<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, 1997   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, 1997, 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 $2.25  a
share) of the 4,177,400 shares held by non-affiliates of the registrant was
$9,400,000.  

                         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.

    In June, 1994, the automotive division of Hi-Shear Corporation was
incorporated as Hi-Shear Automotive Corp.

    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", 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 5,300 square feet of space are leased at a current
annual rental of approximately $145,000 under a lease which expires May 31,
1998.  

    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
$93,600 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 has
set a hearing date of April 6, 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.  See Commitments and Contingencies in the
notes to consolidated financial statements.

    On February 26, 1996, the Company completed the sale of Hi-Shear
Corporation and related entities to GFI Industries S.A. of Belfort, France.  As
specified in the Stock Purchase Agreement, the sales price was subject to
adjustment based upon a review of the closing consolidated balance sheet of
Hi-Shear Corporation and verification of the net asset value.  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.  See Sale of Subsidiary 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 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
                                                    -----     -----
                                                    -----     -----
  Quarter Ended
  August 1995.........................              $8.13     $6.63  
  November 1995.......................               7.63      6.75 
  February 1996.......................               7.88      4.50 
  May 1996............................               6.50      5.63 
                                                    -----     -----
Fiscal Year Ended May 31, 1996                      $8.13     $4.50
                                                    -----     -----
                                                    -----     -----


    As of August 18, 1997 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, 1997.  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,
                                                             -----------------------------------------------------
                                                               1997       1996       1995       1994       1993
                                                             ---------  ---------  ---------  ---------  ---------
                                                                 (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  $  71,519
                                                                        ---------  ---------  ---------  ---------
                                                                        ---------  ---------  ---------  ---------
Income (loss) before discontinued operations                 $  (1,283) $   1,106  $    (545) $  (2,974) $    (943)
Loss from discontinued operations(B)                                --         --         --     (2,616)    (7,312)
                                                             ---------  ---------  ---------  ---------  ---------
Net income (loss)                                            $  (1,283) $   1,106  $    (545) $  (5,590) $  (8,255)
                                                             ---------  ---------  ---------  ---------  ---------
                                                             ---------  ---------  ---------  ---------  ---------
Weighted Average Shares Outstanding                              5,855      5,855      5,855      5,855      5,855
                                                             ---------  ---------  ---------  ---------  ---------
                                                             ---------  ---------  ---------  ---------  ---------
Per Common Share Data:
Income (loss) before discontinued operations(A)              $    (.22) $     .19  $    (.09) $    (.51) $    (.16)
Loss from discontinued operations (B)                               --         --         --       (.45)     (1.25)
                                                             ---------  ---------  ---------  ---------  ---------
Net income (loss)                                            $    (.22) $     .19  $    (.09) $    (.96) $   (1.41)
                                                             ---------  ---------  ---------  ---------  ---------
                                                             ---------  ---------  ---------  ---------  ---------
</TABLE>

                                       4
<PAGE>
<TABLE>
<CAPTION>
                                                                                    As of May 31,
                                                                -----------------------------------------------------
                                                                  1997       1996       1995       1994       1993
                                                                ---------  ---------  ---------  ---------  ---------
                                                                                (Dollars in thousands)
<S>                                                             <C>        <C>        <C>        <C>        <C>
Selected Balance Sheet Data:
Current assets                                                  $   5,105  $  31,103  $  34,846  $  35,659  $  44,324
Current liabilities                                                   640      1,131     12,563     12,013     24,025
Working capital                                                     4,465     29,972     22,283     23,646     20,299
Total assets                                                        7,555     32,748     49,514     49,115     58,826
Long-term debt                                                         --         --      9,872      9,953         --
Stockholders' equity                                                6,915     31,617     27,079     27,149     34,801
</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.  In fiscal 1993 the
loss from discontinued operations includes an after-tax provision of $6.2
million ($1.05 per share) to write down the net assets of the discontinued
businesses to their estimated realizable values, record estimated transaction
costs and report operating results during the phaseout period.


