<PAGE>
 
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
 
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
 
                                   FORM 10-K
 
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934 [No Fee Required]
 
  For the fiscal year ended December 31, 1998
 
[_] Transition Report Pursuant to section 13 or 15(d) of the Securities
    Exchange Act of 1934 [No Fee Required]
 
  For the transition period from _____ to ______
 
                        Commission file number 0-12362
 
                             Berger Holdings, Ltd.
            (Exact name of registrant as specified in its charter)
 
         Pennsylvania                                   23-2160077
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization) 
    
 
805 Pennsylvania Boulevard, Feasterville, PA             19053
    (Address of principal executive                    (Zip Code) 
               offices)
 
       Registrant's telephone number, including area code: 215-355-1200
 
       Securities registered pursuant to Section 12(b) of the Act: None
 
          Securities registered pursuant to section 12(g) of the Act:
 
                              Title of each class
                              -------------------   
                         Common Stock, $.01 par value Rights
 
  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 periods 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 check mark if disclosure of delinquent files 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. [_]
 
  As of March 15, 1999, 5,404,515 shares of Common Stock of the registrant
were outstanding and the aggregate market value of the Common Stock (based
upon the average of high and low bid prices of the Common Stock on the
National Association of Securities Dealers Automatic Quotation System on March
15, 1999) of the registrant, held by nonaffiliates was approximately
$16,200,000.(/1/)
 
  Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [_]
 
                   Documents Incorporated By Reference: None
--------
(1)  Such figure excludes the shares of Common Stock held by the Company's
     executive officers and directors. The information provided shall in no
     way be construed as an admission that any person whose holdings are
     excluded from the figure is an affiliate or that any person whose
     holdings are included is not an affiliate and any such admission is
     hereby disclaimed.
 
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>
 
                                    PART I
 
Item 1. Business
 
Background
 
  Berger Holdings, Ltd. (collectively with its subsidiaries, the "Company")
was incorporated in the Commonwealth of Pennsylvania on August 28, 1979. Prior
to 1983, the Company operated under the name "Life Care Communities
Corporation" as a private concern, which developed life care communities on a
fee basis for non-profit entities. During 1983, the Company successfully
completed a public offering in which funds were raised for the principal
purpose of developing and constructing proprietary life care facilities.
 
  During 1987, the Company conducted an assessment of its business and the
life care industry, in general. As a result of such assessment, the management
of the Company recommended, and on May 5, 1988 the shareholders approved, the
Company's withdrawal from the life care industry in order to seek alternate
investment opportunities. This withdrawal was effectuated through the sale of
the Company's minority interests in certain joint ventures. Subsequent to
these transactions the Company had assets consisting solely of cash and
minimal liabilities.
 
  The Company identified Berger Bros Company ("Berger") as a favorable
candidate for acquisition, and on May 30, 1989 acquired approximately 85% of
the common stock of Berger, through a plan of reorganization (the "1989 Plan
of Reorganization"), in exchange for shares of the Company's common stock (the
"Common Stock") representing approximately 29% of the outstanding Common Stock
after the effective date of the 1989 Plan of Reorganization. Subsequently
during 1989, the Company acquired an additional 15% of the common stock of
Berger and issued, in exchange therefor, shares of the Common Stock
representing approximately an additional 5% of the outstanding Common Stock at
the time of such subsequent acquisition. In connection with such acquisitions,
the Company changed its name to Inovex Industries, Inc.
 
  In 1990, the Company changed its name to Berger Holdings, Ltd. so as to
identify the Company more closely with its principal operating subsidiary.
 
  On December 6, 1991, the Company filed a petition for reorganization under
Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the Eastern District of Pennsylvania (the "Bankruptcy
Court").
 
  On December 29, 1992, the Bankruptcy Court entered an order confirming the
Third Amended Joint Plan of Reorganization (the "Plan of Reorganization")
subject to approval of a settlement agreement (the "Settlement Agreement")
between the Company and its primary secured lender. The Settlement Agreement
was entered into on February 19, 1993 and approved by the Bankruptcy Court on
April 1, 1993. The effective date of the Plan of Reorganization was April 13,
1993. The Chapter 11 case was closed February 28, 1994.
 
  In connection with the bankruptcy proceedings, certain unsecured creditors
of the Company elected to convert their debt into shares of the Common Stock.
An aggregate of 390,540 shares of Common Stock was issued to such creditors.
In addition, holders of the common stock of Graywood Products Company, Inc.
("Graywood") and holders of the Company's then outstanding Preferred Stock
converted such stock into shares of the Common Stock.
 
  On August 21, 1997, the Company's wholly-owned subsidiary, Berger Financial
Corp., a Delaware corporation ("Berger Financial") refinanced its existing
working capital and term loans with loans from Summit Bank, N.A. (the "Bank").
The working capital loan (the "Working Capital Loan") obtained from the Bank
was increased to $3,500,000, as compared to $2,750,000 from the Company's
prior credit facility, which is secured by the Company's accounts receivable
and inventory. The Working Capital Loan bears interest at the Bank's base rate
of interest plus one-half percent. Concurrently, the Company borrowed from the
Bank $1,300,000 (the "Term Loan"), which is repayable over 36 months with
interest at the Bank's base rate of interest plus one
 
                                       2
<PAGE>
 
percent. The Term Loan is secured by equipment of the Company. The refinancing
resulted in an interest rate reduction in excess of 250 basis points when
compared to the former credit facility.
 
  On January 2, 1998, the term of the Working Capital Loan was extended for an
additional three years to December 31, 2000. Also on such date, the Working
Capital Loan was increased to $7,000,000 to help fund the Obdyke Acquisition
(as defined below) in January 1998. The Term Loan was also increased to
$1,960,000 at such time.
 
  On December 7, 1998, the Working Capital Loan was increased to $9,500,000 to
help fund the Sheet Metal Acquisition (as defined below) in December 1998. The
Term Loan was also increased to $2,400,000 at such time.
 
Product Lines
 
  The Company is principally engaged in the manufacture and distribution of
metal roof drainage products ("RDP"). Since 1993, Berger has also engaged in a
program of internal development and product expansion. Internal development
has been characterized chiefly by the modernization and modification of
production facilities, machinery and equipment and the expansion of existing
product lines to emphasize copper-based RDP. External development has been
directed principally towards increasing the sales volume and market
penetration of the Company's products through both the Sheet Metal Acquisition
and the Obdyke Acquisition and an expanded product line which now includes
Real-Tool(R) snow guards for metal standing seam roofs.
 
  The Company's RDP product line, consisting of gutters, downspouts, soffits,
fascias, snow guards, trim coil and associated accessories and fittings, is
manufactured by the Company at its two suburban Philadelphia facilities. The
Company sells RDP through its sales and telemarketing representatives
principally to wholesale distributors who sell directly to roofing and general
contractors for use in the repair and replacement of roof drainage systems in
existing buildings that are primarily residential.
 
  The raw materials used in manufacturing RDP are aluminum, steel and copper.
Supplies of these materials, in either coil, sheet or bar form, are procured
by the Company from various domestic and foreign suppliers. Although the
Company believes that adequate available sources of supply exist at
customarily accepted market prices, trade restrictions, work stoppages or
adverse weather or political conditions may affect the prices and availability
of these materials. Rapid increases in prices of raw materials could adversely
affect the operations of the Company because the cost of raw materials
constitutes the largest single element of the Company's cost of sales.
 
