<PAGE>   1
                                                                      Exhibit 23


                          INDEPENDENT AUDITORS' REPORT





Stockholders of
SPECIALTY CHEMICAL RESOURCES, INC.


We have audited the accompanying balance sheets of Specialty Chemical Resources,
Inc. as of December 31, 1997 and 1996, and the related statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Specialty Chemical Resources,
Inc. as of December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.







                                                 GRANT THORNTON LLP



Cleveland, Ohio
March 6, 1998 (except for the 2nd paragraph of Note D as to which the date is
              April 14, 1998)



                                       F-1

<PAGE>   2


                       Specialty Chemical Resources, Inc.

                                 BALANCE SHEETS
                                   December 31


<TABLE>
<CAPTION>                                                                 
                                     ASSETS
                                                                        1997          1996
                                                                   -----------    -----------
<S>                                                               <C>            <C>
CURRENT ASSETS
   Cash and cash equivalents                                       $     3,100    $   168,641
   Accounts receivable - trade, less allowance for doubtful
       accounts of $137,000 and $102,000, respectively (note D)      5,338,168      4,948,075
   Receivables - other (note E)                                        343,657        258,284
   Inventories (notes A, C and D)                                    8,944,905      5,909,447
   Prepaid expenses                                                    360,196        305,259
   Refundable income taxes                                                --        1,075,016
                                                                   -----------    -----------

            Total current assets                                    14,990,026     12,664,722

PROPERTY AND EQUIPMENT - at cost
   (notes A and D)
      Building                                                       1,293,745        959,199
      Leasehold improvements                                         2,798,551      2,579,490
      Office equipment and furniture                                 1,115,738      1,042,432
      Machinery and equipment                                       11,889,611      9,357,362
      Construction in-progress                                         523,932        227,061
                                                                   -----------    -----------
                                                                    17,621,577     14,165,544
         Less accumulated depreciation and amortization              5,536,789      4,451,017
                                                                   -----------    -----------
                                                                    12,084,788      9,714,527
      Land                                                             118,690        118,690
                                                                   -----------    -----------

                                                                    12,203,478      9,833,217

OTHER ASSETS (note A)
   Goodwill  (note K)                                                  894,319     19,738,338
   Product formulation                                                 692,894        977,150
   Deferred financing costs                                            435,117        421,460
   Other                                                               302,044        288,499
                                                                   -----------    -----------

                                                                     2,324,374     21,425,447
                                                                   -----------    -----------

                                                                   $29,517,878    $43,923,386
                                                                   ===========    ===========


</TABLE>

        The accompanying notes are an integral part of these statements.

                                           F-2





<PAGE>   3
                             Specialty Chemical Resources, Inc.

                                 BALANCE SHEETS - CONTINUED

                                        December 31
<TABLE>
<CAPTION>
                                        LIABILITIES

                                                                         1997             1996
                                                                    ------------     ------------
<S>                                                                 <C>              <C>         
CURRENT LIABILITIES
   Current portion of long-term debt                                $  1,057,497     $    434,733
   Accounts payable                                                    6,893,119        4,004,870
   Accrued liabilities:
      Compensation and payroll taxes                                     123,146          173,320
      Taxes - other                                                       37,116           65,442
      Interest                                                           108,430           68,436
      Other                                                              356,067          368,421
                                                                    ------------     ------------
                                                                         624,759          675,619
                                                                    ------------     ------------

            Total current liabilities                                  8,575,375        5,115,222

LONG-TERM DEBT (note D)                                               15,445,820       12,246,119


DEFERRED INCOME TAXES (notes A and I)                                       --               --


COMMITMENTS AND CONTINGENCIES (note E)                                      --               --



STOCKHOLDERS' EQUITY (notes G and H)
   Preferred stock - $.01 par value; authorized 2,000,000 shares            --               --
   Common stock - $.10 par value; authorized 13,000,000 shares;
      issued 3,947,762 and 3,947,764 shares, respectively                394,777          394,777
   Additional paid-in capital                                         41,935,125       41,935,125
   Accumulated deficit                                               (36,714,497)     (15,629,785)
                                                                    ------------     ------------
   Unearned compensation                                                    --            (19,350)
                                                                       5,615,405       26,680,767
   Less common stock in treasury, at cost;
      65,500 shares each year                                           (118,722)        (118,722)
                                                                    ------------     ------------
                                                                       5,496,683       26,562,045
                                                                    ------------     ------------
                                                                    $ 29,517,878     $ 43,923,386
                                                                    ============     ============
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       F-3
<PAGE>   4
                       Specialty Chemical Resources, Inc.

                            STATEMENTS OF OPERATIONS

                         For the years ended December 31


<TABLE>
<CAPTION>
                                                    1997              1996              1995
                                                ------------     ------------     ------------

<S>                                             <C>              <C>              <C>         
Net sales                                       $ 40,283,662     $ 38,914,148     $ 43,419,021

Cost of goods sold                                33,628,380       32,783,174       39,123,444
                                                ------------     ------------     ------------

          Gross profit                             6,655,282        6,130,974        4,295,577

Selling, general and administrative expenses       6,903,620        6,066,674        7,647,938

Amortization of intangibles                          996,679          906,846          868,692

Impairment of long-lived assets (note K)          18,501,135             --               --
                                                ------------     ------------     ------------

          Operating (loss)                       (19,746,152)        (842,546)      (4,221,053)

Other income (expense)
   Interest expense                               (1,404,700)      (1,059,217)        (779,041)
   Other                                              66,140           11,450           10,488
                                                ------------     ------------     ------------
                                                  (1,338,560)      (1,047,767)        (768,553)
                                                ------------     ------------     ------------

          (Loss) before income taxes             (21,084,712)      (1,890,313)      (4,989,606)

Income taxes (benefits) (notes A and I)                 --           (127,600)      (2,981,000)
                                                ------------     ------------     ------------

          NET (LOSS)                             (21,084,712)    $ (1,762,713)    $ (2,008,606)
                                                ============     ============     ============
Basic (loss) per common share (note J)          $      (5.43)    $      (0.45)    $      (0.51)
                                                ============     ============     ============
</TABLE>





        The accompanying notes are an integral part of these statements.