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

Fiscal 1997 compared to 1996

The Company had no operating activities subsequent to the sale of Hi-Shear
Corporation during fiscal 1996.  The $1.8 million of general and administrative
costs incurred in fiscal 1997 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 1997 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 Company did not record a provision or benefit for federal income taxes due
to it's tax loss carryforward position.

Fiscal 1996 compared to 1995

The Company's results of operations were significantly impacted by the shorter
period of operating activities due to the sale of Hi-Shear Corporation on
February 26, 1996.  For the year ended May 31, 1996, the Company recorded a gain
(net of transaction costs) on the sale of Hi-Shear Corporation of approximately
$1.8 million.  Operating income decreased $744,000 from $958,000 in fiscal 1995
to $214,000 in fiscal 1996 due to the shortened operating period as well as
continued downward pressure on pricing levels and increasing material and labor
costs associated with production.

The interest income reported in fiscal 1996 was due to interest earned on the
investment of the proceeds from the sale of Hi-Shear Corporation.  Interest
expense declined $227,000 from $1.3 million in fiscal 1995 to $1.1 million in
the comparable 1996 period due to the repayment of approximately $13 million of
amounts outstanding 

                                       5
<PAGE>

on the Company's loan agreements with proceeds from the sale
of Hi-Shear Corporation.

With the exception of a provision for alternative minimum tax in fiscal 1996 and
1995, the Company did not record a provision or benefit for federal income taxes
due to the Company'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 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, 1997 the Company had $5.0 million remaining in cash
and cash equivalents.

On May 31, 1995 the Company learned that is 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 April 6,
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.

                                       6
<PAGE>

 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 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.

Item 8.  Financial Statements and Supplementary Data

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


                                                                       Page
                                                                       ----
Report of Independent Accountants.....................                    8
Consolidated Balance Sheets...........................                    9
Consolidated Statements of Operations.................                   10
Consolidated Statements of Stockholders' Equity.......                   11
Consolidated Statements of Cash Flows.................                   12
Notes to Consolidated Financial Statements............                   13

                                       7
<PAGE>

                REPORT OF INDEPENDENT ACCOUNTANTS

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

   We have audited the accompanying consolidated balance sheets of Hi-Shear
Industries Inc. and Subsidiaries as of May 31, 1997 and 1996, and the related
consolidated statements of operations,stockholders' equity and cash flows for
each of the three years in the period ended May 31, 1997, and the financial
statement schedule listed in the Index at Item 14(a)(2) of this form 10-K. 
These financial statements and the financial statement schedule are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements and the financial statement schedule based
on our audits.

   We conducted our audits in accordance with 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, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Hi-Shear
Industries Inc. and Subsidiaries as of May 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended May 31, 1997 in conformity with generally
accepted accounting principles.  In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.

    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 may be 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.

    On February 26, 1996, the Company sold its last operating asset and
effectively ceased operations.  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.  


                                   COOPERS & LYBRAND L.L.P.


Los Angeles, California
July 18, 1997

                                       8
<PAGE>
                   HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                                    May 31,
                                                                                              --------------------
                                                                                                1997       1996
                                                                                              ---------  ---------
                                                                                                  (000 Omitted)
<S>                                                                                           <C>        <C>
    ASSETS
Current assets:
  Cash and equivalents                                                                        $   4,952  $  30,914
  Other                                                                                             153        189
                                                                                              ---------  ---------
      Total current assets                                                                        5,105     31,103
 
Property and equipment, at cost:
  Land                                                                                               80         80
  Equipment and fixtures                                                                            126        188
                                                                                              ---------  ---------
                                                                                                    206        268
  Less, accumulated depreciation and amortization                                                   (91)      (170)
                                                                                              ---------  ---------
                                                                                                    115         98
Other assets                                                                                      2,335      1,547
                                                                                              ---------  ---------
          Total assets                                                                        $   7,555  $  32,748
                                                                                              ---------  ---------
                                                                                              ---------  ---------
    LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
  Accrued income taxes                                                                        $      40  $      43
  Other accrued expenses                                                                            600      1,088
                                                                                              ---------  ---------
      Total current liabilities                                                                     640      1,131
 
