, the Company
operated primarily in one industry segment,  the manufacture and sale of
precision fastening systems and components.  The Company serviced its worldwide
customer base from two manufacturing facilities located in Torrance, California
and Rugby, England.  Financial information for fiscal 1996, includes the
operating activity for the nine month period prior to the sale.

Sales and transfers between geographic areas were generally priced to recover
cost plus an appropriate mark-up for profit.  Sales and transfers from domestic
to foreign locations amounted to $1,110,000 for fiscal 1996.  Sales and
transfers from foreign to domestic locations were not material for any period
presented.  Operating profit is revenue less related costs and direct and
allocated operating expenses, excluding interest and corporate expenses. 
Corporate assets are those assets maintained for general purposes, principally
cash and cash equivalents and corporate facilities.

In fiscal 1996 , approximately 13% of revenue was attributable to a single
customer who purchases through several different divisions and plants.

A summary of the Company's operations by geographic area is presented below:

(DOLLARS IN THOUSANDS)           1998      1997       1996  
------------------------------------------------------------
Net Revenues to Unaffiliated
  Customers:
   United States               $     -    $     -    $36,547
   Foreign                           -          -      9,853
                               -------    -------    -------
                               $     -    $     -    $46,400
                               =======    =======    =======
Operating Profit:
   United States               $     -    $     -    $ 2,518
   Foreign                           -          -        189
                               -------    -------    -------
                                     -          -      2,707

Gain on Sale of Subsidiary           -          -      1,768
Corporate Expenses              (1,322)    (1,773)    (2,493)
Interest Income (Expense), net     181        514       (637)
                               -------    -------    -------
Profit (Loss) before
    income taxes               $(1,141)   $(1,259)   $ 1,345
                               =======    =======    =======
Identifiable Assets
   United States               $     -    $     -    $     -
   Foreign                           -          -          -
   Corporate                     6,288      7,555     32,748
                               -------    -------    -------
                               $ 6,288    $ 7,555    $32,748
                               =======    =======    =======


                                          20
<PAGE>

                              HI-SHEAR INDUSTRIES INC. 
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Foreign operations were conducted primarily in Europe.  Certain products were
manufactured in the United States and exported to foreign customers.  Export
sales from domestic operations were $4,700,000 for the year ended May 31, 1996.

The Company sold aerospace and transportation fastening systems worldwide,
primarily to major aircraft and automotive manufacturers.  Concentrations of
credit risk were limited due to the large number of customers which comprise the
Company's customer base.  Credit was extended based upon an evaluation of 
each customer's financial condition, and generally, collateral was not required.
Credit losses, if any, have been provided for in the financial statements, and
have been consistently within management's expectations.                        
         

COMMITMENTS AND CONTINGENCIES

     In March 1991, the Company terminated the operations of one of its
subsidiaries, Defense Systems Corporation in Reno, Nevada.  As a result of
shutting down operations at this facility, two contracts with the U.S. Navy were
terminated for default.  The Company appealed the default terminations and on
May 31, 1995 its appeals from the default terminations was sustained by the
Armed Services Board of Contract Appeals.  This decision released the Company
from any obligation to repay progress payments received under the contracts, and
entitled the Company to recover contract and additional costs expended in
connection with the contracts.  On January 31, 1996, the Company filed damage
claims against the U.S. Navy totaling $62.9 million.  The government has audited
these claims but has not expressed a willingness to negotiate a settlement of
these claims with the Company.  As a result, on February 11, 1997, the Company
filed an appeal before the Armed Services Board of Contract Appeals requesting
an adjudication of this dispute.  The Board set an appeal hearing date of August
3, 1998, at the conclusion of which, the Board will consider the facts brought
out at the hearing as well as briefs to be filed by both sides in determining
the amount of claim damages to be awarded to the Company.  As a result of the
above, the amount or timing of the recovery cannot be predicted at this time. 
The Company had previously written off additional costs associated with this
matter due to the uncertainty of the outcome, however, since the rendering of
the favorable decision, the company began accruing additional costs incurred,
primarily claims preparation and legal, as claims receivable.  At May 31, 1998
claims receivable of $3.5 million are included as other long term assets on the
balance sheet, as management believes such amounts are reasonable and
collectable.  Since the ultimate recovery of these claims cannot presently be
determined, no recognition from any settlement proposal, other than the claim
receivable noted above,has been reflected in the accompanying financial
statments.


