UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(Mark One)
             [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                       SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

                       For the fiscal year ended December 31, 1997

                                       OR

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

          For the transition period from ______________ to ___________________.

                           Commission File No. 1-8040

                                        USR INDUSTRIES, INC.
              (Exact name of Registrant as specified in its charter)

           DELAWARE                                  22-2303184
(State or other jurisdiction of                    (I.R.S. Employer 
incorporation or organization)                    Identification No.)

550 POST OAK BOULEVARD, SUITE 545, HOUSTON, TEXAS      77027
   (Address of principal executive offices)          (Zip Code)

Registrant's telephone number, including area code:
(713) 622-9171

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

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

                          COMMON STOCK, $1.00 PAR VALUE
                                (Title of Class)

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

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

As of March 1, 1998, there were outstanding 994,655 shares of the Registrant's
Common Stock, $1.00 par value, and the aggregate market value held by
non-affiliates was approximately $20,000.

DOCUMENTS INCORPORATED BY REFERENCE

      The information called for by Part III, Items 10, 11, 12 and 13 is
expected to be filed by August 15, 1998.

                                     1 of 45
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                              USR INDUSTRIES, INC.

                                     PART I
ITEM 1.  BUSINESS

GENERAL DEVELOPMENT OF BUSINESS

      USR Industries, Inc. (the "Company") was established in Delaware in 1980
as a holding corporation owning diversified small manufacturing interests. At
the time of its formation, the Company's principal business lines were held
through wholly-owned subsidiary corporations into which were contributed various
divisional operations of the former United States Radium Corporation ("USRC").
In connection with the establishment of the Company, USRC was merged into a
newly formed subsidiary of the Company and the respective assets and liabilities
of former divisional operations of USRC were assumed by separate, wholly-owned
subsidiaries of the Company. Thereafter, to more closely reflect its business as
primarily a manufacturer of safety lighting products, USRC changed its name to
Safety Light Corporation ("Safety Light"). In 1982 the Company sold all of the
common stock ownership it had held in Safety Light to a group led by Safety
Light management personnel.

      The Company's current operations consist primarily of the support and
development of the specialty metals business of its subsidiaries, USR Metals,
Inc. and MultiMetal Products Corporation, which are located in Bloomsburg,
Pennsylvania. Also, very significant management time and corporate resources
must be devoted to the conduct of so-called "environmental litigation" which
largely arises from events alleged to have occurred nearly a century ago. The
scope of such litigation has frustrated and made moot the Company's former plans
to pursue its own growth and corporate development pursuant to its plans for
asset redeployment as previously announced.

      The Company's financial resources and personnel levels have been reduced
to effective bankruptcy levels as a result of the direct and indirect costs of
such litigation and related regulatory proceedings. The Company's common stock
is not listed on a stock exchange for trading and the Company is advised that
there is no bid regularly reported for the Company's common stock. Litigation
and related proceedings involving the Company is further described in Notes to
Consolidated Financial Statements and Note 8 thereof.

      At the plant level, the Company's remaining manufacturing operations
generally show positive cash flow on a current operating basis. Manufacturing
operations contribute towards payment of legal expenses; administrative and
other parent company overhead costs such as accounting, tax, secretarial and
management; certain maintenance expenses; remediation costs; and other ongoing
regulatory costs. The Company's legal costs include particularly the direct and
indirect costs of ongoing environmental and insurance litigation, other
regulatory matters and other litigation. The Company has been badly damaged by
the costs of having been ensnared in so-called environmental litigation arising
from events alleged to have occurred nearly a century ago. As a result, the
Company has been required to conduct material legal actions on both offensive
and defensive fronts simultaneously. The Company believes however, that its
offensive litigation against more than a dozen major insurance companies for
insurance coverage, payment of its defense costs and other relief have allowed
the Company's survival to date.

                                       2
<PAGE>
      At the same time that it was bearing the costs to defend itself, the
Company brought offensive legal actions against more than a dozen insurance
carriers and won multi-million dollar settlements. Proceeds from these
settlements have in turn provided the basis for settlements with the private
sector plaintiffs and governmental agencies which have asserted regulatory,
enforcement and other claims against the Company. However, the costs to the
Company to initiate and carry forward such legal actions, simultaneously
litigating against insurance carriers and defending itself from claims by
individuals, corporations, class actions, and state and federal agencies, have
greatly damaged the Company. In addition to direct legal costs the Company has
had to bear financial, administrative and managerial costs for site monitoring,
remediation and other programs. As a result, the Company has suffered
substantial overall losses for more than ten years. Moreover, although the
Company has settled much of the long-standing litigation other pending claims
threaten to further damage or extinguish the Company.

      After filing litigation, the Company and Safety Light engaged in
negotiations with their respective insurance carriers. The first significant
insurance settlement was agreed to during 1985. (See paragraph (e) of Note 8 to
the Consolidated Financial Statements). After further years of litigation,
during 1991 certain insurance carriers entered into settlement agreements which
obligated them to fund separate accounts established in connection with the
environmental matters. Other insurance carriers, however, refused to settle. The
Company and Safety Light continued to pursue litigation against these
non-settling carriers.

      Years before any environmental claims were asserted or Congress adopted
statutes providing unlimited retroactive liability in environmental litigation,
the business lines of USRC had been buffeted by negative trends and a
deteriorating economic climate. During the late 1960s and 1970s, foreign
competition against several important sectors of United States industry
increased dramatically. The domestic American automotive and consumer
electronics industries, particularly the color television and wristwatch
industries which had been the primary customers of USRC for many years, were
severely damaged. Often the foreign companies enjoyed political, financial and
public support from their governments, while similar support was not available
to American companies. In response, much of the former U.S.-based domestic
television, watch and consumer electronics business literally moved their
production and jobs outside the United States.

      In view of the foregoing, there is substantial doubt about the Company's
ability to continue as a going concern. The Company could be required to seek
protection from its creditors under the bankruptcy statutes.

      DEVELOPMENTS IN U.S. ECONOMY. Particularly during the 1960s and 1970s
foreign companies increased their sales into several basic American markets
which had constituted the Company's customer base. Hundreds of thousands of
American jobs were lost, and America's industrial base was undercut. Major
production facilities were closed, great numbers of American jobs in basic
manufacturing industries were lost and expansion of existing plants was moved
overseas. USRC's principal domestic customer base, the consumer electronics and
automotive industries, were severely damaged. USRC's principal customers, the
American color television, wristwatch, automobile and decorative metals
manufacturers, were damaged and had to cut back their domestic business
operations. In turn USRC's business as a supplier to these markets was
significantly reduced, and its principal business lines became more intensely
price competitive and were driven towards marginal profitability or losses.
Foreign producers in Europe and Asia, 

                                       3
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whose export businesses and capital expenditure programs often were subsidized
or otherwise supported by their home governments, were able to combine modern
manufacturing equipment with lower-cost labor, improved worldwide delivery
systems and more realistic legal systems. As a result foreign manufacturers
delivered goods of increasing quality into America at highly competitive prices.

      USRC'S SALE OF DIVISION IN 1978. By the mid-1970s the management of USRC
recognized that the principal businesses of USRC were not likely to return to
their earlier levels of volume or profitability. By 1978 cumulative financial
pressures had forced USRC to sell the assets of a principal operating division,
the Medical Products Division, in order to deal with debt payments and liquidity
needs. In 1978, USRC sold the assets of its Medical Products Division to the GAF
Corporation, a large chemical company headquartered in New Jersey. Sale of this
business line was the first of several sales necessary to repay debt and
maintain necessary liquidity.

      FORMATION OF NEW HOLDING CORPORATION. Management took steps to reposition
assets into business sectors believed to offer more promise then did the
domestic color TV, watch, and metal fabricating business lines. USR Industries,
Inc. was formed in 1980 as a holding corporation. Its business objectives
emphasized diversification into the financial services, natural resources and
real estate sectors which were believed to offer improved long-term potential.
The Company announced that it intended to gradually diversify from manufacturing
operations dependent upon sales to segments of American business which appeared
to be in decline.

      Through the 1980s the Company continued gradual divestiture of
manufacturing sector operations dependent on declining U.S. markets. Following
the 1978 sale of assets of the Medical Product Division to GAF Corporation as
above, in 1982 the Company sold certain net assets of USR Chemical Products,
Inc. ("Chemicals") to Mitsubishi Chemical Industries Limited of Japan
("Mitsubishi"). At that time Chemicals was the Company's largest subsidiary
operation. However, it was competing to sell to a customer base of color
television manufacturers who were steadily leaving the U.S. The business of the
Company's Chemicals subsidiary tended to be cyclical, capital intensive and
vulnerable to competition from foreign companies which were better supported by
their own governments such as Mitsubishi of Japan and Hoescht AG of Germany.

      The Company believed it had to diversify from dependence on customers
whose businesses were being driven out of the U.S. Accordingly, the Company
repositioned its asset profile through divestitures of certain business lines
and the purchase of interests in other sectors, including financial services,
real estate and natural resources. Following is a summary of such transactions.

      FINANCIAL SERVICES/REALTY. During 1981 and early 1982, the Company
established an ownership interest in the financial services and real estate
sectors through the purchase of common stock of Boothe Financial Corporation
("BFC"), a diversified real estate and financial services concern based in San
Francisco, California. The Company's ownership position in the stock of BFC was
sold during late 1983 and 1984, with the Company realizing profits exceeding $1
million on such sales.

                                       4
<PAGE>
      During 1987, the Company purchased a limited partnership interest in a
commercial office building located in Houston, Texas. Thereafter, as the Company
fell under increasing financial pressures arising from environmental and
insurance litigation the Company negotiated non-cash settlements of legal bills
and ongoing administrative expenses related to litigation by using such limited
partnership interests as consideration in lieu of cash payments.

     For further discussion of environmental, insurance and other litigation,
see Notes to Consolidated Financial Statements and Note 8 thereof.

      NATURAL RESOURCES. During 1983 the Company established an ownership
interest in the natural resources sector through the purchase of a common stock
interest in Pinnacle Petroleum, Inc. ("Pinnacle"), a small, publicly-held oil
and gas exploration and production company. Thereafter Pinnacle expanded its
scope of operations by merger transactions with other small, publicly-traded
energy companies, including Spur Petroleum, Inc., Amarillo, Texas; Regal
Petroleum, Ltd. and V-Mc Operating Company, Denver, Colorado; and Golden Oil
Company ("Golden Oil"), Tulsa, Oklahoma. The success of the foregoing
transactions was undermined by the sudden worldwide collapse of oil prices and
severe depression which spread throughout the independent oil and gas industry
during the 1990s. As a result of world market and political conditions oil
prices fell from historic highs of around $36 per barrel to depression era lows
of around $10 per barrel, and the value of the Company's ownership interest in
the natural resource sector declined.

      Meanwhile, increasing environmental and related insurance and other
litigation combined with the erosion of traditional U.S.-based markets caused
intensified pressure on the Company. The Company was forced to continue to sell
divisional assets, thereby extending the cause and effect pattern first begun in
the mid-1970s with the collapse of the domestic U.S. television manufacturing
and consumer electronics industries. New litigation arose based on new legal
theories of retroactive liability contained in legislation passed by Congress in
the early 1980s and thereafter vastly expanded by "activist" judicial
interpretation. With its traditional markets eroding and its major customer base
moving out of the United States, the Company faced a choice between retaining
its remaining core manufacturing operation in Bloomsburg, Pennsylvania or
divesting its remaining interests in common stock in the natural resources
sector. The Company chose to divest such stock through a rights offering made
available on the same terms to all Company shareholders.

      For further discussion of environmental, insurance and other litigation,
see Notes to Consolidated Financial Statements and Note 8 thereof.

      OTHER. In connection with plans to redeploy assets, the Company also
proposed to sell certain assets of its USR Lighting, Inc. subsidiary primarily
in order to diversify from a single-product business which was heavily defense
related. Effective February 13, 1985 certain net assets of Lighting were sold to
AeroPanel Corporation ("AeroPanel") a newly formed corporation principally owned
by an officer of the Company and managed by former Company employees. In
connection with its review and approval of the transaction, the Company's Board
of Directors did not authorize the transaction until it had received the written
opinion of the investment banking group of Connecticut National Bank, a
subsidiary of Hartford National Corporation, that the transaction would be fair,
from a financial point of view, to the Company and its stockholders. 

