Commission File Number 0-22745

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                   FORM 10-QSB

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998

                           JANUS AMERICAN GROUP, INC.
        (Exact Name of Small Business Issuer as Specified in Its Charter)

          DELAWARE                                              13-2572712
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

 2300 CORPORATE BLVD., N.W.
         SUITE 232
    BOCA RATON, FLORIDA                                         33431-8596
(Address of principal executive office)                         (Zip Code)

       Registrant's telephone number, including area code: (561) 994-4800

            CHECK WHETHER ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(d) OF THE EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR SUCH
SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2)
HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES |X| NO |_|

  Number of shares of Common Stock outstanding as of August 10, 1998: 8,694,088

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):  YES |_|  NO |X|
<PAGE>



                           JANUS AMERICAN GROUP, INC.

                                   FORM 10-QSB

                    FOR QUARTERLY PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>

<S>                    <C>                                                                             <C>
PART I.                FINANCIAL INFORMATION                                                           PAGE NO.

                       Item 1.  Financial Statements                                                         1

                       Item 2.  Management's Discussion and Analysis of Financial Condition and             31
                       Results of Operations

PART II.               OTHER INFORMATION


                       Item 6.  Exhibits and Reports on Form 8-K                                            38

SIGNATURE PAGE

</TABLE>

                                       2
<PAGE>




                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES

                          INDEX TO UNAUDITED CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS

                                                                      PAGE
HISTORICAL FINANCIAL STATEMENTS:

       UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS                 4
           JUNE 30, 1998 AND DECEMBER 31, 1997

       UNAUDITED CONDENSED CONSOLIDATED STATEMENTS                     5
       OF OPERATIONS
           SIX MONTHS ENDED JUNE 30, 1998
           AND JUNE 30, 1997

       UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF                   6
       STOCKHOLDERS' EQUITY
           SIX MONTHS ENDED JUNE 30, 1998

       UNAUDITED CONDENSED CONSOLIDATED STATEMENTS                     7
       OF CASH FLOWS
           SIX MONTHS ENDED JUNE 30, 1998
           AND JUNE 30, 1997

       NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL             8
       STATEMENTS

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:

       INTRODUCTION TO THE UNAUDITED PRO FORMA CONDENSED               26
       CONSOLIDATED FINANCIAL STATEMENTS                               

       UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT            27
       OF OPERATIONS ADJUSTED FOR DISCONTINUED OPERATIONS
           THREE MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997

       UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT            28
       OF OPERATIONS ADJUSTED FOR DISCONTINUED OPERATIONS
           SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997

       NOTES TO ADJUSTED UNAUDITED PRO FORMA CONDENSED                 29
       CONSOLIDATED FINANCIAL STATEMENTS

                                       3

<PAGE>

                       JANUS AMERICAN GROUP, INC.
             UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
                  AS JUNE 30, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
                                 ASSETS
                                                                           June30,       December31,
                                                                            1998            1997
                                                                        ---------------------------
<S>                                                                     <C>             <C> 
Current asset:
   Cash and cash equivalents                                            $11,045,237     $11,150,243
   Restricted cash for preferred stock of sub. and real estate taxes       $218,342        $373,605
   Accounts receivable                                                     $578,766        $554,882
   Current portion of notes receivable                                     $186,588        $171,632
   Other current assets                                                    $119,817        $386,231
                                                                        ---------------------------
     Total current assets                                               $12,148,751     $12,636,593
Property and equipment, net of accumulated depreciation
   and amortization                                                     $34,293,917     $34,803,291
Notes receivable                                                           $612,361        $126,390
Mortgage notes receivable                                                $5,493,292      $5,558,755
Goodwill, net of accumulated amotization                                 $6,622,251      $6,707,506
Other assets                                                             $2,135,650      $1,571,591
                                                                        ---------------------------
             Total                                                      $61,306,222     $61,404,126
                                                                        ===========================

                   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Payable for redemption of preferred stock                                $41,238         $41,238
   Current portion of long-term debt                                     $2,148,110      $2,112,215
   Accounts payable                                                      $1,082,237        $903,234
   Accrued expenses                                                        $474,270        $786,167
   Dividends payable                                                       $195,974        $197,583
                                                                        ---------------------------
    Total current liabilities                                            $3,941,829      $4,040,437
Long-term debt, net of current portion                                  $17,538,990     $17,866,318
Deferred tax liabilities                                                 $1,190,000      $1,190,000
                                                                        ---------------------------
    Total liabilities                                                   $22,670,819     $23,096,755

Minority interest                                                        $1,690,065      $1,688,969
                                                                        ---------------------------

Commitments and contingencies

Stockholders' equity:
   Preferred stock:
      Series A; par value $.01 per share; 5,000,000 shares
         authorized; none issued
      Series B; par value $.01 per share; 12,000 shares
         authorized; 10,451.88 shares issued and outstanding                   $105            $105
   Common stock, par value $.01 per share; 15,000,000
      shares authorized; 11,880,867 shares issued                          $118,809        $118,809
Additional paid-in capital                                              $43,172,142     $43,163,320
Accumulated deficit                                                     ($5,029,420)    ($5,347,533)
Treasury stock- 3,189,132 shares, at cost                               ($1,316,299)    ($1,316,299)
                                                                        ---------------------------
    Total stockholders' equity                                          $36,945,337     $36,618,402
                                                                        ---------------------------
    Total                                                               $61,306,222     $61,404,126
                                                                        ===========================
</TABLE>


                                        4

<PAGE>


                                 JANUS AMERICAN GROUP, INC.
                  UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
<TABLE>
<CAPTION>
                                                         June 30,        June 30,
                                                           1998            1997
                                                        -------------------------
<S>                                                     <C>            <C> 
Revenues:
Hotel revenues:
 Room and related services                              $4,964,447     $2,197,760
 Food and beverage                                        $792,853       $322,962
 Management fees                                          $816,033       $202,047
 Other                                                    $134,824        $57,263
                                                        -------------------------
     Total hotel revenues                               $6,708,157     $2,780,032
Sales                                                           $0       $731,229
                                                        -------------------------
     Total revenues                                     $6,708,157     $3,511,261
                                                        -------------------------

Cost and expenses:
  Direct hotel operating expenses:
   Room and related services                            $1,236,178       $451,548
   Food and beverage                                      $666,202       $258,335
   Selling and general expenses                           $295,477        $79,978
                                                        -------------------------
      Total direct hotel operating expense              $2,197,857       $789,861
Occupancy and other operating expene                      $882,988       $843,256
Selling, general and administrative expenses            $2,094,008     $1,019,965
Depreciation of property and equipment                    $698,471       $274,009
Amortization of intangible assets                          $96,346        $53,574
                                                        -------------------------
     Total costs and expenses                           $5,969,667     $2,980,665
                                                        -------------------------

Operating income (loss)                                   $738,490       $530,596

Other income (expense)
  Interest income                                         $638,043       $174,615
  Other income                                                            $19,640
  Interest expense                                       ($924,987)     ($322,670)
                                                        -------------------------
Income (loss) before state income taxes and
  minority interest                                       $451,545       $402,181
Credit for prior years federal income tax refunds         $261,215
Credit for prior year state income tax refunds                            $76,257
                                                        -------------------------
Income (loss) before minority interest                    $712,760       $478,438
Minority interest                                           $1,095        $31,847
                                                        -------------------------
Net income (loss)                                         $711,665       $446,591
Less preferred dividend requirements                      $393,558       $130,649
                                                        -------------------------
Net income (loss) applicable to common stock              $318,108       $315,942

Net income (loss) per common share-Basic                      0.04           0.05
                                                        =========================

Net income (loss) per common share-Assuming dilution          0.04           0.05
                                                        =========================

Weighted average common shares outstanding               8,691,735      6,357,577
                                                        =========================
</TABLE>

                                        5

<PAGE>
<TABLE>



                                                     JANUS AMERICAN GROUP, INC.
                                 UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                               FOR THE SIX MONTHS ENDED JUNE 30, 1998

<CAPTION>

                                Preferred Stock     Common Stock                                     Treasury Stock
                                ---------------  ------------------                              ---------------------
                                Number           Number               Additional                 Number
                                  of               of                 Paid-in       Accumulated    of
                                Shares   Amount  Shares       Amount  Capital         Deficit    Shares         Amount     Total
                                ---------------  -------------------  ------------------------------------------------  -----------
<S>                             <C>        <C>   <C>         <C>       <C>          <C>           <C>       <C>          <C>        
Balance January 1 1998          10,451.88  $105  11,880,867  $118,809  $43,163,320  ($5,347,535)  3,189,132 ($1,316,299) $36,618,400

Hat income                                                                            $711,665                             $711,665

Contribution to capital from
  United States Lines, Inc.
  and United States Lines (S.A.),
  Inc. Reorganization Trust                                                                                                      $0

Shares Issued to acquire
  hospitality business                                                                                                           $0

Repurchase of common stock                                                                                                       $0

Conversion of warrants                                                     $8,823                                            $8,823

Preferred Stock Dividends                                                            ($393,558)                           ($393,558)
                                ---------------  -------------------  ------------------------------------------------  -----------
Balance at June 30, 1998        10,451.88  $105  11,880,867 $118,809  $43,172,143  ($5,029,427)  3,189,132 ($1,316,299) $36,945,331

</TABLE>
                                                                 6

<PAGE>

<TABLE>

                                                     JANUS AMERICAN GROUP, INC.
                                     UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                      FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
<CAPTION>