                                          21
<PAGE>

                              HI-SHEAR INDUSTRIES INC. 
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)



     Subsequent to the completion of the trial against the U.S. Navy, certain 
individuals involved in preparing the case were promised a discretionary 
bonus contingent upon the successful recovery of monetary claims. In this 
regard, the Company has entered into agreements with two of these 
individuals providing for the payment of bonuses totalling 8% of the claim 
proceeds recovered.

     The Company is involved in various other actions arising in the normal
course of business with respect to contracts and employment claims.  Management,
after taking into consideration legal counsel's evaluation of all contingent
matters believes that the disposition of these matters will not have a material
adverse effect on the Company's financial position, net income or cash flows.  

     The Company's operations were conducted from leased facilities, all of
which were under operating leases which expired at various dates through 2004. 
The Company also had operating leases covering machinery and equipment which
provided for the Company to pay operating expenses.  All leases, other than the
lease of corporate office space, were assigned to the purchaser of HSC or
terminated.

     In addition to related property taxes and insurance, the Company made net
rental payments of approximately, $96,000, $138,000 and $950,000, for the years
ended May 31, 1998, 1997 and 1996, respectively.  At May 31, 1998 the Company's
commitment for future minimum lease payments under  noncancellable operating
leases is $289,000.














                                          22
<PAGE>

                     HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)


SUMMARY OF QUARTERLY RESULTS (Unaudited)
The following summarizes unaudited quarterly financial data for the fiscal
years ended May 31, 1998 and May 31, 1997:

                                              For The Quarter Ended
                                  ---------------------------------------------
                                   Aug 31,     Nov 30,     Feb 28,     May 31,
                                    1997        1997        1998        1998
                                  ---------   ---------   ---------   ---------
                                       (000 Omitted, except per share data)

Revenues                                 $0          $0          $0          $0
                                  =========   =========   =========   =========
Gross profit                             $0          $0          $0          $0
                                  =========   =========   =========   =========
Net loss                              ($382)      ($283)      ($337)      ($159)
                                  =========   =========   =========   =========
Net loss per share                   ($0.07)     ($0.05)     ($0.06)     ($0.03)
                                  =========   =========   =========   =========



                                   Aug 31,     Nov 30,     Feb 28,     May 31,
                                    1997        1997        1998        1998
                                  ---------   ---------   ---------   ---------

Revenues                                 $0          $0          $0          $0
                                  =========   =========   =========   =========
Gross profit                             $0          $0          $0          $0
                                  =========   =========   =========   =========
Net loss                              ($277)      ($242)      ($425)      ($339)
                                  =========   =========   =========   =========
Net loss per share                   ($0.05)     ($0.04)     ($0.07)     ($0.06)
                                  =========   =========   =========   =========



                                       23
<PAGE>

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

     None.


                                       PART III

Item 10.  Directors and Executive Officers of the Company

NAME                     PRINCIPAL OCCUPATION AND POSITION
----                     ---------------------------------

Harold L. Bernstein      Lawyer.  Secretary of the Company.   Director of
                         Pressure Piping Components, Inc. (until 1985 a
                         manufacturer of industrial products).

Victor J. Galgano        Vice President and Chief Financial Officer of the
                         Company.  Director of Pressure Piping Components, Inc.

Philip M. Slonim         Private investor.  Chairman of Pressure Piping
                         Components, Inc.

David A. Wingate         Chairman of the Board, Chief Executive Officer and
                         President of the Company.  Director of Pressure Piping
                         Components, Inc.

Arthur M. Winston        Investment Manager, Glickenhaus & Co.  Director of Lea
                         Ronal, Inc. (a processor of chemical specialties for
                         the electronics and metal finishing industries). 
                         Director of Pressure Piping Components, Inc.


ITEM 11.  EXECUTIVE COMPENSATION

     The following table sets forth the cash compensation for services rendered
to the Company and its subsidiaries during the fiscal years 1998, 1997 and 1996,
paid to or accrued for those persons who were, at May 31, 1998, the Company's
Chief Executive and all of the other executive officers of the Company and
subsidiaries whose total annual salary and bonus exceeded $100,000:



                                          24
<PAGE>

SUMMARY COMPENSATION TABLE

                                                    ANNUAL     
                                                 COMPENSATION  
                                                ---------------
                                                SALARY    BONUS
NAME AND PRINCIPAL POSITION             YEAR      $         $  
---------------------------             ----    ------    -----

David A. Wingate                        1998    $325,000 $  0
Chairman, President & Chief Executive   1997     325,000    0
                                        1996     462,000    0

Robert A. Schell                        1998     175,000  50,000 
Vice President & Chief Operating        1997     175,000    0
   Officer/Space and Defense            1996     175,000    0

Victor J. Galgano                       1998     162,000    0
Vice President and Chief Financial      1997     162,000    0
   Officer                              1996     162,000    0


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth, as of August 18, 1997, certain information
concerning the persons known to management to be the beneficial owners of more
than 5% of the Company's common stock, and for all of the Company's officers and
directors as a group.  Except as otherwise indicated, the persons listed have
sole voting and investment power with respect to shares beneficially owned by
them.