  The Company is largely dependent for its raw material requirements for its
RDP products on the following three suppliers: Commonwealth (aluminum); Revere
(copper); and Coilplus-Pennsylvania, Inc. (galvanized and painted steel). The
remaining raw materials are provided by a large number of small suppliers. All
raw materials procured by the Company, as well as finished products, are
strictly scrutinized for quality control using industry and internal
guidelines and standards.
 
Acquisitions
 
  On December 7, 1998, the Company acquired (the "Sheet Metal Acquisition")
certain assets of Sheet Metal Manufacturing Co., Inc. ("Sheet Metal"), a
manufacturer of roof drainage products. Sales for Sheet Metal totaled
approximately $11,000,000 in 1998. The purchase price consisted of $3,675,401
in cash and a note payable of approximately $900,000. The acquisition was
funded by an increase to the Company's Working Capital Loan and Term Loan in
an aggregate amount of $4,063,093. This acquisition was accounted for as a
purchase and the excess of the fair value of the assets (goodwill) is being
amortized on a straight line basis over 25 years.
 
  On January 2, 1998, the Company consummated the acquisition (the "Obdyke
Acquisition") of the Roof Drainage Division (the "Acquired Division") of its
main competitor, Benjamin Obdyke, Inc. ("Obdyke"). Sales
 
                                       3
<PAGE>
 
for the Acquired Division totaled approximately $19,700,000 in 1997. The total
cost of this acquisition was $11,379,000, of which $10,000,000 was paid in
cash at closing. The balance was satisfied by issuing 125,000 shares of the
Common Stock and an $879,000 note which is repayable over a two-year period.
In addition, the Company issued to the seller a warrant to purchase 50,000
shares of the Common Stock. This warrant can be exercised over a two-year
period commencing January 2, 1998 at a price of $4.42 per share. The assets
purchased from Obdyke included $1,402,000 of equipment and $2,392,000 of
inventory. The remaining balance of $7,585,000 has been assigned to intangible
assets, which include non-compete agreements, customer lists and goodwill.
This acquisition was funded in part through the issuance of 40,000 shares of
the Company's Series A Convertible Preferred Stock (the "Series A Preferred
Stock") at $100 per share, $2,500,000 of 12.25% debentures due quarterly and a
$4,160,000 increase in the credit facility with the Bank. A portion of the
proceeds from these financings was also used for other corporate purposes. As
described below under "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations--Future Capital Expenditures",
the Series A Preferred Stock was recently exchanged for additional
subordinated debentures and the existing debentures (as well as warrants
issued in connection with the financing) were amended, principally to extend
their terms for one year.
 
  On February 7, 1997, the Company consummated the purchase (the "Real-Tool
Acquisition") of all of the outstanding shares of the Common Stock of Real-
Tool, Inc., a Virginia corporation ("Real-Tool"). As consideration, the
Company paid $900,618 in cash on the closing date, issued 100,000 Common
Shares, and issued a note for $750,000 which was paid in quarterly
installments over the year ended January 15, 1998. Concurrent with the
purchase, the Company entered into a royalty agreement with the sole
shareholder of Real-Tool, Inc. Under this agreement, which expires in 2012,
the Company is required to pay royalties of 6% of revenues with a minimum of
$75,000 annually, through 2002. Subsequent to 2002, the Company has the option
to increase the percentage of royalties paid to this individual and eliminate
the minimum payment requirement.
 
Competition
 
  The Company's business is highly competitive. In general, the building
products market is highly fragmented. The Company competes with numerous small
and large manufacturers and fabricators. Some of the Company's competitors
have substantially greater resources than the Company. The Company competes
primarily in the Northeast/Mid-Atlantic region. During the past two years, the
Company has implemented an advertising and marketing program to expand its
geographic range of operations to a more national level. Competition is
primarily based upon product quality, completeness of product lines, service
and price.
 
Geographic Market
 
  The Company's products are principally sold throughout the states in the
Northeast/Mid-Atlantic region. Approximately 85% of the Company's products are
used in the renovation of existing houses in the Northeast/Mid-Atlantic
region.
 
Major Customers
 
  During 1998, no individual customer accounted for more than 10% of the
Company's sales. The Company has no ongoing contracts for sales of RDP, but
rather services customers on a per-order basis.
 
Seasonal Nature of the Business
 
  The building products industry is seasonal, particularly in the
Northeast/Mid-Atlantic region of the United States where inclement weather
during the winter months usually reduces the level of building activity in
both the home-building and home improvement markets. Typically, the Company's
sales volume is lowest during the months of December, January and February.
 
Inventory Practices
 
  The Company's policy is to obtain, fabricate and/or manufacture inventory in
sufficient volume in order to provide a reasonable inventory level to support
estimated minimum and maximum levels based on customers
 
                                       4
<PAGE>
 
historical demand. Because of the nature of the RDP market, in which an order
generally must be filled within 48 to 72 hours of placement, the Company does
not have any substantial backlog.
 
Employees
 
  As of December 31, 1998, the Company employed 140 individuals, of whom 17
were employed in sales and marketing; 110 were employed in manufacturing and
delivery; and 13 were employed in administration. Approximately 95 of the
Company's employees are represented by one of two labor unions, The
International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers
of America, Local 169 and the Teamsters Local Union 107. The Company's
contracts with both unions expire December 31, 2001. The Company believes that
its employee relations are good.
 
Government Regulation
 
  The Company is subject to numerous federal and state regulations relating
to, among other things, the operations of its manufacturing facilities, the
storage and disposal of environmentally sensitive materials, the control of
emission levels, employee safety and health, employee wages and general
environmental matters. The Company believes that these regulations are
complied with properly. There are no outstanding notices from federal or state
regulatory bodies or agencies indicating a failure to comply with any of these
regulations.
 
Item 2. Properties
 
  The Company owns a 115,000 square foot operating facility in Feasterville,
Pennsylvania. The corporate and sales offices occupy space at the same
location. Due to the need for more space in connection with the Obdyke and
Sheet Metal Acquisitions, the Company has entered into two lease agreements.
One is a 90,000 square foot manufacturing facility in Southampton, PA, which
is leased through 2002 with a five year renewal option and the second is a
56,000 square foot warehousing facility in Huntingdon Valley, PA, which is
leased through 2003 with a two year renewal option.
 
  The Company has a mortgage liability on the Feasterville facility in the
principal amount of approximately $2,944,000 at December 31, 1998. The
mortgage is being repaid in monthly installments of approximately $27,400
through March, 2008 with a balloon of $1,374,838 due then.
 
Item 3. Legal Proceedings
 
  As of the date hereof, there are no legal proceedings presently pending
against the Company.
 
Item 4. Submission of Matters to a Vote of Security Holders
 
  Not applicable.
 
                                       5
<PAGE>
 
                                    PART II
 
Item 5. Market for the Company's Common Stock and Related Stockholder Matters
 
  The Company's Common Stock is traded in the over-the-counter market and is
included for quotation on the Nasdaq SmallCap Market operated by the Nasdaq
Stock Market, Inc. under the symbol "BGRH."
 
  The following table sets forth certain information with respect to the high
and low bid prices of the Company's Common Stock during 1997 and 1998. These
quotations reflect inter-dealer prices, without retail mark-ups, mark-downs or
commissions and may not represent actual transactions.
 
