<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                                  ANNUAL REPORT

                       Pursuant to Section 13 or 15 (d) of
                       the Securities Exchange Act of 1934

For the calendar year ended December 31, 1998         Commission file no 1-11013
                            -----------------                            -------

                       SPECIALTY CHEMICAL RESOURCES, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                      Delaware                            34-1366838
              ------------------------            --------------------------
              (State of incorporation)            (I.R.S. Employer I.D. No.)

       9055 S. Freeway Drive, Macedonia, Ohio               44056
      ----------------------------------------            ----------
      (Address of principal executive offices)            (Zip Code)

Registrant's telephone number, including area code: (330) 468-1380
                                                    --------------

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

                     Common Stock, par value $.10 per share.

Securities registered pursuant to Section 12(g) of the Act: None
                                                            ----

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

     Indicate by checkmark 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.  Yes _____  No __x___

     The aggregate market value of voting stock held by nonaffiliates of the
Registrant as of February 12, 1999 was $643,857.

     As of February 12, 1999, 4,257,101 shares of the Registrant's Common Stock
were outstanding.

Documents Incorporated by Reference: The registrant's definitive proxy statement
for its 1999 Annual Meeting of Stockholders, which the registrant intends to
file with the Securities and Exchange Commission within 120 days of the close of
its fiscal year end, December 31, 1998, is incorporated by reference in Part III
of this Annual Report on Form 10-K from the date of filing of such document.

                                    Page 1 of 22
<PAGE>   2

                                     PART I


ITEM 1. BUSINESS

GENERAL. Specialty Chemical Resources was incorporated in Delaware in 1982 for
the purpose of operating family oriented restaurants and entertainment centers.
By 1988, management had concluded that enhanced growth required a change in the
Company's business focus from the operation of the restaurants to the building
of an industrial corporation. As a result, Specialty Chemical Resources, Inc.
acquired Aerosol Systems, Inc. ("ASI"), effective December 31, 1988, for an
aggregate purchase price of approximately $40,000,000, consisting of
approximately $14,750,000 in cash as payment for stock and approximately
$25,250,000 of assumed liabilities. ASI was merged into Specialty Chemical
Resources, Inc. on December 30, 1992.

     Specialty Chemical Resources, Inc.'s principal executive offices are
located at 9055 S. Freeway Drive, Macedonia, Ohio 44056; telephone (330)
468-1380. Unless the context otherwise indicates, the terms "Company" and
"Specialty Chemical" refer to Specialty Chemical Resources, Inc.

BUSINESS. Specialty Chemical mixes chemicals into formulas and packages them
primarily in aerosol cans, although some formulas are packaged in quart, gallon,
5-gallon and 55-gallon drums. These chemical products are then sold into the
automotive service, manufacturing plant maintenance and cleaning service
markets. Specialty Chemical specializes in creating products for customers who
do not have the skills or knowledge to develop these products themselves, or
customers who will not require enough product for them to justify the expense of
developing their own products. Typically, when Specialty Chemical develops a
formula, it retains the right to sell that formula to any of its customers.
Specialty Chemical produces and sells over 850 different formulas. These
formulas represent know-how of Specialty Chemical developed through the skill
and expertise of its employees. These formulas are not generally patented.

     In 1998, Specialty Chemical sold approximately 27 million units.
Approximately 99% of Specialty Chemical's sales are of products manufactured by
Specialty Chemical, and 92% of sales are of products sold under its customers'
brand names. Specialty Chemical's products include cleaners, sealants,
lubricants, waxes, adhesives, paints, coatings, degreasers, polishes, static
electricity reducing sprays and tire inflators. In addition, Specialty Chemical
produces and sells its own branded products under the Taylor Made Products (TMP)
and Hysan/Aerosol Maintenance Products (Hysan/AMP) names. Approximately 8% of
Specialty Chemical's sales are of its branded products.

     Specialty Chemical acts as an extension of its customers' marketing,
research and development, purchasing, production and quality control
departments. Specialty Chemical provides a wide range of services including:
identification of a customer's need for, and design of, specific aerosol
products; chemical formulation; container selection; assistance with marketing
programs; labeling; filling and packaging; component and raw materials
purchasing; vendor verification; regulatory compliance; inventory control and
overall program management. As such, Specialty Chemical is distinct from
contract packagers, which can fill aerosol cans for a fee but do not provide the
same range of services.



                                    Page 2 of 22
<PAGE>   3

     Specialty Chemical's customers are principally distribution companies.
Specialty Chemical sells to approximately 350 core customers, with no single
customer accounting for more than 10% of net sales. Specialty Chemical provides
customers with prompt shipment, normally within four weeks after receipt of an
order, and will accept orders for as few as 100 cases of products, thereby
reducing the inventory requirements of its customers. Approximately 90% of
Specialty Chemical's aggregate sales are to customers in the automotive service
and manufacturing plant maintenance markets. Other markets served by Specialty
Chemical include janitorial and sanitation, sophisticated electronic and
electrical manufacturing and arts and crafts. Less than 3% of sales are to chain
store merchandisers. Specialty Chemical relies heavily on pre-sale consultation
and ongoing involvement with customers to establish long-term relationships. The
Company believes, based on its customer experience and knowledge of the
industry, that it is the only custom packager in its principal markets that
provides this wide range of services, offers delivery within four weeks and
routinely produces as few as 100 cases of a product.

     On May 22, 1997, Specialty Chemical acquired substantially all of the
non-real estate assets of Hysan Corporation. It acquired these assets for a
purchase price of $7,432,000, including expenses relating to the transaction.
Specialty Chemical deposited $500,000 of the purchase price in escrow with a
bank in order to secure any adjustments to the purchase price that may be
necessary under the asset purchase agreement and to secure the indemnification
obligations from Hysan. Specialty Chemical financed this acquisition by
borrowing under its bank revolving credit agreement. For the fiscal year 1997,
Hysan accounted for $4,867,000, or 12.2%, of Specialty Chemical's net sales. At
the time of purchase, the Hysan assets accounted for 13.6% of Specialty
Chemical's total assets.

PRODUCT DEVELOPMENT PROCESS. The product development process typically takes six
to nine months from new product concept origination to completion. Existing
formulations may also serve as the basis for new products, in which case the
product development process may be substantially accelerated.

     Specialty Chemical's product development activities typically originate
through the identification by its sales or research and development personnel of
a perceived product need for its customers and its potential customers.
Specialty Chemical also develops products by utilizing technology developed by
third parties. After the product concept is originated, the Company develops the
formula and manufactures samples of the product. Specialty Chemical's sales
staff then demonstrates the product for its customers, who field test the
product through end-users. Concurrently, our research and development personnel
conduct product stability tests in its laboratories. Our research and
development personnel make any necessary adjustments resulting from customer and
end-user comments. These adjustments may include changes in formulation, valve,
spray pattern and propellant chemistry. Then, our graphic arts department, with
customer input, designs the label, both for the aerosol cans and for the carton
in which it is packaged. Specialty Chemical's package and container design
services include artistic design, writing of product instructions, product name
creation and regulatory compliance, if necessary. Alternatively, the product
concept origination may be initiated by the customer with the product
development activity continuing in substantially the same way from that point
forward.



                                    Page 3 of 22
<PAGE>   4

PRODUCTS. Aerosol containers are a convenient, effective and efficient way to
deliver thousands of products. The containers, 3.1 billion of which were sold in
the United States in 1997, are generally made of steel or aluminum and can be
recycled. Since 1978, when the use of chlorofluorocarbons ("CFCs") as a
propellant was discontinued in the United States, Specialty Chemical's aerosol
products generally have used compressed gases, such as carbon dioxide and
nitrogen, and liquified gases, such as propane and butane, as propellants.
Specialty Chemical's aerosol containers generally range from 4 ounces to
24 ounces in capacity. Specialty Chemical combines its chemical formulation, an
appropriate propellant, dip tube, valve, actuator, cap and the aerosol container
to produce the final product.

     Products developed by Specialty Chemical for the automotive service and
industrial maintenance markets include cleaners, degreasers, lubricants and
paints. The Company has also developed specialized products for the automotive
service market, such as its patented non-flammable tire inflator, carburetor,
brake and choke cleaners, gasket and trim adhesives, undercoatings, silicones,
belt dressings, and fabric protectors. Specialized products for the industrial
maintenance market include molybdenum lubricants, food-grade lubricants and
cleaners, release agents and protectors for injection and cast molding
applications as well as EPA registered disinfectants and deodorants.

     Specialty Chemical has developed a number of products using barrier
packages. In a typical aerosol, the propellant and product are mixed and
released from the can as a foam or spray. In a barrier package, the product is
separated from the propellant by a liner (a can within a can) and only the
product, and not the propellant, is released. This is important with products
that cannot be mixed with a propellant, such as room temperature vulcanizing
silicones (RTVs), or products which are too viscous to be propelled through a
standard aerosol, such as caulking compounds.

     Specialty Chemical also produces and sells several products under its own
brand names. The Taylor Made Products or TMP brand, which includes paints,
cleaners, lubricants and degreasers, is sold principally to the automotive
do-it-yourself market through chain store merchandisers. The Aerosol Maintenance
Products or AMP and Hysan brands are sold principally to janitorial and
sanitation supply distributors and include cleaning, deodorizing, and
disinfectant products.

MARKETING AND DISTRIBUTION. A combination of a full time inside sales force and
the use of manufacturer's representative agencies carry out Specialty Chemical's
marketing and sales activities. The inside sales force focuses on the sale of
the Company's custom packaging services while the manufacturer's representatives
primarily sell the Company's own branded products. Specialty Chemical's
customers are distributors of a broad range of products to the automotive
service, industrial maintenance and janitorial/sanitation supplies market.
Specialty Chemical's efforts to obtain sales involve detailed pre-production and
ongoing involvement with a customer. Specialty Chemical seeks to develop
long-term customer relationships. More than 40% of Specialty Chemical's current
sales volume is attributable to customers who have been with the Company for
more than 10 years. Specialty Chemical's active core customers number more than
350, with no single customer accounting for 10% of total Company net sales.
Specialty Chemical's customers are located primarily in the eastern two-thirds
of the United States.



                                    Page 4 of 22
<PAGE>   5

RESEARCH AND DEVELOPMENT. Specialty Chemical's research and development
activities are directed toward aerosol product development and improvement,
product screening and custom applications designed to meet the specific
requirements of its customers. The Company's research and development activities
involve both the formulation of proprietary chemical compounds and the
development of associated aerosol delivery systems. The Company works with its
customers to develop new products and to modify existing products for them. It
also seeks to develop new, proprietary products such as its patented fuel
injection system cleaner, water-carried aerosol products, and patented
non-flammable tire inflators. Technical activities are carried out by a staff of
chemists and laboratory technicians. Specialty Chemical holds several registered
trademarks and patents.

MANUFACTURING. The manufacturing facility contains seven production lines. Each
line has different characteristics, providing Specialty Chemical with
flexibility to accommodate the short production runs required for many
customized products, the longer high speed production runs, and the specialized
barrier packaging production. In addition, Specialty Chemical is able to package
products in one gallon cans, five gallon pails, and fifty-five gallon drums.

     In 1998, Specialty Chemical sold approximately 27 million units. The
handling of large volumes of liquid propellants requires that the manufacturing
area be compartmentalized, permitting the isolation of each step in the
production process. Control systems automatically shut down operation if safety
limits are exceeded. Raw materials are stored within the plant, while
propellants and most solvents are stored in above-ground tanks outside the
plant. The raw materials are moved as needed to the mixing area and the product
is piped into a separate filling area where cans are filled. The cans are then
conveyed into propellant charging rooms, where the propellant is loaded and the
cans are crimped (sealed) automatically. After leaving the propellant charging
room, the cans are run through a hot water test tank to test for leaking and
container integrity at elevated temperatures. In cases where the can label has
not been preprinted, a label is applied. The cans are coded, then packed and
palletized for shipment or, in some cases, stored in the warehouse on racks for
order picking.