                                       5
<PAGE>
Such sale was duly approved and ratified by Company shareholders at a Meeting
held March 7, 1986.

NARRATIVE DESCRIPTION OF BUSINESS

      Currently the Company's business primarily involves the support of its
ownership interests in its specialty metals business and management of both the
offensive and defensive litigation involving the Company.

      CONTINUING MANUFACTURING OPERATIONS. USR Metals, Inc. and MultiMetal
Products Corporation (such companies being together referred to herein as
"Metals") continue to own and operate the Company's interest in the
manufacturing sector. Metals specializes in the custom fabrication of specialty
dials and in the anodizing treatment of metals. Metals' specialty dials are used
as components for clocks and timers for automotive and consumer applications,
and are marketed through direct sales and independent sales representatives.
Generally, Metals' products are fabricated and marketed on a quoted fixed-price
basis. The principal raw materials used are aluminum, steel, plastics and
paints. Raw materials are available from several commercial sources, and Metals
has experienced no significant difficulties in obtaining supplies for its
ongoing business operations. Metals holds patents, trademarks or licenses as
deemed advisable in connection with its activities, but does not believe that
its operations are materially dependent thereon. Metals' services include
various fabricating, finishing and decorating processes.

      Metals competes against a substantial number of small specialty companies,
many of which have sales and financial resources exceeding those of Metals.
Price, customer service and product performance are believed important in
marketing products manufactured by Metals. Price competition is very intense,
and requires the purchase of higher volume production machinery to lower Metals'
cost per unit. Metals' business is dependent on sales to a limited number of
customers. During 1997, sales to two customers constituted approximately 46% and
23%, respectively, of total revenues. During 1996, sales to two customers
constituted approximately 54% and 15%, respectively, of total revenues. During
1995, sales to two customers constituted approximately 57% and 18%, respectively
of total revenues. No other single customer accounted for more than 10% of such
sales in the respective years.

      Substantially all product development programs of Metals' specialty dial
business are undertaken by Metals at its expense. Due to the severe pressures
resulting directly and indirectly from environmental litigation and related
matters, resources available for capital expenditures have been severely limited
or extinguished. Under a settlement with the United States Nuclear Regulatory
Commission ("NRC") respecting the Bloomsburg, Pennsylvania site where Metals is
a tenant, Metals is not authorized to move existing equipment off the site
without first applying for and obtaining permission from the NRC. In view of
such NRC requirements as well as Environmental Protection Agency ("EPA")
involvement through lawsuits, negotiations and publicity it appears unlikely
that independent investors will provide funds needed to finance modernization of
Metals' production equipment or make any equity investment in Metals.

      During the last three years through December 31, 1997, expenses for
research, development and engineering for the Company's continuing operations,
including salaries and other expenses of personnel employed on a regular basis
in such work, were primarily connected 

                                       6
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with Metals' custom anodizing operations and are estimated as approximately
$30,000 per year. Various activities of Metals are subject to federal, state or
local regulation with regard to environmental impact. Operations conducted by
Metals have received all certificates from regulatory agencies necessary to
operate Metals' manufacturing equipment in the normal course of business.
Currently, the Company is defending litigation in which substantial claims for
alleged environmental injury are being asserted against it and Metals. Such
claims arise from allegations as to operations of USRC many decades ago in the
era of World War I and to the period following World War II.

      For further discussion of environmental regulations and litigation, see
Notes to Consolidated Financial Statements and Note 8 thereof.

      EMPLOYEES. The Company and its consolidated subsidiaries employed 30
persons on a full-time basis as of December 31, 1997. In addition, the Company
regularly employs part-time personnel and outside professionals who provide
accounting, legal and other services.

      FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS, FOREIGN AND DOMESTIC
OPERATIONS AND EXPORT SALES. Metals is engaged in custom anodizing, fabrication
and distribution of metal products and specialty dials. It had no export sales
during the last three years.

ITEM 2.  PROPERTIES

      The Company leases approximately 3,500 square feet of space for its
principal management and accounting offices located in a commercial office
building at 550 Post Oak Boulevard, Suite 545, Houston, Texas 77027 having
approximately 55,000 net rentable square feet. Such space is under a lease
term which extends through December 31, 2002.

      Metals' manufacturing facility is located in Bloomsburg, Pennsylvania
where Metals currently leases from the owner, Safety Light, approximately 10,000
square feet of space under a lease with renewals through March 31, 2007.

      During 1980, a lease covering administrative offices in Morristown, New
Jersey formerly leased by the Company and having approximately 7,000 square feet
of office space was assigned to Lighting, which subleased the premises to an
unrelated third party subtenant for an initial term of five years with an
optional five year extension, which was exercised by the subtenant. Upon
expiration of the former subtenant's lease extension in September 1990, the
subtenant dissolved its business operations and did not extend its lease. For
over half a decade thereafter, Lighting was unable to sublease its space. In
August 1995, Lighting executed a new sublease covering approximately one-half of
the available space, for a seven-year initial term through October 31, 2002. The
property, which was built in 1955 by its owner, Blanchard Construction Company
("Blanchard") using long-term "credit-lease" financing provided by USRC, has
been the subject of continuing litigation with Blanchard for many years.

      Using financing under the long-term "credit lease" provided by USRC as
above, Blanchard constructed the building in 1955. Relationships between USRC
and Blanchard remained cordial and productive for some twenty years until the
death of Mr. Blanchard, Sr. and succession to Blanchard management of family
heirs, at which time virtually continual litigation ensued. Such 

                                       7
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litigation has the common theme that Blanchard tries different theories before
different local Judges aimed at breaking Lighting's long-term lease so that
Blanchard can dispossess its tenant early and seize control of the premises. For
further description of litigation with Blanchard, see Item 3 ("Legal
Proceedings") below and Notes to Consolidated Financial Statements and Note 8
thereof.

      Management of the Company and its respective subsidiaries are of the
opinion that the principal properties owned or leased thereby are adequate for
their present needs and are adequately protected against insurable risks
customary to their respective industries.

ITEM 3.  LEGAL PROCEEDINGS

      The Company and its subsidiary corporations continue to defend litigation
and related proceedings in which substantial claims for alleged environmental
damages are being asserted. Plaintiffs include both private parties and
governmental regulatory bodies. At the same time the Company also is pursuing
offensive claims against its insurance carriers to determine their
responsibility for insurance coverages and their obligations to assist in
defense of their insureds.

      Legal proceedings involve claims by private sector parties and by
governmental agencies. Many of the private sector claims have been settled. The
principal private sector party actions are described in Note 8 to the
Consolidated Financial Statements. The primary regulatory proceedings are
actions by the EPA and by the NRC, further described in Note 8 to the
Consolidated Financial Statements. Also, the Company is a plaintiff in actions
against certain insurance companies which have been settled in part. These are
discussed in Note 8 to the Consolidated Financial Statements and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources" below.

      During April 1992 Blanchard, owner of a commercial office property located
in Morristown, New Jersey leased by a subsidiary of the Company under a "credit
lease" entered in 1955, instituted an action against Lighting for summary
dispossession. Blanchard has made formal legal claims for dispossession three
times during the last ten years and has communicated to potential subtenants
that litigation was active between Blanchard as landlord and Lighting as tenant,
and that any sublease negotiated by Lighting would remain subject to the
approval of Blanchard and to the outcome of Blanchard's litigation. For over a
decade Blanchard was permitted by the local courts to maintain virtually
continuous lawsuits. Lighting's costs were increased to prohibitive levels, as
Blanchard used the local "litigation lottery" in the hopes of coming before a
sympathetic local judge. During 1994, only thirteen days following final
affirmation by the New Jersey Supreme Court against Blanchard's most recent
previous claims, Blanchard started new litigation on the local Superior Court
level, again seeking to dispossess Lighting. This local Superior Court
proceeding resulted in the trial judge finding for Blanchard on one technical
issue of the lease on which basis the court granted Blanchard possession
effective February 1, 1997. Lighting instructed counsel to file Notice of Appeal
which Notice is anticipated to be reviewed by the Appellate Division of the
State of New Jersey during May 1998. For further discussion see Note 8 to
Consolidated Financial Statements.

      Beginning during February 1991 the Company and Safety Light successfully
negotiated individual settlement agreements with five primary insurance carriers
and three excess insurance 

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carriers. In January 1992 the Company and Safety Light negotiated a settlement
agreement with an additional insurance carrier. Monies obtained under the
initial installment thereunder have been applied in part toward payment on
settlement and defense of the environmental matters. Monies obtained under the
second and final installment will be applied toward the NRC claims further
discussed in Note 8 to the Consolidated Financial Statements. For information
relating to this and additional legal proceedings, see Notes to Consolidated
Financial Statements and Note 8 thereof.

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

      No  matters  were  submitted  for vote by  security  holders  during the
fourth quarter of 1997.

                                   PART II

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

      The Company's common stock is effectively at bankruptcy levels, and is not
listed for trading on a regular exchange. For each of the quarterly periods
within the two years ended December 31, 1997, the transfer agent reported that
there was no regular open market bid for the Company's common stock.

      No cash dividends were declared or paid during the two year period ended
December 31, 1997, and management believes it unlikely that the Company will pay
dividends in the future. At March 1, 1998 there were approximately 1,150 holders
of record of the Company's common stock.

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ITEM 6.    SELECTED FINANCIAL DATA.

      The following selected financial information has been derived from, and is
qualified by reference to and should be read in conjunction with, the Company's
Consolidated Financial Statements and Notes thereto included elsewhere herein,
except that data relating to the fiscal years ended December 31, 1994 and 1993
has been derived from previously published financial statements.

                                            YEARS ENDED DECEMBER 31,
                                -----------------------------------------------
                                    (in thousands, except per share amounts)
                                  1997      1996      1995      1994      1993
                                -------    ------    ------    ------    ------
Revenues ....................   $ 1,506     1,293     1,234     1,291     1,258

Net loss ....................   $   (10)      (52)     (115)     (265)     (396)

Net loss per
  common share ..............   $  (.01)     (.05)     (.12)     (.26)     (.40)

Total assets ................   $   416       463       580       765       883

Total current liabilities ...   $   696       734       799       868       720

Long-term obligations .......   $    55        54        55        56        57

Stockholder equity ..........   $  (335)     (325)     (274)     (159)      106

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

      LIQUIDITY AND CAPITAL RESOURCES. To date the Company has funded its
internal cash needs from operations, asset sales and bank borrowings from time
to time. The Company expects to look to sales of other assets to meet its
liquidity needs, if such are not met from current operations. There can be no
assurance that the proceeds from such transactions would be sufficient to meet
the Company's future expenses, particularly its legal expenses. If in the future
the Company is unable to meet its obligations as they fall due, the Company
could seek protection from creditors under the federal bankruptcy statutes.

      As of December 31, 1997 the Company had a working capital deficit of
$431,042 and the ratio of current assets to current liabilities was 0.4 to 1.0
versus a working capital deficit of $486,346 and a current ratio of 0.3 to 1.0
as of December 31, 1996. The Company evaluates its accounts receivable from time
to time and provides an allowance against current operations for accounts deemed
to be uncollectable. On a historical basis the Company has not experienced any
significant losses from the extension of credit to its customers.

                                       10
<PAGE>
      As a result of complex environmental and related litigation and the
settlements pertaining thereto, and to some further extent as a result of real
estate litigation arising from a 1955 lease, the Company has been required to
bear very substantial legal and related administrative and travel expenses, as
well as increasingly costly and difficult restrictions on its operations. While
settlements of environmental litigation and certain legal expenses for
environmental and related claims during 1991 and 1992 were eventually caused to
be paid directly by insurance carriers, the related direct and indirect costs
and restrictions, particularly restrictions on the Company's ability to arrange
equity financing, new debt agreements or lease financing so as to remove and
replace antiquated production equipment, have badly damaged the Company. The
combined effect of the foregoing has exhausted the Company's financial resources
and liquidity while also effectively prohibiting refinancing or new equity
investment needed to maintain the Company's ability to modernize and compete.
For further discussion of litigation matters, see Notes to Consolidated
Financial Statements and Note 8 thereof.