                                       F-4
<PAGE>   5
                       Specialty Chemical Resources, Inc.

                       STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                         Common Stock Outstanding 
                                              $.10 par value      Additional
                                            --------------------   Paid-in    Accumulated    Unearned   Treasury
                                             Shares     Amount     Capital      Deficit    Compensation   Stock         TOTAL
                                           ---------   --------  -----------  ------------ ------------  --------   ------------
<S>                                        <C>         <C>       <C>          <C>            <C>        <C>         <C>         
Balance at December 31, 1994               3,932,776   $393,277  $41,878,575  $(11,832,504)  $   --     $    --     $ 30,439,348

   Retirement of fractional shares
    received from prior reverse
    stock split                                   (7)      --           --            --         --          --             --

   Net loss for the year                        --         --           --      (2,008,606)      --          --       (2,008,606)

   Dividends ($1.79 per share)                  --         --           --          (6,257)      --          --           (6,257)

   Issuance of restricted stock               15,000      1,500       56,550          --      (38,700)       --           19,350
                                           ---------   --------  -----------  ------------   --------    --------   ------------
Balance at December 31, 1995               3,947,769    394,777   41,935,125   (13,847,367)   (38,700)       --       28,443,835

   Retirement of fractional shares
      received from prior reverse
      stock split                                 (5)      --           --            --         --          --             --
 
   Net loss for the year                        --         --           --      (1,762,713)      --          --       (1,762,713)

   Dividends on redeemable preferred
      stock  ($1.875 per share)                 --         --           --         (19,705)      --          --          (19,705)

   Amortization of unearned compensation        --         --           --            --       19,350        --           19,350

   Purchase of common stock for treasury     (65,500)      --           --            --         --      (118,722)      (118,722)
                                           ---------   --------  -----------  ------------   --------    ---------  ------------
Balance at December 31, 1996               3,882,264    394,777   41,935,125   (15,629,785)   (19,350)   (118,722)    26,562,045

   Retirement of fractional shares
      received from prior reverse
      stock split                                 (2)      --           --            --         --          --             --

   Net loss for the year                        --         --           --     (21,084,712)      --          --      (21,084,712)

   Amortization of unearned compensation        --         --           --            --       19,350        --           19,350
                                           ---------   --------  -----------  ------------   --------   ---------   ------------
Balance at December 31, 1997               3,882,262   $394,777  $41,935,125  $(36,714,497)  $   --     $(118,722)  $  5,496,683
                                           =========   ========  ===========  ============   ========   =========   ============
</TABLE>


          The accompanying notes are an integral part of these statements.

                           F-5
<PAGE>   6
                       Specialty Chemical Resources, Inc.

                            STATEMENTS OF CASH FLOWS

                         For the years ended December 31

<TABLE>
<CAPTION>


                                                                      1997             1996            1995
                                                                   ------------    -----------    ----------- 
Cash Flows from Operating Activities:
<S>                                                                <C>             <C>            <C>         
   Net loss                                                        $(21,084,712)   $(1,762,713)   $(2,008,606)
   Adjustment to reconcile net earnings (loss) to net cash
      provided by (used in) operating activities:
         Depreciation                                                 1,084,143      1,025,799        907,718
         Amortization of intangibles                                    996,679        906,846        868,692
         Impairment of long-lived assets                             18,501,135           --             --
         Deferred income taxes (benefits)                                  --         (138,805)    (1,975,000)
         Stock compensation                                              19,350         19,350         19,350
         Change in assets and liabilities:
              Decrease in accounts receivable                         1,490,817      1,270,433        572,735
              (Increase) decrease in accounts receivable - other        (85,373)       551,818       (728,089)
              (Increase) decrease in inventories                       (279,840)       807,863        114,903
              (Increase) decrease in prepaid expenses                   (54,937)      (103,839)       181,664
              Decrease (increase) in refundable income taxes          1,075,016         59,063     (1,082,181)
              Increase in other assets                                 (123,557)        (7,337)       (26,144)
              Increase (decrease) in accounts payable                 2,888,249     (2,690,647)       925,001
              (Decrease) in accrued liabilities                         (50,860)      (525,047)      (419,824)
                                                                   ------------    -----------    ----------- 
                  Total adjustments                                  25,460,822      1,175,497       (641,175)
                                                                   ------------    -----------    ----------- 

                     Net cash provided by (used in)
                         operating activities                         4,376,110       (587,216)    (2,649,781)
</TABLE>



                            (CONTINUED ON NEXT PAGE)




        The accompanying notes are an integral part of these statements.

                                       F-6
<PAGE>   7
                       Specialty Chemical Resources, Inc.

                      STATEMENTS OF CASH FLOWS - CONTINUED

                         For the years ended December 31


<TABLE>
<CAPTION>

                                                                      1997            1996            1995
                                                                 ------------    ------------    ------------ 
        Net cash provided by (used in) operating activities
<S>                                                              <C>             <C>             <C>          
             (brought forward from previous page)                $  4,376,110    $   (587,216)   $ (2,649,781)

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from sale of assets                                          --              --            39,966
   Acquisition of Hysan assets (note B)                            (7,431,977)           --              --
   Expenditures for property and equipment - net                     (932,139)       (155,621)     (3,685,351)
   Purchase of product formulations and license agreement                --          (400,300)           --
                                                                 ------------    ------------    ------------ 