                                                                                      JUNE 30,             JUNE 30,
                                                                                        1998                  1997
                                                                                  ----------------------------------
<S>                                                                               <C>                   <C> 
Operating activities:
Net income (loss)                                                                    $ 711,665             $ 446,591
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization                                                        $ 698,471             $ 274,009
Amortization of intangible assets                                                     $ 96,346              $ 53,574
Minority Interest                                                                      $ 1,095              $ 31,847
Operating loss from discontinued operations                                          ($ 73,948)             ($ 4,180)
Changes in operating assets and liabilities:
  Accounts receivable                                                                ($ 23,884)           ($ 290,657)
  Other current assets                                                               $ 266,414              $ 11,944
  Other asset                                                                       ($ 575,150)           ($ 103,937)
  Accounts payable and accrued expenses                                             ($ 132,894)            $ 134,345
                                                                                  ----------------------------------
     Net cash provided by (used in) operating
        activities                                                                   $ 968,115             $ 553,536
                                                                                  ----------------------------------
Investing activities:
Acquisition of hospitality business, net of
   noncash consideration and cash required                                                              ($ 1,325,129)
Increase in Notes Receivable                                                          ($ 4,276)
Purchases of property and equipment                                                 ($ 645,034)           ($ 202,053)
Gain on sale of subsidiary's net assets                                               $ 14,161              $ 13,000
Collections of notes receivable                                                       $ 84,536              $ 33,922
                                                                                  ----------------------------------
     Net cash used in investing activities                                          ($ 550,613)         ($ 1,480,260)
                                                                                  ----------------------------------
Financing activities:
Dividends Paid (4th Qtr. 1997-$197,583 & 1st Qtr. 1998-$197,583)                    ($ 395,166)
Decrease in restricted cash                                                                                $ 631,830
Repurchase of common stock                                                                                ($ 441,569)
Repurchase of warrants                                                                                    ($ 102,638)
Conversion of warrants to common stock                                                 $ 8,823
Reduction of payable for redemption of pre-
   ferred stock of subsidiary                                                                             ($ 631,830)
Contributions to capital from United States
   Lines, Inc. and United States Lines (S.A.),
    Inc. Reorganization Trust, including $8,628
   to minority interest in 1997                                                                            $ 755,000
Proceeds from long-term borrowings                                                                          $ 26,136
Repayments of long-term borrowings                                                  ($ 291,425)            ($ 82,900)
                                                                                  ----------------------------------
     Net cash provided by financing activities                                      ($ 677,768)           ($ 154,029)
                                                                                  ----------------------------------
Increase (decrease) in cash and cash equivalents                                    ($ 260,266)           ($ 772,695)

Cash and cash equivalents, beginning of period                                    $ 11,523,848           $ 6,580,836
                                                                                  ----------------------------------
Cash and cash equivalents, end of period                                          $ 11,263,582           $ 5,808,141
                                                                                  ==================================
Supplemental disclosure of cash flow data:
Interest paid                                                                        $ 924,987             $ 311,681
                                                                                  ==================================
</TABLE>

                                                                 7



<PAGE>



                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS

Note 1-Unaudited interim financial statements:

         In the opinion of management, the accompanying unaudited condensed
         consolidated financial statements reflect all adjustments, consisting
         of normal recurring accruals, necessary to present fairly the financial
         position of Janus American Group, Inc. (formerly Janus Industries,
         Inc.) and subsidiaries (the "Company" or "Janus") as of June 30, 1998,
         its results of operations and cash flows for the six months ended June
         30, 1998 and 1997 and its changes in stockholders' equity for the six
         months ended June 30, 1998. Certain terms used herein are defined in
         the audited consolidated financial statements of the Company as of
         December 31, 1997 and 1996 and for the years then ended (the "Audited
         Janus Financial Statements") included in the Company's Form 10-KSB
         previously filed with the Securities and Exchange Commission.
         Accordingly, these unaudited condensed consolidated financial
         statements should be read in conjunction with the Audited Janus
         Financial Statements and the other financial statements included in the
         Form 10-KSB.

         The results of operations for the six months ended June 30, 1998 are
         not necessarily indicative of the results of operations for the full
         year ending December 31, 1998.

Note 2-Organization:

         As of June 30, 1998, the continuing operations of Janus, which until
         September 29, 1997 had been named Janus Industries, Inc., were
         comprised primarily of the operations of seven hotels (of which six are
         wholly-owned and one is 85%-owned) and a hotel management company.

         The Company's owned and managed hotels are located primarily in the
         Midwestern and Southeastern parts of the United States. As further
         described in Note 4, the hotel operations and two mortgage notes
         receivable were acquired, effectively, as of April 30, 1997 in a
         transaction that was accounted for as a purchase. Accordingly, the
         accompanying unaudited consolidated financial statements reflect the
         accounts for the hotel operations for the six months ended June 30,
         1998 and the financial statements for periods prior to that date are
         not comparable.

         As further described in Note 10, management decided during December
         1997 to discontinue and dispose of all of the Company's operations
         related to the provision of engineering and wireline logging services
         to companies in the oil and gas industry (the "oil and gas services
         operations").

                                       8
<PAGE>


                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS


Note 2-Organization (continued):

         As further described in Note 4 those operations were acquired on July
         15, 1996 in a transaction that was accounted for as a purchase.

         From February 1990, when it emerged from the reorganization proceedings
         described below, until July 15,1996, the Company did not actively
         engage in any trade or business. Income consisted primarily of interest
         on temporary investments. Expenses consisted primarily of professional
         fees and other costs incurred in connection with the Company's efforts
         to acquire businesses, and record retention and other administrative
         expenses incurred to satisfy existing financial reporting requirements.

         In November 1986, the Company's predecessors, United States Lines, Inc.
         ("USL") and United States Lines (S.A.) Inc. ("USL-SA"), together with
         two related companies, filed petitions under Chapter 11 of the United
         States Bankruptcy Code. In May 1989, the United States Bankruptcy Court
         for the Southern District of New York (the "Bankruptcy Court")
         confirmed a plan of reorganization with respect to such companies,
         which was later amended and modified pursuant to an order of the
         Bankruptcy Court entered in February 1990 (the "Plan").

         Pursuant to the Plan and the order of the Bankruptcy Court confirming
         the Plan:

         a.        USL and USL-SA changed their names to Janus Industries, Inc.
                   and JI Subsidiary, Inc. ("JIS"), respectively;

         b.        The United States Lines, Inc. and United States Lines (S.A.)
                   Inc. Reorganization Trust (the "Reorganization Trust") was
                   established for the purpose of administering the Plan and
                   liquidating and paying claims of former creditors of USL and
                   USL-SA; it will also make contributions of cash to Janus and
                   JIS from time to time of amounts in excess of its projected
                   liabilities and administrative requirements;

         c.        All claims of former creditors of USL and USL-SA were
                   discharged; as a result, such former creditors may look only
                   to the Reorganization Trust (and not to Janus or JIS) for
                   payment of amounts in respect of their discharged claims;

                                       9
<PAGE>


                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS


Note 2-Organization (continued):

         d.       The interests of all holders of shares of the capital stock of
                  USL and USL-SA were extinguished and the former creditors of
                  USL and USL-SA became entitled to receive all of the shares of
                  capital stock issuable by Janus and JIS, except for shares
                  issuable to Janus and a subsidiary of Dyson-Kissner-Moran
                  ("DKM"), a new Investor; shares of capital stock issuable to
                  such former creditors were initially issued to the
                  Reorganization Trust as recordholder for reissuance to such
                  creditors; and

         e.       The Reorganization Trust contributed $3,000,000 of USL and
                  USL-SA cash to capitalize Janus and JIS on February 23, 1990
                  and provided Janus and JIS with certain books and records, and
                  all tax attributes and tax benefits, of USL and USL-SA; it
                  also made cash contributions of approximately $7,491,000 and
                  $7,622,000 to the capital of Janus and JIS in 1997 and 1996,
                  respectively.

         At the time the Plan was approved, Janus and JIS had no commercial
         operations. However, they had substantial Federal net operating loss
         carryforwards (see Note 11). Under the Plan, DKM purchased
         approximately 36% of the Company's common stock and a warrant to
         purchase an additional 9% of the Company's common stock for $3,000,000.
         In addition, DKM was to control the Board of Directors of Janus and was
         required to seek and assist the Company in the consummation of the
         acquisition of one or more operating businesses while preserving the
         Federal income tax attributes of Janus and JIS. However, DKM was not
         able to assist the Company in consummating any acquisitions and, as a
         result, the Company repurchased and redeemed all of DKM's interests in
         Janus and JIS.

         The Company obtained new management during 1995 and consummated the
         acquisition of the oil and gas services operations in 1996 and the
         hotel operations in 1997.

Note 3 -Summary of significant accounting policies:

         Use of estimates:
                  The preparation of financial statements in conformity with
                  generally accepted accounting principles requires management
                  to make estimates and assumptions that affect certain reported
                  amounts and disclosures. Accordingly, actual results could
                  differ from those estimates.


                                       10
<PAGE>


                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS


Note 3-Summary of significant accounting policies (continued):

         Fresh-start accounting:
                  The Company adopted fresh-start accounting at the time of its
                  reorganization in February 1990 (see Note 2). The Company's
                  opening balance sheet consisted of $6,000,000 in cash and
                  capital stock. Accordingly, the reorganization value of the
                  Company approximated book value.