      Under a Defense Agreement dated September 30, 1985 to which the Company,
Safety Light and five primary insurance carriers are parties ("Defense
Agreement"), certain of the Company's ongoing legal defense costs in the
environmental litigation were assumed by such insurance carriers. However,
payments by such carriers under the Defense Agreement do not cover either the
direct or indirect costs to the Company of the litigation and, in any event, the
Defense Agreement has been superseded to a substantial degree by subsequent
litigation settlements. To the extent such Defense Agreement may still be in
effect, it should be noted that the insurance carriers are defending "under
reservation" of their absolute rights to deny all liability on the underlying
claims and that certain of the insurance carriers under the 1985 Defense
Agreement and certain other insurance carries not party to the 1985 Defense
Agreement have advised that they may refuse to further assist the Company unless
compelled to do so by judicial means.

      The Company is subject to additional claims which are not covered by the
Defense Agreement or other agreements with insurers, although discussions of the
possible participation by certain insurance carriers have been held. Of course
there can be no assurance that any such discussions will result in any further
agreement as to the payment of defense costs by insurance carriers. In event
that no agreement is reached with insurers with respect to such defense costs,
the Company will be required to pay additional legal and litigation related
expenses. Potential sources of payment for such costs include the sale or
transfer of Company assets or the sale, conveyance or discounting of its
accounts receivable. Also, the Company could seek to reorganize under the
bankruptcy laws.

      Beginning during February 1991 the Company and Safety Light successfully
negotiated individual settlement agreements with five primary insurance carriers
and three excess insurance carriers. Settlement documents were executed covering
the monies and releases to be exchanged between the parties. The insurance
carriers paid $6,050,000 in cash into separate trust accounts administered by
parties unrelated to the Company. Substantially all of such amounts were applied
to settle lawsuits, as further described in Note 8 of Notes to the Consolidated
Financial Statements. (See Notes 8(a) and 8(b) thereof). The Company also has
settled: matters described in such Notes (Note 8(d)); other claims that may be
covered under the various trust fund agreements; two claims against Safety
Light; and insurance actions discussed in the Consolidated Financial Statements
and Note 8(e) thereto. Other settlement proposals are pending in various 

                                       11
<PAGE>
stages. In order to reach closure of settlement negotiations with government
agencies the Company intends to move the settlement forum to the unified
jurisdiction of the Federal Bankruptcy Courts if current negotiations with the
Department of Justice are not successful.

      In January 1992 monies obtained under the initial installment were applied
toward defense costs of matters described in Note 8. (See Notes 8(f) and 8(g)
thereof). In January 1992, the Company and Safety Light negotiated a settlement
agreement with an additional insurance carrier, pursuant to which the insurance
carrier paid two installments, one of which was paid in February 1992 upon
execution of all settlement documents and the other paid in January 1993. Monies
have been placed into a separate trust account for the defense of matters
described in the Notes to the Consolidated Financial Statements (particularly
Note 8(f) and Note 8(g) thereof) and to a separate action naming the Company and
Safety Light. On or about May 1992, the Company and Safety Light concluded a
settlement agreement with three primary insurance carriers whereby the insureds
will be reimbursed a total of seventy-five percent (75%) of legal costs and
expenses incurred in the matter described in Note 8(f) of the Notes to
Consolidated Financial Statements.

      Because the uses of amounts paid to the trust accounts were specifically
restricted by terms of the settlement agreements entered into by the Company,
the effects of the above transactions were not reflected in the Company's
Consolidated Financial Statements, other than the reversal of certain previously
accrued legal expenses of $229,240 during 1991, as such expenses were reimbursed
through direct payments by the carriers. Furthermore, since settlements are
negotiated only with the consent of the insurance carriers, no insurance company
receivables are or have been reflected on the Company's Consolidated Financial
Statements.

      Having resolved several of its long-standing litigation matters, but with
other litigation matters continuing in various stages, at this time the
liability of the Company and its subsidiaries alleged to be corporate successors
to the former USRC cannot be reasonably estimated, nor at this time does
management believe that ultimate liability is sufficiently likely to be viewed
as "probable" or that an estimate of insurance proceeds can be made with any
degree of certainty. Therefore, the Company has not made additional accruals for
possible liability at this time. However, due to factors including the very
substantial potential costs of remediation and the uncertainty of the
possibilities of further settlements and of the ultimate outcome of these
matters, despite what the Company and its counsel believe are meritorious
defenses and claims, the Company may be materially adversely affected in the
future even if there is no judicial finding of successor liability.

      The Company is of the opinion that if, in the future, there is any further
material adverse development in such environmental or other litigation, the
Company may be required to make additional asset sales and to file for
protection from creditors under the federal bankruptcy statutes.

                                       12
<PAGE>
RESULTS OF OPERATIONS

      1997 COMPARED WITH 1996. For the year ended December 31, 1997 total
revenues increased to $1,505,594 compared to $1,292,578 for the previous year, a
net increase of $213,016. Net sales from manufacturing for the year ended
December 31, 1997 increased to $1,448,047 compared to $1,233,878 for the prior
year. The increase of $214,169 is primarily a result of an acceleration of
orders from the Company's major customer. The Company reported net rental income
of $57,000 for 1997 compared to $57,919 for the previous year. This rental
income reflects sublease income to a subsidiary of the Company from a small
commercial office property in Morristown, New Jersey that has been the subject
of continual litigation between the Company and the owner of the property. The
Company continues to accrue rent relating to this sublease, but as a result of
the court actions described in Note 8 of the Consolidated Financial Statements,
during 1997 the Company began fully reserving against the resulting accounts
receivable pending acceptance of the Appeal by the Appellate Division and its
outcome.

      Cost of sales increased to $891,516 in 1997 compared to $790,957 for 1996,
an increase of $100,559. Such increase is primarily related to the increase in
net sales from manufacturing. Selling, general and administrative expenses for
the year ended December 31, 1997 were $606,446 compared to $520,099 for the
prior year. The increase of $86,347 is primarily a result of increases in
administrative expenses and professional fees. The Company includes its legal
expenses for the environmental litigation and other litigation discussed in Note
8 to Consolidated Financial Statements in selling, general and administrative
expenses. Depreciation and amortization expense decreased to $5,383 for the year
ended December 31, 1997 from $8,353 for the prior year, as a result of certain
assets becoming fully depreciated for financial reporting purposes in the
current year. The low level of depreciation in recent years reflects that
capital investment needed by the Company at its Bloomsburg, Pennsylvania
subsidiary can not be obtained while that site is subject to ongoing
governmental litigation and claims.

      During 1997 the Company recognized a discount on early redemption of
redeemable preferred stock of $12,375 and $24,750, in 1997 and 1996,
respectively, as a result of the issuer of such stock exercising its right to
redeem the stock at a discount prior to maturity.

      Primarily as a result of the foregoing factors, the Company reported a net
loss of $10,126 for the year ended December 31, 1997 compared to a net loss of
$51,581 in 1996.

      1996 COMPARED WITH 1995. For the year ended December 31, 1996 total
revenues increased to $1,292,578 compared to $1,234,188 for the previous year, a
net increase of $58,390. Net sales from manufacturing for the year ended
December 31, 1996 decreased slightly to $1,233,878 compared to $1,234,188 for
the prior year. The Company reported net rental income of $57,919 for the year
ended December 31, 1996 compared to zero for the prior year. The current year
rental income reflects sublease income to a subsidiary of the Company from a
small commercial office property in Morristown, New Jersey.

      Cost of sales for the current year was $790,957 compared to $815,000 for
1995, a decrease of $24,043. Such decrease is primarily the result of changes in
the Company's sales mix which resulted in products with lower relative material
and overhead costs. Selling, general and administrative expenses for the year
ended December 31, 1996 were $520,099 compared to 

                                       13
<PAGE>
$497,969 for the prior year. The increase of $22,130 is primarily a result of
increased professional fees and administrative expenses. The Company includes
its legal expenses for the environmental litigation and other litigation
discussed in Note 8 to Consolidated Financial Statements in selling, general and
administrative expenses. Depreciation and amortization expense increased
slightly to $8,353 for the year ended December 31, 1996 from $6,200 for the
prior year. The Company recognized a discount on early redemption of redeemable
preferred stock of $24,750 and $29,524, in 1996 and 1995, respectively, as a
result of the issuer exercising its right to redeem such stock at a discount
prior to maturity.

      Primarily as a result of the foregoing factors, the Company reported a net
loss of $51,581 for the year ended December 31, 1996 compared to a net loss of
$114,505 in 1995.

      RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS. In March 1995, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-lived Assets
and for Long-lived Assets to be Disposed of ". This standard requires that
long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company adopted SFAS No. 121 in the first quarter of 1996 with
no effect on the operating results or financial condition of the Company.

      In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation" which encourages, but does not require, employers to adopt a fair
value method of accounting for employee stock-based compensation, and requires
increased disclosures if expense recognition is not adopted. The Company adopted
SFAS 123 in 1996 and did not elect expense recognition for sock options and
therefore implementation of SFAS No. 123 did not have an effect on the Company's
operating results or financial condition.

      In the first quarter of 1997, the FASB issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). This statement
was adopted by the Company effective December 31, 1997. SFAS 128 simplifies the
computation of earnings per common share by replacing primary and fully-diluted
presentations with the new basic and diluted disclosures.

      In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130"). The statement
establishes standards for reporting and display of comprehensive income and its
components. In June 1997, the FASB also issued Statement of Financial Accounting
Standards No. 131, "Disclosures About Segments of an Enterprise and Related
Information" ("SFAS 131"). The statement specifies revised guidelines for
determining an entity's operating and geographic segments and the type and level
of financial information about those segments to be disclosed. The Company will
adopt the provisions of Statements No. 130 and 131 in its 1998 financial
statements.

                                       14
<PAGE>
ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                                                                         PAGE
          Consolidated Balance Sheets                                     16
          Consolidated Statements of Operations                           18
          Consolidated Statements of Stockholder Equity                   19
          Consolidated Statements of Cash Flows                           20
          Notes to Consolidated Financial Statements                      22

                                       15
<PAGE>
                              USR INDUSTRIES, INC.

                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                           December 31,
                                                   ----------------------------
                                                       1997             1996
                                                   -----------      -----------
ASSETS

Current assets:
     Cash and equivalents ....................     $     4,642      $    16,735
     Accounts receivable:
          Trade ..............................         219,875          130,371
          Other ..............................          10,800           54,072
     Inventories .............................          20,221           39,540
     Prepaid expenses and other ..............           9,838            7,331
                                                   -----------      -----------
          Total current assets ...............         265,376          248,049
                                                   -----------      -----------
Redeemable preferred stock, related party ....          82,659          144,372

Property, plant and equipment, at cost .......       1,695,064        1,692,113
     Less:  accumulated depreciation .........      (1,631,578)      (1,626,195)
                                                   -----------      -----------
                                                        63,486           65,918
                                                   -----------      -----------
Other ........................................           4,470            4,470
                                                   -----------      -----------
                                                   $   415,991      $   462,809
                                                   ===========      ===========

                See Notes to Consolidated Financial Statements

                                  (Continued)

                                       16
<PAGE>
                              USR INDUSTRIES, INC.

                   CONSOLIDATED BALANCE SHEETS (CONTINUED)
                                 (UNAUDITED)

                                                          DECEMBER 31,
                                                   ----------------------------
                                                      1997             1996
                                                   -----------      -----------
LIABILITIES AND STOCKHOLDER EQUITY

Current liabilities:
     Accounts payable ........................     $   262,640      $   264,944
     Accrued expenses ........................         433,778          469,451
                                                   -----------      -----------
          Total current liabilities ..........         696,418          734,395
                                                   -----------      -----------
Long-term obligation under
     capital lease ...........................          54,920           53,635

Commitments and contingencies

Stockholder equity:
     Common stock, par value $1;
          3,500,000 shares authorized;
          issued and outstanding 994,655
          shares at December 31, 1997
          and 1996 ...........................         994,655          994,655
     Additional paid-in capital ..............         365,461          365,461
     Accumulated deficit .....................      (1,695,463)      (1,685,337)
                                                   -----------      -----------
          Total stockholder equity ...........        (335,347)        (325,221)
                                                   -----------      -----------
                                                   $   415,991      $   462,809
                                                   ===========      ===========

                 See Notes to Consolidated Financial Statements

                                       17
<PAGE>
                              USR INDUSTRIES, INC.