COMPETITION. The aerosol industry is highly fragmented geographically, along
product lines and by production capacity. Within these areas, the industry is
highly competitive. Although many companies perform some of the individual
operations and services carried out by Specialty Chemical, and some of its
competitors have greater financial and other resources, Specialty Chemical
believes it has few competitors that offer the same type of technical
assistance, product formulation and packaging. Further, the Company's
competitors do not routinely offer to produce as few as 100 cases of product and
to deliver products within four weeks. These services are provided by Specialty
Chemical. Most of Specialty Chemical's customers do not have their own aerosol
research or production facilities. Because of the highly specialized nature of
the business, price, while important, is often not the principal competitive
factor. Specialty Chemical believes that the principal competitive factors in
the industry are quality of product, on-time delivery and the product's ease of
use by its end-user.



                                    Page 5 of 22
<PAGE>   6

EMPLOYEES. As of March 5, 1999, Specialty Chemical employed approximately 144
people on a full-time basis, 52 of whom are salaried and the remainder are
hourly. All hourly employees are represented by one collective bargaining unit
with one collective bargaining agreement. The current collective bargaining
agreement expires in November, 2000. Specialty Chemical considers its
relationship with its employees to be good. There have not been any work
stoppages or slowdowns due to labor related problems.

ENVIRONMENTAL MATTERS. Specialty Chemical's manufacturing facilities are subject
to extensive environmental laws and regulations concerning, among other things:

     (1) emissions to the air,

     (2) discharges to the land, surface, subsurface strata and water, and

     (3) the generation, handling, storage, transportation, treatment and
         disposal of hazardous waste and other materials.

     These facilities are also subject to other federal, state and local laws
and regulations regarding health and safety matters. Management believes that
the business, operations and facilities are being operated in substantial
compliance in all material respects with applicable environmental and health and
safety laws and regulations. As a result, expenditures for compliance with
existing federal, state and local environmental laws are not expected to have a
material effect upon the earnings or competitive position of Specialty Chemical.
Capital expenditures for environmental control facilities for the next two
fiscal years (exclusive of expenses that are expected to be substantially
reimbursed) are not expected to be material. See "Legal Proceedings". Such
costs, if any, should comprise a part of normal purchases of new or replacement
equipment or facilities. However, management cannot predict the effect, if any,
of environmental laws that may be enacted in the future.


ITEM 2. PROPERTIES

PROPERTY. Specialty Chemical's Macedonia production facility is leased. Under a
lease amendment dated July 25, 1994, upon completion of certain leasehold
improvements, the term of the Macedonia lease was extended through the year
2005, with four (4) five-year unilateral options to extend the lease through the
year 2025. On October 6, 1995 Specialty Chemical purchased its previously leased
distribution center in Macedonia, Ohio. Specialty Chemical moved its executive
offices in May, 1997 from the leased space adjacent to the Macedonia production
facility to office space which was available at its distribution center which
was purchased in 1995.


ITEM 3. LEGAL PROCEEDINGS

        The 1990 Consent Order. Specialty Chemical continues to be involved in
implementing a settlement reached pursuant to a consent order entered into
between the State of Ohio and Aerosol Systems, Inc. on July 9, 1990. This
consent order relates to the release of hazardous substances at the
manufacturing facility located at 9150 Valley View Road, Macedonia, Ohio, by
Aerosol Systems prior to Specialty Chemical's acquisition of it in 1988. Aerosol
Systems now operates as a division of Specialty Chemical.



                                    Page 6 of 22
<PAGE>   7

     Specialty Chemical was required to submit to the Ohio Environmental
Protection Agency a closure plan to address contamination identified at the
Macedonia plant. A closure plan is a document approved by the Ohio EPA which
provides a detailed approach to remediation of contamination identified at any
specific property. Further, the 1990 consent order enjoined Specialty Chemical
to comply with all applicable requirements of Ohio Revised Code Chapter 3734,
Ohio's hazardous waste law, and Ohio Revised Code Chapter 6111, Ohio's water
protection law. The 1990 consent order provides for automatic, stipulated
penalties in the event Specialty Chemical violates the requirements of the 1990
consent order or any applicable Ohio environmental law.

     Specialty Chemical submitted the closure plan as required. The Ohio EPA
also requested, in the event the remedial measures in the proposed closure plan
were not successful within a two-year period, that Specialty Chemical, at that
time, 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.
These unilateral modifications consisted of changes to the closure plan required
by the Ohio EPA without the Company's concurrence. On June 17, 1994, Specialty
Chemical appealed the Ohio EPA's action on the grounds that the unilateral
modifications were unreasonable and unlawful. On January 6, 1995, Specialty
Chemical and the State of Ohio entered into a settlement agreement, which
resulted in a termination of Specialty Chemical'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 implementation of a Groundwater Extraction and Treatment
System, a Soil Vapor Extraction System, and certain other closure plan
requirements which the Company agreed to implement. As of December 31, 1998, the
Company believes that the total costs of necessary closure activities required
to fully implement the closure plan required by the 1990 consent order are
consistent with previously disclosed cost estimates which range from $1,526,300
to $2,000,000, not including any potential stipulated penalties, which Specialty
Chemical believes will not be material when settled. Based on a recent risk
assessment, the Company believes that necessary remedial activities have been
substantially completed.

     Notwithstanding the progress on the closure plan, on October 15, 1997
Specialty Chemical received a letter from the Ohio Attorney General's Office
alleging that it has failed to comply with certain terms of the 1990 consent
order. The State alleges that Specialty Chemical has committed numerous
violations of applicable Ohio hazardous waste laws and regulations. The Ohio EPA
asserts that Specialty Chemical is liable for stipulated penalties of up to
$5,000 per day for each violation of the 1990 consent order. The Ohio EPA bases
these allegations upon the results of a number of inspections conducted from
1993 through 1997. These inspections were documented by the Ohio EPA in the form
of notices of violation. Specialty Chemical prepared detailed written responses
to each notice of violation and without admitting liability, took specific
actions in response to the allegations identified by the Ohio EPA. Nonetheless,
the Attorney General, on behalf of the Ohio EPA, demanded that Specialty
Chemical pay the State of Ohio the sum of $1,080,000 as stipulated penalties for
alleged violations of these laws and regulations. Through the October 15, 1997
letter, the Attorney General invited Specialty Chemical to enter into
negotiations to resolve the disagreement regarding its alleged violations of the
1990 consent order. Such negotiations are currently in progress.



                                    Page 7 of 22
<PAGE>   8

     Specialty Chemical believes that it has materially complied with the
requirements of the 1990 consent order. However, negotiations with the State of
Ohio may not be successful and may result in extended litigation with the State
of Ohio. Further, Specialty Chemical cannot predict whether a court would find
it liable for stipulated penalties significantly in excess of the initial demand
proposed by the State of Ohio.

     Air Pollution Issues. On May 21, 1998, Specialty Chemical received a letter
from the Ohio EPA alleging that odors from the Macedonia plant and dust from its
unpaved parking lot constituted a nuisance. Further, the Ohio EPA contends that
Specialty Chemical must submit revised permit applications for its can filling
and gassing lines, because current permits allow the filling part of each line
to be a separate emissions unit. The Company does not believe that odors from
its Macedonia plant or dust from its parking lot constitute a nuisance as
defined by applicable law. However, the Ohio EPA's request to re-evaluate and
re-submit Specialty Chemical's existing air permits ultimately may require the
addition of supplemental air pollution control technology at the Macedonia plant
or lead to litigation regarding these permitting issues.

     On December 21, 1998, the Ohio Attorney General's Office notified Specialty
Chemical that it has been asked to initiate a civil enforcement action against
the Company for alleged violations of Ohio Revised Code Chapter 3704, Ohio's air
pollution control laws. To avoid this litigation, the Ohio Attorney General has
offered to enter settlement negotiations with Specialty Chemical regarding these
alleged violations. The Company has entered into these discussions in an attempt
to resolve this dispute without litigation.

     Commercial Lease Litigation. Specialty Chemical is currently involved in a
legal proceeding related to its former commercial lease. On October 30, 1995,
9150 Group v. Aerosol Systems, Inc., a Division of Specialty Chemical Resources,
Inc., was filed in the Cuyahoga County Court of Common Pleas and is currently in
the discovery stage of litigation. The plaintiff alleges damages in an
unspecified amount, together with interest and costs, arising out of the alleged
improper removal of certain manufacturing equipment by Specialty Chemical
following the termination of a commercial lease under which it was a tenant.

     Litigation Regarding Hysan Assets. Specialty Chemical is currently involved
in a legal proceeding related to its 1997 purchase of assets from Hysan
Corporation. In August 1998, Hysan filed a demand for arbitration before the
American Arbitration Association in Chicago in connection with its asset
purchase agreement with Specialty Chemical. In its demand, Hysan seeks $251,000
in compensatory damages from Specialty Chemical from a $500,000 post-closing
escrow account for alleged expenses incurred for post-transaction storage of
equipment purchased in the transaction. Specialty Chemical has denied the
material allegations in the arbitration demand and has asserted a counterclaim
against Hysan related to allegedly obsolete inventory and for certain indemnity
claims related to accounts receivable and other inventory issues. The
counterclaim seeks $542,864 from the post-closing escrow account and, to the
extent that the amount sought exceeds the escrow account, from Hysan.



                                    Page 8 of 22
<PAGE>   9

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

     No matters were submitted to a vote of security holders during the fourth
quarter of 1998.


EXECUTIVE OFFICERS

     Set forth below is certain information concerning the Executive Officers of
Specialty Chemical Resources, Inc. Officers are elected annually by the Board of
Directors of the Company, and serve at the pleasure of the Board of Directors
that elects them.

<TABLE>
<CAPTION>
    NAME                     AGE                            POSITION
    ----                     ---                            --------
<S>                          <C>                 <C> 

Edwin M. Roth                71                  C.E.O., Chairman of the
                                                 Board, and Director

Corey B. Roth                41                  President, Chief Operating
                                                 Officer, and Director

David F. Spink               48                  Vice President, Chief Financial
                                                 Officer, Treasurer, and Asst.
                                                 Secretary
</TABLE>


     Mr. Edwin M. Roth has been a Director and President of the Company and
Chairman of the Board of Directors of the Company since its formation in June
1982. Mr. Roth was Chief Executive Officer of ASI from the time of its
acquisition in December 1988 until its merger into the Company in December 1992.
Mr. Roth is the father of Mr. Corey B. Roth.

     Mr. Corey B. Roth has been President of the Company since June 1997, a
Director since October 1984 and Asst. Secretary since June 1992. Mr. Roth served
as Treasurer from November 1987 until January 30, 1990 and from June 1992 to
June 1997. Mr. Roth served as Secretary from October 1984 until June 1992.
Mr. Roth was Vice President of Administration of ASI from April 1989 until
December 1992. Mr. Roth is the son of Mr. Edwin M. Roth.

     Mr. David F. Spink joined the Company in 1996. In June 1997 he was elected
Chief Financial Officer and Treasurer. He has been Vice President of the Company
since June 1996. Prior to joining the Company, Mr. Spink worked 17 years at
B.F. Goodrich Company in a progression of financial positions. In 1992 he was
Controller of the Research Division for Goodrich. From 1993 to 1994 Mr. Spink
was Director of Planning and Analysis for that corporation.



                                    Page 9 of 22
<PAGE>   10

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

     The Common Stock is listed on the American Stock Exchange ("AMEX") under
the symbol "CHM".

     During 1998, the closing sales prices on the AMEX ranged from $0.19 to
$1.44. During 1997, the closing sales prices on the AMEX ranged from $1.00 to
$2.50. The following table sets forth the high and low sale prices by quarter
for 1998 and 1997.
<TABLE>
<CAPTION>
                                 CALENDAR YEAR ENDED DECEMBER 31,
                                 --------------------------------
                                 1998                        1997
                           ----------------            ----------------

       QUARTER             HIGH       LOW              HIGH       LOW
       -------             ----       ---              ----       ---
<S>                        <C>        <C>              <C>        <C>
First Quarter........      1.438      1.000            2.500      1.375
Second Quarter.......      1.063       .750            2.188      1.250
Third Quarter........      1.000       .188            2.000      1.250
Fourth Quarter.......       .938       .250            1.500      1.000
</TABLE>


     As of February 12, 1999, the closing price for the Common Stock on AMEX was
$0.25. As of February 12, 1999, there were 550 holders of record of Common Stock
and 4,257,101 shares of Common Stock issued and outstanding.