          Net cash (used in) investing activities                  (8,364,116)       (555,921)     (3,645,385)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from sale of redeemable preferred stock                      --              --           350,000
   Redemption of redeemable preferred stock                              --          (350,000)           --
   Dividends paid on redeemable preferred stock                          --           (19,705)           --
   Payments on long-term obligations                                 (538,440)       (134,503)         (2,371)
   Proceeds from note payable, net of deferred financing costs      2,090,000       1,688,368         913,750
   Proceeds from issuance of short-term debt                        1,500,000       8,500,265            --
   Payments on short-term debt                                     (1,500,000)    (10,121,882)           --
   Proceeds from sale of convertible subordinated debentures,
      net of deferred financing costs                                 240,000       3,723,373            --
   Purchase of common stock for treasury                                 --          (118,722)           --
   Proceeds on revolver                                            49,734,451      37,041,248      11,965,000
   Payments on revolver                                           (47,703,546)    (38,897,902)     (6,945,000)
                                                                 ------------    ------------    ------------ 

          Net cash provided by financing activities                 3,822,465       1,310,540       6,281,379
                                                                 ------------    ------------    ------------ 

          NET (DECREASE) INCREASE IN CASH
                AND CASH EQUIVALENTS                                 (165,541)        167,403         (13,787)

Cash and cash equivalents at beginning of year                        168,641           1,238          15,025
                                                                 ------------    ------------    ------------ 

Cash and cash equivalents at end of year                         $      3,100    $    168,641    $      1,238
                                                                 ============    ============    ============
</TABLE>



        The accompanying notes are an integral part of these statements.

                                    F-7

<PAGE>   8
                       Specialty Chemical Resources, Inc.

                          NOTES TO FINANCIAL STATEMENTS

                        December 31, 1997, 1996 and 1995



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   Specialty Chemical Resources, Inc. (SCR, Inc.) formulates, blends, and
   packages pressurized specialty chemical products for sale to marketers,
   distributors, and retailers primarily throughout the United States.  Its
   primary markets are the automotive and industrial maintenance and    
   janitorial/sanitation markets.

   A summary of the significant accounting policies consistently applied in the
   preparation of the accompanying financial statements follows.

   INVENTORIES

   Inventories are stated at the lower of cost or market. Cost is determined by
   the last-in, first-out (LIFO) method for raw materials and the first-in,
   first-out (FIFO) method for finished goods.

   PROPERTY AND EQUIPMENT

   Depreciation is provided for in amounts sufficient to relate the costs of
   depreciable assets to operations over their estimated service lives. The
   straight-line method of depreciation is used for financial reporting
   purposes. Accelerated methods are used for tax purposes.

   The estimated lives used in determining depreciation and amortization for
   financial reporting purposes are as follows:

Building....................................................... 20 years

Leasehold improvements......................................... 15 years

Office equipment and furniture................................. 7-10 years

Machinery and equipment........................................10-16 years


   INTANGIBLES

   The Company adopted Statement of Financial Accounting Standards No. 121,
   Accounting For The Impairment Of Long-Lived Assets and For Long-Lived Assets
   To Be Disposed Of (SFAS 121) as of January 1, 1996. This Statement requires
   that long-lived assets, including goodwill, held and used by an entity be
   reviewed for impairment whenever events or changes in circumstances indicate
   that the carrying amount of an asset may not be recoverable.


                                       F-8


<PAGE>   9



                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1997, 1996 and 1995



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

   INTANGIBLES (CONTINUED)

   In performing the review for recoverability, the Company estimates its
   expected future cash flows (undiscounted and without interest charges) and
   compares this amount to the carrying value of its long-lived assets to
   determine if an impairment exists. Otherwise, an impairment loss is not
   recognized. The projected amounts used in this computation are based upon
   management's best estimates utilizing information currently available.
   Inherent in these projections are estimates for which the ultimate outcome
   cannot be predicted with a high degree of certainty. Therefore, the actual
   results could materially differ from the projected amounts (see note K).

   Goodwill, resulting from the excess of the purchase price over the fair value
   of net assets acquired is being amortized over 40 years (see note K).
   Purchased product formulations are being amortized on a straight-line basis
   over 10 years. All research and development costs are being expensed as
   incurred.

   Deferred financing costs are related to the bank debt and the issuance of the
   convertible subordinated debentures. These costs are being amortized on a
   straight-line basis over the period of the respective debt agreements.

   Accumulated amortization for intangibles amounted to approximately $2,608,000
   and $6,877,000 for the years ended December 31, 1997 and 1996, respectively.

   INCOME TAXES

   Income taxes are recorded in accordance with Statement of Financial
   Accounting Standards No. 109, Accounting for Income Taxes (SFAS No. 109).
   SFAS 109 utilizes the asset and liability method, under which deferred income
   taxes are recognized for the tax consequences of "temporary differences" by
   applying currently enacted statutory rates to differences between the
   financial statement carrying amounts and the tax basis of existing assets and
   liabilities. Under SFAS 109, the effect on deferred taxes of a change in tax
   rates is recognized in income in the period that includes the enactment date.

   REVENUE RECOGNITION

   The Company recognizes revenue when the product is shipped.




                                       F-9


<PAGE>   10





                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1997, 1996 and 1995



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


   USE OF ESTIMATES

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


   STATEMENTS OF CASH FLOWS

   For purposes of the statements of cash flows, the Company considers all
   highly liquid investments purchased with a maturity of three months or less
   to be cash equivalents.

   Cash payments for income taxes amounted to $38,000, $75,000 and $79,000 for
   the years ended December 31, 1997, 1996 and 1995, respectively. In addition,
   the Company received income tax refunds of approximately $1,080,000 during
   1997. Cash payments for interest amounted to $1,124,000, $1,095,000 and
   $687,000 in the year ended December 31, 1997, 1996 and 1995, respectively.
   The Company also accrued $240,000 and $150,000 of interest in 1997 and 1996,
   respectively, on convertible subordinated debentures due 2006. During 1995,
   the Company accrued $6,257 of preferred stock dividends and issued $58,050 of
   restricted stock to an employee.


   FAIR VALUE OF FINANCIAL INSTRUMENTS

   The following methods and assumptions were used by the Company in estimating
   the fair value of each class of financial instruments for which it is
   practicable to estimate fair value.

   For cash, receivables and payables, the carrying amounts approximate fair
   value because of the short maturity of these instruments. For long-term
   obligations, including current maturities, the fair value of the Company's
   long-term obligations approximates historically recorded cost since interest
   rates approximate market.