                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)


                                               YEARS ENDED DECEMBER 31,
                                      -----------------------------------------
                                          1997           1996           1995
                                      -----------    -----------    -----------
Revenues:
   Net sales ......................   $ 1,448,047    $ 1,233,878    $ 1,234,188
   Rental income ..................        57,000         57,919           --
   Other income ...................           547            781           --
                                      -----------    -----------    -----------
        Total revenues ............     1,505,594      1,292,578      1,234,188
                                      -----------    -----------    -----------
Costs and expenses:
   Cost of sales ..................       891,516        790,957        815,000
   Selling, general and
        administrative ............       606,446        520,099        497,969
   Depreciation and amortization ..         5,383          8,353          6,200
                                      -----------    -----------    -----------
        Total costs and expenses ..     1,503,345      1,319,409      1,319,169
                                      -----------    -----------    -----------
Discount on early redemptions of
   redeemable preferred stock .....        12,375         24,750         29,524
                                      -----------    -----------    -----------
Net loss ..........................   $   (10,126)   $   (51,581)   $  (114,505)
                                      ===========    ===========    ===========
Net loss per common share .........   $     (0.01)   $     (0.05)   $     (0.12)
                                      ===========    ===========    ===========
Weighted average number of common
   shares outstanding .............       994,655        994,655        994,655
                                      ===========    ===========    ===========

                See Notes to Consolidated Financial Statements

                                       18
<PAGE>
                              USR INDUSTRIES, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDER EQUITY
                                 (Unaudited)
<TABLE>
<CAPTION>
                                      COMMON STOCK    
                                   ------------------    PAID-IN   ACCUMULATED   STOCKHOLDER
                                    SHARES    AMOUNT     CAPITAL     DEFICIT       EQUITY
                                   -------   --------   --------   -----------    ---------
<S>                                <C>       <C>        <C>        <C>            <C>       
 Balance at
      December 31, 1995 ........   994,655   $994,655   $365,461   $(1,633,756)   $(273,640)

 Net loss ......................      --         --         --         (51,581)     (51,581)
                                   -------   --------   --------   -----------    ---------
 Balance at
      December 31, 1996 ........   994,655    994,655    365,461    (1,685,337)    (325,221)

 Net loss ......................      --         --         --         (10,126)     (10,126)
                                   -------   --------   --------   -----------    ---------
 Balance at
      December 31, 1997 ........   994,655   $994,655   $365,461   $(1,695,463)   $(335,347)
                                   =======   ========   ========   ===========    =========
</TABLE>
                See Notes to Consolidated Financial Statements

                                       19
<PAGE>
                              USR INDUSTRIES, INC.

                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (UNAUDITED)

                                                  YEARS ENDED DECEMBER 31,
                                              ---------------------------------
                                                1997        1996        1995
                                              --------    --------    ---------

Cash flows from operating activities:
Net loss ...................................  $(10,126)   $(51,581)   $(114,505)
     Adjustments to reconcile net loss
          to net cash used
          in operating activities:
     Depreciation and amortization .........     5,383       8,353        6,200
     Discount on early redemptions
         of redeemable preferred stock .....    12,375      24,750       29,524
     Changes in components of
          working capital:
          (Increase) decrease in accounts
               receivable ..................   (46,232)     17,676       75,716
          (Increase) decrease in inventories    19,319      (3,671)      (7,474)
          (Increase) decrease in prepaid
               expenses and other ..........    (2,507)     (7,225)        (106)
          Increase (decrease) in accounts
               payable .....................    (2,304)    (36,045)      39,392
          Increase (decrease) in accrued
               expenses ....................   (34,281)    (28,261)    (108,952)
                                              --------    --------    ---------
Net cash used in operating activities ......  $(58,373)   $(76,004)   $ (80,205)
                                              --------    --------    ---------

                See Notes to Consolidated Financial Statements
                                 (Continued)

                                       20
<PAGE>
                              USR INDUSTRIES, INC.

              CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                 (UNAUDITED)

                                                   YEARS ENDED DECEMBER 31,
                                               --------------------------------
                                                 1997        1996        1995
                                               --------    --------    --------
Cash flows from investing activities:
   Redemptions of investment in
     redeemable Preferred stock ............   $ 49,338    $ 99,000    $ 88,571
   Additions to property, plant and
     equipment .............................     (2,951)     (5,000)     (4,369)
                                               --------    --------    --------
    Net cash provided by investing
      activities ...........................     46,387      94,000      84,202
                                               --------    --------    --------
Cash flows from financing activities:
    Payment of long-term lease
      obligations ..........................       (107)     (1,585)     (1,055)

    Rent deposit ...........................       --        (4,470)       --
                                               --------    --------    --------
    Net cash used in financing
      activities ...........................       (107)     (6,055)     (1,055)
                                               --------    --------    --------
Net increase (decrease) in cash
    and equivalents ........................    (12,093)     11,941       2,942

Cash and equivalents at beginning of
    year ...................................     16,735       4,794       1,852
                                               --------    --------    --------
Cash and equivalents at end of year ........   $  4,642    $ 16,735    $  4,794
                                               ========    ========    ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

      There were no cash interest payments in 1997, 1996 and 1995. Due to its
substantial tax loss carryforward and operating losses, the Company was not
required to make cash payments for income taxes during 1997, 1996 and 1995.

                   See Notes to Consolidated Financial Statements

                                       21
<PAGE>
                              USR INDUSTRIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(1)   SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

      SUMMARY AND PRINCIPLES OF CONSOLIDATION. The accompanying Consolidated
Financial Statements and Notes thereto present on a consolidated basis the
accounts of USR Industries, Inc. ("Company") and its wholly owned subsidiaries
USR Chemicals, Inc. ("Chemicals"); USR Lighting, Inc. ("Lighting"); and Metal
Fabricators, Inc. ("Fabricators") which in turn owns its subsidiaries USR
Metals, Inc. ("Metals") and MultiMetal Products Corporation ("MultiMetals"). All
significant intercompany accounts and transactions have been eliminated in
consolidation.

      PRESENTATION. As more fully discussed in Note 8 to the Consolidated
Financial Statements, the Company is subject to material contingent liabilities
for environmental claims arising from allegations of nearly a century ago. Such
claims have been asserted through private sector litigation and by litigation
proceedings and enforcement by various governmental agencies. Certain insurance
carriers which have assisted the Company's defense in earlier years have
indicated that they may refuse or restrict further financial assistance for
defense costs. The Company's litigation related costs are expected to continue
to be material.

      It is uncertain whether the Company's current operations will generate
sufficient working capital to enable it to continue to support effective legal
defenses while also maintaining the necessary offensive legal capabilities. The
Company also requires cash flow to support continued negotiations and proposals;
remediation programs; other litigation; and personnel and capital equipment
needs. These considerations raise substantial doubts about the Company's ability
to continue as a going concern. As the outcome of these uncertainties cannot
presently be determined, the accompanying financial statements have been
prepared assuming that the Company will continue as a going concern and do not
include any adjustments that might result from the outcome of the foregoing or
other uncertainties.

      The Company's financial resources and personnel levels have been reduced
to effective bankruptcy levels as a result of the adverse effect of the
litigation and related regulatory proceedings referred to above. The Company's
common stock is not listed on a stock exchange for trading and there have not
been regular open market transactions recorded by the Company's transfer agent
during the last two full years. The accompanying Financial Statements and
related Notes are unaudited, as the Company is without resources necessary to
continue to engage independent certified public accountants. In the opinion of
management, such unaudited statements reflect all adjustments which are
necessary to present fairly, in all material respects, the results of the
Company for the periods included herein.

      INVENTORIES. Inventories of raw materials are carried at the lower of cost
(first-in, first-out) or market. Work-in-process and finished goods inventories
are valued at the lower of average cost or market. The majority of inventories
at December 31, 1997 consisted of work-in-process.

      INVESTMENTS. The Company had no short-term investments at December 31,
1997 and 1996.

                                       22
<PAGE>
     PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are
depreciated over the estimated useful lives of the depreciable assets using the
straight line method. Expenditures for maintenance and repairs which do not
improve or extend the useful lives are charged to operations as incurred, while
expenditures for major renewals and betterments are capitalized.

      Dispositions of assets are reflected at their historical cost less
accumulated depreciation, with resulting gain or loss reflected in operations
currently.

     In March 1995, the Financial Accounting Standards Board ("FASB") issued
statement of Financial Accounting Standards (SFAS") No. 121, "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of ".
This standard requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The Company adopted SFAS No. 121 in the first
quarter of 1996 with no effect on the operating results or financial condition
of the Company.

      INCOME  TAXES.  The Company and its  wholly-owned  subsidiaries  join in
filing a consolidated  federal  income tax return.  Investment tax credits are
accounted for by the flow-through method.

      ACCRUALS AND RESERVES. The consolidated balance sheets include an accrual
provision of approximately $220,000 and $230,000 at December 31, 1997 and 1996,
respectively, in respect of estimated future litigation expenses in connection
with claims asserted against the Company and its wholly owned subsidiaries. See
Note 8 to the Consolidated Financial Statements. Also at December 31, 1997 and
1996 fees owed but unpaid to directors had accrued to $71,500 and $56,500,
respectively. As a cash conservation measure, such fees have not been paid
currently. The Company intends to propose payment involving elements of non-cash
consideration.

      EARNINGS PER SHARE. Earnings per share of common stock are based on the
weighted average number of shares of common stock outstanding during each
period.

      In the first quarter of 1997, the FASB issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). This statement
was adopted by the Company effective December 31, 1997. SFAS 128 simplifies the
computation of earnings per common share by replacing primary and fully-diluted
presentations with the new basic and diluted disclosures.

      CASH EQUIVALENTS. For purposes of accounting presentation, highly liquid
instrument purchases with an original maturity of three months or less are shown
as cash equivalents.

      RECLASSIFICATIONS. Certain amounts from prior periods have been
reclassified to conform with the presentation format of the 1997 Consolidated
Financial Statements with no effect on reported results of operations.

                                       23
<PAGE>
(2)   CERTAIN TRANSACTIONS

      Effective February 13, 1985 Company stockholders considered and approved
the sale of certain net assets of Lighting to AeroPanel Corporation
("AeroPanel"), a newly formed corporation owned by an officer of the Company and
managed by former Company personnel. In connection with its review and approval
of the transaction, the Board of Directors of the Company received the written
opinion of the investment banking group of Connecticut National Bank (a
subsidiary of Hartford National Corporation) that the transaction would be fair,
from a financial point of view, to the Company and its stockholders. At a
meeting held March 7, 1986 the Company's stockholders voted to approve and
ratify the sale.

      In connection with the asset sale, in addition to cash consideration of
$325,000, the Company received notes payable to it having aggregate face value
of $570,000 as of the transaction date, secured by a subordinated interest in
AeroPanel assets. During the third quarter of 1993 the Company agreed to defer
principal payments on such notes receivable and to forgive interest thereon from
July 1, 1993 to September 1, 1994. As a condition thereto, the Company required
AeroPanel to raise substantial new financing. The Company's actions were deemed
necessary and in the best interests of the Company in view of sudden and
significant reductions in defense spending following the end of the Cold War and
the curtailment or cancellation of military and space exploration programs for
which AeroPanel serves as a subcontractor. The Company believed that if it were
to attempt to force accelerated payment of the notes payable to it, AeroPanel in
turn might be forced to seek defensive reorganization under the bankruptcy
statutes, impairing the value of a Company asset.

      As of September 1, 1993 AeroPanel fulfilled the first performance
milestone required by the Company as a condition to the possible restructure of
the notes by concluding a financing agreement with a commercial factor. The
agreement provided up to $250,000 of cash financing available immediately to
AeroPanel while the commercial factor was provided a senior security interest in
AeroPanel's assets and other independent security. Effective during the first
quarter of 1994 AeroPanel fulfilled the second condition required of the Company
by obtaining new loan financing. Such loan, which may range to a total amount of
$400,000, is secured by second liens on the business and assets of AeroPanel,
and is subordinate to the first lien of the commercial factor as above.