     Specialty Chemical has not paid cash dividends on its Common Stock and
intends to follow a policy of retaining earnings in order to finance the
continued growth and development of its business. Payment of dividends will be
within the discretion of the Board of Directors and will depend, among other
factors, on earnings, capital requirements, and the operating and financial
condition of the Company. The terms of Specialty Chemical's outstanding loans
currently prohibit it from paying cash or stock dividends to its stockholders.

     Specialty Chemical has been notified by AMEX that its Common Stock may be
delisted from trading on the exchange. If the shares of Common Stock are
delisted from AMEX and the shares are not approved for listing on another
exchange or NASDAQ, stockholders may find it more difficult to dispose of, or to
obtain accurate price quotations of, Specialty Chemical's Common Stock. As a
result, the market price for Specialty Chemical's Common Stock may be adversely
affected.


ITEM 6. SELECTED FINANCIAL DATA

     The selected financial data for the fiscal years 1994 through 1998 are
derived from Specialty Chemical's audited financial statements. This information
should be read in conjunction with the Company's Financial Statements and Notes
thereto and Management's Discussion and Analysis of Financial Condition and
Results of Operations, each of which is included elsewhere in this Report.



                                   Page 10 of 22
<PAGE>   11

                             SELECTED FINANCIAL DATA
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                          ------------------------------------------------------------
                                           1998          1997         1996         1995         1994
                                           ----          ----         ----         ----         ----
<S>                                       <C>          <C>           <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA(1):
Net sales                                 $35,557      $ 40,283      $38,914      $43,419      $44,931
Cost of goods sold                         29,453        33,628       32,783       39,123       38,066
                                          -------      --------      -------      -------      -------
Gross profit                                6,104         6,655        6,131        4,296        6,865
Selling, general and
  administrative expenses                   6,467         6,903        6,067        7,648        6,995
Amortization of intangibles                   416           997          907          869          874
Loss on impairment(4)                          --        18,501           --           --           --
Restructuring charges                          --            --           --           --          954
                                          -------      --------      -------      -------      -------
Operating profit (loss)                      (779)      (19,746)        (843)      (4,221)      (1,958)

Other income (expense)
  Interest expense                         (1,656)       (1,405)      (1,059)        (779)        (560)
  Other                                        --            66           11           10           39
                                          -------      --------      -------      -------      -------
                                           (1,656)       (1,339)      (1,048)        (769)        (521)
                                          -------      --------      -------      -------      -------
Earnings (loss) before income
  taxes and extraordinary item             (2,435)      (21,085)      (1,891)      (4,990)      (2,479)
Income tax benefits (expense)                  --            --          128        2,981          840
                                          -------      --------      -------      -------      -------
Earnings (loss) before
  extraordinary item                       (2,435)      (21,085)      (1,763)      (2,009)      (1,639)

Extraordinary Item:
  Gain (loss) due to fire
  (net of income taxes)                        --            --           --           --        2,265
                                          -------      --------      -------      -------      -------
Net earnings (loss)                       $(2,435)     $(21,085)     $(1,763)     $(2,009)     $   626
                                          =======      ========      =======      =======      =======

SHARE DATA:
 Earnings (loss) per common share:
   Before extraordinary item              $ (0.63)     $  (5.43)     $ (0.45)     $ (0.51)     $ (0.42)
   Extraordinary Item                          --            --           --           --         0.58
                                          -------      --------      -------      -------      -------
   Net earnings (loss)                    $ (0.63)     $  (5.43)     $ (0.45)     $ (0.51)     $  0.16
                                          =======      ========      =======      =======      =======
Dividends paid                                 --            --           --           --
Weighted average common shares
 outstanding                                3,882         3,882        3,946        3,939        3,935


<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                          ------------------------------------------------------------
                                           1998          1997          1996        1995          1994
                                           ----          ----          ----        ----          ----
<S>                                       <C>          <C>           <C>          <C>          <C>
BALANCE SHEET DATA
Working capital                           $ 5,799      $  6,415      $ 7,550      $ 7,142      $ 6,420
Total assets                              $25,169      $ 29,518      $43,923      $47,272      $44,558
Long-term debt                            $16,297(2)   $ 15,446(2)   $12,246(2)   $10,399      $ 4,512
Redeemable preferred stock(3)                  --            --           --      $   350           --
Stockholders' equity                      $ 3,062      $  5,497(4)   $26,562      $28,444      $30,439
</TABLE>



                                   Page 11 of 22
<PAGE>   12

(1) At December 31, 1998, the Company had approximately $13,355,000 of net
    operating loss carryforwards available for federal income tax purposes. See
    "Management's Discussion and Analysis of Financial Condition and Results of
    Operations -- Income Taxes and Net Operating Loss Carryforwards" regarding
    limitations on the usage of these carryforwards.

(2) Includes long-term obligations (less current maturities), and convertible
    subordinated debentures, which are convertible at the option of the holder
    into shares of the Company's common stock any time after 2001. (See Note D
    to Financial Statements).

(3) On October 6, 1995, the Company issued 3,500 shares of convertible preferred
    stock to an officer/director at a $100 per share price, which aggregated
    $350,000. On October 16, 1996, the Company redeemed all of its 3,500 shares
    of convertible preferred stock for $350,000 from the proceeds received in
    conjunction with the convertible subordinated debentures. (See Notes D and G
    to Financial Statements.)

(4) In accordance with FAS 121, the Company recorded a non-cash charge of
    $18,501,000 which is reflected as a reduction in the carrying amount of
    goodwill.


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

GENERAL. This discussion should be read in conjunction with the information
contained in the Financial Statements and Notes thereto of Specialty Chemical
Resources, Inc. contained elsewhere in this Report.


RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage of net
sales of certain items included in Specialty Chemical's Statement of Operations.
<TABLE>
<CAPTION>
                                              YEAR ENDED DECEMBER 31,
                                           -----------------------------
                                           1998        1997        1996
                                           -----       -----       -----
<S>                                        <C>         <C>         <C>
Net Sales..............................    100.0%      100.0%      100.0%
  Cost of goods sold...................     82.8%       83.5%       84.2%
                                           -----       -----       -----
Gross profit...........................     17.2%       16.5%       15.8%

Selling, general and administrative
  expenses.............................     18.2%       17.1%       15.6%
Amortization of intangibles............      1.2%        2.5%        2.3%
Impairment of long lived assets........        -        45.9%          -
                                           -----       -----       -----
Operating profit (loss)................     (2.2%)     (49.0%)      (2.2%)
Interest and expense...................      4.7%        3.5%        2.7%
</TABLE>



                                   Page 12 of 22
<PAGE>   13

FISCAL YEAR ENDED DECEMBER 31, 1998 AS COMPARED TO 1997

     Net sales of $35,557,000 for the year ended December 31,1998 were
$4,726,000 below the comparable period in the prior year. The reduction in net
sales in 1998 is entirely due to reduced volume that resulted primarily from
production shortfalls in the last six months of 1997 that caused a loss of
customers and a loss of business from several continuing customers. Reduced
sales to the Company's top ten customers in 1998 compared to 1997 accounted for
approximately 50% of the 1998 sales reduction. Average pricing in 1998 was
essentially unchanged from 1997.

     Cost of goods sold for the year ended December 31, 1998 decreased by
$4,176,000 as compared to the cost of goods sold in 1997. Approximately 94% of
the decrease was due to decreased sales volume in 1998. The remainder of the
decrease was due to improved material and labor utilization efficiencies in
1998. Cost of goods sold decreased as a percentage of sales from 83.5% to 82.8%
for the years ended December 31, 1997 and 1998, respectively. All of the
decrease was due to improved material utilization efficiency.

     Selling, general and administrative expenses were $6,467,000 for the year
ended December 31, 1998, or 18.2% of net sales. This compares with selling,
general and administrative expenses of $6,904,000, or 17.1% of sales for the
year ended December 31, 1997. Approximately 73% of the decrease in selling,
general and administrative expenses is due to cost reduction programs initiated
throughout 1998. The remaining 27% of the decrease is due to volume related
reductions in shipping costs and commissions.

     Amortization of intangibles was $416,000 in 1998 compared to $997,000 for
1997. The reduction is due to lower amortization of goodwill resulting from the
1997 writedown of goodwill. At December 31, 1997, in accordance with FAS 121,
Specialty Chemical determined that an impairment of long-lived assets existed
and based on a fair value measurement, recorded a non-cash charge of $18,501,000
which was reflected as a reduction in the carrying value of goodwill. See
"Fiscal Year Ended December 31, 1997 As Compared to 1996".

     On a quarterly basis in 1998 and at December 31, 1998, Specialty Chemical
has applied a consistent method of assessing impairment of long-lived assets in
accordance with FAS 121. These tests of impairment in 1998 and at December 31,
1998 indicated that based on management's best estimates for future cash flows,
no impairment exists and, therefore, no further charges to income have been
recorded in 1998.

     Interest expense for the year ended December 31, 1998 was $1,656,000, or
4.7% of net sales. This compares to interest expense for the year ended
December 31, 1997 of $1,407,000, or 3.5% of net sales. The increase in interest
expense is due primarily to a full year of increased borrowings under the senior
credit facility that followed the May 22, 1997 acquisition of the assets of
Hysan Corporation and the addition of an aggregate $1.5 million of subordinated
12% notes on June 15, 1998 for loans made to the Company by Edwin Roth, CEW
Partners and Martin Trust. See "Liquidity and Capital Resources".



                                   Page 13 of 22
<PAGE>   14

     Specialty Chemical recorded a net loss for the year ended December 31, 1998
of $2,435,000, or a $0.63 loss per share on weighted average shares outstanding
of 3,882,262. This compared to a net loss of $21,085,000, or a $5.43 loss per
share on weighted average shares outstanding of 3,882,264 for the same period in
1997. In 1997, the charge for impairment of long-lived assets accounted for
$18,501,000 of the loss, or a $4.77 loss per share. Without the impairment
charge, the 1997 net loss would have been $2,584,000, or a $0.67 loss per share.


FISCAL YEAR ENDED DECEMBER 31, 1997 AS COMPARED TO 1996

     The Company's results for the fiscal year ended December 31, 1997 include
the results attributable to the Company's acquisition of the Hysan Assets as of
May 22, 1997. Net sales of $40,284,000 for the year ended December 31, 1997 were
$1,370,000, or 3.5%, above the comparable period in fiscal year 1996. $4,867,000
of the fiscal year 1997 net sales were attributed to the acquisition of the
Hysan Assets. Excluding acquisition related sales, net sales for the year ended
December 31, 1997 were $35,417,000, which was $3,497,000, or 9.0%, below the
comparable period in the prior year. This reduction in net sales for the year
was due primarily to production shortfalls caused by the difficulty of
integrating the Hysan operations.

     Cost of goods sold for the year ended December 31, 1997 increased by
$845,000 as compared to cost of goods sold for the same period in the prior
year. All of this increase was due to increased sales unit volume during the
year ended December 31, 1997, attributable to the acquisition of Hysan. Cost of
goods sold decreased as a percentage of net sales from 84.2% to 83.4% for the
years ended December 31, 1996 and 1997, respectively. The decrease as a percent
of net sales was due primarily to higher unit pricing in 1997.

     Selling, general and administrative expenses were $6,904,000 for the year
ended December 31, 1997, or 17.2% of net sales. Selling, general and
administrative expenses were $6,067,000, or 15.6% of net sales for the year
ended December 31, 1996. The increase in selling, general and administrative
expenses was due primarily to increased shipping costs ($334,000) as a result of
operational disruptions and increased sales salary and commission costs
($185,000) both related to the Hysan acquisition.

     At December 31, 1997, in accordance with FAS 121, Specialty Chemical
estimated its undiscounted cash flows from operations, which results indicated
that an impairment of long-lived assets existed and that a write-down to fair
value was required. Specialty Chemical utilized an independent third party
appraiser to determine fair value based upon management's best estimate of
future cash flows from operations discounted at a rate commensurate with the
risks involved. For the projections, management used historical earnings before
interest, tax, depreciation and amortization, adjusted for non-recurring
expenses, and projected 5% annual growth for a forty-year valuation period. The
valuation used a discount rate of 9.1% based on a weighted average cost of
capital. Based upon the valuation performed, Specialty Chemical recorded a
non-cash charge of $18,501,000 which is reflected as a reduction in the carrying
amount of goodwill.