                                      F-10


<PAGE>   11




                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1997, 1996 and 1995



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

   NEWLY ISSUED ACCOUNTING STANDARDS

   In 1997, the FASB issued Statement of Financial Accounting Standards No. 130,
   Reporting Comprehensive Income ("SFAS 130") and Statement of Financial
   Accounting Standards No. 131, Disclosures About Segments of an Enterprise and
   Related Information ("SFAS 131"). SFAS 130 establishes standards to measure
   all changes in equity that result from transactions and other economic events
   other than transactions with owners. Comprehensive income is the total of net
   income and all other nonowner changes in equity. SFAS 131 introduces a new
   segment reporting model called the "management approach". The management
   approach is based on the manner in which management organizes segments within
   a company for making operating decisions and assessing performance. The
   management approach replaces the notion of industry and geographic segments.
   The Company will adopt SFAS 130 and SFAS 131 in fiscal year 1998. The Company
   believes adoption of SFAS 130 and SFAS 131 will not have a significant effect
   on the Company's financial statements.

NOTE B - ACQUISITION

   On May 22, 1997, Specialty Chemical Resources, Inc. acquired substantially
   all of the tangible and intangible non-real estate assets of Hysan
   Corporation ("Hysan") pursuant to an Asset Purchase Agreement (the
   "Agreement"). The purchase price for the acquired assets was $7,432,000,
   including expenses related to the transaction. The Agreement required that
   $500,000 of the purchase price be deposited in escrow with a bank as security
   for any adjustments to the purchase price that may be necessary to secure
   Hysan's indemnification obligations thereunder. The remaining portion of the
   purchase price was paid in cash. The acquisition was recorded under the
   purchase method of accounting in accordance with Accounting Principles Board
   Opinion (APB) No. 16. The purchase price was allocated based upon the fair
   value of assets acquired at the date of acquisition. The excess of the
   purchase price over the fair value of the assets acquired of approximately
   $273,000 was recorded as goodwill. The Company included the results of
   operations of Hysan as of the acquisition date. The following unaudited
   proforma information has been prepared assuming Hysan had been acquired as of
   the beginning of the periods presented:

                                    ==========================================
                                            YEARS ENDED DECEMBER 31,
                                    ------------------------------------------
                                      1997                          1996
                                    ------------------------------------------
Net sales                             $44,571,000              $53,710,000

Net (loss)                            $(21,382,000)            $( 1,582,000)

Basic (loss) per share                $(5.51)                  $(.40)


                                      F-11


<PAGE>   12




                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1997, 1996 and 1995



NOTE C - INVENTORIES

   Inventories consist of the following at:
<TABLE>
<CAPTION>
                                                       ===========================================
                                                                          DECEMBER 31,
                                                       -------------------------------------------
                                                             1997                    1996
                                                       -------------------------------------------
<S>                                                      <C>                     <C>       
Raw materials                                            $5,416,048              $3,663,804

Finished goods                                            4,224,414               2,890,674
                                                       -------------------------------------------
                                                          9,640,462               6,554,478

Less excess of FIFO over LIFO cost                          695,557                 645,031
                                                       -------------------------------------------
                                                         $8,944,905              $5,909,447
                                                       ===========================================
</TABLE>

   Had the Company historically followed the FIFO cost method for raw material
   inventories, the net loss for the years ended December 31, 1997, 1996 and
   1995 would have decreased by approximately $51,000, increased by
   approximately $44,000, and decreased by approximately $79,000, respectively.

NOTE D - LONG-TERM DEBT

   Long-term debt consists of the following at:
<TABLE>
<CAPTION>
                                               =====================================
                                                              DECEMBER 31,
                                               -------------------------------------
                                                       1997              1996
                                               -------------------------------------
<S>                                             <C>                 <C>        
Revolver                                          $ 8,072,634        $ 6,041,729

Term loan A - bank                                  2,680,000          1,710,000

Term loan B - bank                                    666,670               --

Mortgage loan - bank                                  794,013            871,944

6% Convertible subordinated debentures              4,290,000          4,050,000

Other                                                    --                7,179
                                                  ------------------------------
                                                   16,503,317         12,680,852

Less current portion                                1,057,497            434,733
                                                  ------------------------------
                                                  $15,445,820        $12,246,119
                                                  ==============================
</TABLE>

                                      F-12


<PAGE>   13




                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1997, 1996 and 1995



NOTE D - LONG-TERM DEBT (CONTINUED)

   During September 1996, the Company terminated its revolving credit agreement
   with a bank and entered into a $12,000,000 financing agreement with a new
   bank. During May 1997, the Company entered into a First Amendment to the
   financing agreement increasing potential borrowings to $15,000,000. The
   amended credit facility is comprised of a Revolving Loan and Term Loan A and
   Term Loan B. The maximum borrowings under the credit facility are pursuant to
   a formula based upon the amount of the Company's receivables, inventory and
   the then outstanding balance under the previous facility. In addition, the
   bank can reduce the maximum borrowings under the facility by establishing an
   environmental compliance reserve in certain circumstances. No compliance
   reserves have been required as of December 31, 1997. Borrowings under this
   credit agreement are collateralized by substantially all of the Company's
   assets. The Revolving Loan matures on December 31, 2000 and bears interest at
   the bank's prime rate (8.5% at December 31, 1997) plus 1-1/2%. The interest
   rate charged by the bank can be reduced to the prime rate based upon the
   Company meeting certain performance measures. Under the terms of the credit
   agreement, the Company is required to comply with various covenants, the most
   restrictive of which relate to the maintenance of certain financial ratios,
   levels of tangible net worth, limits on capital expenditures and restrictions
   on distributions from the Company to its stockholders. Based on 1997
   financial performance, the senior lender has revised the various covenants by
   amending the credit agreement. The Company is currently in compliance with
   all of the covenants. Such amendment requires that such financial covenants
   for the future be revised in a form mutually agreeable to the bank and the
   Company no later than May 15, 1998. Such amendment further requires that
   the Company provide an acceptable plan to the bank no later than April 30,
   1998 to provide additional capital for the Company and consummate such plan
   no later than May 30, 1998. The failure to do so would constitute an event of
   default under the credit agreement. As of December 31, 1997, approximately
   $591,000 is unused and available under the credit agreement.