      Upon receiving evidence satisfactory to the Company of the successful
completion of the required AeroPanel financings as above, the Company agreed to
restructure the notes receivable, together with certain unsecured accounts
receivable from AeroPanel, into non-cumulative, redeemable preferred stock
having a par value of approximately $386,000. In connection with the
restructuring, the Company recognized a non-cash loss of approximately $144,000.
The preferred stock is redeemable by AeroPanel prior to maturity at December 31,
2003 on a scheduled basis which provides an incentive discount for early
redemption. In the year 2003, the preferred stock becomes payable in full at par
value. The schedule for early redemption provides an incentive discount of 25%
from face value if preferred stock is redeemed by AeroPanel on or before
December 31, 1995; 20% if redeemed on or before December 31, 1997; 15% if
redeemed on or before December 31, 1999; 10% if redeemed on or before December
31, 2001; and 5% if redeemed on or before December 31, 2003.

                                       24
<PAGE>
      During 1997, 1996 and 1995 AeroPanel made early redemptions of $61,713,
$123,750 and $118,095 in par value of preferred stock. Of course the ability of
AeroPanel to redeem such preferred stock in the future, whether on an
accelerated basis or at maturity in 2003, is dependent upon a number of factors
beyond the control of the Company, including future developments in the
aerospace and aircraft markets.

(3)   PROPERTY, PLANT AND EQUIPMENT

      A summary of property, plant and equipment at December 31, 1997 and 1996
is as follows:

                                                         1997          1996
                                                      -----------   -----------
           Land and buildings, under capital lease    $   183,254   $   183,254
           Machinery and equipment ................       861,389       858,438
           Office furniture and fixtures ..........        76,921        76,921
           Leasehold improvements .................       573,500       573,500
                                                      -----------   -----------
                                                        1,695,064     1,692,113
                                                      -----------   -----------
           Less accumulated depreciation
             (including accumulated amortization
             of assets under capital lease of
             $128,397 in 1997 and $123,950 in 1996)    (1,631,578)   (1,626,195)
                                                      -----------   -----------
                                                      $    63,486   $    65,918
                                                      ===========   ===========

(4)   EMPLOYEE BENEFIT PLAN

      Effective January 1, 1987 the Company adopted a 401(k) savings plan. The
plan covers all employees who have completed one or more years of service and
are not covered by a collective bargaining agreement. Each participant may make
annual contributions up to the lesser of the maximum amount allowable or 13% of
compensation. The Company, at its discretion, may match participants'
contributions up to 2% of their compensation. Participant contributions are
vested at all times, and the discretionary employer contributions vest 20% per
year after two years. No contributions were made by the Company in 1997, 1996 or
1995.

      Effective January 1, 1987 the Company adopted a defined benefit plan for
all employees covered by a collective bargaining agreement. The Company's annual
contribution to the plan is actuarially determined. Currently the defined
benefit plan covers 18 employees and the participants in the plan are fully
vested after five years of service. The actuarial status of the defined benefit
plan at December 31,1997 has not been determined; however, management does not
consider the impact of the plan to be material to the Consolidated Financial
Statements. The Company incurred pension expense of $6,520, $7,020 and $6,270 in
1997, 1996 and 1995 respectively.

                                       25
<PAGE>
(5)   FEDERAL INCOME TAXES

      At December 31, 1997 the Company had aggregate net operating loss
carryforwards of approximately $2,412,000 which expire at various dates through
the year 2009. Certain restrictions may exist as to the utilization of such
carryforwards. The components of the Company's deferred tax assets and
liabilities at December 31, 1997 and 1996 are as follows:

                                                           Deferred Tax
                                                       Assets (Liabilities)
                                                      -------------------------
                                                         1997            1996
                                                      ---------       ---------
Property, plant and equipment ..................      $  (1,163)      $  (1,974)
Accrued expenses ...............................        118,494         113,121
Net operating losses ...........................        819,960         794,328
                                                      ---------       ---------
   Subtotal ....................................        937,291         905,475
Valuation allowance ............................       (937,291)       (905,475)
                                                      ---------       ---------
Net deferred tax assets (liabilities) ..........      $    --         $    --
                                                      =========       =========

      Due to the Company's ongoing litigation expenses and resultant financial
position, the Company believes it is unlikely that it will be able to utilize
its deferred tax asset prior to its expiration and, accordingly, has provided a
reserve on the full amount of the asset. During 1997, the Company's valuation
allowance increased by approximately $32,000 primarily due to the addition of
current year tax loss carryforwards.

(6)   LEASES

      The Company leases its administrative offices in a commercial office
building at 550 Post Oak Boulevard, Houston, Texas under a lease through
December 2002. The Company's office space comprises 3,500 square feet in such
building, which has a total of approximately 55,000 square feet. An officer of
the Company holds a limited partnership interest in the building. The Company's
wholly-owned subsidiary, Metals, leases a plant facility in Bloomsburg,
Pennsylvania under a long-term lease which provides for nominal rental payments
but includes certain maintenance obligations. Depending on its production
requirements and other factors the Company may propose modifications to such
lease arrangement during 1998. The Company's wholly-owned subsidiary, Lighting,
leases a small commercial office building under a long-term capital lease. As
more fully discussed in Note 8 to the Consolidated Financial Statements since
the late 1970s this lease has been the subject of ongoing litigation between the
Company and the owner of the property, and the Company has instructed its
counsel to file an appeal from an adverse trial court ruling concerning the
lease.

                                       26
<PAGE>
      At December 31, 1997, the aggregate future minimum lease payments under
the above capital lease is as follows. The amounts listed below are based on the
historical payment schedule outlined in the original 1955 lease agreement. They
have not been adjusted to reflect the outcome of the court actions described in
Note 8 herein pending the outcome of the appeal which the Company instructed
counsel to file on its behalf.

                                                                   Capital Lease
                                                                    ---------
1998 .....................................................          $   5,318
1999 .....................................................              5,318
2000 .....................................................              5,318
2001 .....................................................              5,318
Subsequent to 2002 .......................................             81,551
                                                                    ---------
Total minimum lease payments .............................            102,823
Less amount representing
     interest ............................................            (47,903)
                                                                    ---------
Present value of future
     minimum lease payments ..............................          $  54,920
                                                                    =========

(7)   SIGNIFICANT CUSTOMERS

      For the year ended December 31, 1997, subsidiaries of the Company had
sales to two (2) customers of approximately 46% and 23% of total revenues. For
the year ended December 31, 1996, subsidiaries of the Company had sales to two
(2) customers of approximately 54% and 15% of total revenues. For the year ended
December 31, 1995, subsidiaries of the Company had sales to two (2) customers of
approximately 57% and 18% of its total consolidated revenues. The Company's
accounts receivable are primarily from companies involved in the consumer
products and machinery control industries and generally are not collateralized.

(8)      COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

      (a) T&E INDUSTRIES, INC. On April 2, 1981 an action was commenced in the
Superior Court of New Jersey, Essex County, by T & E Industries, Inc. naming
USRC, the corporate predecessor to Safety Light Corporation ("Safety Light"), as
a defendant and alleging, inter alia, that property in Orange, New Jersey owned
by the plaintiff suffers from contamination from certain radioactive materials
allegedly deposited thereon by USRC during prior years. The litigation arises
from operations conducted by USRC at the site during the years 1917 through

                                       27
<PAGE>
1925. Subsequent to the commencement of this action the complaint was amended to
include the Company and certain of its wholly owned subsidiary corporations
alleged to be corporate successors to the former USRC. The plaintiff seeks to
compel remedial action as to alleged improper condition of the site and damages
in unspecified amounts in compensation for alleged injury to its property and
business as well as punitive damages.

     During December 1983 plaintiffs amended such complaint to include as
additional defendants GAF Corporation, Mitsubishi Chemical Industries, Inc.
("MCI") and MCI's subsidiary in New Jersey, USR Optonix, Inc., which was alleged
to be a corporate successor to the former USRC. The additional defendants were
claimed to be liable under a so-called product line exception to the general
theory that a third party purchaser of assets is not liable as a successor. The
additional defendants answered denying liability and demanded that the
previously named defendants defend the action on their behalf and indemnify them
against costs and any potential liability in connection therewith. In 1984 the
additional defendants were successful on a motion for summary judgment against
the plaintiffs and, accordingly, the claims of the additional defendants against
the Company and its subsidiaries were dismissed.

     In early 1985 the Company prevailed against a motion for summary judgment
by the plaintiff seeking judgment that the Company is the successor to USRC.

     In September 1985 five primary insurance carriers of the Company and Safety
Light assumed the defense of the Company, certain of the Company's subsidiaries
and Safety Light, pursuant to a Defense Agreement. While the insurance carriers
assisted in the defense of certain actions their defense was made subject to an
absolute reservation of rights to deny liability on any of the underlying
claims.

     On February 3, 1986, this matter was tried before a jury in front of the
Honorable Stanley G. Bedford. This trial was only with respect to the liability,
if any, of Safety Light. Prior to trial, the Court bifurcated the count
asserting liability against the Company and certain of the Company's
subsidiaries and on November 18, 1985 ordered that all claims against the
Company would be severed and separately tried, if at all, in the event plaintiff
obtains a judgment against Safety Light.

     During the trial the Court granted a directed verdict in favor of Safety
Light dismissing all of plaintiff's strict liability claims, all negligence
based claims relating to the conduct of USRC between 1917-1925, and all claims
based upon fraud, recklessness and intentional conduct. The only remaining
claims against Safety Light were an alleged negligent failure to warn when the
premises were sold in 1943 and a negligence theory which allegedly placed upon
USRC a continuing duty to warn prospective purchasers up through the time
plaintiff purchased the property in 1974, thirty-one years later. The Court also
reduced plaintiff's damage claim from $2.8 million to under $400,000.

     On March 11, 1986, the jury returned a verdict, finding that USRC was not
negligent in 1943 when it failed to warn its immediate purchaser that the
presence of radioactive tailings on the premises constituted a potential risk to
health or property. The jury did find that USRC was negligent for not warning
plaintiff before its purchase of the property thirty-one years later, in 

                                       28
<PAGE>
1974, that some potential risk to health or property existed on the premises.
Damages were assessed against Safety Light in the amount of $372,100.

     On April 25, 1986, Judge Bedford granted Safety Light's motion for judgment
in its favor notwithstanding the jury's verdict of March 11, 1986. The Court
also denied plaintiff's application for indemnification by Safety Light of all
cleanup costs assessed against plaintiff as a result of any future government
efforts to decontaminate the property. Final judgment was thereafter entered in
favor of Safety Light, the Company and certain of the Company's subsidiaries on
May 29, 1986 and awarded on September 20, 1986, dismissing all of plaintiff's
claims in their entirety.

     On July 9, 1986, plaintiff filed a Notice of Appeal from the June 20, 1986
judgment. On August 11, 1988 the Appellate Division reversed the lower court's
decision, entered judgment in favor of plaintiff based on plaintiff's absolute
liability claim and remanded the case to the trial court for a new trial on the
issue of damages. By order dated September 19,1988 Safety Light's motion for
re-consideration was denied by the Appellate Division. A petition for
certification to the Supreme Court of New Jersey was granted and oral arguments
were heard on March 12, 1990. On April 2, 1991 Safety Light and the Company
settled all claims asserted by plaintiff with the exception of future unknown
third party claims against plaintiff relating to the property and future cleanup
costs incurred by plaintiff. Settlement documents have been finalized and
executed by all parties. All monies for this settlement have been provided by
certain insurance carriers of the Company and Safety Light. On April 3,1991, the
Supreme Court modified the Appellate Division's decision, affirmed the decision
and modified and remanded the matter for a new trial on damages. Because of the
aforementioned settlement, this new trial will not be necessary.

      Claims also were made by T & E Industries in an action brought in the U.S.
District Court for the District of New Jersey, allegedly pursuant to the
Comprehensive Environmental Response, Compensation Liability Act of 1980
("CERCLA") seeking a declaration that defendants are liable for all costs of
cleanup and decontamination, consistent with the National Contingency Plan, of
the site presently known as 422 Alden Street, Orange, New Jersey and seeking a
judgment for "response costs" already incurred and injunctive relief for
enforcing such remedy. Defendants made a motion to dismiss and plaintiffs made a
cross-motion for partial summary judgment against Safety Light. The motions were
heard on February 10, 1988. The Court, through Judge Wolin, found against the
defendants' motion to dismiss and granted T & E's application that Safety Light
is liable under CERCLA for all necessary costs of response incurred by T & E
which are consistent with the National Contingency Plan. The Court, however,
limited T & E's alleged damages and determined, inter alia, that T & E's claim
for attorney's fees are not recoverable response costs under CERCLA.