                                   Page 14 of 22
<PAGE>   15

     Specialty Chemical has historically applied a consistent method of
assessing impairment of long-lived assets in accordance with FAS 121. The
Company has, on a quarterly and annual basis, computed projected cash flows from
operations, based on management's best estimates, including depreciation,
amortization and interest charges in conjunction with the test for impairment.
The trends in 1997 and factors that were considered in the quarterly cash flow
projections and impairment tests which ultimately led to the adjustment in the
fourth quarter of 1997 are described below.

     In the first quarter of 1997 there was reasonably strong cash flow from
operations consistent with projections and the assessment determined that no
impairment existed. In the second quarter of 1997, Specialty Chemical was in the
process of acquiring Hysan Corporation, which Specialty Chemical believed would
enhance its future cash flow projections based upon the synergy of the
acquisition. By the third quarter, Specialty Chemical was starting to experience
difficulty in consolidating the Hysan acquisition, but was still projecting an
increase in cash flow from the synergy of the acquisition. By the fourth
quarter, Specialty Chemical realized that it was now unable to bring about the
cost savings and efficiencies and additional volume that it had anticipated with
the Hysan acquisition. The impairment measurement in the fourth quarter of 1997
was the first quarter where the cash flow from operations, after adding back
interest, depreciation and amortization was no longer showing recoverability of
the long-lived assets. During the fourth quarter, operating results decreased
precipitously with production shortfalls that caused a decrease in sales from a
loss of customers and an increase in selling, general and administrative
expenses. The combination of decreased sales and increased expenses resulted in
increased losses and reduced cash flows in the fourth quarter of 1997. Further,
the loss of customers caused management to reduce its projections for future
sales growth, thereby adversely affecting projections for future cash flows. The
resulting estimates of undiscounted cash flows from operations indicated that an
impairment of long-lived assets existed.

     Interest expense for the year ended December 31, 1997 was 3.5% of net sales
versus 2.7% for the comparable period in the prior year. Interest expense was
$1,405,000 for the year ended December 31, 1997, as compared to $1,059,000 for
the year ended December 31, 1996. The increase in interest expense is due to
increased borrowing under the Company's senior credit facility resulting from
the acquisition, as well as a full year accrual of interest on the Company's 6%
convertible subordinated debentures. See "Liquidity and Capital Resources".

     The Company recorded a net loss for the year ended December 31, 1997 of
$21,085,000, or $5.43 per share on weighted average shares outstanding of
3,882,264. The charge for impairment of long-lived assets accounted for
$18,501,000 of the loss, or $4.77 per share. This compared to a net loss of
$1,762,713, or $.45 per share on weighted average shares outstanding of
3,945,618 for the same period in the prior year. The decrease in earnings for
the 1997 period is due primary to the non-cash charge incurred with the
impairment of long-lived assets (described above).



                                   Page 15 of 22
<PAGE>   16

INCOME TAXES AND NET OPERATING LOSS CARRYFORWARDS

     As of December 31, 1998, the Company had approximately $13,335,000 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 1998, 1997 and 1996 and the realization in 1994 of built-in gains,
approximately $12,000,000 of the carryforwards may be utilized beyond the
current annual limitation to offset future taxable income. Except as discussed
below, and subject to limitations of the Internal Revenue Code of 1986, as
amended (the "Code"), the NOLs should be available to offset future income of
the Company. Use of the NOLs to reduce future taxable income may subject the
Company to an alternative minimum tax.

     Section 382 of the Code limits the amount of a corporation's taxable income
which can be offset by NOLs arising prior to an "ownership change". An ownership
change occurs when the percentage of stock owned by 5 percent shareholders, or a
group of 5 percent shareholders, increases over 50 percent over a three year
period. For example, an ownership change would occur if shares comprising more
than 50 percent of a corporation's stock are sold to new public shareholders. As
a result of the public offering in February 1992 and the ownership change that
occurred in connection therewith, the limitation on the utilization of the NOLs
imposed by Section 382 of the Code will apply. Under the limitation, the amount
of the Company's taxable income that each year can be offset by NOLs
attributable to periods before the ownership change cannot exceed the product of
(i) the fair market value of the stock of the Company immediately prior to the
ownership change and (ii) the long-term tax-exempt rate prescribed by the IRS.
The limitation imposed by the change in ownership may result in the Company
paying income taxes in excess of the amount payable in the absence of a change
in ownership.

     The Company had no income tax expense for 1988 and 1997. The income tax
benefit of $127,600 for the year ended December 31, 1996 consists of
approximately $11,000 of current refundable federal income taxes and
approximately $138,600 of deferred tax benefits.


LIQUIDITY AND CAPITAL RESOURCES

     As of December 31, 1998, Specialty Chemical's ratio of current assets to
current liabilities was 2.00 to 1 and the quick ratio (cash and cash
equivalents, and accounts receivable, divided by current liabilities) was .77
to 1. As of December 31, 1997, Specialty Chemical's ratio of current assets to
current liabilities was 1.75 to 1 and the quick ratio (described above) was .66
to 1. The increase in liquidity is due primarily to a $2,995,000 decrease in
accounts payable that corresponds to a $2,424,000 decrease in inventories and a
$962,000 increase in long-term debt.

     During the twelve months ended December 31, 1998, Specialty Chemical
incurred $1,656,000 in interest expense, of which $266,000 was accrued to the
carrying value of the 6% Convertible Subordinated Debentures and $103,000 was
accrued to the carrying value of 12% subordinated notes to Edwin Roth, CEW
Partners and Martin Trust. In 1998 Specialty Chemical made interest payments
totaling $1,303,000. Accrued interest at December 31, 1998, was $92,000. Accrued
interest reflected in the carrying value of the 6% Convertible Subordinated
Debentures was $556,000 at December 31, 1998.



                                   Page 16 of 22
<PAGE>   17

     On May 22, 1997 the Company, in connection with the acquisition of the
Hysan Assets, executed an amendment to its current agreement (the "Credit
Agreement") with its senior lender Star Bank, N.A. The amended Credit Agreement
provided for a $15,000,000 facility which expired on December 31, 2000,
comprised of a revolving line of credit and three term loans. Borrowings on the
revolving line of credit and two of the term loans bear interest at the prime
rate plus 1.5%, subject to decrease if certain ratios and financial tests are
met. The first of these two term loans for $2,680,000 amortizes in forty-seven
consecutive monthly installments of $55,833 commencing June 1, 1998 with a
forty-eighth and final principal payment of $55,849. The second of these term
loans was paid off in 1997. The third term loan bears interest at the prime rate
plus 4.5%, subject to decrease if certain financial tests are met. This term
loan for $1,000,000 amortizes in seventeen consecutive monthly installments of
$55,555 commencing July 1, 1997 with an eighteenth and final installment of
$55,565.

     Under the terms of the Credit Agreement, the Company is required to comply
with various covenants, the most restrictive of which relates 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. On April 14, 1998, the Company and the senior lender executed a
Second Amendment to the Credit Agreement whereby the senior lender revised the
various financial covenants and required that the Company provide an acceptable
plan to the bank to provide additional capital for the Company. On May 20, 1998
the Company and its senior lender executed a Third Amendment to the Credit
Agreement related to the implementation of the Company's recapitalization plan.
On November 12, 1998, the Company and its senior lender executed a Fourth
Amendment to the Credit Agreement, to allow the Company to issue $1,800,000 of
new Subordinated Convertible Notes pursuant to a rights offering to its
stockholders, to reduce the total credit facility from $15 million to $14
million, to revise repayment schedules for the two continuing term loans and to
revise certain financial covenants. The revised term loan repayment schedule
does not alter the monthly amount of the payments, but restructures the
application of the payments to pay off the higher interest bearing (prime +4.5%)
term loan first and then commence repayment of the lower interest (prime +1.5%)
term loan. On February 15, 1999, Specialty Chemical and its senior lender
executed a Fifth Amendment to the Credit Agreement reducing the amount of the
new Subordinated Convertible Notes from $1,800,000 to $1,360,000 and permitting
the issuance of three unsecured subordinated promissory notes to Edwin Roth,
Martin Trust and CEW Partners in the aggregate amount of $304,800.

     Based on 1998 financial performance, the senior lender has revised the
various covenants in a Sixth Amendment to the Credit Agreement. The Company is
currently in compliance with all covenants set by the Sixth Amendment to the
Credit Agreement. Such amendment reduces the total loan facility from $14
million to $12 million and requires Specialty Chemical to obtain an additional
$1 million of cash contributions through either equity or unsecured subordinated
debt by June 30, 1999. Subsequent to Specialty Chemical's receipt of the cash
contribution, the senior lender will establish financial covenants beyond June
30, 1999. On April 14, 1999, Specialty Chemical received a commitment letter
from Edwin Roth, Martin Trust and CEW Partners to guarantee subordinated 
indebtedness in the amount of the required cash contribution prior to 
June 30, 1999.



                                   Page 17 of 22
<PAGE>   18

     As of December 31, 1998, approximately $176,000 was unused and available
under the Credit Agreement.

     During January, 1998, the Company refinanced the mortgage on its
distribution center and corporate offices with a $1,125,000 note with a new
bank. The note, which bears interest at 8.75%, requires twelve monthly interest
only payments until February 1, 1999. Commencing on February 1, 1999, the note
requires 167 monthly principal and interest payments of $11,790, the final
payment being due on November 1, 2012. The borrowing is collateralized by a
facility which serves as the Company's distribution center and corporate
offices.

     On May 20, 1998, the Company issued three $150,000 principal amount
subordinated promissory notes to Martin Trust, CEW Partners and Edwin M.
Roth, respectively (the "Investors"). Such notes were due June 22, 1998. On
June 15, 1998, the Company issued three $500,000 principal amount 12%
promissory notes subordinated to the bank (the "Subordinated Notes") to
such Investors in part to refinance the original notes issued on May 20,
1998. Such Subordinated Notes were originally due December 15, 1998, but
were extended to March 15, 1999. Interest accrued on the Subordinated Notes
through January 31, 1999 was paid in common stock of the Company on
February 11, 1999. The Investors and the Company agreed at the time these
loans were made that the Subordinated Notes would be refinanced with the
net proceeds of a pro rata rights offering of Company debt to its
stockholders and its holders of Original Notes (as defined below). On March
15, 1999, the Company completed an offering of subscription rights to
purchase an aggregate principal amount of $1,360,000 of 6% Convertible
Subordinated Notes due in ten years (the "New Notes") to stockholders and
holders of the 6% Convertible Subordinated Notes due 2006 (the "Original
Notes"). The net proceeds available to the Company from the rights offering
were approximately $1,160,000. The net proceeds of the rights offering were
used to repay a portion of the loans made to the Company by the Investors.
As agreed to by the Investors and the Company, the Company canceled the
Subordinated Notes as payment of each Investor's subscription price for the
New Notes. After the rights offering, Specialty Chemical issued an
aggregate of $304,800 in new 12% subordinated notes on March 15, 1999, due
January 15, 2001. These new subordinated notes were issued to the Investors
in the amount equal to the principal amount of the Subordinated Notes that
exceeded the subscription price for the New Notes purchased by each
Investor. The principal and accrued interest on the new subordinated notes
will be payable at maturity in cash, or at the holder's option, in shares
of Common Stock based upon the fair market value of the Common Stock.
However, the noteholders may demand full payment of principal and accrued
interest on the new subordinated notes at any time after the Company has
authorized, unissued and unreserved shares of Common Stock sufficient to
pay, in full, the outstanding principal and interest under all the new
subordinated notes. The fair market value will be the average closing price
of the Common Stock on five consecutive trading days prior to the day
immediately before the date that the stockholders authorize the issuance of
Common Stock sufficient to pay all the outstanding principal and interest
due under the new subordinated notes.

     Other than the interest and loan amortization commitments described above,
Specialty Chemical had no other material commitments for capital leases,
interest or fees. (See Note D - Long-Term Debt and Note E - Commitments and
Contingencies)



                                   Page 18 of 22
<PAGE>   19

     Net cash provided by operating activities was $32,000 in 1998, versus cash
provided of $4,616,110 for 1997, and net cash used in operating activities of
$537,000 for 1996. Net capital expenditures were $537,000, $932,000 and $156,000
respectively, for the three years ended 1998, 1997, and 1996. The Company
expects to spend approximately $200,000 in capital expenditures for 1999 to be
funded from operating cash flows and borrowings under the senior credit
facility. Under current business conditions, the Company expects no significant
change in its liquidity position during the current fiscal year, and the Company
believes that cash from operations and the senior credit facility will be
adequate to satisfy the Company's liquidity needs during fiscal 1999.