   The original term loan portion of the credit facility consisted of a
   $1,800,000 installment loan payable in sixty monthly installments of $30,000
   beginning on October 1, 1996. The amended term loan portion of the credit
   facility is comprised of Term Loan A in the amount of $2,680,000 and Term
   Loan B in the amount of $1,000,000. Principal on Term Loan A is payable in
   forty-eight monthly installments of $55,833 beginning on June 1, 1998.
   Interest is payable monthly at the same rate and terms as the Revolving Loan.
   Principal on Term Loan B is payable in eighteen monthly installments of
   $55,555 commencing on July 1, 1997. Interest is payable monthly at the bank's
   prime rate plus 4-1/2%. For each six-month period that Term Loan B remains
   outstanding, the Company may be required to make an additional principal
   payment based on its "excess cash flow" as defined in the agreement.

   In addition to the above loans, the bank advanced to the Company $1,500,000
   on a short-term basis in conjunction with the acquisition of Hysan. The
   advance was fully repaid in 1997.

                                      F-13


<PAGE>   14




                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1997, 1996 and 1995

NOTE D - LONG-TERM DEBT (CONTINUED)

   The mortgage note originally consisted of a $1,075,000 installment note dated
   October 15, 1995. Monthly principal payments of approximately $6,000 began on
   June 1, 1996, with the balance due on February 1, 1998. As of December 31,
   1997, the Company had $794,013 remaining on the note. Effective January 1998,
   the Company refinanced the mortgage with a new $1,125,000 installment note
   with a new bank. The note, which bears interest at 8.75%, requires twelve
   monthly interest payments. Commencing on February 1, 1999, the note requires
   167 monthly principal and interest payments of $11,790, with final payment on
   November 1, 2012. The aggregate maturities schedule of long-term debt
   reflects the terms of the new note. The borrowing is collateralized by a
   building which serves as the Company's distribution center and corporate
   offices.

   The 6% convertible subordinated debentures, due October 15, 2006, are
   convertible at the option of the holder into shares of the Company's common
   stock at a conversion price of $1.50 per share. Each $100 principal amount of
   the debentures is convertible into 66.67 shares of common stock at any time
   after December 31, 2001, or under certain circumstances, if there is a change
   in control of the Company as defined under the debentures. Subsequent to
   October 15, 1999, the debentures are redeemable at the option of the Company,
   in whole or in part, initially at 110%, and thereafter at prices declining to
   100% at October 15, 2004, together with accrued interest. The debentures are
   subordinated to all senior debt of the Company. The proceeds, which were
   received in 1996, were used to repay a portion of the Company's indebtedness
   and to repurchase all of its outstanding redeemable preferred stock from a
   major shareholder (see note G). Interest accrues semi-annually and is due
   upon maturity of the debentures.

   Aggregate maturities of long-term debt at December 31, 1997 are as follows:

                 1998                                $ 1,057,497
                 1999                                    709,823
                 2000                                  8,789,450
                 2001                                    721,423
                 2002                                    335,361
                 Thereafter                            4,889,763
                                                      ----------
                                                     $16,503,317
                                                     ===========


NOTE E - COMMITMENTS AND CONTINGENCIES

    Certain operations of the Company are conducted in leased facilities under
    noncancellable operating leases which expire at various dates through 2005.
    One of the leases which relates to the manufacturing facility can be
    extended at the option of the Company to the year 2025. The Company also has
    entered into several noncancellable operating leases for various machinery
    and equipment which expire at various dates through 2001.

                                      F-14


<PAGE>   15




                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1997, 1996 and 1995



NOTE E - COMMITMENTS AND CONTINGENCIES (CONTINUED)

    The following table details scheduled minimum rental payments of all
    noncancellable operating leases:
                                                              RENTAL
                       YEAR ENDING DECEMBER 31,            COMMITMENT
                       ------------------------            ----------

                                1998                      $  395,000
                                1999                         402,000
                                2000                         383,000
                                2001                         297,000
                                2002                         216,000
                             Thereafter                      577,000
                                                          ----------
                                                          $2,270,000
                                                          ==========


    Rent expense for the years ended December 31, 1997, 1996 and 1995 was
    approximately $518,000, $407,000 and $512,000, respectively.

    The Company is currently involved in litigation and investigations
    pertaining to environmental concerns by the State of Ohio in connection with
    several potential problems at its Macedonia, Ohio manufacturing plant. In
    1990 the Company entered into a Consent Order with the State of Ohio. The
    Company was required to submit to the Ohio Environmental Protection Agency
    (Ohio EPA), a closure plan to address contamination identified at the
    property. The Company submitted the closure plan as required. Ohio EPA also
    requested, in the event the remedial measures in the proposed closure plan
    are not successful within a two-year period, that at that time the Company
    provide supplemental or alternative measures to clean up the remaining
    contamination.