      This matter has also been settled pursuant to the terms of the settlement
agreement discussed previously with all monies paid in settlement provided by
certain insurance carriers of the Company and Safety Light. The same reservation
of rights by plaintiff pertains to this matter. Plaintiff has asserted no claims
against the Company or Safety Light under this reserved right to seek recovery
for future unknown third party claims against plaintiff relating to the property
and future cleanup costs incurred by plaintiff. At this time, since no claims
have been made, the 

                                       29
<PAGE>
Company cannot predict whether or in what amount plaintiff may seek recovery
against the Company under plaintiff's right to make such claims.

      (b) MONTCLAIR, GLEN RIDGE AND WEST ORANGE. Between 1984 and 1990 Safety
Light, the Company and its two manufacturing subsidiaries, USR Lighting, Inc.
and USR Metals, Inc., were named as defendants in seven actions commenced in
Superior Court, Essex County, New Jersey. These actions were brought on behalf
of certain residents in the Townships of Montclair, Glen Ridge and West Orange,
New Jersey and claim, inter alia, damages to land and personal injury in amounts
to be proved at trial as well as punitive damages. Such alleged damages are
claimed to have been caused by actual or threatened exposure of the property and
persons of plaintiffs to gamma radiation and levels of radon gas, a radioactive
decay product of uranium or radium bearing ores, at levels above background
levels naturally occurring and in excess of permissible levels established by
the government for members of the public. Plaintiffs allege that such radiation
is a product of landfill obtained from the former USRC site in Orange, New
Jersey.

      By notice of motion returnable on July 18, 1986, the Company, certain of
the Company's subsidiaries and Safety Light moved for summary judgment
dismissing plaintiff's claims based upon the continued lack of a factual nexus
between their activities and the presence of radon in plaintiffs' homes. The
motion was also based upon the inapplicability of the legal theories advanced by
plaintiffs to these matters. By order dated August 22, 1986, the Court granted
in part and denied in part the motion for summary judgment, ruling that there
remained factual issues preventing the dismissal of certain claims which could
not be resolved without a full plenary hearing. The Court dismissed all causes
of action based upon manufacture of a defective product, breach of an express or
implied warranty, battery and trespass. By the same order, the Court also
consolidated these matters for discovery and trial purposes.

      By order dated January 16, 1987, the Court granted the motion filed by the
Company, certain of the Company's subsidiaries and Safety Light for severance
and separate trial of certain liability and damage issues. The Court directed
that these matters be tried in three separate phases: (1) a Phase I trial
relating solely to plaintiffs' claims that the allegedly contaminated soil
around plaintiffs' homes originated at the former USRC site in Orange, New
Jersey; (2) if plaintiffs are successful in the Phase I trial, a second trial
would follow encompassing all remaining liability issues; and (3) if plaintiffs
are successful again in the Phase II trial, a third trial would follow relating
to the plaintiffs' personal injury and property damage claims.

      On November 19 and 20, 1987 the defendants' motion for partial summary
judgment regarding the absence of contaminated soil originating from the Orange
site of the former USRC on plaintiffs' property was argued before the Superior
Court of New Jersey, Law Division, Essex County. By letter opinion dated January
29, 1988, as supplemented by Judge Yanoff's letter of February 4, 1988, the
Court granted in part and denied in part defendants' application. The Court
adjudicated as a fact that there is no contamination fill originating from the
Orange site on six of the properties claiming to be contaminated and directed a
hearing, with further expert testimony, regarding the alleged presence of
contaminated sub-surface material on 14 properties as well as 30 remaining
properties where certain bore hole sampling results were relied upon. On March
18, 1988, the Court denied plaintiffs' request for a rehearing on defendants'
motion, as well as plaintiffs' request for leave to perform additional bore hole
sampling and analysis to oppose 

                                       30
<PAGE>
defendants' application. Following a lengthy hearing in April and May, 1989, the
Court, by letter opinion dated July 12, 1989, determined such testimony to be
inadmissible.

      By notice of motion dated September 15, 1989 defendants renewed their
motion for partial summary judgment adjudicating as a fact that there is not
contaminated fill originating from the former USRC's former property in Orange
on 18 plaintiff owned or occupied properties. Defendants also moved for the
dismissal of all property damage and consequential damage claims of 22
plaintiffs, based on the absence of contaminated fill on certain properties.

      As in the T&E Industries matter, the same five primary insurance carriers
of the Company and Safety Light assumed the defense of the Company, certain of
the Company's subsidiaries and Safety Light, with a complete reservation of
rights.

      On March 15, 1991, the parties agreed to the terms of a settlement
pursuant to which plaintiffs would release the Company and Safety Light from all
claims, present and future, known and unknown. All monies paid as the result of
this settlement were provided by certain insurance carriers of the Company and
Safety Light. Settlement documents have been executed with all monies paid as of
September 30, 1991. These monies have been distributed to all plaintiffs
following receipt of signed releases from each plaintiff and/or court approval
of the settlement as to all plaintiffs who have not yet reached the age of
majority.

      (c) U.S. ENVIRONMENTAL PROTECTION AGENCY PROCEEDINGS. The U.S.
Environmental Protection Agency ("EPA") has included the Orange, New Jersey site
and the Montclair, Glen Ridge and West Orange sites on the national priorities
list of the Comprehensive Environmental Response Compensation Liability Act of
1980, 42 U.S.C. 9601, et seq., and has notified the Company that it, among
others, may be a potentially responsible party under the Act. The Company has
provided requested information to the EPA. In view of the decision of Judge
Wolin of the U.S. Federal District Court declaring Safety Light a liable party
under CERCLA for the remediation and cleanup for the Orange site, the EPA
completed a Work Plan for Remedial Investigation and Feasibility Study ("RI/FS")
for cleanup of the Orange, New Jersey site. Based on a preliminary review and
certain assumptions about the remediation steps to be undertaken, a consultant
for defendants estimated remediation costs at $4,800,000. EPA has estimated
remediation costs with this property and so called satellite and vicinity
properties at $80,000,000. Defendants agreed to erect a security fence around
the Orange site. An Administrative Consent Order embodying this agreement was
negotiated with EPA and the fence was completed. Four of the same five
preliminary insurance carriers of the Company and Safety Light assumed all the
costs associated with the construction of the security fence.

      The RI/FS and supplemental RI/FS have been completed by EPA for the Glen
Ridge, Montclair and West Orange sites. EPA has estimated remediation costs for
a ten year excavation and removal program at these offsite locations to be
approximately $250,000,000. The Record of Decision ("ROD") selecting the remedy
for the sites was issued by EPA and implementation of the selected remedy is
believed to have been substantially completed. Represented by the Department of
Justice ("DOJ"), the federal government subsequently commenced proceedings
against the Company and Safety Light for the recovery costs associated with the
investigation or remediation of the Orange site or the Glen Ridge, Montclair and
West Orange sites.

                                       31
<PAGE>
      The Company has not made additional accruals for any potential exposure in
this matter at this time due to unresolved questions of the Company's liability
under CERCLA as an alleged successor to the former USRC. However, the costs of
remediation under the methods elected by the federal government were very large.
Various proposals to settle this matter are currently under active consideration
by the Company, Safety Light, the DOJ and various state and federal agencies. In
the event that litigation proceeds and the Company is found liable and the
eligible insurance carriers prevail in any further action seeking to deny or
limit coverage, the Company would be materially adversely affected and would be
required to seek protection under the federal bankruptcy code. Of course, no
assurance can be given as to the outcome of these matters.

      During the spring of 1996 counsel for the Company and Safety Light in this
matter advised the EPA that the Company had won litigation settlements from
insurers in multi-million dollar amounts. The total of amounts won to date is
substantially greater than the net worth of the Company. Such proceeds have been
set aside for use in connection with environmental claims, including payment of
legal fees and certain other expenses.

      The EPA was further advised that, except for the multi-million dollar
amounts won by the Company and set aside as above, the Company is unable to pay
any additional costs for environmental claims. The Company has been advised that
it may be eligible for legislative exception by reason of its limited ability to
pay. Accordingly, the Company has made various filings and proposals to the EPA
with a view towards establishing the Company's limited ability to pay. There has
not been a final decision to accept the Company's application under the limited
ability to pay exception. If it elects to do so, the EPA may file additional
environmental litigation to add to the pending claims referenced in this Note 8.

      The Company believes that its employees, stockholders and itself have been
unfairly and wrongfully subjected to theories of retroactive liability springing
from allegations dating back to the turn of the century and the era before World
War I. The Company believes that the actions complained of not only were fully
legal but were in accord with the accepted knowledge and industry practice of
their time. If further litigation claims are made by the government or private
parties the Company will have no alternative but to file for reorganization
pursuant to the bankruptcy statutes.

      (d) U.S. NUCLEAR REGULATORY COMMISSION PROCEEDING. During the first
quarter of 1989 the Company received from the U.S. Nuclear Regulatory Commission
("NRC") an order dated March 16, 1989 modifying certain operating licenses of
Safety Light and demanding information respecting the Bloomsburg, Pennsylvania
site of Safety Light. The order, which alleges in part that the Company is
liable as a "corporate successor" of Safety Light, requires certain activities
including the preparation and implementation of a plan for site characterization
and decontamination of the Bloomsburg facility, and makes demand for certain
information. On June 2, 1989, a Joint Characterization Plan prepared by the
Company's consultant was submitted in response to the March 16, 1989 Order. That
plan was rejected by the NRC Staff on June 16, 1989. An alternative plan was
submitted in August 1989.

                                       32
<PAGE>
      On August 21, 1989, the NRC Staff issued a second immediately effective
order requiring the named parties, including the Company, to establish a one
million dollar trust fund to finance a broad plan to characterize the extent of
contamination at the Bloomsburg site. The Company requested a hearing before the
Atomic Safety and Licensing Board (the "Licensing Board") with respect to both
the March and August orders. In addition, the Company filed a petition for
Review before the United States Court of Appeals for the District of Columbia
Circuit. By orders dated November 22, 1989 and December 1, 1989, the Licensing
Board issued a stay of the March and August orders with respect to the Company.
By order dated July 26, 1989, the District of Columbia Circuit Court stayed
further action in that proceeding pending further action by the NRC on the March
16, 1989 order.

      By order dated February 8, 1990, the Licensing Board reconsidered and
modified the stay of the March and August Orders, and required the Company to
make contributions to an escrow fund pursuant to the August 21, 1989 order. The
Atomic Safety and Licensing Appeal Board heard oral argument on the issue of
reconsideration and modification of the stay on March 6, 1990. On April 24,
1990, the Atomic Safety and Licensing Appeal Board affirmed the Licensing
Board's February 8, 1990 Order. On August 3, 1990, the Company filed a timely
petition for review of the Appeal Board's decision in the United States Court of
Appeals for the District of Columbia Circuit. Such appeal was then stayed
pending further agency action.

      On or about May 4, 1990, the Company and the NRC Staff entered into a
partial interim settlement, which provided for partial characterization study of
the Safety Light site to be completed on or by October 15, 1990. By order dated
May 4, 1990, the Licensing Board granted a joint motion by the NRC Staff and the
Company to stay the NRC proceedings during the term of the partial interim
settlement agreement. The NRC Staff and the Company further agreed to (a) report
to the Licensing Board on or by November 26, 1990, on the results of the study
and (b) to make recommendations for further action at that time. On or about
October 15, 1990, the Company forwarded to the NRC Staff and to the members of
the Licensing Board copies of the partial interim characterization study
prepared by Chem-Nuclear Systems, Inc., pursuant to the partial settlement
agreement. Based on that study, the Company has been advised that remediation
costs could total between $15,000,000 to in excess of $25,000,000 based on
remediation costs for similar properties if all remediation actions originally
ordered were completed.