<TABLE>
<CAPTION>
                                                                  High     Low
                                                                 ------- -------
      <S>                                                        <C>     <C>
      1997
      First Quarter............................................. 4 3/8   1 53/64
      Second Quarter............................................ 4 1/16  3
      Third Quarter............................................. 3 7/8   3
      Fourth Quarter............................................ 4 1/4   3 1/4
 
      1998
      First Quarter............................................. 3 15/16 3
      Second Quarter............................................ 4 5/16  2 5/8
      Third Quarter............................................. 3 1/2   2 1/4
      Fourth Quarter............................................ 3 7/16  2 1/8
</TABLE>
 
  At December 31, 1998, there were approximately 2,200 holders of record of
shares of Common Stock.
 
Dividend Policy
 
  The Company has not paid any cash dividends on its Common Stock to date, and
does not anticipate paying cash dividends in the foreseeable future.
 
                                       6
<PAGE>
 
Item 6. Selected Financial Data
 
               Selected Financial Data for Berger Holdings, Ltd.
                            Year Ended December 31,
 
<TABLE>
<CAPTION>
                             1998         1997         1996         1995         1994
                          -----------  -----------  -----------  -----------  -----------
<S>                       <C>          <C>          <C>          <C>          <C>
Net Sales...............  $35,608,309  $20,748,017  $19,745,890  $15,653,321  $16,595,918
Cost of Sales...........   28,791,521   16,196,776   15,587,221   13,738,061   14,413,877
                          -----------  -----------  -----------  -----------  -----------
Gross Profit............    6,816,788    4,551,241    4,158,699    1,915,260    2,182,041
                          -----------  -----------  -----------  -----------  -----------
Selling, Administrative
 and General Expenses...    4,625,043    2,963,614    2,389,285    2,225,685    2,119,700
Income (Loss) from
 Operations.............    2,191,745    1,587,627    1,769,384     (310,425)      62,341
Interest Expense........   (1,284,761)    (581,624)    (619,178)    (570,420)    (520,908)
Other Income (Expense)..      136,643       14,374        4,295       30,984       (2,084)
                          -----------  -----------  -----------  -----------  -----------
Income (Loss) from
 Continuing Operations
 before Extraordinary
 Item, Income Tax
 Benefit and Preferred
 Stock Dividend.........  $ 1,043,627  $ 1,020,377  $ 1,154,501    ($849,861)   ($460,651)
Income Tax Benefit......      647,201    1,000,000      500,000          --           --
                          -----------  -----------  -----------  -----------  -----------
Income (Loss) before
 Extraordinary Item and
 Preferred Stock
 Dividend...............  $ 1,690,828  $ 2,020,377  $ 1,654,501    ($849,861)   ($460,651)
Extraordinary Item......          --           --           --           --       948,207
Preferred Stock
 Dividend...............      400,000          --           --           --           --
                          -----------  -----------  -----------  -----------  -----------
Net Income (Loss)
 available to Common
 Stock holders..........  $ 1,290,828  $ 2,020,377  $ 1,654,501     (849,861) $   487,556
                          ===========  ===========  ===========  ===========  ===========
BASIC EARNINGS (LOSS)
 PER COMMON SHARE:
 Income (Loss) before
  Extraordinary Item and
  Preferred Stock
  Dividend..............  $      0.31  $      0.40  $      0.44       ($0.26)      ($0.15)
 Extraordinary Item.....          --           --           --           --          0.32
 Preferred stock
  dividend..............        (0.07)         --           --           --           --
                          -----------  -----------  -----------  -----------  -----------
Net Income (Loss).......  $      0.24  $      0.40  $      0.44       ($0.26) $      0.17
                          ===========  ===========  ===========  ===========  ===========
TOTAL ASSETS............  $34,587,204  $19,751,213  $12,292,861  $ 9,885,339  $10,352,762
                          -----------  -----------  -----------  -----------  -----------
LONG TERM DEBT, CAPITAL
 LEASES AND REDEEMABLE
 COMMON STOCK...........  $15,060,307  $ 6,022,147* $ 3,721,719  $ 1,676,713  $ 3,873,299
                          -----------  -----------  -----------  -----------  -----------
SHAREHOLDERS' EQUITY....  $15,361,725  $12,493,271  $ 7,655,336  $ 4,635,369  $ 5,171,321
                          ===========  ===========  ===========  ===========  ===========
</TABLE>
--------
*  Long-Term Debt includes a $2,000,000 12.25% subordinated debenture used for
   the Obdyke Acquisition and at December 31, 1997 was included in cash and
   cash equivalents.
 
                                       7
<PAGE>
 
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
 
Results of Operations
 
  The Company's results of operations for the years ended December 31, 1998,
1997 and 1996 represent the consolidated operations of Berger Holdings, Ltd.
and its subsidiaries, Berger Financial and Berger.
 
  Net sales increased to $35,608,309 in 1998 from $20,748,017 in 1997 and from
$19,745,890 in 1996. The Obdyke Acquisition was the major factor contributing
to the increase in revenues from 1997 to 1998. The increase in 1997 over 1996
was primarily due to the Real-Tool Acquisition.
 
  The Company's gross profit, as a percentage of revenues, was 19.1% in 1998,
21.9% in 1997 and 21.1% in 1996. The changes in the Company's gross profit
percentages are related to changes in the sales product mix. In 1998 the gross
profit percentage was decreased primarily due to the lower margin sales
resulting from the Obdyke Acquisition.
 
  Selling, administrative and general expenses, as a percentage of net sales,
decreased to 13.0% in 1998 from 14.3% in 1997 and 12.1% in 1995. The 1998
decrease is primarily due to the economies of scale resulting from the Obdyke
Acquisition. The 1997 increase was primarily due to an increase in advertising
expense promoting the recently acquired product line.
 
  Income from operations was $2,191,745, or 6.2% of revenues, in 1998 compared
to $1,587,627, or 7.7% of revenues, in 1997 and $1,769,384, or 9.0% of
revenues, in 1996. The 1998 increase in income was primarily due to the Obdyke
Acquisition. The decline in 1997's income from operations was primarily due to
an increase in advertising expense promoting the recently acquired product
line.
 
  Interest expense increased to $1,284,761 in 1998 compared to $581,624 in
1997 and $619,178 in 1996. The increase in interest expense for 1998 was a
result of the increase in average debt outstanding. The outstanding debt
increased primarily as a result of the acquisitions made in 1998. The interest
expense decrease in 1997 was primarily as a result of a full years decrease in
the Company's borrowing rate from 3.25 over prime to .50 over prime.
 
  Income from continuing operations was $1,043,627, or 2.9% of revenues, in
1998 compared to $1,020,377, or 4.9% of revenues, in 1997 and $1,154,501, or
5.9% of revenues, in 1996. The decrease in percentages is primarily due to the
Company's build up in infrastructure to support the acquisitions made in 1998
and 1997.
 
  The net income was $1,290,828, or 3.6% of revenues, in 1998 as compared to
$2,020,377, or 9.7% of revenues, in 1997 and $1,654,501, or 8.4% of revenues,
in 1996. The decrease in percentages is primarily due to lower margin sales
resulting from the Obdyke Acquisition, the build up in infrastructure and the
increased interest costs. During 1998, 1997 and 1996, the Company reduced the
valuation allowance applied against deferred tax benefits associated with Net
Operating Loss Carryforwards by $1,023,804, $1,387,905 and $1,500,000,
respectively. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The ultimate realization
of deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax
liabilities and projected future taxable income in making this assessment.
Based upon the level of historical taxable income and projections for future
taxable income over the periods which the deferred tax assets are deductible,
along with reasonable and prudent tax planning strategies and the expiration
dates of carryforwards, management believes it is more likely than not the
Company will realize the benefits of these deductible differences, net of the
existing valuation allowances, at December 31, 1998.
 