         Principles of consolidation:
                  The unaudited consolidated financial statements include the
                  accounts of Janus and its majority-owned subsidiaries. All
                  significant intercompany balances and transactions have been
                  eliminated in consolidation.

         Cash equivalents:
                  Cash equivalents generally consist of highly liquid
                  investments with maturities of six months or less when
                  acquired.

         Property and equipment:
                  Property and equipment is stated at cost. Depreciation is
                  computed using the straight-line method over the estimated
                  useful lives of the assets.

         Goodwill:
                  Goodwill, which represents the excess of the costs of acquired
                  businesses over the fair value of the net assets acquired at
                  the respective dates of acquisition, is amortized using the
                  straight-line method over the estimated useful lives of the
                  assets.

         Impairment of long-lived assets:
                  The Company has adopted the provisions of Statement of
                  Financial Accounting Standards No. 121, Accounting for the
                  Impairment of Long-Lived Assets and for Long-Lived Assets to
                  be Disposed of ("SFAS 121"). Under SFAS 121, impairment losses
                  on long-lived assets, such as property and equipment and
                  goodwill, are recognized when events or changes in
                  circumstances indicate that the undiscounted cash flows
                  estimated to be generated by such assets are less than their
                  carrying value and, accordingly, all or a portion of such
                  carrying value may not be recoverable. Impairment losses are
                  then measured by comparing the fair value of assets to their
                  carrying amounts.

                                       11
<PAGE>


                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS


Note 3-Summary of significant accounting policies (continued):

         Deferred loan costs:
                  Costs incurred to obtain long-term financing are deferred and
                  amortized using the straight-line method (which approximates
                  the interest method) over the terms of the loans.

         Revenue recognition:
                  The Company recognizes revenues from room and related services
                  and management fees on an accrual basis as earned. Food and
                  beverage revenues are recognized when goods are sold. Revenues
                  from discontinued engineering and wireline logging services
                  were also recognized on an accrual basis as earned.

         Advertising costs:
                  The costs of advertising and promotion are expensed as
                  incurred.

         Income taxes:
                  The Company accounts for income taxes pursuant to the asset
                  and liability method which requires deferred tax assets and
                  liabilities to be computed annually for temporary differences
                  between the financial statement and tax bases of assets and
                  liabilities that will result in taxable or deductible amounts
                  in the future based on enacted tax laws and rates applicable
                  to the periods in which the temporary differences are expected
                  to affect taxable income. Valuation allowances are established
                  when necessary to reduce deferred tax assets to the amount
                  expected to be realized. The income tax provision or credit is
                  the tax payable or refundable for the period plus or minus the
                  change during the period in deferred tax assets and
                  liabilities. Income tax credits attributable to benefits from
                  net operating loss carryforwards or other temporary
                  differences that existed at the time the Company adopted
                  fresh-start accounting are reflected as a contribution to
                  stockholders' equity in the period in which the tax benefits
                  are realized.

                  As explained in Note 2, the assets and liabilities of USL and
                  USL-SA were initially transferred to the Reorganization Trust
                  in February 1990. The Reorganization Trust is considered to be
                  a grantor trust for income tax purposes. Accordingly, any
                  taxable income or loss associated with the disposition of
                  assets and the settlement of liabilities by the Reorganization
                  Trust are recorded in the Federal and state income tax returns
                  of the Company; however, such assets and liabilities are not
                  presented in these consolidated financial statements.

                                       12
<PAGE>


                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS


Note 3-Summary of significant accounting policies (continued):

         Stock options:
                  In accordance with the provisions of Accounting Principles
                  Board Opinion No. 25, Accounting for Stock Issued to
                  Employees, the Company will recognize compensation costs as a
                  result of the issuance of stock options based on the excess,
                  if any, of the fair value of the underlying stock at the date
                  of grant or award (or at an appropriate subsequent measurement
                  date) over the amount the employee must pay to acquire the
                  stock. Therefore, the Company will not be required to
                  recognize compensation expense as a result of any grants of
                  stock options at an exercise price that is equivalent to or
                  greater than fair value. The Company will also make pro forma
                  disclosures, as required by Statement of Financial Accounting
                  Standards No. 123, Accounting for Stock-Based Compensation
                  ("SFAS 123"), of net income or loss as if a fair value based
                  method of accounting for stock options had been applied, if
                  such amounts differ materially from the historical amounts.

         Income (loss) per common share:
                  Effective December 31, 1997, the Company adopted the
                  provisions of Statement of Financial Accounting Standards No.
                  128, Earnings per Share ("SFAS 128"), which replaces the
                  presentation of "primary" and "fully-diluted" income (loss)
                  per common share required under previously promulgated
                  accounting standards with the presentation of "basic" and
                  "assuming dilution" income (loss) per common share.

                  Basic net income (loss) per common share is calculated by
                  dividing net income or loss, as adjusted for required
                  preferred stock dividends, by the weighted average number of
                  common shares outstanding during the period. The calculation
                  of diluted net income (loss) per common share is similar to
                  that of basic net income (loss) per common share, except that
                  the denominator is increased to include the number of
                  additional common shares that would have been outstanding if
                  all potentially dilutive common shares, principally those
                  issuable upon the exercise of stock options and warrants, were
                  issued during the period.

                  The Company's reported net income represents its net income
                  available to common shareholders for purposes of computing
                  both measures. The following reconciles shares outstanding at
                  the beginning of the year to average shares outstanding used
                  to compute both income per share measures:

                                       13
<PAGE>


                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                              1998                 1997
                    <S>                                                     <C>                 <C>      
                    Shares outstanding at beginning of year                 8,691,735           6,357,577

                    Average shares outstanding - basic                      8,691,735           6,357,577


                    Effect of dilutive securities
                         Dilutive shares contingently
                         issuable upon the exercise of stock                 
                         options and warrants                                 223,600             500,000
                                                                              -------             -------

                    Average shares outstanding--assuming dilution           8,915,335           6,857,577
</TABLE>

         Other recent accounting pronouncements:
                  In June 1997, the Financial Accounting Standards Board issued
                  Statement of Financial Accounting Standards No. 130, Reporting
                  Comprehensive Income ("SFAS 130"), and Statement of Financial
                  Accounting Standards No. 131, Disclosures about Segments of an
                  Enterprise and Related Information ("SFAS 131"), which could
                  require the Company to make additional disclosures in its
                  financial statements no later than for the year ending
                  December 31, 1998. SFAS 130 defines comprehensive income,
                  which includes items in addition to those reported in the
                  statement of operations, and requires disclosures about its
                  components. Management believes that the adoption of SFAS 130
                  will not have a material impact on the Company's disclosures.
                  SFAS 131 requires disclosures for each segment of a business
                  and the determination of segments based on its internal
                  management structure. Management is in the process of
                  evaluating whether SFAS 131 will require the Company to make
                  any additional disclosures.

Note 4-Acquisitions:
         On April 24, 1997, the Company entered the hospitality business by
         acquiring the following from affiliates of Louis S. Beck and Harry
         Yeaggy (the "Sellers"): (i) seven hotels (of which six are wholly-owned
         and one is owned by an 85%-owned partnership), (ii) a hotel management
         company and substantially all of the assets thereof other than seven
         management contracts and (iii) financial participations in the form of
         mortgages on one additional hotel and a campground (the "Mortgages").
         The hotels, the management company and the Mortgages are also referred
         to herein as the "Hotel Group." The Sellers also own controlling
         interests in other hotels, certain of which are managed by the
         management company. Each

                                       14
<PAGE>

                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS


         Note 4-Acquisitions (Continued):

         of the Sellers became an executive officer of the Company as of the
         date of acquisition.

         The consideration exchanged by the Company for the assets and
         liabilities of the Hotel Group and the other direct acquisition costs
         were comprised as follows:
<TABLE>
<CAPTION>

                    <S>                                                                         <C>        
                    Issuance of
                       10,451.88 shares of Series B preferred stock with a                      
                       liquidation preference and estimated fair value of $1,000
                       per share                                                                $10,451,880
                       3,799,999 shares of Janus common stock with an estimated                  
-                       fair value of $3.25 per share                                            12,349,997
                                                                                                -----------
                                            TOTAL VALUE OF SHARES ISSUED                        $22,801,877

                       Cash paid to the Sellers to repay short-term loans                           793,803
                       Legal, accounting and other costs related to the purchase                  1,007,424
                                                                                                -----------
                       Total purchase price to be allocated                                     $24,603,104
                                                                                                -----------
</TABLE>


                  The acquisition was accounted for as a purchase and,
                  accordingly, the results of the Hotel Group have been included
                  in the accompanying unaudited consolidated statements of
                  operations subsequent to April 30, 1997 (the effective date of
                  the acquisition for accounting purposes). In addition, total
                  acquisition costs were allocated to the assets acquired and
                  liabilities assumed based on their estimated fair values on
                  the date of acquisition, with the excess of cost over such
                  fair values allocated to goodwill, as shown below:

                                       15
<PAGE>

                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS


Note 4-Acquisitions (Continued):
<TABLE>
<CAPTION>

                   <S>                                                                          <C>    
                   Cash                                                                             $79,994
                   Accounts receivable                                                              230,011
                   Other current assets                                                             217,024
                   Property and equipment                                                        34,400,000
                   Mortgage notes receivable                                                      5,758,282
                   Goodwill                                                                       6,820,406
                   Other assets                                                                   1,256,672
                   Accounts payable                                                               (579,115)
                   Other current liabilities                                                      (519,595) 
                   Long-term debt                                                              (20,333,575)
                   Deferred tax liabilities                                                     (1,190,000)
                   Minority interest in the 85%-owned hotel Partnership                         (1,537,000)
                                                                                                -----------
                   Total purchase price allocated                                               $24,603,104
                                                                                                -----------
</TABLE>

                  Although the Company has a substantial amount of estimated
                  available net operating loss carryforwards for Federal income
                  tax and alternative minimum tax purposes, the deferred tax
                  assets potentially available from such carryforwards have been
                  reduced by a valuation allowance due to uncertainties related
                  to their future realization. Accordingly, the amounts
                  allocated to goodwill and deferred tax liabilities shown above
                  in connection with the acquisition of the Hotel Group have
                  each been reduced by approximately $8,134,000, which is
                  equivalent to the reduction in the valuation allowance
                  attributable to the portion of the net operating loss
                  carryforwards that management estimates will be offset by
                  temporary differences attributable to the acquired net assets
                  of the Hotel Group.