                                                         PERCENT
                                                            OF
NAME AND ADDRESS OF                       AMOUNT          COMMON
BENEFICIAL OWNER                     BENEFICIALLY OWNED   STOCK 
-------------------                  ------------------  -------
GAMCO Investors, Inc.                1,417,540 (1)(2)    24.21%
  One Corporate Center
  Rye, NY 10580

David A. Wingate                     1,181,494 (3)       20.18%
  3333 New Hyde Park Road
  North Hills, NY 11042

Corbyn Invesment Management          1,124,200 (4)       19.20%
  2330 West Joppa Rd., Suite 108
  Lutherville, MD 21093

Philip M. Slonim                       446,067 (5)        7.62%
  P.O. 27835
  San Diego, CA 92128

All directors and officers as a
   group                             1,677,218           28.65%


                                          25
<PAGE>

(1)  Firm and related entities have investment discretion regarding this
aggregatenumber of shares, which are beneficially owned by many investment
clients.

(2)  Share ownership is based upon information in Amendment No. 46 to Schedule
13D filed with the Securities and Exchange Commission.

(3)  Include shares held by Mr. Wingate as the sole trustee of The Wingate
Family Trust of 1980 and shares held by Mr. Wingate's spouse as the sole trustee
of a revocable trust.  Does not include 150,000 shares owned by The David A. &
Shoshanna Wingate Foundation Inc. of which Mr. Wingate is one of four directors.

(4)  Share ownership is based upon information in Schedule 13G filed with the
Securities and Exchange Commission.

(5)  Mr. Slonim and spouse hold these shares as trustees of a revocable trust.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     None.


                                       PART IV

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

     (a)  (1)  Financial Statements - See "Index to Consolidated Financial
Statements" in Part II Item 8 herein.

     (a)  (2)  Financial Statement Schedules

     All schedules have been omitted because they are inapplicable, not
required, or the required information is included elsewhere in the financial
statements or notes thereto.

     (a)  (3)  Exhibits

          (3)(a)  Certificate of Incorporation of the Company, restated to
include amendments adopted September 30, 1980, filed as an Exhibit to the
Company's Report on Form 10-K filed with the Commission on August 28, 1981 and
incorporated herein by reference.

          (3)(b)  By Laws of the Company, as amended March 27, 1986, filed as an
Exhibit to the Company's Report on Form 10-K filed with the Commission on August
26, 1986 and incorporated herein by reference.


                                          26
<PAGE>

          (10)(a)  Contingent Compensation Agreement between the Company and an
executive signed as of December 26, 1985 (updated November 17, 1987), filed as
an Exhibit to the Company's Report on Form 10-K filed with the Commission on
August 26, 1986 and incorporated herein by reference.
                                           
          (10)(b) Employment agreement dated October 16, 1989 between the
Company and an executive, filed as an Exhibit to the Company's Report on Form
10-K filed with the Commission on August 24, 1991 and incorporated herein by
reference.

          (22)  Subsidiaries of the Company, filed herewith.

     All other required exhibits have been previously reported in the Company's
prior 10-K's.


ITEM 14 (b) REPORTS ON FORM 8-K

     None.

















                                          27
<PAGE>

                                      SIGNATURES

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

                               HI-SHEAR INDUSTRIES INC.


                               By /s/ David A. Wingate
                                 ------------------------------
                                  David A. Wingate, Chairman,
                                     President and Chief 
                                     Executive


                               By /s/ Victor J. Galgano  
                                 ------------------------------
                                  Victor J. Galgano, Vice
                                     President and Chief
                                     Financial Officer

August 24, 1998

     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 date indicated.

By /s/ Harold L. Bernstein
   ---------------------------------
   Harold L. Bernstein, Director


             August 24, 1998 
          ----------------------
                   Date


By /s/ Philip M. Slonim
   ---------------------------------
   Philip M. Slonim, Director


             August 24, 1998 
          ----------------------
                   Date 


By /s/ Arthur M. Winston
   ---------------------------------
   Arthur M. Winston, Director


             August 24, 1998 
          ----------------------
                   Date      



                                          28