Liquidity and Capital Resources
 
  At December 31, 1998, the working capital of the Company was $7,233,735
(resulting in a ratio of current assets to current liability of 2.7 to 1),
compared to $8,656,066 (8.0 to 1) at December 31, 1997. The decrease in
 
                                       8
<PAGE>
 
working capital is primarily due to a decrease of $4 million in cash used to
fund the Obdyke Acquisition and an increase of approximately $3 million in
current liabilities also due to the acquisitions in 1998.
 
  At December 31, 1998, current liabilities totaled $4,165,172, consisting
primarily of $2,102,886 of accounts payable and accrued expenses and
$2,062,286 of current maturities of long-term debt. Current liabilities
increased $2,929,377 as compared to 1997. The change in current liabilities is
primarily the result of an increase of $1,539,607 in current maturities of
long-term debt; an increase in accounts payable of $709,860; and an increase
in accrued expenses of $679,910. All of such increases relate to the Real
Tool, Obdyke and Sheet Metal Acquisitions.
 
  At December 31, 1998 obligations to the Bank totaled $9,024,294 compared to
$2,661,007 in 1997 and to the obligations under the prior credit facility
which totaled $2,220,051 at December 31, 1996. The increase is the result of
the Real-Tool, Obdyke and Sheet Metal Acquisitions.
 
  In 1998, the Company raised $1,552,476 of additional capital through the
issuance of 15,000 shares of Series A Preferred Stock, and the issuance of
72,357 common shares through the exercise of options and warrants from
previous private placements and employee stock option grants.
 
  Cash flow provided by operating activities for 1998 was $2,298,946 as
compared to $464,917 used in operating activities for 1997. The cash provided
by operating activities increased due to the increase in accounts payable and
accrued expenses offsetting the increase in inventory and accounts receivable
relating to the Real-Tool, Obdyke and Sheet Metal Acquisitions.
 
  Net cash used in investing activities totaled $16,057,211 for 1998,
primarily as a result of the Obdyke and Sheet Metal Acquisitions, as compared
to net cash used in investing activities of $1,553,333 for 1997.
 
  Net cash provided by financing activities totaled $9,496,803 for 1998, as
compared to $5,192,888 provided by financing activities in 1997. This
difference was primarily the result of proceeds received from the increased
loans from the Bank, the issuance of the Series A Preferred Stock, debentures
and the exercise of stock warrants and options.
 
Future Capital Expenditures
 
  Along with operating cash flow anticipated to be received from operations in
1999, the Working Capital Loan is anticipated to be sufficient to cover the
Company's capital expenditure needs for 1999, which are estimated to be
$600,000. The Company may need to raise additional capital should it make any
acquisitions in the future.
 
  The Company anticipates that it may, in the future, need to obtain
additional financing to accomplish the following: the satisfaction of the
debentures issued during the first quarter of 1998 to Tandem Capital and
Argosy Investment Partners upon their conversion of the Series A Preferred
Stock issued to them in connection with the Obdyke Acquisition (the
"Conversion Debentures"), and the satisfaction of the debentures issued to
Tandem Capital and Argosy Investment Partners in connection with the Obdyke
Acquisition (the "Existing Debentures"). Specifically, the Company anticipates
redeeming such instruments before the interest due under such instruments
increases substantially. Such substantial increases will occur on December 31,
2002 and January 2, 2003 with respect to the Conversion Debentures issued to
Tandem Capital and Argosy Investment Partners, respectively, and on January 2,
2001 with respect to the Existing Debentures. The Company has the right to
prepay the Conversion Debentures at any time after January 1, 2000, but only
if the average closing price of the Common Stock exceeds $9.00 for a period of
20 days prior to such prepayment.
 
  The terms of the conversion of the Series A Preferred Stock into the
Conversion Debentures were as follows: The Company agreed to convert all of
the 40,000 issued and outstanding shares of Series A Preferred Stock into the
Conversion Debentures. The Conversion Debentures have the same rights as the
Series A Preferred Stock and earn 10% interest on the $4,000,000 annually. The
Conversion Debentures are convertible at any time into 23.53 common shares for
each $100 of Conversion Debentures outstanding on the conversion date.
 
  Simultaneously with the conversion of the Series A Preferred Stock, the
Company will extend the exercise date on 300,000 common stock warrants from
January 2, 2003 to December 31, 2003; and will extend the
 
                                       9
<PAGE>
 
maturity date on the Existing Debentures from January 2, 2003 to December 31,
2003. The increase in interest rates from 12.25% to 20% on the Existing
Debentures issued to Tandem Capital was changed from January 2, 2001 to
January 2, 2002, and from 12.25% to 19.25% on the Existing Debentures issued
to Argosy Investment Partners from January 3, 2001 to January 2, 2002. The
interest rate decrease from 19.25% to 14% on the Existing Debentures issued to
Argosy Investment Partners was changed to January 2, 2003, rather than the
original date of January 3, 2002.
 
Year 2000 Readiness Disclosure
 
  The Company is aware of the issues with the Year 2000 problem. The "Year
2000" matter relates to whether computer hardware, software and equipment will
properly recognize date sensitive information referring to the Year 2000.
Potential computer system and equipment failures arising from years beginning
with "20" rather than "19" are a known risk.
 
  The Company currently has a program underway to remediate by the end of the
second quarter of 1999 all of the Company's significant computer systems that
are not Year 2000 compliant. The program to ensure its Year 2000 readiness
includes the following: identifying all systems which may not be Year 2000
compliant; correcting or replacing those systems which are not Year 2000
ready; testing the new or corrected systems to make sure they will operate
according to Year 2000 requirements; and inquiring of vendors and customers of
the Company to assess their Year 2000 readiness. The Company has identified
certain critical software and hardware systems that need to be replaced or
updated in order to be Year 2000 compliant. The Company has replaced or is in
the process of replacing such systems and intends to complete its assessment
process by the first half of 1999. The Company does not expect any Year 2000
related issues to affect its non-IT systems in any material adverse fashion.
 
  The Company has been inquiring of certain key suppliers and business
partners about their Year 2000 readiness. While no assurances can be given
that key suppliers and business partners will remedy their own Year 2000
issues, the Company to date has not identified any material impact on its
ability to continue normal business operations with suppliers or other third
parties who fail to address the Year 2000 issue.
 
  Actual costs associated with implementation of the Company's Year 2000
program are not expected to be material to the Company's operations and
financial condition. Costs of approximately $250,000 to $300,000, primarily
for software have been or are expected to be incurred and capitalized. As of
December 31, 1998, approximately $250,000 of costs have been expended.
 
  The Company will continue to monitor and evaluate the impact of the Year
2000 issue on its operations. Until the Company has completed the final
testing part of its program, the risks from potential Year 2000 failures
cannot be fully assessed. Due to this situation, the Company cannot now begin
final contingency plans. These plans will be developed as potential Year 2000
failures are identified in the final testing stages. Nevertheless, if
remediation is not accomplished successfully in a timely fashion and
successful contingency plans are not implemented, the Company believes the
Year 2000 issue could have a material adverse effect on the Company.
 