                  The goodwill attributable to the acquisition of the Hotel
                  Group is being amortized based on an estimated useful life of
                  40 years.

                                       16
<PAGE>

                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS


Note 4-Acquisitions (continued)

                  The following unaudited information shows the actual results
                  of continuing operations of the Company for the six months
                  ended June 30, 1998 and pro forma results of operations for
                  the six months ended June 30, 1997 as though the Hotel Group
                  had been acquired as of January 1, 1997. In each case, the
                  results of the discontinued oil and gas services operations
                  are excluded.

<TABLE>
<CAPTION>

                                                                     June 30, 1998              Adjusted Pro Forma
                                                                                                     June 30, 1997
                                                            -------------------------------------------------------
<S>                                                                     <C>                             <C> 
Revenues:
  Hotel revenues:
       Room and related services                                        $4,964,447                      $4,952,302
       Food and beverage                                                   792,853                         751,575
       Management fees                                                     816,033                         556,440
       Other                                                               134,824                         106,272
                                                            -------------------------------------------------------
            Total hotel revenues                                         6,708,157                       6,366,589
       Sales                                                                                                     0
                                                            -------------------------------------------------------
            Total revenues                                               6,708,157                       6,366,589
                                                            -------------------------------------------------------

Cost and expenses:
  Direct hotel operating expenses
       Room and related services                                         1,236,178                       1,196,351
       Food and beverage                                                   666,202                         617,638
       Selling and general expenses                                        295,477                         264,969
                                                            -------------------------------------------------------
            Total direct hotel operating expense                         2,197,857                       2,078,958
       Occupancy and other operating expenses                              882,985                         843,948
       Selling, general and admin. expenses                              2,094,008                       2,007,522
       Depreciation of property and equipment                              698,471                         605,165
       Amortization of intangible assets                                    96,346                          71,587
                                                            -------------------------------------------------------

            Total costs and expenses                                     5,969,667                       5,607,180
                                                            -------------------------------------------------------

Operating income (loss)                                                    738,490                         759,409

Other income (expense)
       Interest income                                                     638,043                         327,425
       Interest expense                                                  (924,987)                       (933,685)
                                                            -------------------------------------------------------

Income (loss) before income taxes                                          451,545                         153,149
       and minority interest

</TABLE>
                                       17
<PAGE>
                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S>                                                                     <C>                             <C>       
Credit for prior year state income tax refunds                                   0                          57,257

Credit for prior year federal income tax refunds                           261,215                               0

Income (loss) before minority interest                                     712,760                         210,406

Minority interest                                                            1,095                         (9,147)
                                                            -------------------------------------------------------

Net income (loss)                                                          711,665                         219,553

Less preferred dividend requirements                                       393,558                         391,946
                                                            -------------------------------------------------------

Net income (loss) applicable to common stock                               318,108                       (172,393)

Net income (loss) per common share                                            0.04                           -0.02
                                                            -------------------------------------------------------

Weighted average common shares outstanding                               8,691,735                       8,876,913
                                                            =======================================================
</TABLE>


         In addition to combining the historical results of operations of the
         Company (which did not have any active operations prior to the Hotel
         Group acquisition other than the discontinued oil and gas services
         operations not included above) and the historical pre-acquisition
         results of operations of the Hotel Group, the pro forma results of
         operations include adjustments that, among other things, 

         Reflect:

         --   The elimination of the net revenues derived from management
              contracts of the Hotel Group that were not acquired by the
              Company;

         --    Depreciation of property and equipment based on the fair values 
               of assets acquired;

         --    Amortization of the additional goodwill arising from the Hotel 
               Group acquisition;

         --   The net effects of changes to compensation and related expenses
              based on revised lease agreements and expense sharing arrangements
              with a related party and revised employment agreements;


                                       18
<PAGE>

                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS


Note 4-Acquisitions (continued)
     --  The provision for income taxes is based upon pro forma income from
         continuing operations and the statutory Federal and state rates. Any
         actual income tax credits attributable to benefits from net operating
         loss carryforwards that existed at the time the Company adopted
         fresh-start accounting will be reflected as a contribution to
         stockholders' equity in the period in which the tax benefits are
         realized; and

     --  The effects of the issuance of shares of preferred and common stock as
         part of the consideration for the acquisition on preferred stock
         dividends and weighted average common shares

         The unaudited pro forma results of operations shown above do not
         purport to represent what the combined results of operations actually
         would have been if the acquisition of the Hotel Group had occurred as
         of January 1, l997 instead of the actual date of consummation or what
         the results of operations would be for any future periods

         On July 15, 1996, the Company commenced oil and gas services operations
         when it acquired certain assets and liabilities of Pre-Tek Wireline
         Service Company, Inc. ("PTWSC") and its wholly-owned subsidiary, K.F.E.
         Wireline, Inc. ("KFE"), for consideration comprised of cash, common
         stock and warrants. PTWSC and KFE are referred to collectively herein
         as "Pre-Tek." The oil and gas services operations were discontinued in
         December 1997.

         The consideration exchanged by the Company for such assets and
         liabilities and the other direct acquisition costs were comprised as
         follows:
<TABLE>
<CAPTION>

<S>                                                                                                 <C>     
         Cash payments to certain creditors and
         former stockholders of Pre-Tek                                                             $605,413

         Issuance of 268,368 shares of Janus common stock, with a fair value
         per share of $2.75, and 500,000 warrants to purchase Janus common
         stock, to stockholders and former stockholders of Pre-Tek
                                                                                                     738,012

         Return of 37,350 shares of Janus common
         stock as a result of post-closing adjustments                                             (102,713)

         Other acquisition costs                                                                     182,092
                                                                                                  ----------
               TOTAL                                                                              $1,422,804
                                                                                                  ----------
                                       19
</TABLE>


<PAGE>

                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS

Note 4-Acquisitions (continued):

         The acquisition was accounted for as a purchase and, accordingly, the
         results of Pre-Tek's operations have been included as discontinued
         operations.

         Unaudited pro forma information showing the results of operations for
         the three months ended June 30, 1998 and 1997 of the oil and gas
         services operations are not presented because such operations have been
         discontinued.

Note 5-Mortgage notes receivable:
         The Mortgages, which were acquired on April 24, 1997 in connection with
         acquisition of the Company's hotel operations, are secured by a hotel
         in Juno Beach, Florida and a campground in Kissimmee, Florida, both of
         which are owned by entities controlled by the Sellers. The Sellers have
         also personally guaranteed the Mortgages. The balances receivable at
         June 30, 1998 consisted of the following:

         Note secured by hotel property, with interest at
         .5% above specified  prime rate (an effective 
         rate of 9.0% at December 31, 1997)                 $2,164,240

         Note secured by campground, with interest at 8%     3,457,306

         Total long-term debt                                5,621,546

         Less current portion                                  128,254
                                                            ----------
         LONG-TERM PORTION, NET OF CURRENT PORTION          $5,493,292
                                                            ----------

         The Mortgages are payable in monthly installments of principal and
         interest through April 2003 and final installments of all remaining
         principal and interest in May 2003.

         Principal payments on the Mortgages in each of the five years
         subsequent to December 31, 1997 are:

                                Year Ending
                                December 31                   Amount
                                -----------                   ------

                                   1998                     $123,022
                                   1999                      133,708
                                   2000                      145,326
                                   2001                      157,958
                                   2002                      171,690

                                       20
<PAGE>

                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS


Note 5-Mortgage notes receivable (continued):
       The Company derived interest income of $237,160 from the Mortgages
       during the period from January 1, 1997 to June 30, 1998.