    On May 17, 1994, the Ohio EPA approved the revised closure plan which
    included unilateral modifications as deemed necessary by the Ohio EPA. On
    June 17, 1994, the Company appealed the Ohio EPA's action on the grounds
    that the unilateral modifications were unreasonable and unlawful. On January
    6, 1995, the Company and the State of Ohio entered into a settlement
    agreement, which resulted in a termination of the Company's appeal of this
    matter before the Environmental Board of Review. On May 3, 1995, the Ohio
    EPA issued a supplemental closure plan approval letter that established
    certain deadlines with regard to the Company's implementation of a
    Groundwater Extraction and Treatment System, a Soil Vapor Extraction System,
    and certain other closure plan tasks. On December 9, 1996, the Company
    revised its estimate to address




                                      F-15


<PAGE>   16




                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1997, 1996 and 1995



NOTE E - COMMITMENTS AND CONTINGENCIES (CONTINUED)

    closure costs at the Macedonia facility. Based on estimates of closure costs
    received from the Company's environmental consultant, the revised total
    closure costs are estimated at approximately $1,446,000. As of December 31,
    1997, $1,296,000 of closure costs were expended, of which $792,000 was
    received from both escrow funds and an Ohio EPA Trust Account (the Trust).
    The escrow funds and trust funds were deposited by previous owners. During
    1996, the Company received $621,000 from the Trust for reimbursement of
    expenditures; in addition the Company has approximately $344,000 of monies
    due from the Trust for reimbursement of EPA expenditures and has recorded
    this amount as an Account Receivable - Other on the December 31, 1997
    balance sheet. The Company believes that the expenditures for which they are
    seeking reimbursement are in accordance with the closure activities
    contemplated by the Trust requirements. While the Company is not aware of
    any reason that it would not receive reimbursement for these expenditures,
    the Ohio EPA has discretion in responding to the Company's request.

    If the remediation techniques proposed in the closure plan are not
    successful, or if supplemental or alternative technologies are required to
    be used, then the Company may incur costs in excess of the $1,446,000
    closure cost estimate. The Company believes, based on discussions with its
    technical consultants, that the cost of additional testing and operation of
    the proposed remedial systems will be approximately $150,000 and that the
    costs of the supplemental or alternative cleanup measures, if determined to
    be necessary, would not exceed $2,000,000.

    On October 15, 1997, the Company received Notices of Violation ("NOV's")
    from the Ohio Attorney General's Office alleging that the Company has failed
    to comply with the terms of the 1990 Consent Order. The State alleges that
    the Company has committed numerous violations of applicable Ohio hazardous
    waste laws and regulations. Ohio EPA bases these allegations upon the
    results of a number of inspections conducted from 1993 through 1997. The
    Company prepared detailed written responses to each NOV and, without
    admitting liability, took specific actions in response to the allegations
    identified by Ohio EPA. The Ohio EPA has demanded that the Company pay the
    State of Ohio the sum of $1,080,000 as stipulated penalties for the alleged
    violations. Through the October 15, 1997 letter, the Attorney General
    invited the Company to enter negotiations to resolve the disagreement
    regarding the Company's alleged violations of the 1990 Consent Order.

    The Company believes that it has materially complied with the requirements
    of the Consent Order and that stipulated penalties due to the State of Ohio
    pursuant to the Consent Order, if any, should not have a materially adverse
    effect on the financial condition of the Company. However, there can be no
    assurance that negotiations with the State of Ohio will be successful and
    will not result in extended litigation between the Company and the State of
    Ohio.



                                      F-16


<PAGE>   17



                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1997, 1996 and 1995




NOTE E - COMMITMENTS AND CONTINGENCIES (CONTINUED)

    The Company was also a defendant in two product liability lawsuits. Both of
    these suits were defended by the Company's insurance carrier and were
    settled by the insurance company within the limits of the insurance
    coverage.


NOTE F - EMPLOYEE BENEFIT PLANS

    The Company has a defined contribution 401(k) profit-sharing plan (the Plan)
    covering certain salaried employees with one year of credited service. The
    Company's profit-sharing contributions are at the discretion of the Board of
    Directors and are credited to each participant's account based on a
    percentage of gross compensation subject to a maximum contribution for each
    participant. The Company is also required under the 401(k) provisions to
    match employee contributions equal to 50% of each such participant's
    deferred compensation up to a maximum of 4% of the participant's annual
    compensation. Contributions by the Company under the 401(k) provisions for
    1997, 1996 and 1995 were approximately $57,200, $48,000 and $51,700,
    respectively. The Company did not make any profit-sharing contributions to
    the Plan for the years ended December 31, 1997, 1996 and 1995.

    The Company has a Retirement Savings Trust and Plan covering full-time
    hourly employees who have completed six months of service. The Company's
    contributions are made on an annual basis and are credited to each
    participant's account at an amount equal to 13 cents per hour of
    compensation (maximum of 48 hours per week). In addition, qualified
    employees are eligible to make voluntary contributions to the Retirement
    Savings Trust and Plan which are fully vested and nonforfeitable.
    Contributions by the Company for the years ended December 31, 1997, 1996 and
    1995 approximated $38,900, $34,500 and $35,200, respectively.


NOTE G - REDEEMABLE PREFERRED STOCK

    During 1995, the Company designated 3,500 shares of its previously
    authorized 2,000,000 preferred shares as cumulative, convertible preferred
    stock. On October 6, 1995, the Company issued 3,500 shares of cumulative,
    convertible preferred stock to an officer/director at a $100 per share
    price, which aggregated to $350,000. The cumulative, convertible preferred
    stock pays quarterly dividends of $1.875 per share. On October 16, 1996, the
    Company redeemed all of its 3,500 shares of redeemable preferred stock for
    $350,000 from the proceeds received in conjunction with the convertible
    subordinated debentures (see note D).



                                      F-17


<PAGE>   18


                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1997, 1996 and 1995



NOTE H - STOCKHOLDERS' EQUITY

    On July 25, 1995, the Company entered into a Restricted Stock Award
    Agreement with a key employee for 15,000 shares of common stock. The Company
    charged $19,350 to compensation expense and distributed one-third (1/3) of
    the shares to the employee annually for 1997, 1996 and 1995. All shares were
    distributed on July 25, 1997, at which time the restrictions lapsed. The
    value of the shares under restriction at December 31, 1995 were charged to
    equity as unearned compensation and have been fully amortized to operations.

    In December 1996, the Board of Directors authorized the Company to redeem
    shares of its common stock at the open market price. On December 20, 1996,
    the Company redeemed into treasury, 65,500 common shares at $1.8125 per
    share at an aggregate cost of $118,722, including expenses.