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     34,572
  Accumulated deficit                                                                            (2,148)      (865)
  Less treasury stock, at cost (285,138 shares)                                                  (2,704)    (2,704)
                                                                                              ---------  ---------
                                                                                                  6,915     31,617
                                                                                              ---------  ---------
      Total liabilities and stockholders' equity                                              $   7,555  $  32,748
                                                                                              ---------  ---------
                                                                                              ---------  ---------
</TABLE>

See notes to consolidated financial statements.

                                       9
<PAGE>
                   HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                                         Years ended May 31,
                                                                                   -------------------------------
                                                                                     1997       1996       1995
                                                                                   ---------  ---------  ---------
<S>                                                                                <C>        <C>        <C>
                                                                                         (000 Omitted except
                                                                                           per share data)
Revenues:
  Net sales                                                                        $      --  $  45,268  $  57,484
  Other                                                                                   --      1,132      1,155
                                                                                   ---------  ---------  ---------
                                                                                           0     46,400     58,639
                                                                                   ---------  ---------  ---------
Cost of goods sold                                                                        --     37,316     46,855
Selling, general and administrative expenses                                           1,773      8,870     10,826
                                                                                   ---------  ---------  ---------
                                                                                       1,773     46,186     57,681
                                                                                   ---------  ---------  ---------
    Operating income (loss)                                                           (1,773)       214        958
Gain on sale of subsidiary                                                                --      1,768         --
Interest income                                                                          515        434          6
Interest expense                                                                          (1)    (1,071)    (1,298)
                                                                                   ---------  ---------  ---------
    Income (loss) before income taxes                                                 (1,259)     1,345       (334)
Provision for income taxes                                                                24        239        211
                                                                                   ---------  ---------  ---------
    Net income (loss)                                                              ($  1,283) $   1,106  ($    545)
                                                                                   ---------  ---------  ---------
                                                                                   ---------  ---------  ---------
Weighted average Common shares outstanding                                             5,855      5,855      5,855
                                                                                   ---------  ---------  ---------
    Net income (loss) per share                                                    ($   0.22) $    0.19  ($   0.09)
                                                                                   ---------  ---------  ---------
                                                                                   ---------  ---------  ---------
</TABLE>
 
See notes to consolidated financial statements.

                                       10
<PAGE>
                   HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    YEARS ENDED MAY 31, 1997, 1996 AND 1995
 
<TABLE>
<CAPTION>
                                                                                            Cumulative
                                                                                            translation,
                                                      Common Stock               Retained   pension and    Treasury Stock
                                                     ---------------   Paid-in   earnings      other      ----------------
                                                     Shares   Amount   captial   (deficit)  adjustments   Shares   Amount
                                                     ------   ------   --------  --------   -----------   ------   -------
<S>                                                  <C>      <C>      <C>       <C>        <C>           <C>      <C>
                                                                                 (000 Omitted)
Balance, May 31, 1994                                6,140     $614    $ 34,572  ($1,426)     ($3,907)     (285)   ($2,704)
Unrealized foreign currency translation adjustments     --       --          --       --          378        --        --
Net loss                                                --       --          --     (545)          --        --        --
Pension adjustment                                      --       --          --       --           97        --        --
                                                     ------   ------   --------  --------   -----------   ------   -------
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)           0      (285)   (2,704 )
Distribution to Stockholders                            --       --     (23,419)      --           --        --        --
Net Loss                                                --       --          --   (1,283)          --        --        --
                                                     ------   ------   --------  --------   -----------   ------   -------
                                                     6,140     $614    $ 11,153  ($2,148)     $     0      (285)   ($2,704)
                                                     ------   ------   --------  --------   -----------   ------   -------
                                                     ------   ------   --------  --------   -----------   ------   -------
</TABLE>
 