Note 6-Property and equipment:
       Property and equipment at June 30, 1998 and 1997 consisted of the
       following:

                                    Years of      June 30,         December 31,
                                  Useful Life       1998               1997
                                  -----------       ----               ----

 Land                                             $6,035,000        $6,035,000
 Hotels                                30         26,942,000        26,942,000
 Hotel furniture and fixtures          5           2,879,217         2,232,941
 Equipment and vehicles                5                   0           648,147
 Other                                 5              10,483            11,724
                                              --------------------------------
                                                 $35,866,700       $35,869,812
 Less accumulated
 depreciation and amortization
                                                   1,572,781         1,066,521
                                              --------------------------------
 Totals                                          $34,293,919       $34,803,291
                                              --------------------------------

Note 7-Long-term debt:
  Long-term debt at June 30, 1998 consisted of the following:

  Fixed   rate   mortgage    notes   payable   in   monthly
  installments,  including  interest at rates  ranging from
  8.875% to 10%;
  The mortgage notes mature from August 2000 through                 $10,590,904
  January 2016

  Variable rate mortgage notes payable in monthly installments,
  including interest at rates varying with the prime commercial
  Lending rate, rates on U.S. Treasury securities and other
  defined indexes (the effective rates at December 31, 1997 ranged
  from 8.73% to 9.5%);  the  mortgage  notes  mature  from
  August 1998 through April 2006                                       8,951,237
  

                                       21

<PAGE>

                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS



   Equipment notes with various  maturities through December
   2001 and interest at rates ranging from 8.98% to 15%          144,959
                                                             -----------

   Total long-term debt                                       19,687,100

   Less current portion                                        2,148,110

   Long-term debt, net of current portion                    $17,538,990
                                                             -----------

Note 7-Long-term debt (continued):

         Long-term debt is secured by the Company's property and equipment.

         Principal payments in years subsequent to December 31, 1997 are as
         follows:

                  Year Ending                                          
                  December 31                                         Amount
                  -----------                                         ------
                      1998                                         $2,112,215
                      1999                                            570,665
                      2000                                            620,790
                      2001                                          1,502,792
                      2002                                          2,717,123


Note 8-Commitments and contingencies:
         Employment agreements:
                  During 1997, the Company entered into employment agreements
                  whereby it will be obligated to pay minimum salaries to four
                  of its executive officers, including each of the Sellers,
                  aggregating $760,000 during 1998 and 1999 and $250,000 in
                  2000.

         Concentration of credit risk:
                  Financial instruments that potentially subject the Company to
                  concentrations of credit risk consist principally of cash in
                  banks, accounts receivable and the Mortgages.


                                       22
<PAGE>

                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS


Note 8-Commitments and Contingencies (continued):
                  The Company maintains its cash balances in bank deposit
                  accounts which, at times, may exceed the Federal Deposit
                  Insurance Corporation coverage limits thereby exposing the
                  Company to credit risk. The Company reduces its exposure to
                  credit risk by maintaining such deposits with financial
                  institutions which management believes are high quality.

                  Exposure to credit risk with respect to trade receivables is
                  limited by the short payment terms and, generally, the low
                  balances applicable to such instruments and the Company's
                  routine assessment of the financial strength of its customers.

                  Exposure to credit risk with respect to the Mortgages is
                  limited because they are secured by real estate with an
                  estimated market value in excess of the mortgage balance.

         Litigation:
                  The Company is a party to various legal proceedings. In the
                  opinion of management, these actions are routine in nature and
                  will not have a material adverse effects on the Company's
                  consolidated financial statements in subsequent years.

Note 9-Income taxes:
         For financial statement purposes, there was no net provision for
         Federal income taxes at June 30, 1998 and 1997 because all of the tax
         loss attributes referred to above have been fully reserved through a
         valuation allowance rather than reflected as deferred tax as deferred
         tax assets due to the lack of a historical taxable income stream and
         the uncertainties referred to above. Future benefits, if any, to be
         realized from the utilization of the net operating loss carryforwards
         generated prior to the Company's reorganization in February 1990 will
         be reported as an increase in additional paid-in capital and not as a
         credit to results of operations.

         Additionally, Section 382 of the Internal Revenue Code limits the
         amounts of net operating loss carryforwards usable by a corporation
         following a change of more than 50% in the ownership of the corporation
         during a three-year period. As of June 30, 1998 management believes
         that such a change in ownership has not occurred.

         During the period ended June 30, 1998, the Company received $261,215 in
         refunds from the Internal Revenue Service (the "Service") attributable
         to amended returns filed for previous years, plus interest of $154,280.
         The Company recorded such refunds as income upon receipt as such
         amended returns had been reviewed by the Service and accepted.

                                       23
<PAGE>

                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS


Note 10-Discontinued operations:
         In December 1997, the Company adopted a plan to discontinue and dispose
         of the oil and gas services operations that it had acquired in July
         1996 (see Note 4). Accordingly, the results of the oil and gas services
         operations through December 31, 1997 and the estimated loss to be
         incurred in connection with the disposal have been classified as
         separate components of discontinued operations. See audited
         consolidated financial statements filed as part of Form 10-KSB for the
         year ended December 31, 1997. Management has completed the disposal
         through the sale of the stock of PTWSC as of March 31, 1998.

         Pre-Tek operating losses from January 1 to March 31, 1998 totaled
         $42,787. The gain from the sale of stock totaled $14,161. The net
         effect of the operating loss and gain on sale of stock totaling $18,626
         reduced the accrual from discontinued operations at March 31, 1998 to
         $136,186.

Note 11-Fair value of financial instruments:
         The Company's financial instruments at June 30, 1998 and 1997 consisted
         of cash, accounts receivable, mortgage notes receivable, accounts
         payable and fixed and variable rate mortgage and equipment notes
         payable. In the opinion of management, (i) cash, accounts receivable
         and accounts payable were carried at values that approximated their
         fair values because of their short-term maturities and (ii) mortgage
         notes receivable and mortgage and equipment notes payable were carried
         at values that approximated their fair values because they had interest
         rates equivalent to those currently prevailing for financial
         instruments with similar characteristics.

Note 12-Minority interest:
         The Company owns an interest of approximately 90% in JIS and an
         interest of 85% in a hotel partnership that it acquired as part of the
         acquisition of the Hotel Group during 1997 (see Note 4). The balance of
         the minority interest in these consolidated subsidiaries at June 30,
         1998 and the changes in the minority interest are set forth below:

                               JIS          HOTEL PARTNERSHIP        TOTAL
                       ------------------ -------------------- ----------------
  Balance 1/1/98                 $91,114           $1,597,856       $1,688,970
  Net Income (loss)                  -0-                1,095            1,095
                       ------------------ -------------------- ----------------
  Balance at 3/31/98             $91,114           $1,598,951       $1,690,065



                                       24

<PAGE>

                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                    NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS


Note 13-Subsequent Event:
         On August 14, 1998, the Company, through four limited liability
         companies, acquired four hotels located in Ohio, as follows:

         (i) Holiday Inn, Independence is a 364-room full-service hotel located
         near downtown Cleveland and the Hopkins International Airport at the
         intersection of Interstate Highway 77 and State Route 480. The purchase
         price was $21,807,000.

         (ii) Holiday Inn, Hudson is a 289-room full-service hotel located off
         Exit 189 of the Ohio Turnpike between Cleveland and Akron and about 15
         miles from Sea World, a visitor attraction. The purchase price was 
         $13,369,350.

         (iii) Holiday Inn, North Canton is a 194-room full-service hotel
         located three miles from downtown Canton off Interstate Highway 77. The
         purchase price was $5,454,250.

         (iv) Comfort Inn, West Montrose is a 132-room limited feature hotel
         located north of Akron off Exit 137 of Interstate 77. The purchase
         price was $3,479,900.

         The selling entities were commonly controlled. The total acquisition
         price was $44,110,500 in cash and was financed by borrowings from
         Amresco Capital L.P. in substantially the total amount of the
         acquisition prices, secured by the acquired properties. The four loans
         are cross-defaulted and cross-collateralized, but otherwise of limited
         recourse to the Company. The financing is for a term of ten years,
         based upon a 25-year amortization schedule, at a fixed interest rate
         of 8.09% per annum.

                                       25
<PAGE>



                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
         UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


On April 24, 1997, Janus American Group, Inc. ("Janus") consummated the
acquisition of a 100% equity interest in six hotels and an 85% equity interest
in a seventh hotel (the "Hotels"), a 100% equity interest in a hotel management
company (the "Management Company") and substantially all of the assets thereof
other than seven management contracts and 100% interests in mortgages (the
"Mortgages") on one additional hotel and a campground, all of which were owned
by corporations and partnerships that were, effectively, wholly-owned or
controlled by Louis S. Beck and Harry Yeaggy (the "Sellers") during the year
ended December 31, 1996 and the period from January 1, 1997 through the date of
acquisition. The Hotels, the Management Company and the Mortgages are referred
to herein as the "Beck-Yeaggy Group." On July 15, 1996, the Company acquired the
oil and industry services business of Pre-Tek Wireline Service Company, Inc. and
its wholly-owned subsidiary ("Pre-Tek"). Janus has accounted for the
acquisitions of the Beck-Yeaggy Group and Pre-Tek pursuant to the purchase
method of accounting in its historical financial statements based on effective
acquisition dates of April 30, 1997 and July 15, 1996, respectively. It was
determined by management to discontinue and dispose of the oil and gas services
operations at December 31, 1997. The estimated loss was accrued. Based upon the
above, the pro forma was adjusted to eliminate the effect of Pre-Tek from
operations.

The accompanying adjusted unaudited pro forma condensed statement of operations
for the three months ended June 30, 1997 combines the historical consolidated
statement of operations of Janus and its subsidiaries for the three months ended
June 30, 1997 (including the Beck-Yeaggy Group for the period from January 1,
1997 to June 30, 1997 as if the acquisition was consummated as of January 1,
1997, and the elimination of Pre-Tek for the entire period).