YEAR 2000

     Many computer systems and software products will have trouble processing
data related to the Year 2000. Specialty Chemical has reviewed all of its
information technology and non-information technology computer systems, computer
chips and software products for Year 2000 problems and has determined that its
operations systems and products relating to production and shipments should not
have Year 2000 problems, but that certain financial systems and products and
outsourced payroll systems should be upgraded or replaced. Specialty Chemical
recently replaced its vendor for outsourced payroll systems. Specialty Chemical
intends to begin replacing financial computer systems and software products in
April, 1999 and believes that new systems and products will be tested and in
place by June 30, 1999.

     During 1998, Specialty Chemical made no expenditures relating to Year 2000
issues and used internal personnel to complete all work on such issues. In 1999,
Specialty Chemical expects to spend approximately $80,000 to complete its Year
2000 compliance efforts, which will be funded from operating cash flows and
borrowings under its credit agreement.

     Specialty Chemical has received verbal and written responses from its
material suppliers and vendors regarding their Year 2000 compliance efforts. All
have responded that they either are compliant or have plans to be compliant
prior to the Year 2000. Specialty Chemical's contingency plan for uninterrupted
material supply sources includes maintaining multiple suppliers for most of its
raw materials and identifying back up suppliers for all key materials. However,
if Specialty Chemical's upgrade and replacement plan is not successful, or its
material suppliers or vendors develop Year 2000 problems, then Specialty
Chemical may suffer significant losses which would have a material adverse
effect on its business.



                                   Page 19 of 22
<PAGE>   20

FORWARD-LOOKING STATEMENTS

     Certain statements contained herein that are not statements of historical
facts are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and are thus prospective. Such
forward-looking statements include, without limitation, statements regarding
expected financial performance, the ability to generate necessary capital from
the Investors, ongoing business strategies and possible future action that the
Company intends to pursue in order to achieve strategic objectives. Such
forward-looking statements are subject to risks, uncertainties and other factors
that could cause actual results to differ materially from future results
expressed or implied by such forward-looking statements. Important factors that
could cause actual results to differ materially from the results expressed or
implied by any forward-looking statements ("Cautionary Statements") include
general economic conditions, conditions in the Company's industry, the
uncertainty of availability of net operating loss carryovers, the outcomes of
certain environmental and legal proceedings and the adequacy of Year 2000
compliance measures. All subsequent written and oral forward-looking statements
relating to the matters described herein and attributable to the Company or to
persons acting on behalf of the Company are expressly qualified in their
entirety by the Cautionary Statements.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


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

None



                                    Part III

Incorporated by reference to the Company's definitive proxy statement for the
1999 Annual Meeting of Stockholders.



                                     PART IV


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

The Index to Financial Statements and Financial Statement Schedules is listed
below.

     Reports on Form 8-K.

1. The Company filed a Form 8-K/A-2 on January 20, 1999, on which it revised
   Proforma Financial Information.



                                   Page 20 of 22
<PAGE>   21

      INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
                                                                        PG NO.
                                                                        ------
<S>                                                                    <C>
Report of Independent Certified Public Accountants...................        F-1

Balance Sheets
   December 31, 1998 and 1997........................................  F-2 & F-3

Statements of Operations
   December 31, 1998, 1997 and 1996..................................        F-4

Statements of Stockholders' Equity
   December 31, 1998, 1997, and 1996.................................        F-5

Statements of Cash Flows
   December 31, 1998, 1997, and 1996.................................  F-6 & F-7

Notes to Financial Statements........................................ F-8 - F-26

Report of Independent Certified Public Accountants on Schedules......       F-27

Schedule II - Valuation and Qualifying Accounts
              December 31, 1998, 1997 and 1996.......................       F-28
</TABLE>



                                   Page 21 of 22
<PAGE>   22

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized, this 15th
day of April, 1999.

                                    SPECIALTY CHEMICAL RESOURCES, INC.



                                    By:/s/ Edwin M. Roth
                                       -----------------------------------------
                                                    Edwin M. Roth
                                           C.E.O. and Chairman of the Board


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report on Form 10-K has been signed by the following persons in the capacities,
on the date indicated. This Report may be signed in multiple counterparts, all
of which taken together shall constitute one document.
<TABLE>
<CAPTION>
   NAME                        TITLE                              DATE
   ----                        -----                              ----
<S>                            <C>                                <C>

/s/ Edwin M. Roth              C.E.O. and Chairman                April 15, 1999
----------------------------   of the Board
Edwin M. Roth                  (Principal Executive Officer)


/s/ Corey B. Roth              President, Chief Operating         April 15, 1999
----------------------------   Officer, and Director
Corey B. Roth


/s/ David F. Spink             Vice President,                    April 15, 1999
----------------------------   Chief Financial Officer,
David F. Spink                 Treasurer, and Asst. Secretary


/s/ George N. Aronoff          Director                           April 15, 1999
----------------------------
George N. Aronoff


/s/ Victor Gelb                Director                           April 15, 1999
-----------------------------
Victor Gelb


/s/ Lionel N. Sterling         Director                           April 15, 1999
-----------------------------
Lionel N. Sterling


/s/ Geoffrey J. Colvin         Director                           April 15, 1999
-----------------------------
Geoffrey J. Colvin


/s/ Terence J. Conklin         Director                           April 15, 1999
-----------------------------
Terence J. Conklin
</TABLE>



                                   Page 22 of 22
<PAGE>   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, 1998 and 1997, and the related statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1998. 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, 1998 and 1997, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.







                                            GRANT THORNTON LLP



Cleveland, Ohio
March 4, 1999 (except for Note D as to which the
  date is April 14, 1999)


                                       F-1


<PAGE>   24
              Specialty Chemical Resources, Inc.
                        BALANCE SHEETS
                          December 31


                                     ASSETS
<TABLE>
<CAPTION>
                                                                                1998                  1997
                                                                            ------------          ------------
CURRENT ASSETS
<S>                                                                              <C>                   <C>    
   Cash and cash equivalents                                                $      3,100          $      3,100
   Accounts receivable - trade, less allowance for doubtful
       accounts of $112,000 and $137,000, respectively (note D)                4,511,220             5,338,168
   Receivables - other (note E)                                                  359,747               343,657
   Inventories (notes A, C and D)                                              6,520,852             8,944,905
   Prepaid expenses                                                              215,498               360,196
                                                                            ------------          ------------
            Total current assets                                              11,610,417            14,990,026

PROPERTY AND EQUIPMENT - at cost
   (notes A and D)
      Building                                                                 1,337,655             1,293,745
      Leasehold improvements                                                   2,865,829             2,798,551
      Office equipment and furniture                                           1,887,853             1,115,738
      Machinery and equipment                                                 12,018,015            11,889,611
      Construction in-progress                                                    49,203               523,932
                                                                            ------------          ------------
                                                                              18,158,555            17,621,577
         Less accumulated depreciation and amortization                        6,666,274             5,536,789
                                                                            ------------          ------------
                                                                              11,492,281            12,084,788
      Land                                                                       118,690               118,690
                                                                            ------------          ------------
                                                                              11,610,971            12,203,478

OTHER ASSETS (note A)
   Goodwill  (note K)                                                            866,239               894,319
   Product formulation                                                           408,638               692,894
   Deferred financing costs                                                      461,630               435,117
   Other                                                                         211,537               302,044
                                                                            ------------          ------------
                                                                               1,948,044             2,324,374
                                                                            ------------          ------------
                                                                            $ 25,169,432          $ 29,517,878
                                                                            ============          ============
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       F-2
<PAGE>   25





               Specialty Chemical Resources, Inc.

                         BALANCE SHEETS

                           December 31


                                   LIABILITIES
<TABLE>
<CAPTION>
                                                                                 1998                  1997
                                                                              -----------           -----------
CURRENT LIABILITIES
<S>                                                                           <C>                   <C>        
   Current portion of long-term debt                                          $ 1,176,503           $ 1,057,497
   Accounts payable                                                             3,898,411             6,893,119
   Accrued liabilities:
      Compensation and payroll taxes                                              251,431               123,146
      Taxes - other                                                                36,768                37,116
      Interest                                                                     92,340               108,430
      Other                                                                       355,752               356,067
                                                                              -----------           -----------
                                                                                  736,291               624,759
                                                                              -----------           -----------

            Total current liabilities                                           5,811,205             8,575,375


LONG-TERM DEBT (NOTE D)                                                        16,296,680            15,445,820

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 3,947,761 and 3,947,762 shares, respectively                         394,777               394,777
   Additional paid-in capital                                                  41,935,125            41,935,125
   Accumulated deficit                                                        (39,149,633)          (36,714,497)
                                                                              -----------           -----------
                                                                                3,180,269             5,615,405
   Less common stock in treasury, at cost;
      65,500 shares each year                                                    (118,722)             (118,722)
                                                                              -----------           -----------
                                                                                3,061,547             5,496,683
                                                                              -----------           -----------
                                                                             $ 25,169,432          $ 29,517,878
                                                                             ============          ============
</TABLE>


The accompanying notes are an integral part of these statements.

                               F-3
<PAGE>   26

                       Specialty Chemical Resources, Inc.
                            STATEMENTS OF OPERATIONS
                         For the years ended December 31

<TABLE>
<CAPTION>
                                                               1998                1997                 1996
                                                          ------------        ------------         ------------
<S>                                                       <C>                 <C>                  <C>         
Net sales                                                 $ 35,557,165        $ 40,283,662         $ 38,914,148

Cost of goods sold                                          29,452,765          33,628,380           32,783,174
                                                          ------------        ------------         ------------
          Gross profit                                       6,104,400           6,655,282            6,130,974

Selling, general and administrative expenses                 6,466,837           6,903,620            6,066,674

Amortization of intangibles                                    416,543             996,679              906,846

Impairment of long-lived assets (note K)                             -          18,501,135                    -
                                                          ------------        ------------         ------------
          Operating (loss)                                    (778,980)        (19,746,152)            (842,546)

Other income (expense)
   Interest expense                                         (1,656,156)         (1,404,700)          (1,059,217)
   Other                                                             -              66,140               11,450
                                                          ------------        ------------         ------------
                                                            (1,656,156)         (1,338,560)          (1,047,767)
                                                          ------------        ------------         ------------

          (Loss) before income taxes                        (2,435,136)        (21,084,712)          (1,890,313)

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


          NET (LOSS)                                      $ (2,435,136)       $(21,084,712)        $ (1,762,713)
                                                          ============        ============         ============ 

Basic (loss) per common share (note J)                    $      (0.63)            $ (5.43)             $ (0.45)
                                                          ============        ============         ============ 
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       F-4
<PAGE>   27
                       Specialty Chemical Resources, Inc.