      By order dated November 21, 1990, the Licensing Board granted a joint
motion to hold the NRC proceeding in abeyance until January 21, 1991, to enable
the NRC Staff to issue Demands for Information to USR Industries, Inc. and
Safety Light regarding NRC decommission funding requirements found in 10 C.F.R.
ss.30.35. On January 7, 1991, the NRC Staff issued the Demand foR Information to
the Company. The Company responded on February 7, 1991. On January 22, 1991, the
NRC Staff and the Company filed a second joint motion to hold the NRC proceeding
in abeyance until March 4, 1991, to enable the staff to complete its review. On
March 4, 1991, the NRC Staff again moved to stay action.

      In addition, on February 7, 1992 the NRC issued an order to the Company
and Safety Light in which it denied the license renewal applications which had
been filed by Safety Light on January 24, 1984 and November 27, 1987,
respectively. The NRC based its denial on Safety 

                                       33
<PAGE>
Light's alleged violation of regulations regarding a decommissioning funding
plan. The Company and Safety Light have filed an answer and request for hearing.
Among the issues identified for that hearing is whether the NRC has jurisdiction
over the Company. No schedule has been set in that proceeding. However, the
Licensing Board has asked the parties to respond to a series of questions to
enable the Licensing Board to determine if the proceedings should be
consolidated.

      Pursuant to the settlement agreements referenced in (e) below, the Company
and Safety Light have allocated approximately $975,000 of trust funds toward
defense efforts and payment of costs and expenses associated with the continuing
investigation and decommissioning of the property. Approximately $230,000 of
this amount has been paid to consultants retained by the Company and Safety
Light. Of the aforementioned allocated amount, $200,000 was paid in January 1993
by the insurance carrier with whom settlement was reached in January 1992.
Additional costs and expenses are anticipated.

      During March 1993 the Company's NRC counsel became concerned that the
money available from insurance settlements for legal costs, remediation and
additional settlements was being outstripped by accelerating legal expenses to
defend motions, requests for interrogatories and other actions by the NRC legal
staff. Such counsel and the Company both believe that the combined legal costs
to wage simultaneous actions offensively against the insurance carriers and
defensively to protect the Company were running substantially in excess of
amounts currently available. Accordingly, such counsel advised the Company,
Safety Light and the NRC that it had withdrawn from representation of the
Company and Safety Light effective March 15, 1993. Thereafter, other than with
respect to certain limited contributions of legal services to encourage
settlement between the Company, Safety Light and the NRC and, except to provide
representation of the Company to contest NRC jurisdiction, such counsel will no
longer represent the interests of the Company or Safety Light in the foregoing
proceedings.

      The Company thereupon advised the NRC that, as it would be unable to
continue to pay legal counsel both for defense of the NRC matter and offensive
pursuit of the insurers, the Company had no alternative but to represent itself
before the NRC. On April 2, 1993 the Company, represented by its own officers,
and Safety Light appeared before a three judge panel of the Atomic Safety and
Licensing Board in a settlement review. On April 2, 1993 that Board directed
that all pending legal motions in the matter would be suspended to allow for
direct review and negotiation between Safety Light and the NRC technical staff
without use of attorneys by any party. The Company was given standing to be
present and to assist at such meetings.

      One area reviewed was a proposal for site characterization and potential
remediation which Safety Light arranged to be submitted by Amersham
International, Inc. ("Amersham"), a leading worldwide specialist in nuclear
medicine and remediation. Amersham is a commercial outgrowth of a government
atomic energy authority of the United Kingdom. A conference between NRC
technical personnel and Amersham was set for the week beginning May 3, 1993.

      Following conferences and proposals between the Company; Safety Light; NRC
staff, licensing, enforcement and technical personnel; outside experts on
remediation, lead by Amersham; and with the further limited participation and
assistance of NRC counsel for the Company and Safety Light, a settlement
agreement was concluded on September 20, 1994 

                                       34
<PAGE>
between the NRC, Safety Light and the Company. Under the agreement the Atomic
Safety and Licensing Board dismissed proceedings which were then pending against
Safety Light and the Company. Dismissal of these proceedings effectively
terminated enforcement actions which had been brought by the NRC staff against
the Company and Safety Light for a period of five years through December 1999.
In conjunction with the NRC settlement the Company agreed to make monthly
payments into a trust account in the amount of $1,000 for forty-eight (48)
consecutive months. Safety Light undertook independent financial and remediation
obligations.

      Separately the NRC advised the Company that the Licensing Board of the NRC
had determined that, for NRC purposes, the Company is deemed a "successor" to
USRC.

      At this time, the Company believes it has meritorious defenses against
liability as an alleged successor and meritorious claims for defense and
coverage against its insurance carriers; however, of course no assurance can be
given as to the final outcome of these matters.


      (e) PROCEEDINGS AGAINST CERTAIN INSURERS. During 1984 the Company notified
its insurance carriers as to the pendancy of certain of the above described
actions and requested that such carriers defend and indemnify the Company as a
named insured under various primary insurance policies as well as excess
coverage or umbrella policies. All such carriers answered denying liability and
denying any obligation to defend the Company against the claims asserted.
Thereupon on August 20, 1984 the Company commenced an action in Superior Court
of New Jersey, Essex County, naming as defendants all of the Company's primary
and excess coverage insurers and seeking judicial determination as to such
carriers' duty to defend and to indemnify the Company and its subsidiaries and
seeking reimbursement of costs expended by the Company for its defense,
assumption of such defense on an ongoing basis, damages for wrongful declination
to defend and punitive damages and counsel fees for willful failure to defend
and indemnify the Company in each of the foregoing actions.

      In September 1985, five primary insurance carriers of Safety Light and the
Company assumed the defense of the Company and certain of its subsidiaries
alleged to be successors in certain of the underlying actions described above,
while reserving their right to disclaim liability. As a result of that
Agreement, this action had been stayed except with respect to applications by
plaintiffs to require other primary insurance carriers not party to the Defense
Agreement to provide for a defense and indemnification of the Company, certain
of the Company's subsidiaries and Safety Light. By case management order dated
March 21, 1989, the case was re-activated to the extent that discovery was taken
concerning the existence, placement, negotiation and terms of insurance
contracts potentially applicable to the underlying matters referred to in the
Amended Complaint.

      Beginning during February 1991 Safety Light and the Company successfully
negotiated individual settlement agreements with all five primary insurance
carriers and three excess insurance carriers. Settlement documents have been
executed with all monies and releases to be exchanged between the parties. The
insurance carriers paid $6,050,000 on behalf of the Company and Safety Light
into separate trust accounts administered by parties unrelated to the Company,
none of which amounts were received by the Company. These amounts were used to
settle 

                                       35
<PAGE>
matters described in Note 8(a) and 8(b) of Notes to Consolidated Financial
Statements as well as various payments discussed in Note 8(d) to the
Consolidated Financial Statements and approximately $229,000 of legal fees
previously accrued by the Company. The remaining $672,000 in these trust
accounts may be used solely to pay future costs and expenses in resolving the
matters described in Note 8(c) and 8(d) to the Consolidated Financial Statements
as well as other claims that may be covered under the various trust fund
agreements; two claims against Safety Light, and the prosecution of the
Company's insurance actions discussed in 8(e) to the Consolidated Financial
Statements. In January 1992, monies obtained under the initial installment were
applied toward defense costs of matters described in Note 8(f) and 8(g). Because
the use of amounts paid to the trust accounts were specifically restricted, the
effects of the above transactions were not reflected in the Company's
Consolidated Financial Statements, other than reversal of previously accrued
legal expenses of $229,240 during 1991, which expenses were paid through direct
insurance carrier payments. Furthermore, since settlements are negotiated only
with the consent of the insurance carriers, no insurance company receivables are
or have been reflected on the Company's Consolidated Financial Statements.
Monies will also be applied towards defense costs, remediation efforts made
pursuant to settlements and the continued pursuit of non-settling carriers.
During late March 1993 Judge Humphreys, the administrative judge currently
assigned for the foregoing insurance litigation, ordered that the trial date for
USR Industries, Inc. et al. versus INA, et al., Docket No. L-055362-84, would be
set. In order to more fully prepare this complex matter for trial, both sides
evaluated a possible agreement to procedurally dismiss the case by stipulation,
shortly after which the action would be refiled under a new docket number. Such
stipulation would include agreements by both sides not to change the status quo
in other respects, including a Discovery Order issued by Judge Yanoff on
December 16, 1992. Following further negotiation the Company and Safety Light
entered a stipulation in the foregoing case and settlement discussions were
concluded with INA.

      While there can of course be no assurance as to the outcome of these
matters, the Company has been advised that it has meritorious claims to support
its actions against the remaining insurance carriers for defense and
indemnification.

      (f) TAYLOR MATTER. In this matter it was alleged that plaintiff's decedent
was employed by the Wellsbach Company of Philadelphia during the years 1966 and
1967. His duties there allegedly included quality control testing of gas
mantles. The complaint as amended contends that during the course of his
employment he was exposed to thorium, thorium nitrate, thorium dioxide and/or
tredium. Such exposure allegedly caused angiosarcoma of the liver and ultimately
his death on April 7, 1990.

      Theodore Taylor ("Taylor"), while still living, filed a complaint in the
same court in 1989 to which the Company was not a party. The 1989 action was
dismissed without prejudice in March 1991 based on plaintiff's failure to comply
with a number of discovery orders directing plaintiff to specify the products
which allegedly caused Taylor's injuries and to identify the manufacturers and
distributors of same.

      The Company believes that the plaintiff's claims against the Company are
without merit as the former USRC was not involved in the manufacture,
distribution or sale of thorium or thorium compounds, nor was it involved in
manufacturing gas mantles, nor did it deal with the Wellsbach 

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Company. Further, although USRC dealt with tritium, the Company has been advised
that tritium could not have been used in the making of gas mantles due to its
scientific properties. Based on the foregoing, the Company has successfully
defended against this claim and a Stipulation of Dismissal with Prejudice was
filed with the court and received by the Company.

      (g) SHARKEY LANDFILL MATTER. A third-party complaint was filed on July 31,
1991 against, inter alia, USR Industries, Inc., as the alleged successor to the
former USRC.

      The claim against the Company is based on an affidavit claiming that Carl
Gulick, Inc., a waste hauler, pumped a sudsy rinse water from a photographic
slide manufacturing process from USRC's plant at Hanover Avenue and Horsehill
Road in Morris County, New Jersey. The affidavit further claims that this
material was believed to have been taken to the Sharkey Landfill in Parsippany,
New Jersey and that such substances are of the type alleged by government
plaintiffs to have been found at the Landfill. Based on this allegation, the
third-party complaint seeks contribution under Section 113(f) of CERCLA, and
under New Jersey statutes, for the investigation and remediation of the
Landfill.

      The Company has joined the Sharkey Landfill Steering Committee and from
the aforementioned trust funds paid the sum of $10,000 for its share of
administrative costs incurred by the Committee. The litigation has been stayed
pending settlement discussions with the government plaintiffs. When any
settlement figure is agreed upon, the Steering Committee members must arrive at
an allocation of that sum amongst themselves. In connection with that effort,
the Company has responded to an Allocation Questionnaire and has submitted the
required position statements to the Allocation Consultant. Based on the
allocation determined by the Allocation Consultant, the Steering Committee and
the Company and upon ongoing negotiations the Sharkey Landfill matter is
expected to settle without further material cost net to the Company.

      At this time, the Company cannot determine the final outcome of this
matter and of course no assurance can be given with respect thereto.

      (h) BLANCHARD SECURITIES CO. MATTERS. On April 29, 1992 Blanchard
Securities Co. ("Blanchard"), owner of a commercial office property located in
Morristown, New Jersey which is leased by a subsidiary of the Company under a
long term "credit lease", instituted an action for summary dispossession against
its tenant, USR Lighting, Inc. ("Lighting") and the Company. The property is
subject to a Lease Agreement entered into in 1955 and with extensions at the
tenant's option through 2016. Blanchard's complaint was filed in the
Landlord-Tenant Special Civil Part Division, Morris County. On April 30, 1992
Lighting commenced an action by Verified Complaint against Blanchard and its
managing partner, William C. Blanchard, in the Superior Court of New Jersey,
Chancery Division, Morris County. Lighting sought injunctive and declaratory
relief relating to Blanchard's attempted termination of the 1955 Lease
Agreement, as well as compensatory and punitive damages for business torts,
including tortious interference with Lighting's signed sublease with a proposed
subtenant which sublease was being held in escrow and to which Blanchard had
conditionally consented as Landlord.