See notes to consolidated financial statements

                                       11
<PAGE>
            HI-SHEAR INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                       Years Ended May 31,
                                                                                ----------------------------------
                                                                                   1997        1996        1995
                                                                                ----------  ----------  ----------
<S>                                                                             <C>         <C>         <C>
                                                                                          (000 Omitted)
Cash flows from operating activities:
Net income (loss)                                                               ($   1,283) $    1,106  ($     545)
Adjustments to reconcile net income (loss) to cash provided by operating
  activities:
      Net gain on sale of subsidiary                                                    --      (1,768)         --
      Depreciation and amortization                                                     13       1,789       2,006
      (Increase) decrease in accounts receivable                                        --      (1,181)        235
      Decrease in inventories                                                           --         693         813
      Increase in other assets                                                        (752)       (842)     (1,642)
      Increase (decrease) in accrued income taxes                                       (3)         95         (61)
      Increase (decrease) in accounts payable, accrued salaries and wages and
        other accrued expenses                                                        (488)     (1,295)       (144)
                                                                                ----------  ----------  ----------
        Net cash provided by (used for) operating activities                        (2,513)     (1,403)        662
                                                                                ----------  ----------  ----------
Cash flows from investing activities
  Capital expenditures                                                                 (30)     (3,344)     (1,649)
  Net proceeds from sale of subsidiary                                                  --      45,397          --
  Proceeds from sale of property and equipment                                          --          83          45
                                                                                ----------  ----------  ----------
        Net cash provided by (used for) investing activities                           (30)     42,136      (1,604)
                                                                                ----------  ----------  ----------
Cash flows from financing activities:
  Liquidating distribution                                                         (23,419)         --          --
  Proceeds from (payment of) short-term debt                                            --        (409)        701
  Proceeds from long-term debt                                                          --      39,141      50,918
  Payment of long-term debt                                                             --     (49,188)    (50,999)
                                                                                ----------  ----------  ----------
        Net cash provided by (used for) financing activities                       (23,419)    (10,456)        620
                                                                                ----------  ----------  ----------
Effect of exchange rate changes on cash                                                 --           1          18
                                                                                ----------  ----------  ----------
Net increase (decrease) in cash and cash equivalents                               (25,962)     30,278        (304)
Cash and cash equivalents--beginning of year                                        30,914         636         940
                                                                                ----------  ----------  ----------
Cash and cash equivalents--end of year                                          $    4,952  $   30,914  $      636
                                                                                ----------  ----------  ----------
                                                                                ----------  ----------  ----------
 
Supplemental disclosures of cash flow information
  Cash paid during the year for:
    Interest                                                                            $1      $1,049      $1,232
    Income taxes                                                                        27         341         239
</TABLE>
 
See notes to consolidated financial statements

                                       12
<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.

   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.

                                       13
<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.  Earnings per share are computed based on weighted 
average number of common shares outstanding (excludes treasury stock) during 
the periods.  The effect of common stock equivalents is not significant for 
any periods presented.  

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.

                                       14
<PAGE>

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

Loan Agreements

    Prior to February 26, 1996, the Company maintained a revolving line of 
credit which provided for borrowings tied to a percentage of eligible 
accounts receivable and inventory with a maximum borrowing capacity of $15 
million.  Borrowings under this agreement were collateralized by 
substantially all of the assets of HSC.  Concurrent with the sale of HSC, the 
Company used a portion of the proceeds of the sale to pay off this loan 
obligation as well as a term loan facility maintained by a foreign subsidiary 
of HSC.  At May 31, 1997 and 1996, the Company had no credit facilities or 
other loan agreements.