New Accounting Standards
 
  In February 1999, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 135, "Rescission of FASB
Statement No. 75 and Technical Corrections." This Statement amends existing
authoritative literature to make various technical corrections, clarify
meanings, or describe applicability under changed conditions. The Statement is
effective for fiscal years ending after February 15, 1999. Management has not
yet determined the impact that the adoption of this Statement may have on
earnings, financial condition or liquidity of the Company.
 
  In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement standardizes the
accounting for derivative instruments, including derivative instruments
embedded in other contracts, by requiring that an entity recognize those items
as assets for liabilities in the statement of financial position and measure
them at fair value. The statement is effective for fiscal year beginning after
June 15, 1999. Management has not yet determined the impact that the adoption
of this statement
 
                                      10
<PAGE>
 
may have on earnings, financial condition or liquidity of the Company. The
Company plans to adopt SFAS No. 133 as permitted by this accounting standard
by January 1, 2000.
 
  In March 1998, the Accounting Standards Executive Committee (AcSEC) issued
Statement of Position (SOP 98-1 "Accounting For the Costs of Computer Software
Developed or Obtained for Internal Use." The SOP is effective for financial
statements for fiscal years beginning after December 15, 1998.
 
  In April 1998, the Accounting Standards Executive Committee (AcSEC) issued
Statement of Position (SOP) 98-5, "Reporting as the costs of Start-Up
Activities." This SOP provides guidance on the financial reporting of start-up
costs and organization costs. The SOP requires costs related to start-up
activities and organization costs be expensed as incurred. The statement is
effective for financial statements for fiscal year beginning after December
15, 1998
 
  The Company plans to adopt these SOP's in connection with the preparation of
the December 31, 1999 consolidated financial statements as permitted by SOP
98-1 and 98-5. The adoption of these standards will not have a material impact
on consolidated results, financial conditions, or long-term liquidity.
 
Forward-Looking and Cautionary Statements
 
  Certain statements herein that include forward-looking terminology such as
"may," "will," "should," "expect," "anticipate," "estimate," "plan" or
"continue" or the negative thereof or other variations thereon are, or could
be deemed to be "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements are
affected by known and unknown risks, uncertainties and other factors that may
cause the Company's actual results, performance or achievements to differ
materially from the results, performance and achievements expressed or implied
in the Company's forward-looking statements. These risks, uncertainties and
factors include competition by competitors with more resources than the
Company and the cyclical nature of roofing repair. Reference is made to the
Company's 1998 Annual Report on Form 10-K regarding other important factors
that could cause the actual results, performance or achievement of the Company
to differ materially from those contained in or implied by any forward-looking
statement made by or on behalf of the Company, including forward-looking
statements contained herein.
 
Item 7A. Qualitative and Quantitative Disclosure About Market Risk
 
  The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's investment portfolio. The Company does not have any
derivative financial instruments in its portfolio. The Company places its
investments in instruments that meet high credit quality standards. The
Company is adverse to principal loss and ensures the safety and preservation
of its invested funds by limiting default risk, market risk and reinvestment
risk. As of December 31, 1998, the Company's investments consisted of cash and
money market funds. The Company does not expect any material loss with respect
to its investment portfolio.
 
Item 8. Financial Statement and Supplementary Data
 
  Attached at pages F-1 through F-24 are the financial statements and
financial statement schedules identified in Item 14 hereof.
 
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
 
  None.
 
                                      11
<PAGE>
 
                                   PART III
 
Item 10. Directors and Executive Officers of the Registrant
 
  The following are the Executive Officers and Directors of the Company as of
the date of this report. The Company's By-Laws provide for the classification
of Directors into three classes, as nearly equal in numbers as possible, with
one class being elected at each annual meeting for a term of three years. The
terms of Class I directors will expire in 2000, the terms of Class II
directors in 2001 and the terms of Class III directors in 1999. Francis E.
Wellock, Jr. is the son-in-law of Joseph F. Weiderman; otherwise, there is no
family relationship among any of the Company's officers or directors. The
current directors of the Company will serve until their terms expire and until
their successors in office are elected or appointed and qualified.
 
                       Executive Officers and Directors
 
<TABLE>
<CAPTION>
Name                              Age                 Position(s)
----                              ---                 -----------
<S>                               <C> <C>
Theodore A. Schwartz.............  69 Chairman of the Board of Directors, Chief
 (Class I)                             Executive Officer (Principal Executive
                                       Officer)
 
Joseph F. Weiderman..............  57 President, Chief Operating Officer,
 (Class III)                           Secretary, Treasurer and Director
 
Paul L. Spiese, III..............  47 Vice President and Director
 (Class II)
 
Francis E. Wellock, Jr. .........  34 Chief Financial Officer (Principal
                                       Financial and Accounting Officer)
 
Jacob I. Haft, M.D. .............  62 Director
 (Class III)
 
Dr. Irving Kraut.................  81 Director
 (Class I)
 
Larry Falcon.....................  59 Director
 (Class II)
 
Jay Seid.........................  38 Director
 (Class I)
 
John Paul Kirwin, III............  43 Director
 (Class III)
 
</TABLE>
 
 
  THEODORE A. SCHWARTZ was elected a Director of the Company effective June
1987 and served as President of the Company from May 5, 1988 to May 30, 1989
and from July 17, 1990 to January 15, 1991. From May 30, 1989 to present, Mr.
Schwartz has served as Chairman of the Board of Directors and Chief Executive
Officer of the Company. Mr. Schwartz holds a B.S. in Economics from the
Wharton School of Business and spent 35 years in the investment field prior to
joining the Company.
 
  JOSEPH F. WEIDERMAN was elected a Director of the Company on June 1, 1990,
served as Chief Financial Officer of the Company from February 1990 to January
1991, and was elected President of the Company on January 15, 1991. He also
serves as Secretary and Treasurer of the Company. Mr. Weiderman holds a
Bachelor of Science Degree in Accounting and a Master of Business
Administration Degree in Finance from LaSalle University. Prior to his joining
the Company, Mr. Weiderman had served for over fourteen years as the Chief
Financial Officer of Harry Levin, Inc., a multi-store retailer.
 
  PAUL L. SPIESE, III was elected a Director of the Company on March 30, 1991.
Mr. Spiese joined Berger as Plant Manager in 1985 and was named Vice
President--Manufacturing of the Company in July 1990. Previously, he was
employed by Hurst Performance, Inc. as a Plant Manager.
 
                                      12
<PAGE>
 
  FRANCIS E. WELLOCK, JR., was hired as Controller of the Company on June 10,
1991 and was elected Vice President-Finance and Chief Financial Officer on
August 19, 1996. Mr. Wellock holds a Bachelor of Science Degree in Accounting
from Saint Joseph's University. Prior to joining the Company, Mr. Wellock
worked for a public accounting firm.
 
  JACOB I. HAFT, M.D. was elected a Director of the Company in conjunction
with the Company's acquisition of Berger in 1989. Dr. Haft has practiced
medicine, with a specialization in cardiology, for over twenty-five years.
Since 1974, Dr. Haft has been a Cardiologist and from 1974 to 1998 was Chief
of Cardiology at St. Michael's Medical Center in Newark, New Jersey. In
addition, Dr. Haft is currently a Clinical Professor of Medicine at the New
Jersey College of Medicine and Dentistry and Professor of Medicine at the
Seton Hall University Post Graduate School of Medicine. Dr. Haft has several
professional certifications, is a member of various professional societies and
associations and has published many scholarly articles and books. Dr. Haft has
served on the Cardiac Services Committee of the New Jersey Department of
Health.
 