                       STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                    ----------------------------------------------------------------------------
                                                    COMMON STOCK OUTSTANDING       ADDITIONAL

                                                         $.10 PAR VALUE             PAID-IN         ACCUMULATED        UNEARNED   
                                                    -----------------------
                                                      SHARES         AMOUNT         CAPITAL           DEFICIT        COMPENSATION 
                                                    ----------     ---------     ------------     -------------      ------------ 
                                                      
<S>                                                  <C>           <C>           <C>              <C>                  <C>        
BALANCE AT DECEMBER 31, 1995                         3,947,769     $ 394,777     $ 41,935,125     $ (13,847,367)       $ (38,700) 

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

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

   Amortization of unearned compensation                     -             -                -                 -           19,350  

   Purchase of common stock for treasury               (65,500)            -                -                 -                -  
                                                     ---------     ---------     ------------     -------------        ---------  
BALANCE AT DECEMBER 31, 1996                         3,882,264       394,777       41,935,125       (15,629,785)         (19,350) 

   Retirement of fractional shares received from
       prior reverse stock split                            (2)            -                -                 -                -  
 
   Net loss for the year                                     -             -                -       (21,084,712)               -  

   Amortization of unearned compensation                     -             -                -                 -           19,350  
                                                     ---------     ---------     ------------     -------------        ---------
BALANCE AT DECEMBER 31, 1997                         3,882,262       394,777       41,935,125       (36,714,497)               -  
                                                       
   Retirement of fractional shares received from
       prior reverse stock split                            (1)            -                -                 -                -  
 
   Net loss for the year                                     -             -                -        (2,435,136)               -  
                                                     ---------     ---------     ------------     -------------        ---------  
BALANCE AT DECEMBER 31, 1998                         3,882,261     $ 394,777     $ 41,935,125     $ (39,149,633)       $       -  
                                                     =========     =========     ============     =============        ========= 




<CAPTION>

                                                     
                                                      ---------------------------
                                                      TREASURY
                                                   
                                                        STOCK            TOTAL
                                                      -----------    ------------
                                                   
<S>                                                          <C>     <C>         
BALANCE AT DECEMBER 31, 1995                          $        -     $ 28,443,835

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

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

   Amortization of unearned compensation                       -           19,350
                                                      
   Purchase of common stock for treasury                (118,722)        (118,722)
                                                      ----------     ------------
BALANCE AT DECEMBER 31, 1996                            (118,722)      26,562,045

   Retirement of fractional shares received from
       prior reverse stock split                               -                -
 
   Net loss for the year                                       -      (21,084,712)

   Amortization of unearned compensation                       -           19,350
                                                      ----------     ------------
BALANCE AT DECEMBER 31, 1997                            (118,722)       5,496,683
                                                      
   Retirement of fractional shares received from
       prior reverse stock split                               -                -
 
   Net loss for the year                                       -       (2,435,136)
                                                      ----------     ------------
BALANCE AT DECEMBER 31, 1998                          $ (118,722)     $ 3,061,547
                                                      ==========      ===========
</TABLE>



        The accompanying notes are an integral part of these statements.

                                       F-5

<PAGE>   28
                       Specialty Chemical Resources, Inc.

                            STATEMENTS OF CASH FLOWS

                         For the years ended December 31



<TABLE>
<CAPTION>
                                                                      1998               1997                1996
                                                                    -------            -------           ---------
<S>                                                              <C>               <C>                  <C>          
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                      $ (2,435,136)     $ (21,084,712)       $ (1,762,713)
   Adjustment to reconcile net loss to net cash provided by
      (used in) operating activities:
         Depreciation                                               1,129,485          1,084,143           1,025,799
         Amortization of intangibles                                  416,543            996,679             906,846
         Impairment of long-lived assets                                    -         18,501,135                   -
         Deferred income taxes (benefits)                                   -                  -            (138,805)
         Stock compensation                                                 -             19,350              19,350
         Accrued interest on subordinated debentures                  369,068            240,000              50,000
         Change in assets and liabilities:
              Decrease in accounts receivable                         826,948          1,490,817           1,270,433
              (Increase) decrease in accounts receivable - other      (16,090)           (85,373)            551,818
              (Increase) decrease in inventories                    2,424,053           (279,840)            807,863
              (Increase) decrease in prepaid expenses                 144,698            (54,937)           (103,839)
              Decrease in refundable income taxes                           -          1,075,016              59,063
              (Increase) decrease in other assets                      55,741           (123,557)             (7,337)
              Increase (decrease) in accounts payable              (2,994,708)         2,888,249          (2,690,647)
              Increase (decrease) in accrued liabilities              111,532            (50,860)           (525,047)
                                                                 ------------      -------------        ------------ 
                  Total adjustments                                 2,467,270         25,700,822           1,225,497
                                                                 ------------      -------------        ------------ 
                     Net cash provided by (used in)
                         operating activities                          32,134          4,616,110            (537,216)
</TABLE>



                            (CONTINUED ON NEXT PAGE)






        The accompanying notes are an integral part of these statements.

                                       F-6


<PAGE>   29

                       Specialty Chemical Resources, Inc.

                      STATEMENTS OF CASH FLOWS - CONTINUED

                         For the years ended December 31




<TABLE>
<CAPTION>
                                                                     1998               1997                1996
                                                                 ------------      -------------        ------------ 
<S>                                                              <C>              <C>                   <C>         
        Net cash provided by (used in) operating activities
             (brought forward from previous page)                $    32,134      $   4,616,110         $  (537,216)

CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisition of Hysan assets (note B)                                    -         (7,431,977)                  -
   Expenditures for property and equipment - net                    (536,978)          (932,139)           (155,621)
   Purchase of product formulations and license agreement                  -                  -            (400,300)
                                                                 ------------      -------------        ------------ 
          Net cash (used in) investing activities                   (536,978)        (8,364,116)           (555,921)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Redemption of redeemable preferred stock                                -                  -            (350,000)
   Dividends paid on redeemable preferred stock                            -                  -             (19,705)
   Payments on long-term obligations                                (682,217)          (538,440)           (134,503)
   Proceeds from long-term obligations, net of deferred
       financing costs                                               661,178          2,090,000           1,688,368
   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 subordinated debentures,
      net of deferred financing costs                              1,429,410                  -           3,673,373
   Purchase of common stock for treasury                                   -                  -            (118,722)
   Proceeds on revolver                                           38,077,591         49,734,451          37,041,248
   Payments on revolver                                          (38,981,118)       (47,703,546)        (38,897,902)
                                                                 ------------      -------------        ------------ 

          Net cash provided by financing activities                  504,844          3,582,465           1,260,540
                                                                 ------------      -------------        ------------ 

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

Cash and cash equivalents at beginning of year                         3,100            168,641               1,238
                                                                 ------------      -------------        ------------ 

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


        The accompanying notes are an integral part of these statements.

                                       F-7
<PAGE>   30
                       Specialty Chemical Resources, Inc.

                          NOTES TO FINANCIAL STATEMENTS

                        December 31, 1998, 1997 and 1996



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>   31

                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1998, 1997 and 1996



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
   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 $3,024,000
   and $2,608,000 for the years ended December 31, 1998 and 1997, 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 bases 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>   32

                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1998, 1997 and 1996



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 $18,000, $38,000 and $75,000 for
   the years ended December 31, 1998, 1997 and 1996, respectively. In addition,
   the Company received income tax refunds of approximately $15,000 and
   $1,080,000 during 1998 and 1997, respectively. Cash payments for interest
   amounted to $1,303,000, $1,124,000 and $1,095,000 in the years ended December
   31, 1998, 1997 and 1996, respectively.

   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.

   RECLASSIFICATION

   Certain amounts in previously issued financial statements were reclassified
   to conform to the 1998 presentation.






                                      F-10
<PAGE>   33

                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1998, 1997 and 1996


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") which is effective for fiscal
   years beginning after December 15, 1997. There are no components of
   comprehensive income for the Company except reported net income (loss).

   Statement of Financial Accounting Standards No. 131, Disclosures About
   Segments of an Enterprise and Related Information ("SFAS 131") was issued by
   the FASB in 1997, which is effective for fiscal years beginning after
   December 15, 1997. 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. Given the similar economic
   characteristics and the similarities as to the nature of products, the
   Company believes it qualifies for the aggregation rules of the statement and
   therefore operates in one reportable segment.

   In 1998, the FASB issued SFAS No. 132, Employers' Disclosures About Pensions
   and Other Postretirement Benefits which is effective for fiscal years
   beginning after December 31, 1997. The disclosures herein are reflective of
   the adoption of this statement.

   In 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments
   and Hedging Activities which is effective for fiscal years beginning after
   June 15, 1999. Management does not believe the adoption of this statement
   will have a material impact on the Company's financial statements.
   Additionally, during 1998, a new Statement of Position (SOP) was issued by
   the American Institute of Certified Public Accountants. The SOP, Reporting on
   the Costs of Start-up Activities, requires that costs incurred to open a new
   facility, introduce a new product, commence a new operation or other similar
   activities be expensed as incurred. Management does not believe that this
   SOP, which will be adopted for 1999, will have a material impact on the
   Company's financial statements.






                                      F-11

<PAGE>   34

                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1998, 1997 and 1996


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. Included in the Company's asset allocation
   was $2,522,000 which was allocated to machinery and equipment. As of December
   31, 1998, the Company has not yet put into service approximately $2,018,000
   of this production equipment and therefore has not commenced recording
   depreciation expense on those assets. 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:

<TABLE>
<CAPTION>
                                                       ============================
                                                          YEARS ENDED DECEMBER 31,
                                                       ----------------------------
                                                            1997            1996
                                                       ------------    ------------
<S>                                                    <C>             <C>         
Net sales                                              $ 44,571,000    $ 53,710,000
Net (loss)                                             $(21,382,000)   $ (1,582,000)
Basic (loss) per share                                 $      (5.51)   $      (0.40)
</TABLE>


NOTE C - INVENTORIES
<TABLE>
<CAPTION>
   Inventories consist of the following at:
                                                       ============================
                                                          YEARS ENDED DECEMBER 31,
                                                       ----------------------------
                                                            1998            1997
                                                       ------------    ------------
<S>                                                    <C>             <C>         
Raw materials                                          $  3,737,239    $  5,416,048
Finished goods                                            3,473,217       4,224,414
                                                       ------------    ------------
                                                          7,210,456       9,640,462
Less excess of FIFO over LIFO cost                          689,604         695,557
                                                       ------------    ------------
                                                       $  6,520,852    $  8,944,905
                                                       ============    ============
</TABLE>

                                      F-12


<PAGE>   35

                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1998, 1997 and 1996




NOTE C - INVENTORIES (CONTINUED)

   Had the Company historically followed the FIFO cost method for raw material
   inventories, the net loss for the years ended December 31, 1998, 1997 and
   1996 would have decreased by approximately $6,000, decreased by approximately
   $51,000 and increased by approximately $44,000, respectively.




NOTE D - LONG-TERM DEBT

   Long-term debt consists of the following at:



<TABLE>
<CAPTION>
                                                          =========================================
                                                                         DECEMBER 31,
                                                          ------------------- ---------------------
                                                                   1998                  1997
                                                          ------------------- ---------------------
<S>                                                     <C>                   <C>        
Revolver                                                         $ 7,169,106           $ 8,072,634
Term loan A - bank                                                 2,624,167             2,680,000
Term loan B - bank                                                   410,842               666,670
Mortgage loan - bank                                               1,125,000               794,013
6% Convertible subordinated debentures                             4,541,218             4,290,000
12% Subordinated notes                                             1,602,850                     -
                                                          ------------------- ---------------------
                                                                  17,473,183            16,503,317
   Less current portion                                            1,176,503             1,057,497
                                                          ------------------- ---------------------
                                                                 $16,296,680           $15,445,820
                                                          =================== =====================
</TABLE>




                                      F-13


<PAGE>   36

                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1998, 1997 and 1996


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, 1998. 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 (7.75% at December 31, 1998) 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 1998
   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 reduces the total loan facility to $12
   million and requires Specialty Chemical to obtain an additional $1 million of
   cash contributions through either equity or unsecured subordinated debt by
   June 30, 1999. On April 14, 1999, Specialty Chemical received a commitment
   letter from Edwin Roth, Trust Investments and CEW Partners (the "Investors")
   whereby the Investors have guaranteed to secure $1,000,000 of indebtedness
   from a lender prior to June 30, 1999. The failure to do so would constitute
   an event of default under the credit agreement.
   As of December 31, 1998, approximately $176,000 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 $2,624,000 and Term
   Loan B in the amount of $411,000. Principal on Term Loan A is payable in one
   installment of $34,710 on April 1, 1999; in four consecutive monthly
   installments of $111,388 each commencing May 1, 1999, in one installment of
   $78,068 on September 1, 1999, and thereafter, in consecutive monthly
   installments, on the first day of each month, in the amount of $55,833 each.
   Interest is payable monthly at the same rate and terms as the Revolving Loan.
   Principal on Term Loan B is payable in three consecutive equal monthly
   installments of $111,388 each, commencing on the first day of January 1999,
   with the last payment of principal being due and payable on April 1, 1999, in
   the amount of $76,678. Interest is payable monthly at the bank's prime rate
   plus 4-1/2%. As of April 1, 1999, Term Loan B has been fully repaid.



                                      F-14


<PAGE>   37

                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1998, 1997 and 1996

NOTE D - LONG-TERM DEBT (CONTINUED)

   In 1997, 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.

   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. In 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 the first twelve
   monthly payments to be interest only. 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 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 compounds semi-annually and is due
   upon maturity of the debentures.