Provision For Income Taxes 

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

<TABLE>
<CAPTION>
                                                                                                    Years ended May 31,
                                                                                             ---------------------------------
                                                                                                1997        1996       1995
                                                                                                -----     ---------  ---------
                                                                                                       (000 Omitted)

<S>                                                                                          <C>          <C>        <C>
Current:
   Domestic
        Federal............................................................................   $      --   $     160  $      24
        State and local....................................................................          24          58         27
        Foreign............................................................................          --          21        187
                                                                                                    ---   ---------  ---------
                                                                                                     24         239        238
                                                                                                    ---   ---------  ---------
Deferred:
   Domestic
        Federal............................................................................          --          --         --
        State and local....................................................................          --          --         --
   Foreign.................................................................................          --          --        (27)
                                                                                                    ---   ---------  ---------
                                                                                                     --          --        (27)
                                                                                                    ---   ---------  ---------
   Total income tax provision..............................................................   $      24   $     239  $     211
                                                                                                    ---   ---------  ---------
                                                                                                    ---   ---------  ---------
</TABLE>

                                       15
<PAGE>

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




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

<TABLE>
<CAPTION>
                                                                                                Years ended May 31,
                                                                                          -------------------------------
                                                                                            1997       1996       1995
                                                                                          ---------  ---------  ---------
<S>                                                                                       <C>        <C>        <C>
                                                                                                   (000 Omitted)

Tax provision at federal income tax statutory rate......................................  $    (428) $     457  $    (113)
Increase (decrease) in taxes resulting from:
    Permanent differences...............................................................         --         --        (11)
    Foreign tax rate differences........................................................         --          1         39
    Alternative minimum tax.............................................................         --        177         24
    Benefit of operating loss carryforwards.............................................         --       (457)        --
    Unrecognized tax benefit                                                                    430         --        236
    State and local taxes on income, net of federal tax benefit.........................         16         38         18
    Other...............................................................................          6         23         18
                                                                                          ---------  ---------  ---------
Income tax provision per consolidated statements of operations..........................  $      24  $     239  $     211
                                                                                          ---------  ---------  ---------
                                                                                          ---------  ---------  ---------
</TABLE>

    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, 
1997 and 1996 were as follows:

<TABLE>
<CAPTION>
                                                                                                     May 31,
                                                                                              ---------------------
                                                                                                 1997       1996
                                                                                              ---------   ---------
<S>                                                                                            <C>        <C>
                                                                                                   (000)Omitted
Assets
    Federal net operating loss carryforwards                                                   $   3,081  $   2,841
    State net operating loss caryforwards                                                            321        299
    Foreign tax credit carryforwards                                                                  --         39
    Alternative minimum tax credit carryforwards                                                     369        369
    Charitable contribution carryforwards                                                             --        119
    Other                                                                                            142        190
                                                                                               ---------  ---------
        Total deferred tax assets                                                                  3,913      3,857
                                                                                               ---------  ---------
    Valuation allowance                                                                           (3,913)    (3,857)
                                                                                               ---------  ---------
        Net deferred taxes                                                                     $      --  $      --
                                                                                               ---------  ---------
                                                                                               ---------  ---------
</TABLE>

    As of May 31, 1997, the Company had a federal net operating loss 
carryforward of approximately $10,400,000 which expires between 2006 and 
2012, state net operating loss carryforward of approximately $5,100,000 
expiring between 1998 and 2000 and alternative minimum tax credit 
carryforward of $369,000 with no expiration.

                                       16
<PAGE>


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

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 and 1995, the 
Company incurred total pension costs of approximately $ 365,000 and $532,000, 
respectively.  

    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.  The amounts charged to expense under these plans were 
$0 and $62,000 for the years ended May 31, 1996, and 1995, respectively.

    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 and 1995 
pension cost for the plan was $150,000 and $197,000, respectively. 

    Contributions to Hi-Shear Corporation's Deferred Investment Profit 
Sharing Plan under Section 401(k) of the Internal Revenue Code were $285,000 
and $444,000 for the years ended May 31, 1996 and 1995, respectively.  
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 $12,000 and $28,000 for the years ended May 31, 1997 and 1996, 
respectively.