    The Company has a Nonqualified and Incentive Stock Option Plan (the Plan)
    under which 650,000 shares of common stock have been reserved. The Plan
    provides for grants to officers and key employees of the Company of both
    nonqualified and incentive stock options. The exercise price for options
    granted under the Plan must be at least equal to fair market value of the
    shares on the date of grant. The Plan will terminate in January 1999 but
    will not affect any outstanding options previously granted. Such options
    granted may be exercised after one year from the date of grant for not more
    than one-third of the shares originally subject to the option and an
    additional one-third for each of the two years thereafter. The options
    granted under the Plan expire five years from the date of grant. As of
    December 31, 1997, all options granted were under the Nonqualified Option
    Plan.

    The Company also has an Outside Directors' Stock Option Plan (Directors'
    Plan) under which 150,000 shares of common stock have been reserved. Under
    the Directors' Plan, each outside director will be granted an option to
    purchase 10,000 shares of common stock and an additional option to purchase
    5,000 shares of common stock every two years thereafter as long as the
    individual remains on the Company's Board of Directors and remains an
    "outside" director. The exercise price for options granted shall be the fair
    market value of the shares on the date of grant. Directors vest in their
    options in 25% annual increments commencing one year after the date of
    grant. Options granted, to the extent the director has vested, shall be
    exercisable for a term of ten years from the date of grant. In addition, the
    Directors' Plan calls for the exercising of options by directors within
    seven months after their termination and by their beneficiaries within one
    year after their death. The Directors' Plan will terminate in January 1999
    but will not affect any outstanding options previously granted.




                                      F-18


<PAGE>   19
                       Specialty Chemical Resources, Inc.

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1997, 1996 and 1995

NOTE H - STOCKHOLDERS' EQUITY (Continued)

Transactions for both stock option plans are as follows:

<TABLE>
<CAPTION>

                                    -------------------------------------------------------------------------------
                                         1997                           1996                     1995
                                   -------------------------------------------------------------------------------
                                              Weighted                      Weighted                  Weighted
                                              Average                      Average                    Average
                                   Shares  Exercise Price      Shares    Exercise Price   Shares   Exercise Price
                                  -------- --------------     -------   ---------------   ------    -------------
<S>                                <C>           <C>           <C>         <C>             <C>           <C>   
Outstanding -
  beginning of year                567,391       $ 5.86        545,428     $   6.14        405,715       $ 7.82
     Granted                       252,000       $ 1.75         50,000     $   1.70        236,570       $ 3.59
     Exercised                        --         $ --             --       $   --             --         $ --
     Cancelled                    (174,857)      $ 9.02        (28,037)    $   3.85        (96,857)      $ 6.95
                                   -------                     -------                     -------             
Outstanding - 
   end of year                     644,534       $ 3.40        567,391     $   5.86        545,428       $ 6.14
                                   =======                     =======                     =======             

Exercisable at end of year         291,545       $ 4.91        347,583     $   7.48        249,024       $ 8.80
                                   =======                     =======                     =======             

Available for grant                155,466                     232,609                     254,572
                                   =======                     =======                     =======              

Weighted average fair value
   of options granted
   during the year                $   0.87                    $   1.23                   $   1.88
</TABLE>

<TABLE>
<CAPTION>
                               -------------------------------------------------   ---------------------------
                                             Outstanding                              Exercisable
                               -------------------------------------------------   ---------------------------
                                              Weighted-
                                               Average
                                              Remaining           Weighted-                      Weighted-
              Range of                       Contractual           Average                         Average
          Exercise Prices       Shares          Life            Exercise Price      Shares     Exercise Price
          ---------------       ------          ----            --------------      ------     --------------
<S>        <C>      <C>        <C>              <C>                <C>              <C>           <C>   
           $1.625 - 1.813      294,000          4.7                $ 1.74           12,083        $ 1.70
           $3.375 - 4.06       201,963          2.3                $ 3.59          134,641        $ 3.59
            $4.50 - 6.38       118,571          1.4                $ 5.49          114,821        $ 5.46
           $10.00 - 10.50       30,000          4.2               $ 10.00           30,000       $ 10.00
                               -------
                               644,534
                               =======
</TABLE>

                                      F-19

<PAGE>   20



                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1997, 1996 and 1995




NOTE H - STOCKHOLDERS' EQUITY (CONTINUED)

    Both of the Company's stock option plans are accounted for under APB Opinion
    25 and related interpretations. Accordingly, no compensation cost has been
    recognized for the plans. Had compensation cost for the plans been
    determined based on the fair value of the options at the grant dates
    consistent with the method of Statement of Financial Accounting Standards
    123, Accounting for Stock-Based Compensation (SFAS 123), the Company's net
    loss and loss per share would have been increased each period to the
    proforma amounts indicated below.

<TABLE>
<CAPTION>
                                             ==================================================
                                                     1997            1996             1995
                                             --------------------------------------------------
<S>                                           <C>              <C>              <C>         
Net (loss)                   As reported      $(21,084,712)    $(1,762,713)     $(2,008,606)

                             Pro forma        $(21,244,477)    $(1,919,713)     $(2,114,606)



Basic (loss) per share       As reported        $(5.43)          $(0.45)          $(0.51)

                             Pro forma          $(5.47)          $(0.49)          $(0.54)
</TABLE>



    The fair value of each option grant is estimated on the date of grant using
    the Black-Scholes options-pricing model with the following weighted-average
    assumptions used for grants in 1997, 1996 and 1995: expected volatility of
    48, 61 and 50 percent; risk-free interest rates of 6.44, 6.34 and 6.59
    percent; expected lives of 3, 4 and 3 years; and no dividend payments.


NOTE I - INCOME TAXES

    As of December 31, 1997, the Company had approximately $11,335,000 of net
    operating loss carryforwards. However, due to a change in ownership during
    1992, the Company has an annual limitation of approximately $850,000 in the
    utilization of its net operating loss carryforwards. In addition, due to
    losses in 1997, 1996 and 1995 and the realization in 1994 of built-in gains,
    approximately $10,000,000 of the carryforwards may be utilized beyond the
    current annual limitation to offset future taxable income.