  LARRY FALCON was elected as a Director of the Company in November 1985 and
acted as Chairman of the Board from September 3, 1986 to June 1, 1987. He has
served as President of the Residential Division of The Kaplan Organization, a
real estate developer, since 1985.
 
  DR. IRVING KRAUT was elected as a Director at the Company in July 1993. Dr.
Kraut was a practicing orthodontist from 1948 to 1991. Since that time, he has
served as a consultant to orthodontists in his capacity as President of Irving
Kraut, D.D.S., P.A. Since 1978, Dr. Kraut has served as a director of
Princeton Research Lands, Inc., a private real estate company.
 
  JAY SEID was elected as a Director of the Company on December 15, 1997. Mr.
Seid is a Vice President of Bachow & Associates, a venture capital firm. Prior
to joining Bachow in December 1992, Mr. Seid was President and General Counsel
of Judicate, Inc. Previously he was an attorney specializing in corporate law
at Wolf, Block, Schorr and Solis-Cohen LLP in Philadelphia. Mr. Seid graduated
with a B.A. from Rutgers University and received a J.D. from New York
University School of Law.
 
  JOHN PAUL KIRWIN, III was elected as a Director of the Company on December
15, 1997. Mr. Kirwin is a principal in Argosy Investment Partners, L.P., a
small business investment company. Mr. Kirwin is also a principal in Odyssey
Capital Group, L.P., a private investment fund. Mr. Kirwin was a corporate and
securities attorney for 14 years, including six years as a partner at
McCausland, Keen & Buckman, until joining Odyssey full time in January 1996.
Mr. Kirwin holds a Juris Doctris, Order of the Coif, from the National Law
Center of George Washington University and a Bachelor of Arts from Dickinson
College.
 
Compliance with Section 16(a) of the Exchange Act
 
  Section 16(a) of the Exchange Act requires the Company's officers and
directors and persons who own more than ten percent of a registered class of
the Company's equity securities (collectively, the "Reporting Persons") to
file reports of ownership and changes in ownership with the Commission and to
furnish the Company with copies of these reports.
 
  Based on the Company's review of the copies of the reports received by it,
the Company believes that all filing required to be made by the Reporting
Persons for the year ended December 31, 1998 were made on a timely basis,
except for a Form 4 filed by Mr. Weiderman in February, 1999.
 
                                      13
<PAGE>
 
Item 11. Executive Compensation
 
  The following table shows the annual compensation of each of the Company's
executive officers for the years 1998, 1997 and 1996.
 
                          Summary Compensation Table
 
<TABLE>
<CAPTION>
                                                                  Long-Term
                                                                 Compensation
                                     Annual Compensation            Awards
                              ---------------------------------- ------------
          (a)            (b)     (c)      (d)          (e)           (g)            (i)
    Name & Principal                              Other Annual     Options/      All other
        Position         Year Salary($) Bonus($) Compensation($)   SARs(#)    Compensation($)
    ----------------     ---- --------- -------- --------------- ------------ ---------------
<S>                      <C>  <C>       <C>      <C>             <C>          <C>
Theodore A. Schwartz.... 1998 $154,315  $12,500          0             --         14,735(1)
 Chairman & Chief        1997  131,561   10,000          0             --         12,770
 Executive Officer       1996  131,955   31,854          0         200,000        11,273
 
Joseph F. Weiderman..... 1998 $157,353  $22,500          0             --          2,213(2)
 President and Chief     1997  127,512   10,000          0             --          2,507
 Operating Officer       1996  118,435   42,470          0         200,000         2,242
 
Paul L. Spiese, III..... 1998 $114,950  $15,750          0             --          1,939(3)
 Vice President          1997   93,767   10,000          0             --          1,879
                         1996   88,015   29,980          0         200,000         1,856
 
Francis E. Wellock,
 Jr..................... 1998 $ 96,597  $13,500          0             --            533(4)
 Chief Financial Officer 1997   75,132   10,000          0             --            514
                         1996   55,818    5,000          0         180,000            49
</TABLE>
--------
(1) Represents premiums paid by the Company for life insurance for the benefit
    of Mr. Schwartz.
(2) Represents premiums paid by the Company for life insurance for the benefit
    of Mr. Weiderman.
(3) Represents premiums paid by the Company for life insurance for the benefit
    of Mr. Spiese.
(4) Represents premiums paid by the Company for life insurance for the benefit
    of Mr. Wellock.
 
  The following table shows (1) the number and value of options exercised by
the Company's executive officers during fiscal year 1998 and (2) the number
and value of unexercised options held by the Company's executive officers at
the end of 1998:
 
                Aggregated Option Exercises in Last Fiscal Year
                           and FY-End Option Values
 
<TABLE>
<CAPTION>
          (a)                (b)         (c)                (d)                       (e)
                                                                                   Value of
                           Shares                    # of Unexercised      Unexercised In-the-Money
                         Acquired on    Value      Options at FY-End(#)    Options/SARs at FY-End($)
          Name           Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
          ----           ----------- ----------- ------------------------- -------------------------
<S>                      <C>         <C>         <C>                       <C>
Theodore A. Schwartz....   11,717          0          290,000/200,000          $525,625/$344,500
Joseph F. Weiderman.....    2,500          0          258,143/200,000          $467,534/$344,500
Paul L. Spiese, III.....      833          0          253,700/200,000          $459,831/$344,500
Francis E. Wellock,
 Jr.....................    1,000          0          114,000/150,000          $206,625/$258,375
</TABLE>
 
  During 1998, members of the Company's Board of Directors who were not also
executive officers of the Company were paid $250 per Board meeting attended.
An aggregate of $4,750 was paid to directors for their services. No director
was paid more than $1,000.
 
Additional Information With Respect to Compensation Committee Interlocks and
Insider Participation
 
  The current members of the Compensation Committee are Mr. Falcon and Dr.
Kraut. There were no relationships during 1998 that are required to be
disclosed under Item 401(j) of Regulation S-K promulgated by the Securities
and Exchange Commission.
 
                                      14
<PAGE>
 
Employment Agreements
 
 Theodore A. Schwartz, Joseph F. Weiderman & Paul L. Spiese, III
 
  Pursuant to Employment Agreements amended as of December 15, 1997 and again
in 1998, Messrs. Schwartz, Weiderman and Spiese are employed by the Company as
its Chief Executive Officer, President and Chief Operating Officer and Vice
President of Manufacturing, respectively. These agreements, originally for a
term of five years, have been extended for two additional years and now expire
December 31, 2000. The agreements provide for base annual salaries of
$180,000, $180,000 and $125,000, respectively. In addition to their salaries,
the agreements provide that Messrs. Schwartz, Weiderman and Spiese shall be
entitled to a bonus at the discretion of the Board of Directors. If, at the
end of the term of the agreement, the Company and Messrs. Schwartz, Weiderman
and Spiese have not agreed to an extension of these agreements for a minimum
additional term of three years, the Company is obligated to pay them an amount
equal to 50% of their then annual salary in weekly installments over a six
month period (the "Severance Payment"). In the event that the three officers
are unable to perform their duties under the agreement for an aggregate period
of more than 180 days in any 365 day period, the Company may terminate any one
of the three officers' employment upon 90 days notice. In this event, the
Company is obligated to pay Messrs. Schwartz, Weiderman or Spiese his full
salary for a period of 12 months. At the end of this 12 month period, the
Company is obligated to pay the sum of $1,000 per week, subject to certain
reductions set forth in the agreement, for a period of 3 years and then $500
per week for the remainder of their lives.
 