Capital Stock

    Common stock outstanding at May 31, 1997 does not include
284,222 shares reserved under the Company's stock option incentive
plan.  At May 31, 1997, there were no options outstanding under this
plan.

                                       17
<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 and $1,566,000 for 
fiscal 1996 and 1995, respectively.  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 and 1995, approximately 13% and 17%  respectively, 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:

<TABLE>
<CAPTION>

(Dollars in thousands)                                                               1997       1996       1995
---------------------------------------------------------------------------------  ---------  ---------  ---------
<S>                                                                                <C>        <C>        <C>
Net Revenues to Unaffiliated
  Customers:
    United States                                                                  $      --  $  36,547  $  46,547
    Foreign                                                                               --      9,853     12,092
                                                                                   ---------  ---------  ---------
                                                                                   $      --  $  46,400  $  58,639
                                                                                   ---------  ---------  ---------
                                                                                   ---------  ---------  ---------
Operating Profit:
    United States                                                                  $      --  $   2,518  $   3,233
    Foreign                                                                               --        189        341
                                                                                   ---------  ---------  ---------
                                                                                          --      2,707      3,574
Gain on Sale of Subsidiary                                                                --      1,768         --
Corporate Expenses                                                                    (1,773)    (2,493)    (2,616)
Interest Income (Expense), net                                                           514       (637)    (1,292)
                                                                                   ---------  ---------  ---------
Profit (Loss) before income taxes                                                  $  (1,259) $   1,345  $    (334)
                                                                                   ---------  ---------  ---------
                                                                                   ---------  ---------  ---------
Identifiable Assets
    United States                                                                  $      --  $      --  $  37,146
    Foreign                                                                               --         --      9,000
    Corporate                                                                          7,555     32,748      3,368
                                                                                   ---------  ---------  ---------
                                                                                   $   7,555  $  32,748  $  49,514
                                                                                   ---------  ---------  ---------
                                                                                   ---------  ---------  ---------
</TABLE>

                                       18

<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 and $8,300,000 for the years 
ended May 31, 1996 and 1995, respectively.
             
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.  These 
claims are subject to government audit and their amount may be contested by 
the U.S. Navy.  Therefore 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, 1997 claims receivable of $2.3 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.

    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.  

                                       19
<PAGE>

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


    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, $138,000, $950,000 and $1,278,000, for the 
years ended May 31, 1997, 1996 and 1995, respectively.  At May 31, 1997 the 
Company's commitment for future minimum lease payments under a noncancellable 
operating leases is $145,000.
      

                                       20
<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, 1997 and May 31, 1996:
<TABLE>
<CAPTION>
                                                                                    For The Quarter Ended
                                                                         ----------------------------------------------------
                                                                          Aug 31,       Nov 30,       Feb 28,        May 31,
                                                                           1996          1996          1997           1997
                                                                         ---------     ---------     ---------     -----------
<S>                                                                      <C>           <C>           <C>           <C>
                                                                                (000 Omitted, except per share data)
Revenues (B)                                                             $       0     $       0     $       0      $       0
                                                                         ---------     ---------     ---------     -----------
                                                                         ---------     ---------     ---------     -----------
Gross profit (B)                                                         $       0     $       0     $       0      $       0
                                                                         ---------     ---------     ---------     -----------
                                                                         ---------     ---------     ---------     -----------
Net loss                                                                 ($    277)    ($    242)    ($    425)     ($    339)
                                                                         ---------     ---------     ---------     -----------
                                                                         ---------     ---------     ---------     -----------
Net loss per share                                                       ($   0.05)    ($   0.04)    ($   0.07)     ($   0.06)
                                                                         ---------     ---------     ---------     -----------
                                                                         ---------     ---------     ---------     -----------
                                                                                                                  