                                      F-20


<PAGE>   21





                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1997, 1996 and 1995




NOTE I - INCOME TAXES (CONTINUED)

    The net operating loss carryforwards, to the extent unused, will expire as
follows:

                                   ===============                  
           YEAR ENDING              NET OPERATING 
           DECEMBER 31,                  LOSS
          -------------            ---------------

               1999                   $ 3,060,000

               2000                     2,477,000

               2001                       919,000

               2002                          -

               2003                         1,000

               2004                       139,000

               2010                     1,234,000

               2011                     1,651,000

               2012                     1,854,000
                                    -------------
                                      $11,335,000
                                    =============



    The above-mentioned carryforwards gave rise to deferred tax assets of
    approximately $4.5 million, $3.8 million and $3.2 million at December 31,
    1997, 1996 and 1995, respectively. Due to the uncertainty of the ultimate
    realization of the deferred tax asset, a valuation allowance in the amounts
    of $2.7 million, $2 million and $1.3 million was recorded by the Company for
    the years ended December 31, 1997, 1996 and 1995, respectively. The net
    change in the valuation allowances for 1997, 1996 and 1995 was $.7 million,
    $.7 million and $(1.3) million, respectively.






                                      F-21


<PAGE>   22


                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1997, 1996 and 1995




NOTE I - INCOME TAXES (CONTINUED)

    The asset recognition of the net operating loss carryforward is based
    principally on the portion of the carryforwards which are not limited as to
    their use and offset the deferred tax credits that are scheduled to reverse
    in the carryforward period.

    The provision for income taxes is different from that which would be
    obtained by applying the statutory federal income tax rate for 1997, 1996
    and 1995 due primarily to amortization of goodwill, impairment losses on
    long-lived assets and the recognition of net operating loss carryforwards.

    Deferred tax (assets) liabilities are as follows:
<TABLE>
<CAPTION>

                                                ================================================
                                                                 DECEMBER 31,
                                                ------------------------------------------------
                                                      1997                         1996
                                                ------------------------------------------------
<S>                                               <C>                          <C>        
Depreciation                                      $ 1,404,000                 $ 1,441,000

Amortization of product
  formulation costs                                   155,000                     260,000

Accounts receivable allowance                         (55,000)                    (41,000)

Excess of book inventory over
  tax inventory                                       324,000                     171,000

Other                                                 (69,000)                    (31,000)

Net operating loss carryforwards                   (4,500,000)                 (3,800,000)

Valuation allowance                                 2,741,000                   2,000,000
                                                ------------------------------------------------
                                                  $     -                  $         -
                                                ================================================
</TABLE>


    The Company had no income tax expense for 1997. The income tax benefit of
    $127,600 for the year ended December 31, 1996 consists of approximately
    $11,000 of current federal income taxes and approximately $138,600 of
    deferred tax benefits. The income tax benefit of $2,981,000 for the year
    ended December 31, 1995 consists of approximately $1,006,000 of current
    refundable federal income taxes and approximately $1,975,000 of deferred tax
    benefits.



                                      F-22


<PAGE>   23





                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1997, 1996 and 1995




NOTE J - LOSS PER SHARE OF COMMON STOCK

    The Company adopted SFAS No. 128, Earnings Per Share, effective December 31,
    1997 and all loss per share amounts disclosed herein have been calculated
    under the provisions of SFAS No. 128. Basic loss per common shares was
    computed by dividing net loss by the weighted average number of shares of
    common stock outstanding during the reporting period. The weighted average
    number of common shares used to compute basic loss per common share was
    3,882,264 for 1997, 3,945,618 for 1996 and 3,939,348 for 1995. Diluted loss
    per common share which would include common share equivalents for employee
    stock options, cumulative convertible preferred stock and convertible
    subordinated debentures is not reported because their effect would be
    anti-dilutive for the years presented.


NOTE K - IMPAIRMENT OF LONG-LIVED ASSETS

    At December 31, 1997, in accordance with SFAS 121, the Company estimated its
    undiscounted cash flows from operations in order to determine if there has
    been an impairment of its long-lived assets. The results of that computation
    indicated that an impairment exists and that a write-down of the carrying
    value of the long-lived assets to fair value is required. The Company
    utilized an independent third party appraiser to determine fair value based
    upon expected future cash flows from operations discounted at a rate
    commensurate with the risks involved. Based upon the valuation performed,
    the Company recorded a non-cash charge of $18.5 million which is reflected
    as a reduction in the carrying amount of goodwill.






                                      F-23



<PAGE>   24

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
                                  ON SCHEDULES







Stockholders of
SPECIALTY CHEMICAL RESOURCES, INC.



In connection with our audit of the financial statements of Specialty Chemical
Resources, Inc. referred to in our report dated March 6, 1998, we have also
audited Schedule II for each of the three years in the period ended December 31,
1997. In our opinion, this schedule presents fairly, in all material respects,
the information required to be set forth therein.





                                              GRANT THORNTON LLP



Cleveland, Ohio
March 6, 1998







                                      F-24


<PAGE>   25





                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                       Specialty Chemical Resources, Inc.

              For the years ended December 31, 1997, 1996 and 1995



<TABLE>
<CAPTION>
                          Column A                Column B                   Column C                   Column D     Column E
                                                                             Additions
                                                                ------------------------------------
                                                 Balance at         Charged to                                       Balance at
                                                Beginning of        Costs and         Charged to                      End of
    Year                 Description               Period            Expenses       Other Accounts    Deductions      Period
------------- ---------------------------   ------------------- ---------------- ------------------- --------------- -------------
<S>                                               <C>               <C>                <C>              <C>            <C>      
    1995                Allowance for
                      doubtful accounts           $ 123,000         $ 260,400          $ -              $ (38,400)     $ 345,000

    1996                Allowance for
                      doubtful accounts           $ 345,000          $ 65,000          $ -              $ (308,000)    $ 102,000

    1997                Allowance for
                      doubtful accounts           $ 102,000          $ 73,800          $ -              $ (38,800)     $ 137,000
</TABLE>


                                      F-25