    On May 20, 1998, the Company issued three $150,000 principal amount
    subordinated promissory notes to the Investors. Such notes were due June 22,
    1998. On June 15, 1998, the Company issued three $500,000 principal amount
    12% promissory notes subordinated to the bank (the "Subordinated Notes") to
    such Investors in part to refinance the original notes issued on May 20,
    1998. Such Subordinated Notes were originally due December 15, 1998, but
    were extended to March 15, 1999. Interest accrued on the Subordinated Notes
    through January 31, 1999 was paid in Common Stock of the Company on February
    11, 1999. The Investors and the Company agreed at the time these loans were
    made that the Subordinated Notes would be refinanced with the net proceeds
    of a pro rata rights offering of Company debt to its stockholders and its
    holders of the 6% Convertible Subordinated Notes due October 15, 2006 (the
    "Original Notes"). On March 15, 1999, the Company completed an offering of
    subscription rights to purchase an aggregate principal amount of $1,360,000
    of 6% Convertible Subordinated Notes due in ten years (the "New Notes") to
    stockholders and holders of the Original Notes. The net proceeds available
    to the Company from the rights offering were approximately $1,160,000. The
    net proceeds of the rights offering were used to repay a portion of the
    loans made to the Company by the Investors. The Investors canceled a portion
    of the indebtedness represented by the Subordinated Notes as payment of the
    subscription price for the New Notes.

                                      F-15

<PAGE>   38

                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1998, 1997 and 1996



NOTE D - LONG-TERM DEBT (CONTINUED)


    After the rights offering, the Company issued an aggregate of $304,800 in
    new 12% Subordinated Notes on March 15, 1999, due January 15, 2001. These
    new Subordinated Notes were issued to the Investors to represent the
    principal amount of the Subordinated Notes that was not canceled as payment
    of the subscription price. The principal and accrued interest on the new
    Subordinated Notes will be payable at maturity in cash, or at the holder's
    option, in shares of Common Stock based upon the fair market value of the
    Common Stock. However, the noteholders may demand full payment of principal
    and interest on the new Subordinated Notes at any time after the Company has
    authorized, unissued and unreserved shares of Common Stock sufficient to
    pay, in full, the outstanding principal and interest under all the new
    Subordinated Notes. The fair market value will be the average closing price
    of the Common Stock on five consecutive trading days prior to the day
    immediately before the date that the stockholders authorize the issuance of
    Common Stock sufficient to pay all the outstanding principal and interest
    due under the new Subordinated Notes.

    The new 6% convertible debentures, due March 15, 2009 are convertible at the
    option of the holder into shares of the Company's common stock at a
    conversion price of $0.40 per share. Each $100 principal amount of the
    debentures is convertible into 250 shares of common stock at any time after
    March 15, 2002, or under certain circumstances if there is a change in
    control of the Company as defined under the debentures. Subsequent to March
    15, 2002, 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 March 15, 2007, together with accrued interest. The debentures are
    subordinated to all senior debt of the Company. Interest compounds
    semi-annually and is due upon maturity of the debentures.


   Aggregate maturities of long-term debt at December 31, 1998 are as follows:

<TABLE>
<S>                              <C>                                  <C>       
                                 1999                                 $1,176,503
                                 2000                                  7,885,922
                                 2001                                    721,423
                                 2002                                    614,542
                                 2003                                     61,371
                                 Thereafter                            7,013,422
                                                                      ----------
                                                                     $17,473,183
                                                                     ===========
</TABLE>





                                      F-16
<PAGE>   39

                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1998, 1997 and 1996


NOTE E - COMMITMENTS AND CONTINGENCIES

    Certain operations of the Company are conducted in facilities leased 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.

    The following table details scheduled minimum rental payments of all
noncancellable operating leases:
<TABLE>
<CAPTION>
                                                                  RENTAL
                              YEAR ENDING DECEMBER 31,          COMMITMENT
                              ------------------------          ----------
<S>                                   <C>                      <C>       
                                      1999                     $  421,000
                                      2000                        412,000
                                      2001                        314,000
                                      2002                        216,000
                                      2003                        216,000
                                   Thereafter                     360,000
                                                               ----------
                                                               $1,939,000
                                                               ==========
</TABLE>


    Rent expense for the years ended December 31, 1998, 1997 and 1996 was
    approximately $558,000, $518,000 and $407,000, 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.



                                      F-17

<PAGE>   40

                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1998, 1997 and 1996


NOTE E - COMMITMENTS AND CONTINGENCIES (CONTINUED)

    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. As of September 23, 1998, the Company
    revised its estimate to address 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 a
    range of approximately $1,526,000 to $2,000,000. As of December 31, 1998,
    $1,475,000 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 $360,000 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, 1998 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 $1,526,000
    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 $50,000 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.


                                      F-18

<PAGE>   41

                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1998, 1997 and 1996

NOTE E - COMMITMENTS AND CONTINGENCIES (CONTINUED)

    The Company believes that is 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. The Company is currently
    negotiating with the Ohio Attorney General regarding the Company's alleged
    violations of the 1990 consent order. 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.
    Further, the Company cannot predict whether a court would find the Company
    liable for stipulated penalties in excess of the initial demand proposed by
    the State of Ohio.

    On May 21, 1998, the Company received a letter from the Ohio EPA alleging
    that odors from the Macedonia Plan and dust from its unpaved parking lot
    constitute a nuisance. Further, the Ohio EPA contends that the Company must
    submit revised permit applications for its can filling and gassing lines,
    which according to the Ohio EPA have been erroneously granted permits to
    allow the filling part of each line to be a separate emissions unit. The
    Company does not believe that odors from its Macedonia Plant or dust from
    its parking lot constitute a nuisance as defined by applicable law. However,
    the Ohio EPA's request for the Company to re-evaluate and re-submit its
    existing air permits ultimately may require the addition of supplemental air
    pollution control technology at the Macedonia Plant or lead to litigation
    regarding such permit issues.

    On December 21, 1998, the Ohio Attorney General's Office notified the
    Company that it has been asked to initiate a civil enforcement action
    against it for alleged violations of Ohio Revised Code Chapter 3704, Ohio's
    air pollution control laws. To avoid this litigation, the Ohio Attorney
    General has offered to enter into settlement negotiations with the Company
    regarding these alleged violations. The Company has entered into these
    discussions in an attempt to resolve this dispute without litigation.

    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 or more 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
    1998, 1997 and 1996 were approximately $49,500, $50,600 and $48,000,
    respectively. The Company did not make any profit-sharing contributions to
    the Plan for the years ended December 31, 1998, 1997 and 1996.

                                      F-19


<PAGE>   42

                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1998, 1997 and 1996


NOTE F - EMPLOYEE BENEFIT PLANS (CONTINUED)


    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, 1998, 1997 and
    1996 approximated $40,100, $38,900 and $34,500, respectively.



NOTE G - REDEEMABLE 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).




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.

    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.

    On February 11, 1999, the Company used 375,000 shares of common stock,
    comprised of 65,500 of treasury shares and 309,500 of newly issued shares, 
    to pay interest accrued on the 12% subordinated notes through January 31,
    1999.





                                      F-20
<PAGE>   43

                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1998, 1997 and 1996





NOTE H - STOCKHOLDERS' EQUITY (CONTINUED)


    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, 1998, 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-21

<PAGE>   44

                       Specialty Chemical Resources, Inc.

                     NOTES TO FINANCIAL STATEMENTS CONTINUED

                        December 31, 1998, 1997 and 1996


NOTE H   STOCKHOLDERS' EQUITY (Continued)

   Transactions for both stock option plans are as follows:

<TABLE>
<CAPTION>
                                  --------------------------- ----------------------------  -------------------------------
                                             1998                         1997                       1996
                                   -------------------------- ----------------------------  -------------------------------
                                                 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             644,534       $ 3.27          567,391        $ 5.86          545,428           $ 6.14
          Granted                    169,500       $ 0.93          252,000        $ 1.75           50,000           $ 1.70
          Exercised                     --         $  --              --          $  --              --             $  --
          Cancelled                 (169,214)      $ 3.08         (174,857)       $ 9.02          (28,037)          $ 3.85
                                 -----------                 -------------                  -------------   
     OUTSTANDING  
        END OF YEAR                  644,820       $ 2.61          644,534        $ 3.27          567,391           $ 5.86
                                 ============                ==============                 ==============              
     Exercisable at end of year      325,987                       291,545        $ 4.91          347,583           $ 7.48
                                 ============                ==============                 ==============              
     Available for grant             155,180                       155,466                        232,609
                                 ============                ==============                 ==============              
                                                                                                                      
     Weighted average fair value
        of options granted
        during the year               $ 0.61                        $ 0.87                         $ 1.23
                                 ============                ==============                 ==============              
</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>    
           $0.5   1.813              413,000       4.32          $ 1.40           94,167        $  1.67
           $3.375   4.5              178,249       1.10          $ 3.73          178,249        $  3.73
           $5.24   6.38               23,571       1.68          $ 5.97           23,571        $  5.97
            $10   10.5                30,000       3.16         $ 10.00           30,000        $ 10.00
                                 ------------                              -------------                         
                                     644,820                                     325,987
                                 ============                              =============                             
</TABLE>

                                      F-22

<PAGE>   45



                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1998, 1997 and 1996




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>
                                                           ==============================================================
                                                                   1998                  1997                1996
                                                           ---------------------- ------------------- -------------------
<S>                                                        <C>                    <C>                 <C>         
Net (loss)                           As reported           $(2,435,136)           $(21,084,712)       $(1,762,713)

                                     Pro forma             $(2,464,536)           $(21,244,477)       $(1,919,713)

Basic (loss) per share               As reported                $(0.63)                $(5.43)             $(0.45)

                                     Pro forma                  $(0.63)                $(5.47)             $(0.49)
</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 1998, 1997 and 1996: expected volatility of
    72, 48 and 61 percent; risk-free interest rates of 5.47, 6.44 and 6.34
    percent; expected lives of 6, 5 and 9 years; and no dividend payments.


NOTE I - INCOME TAXES

    As of December 31, 1998, the Company had approximately $13,355,000 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 1998, 1997 and 1996 and the realization in 1994 of built-in gains,
    approximately $12,000,000 of the carryforwards may be utilized beyond the
    current annual limitation to offset future taxable income.





                                      F-23
<PAGE>   46

                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1998, 1997 and 1996





NOTE I - INCOME TAXES (CONTINUED)

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

<TABLE>
<CAPTION>
------------------------------------ ------------------------
            YEAR ENDING                   NET OPERATING
           DECEMBER 31,                       LOSS
------------------------------------ ------------------------
<S>            <C>                               <C>        
               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                                1,874,000
               2018                                2,000,000
                                                 ============
                                                 $13,355,000
                                                 ============
</TABLE>



    The above-mentioned carryforwards gave rise to deferred tax assets of
    approximately $5.3 million, $4.5 million and $3.8 million at December 31,
    1998, 1997 and 1996, respectively. Due to the uncertainty of the ultimate
    realization of the deferred tax asset, a valuation allowance in the amounts
    of $3.7 million, $2.7 million and $2 million was recorded by the Company for
    the years ended December 31, 1998, 1997 and 1996, respectively. The net
    change in the valuation allowances for 1998, 1997 and 1996 was $.8 million,
    $.7 million and $.7 million, respectively.






                                      F-24

<PAGE>   47

                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1998, 1997 and 1996




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.

    Deferred tax (assets) liabilities are as follows:

<TABLE>
<CAPTION>
                                                 ==========================================
                                                                 DECEMBER 31,
                                                 ------------------------------------------
                                                             1998                  1997
                                                 ------------------------------------------
<S>                                                      <C>                  <C>         
Depreciation                                             $ 1,383,000          $  1,404,000
Amortization of product
  formulation costs                                           51,000               155,000
Accounts receivable allowance                               (45,000)              (55,000)
Excess of book inventory over
  tax inventory                                              296,000               324,000
Other                                                       (55,000)              (69,000)
Net operating loss carryforwards                         (5,300,000)           (4,500,000)
Valuation allowance                                        3,670,000             2,741,000
                                                 ------------------------------------------
                                                       $           -         $           -
                                                 ==========================================
</TABLE>



    The Company had no income tax expense for 1998 and 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.