The accompanying unaudited pro forma condensed combined financial statements are
based on the assumptions and adjustments described in the accompanying notes
which management believes are reasonable. The unaudited pro forma condensed
consolidated financial statements do not purport to represent what the combined
results of operations actually would have been if the acquisition of Beck
Yeaggy-Group referred to above had occurred as of January 1, 1997 instead of the
actual date of consummation or what the financial position and results of
operations would be for any future periods. The unaudited pro forma condensed
combined financial statements and the accompanying notes should be read in
conjunction with the audited and unaudited historical financial statements of
Janus and its subsidiaries, the Beck-Yeaggy Group and Pre-Tek included elsewhere
herein and in the Form 10-KSB for the year ended December 31, 1997.

                                       26

<PAGE>
<TABLE>
                                                     JANUS AMERICAN GROUP, INC.
                                 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                                ADJUSTED FOR DISCONTINUED OPERATIONS
                                         FOR SIX MONTHS ENDED JUNE 30.1998 AND JUNE 30, 1997
<CAPTION>

                                                                     Adjusted Pro Forma  Pro Forma        Pre-tek   Janus Pro Forma
                                                          June 30,          June 30,      June 30,    Consolidated  Hotel Operations
                                                            1998            1997            1997      June 30,1997  at June 30,1997
                                                        ----------------------------------------------------------------------------
<S>                                                     <C>              <C>            <C>            <C>            <C>        
Revenues:
Hotel revenues:
 Room and related services                               $4,964,447       $4,952,302     $4,952,302                    $4,952,302
 Food and beverage                                         $792,853         $751,575       $751,575                      $751,575
 Management fees                                           $816,033         $556,440       $556,440                       556,440
 Other                                                     $134,824         $106,272       $106,272                      $106,272
                                                        -------------------------------------------------------------------------
     Total hotel revenues                                $6,708,157       $6,366,589     $6,366,589            $0      $6,366,589
Sales                                                                             $0       $731,229      $731,229              $0
                                                        -------------------------------------------------------------------------
     Total revenues                                      $6,708,157       $6,366,589     $7,097,818      $731,229      $6,366,589
                                                        -------------------------------------------------------------------------
Cost and expenses:
  Direct hotel operating expenses:
    Room and related services                            $1,236,178       $1,196,351     $1,196,351                    $1,196,351
    Food and beverage                                      $666,202         $617,638       $617,638                      $617,638
    Selling and general expenses                           $295,477         $264,969       $264,969                      $264,969
                                                        -------------------------------------------------------------------------
     Total direct hotel operating expense                $2,197,857       $2,078,958     $2,078,958                    $2,078,958
    Occupancy and other operating expense                  $882,985         $843,948     $1,417,947      $573,999        $843,948
    Selling, general and administrative expenses         $2,094,008       $2,007,522     $2,209,922      $202,400      $2,007,522
    Depreciation of property and equipment                 $698,471         $605,165       $668,231       $63,066        $605,165
    Amortization of intangible assets                       $96,346          $71,587       $101,299       $29,712         $71,587
                                                        -------------------------------------------------------------------------
     Total costs and expenses                            $5,969,667       $5,607,180     $6,476,357      $869,177      $5,607,180
                                                        -------------------------------------------------------------------------
Operating income (loss)                                    $738,490         $759,409       $621,461     ($137,948)       $759,409

Other income (expense)
   Interest income                                         $638,043         $327,425       $343,895       $16,470        $327,425
   Other income                                                                                                                $0
   Interest expense                                       ($924,987)       ($933,685)     ($935,420)      ($1,735)      ($933,685)
                                                                                                                               $0
Income (loss) before state income taxes and
   minority interest                                       $451,545         $153,149        $29,936     ($123,213)       $153,149
Credit for prior year federal income tax refunds           $261,215
Credit for prior year state income tax refunds                               $57,257        $57,257                       $57,257
                                                        -------------------------------------------------------------------------
                                                                                                                               $0
lncome (loss) before minority interest                     $712,760         $210,406        $87,193     ($123,213)       $210,406
                                                                                                                               $0
Minority interest                                            $1,095          ($9,147)       ($9,147)                      ($9,147)
                                                        -------------------------------------------------------------------------
Net income (loss)                                          $711,665         $219,553        $96,340     ($123,213)       $219,553
                                                                                                                               $0
Less preferred dividend requirements                       $393,558         $391,946       $391,946                      $391,946
                                                        -------------------------------------------------------------------------
                                                                 $0
Net income (loss) applicable to common stock               $318,108        ($172,393)     ($295,606)    ($123,213)      ($172,393)
Net income (loss) per common share-Basic                       0.04            -0.02          -0.03                         -0.02
                                                        ===========================================                   ===========
Net income (loss) per common share-Assuming dilution           0.04            -0.02          -0.03
                                                        ===========================================                   
Weighted average common shares outstanding                8,691,735        8,876,913      8,876,913                     8,876,913
                                                        ===========================================                   ===========
</TABLE>
 
                                                                 27

<PAGE>
<TABLE>
<CAPTION>

                                                     JANUS AMERICAN GROUP, INC.
                                 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                                ADJUSTED FOR DISCONTINUED OPERATIONS
                                     FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997



                                                                                                    Adjusted Pro Forma
                                                                                3 months ended        3 months ended
                                                                                  June 30, 1998         June 30, 1997
                                                                                ------------------------------------
<S>                                                                                <C>                   <C>        
Revenues:
 Hotel revenues:
  Room and related services                                                        $3,127,780             $3,032,604
  Food and beverage                                                                  $499,807               $456,796
  Management fees                                                                    $440,902               $282,131
  Other                                                                              $104,296                $72,206
                                                                                ------------------------------------
     Total hotel revenues                                                          $4,172,785             $3,843,737
Sales                                                                                      $0                     $0
                                                                                ------------------------------------
     Total revenues                                                                $4,172,785             $3,843,737
                                                                                ------------------------------------
Cost and expenses:
  Direct hotel operating expenses:
    Room and related services                                                        $712,996               $678,536
   Food and beverage                                                                 $414,022               $347,676
   Selling and general expenses                                                      $168,327               $135,023
                                                                                ------------------------------------
      Total direct hotel operating expense                                         $1,295,345             $1,161,235
Occupancy and other operating expenes                                                $461,637               $432,959
Selling, general and administrative expenses                                       $1,174,672             $1,036,445
Depreciation of property and equipment                                               $356,747               $309,132
Amortization of intangible assets                                                     $45,364                $37,753
                                                                                ------------------------------------
     Total costs and expenses                                                      $3,333,765             $2,977,524
                                                                                ------------------------------------
Operating income (loss)                                                              $839,020               $866,213

Other income (expense)
  Interest income                                                                    $391,594               $149,240
  Other income                                                                                                   $ 0
  Interest expense                                                                  ($466,565)             ($482,806)
                                                                                ------------------------------------
Income (loss) before state income taxes and
  minority interest                                                                  $764,048               $532,647
Credit for prior year federal income tax refunds                                     $261,215
Credit for prior year state income tax refunds                                             $0                $57,257
                                                                                ------------------------------------
Income (loss) before minority interest                                             $1,025,263               $589,904
Minority interest                                                                     $40,846                $27,663
                                                                                ------------------------------------
Net income (loss)                                                                    $984,417               $562,241
Less preferred dividend requirements                                                 $195,975               $195,973
                                                                                ------------------------------------
Net income (loss) applicable to common stock                                         $788,443               $366,268

Net income (loss) per common share-Basic                                                 0.09                   0.04
                                                                                ====================================

Net income (loss) per common share-Assuming dilution                                     0.09                   0.04
                                                                                ====================================

Weighted average common shares outstanding                                          8,691,735              8,876,913
                                                                                ====================================
</TABLE>

                                                    28

<PAGE>




Purchases of the Beck-Yeaggy Group and Pre-Tek:

Information with respect to the cost incurred by Janus to purchase the
Beck-Yeaggy Group on April 30, 1997 (the effective date of the acquisition used
for accounting purposes) and the allocation of such costs in accordance with the
purchase method of accounting is set forth in Note 4 of the notes to the
unaudited condensed consolidated financial statements of Janus included
elsewhere herein.

Information with respect to the cost incurred by Janus to purchase Pre-Tek on
July 15, 1996 is set forth in Note 4 of the notes to the unaudited condensed
consolidated financial statements of Janus included elsewhere herein.


Pro Forma Adjustments to the Unaudited Condensed Consolidated Statements of
Operations for the three months ended June 30, 1997.

(a)  To eliminate the net revenues derived from management contracts of the
     Beck-Yeaggy Group that were not acquired by Janus.

(b)  To record the additional cost to be incurred as a result of the revisions
     to the agreement with Hospitality Employee Leasing Program, Inc. that
     became effective upon the consummation of the acquisition of the
     Beck-Yeaggy Group.

(c)  To record the net effects of changes to compensation and related expenses
     based on revised employment and lease agreements that became effective upon
     the consummation of the acquisition of the Beck-Yeaggy Group and the
     elimination of the costs of consultants who will no longer be employed and
     certain other nonrecurring costs.

(d)  To record the effects arising from the allocation of the purchase price for
     the acquisition of the Beck-Yeaggy Group on historical depreciation and
     amortization of property and equipment based on the fair values and
     estimated useful lives of the assets required.

(e)  To record the effects arising from the allocation of the purchase price for
     the acquisition of the Beck-Yeaggy Group on historical amortization of
     goodwill based on a minimum estimated benefit period for goodwill arising
     from the acquisition of the Beck-Yeaggy Group of 40 years.