      On May 8, 1992 Lighting moved to transfer Blanchard's Special Civil Part
suit and consolidate that matter with Lighting's Chancery Division action.
Lighting's motion was granted 

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<PAGE>
on May 15, 1992. On May 20, 1992 Blanchard and William C. Blanchard filed their
Answer to Lighting's Verified Complaint. Blanchard's Answer generally denied
Lighting's allegations and asserted a counterclaim which incorporated the
summary dispossession action.

      Blanchard, has pursued the strategy of using the local "litigation
lottery" to hinder or block potential subtenants by repeatedly asserting similar
litigation claims against Lighting and the Company. Blanchard's most recent
summary dispossession action asserts that repairs to the roof and heating,
ventilation and air conditioning ("HVAC") required under the 1955 Lease
Agreement were not done to the standard required and were not timely, and that
Lighting's failure to effect repairs constituted a breach of the 1955 Lease and
was grounds to dispossess Lighting. Blanchard claims that Lighting breached the
1955 Lease Agreement because of provisions in the separate sublease agreement
between Lighting and a proposed subtenant for improvements to the roof and the
HVAC systems. Lighting agreed to perform these custom improvements in order to
induce its proposed subtenant to enter into a long-term sublease with Lighting.
Blanchard admitted to never having inspected the roof or operated the HVAC
systems to determine whether any repairs were in fact necessary under the 1955
Lease Agreement. Blanchard also admitted to not knowing the condition of the
roof and HVAC systems or the specific nature of the improvements agreed to
between Lighting and its proposed subtenant. Nevertheless, Blanchard has been
permitted by the local courts to pursue virtually continuous litigation in the
matter. As a result, Lightning's sublease rights have been greatly decreased in
value because of the costs of defending Blanchard's repeated court actions and
the chilling effect on potential subtenants of delays in approval of their
subtenancies and legal threats against them by Blanchard. These factors,
together with the maintenance and legal costs associated with holding and
managing the building for five years without a subtenant, have become excessive.

      During 1994, only thirteen days following final affirmation by the New
Jersey Supreme Court against Blanchard's most recent previous claims, Blanchard
started new litigation in Supreme Court, Morris County, New Jersey seeking to
dispossess Lighting. Again Blanchard's litigation was first filed in
Landlord-Tenant Special Civil Part Division, Morris County so that separate
motion by Lighting was required to again transfer the matter to the Superior
Court, Chancery Division, Morris County, New Jersey.

      In its 1994 suit, Blanchard repeated claims that Lighting had not properly
maintained and repaired the building. This time Blanchard cited the allegedly
excessive length of time required to repair substantial water damage to the
building caused by freezing and burst plumbing. Such damage was caused by a
power outage during a historic blizzard in northern New Jersey in early winter
of 1994 and has been admitted by the power company not to have been caused by
Lighting. Blanchard also asserted that Lighting did not meet repair and
maintenance obligations respecting grounds maintenance and removal of trash,
principally containers deposited on the wooded area of the property after
business hours by patrons of a nearby fast food restaurant. Blanchard also
alleged, inter alia, that the property had been abandoned by Lighting; that
Lighting had not made a proper effort to sublease the property; and that
Lighting was not meeting on a full and timely basis other incidents of long-term
ownership in that Lighting was late in delivering local property taxes assessed
on the property; and that Lighting had not given effective notice of extension
on the 1955 lease. Lighting had appealed the property tax assessment, which
appeal successfully reduced applicable property taxes by approximately 25%.
Blanchard's complaint was amended during 

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<PAGE>
February 1996 to assert that Blanchard had no notice of Lighting's intention to
extend its lease following its June 30, 1996 expiration.

      For its part, Lighting answered and counterclaimed against Blanchard,
asserting repeated and willful breaches of the covenants of good faith and
Lighting's right to quiet enjoyment of the premises contained in the 1955 Lease
Agreement which Lighting has duly honored throughout its occupancy of the
building since 1955.

      Trial was conducted in Morristown, New Jersey over a three week period
during May and June 1996. Thereafter, the presiding Superior Court Judge, The
Honorable Kenneth C. MacKenzie, issued an opinion in which he found in favor of
the Company on all claims with respect to the occupancy, maintenance, insurance,
tax payment, repair and other related assertions by Blanchard. However, on the
sole technical finding that during the litigation with Blanchard wherein
Lighting was asserting its lease rights through 2016 that Blanchard had not been
given notice of Lighting's intent to extend its tenancy under the Lease, Judge
MacKenzie ordered Lighting to vacate as of February 1, 1997. On April 18, 1997
counsel for Lighting filed Notice of Appeal of this element of Judge MacKenzie's
Opinion and thereafter Blanchard's counsel filed Notice of Cross-Appeal on other
findings at trial. The Appellate Division, finding that the Company's counsel
was a member of the New Jersey bar but did not have a resident office in New
Jersey and had not caused the Notice of Appeal to be manually executed by
co-counsel having a New Jersey office, apparently returned the Notice of Appeal
by regular mail for correction. Such notification was lost in the mail and was
not received by counsel for the Company. Such counsel plans to file renewed
Notice and Motion during May 1998.

      Lighting will also appeal Judge MacKenzie's finding that Blanchard acted
in a commercially reasonable manner with respect to this lease and that punitive
damages should not be awarded to Lighting. The renewal Notice of Appeal has not
yet been filed by counsel for Lighting, so that of course formal appellate
briefs have not yet been filed with the Superior Court of New Jersey, Appellate
Division.

      Lighting has been advised that it has good cause for appeal and
meritorious defenses against the appeals by Blanchard. Of course, there can be
no assurance as to whether, and to what extent, appeals by Lighting or Blanchard
may be successful or whether the Appellate Division will agree to hear the
appeal.

      Lighting has also been notified that Blanchard has dispossessed its former
subtenant, Ardry Trading. In turn Ardry Trading has named Lighting as a third
party defendant in an action where Blanchard is suing Ardry Trading for unpaid
rent, damages and attorney's fees. Ardry Trading is seeking indemnity against
any judgement in favor of Blanchard and is also asking for consequential damages
related to business interruption, moving expenses and differential costs for a
new lease, among other things. In addition two real estate brokers who
participated in Lighting's sublease to Ardry Trading have commenced actions
against Lighting during 1997 seeking commissions allegedly due, damages and
legal costs. The above matters are in their preliminary stages. While the
Company believes it has meritorious defenses and claims related to these
matters, of course no assurance can be offered as to the outcome of such
litigation claims.

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<PAGE>
SUMMARY

      Having resolved several of the Company's long-standing litigation matters,
but with other matters still in preliminary stages, at this time the liability
of the Company and its subsidiaries alleged to be corporate successors to the
former USRC cannot be reasonably estimated, nor does management believe at this
time that ultimate liability is sufficiently likely to be viewed as "probable"
or that an estimate of insurance proceeds can be made with any degree of
certainty. For these reasons the Company has not made additional accruals for
possible liability at this time. However, due to factors including the very
substantial potential costs of remediation and the uncertainty of the final
outcome of these matters, despite what the Company believes are meritorious
defenses and claims, the Company may be materially adversely affected in the
future even if there is no judicial funding of successor liability.

      The legal costs both to defend and to prosecute the above litigation and
related contingent items have been and are expected to be material in amount. If
the Company is not successful in its pursuit of additional financial assistance
from its insurance companies, it is unlikely that current operations will
generate sufficient working capital to enable the Company to continue its legal
defense. Various settlement proposals and negotiations with the government are
ongoing; however, of course there can be no assurances that any such proposal or
negotiation will prove successful.

      The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern and do not include any adjustments that
might result from the outcome of these uncertainties. The Company believes that
its employees, stockholders and itself have been unfairly and wrongfully
subjected to theories of retroactive liability springing from allegations dating
back to the turn of the century and the era before World War I. The Company
believes that the actions complained of were legal and, moreover were in
accordance with the accepted knowledge and practice of their time. If further
litigation claims are made by the government or private parties the Company will
have no alternative but to file for reorganization pursuant to the bankruptcy
statutes.

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<PAGE>
ITEM 9.     CHANGES IN AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND
            DISCLOSURE

      Not applicable.

PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      The information to be filed by the Company pursuant to Regulation 14A of
the Securities Exchange Act of 1934 is expected to be filed by August 15, 1998.

ITEM 11.    EXECUTIVE COMPENSATION

      The information to be filed by the Company pursuant to Regulation 14A of
the Securities Exchange Act of 1934 is expected to be filed by August 15, 1998.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The information to be filed by the Company pursuant to Regulation 14A of
the Securities Exchange Act of 1934 is expected to be filed by August 15, 1998.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The information to be filed by the Company pursuant to Regulation 14A of
the Securities Exchange Act of 1934 is expected to be filed by August 15, 1998.


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<PAGE>
PART IV

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

PAGE

(A)         1. The following Consolidated Financial Statements are included in
            Part II, Item 8:

                  CONSOLIDATED FINANCIAL STATEMENTS:

                  Consolidated Balance Sheets as of
                  December 31, 1997 and 1996                               16

                  Consolidated Statements of Operations for the
                  years ended December 31, 1997, 1996 and 1995             18

                  Consolidated Statements of Stockholder Equity
                  for the years ended December 31, 1997 and 1996           19

                  Consolidated Statements of Cash Flows for the
                  years ended December 31, 1997, 1996 and 1995             20

                  Notes to Consolidated Financial Statements               22

      2.    FINANCIAL STATEMENT SCHEDULES:

      All schedules are omitted because they are not applicable or the
      information is included in the financial statements and notes included
      herewith.

(B)   REPORTS ON FORM 8-K

      No reports on Form 8-K were filed during the Company's last fiscal quarter
of 1997.

(C)   EXHIBITS

      The following exhibits are filed as part of this report. Where such filing
      is made by incorporation by reference to a previously filed statement or
      report, such statement or report is identified in parenthesis.

3.    ARTICLES OF INCORPORATION AND BYLAWS

3.1   Certificate of Incorporation (incorporated by reference to Exhibit 3(a) of
      Form 8-B dated October 15, 1980).

3.2   Amendment to Certificate of Incorporation filed on June 13, 1984
      (incorporated by reference to Exhibit 3 of Form 10-K for year ended
      December 31, 1984).

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<PAGE>
3.3   Bylaws (incorporated by reference to Exhibit 3(b) of Form 8-B dated
      October 15, 1980).

10.   MATERIAL CONTRACT

10.1  Asset Purchase Agreement between USR Lighting, Inc. and AeroPanel
      Corporation (incorporated by reference to Exhibit 2(a) of Form 8-K March
      8, 1985).

10.2  Asset Purchase Agreement between USR Metals, Inc. and MultiMetal Products
      Corporation (incorporated by reference to Exhibit 2(b) of Form 8-K March
      8, 1985).

10.3  Lease dated as of December 12, 1983 between USR Lighting, Inc. and 661
      Myrtle Property Co., Ltd. (incorporated by reference to Exhibit 10 of Form
      10-K for year ended December 31, 1984).

10.4  Restructuring Agreement between USR Lighting, Inc. and AeroPanel
      Corporation dated as of January 1, 1994. (Incorporated by reference to
      Exhibit 10.4 of Form 10-K for the year ended December 31, 1994.)

22.1  SUBSIDIARIES OF THE COMPANY (filed herewith).

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<PAGE>
SIGNATURES

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

                                          USR INDUSTRIES, INC.



 Date:      April 15, 1998                By: /s/ RALPH T. MCELVENNY, JR.
                                                  Ralph T. McElvenny, Jr.,
                                                  Director, Acting Principal
                                                  Executive, Financial and 
                                                  Accounting Officer

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



Date:       April 15, 1998                By: /s/ STEPHEN B. AYCOCK
                                                  Stephen B. Aycock,
                                                  Director

Date:       April 15, 1998                By: /s/ RALPH T. MCELVENNY, JR.
                                                  Ralph T. McElvenny, Jr.,
                                                  Director

                                       44