                                      F-25

<PAGE>   48

                       Specialty Chemical Resources, Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1998, 1997 and 1996


NOTE I - INCOME TAXES (CONTINUED)

    A reconciliation of differences between the statutory U.S. Federal income
tax rate and the Company's effective tax rate follows:
<TABLE>
<CAPTION>
                                                                          =======================================
                                                                                       DECEMBER 31
                                                                          ---------------------------------------
                                                                           1998         1997          1996
                                                                          ---------------------------------------
<S>                                                                          <C>          <C>          <C>  
            U.S. Statutory rate                                              (34)%        (34%)        (34%)
            Goodwill amortization                                              1%           1%          11%
            Impairment write-down                                             --          30%            --
            Other                                                              2%          --            2%
            Effect of net operating loss carryforward
               and valuation allowance                                        31%           3%          14%
                                                                          ---------------------------------------
            Effective income tax rate                                           0%          0%          (7%)
                                                                          =======================================
</TABLE>


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
    3,882,262 for 1998, 3,882,264 for 1997 and 3,945,618 for 1996. 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 determined
    that circumstances related to its recurring operating losses, the reduction
    in customer base, and current projections, indicated that the recoverability
    of the carrying amount of long-lived assets should be assessed. In making
    that assessment, the Company estimated its undiscounted future cash flows
    from operations. The results of that computation indicated that an
    impairment existed and that a write-down of the carrying value of the
    long-lived assets to fair value was 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 for 1997 which was reflected as
    a reduction in the carrying value of goodwill.


                                      F-26
<PAGE>   49

               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 4, 1999, we have also
audited Schedule II for each of the three years in the period ended December 31,
1998. 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 4, 1999






                                      F-27

<PAGE>   50


                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                       SPECIALTY CHEMICAL RESOURCES, INC.

              For the years ended December 31, 1998, 1997 and 1996




<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>              <C>
  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
                                                                                               
  1998            Allowance for                                                                
                doubtful accounts            $ 137,000          $ 60,000             $ -             $ (85,000)       $ 112,000
</TABLE>


                                      F-28
<PAGE>   51

                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
------
<S>   <C>
3.01  The Amended and Restated Bylaws of the Company were filed as
      Exhibit 3.03 to the Company's Form S-1 Registration Statement
      (Registration No. 2-78134) and are incorporated herein by reference ..

3.02  The Restated Certificate of Incorporation of the Company was filed
      as an exhibit to Company's Second Modified Plan of Reorganization
      which was filed as Exhibit 2.1 to the Company's Current Report on
      Form 8-K dated December 9, 1986, and is incorporated herein by
      reference ............................................................

3.03  Amendment, effective December 12, 1991, to the Company's Restated
      Certificate of Incorporation was filed as Exhibit 3.03 to the
      Company's Annual Report on Form 10-K for the year ended December 31,
      1991 and is incorporated herein by reference .........................

3.04  Amendment, effective February 26, 1992, to the Company's Restated
      Certificate of Incorporation was filed as Exhibit 3.04 to the
      Company's Annual Report on Form 10-K for the year ended December 31,
      1991 and is incorporated herein by reference .........................

3.05  The Amended and Restated Bylaws of the Company were filed as
      Exhibit 3.01 to the Company's Form 8-K on June 8, 1995 and are
      incorporated by reference herein .....................................

4.01  Specimen Stock Certificate of the Company was filed as Exhibit 4.5
      to the Company's Registration Statement on Form S-2, File No.
      33-43092, and is incorporated herein by reference ....................

4.02  Open ended mortgage note dated October 6, 1995 between the Company
      and National City Bank, was filed as Exhibit 4.08 to the Company's
      Form 10-K for the year ended December 31, 1995 and is incorporated
      by herein by reference ...............................................

4.03  Indenture Agreement between the Company and Bank One, N.A. dated
      October 15, 1996 was filed as Exhibit 4.1 to the Company's
      Form 10-Q for its quarter ended September 30, 1996 and is
      incorporated by reference herein .....................................

4.04  The Credit Agreement between the Company and Star Bank, N.A. dated
      September 18, 1996 was filed as an exhibit to the Company's current
      Form 8-K, dated September 23, 1996 an is incorporated by reference
      herein ...............................................................

4.05  Indemnification Agreement between the Company and Martin Trust and
      CEW Partners dated August 30, 1996 was filed as Exhibit 4.5 to the
      Company's Registration Statement on Form S-3 (Registration Number
      333-09879) and is incorporated by reference herein ...................

10.01 1989 Non-Qualified and Incentive Stock Option Plan of the Company
      was filed as Exhibit 10.13 to the Company's Annual Report on
      Form 10-K for the year ended January 1, 1989 and is incorporated
      herein by reference ..................................................

10.02 Form of option agreement pursuant to 1989 Incentive Stock Option
      Plan of the Company was filed as Exhibit 10.14 to the Company's
      Annual Report on Form 10-K for the year ended January l, 1989 and
      is incorporated herein by reference ..................................
</TABLE>



                                     -EX 1-
<PAGE>   52

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
------
<S>   <C>
10.03 1989 Outside Directors' Stock Option Plan of the Company was filed
      as Exhibit 10.5 to the Company's Registration Statement on
      Form S-2, File No. 33-43092 and is incorporated by reference herein ..

10.04 First Amendment to 1989 Non-Qualified and Incentive Stock Option
      Plan of the Company, adopted October 3, 1991, was filed as
      Exhibit 10.12 to the Company's Registration Statement on Form S-2,
      File No. 33-43092 and is incorporated by reference herein ............

10.05 Second Amendment to 1989 Non-Qualified and Incentive Stock Option
      Plan of the Company, dated February 26, 1992, was filed as
      Exhibit 10.12 to the Company's Registration Statement on Form S-2,
      File No. 33-43092 and is incorporated by reference herein ............

10.06 First Amendment to 1989 Outside Directors' Stock Option Plan of the
      Company, adopted October 3, 1991, was filed as 10.9 to the Company's
      Registration Statement on Form S-2, File No. 33-43092 and is
      incorporated by reference herein .....................................

10.07 Second Amendment to the 1989 Outside Directors' Stock Option Plan,
      dated February 26, 1992, was filed as Exhibit 10.13 to the Company's
      Registration Statement on Form S-2, File No. 33-43092 and is
      incorporated by reference herein .....................................

10.08 Agreement between ASI and Teamsters Local Union No. 416, dated
      November 17, 1993 and effective as of August 15, 1993 was filed as
      exhibit 10.10 on the Company's annual report for the year ended
      December 31, 1993 and is incorporated by reference herein ............

10.09 Agreement between ASI and Teamsters Local Union No. 416, dated
      January 12, 1992, and effective as of December 23, 1991 was filed as
      Exhibit 10.11 to the Company's Registration Statement on Form S-2,
      File No. 33-43092 and is incorporated by reference herein ............

10.10 Lease between ASI and Dutton Company, dated October 7, 1987 as
      amended May 4, 1989, was filed as Exhibit 10.12 to the Company's
      Annual Report on Form 10-K for the year ended December 31, 1990,
      File No. 2-78134, and is incorporated herein by reference ............

10.11 Lease amendment between Specialty Chemical Resources, Inc. (assignee
      of ASI) and the 9150 Group dated July 25, 1994 was filed as
      Exhibit 10.13 on Form 10-K for the year ended December 31, 1994 and
      is incorporated by reference .........................................

10.12 Agreement between ASI and Teamsters Union Local No. 416 dated
      May 1, 1995 and effective as of December 16, 1994 was filed as
      Exhibit 10.14 on the Company's Form 10-Q for the quarter ended
      March 31, 1995 and is incorporated by reference herein ...............

10.13 Restricted Stock Award Agreement dated July 25, 1995 between the
      Company and John H. Ehlert was filed as Exhibit 10.15 on the
      company's Annual Report on Form 10-K for the year ended
      December 31, 1995 ....................................................

10.14 Agreement of Settlement and Release, dated as of July 21, 1995, among
      the Company, the Directors, the Committee and the individual members
      of the Committee was filed as Exhibit 10.01 to the Company's
      Form 8-K on July 8, 1995 and is incorporated by reference herein .....
</TABLE>



                                     -EX 2-
<PAGE>   53

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
------
<S>   <C>
10.15 First Amendment of the Credit Agreement between Specialty Chemical
      Resources, Inc. and Star Bank N.A. dated May 22, 1997 was filed as
      Exhibit 4.1 on the Company's Form 10-Q for the quarter ended June 30,
      1997 and is incorporated by reference ................................

10.16 Promissory Note between Specialty Chemical Resources, Inc. and
      Metropolitan Savings Bank dated December 5, 1997 was filed as
      Exhibit 10.15 on Form 10-K for the year ended December 31, 1997 and
      is incorporated by reference .........................................

10.17 Second Amendment of the Credit Agreement between Specialty Chemical
      Resources, Inc. and Star Bank N.A. dated April 14, 1998 was filed as
      Exhibit 10.16 on Form 10-K for the year ended December 31, 1997 and
      is incorporated by reference .........................................

10.18 Third Amendment of the Credit Agreement between Specialty Chemical
      Resources, Inc. and Star Bank N.A. dated May 20, 1998 was filed as
      Exhibit 4.1 on Form 10Q for the quarter ended June 30, 1998 and is
      incorporated by reference ............................................

10.19 $500,000, 12% Subordinated Promissory Note between the Company and
      CEW Partners dated June 15, 1998 was filed as Exhibit 4.2 on
      Form 10-Q for the quarter ended June 30, 1998 and is incorporated by
      reference ............................................................

10.20 $500,000, 12% Subordinated Promissory Note between the Company and
      Edwin M. Roth dated June 15, 1998 was filed as Exhibit 4.3 on
      Form 10-Q for the quarter ended June 30, 1998 and is incorporated
      by reference .........................................................

10.21 $500,000,12% Subordinated Promissory Note between the Company and
      Martin Trust dated June 15, 1998 was filed as Exhibit 4.4 on
      Form 10-Q for the quarter ended June 30, 1998 and is incorporated by
      reference ............................................................

10.22 Term Sheet pertaining to Proposed Rights Offering dated June 15,
      1998 between the Company and CEW Partners, Edwin M. Roth and
      Martin Trust was filed as Exhibit 4.5 on Form 10-Q for the quarter
      ended June 30, 1998 and is incorporated by reference ................

10.23 Fourth Amendment of the Credit Agreement between Specialty Chemical
      Resources, Inc. and Star Bank N.A. dated November 12, 1998 was
      filed as Exhibit 4.1 on Form 10-Q for the quarter ended September 30,
      1998 and is incorporated by reference ................................

10.24 Fifth Amendment of the Credit Agreement between Specialty Chemical
      Resources, Inc. and Star Bank N.A. dated February 15, 1999* ..........

10.25 Indenture between the Company and Bank One, N.A., dated as of
      February 1, 1999* ....................................................

10.26 Sixth Amendment of the Credit Agreement between Specialty Chemical
      Resources, Inc. and Star Bank N.A. (AKA Firstar Bank) dated
      April 14, 1999* ......................................................

10.27 Allocation Agreement dated as of February 1, 1999, among CEW Partners,
      Martin Trust, Edwin Roth and Corey Roth was filed as Exhibit 4.4 to
      the Company's Registration Statement on Form S-3 (Registration
      No. 333-66737) and is incorporated by reference ......................
</TABLE>



                                     -EX 3-
<PAGE>   54

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
------
<S>   <C>
10.28 Agreement, dated as of February 1, 1999, among CEW Partners, Martin Trust, 
      Edwin Roth and Corey Roth was filed as Exhibit 99.1 to the Company's 
      Registration Statement on Form S-3 (Registration No. 333-66737) and is
      incorporated by reference ............................................

10.29 $101,600, 12% Subordinated Promissory Note between the Company and CEW
      Partners dated March 15, 1998, due June 15, 2001* ....................

10.30 $101,600, 12% Subordinated Promissory Note between the Company and
      Edwin M. Roth dated March 15, 1998, due June 15, 2001* ...............

10.31 $101,600, 12% Subordinated Promissory Note between the Company and
      Martin Trust dated March 15, 1998, due June 15, 2001* ................

27.00 Financial Data Schedule* .............................................
</TABLE>

* Filed herein



                                     -EX 4-