(f)  To adjust state income tax provisions and credits based on the pro forma
     income or loss before income taxes and related carryforwards applicable to
     each state. No provisions or credits for Federal income taxes have been
     recorded on the pro forma net income or loss before income taxes based on
     the availability of net operating loss carryforwards due to the
     uncertainties related to their future use (see Note 5 of the notes to the
     condensed consolidated financial statements herein).

(g)  To record the minority interest in the net income (loss) of the 85%-owned
     hotel.


                                       29
<PAGE>

(h)  To record the dividends attributable to the shares of Series B preferred
     stock issued as part of the consideration paid to the Sellers.


                                       30
<PAGE>




ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

GENERAL

         The following discussion of the Company's historical results of
operations, changes in liquidity and capital resources and liquidity and capital
resources as of June 30, 1998 and for the six months ended June 30, 1998 and
1997 should be read in conjunction with the Unaudited Condensed Consolidated
Financial Statements of the Company and the notes thereto and the Unaudited Pro
Forma Condensed Consolidated Financial Statements Adjusted for Discontinued
Operations, of Janus American Group, Inc. and Subsidiaries and the notes thereto
included elsewhere herein. The term "Company" means Janus American Group, Inc.
("Janus") collectively with its subsidiaries JI Subsidiary, Inc. ("JIS"),
Pre-Tek Wireline Service Company, Inc. ("Wireline") and KFE Wireline, Inc.
("KFE"). References to the operations of "Pre-Tek" in this discussion are to the
combined operations of Wireline and Wireline's subsidiary, KFE.

         Janus and JIS are the successors to United States Lines, Inc. ("U.S.
Lines") and United States Lines (S.A.), Inc. ("U.S. Lines (S.A)"), which emerged
from a Chapter 11 bankruptcy in 1990. The Plan of Reorganization, which was
approved by the creditors of U.S. Lines and U.S. Lines (S.A.) and the United
States Bankruptcy Court for the Southern District of New York, contemplated that
Janus and JIS would seek out acquisition opportunities for each of the
reorganized companies in order to utilize their respective anticipated available
net operating loss carryforwards ("NOLs") for Federal income tax purposes.

         The Company acquired the business of Pre-Tek, an oil and gas
engineering services and wireline logging company based in Bakersfield,
California, in July 1996. On April 24, 1997, the Company acquired, from
affiliates of Louis S. Beck ("Beck") and Harry Yeaggy ("Yeaggy"), certain assets
relating to the hospitality business comprised of (i) six hotels and an 85%
partnership interest in a partnership which owns a hotel (collectively, the
"Owned Hotels"), (ii) a hotel management company, with 21 hotels under
management inclusive of the Owned Hotels (hereinafter the hotels which are
managed, but not owned by the Company, are referred to as the "Managed Hotels"
and the Owned Hotels and the Managed Hotels are collectively referred to as the
"Hotels"), (iii) a management fee sharing arrangement with Summit Hotel
Management Company and (iv) two loans, one of which is secured by a first
mortgage on a hotel and the other of which is secured by a first mortgage on a
campground and both of which are personally guaranteed by Messrs. Beck and
Yeaggy (the acquired businesses and assets are collectively the "Beck-Yeaggy
Group"). Management is diligently pursuing a program for additional acquisitions
through the use of a combination of cash, capital stock and, when necessary,
borrowing.

         In December 1997, the Company adopted a plan to discontinue and dispose
of the oil and gas services operations that it had acquired in July 1996. See
Note 4 to the Unaudited Condensed Consolidated Financial Statements included
elsewhere herein. Accordingly, the results of the oil and gas services
operations through December 31, 1997 and the estimated loss to be incurred in

                                       31
<PAGE>

connection with the disposal were classified as separate components of
discontinued operations at December 31, 1997. See Consolidated Statements of
Operations included in the Company's Report on Form 10-KSB for the year ended
December 31, 1997. Management has completed the disposal through the sale of the
stock of Pre-Tek to management of Pre-Tek as of March 31, 1998.

HISTORICAL AND PRO FORMA RESULTS OF OPERATIONS FOR SIX MONTHS ENDED JUNE 30,
1998 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1997


         The acquisition of the Beck-Yeaggy Group and Pre-Tek were accounted for
as purchases and, accordingly, the Company's historical results of operations
for the six months ended June 30, 1998 and 1997 include the results of
operations of the Beck-Yeaggy Group for the six months ended June 30, 1998 and
subsequent to April 30, 1997 (the effective date of acquisition for accounting
purposes) and Pre-Tek for the six months ended June 30, 1997 subject to the
effect of discontinued operations as estimated at December 31, 1997. See Note 10
to the Unaudited Condensed Consolidated Financial Statements included elsewhere
herein. Accordingly, the Company's historical results of operations for the six
months ended June 30, 1998 are not directly comparable to those for the six
months ended June 30, 1997.

         To present more comparable information, adjusted unaudited pro forma
combined results of operations for the six months ended June 30, 1998 and 1997
are set forth herein. The adjusted unaudited pro forma results of operations
sets forth the actual results of continuing operations of the Company for the
six months ended June 30, 1998 as compared to pro forma results of operations
for the six months ended June 30, 1997, as though the Beck-Yeaggy Group had been
acquired as of January 1, 1997. In each case, the results of the discontinued
oil and gas services operations are excluded.

         The pro forma combined net income of the Company was $318,198 for the
six months ended June 30, 1998 as compared to a net loss of $172,393 during the
same period of 1997. The difference was primarily the result of increases in
interest income and management fee income in addition to federal income tax
refunds totaling $261,215.

         Room revenue remained stable in the six months ended June 30, 1998 as
compared to the six month period in the prior year. However, an average rate
increase of $1.70 from $45.26 in 1997 to $49.96 for 1998 was offset by an
occupancy percentage decrease of 1.59% in 1998 to 60.20%, from 61.79% in 1997.

         Management fee income increased from $556,440 in 1997 to $816,033 in
1998 attributable to: (i) an increase in room revenue at the Managed Hotels
where the management fees are calculated as a percentage of room revenues; (ii)
additional management contracts over the same period in the prior year; and
(iii) the Company's receipt of payment of incentive management fees upon the
sale of certain Managed Hotels by such hotels' owners.

                                       32
<PAGE>

         Other hotel related revenues increased to $134,824 in 1998 from
$106,727 in 1997 as a result of additional ticket sales for the Kings Dominion
Amusement Park at Best Western Kings Quarters.

         Direct hotel operating expenses increased by $118,899 from $2,078,958
in 1997 to $2,197,857 in 1998. Direct room and related services costs increased
as labor costs increased. Food and beverage costs increased as a result of
increased food and beverage sales which led to higher labor costs partially
offset by lower food costs.

         Selling and general expenses increased by $30,508 from $264,969 in 1997
to $295,477 in 1998 because of increased outdoor advertising.

         Occupancy and other operating expenses increased to $882,985 in 1998
from $843,949 in 1997. The increase was the result of payroll expense increases
due to renovation programs commenced in the second quarter.

         Selling, general and administrative expenses increased $86,486 to
$2,094,008 in 1998 from $2,007,522 in 1997 as a result of increased compensation
expenses and professional fees for legal and accounting services.

         Depreciation and amortization expense increased by $93,306 in 1998 from
$605,165 in 1997 as a result of depreciation expense on 1997 and 1998
improvements.

         Interest and other income increased $571,833 to $899,258 in 1998 from
$327,425 in 1997 as the amount of funds invested increased over the same period
in the prior year as a result of federal income tax refund and interest thereon.

         Interest expense decreased from $933,685 in 1997 to $924,987. The
decrease was a combination of interest rate increases on variable debt and the
offsetting interest expense deduction as a result of normal amortization.

         The charges to operations for minority interest increased by $10,242 to
$1,095 in 1998 from ($9,147) in 1997 as a result of increased profits from Best
Western Kings Quarters.

HISTORICAL AND PRO FORMA RESULTS OF OPERATIONS FOR THREE MONTHS ENDED JUNE 30,
1998 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1997

         The pro forma combined net income of the Company was $788,443 for the
three months ended June 30, 1998 as compared to $366,268 during the same period
of 1997. The increase in net income was primarily the result of increases in
interest and management fee income and federal income tax refunds from prior
years totaling $261,215.

         Room revenue increased by $95,176 in the three months ended June 30,
1998 as compared to the three-month period in the prior year. However, an
average rate decrease of 


                                       33
<PAGE>

 .19% from $51.15 in 1997 to $50.96 in 1998 was offset by an occupancy percentage
increase of 2.4% in 1997 to 71.1% in 1998.

         Management fee income increased from $282,131 in the three months ended
June 30, 1997 to $440,902 in the three months ended June 30, 1998 attributable
to: (i) an increase in room revenues at the Managed Hotels where the management
fees are calculated as a percentage of room revenues, (ii) additional management
contracts over the same period in the prior year and (iii) the Company's receipt
of payment of incentive management fees upon the sale of certain managed hotels
by such hotels' owners.

         Other hotel related revenues increased to $104,296 from $72,206 in 1997
as a result of additional ticket sales for the Kings Dominion Amusement Park.

         Direct hotel operating expenses increased by $134,110 from $1,161,235
for the three months ended June 30, 1997 to $1,295,345 for the three months
ended June 30, 1998. Direct room and related services costs increased as labor
costs increased. Food and beverage costs increased as a result of increased food
and beverage sales which led to higher labor costs partially offset by lower
food costs. Selling and general expenses increased because of increased outdoor
advertising.