  Messrs. Schwartz, Weiderman and Spiese are also entitled to the use of a car
provided by the Company and life insurance to benefit the beneficiary of their
respective choices in the face amount of $500,000. During the term of the
agreement, and so long as the any one of the three officers receives a
Severance Payment, they are prohibited directly or indirectly from engaging in
any business which is the same as, similar to or in competition with the
business of the Company. In addition, the amended agreement stipulates that
during 1999 and 2000, the stock options granted for those years will be
100,000 for each year.
 
 Francis E. Wellock, Jr.
 
  Pursuant to an Employment Agreement amended as of December 15, 1997 and
again in 1998, Mr. Wellock is employed by the Company as its Vice President of
Finance. This agreement is for a term of four and one half years and expires
December 31, 2000. The agreement provides for a base annual salary of
$110,000. In addition to his salary, the agreement provides that Mr. Wellock
shall be entitled to a bonus at the discretion of the Board of Directors. If,
at the end of the term of the agreement, the Company and Mr. Wellock have not
agreed to an extension of such agreement for a minimum additional term of
three years, the Company is obligated to pay Mr. Wellock an amount equal to
50% of his then annual salary in weekly installments over a six month period
(the "Severance Payment"). In the event that Mr. Wellock is unable to perform
his duties under the agreement for an aggregate period of more than 180 days
in any 365 day period, the Company may terminate Mr. Wellock's employment upon
90 days notice. In such event, the Company is obligated to pay Mr. Wellock his
full salary for a period of 12 months. At the end of this 12 month period, the
Corporation is obligated to pay Mr. Wellock the sum of $1,000 per week,
subject to certain reductions set forth in the agreement, for a period of
three years and then $500 per week for the remainder of Mr. Wellock's life.
 
  Mr. Wellock is also entitled to the use of a car provided by the Company and
receives life insurance to benefit the beneficiary of his choice in the face
amount of $500,000. During the term of the agreement, and so long as Mr.
Wellock receives the Severance Payment, Mr. Wellock is prohibited directly or
indirectly from engaging in any business which is the same as, similar to or
in competition with the business of the Company. In addition, the amended
agreement stipulates that during 1999 and 2000, the stock options granted for
those years will be 75,000 for each year.
 
                                      15
<PAGE>
 
Item 12. Security Ownership of Certain Beneficial Owners and Management
 
Principal Shareholders
 
  The following table sets forth, as of December 31, 1998, information with
respect to the beneficial ownership of the Company's directors, all directors
and executive officers as a group, and all persons believed by the Company to
beneficially own more than 5% of the outstanding Common Stock based upon
filings with the Securities and Exchange Commission. Unless otherwise
indicated, such ownership is believed to be direct, with sole voting and
investment power.
 
<TABLE>
<CAPTION>
                                                     Shares Owned
                Name and Address of                  Beneficially   Percentage
            Outstanding Beneficial Owner             and of Record  of Shares
            ----------------------------             -------------  ----------
<S>                                                  <C>            <C>
Theodore A. Schwartz................................     465,692(1)    8.32%
Joseph F. Weiderman.................................     388,090(2)    6.98%
Paul L. Spiese, III.................................     344,726(3)    6.21%
Jacob I. Haft, M.D. ................................     151,700(4)    2.83%
Larry Falcon........................................      67,791(5)    1.27%
Dr. Irving Kraut....................................     277,533(6)    5.16%
Jay Seid............................................      26,500          *
John Paul Kirwin....................................       5,000          *
Francis E. Wellock, Jr. ............................     145,750(7)    2.69%
Tandem Capital......................................     588,235(8)    9.99%
Argosy Investment Partners, L.P. ...................     352,941(8)    6.24%
All Directors and Executive Officers as a group (9
 persons)...........................................   2,813,958      38.45%
</TABLE>
--------
* =  less than 1%
(1)  Includes 1,500 shares of Common Stock registered to Mr. Schwartz as joint
     tenant with Janice L. Bredt and options to purchase 290,000 shares of
     Common Stock.
(2)  Includes options to purchase 258,143 shares of Common Stock.
(3)  Includes options to purchase 253,700 shares of Common Stock.
(4)  Includes options to purchase 55,000 shares of Common Stock.
(5)  Includes options to purchase 30,000 shares of Common Stock.
(6)  Includes options to purchase 75,000 shares of Common Stock.
(7)  Includes options to purchase 114,000 shares of Common Stock.
(8)  Consists solely of shares of Series A Convertible Preferred Stock
     convertible into Common Stock.
 
Item 13. Certain Relationships and Related Transactions
 
 Theodore A. Schwartz, Joseph F. Weiderman and Paul L. Spiese, III
 
  The Company holds promissory notes (the "Notes") from Messrs. Schwartz,
Weiderman and Spiese totaling $175,083, $152,000 and $100,833 respectively,
which bear interest at a rate of six percent per annum. The Notes require that
the principal and accrued interest be paid on or before November 21, 2001. The
proceeds of the Notes were used by Messrs. Schwartz, Weiderman and Spiese to
purchase securities of the Company in the Company's 1993 private placements
and warrant exercise of 1996. These securities were purchased on the same
terms as other investors in the private placements. The largest aggregate
amount outstanding under each of the Notes during the year ended December 31,
1998 was $175,083, $152,000 and $100,833 respectively, all of which are
currently outstanding. There are additional notes outstanding which are less
than $50,000 each.
 
                                      16
<PAGE>
 
                                    PART IV
 
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
 
(a) The following documents are filed as a part of this report:
 
  1. Financial statements--attached at pages F-1 through F-24 are the
consolidated financial statements and consolidated financial schedules set
forth below, and which are incorporated by reference in Item 8:
 
<TABLE>
<S>                                                                         <C>
Berger Holdings, Ltd.
 Reports of Independent Auditors on Consolidated Financial Statements of
  Berger Holdings, Ltd. and Subsidiary for 1998, 1997 and 1996............. F-1
 Consolidated Balance Sheets of Berger Holdings, Ltd. and Subsidiary as of
  December 31, 1998 and 1997............................................... F-3
 Consolidated Statements of Operations of Berger Holdings, Ltd. and
  Subsidiary for the years ended December 31, 1998, 1997, and 1996......... F-4
 Consolidated Statements of Stockholders' Equity of Berger Holdings, Ltd.
  and Subsidiary for the years ended December 31, 1998, 1997 and 1996...... F-5
 Consolidated Statements of Cash Flows of Berger Holdings, Ltd. and
  Subsidiary for the years ended December 31, 1998, 1997 and 1996.......... F-6
 Notes to Consolidated Financial Statements of Berger Holdings, Ltd. and
  Subsidiary............................................................... F-7
 Report of Independent Auditors on Financial Statement Schedules........... S-1
 Schedule II--Valuation and Qualifying Accounts............................ S-2
</TABLE>
 
                                       17
<PAGE>
 
                        REPORT OF INDEPENDENT AUDITORS
 
Stockholders and Board of Directors
Berger Holdings, Ltd.
Feasterville, Pennsylvania
 
  We have audited the accompanying consolidated balance sheet of BERGER
HOLDINGS, LTD. and subsidiary as of December 31, 1998 and the related
consolidated statement of operations, stockholders' equity, and cash flows
listed under Item 14(a)(2) of the Company's annual report on Form 10-K for the
year ended December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and schedules based on
our audit. The accompanying consolidated financial statements of Berger
Holdings, Ltd. as of and for the year ended December 31, 1997 and 1996 were
audited by other auditors whose report thereon dated February 13, 1998,
expressed an unqualified opinion on those statements.
 