<CAPTION>                                                                                                         
                                                                                                                  
                                                                          Aug 31,       Nov 30,       Feb 29,        May 31,
                                                                           1995          1995          1996           1996
                                                                         ---------     ---------     ---------     -----------
<S>                                                                      <C>           <C>           <C>           <C>
Revenues (B)                                                             $  14,877     $  16,264     $  15,144      $     115
                                                                         ---------     ---------     ---------     -----------
                                                                         ---------     ---------     ---------     -----------
Gross profit (B)                                                         $   2,325     $   2,912     $   3,198      $     649
                                                                         ---------     ---------     ---------     -----------
                                                                         ---------     ---------     ---------     -----------
Net income (loss)                                                        ($    475)    ($    199)    $   1,709(A)   $      71
                                                                         ---------     ---------     ---------     -----------
                                                                         ---------     ---------     ---------     -----------
Net income (loss) per share                                              ($   0.08)    ($   0.03)    $    0.29      $     .01
                                                                         ---------     ---------     ---------     -----------
                                                                         ---------     ---------     ---------     -----------
</TABLE>
 
(A) Includes gain on sale of subsidiary of $2,013
 
(B) Includes revenue, gross profit 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. As a result of the sale, the Company had no
    revenue or gross profit during fiscal 1997.
 
                                       21
<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

<TABLE>
<CAPTION>

Name                                                Principal Occupation and Position
----                                 ---------------------------------------------------------------------------
<S>                                   <C>
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.
</TABLE>


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 1997, 
1996 and 1995, paid to or accrued for those persons who were, at May 31, 
1997, 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:

                                       22
<PAGE>

Summary Compensation Table

                                                         Annual     
                                                      Compensation  
                                                          Salary         Bonus
Name and Principal Position                  Year           $              $  
---------------------------                  ----         ------         -----

David A. Wingate                             1997         $325,000         0
Chairman, President & Chief Executive        1996          462,000         0
                                             1995          458,000         0

Robert A. Schell                             1997          175,000         0
Vice President & Chief Operating             1996          175,000         0
   Officer/Space and Defense                 1995          175,000         0

Victor J. Galgano                            1997          162,000         0
Vice President and Chief Financial           1996          162,000         0
   Officer                                   1995          150,000         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.                1,475,690 (1)(2)          25.21%
  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            669,950 (4)             11.44%
  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%
                                     ---------                 ------

                                       23
<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

             Schedule II - Valuation and Qualifying Accounts

    All other 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.

<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.

                                       24
<PAGE>
                                                                     SCHEDULE II
 
                   HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
                For the years ended May 31, 1997, 1996 and 1995
 
<TABLE>
<CAPTION>
                                                      Balance
                                                     beginning    Charged to      Charged                       Balance
                                                        of         costs and     to other                      at end of
                   Description                        period       expenses      accounts    Deductions (A)     period
--------------------------------------------------  -----------  -------------  -----------  ---------------  -----------
<S>                                                 <C>          <C>            <C>          <C>              <C>
1997:
  Valuation adjustment for deferred income tax
    assets........................................      $3,857            $0           $56              $0        $3,913
                                                    -----------         -----        -----          ------    -----------
                                                    -----------         -----        -----          ------    -----------
1996:
  Valuation adjustment for deferred income tax
    assets........................................      $7,988             $0           $0          $4,131        $3,857
                                                    -----------         -----        -----          ------    -----------
                                                    -----------         -----        -----          ------    -----------
1995:
  Valuation adjustment for deferred income tax
    assets........................................      $7,139             $0         $849              $0        $7,988
                                                    -----------         -----        -----          ------    -----------
                                                    -----------         -----        -----          ------    -----------
</TABLE>
 
(A) Deductions are the result of utilization of net operating loss carryforwards
    and reversal of other temporary differences.

                                       25
<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 26, 1997

    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 26, 1997 
           .................... 
                   Date


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


             August 26, 1997 
           .....................
                   Date 


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


             August 26, 1997 
           .....................
                   Date      


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