         Occupancy and other operating expense increased to $461,637 in 1998
from $432,959 in 1997. The increase was the result of payroll expense increases
due to renovation programs commenced during the three months ended June 30,
1998.

         Selling, general and administrative expenses increased $138,227 to
$1,174,672 for the three months ended June 30, 1998 from $1,036,445 for the
three months ended June 30, 1997, as a result of increased compensation expenses
and professional fees for legal and accounting services.

         Depreciation and amortization expense increased by $47,615 as a result
of depreciation expense on 1997 and 1998 improvements.

         Interest income increased $242,354 to $391,594 in the three months
ended June 30, 1998 from $149,240 for the three months ended June 30, 1997 as
the amount of funds invested increased and interest income was received on the
federal income tax refund.

         Interest expense decreased by $16,241 as the effect of principal
amortization more than offset interest rates increases on variable rate debt.

         Minority interest increased by $13,183 from $27,663 for the three
months ended June 30, 1997 to $40,846 for the three months ended June 30, 1998,
as a result of increased profits from Best Western Kings Quarters.


                                       34
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES AT JUNE 30, 1998

         The following discussion reflects the liquidity and capital resources
of the Company. The Company's principal sources of liquidity are cash on hand
(including escrow deposits and replacements reserve), cash from operations,
earnings on invested cash and, when required, principally in connection with
acquisitions, borrowings (consisting primarily of loans secured by mortgages on
real property owned or to be acquired by the Company). The Company's continuing
operations are funded through cash generated from its hotel operations.
Acquisitions of hotels are expected to be financed through a combination of cash
on hand, internally generated cash, issuance of equity securities of Janus and
borrowings, some of which is likely to be secured by assets of the Company. The
Company has no committed lines of credit and there can be no assurance that
credit will be available to the Company or if available that such credit will be
available on terms and in amounts satisfactory to the Company. The ability of
the Company to issue its common or preferred stock is materially restricted by
the requirements of the Internal Revenue Code of 1986, as amended, if the
Company wishes to preserve its net operating loss carryforwards.

         At June 30, 1998, the Company had $11,263,579 in cash and cash
equivalents. Included in the total is restricted cash of $218,342 consisting of
$41,238 for the redemption of preferred stock of JIS and $177,104 for real
estate tax escrow accounts.

         During the six months ended June 30, 1998, the Company invested
approximately $645,000 in capital improvements in connection with the Owned
Hotels. The Company plans to spend an additional $870,000 on such capital
improvements over the remaining six months of 1998.

         Capital for improvements to Owned Hotels has been and is expected to be
provided by a combination of internally generated cash and, if necessary and
available, borrowings. The Company expects to spend annually approximately 4% to
5% of revenues from Owned Hotels for ongoing capital expenditures in each year.
The Company believes, based on its operating experience, that these types of
capital investments will enhance the competitive position of the Owned Hotels
and thereby enhance the Company's competitive position. Changes in the
competitive environment for a specific Owned Hotel may dictate higher or lower
capital expenditures.

         The Company maintains a number of commercial banking relationships but
does not currently have committed lines of credit. It is in active negotiations
with lending institutions which might extend credit facilities to the Company
for capital purposes including capital that might be required for the
acquisition of additional hotels or management contracts. There can be no
assurance such negotiations will be successful.

         The Company anticipates that it will be able to secure the capital
required to pursue its acquisition program through a combination of borrowing,
internally generated cash and utilization of its common and/or preferred stock
to the extent such utilization does not jeopardize the Company's NOLs. There can
be no assurance however that the Company will be able to 

                                       35
<PAGE>

negotiate sufficient borrowings to accomplish its acquisition program on terms
and conditions acceptable to the Company, or at all. Further, any such
borrowings may contain covenants that impose limitations on the Company which
could constrain or prohibit the Company from making additional acquisitions as
well as its ability to pay dividends or to make other distributions, incur
additional indebtedness or obligations or to enter into other transactions which
the Company may deem beneficial. Additionally, factors outside of the Company's
control could affect its ability to secure additional funds on terms acceptable
to the Company. Those factors include, without limitation, any increase in the
rate of inflation and/or interest rates, localized or general economic
dislocations, an economic down-turn and regulatory changes constricting the
availability of credit.

         The Company has benefited and management believes that the Company will
continue to benefit as the recipient of moneys disbursed by the Reorganization
Trust as the Reorganization Trust has funds in excess of its reasonably required
reserves and projected operating expenses. There is no objective formula to
determine the extent to which Reorganization Trust assets exceed projected
liabilities and administrative requirements thereby making additional cash
available for contribution to the Company. However, it is management's belief
that there will be further contributions is based upon the decrease of the
Reorganization Trust's administrative expenses through reductions in personnel
and office space, which is related to the decreasing volume of unsettled claims
of former unsecured creditors of U.S. Lines and U.S. Lines (S.A.). The amount of
excess cash available for contribution to the Company will also be dependent
upon the remaining duration of Reorganization Trust activity necessary to
resolve outstanding claims, particularly the asbestos and other late-manifesting
personal injury claims, and the amount of professional fees associated with this
activity. Accordingly, no assurance can be given as to the amount or timing of
additional contributions from the Reorganization Trust, if in fact there are any
additional contributions.

         The Company's long-term debt at June 30, 1998 totals $19,687,100.
Mortgage debt totals $19,542,141, which consists of $10,590,904 in fixed rate,
fully self-amortizing mortgage loans and $8,951,237 in adjustable rate (3-5 year
adjustment period) mortgage loans. Such adjustable rate loans have maturity
dates at various dates through April 2006. Interest rates on mortgage debt range
from 8.875% to 10.00% with a weighted average interest rate of 9.3% effective at
June 30, 1998. The approximate scheduled repayments of principal on the
long-term debt of the Company are: from June 30, 1998 through December 31, 1998
-- $1,820,790; 1999 -- $570,665; 2000 -- $620,790; and 2001 -- $1,502,792.
Management of the Company currently believes that the cash flow from the
Company's hotel operations will be sufficient to make the required amortization
payments. Balloon payments required to be made at the maturity of the
non-self-amortizing loans are expected to be made from cash on hand at the time
or from the proceeds of refinancing. There can be no assurance that the Company
will be able to obtain financing, or financing on terms satisfactory to it.

         Seasonality. Demand at many of the hotels is affected by seasonal
patterns. Demand for hotel rooms in the industry generally tends to be lower
during the first and fourth quarters and higher in the second and third
quarters. Accordingly, the Company's revenues reflect this seasonality.

                                       36
<PAGE>

YEAR 2000 ISSUES

         The Company has conducted a review of its computer systems to identify
the systems that could be affected by the "Year 2000" issue and has initiated an
implementation plan to resolve the issue. The Year 2000 problem is the result of
computer programs being written using the two digits rather than four to define
the applicable year. Any of the Company's programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in system failures or miscalculations. The Company
presently believes that, with modifications to existing software and converting
to new software, the Year 2000 problem will not pose significant operational
problems for the Company's computer systems as so modified and converted. The
Company also relies on computer-based services provided by third parties, such
as hotel reservations systems maintained by hotel franchisors. The Company is in
the process of determining whether these third parties have implemented Year
2000 plans. At present, the Company does not expect the Year 2000 problem to
have a material effect on its financial position or results of operations.
However, if the Company's own modifications and conversions , or those by third
parties, are not completed timely, the Year 2000 problem may have a material
impact on the financial position or operations of the Company.

FORWARD LOOKING STATEMENTS

         When used in this and in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases and in oral
statements made with the approval of an authorized executive officer of the
Company, the words or phrases "will likely result," "expects," "plans," "will
continue," "is anticipated," "estimated," "project" or "outlook" or similar
expressions (including confirmations by an authorized executive officer of the
Company of any such expressions made by a third party with respect to the
Company) are intended to identify forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. The Company wishes to
caution readers not to place undue reliance on any such forward-looking
statements, each of which speak only as of the date made. Such statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected. The Company has no obligation to publicly release the result of any
revisions which may be made to any forward-looking statements to reflect
anticipated or unanticipated events or circumstances occurring after the date of
such statements.


                                       37
<PAGE>



                                        PART II - OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (A)      Exhibits

                  10.20    Consulting Agreement by and between Janus American
                           Group, Inc. and The Cornerstone Company

                  10.21    Purchase and Sale Agreement between Galburton Inn,
                           Inc. and Janus American Group, Inc.

                  10.22    Purchase and Sale Agreement between West Montrose
                           Properties and Janus American Group, Inc.

                  10.23    Purchase and Sale Agreement between North Canton
                           Operating Corp., Canton North Properties and Janus
                           American Group, Inc.

                  10.24    Purchase and Sale Agreement between Rockside Road
                           Operating Corp., Rockside Road Properties and Janus
                           American Group, Inc.

                  27.2     Financial Data Schedule

         (B) Reports on Form 8-K:


                                    SIGNATURE

         April 16, 1998--Reporting a change in the Company's certifying 
accountant.


         In accordance with the requirements of the Securities Exchange Act of
1934, as amended, the Registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.


Dated: August 14, 1998              JANUS AMERICAN GROUP, INC.


                                    By:    /s/ James E. Bishop
                                           -------------------------------------
                                           James E. Bishop, President


                                           /s/ Richard A. Tonges
                                           -------------------------------------
                                           Richard A. Tonges, Treasurer and
                                           Vice President of Finance (Principal
                                           Financial and Accounting Officer)


                                       38