  We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
 
  In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of BERGER
HOLDINGS, LTD. and subsidiary as of December 31, 1998, and the results of
their operations, stockholders' equity and cash flows for the year ended
December 31, 1998 in conformity with generally accepted accounting principles.
 
                                          KPMG LLP
 
Philadelphia, Pennsylvania
March 3, 1999
 
                                      F-1
<PAGE>
 
                         INDEPENDENT AUDITOR'S REPORT
 
                                                              February 13, 1998
 
Stockholders and Board of Directors
Berger Holdings, Ltd. and Subsidiary
Feasterville, Pennsylvania
 
  We have audited the accompanying consolidated balance sheets of BERGER
HOLDINGS, LTD. AND SUBSIDIARY as of December 31, 1997 and 1996 and the related
consolidated statements of operations, of stockholders' equity, and of cash
flows listed under Item 14(a)(2) of the Company's annual report on Form 10-K
for each of the two years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of BERGER
HOLDINGS, LTD. AND SUBSIDIARY as of December 31, 1997 and 1996, and the
results of their operations, stockholders' equity and cash flows for each of
the two years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
 
                                                 /s/ Goldenberg Rosenthal
                                                        Friedlander
                                          _____________________________________
                                             Goldenberg Rosenthal Friedlander
 
Jenkintown, Pennsylvania
 
                                      F-2
<PAGE>
 
                             BERGER HOLDINGS, LTD.
 
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                             December 31
                                                       ------------------------
                                                          1998         1997
                                                       -----------  -----------
<S>                                                    <C>          <C>
                       ASSETS
Current assets
  Cash and cash equivalents..........................  $   149,885  $ 4,411,347
  Accounts receivable, net of allowance for doubtful
   accounts of $30,000 in 1998 and $43,000 in 1997...    3,928,858    1,655,327
  Inventories........................................    6,552,420    2,652,466
  Prepaid and other current assets...................      283,744      372,721
  Deferred income taxes..............................      484,000      800,000
                                                       -----------  -----------
    Total current assets.............................   11,398,907    9,891,861
Property, plant and equipment, net...................    9,789,015    6,610,128
Deferred income taxes................................    1,731,201      700,000
Other assets, net of accumulated amortization of
 $287,205 in 1998 & $32,551 in 1997..................    4,342,283    1,026,575
Goodwill, net of accumulated amortization of $918,704
 in 1998 and $550,254 in 1997........................    7,325,798    1,522,649
                                                       -----------  -----------
                                                       $34,587,204  $19,751,213
                                                       ===========  ===========
        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Current maturities of long-term debt...............  $ 2,062,286  $   522,679
  Accounts payable...................................      960,953      251,093
  Accrued expenses...................................    1,141,933      462,023
                                                       -----------  -----------
    Total current liabilities........................    4,165,172    1,235,795
Long-term debt.......................................   14,560,307    6,022,147
Redeemable common stock, 125,000 shares in 1998......      500,000          --
Commitments and contingencies........................          --           --
Stockholders' equity
  Series A convertible preferred stock, $.01 par
   value ($4,000,000 liquidation value)
   Authorized 5,000,000 shares
   Issued and outstanding 40,000 shares in 1998
    25,000 shares in 1997............................          400          250
  Common stock, $.01 par value
   Authorized 20,000,000 shares
   Issued and outstanding 5,301,330 shares in 1998
    5,228,973 shares in 1997.........................       53,013       52,289
  Additional paid-in capital.........................   21,114,214   19,562,462
  Accumulated deficit................................   (5,322,986)  (6,613,814)
                                                       -----------  -----------
                                                        15,844,641   13,001,187
  Less common stock subscribed.......................     (482,916)    (507,916)
                                                       -----------  -----------
    Total stockholders' equity.......................   15,361,725   12,493,271
                                                       -----------  -----------
                                                       $34,587,204  $19,751,213
                                                       ===========  ===========
</TABLE>
 
          See accompanying notes to consolidated financial statements
 
                                      F-3
<PAGE>
 
                             BERGER HOLDINGS, LTD.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                              Year Ended December 31
                                        -------------------------------------
                                           1998         1997         1996
                                        -----------  -----------  -----------
<S>                                     <C>          <C>          <C>
Net sales.............................. $35,608,309  $20,748,017  $19,745,890
Cost of sales..........................  28,791,521   16,196,776   15,587,221
                                        -----------  -----------  -----------
Gross profit...........................   6,816,788    4,551,241    4,158,669
Selling, administrative and general
 expenses..............................   4,625,043    2,963,614    2,389,285
                                        -----------  -----------  -----------
Income from operations.................   2,191,745    1,587,627    1,769,384
Interest expense.......................  (1,284,761)    (581,624)    (619,178)
Other income, net......................     136,643       14,374        4,295
                                        -----------  -----------  -----------
Income before income taxes and
 preferred stock dividend..............   1,043,627    1,020,377    1,154,501
Provision for income tax benefit.......     647,201    1,000,000      500,000
                                        -----------  -----------  -----------
Income before preferred stock
 dividend..............................   1,690,828    2,020,377    1,654,501
Preferred stock dividend...............     400,000          --           --
                                        -----------  -----------  -----------
Net income available to common
 stockholders.......................... $ 1,290,828  $ 2,020,377  $ 1,654,501
                                        ===========  ===========  ===========
Basic earnings per share............... $      0.24  $      0.40  $      0.44
                                        ===========  ===========  ===========
Diluted earnings per share............. $      0.22  $      0.31  $      0.44
                                        ===========  ===========  ===========
</TABLE>
 
 
          See accompanying notes to consolidated financial statements
 
                                      F-4
<PAGE>
 
                             BERGER HOLDINGS, LTD.
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
                  Years Ended December 31, 1998, 1997 and 1996
 
<TABLE>
<CAPTION>
                          Series A Convertible                                                       Common Stock
                            Preferred Stock          Common Stock                                     Subscribed
                          -----------------------  ------------------  Additional                 ------------------
                            Number                  Number               Paid-in    Accumulated    Number
                           of Shares     Amount    of Shares  Amount     Capital      Deficit     of Shares  Amount
                          -----------   ---------  ---------  -------  -----------  ------------  --------- --------
<S>                       <C>           <C>        <C>        <C>      <C>          <C>           <C>       <C>
Balance, January 1,
 1996...................           --    $     --  3,531,439  $35,314  $15,088,747  $(10,288,692)  170,000  $200,000
Debt converted to common
 shares.................           --          --    175,000    1,750      173,250           --        --        --
Warrants exercised at
 $1.50 per share, net of
 costs associated with
 raising funds..........           --          --    966,250    9,662    1,415,079           --    247,500   371,250
Warrants exercised at
 $1.00 per share........           --          --     52,500      525       51,975           --        --        --
Common shares issued in
 exchange for services..           --          --    133,000    1,330       24,870           --        --        --
Retired shares and
 common
 stock subscribed.......           --          --        (39)     --           (59)          --    (46,667)  (58,334)
Net income available to
 common stockholders....           --          --        --       --           --      1,654,501       --        --
                           -----------   --------- ---------  -------  -----------  ------------   -------  --------
Balance, December 31,
 1996...................           --          --  4,858,150   48,581   16,753,862    (8,634,191)  370,833   512,916
Issuance of 25,000
 shares of Series A
 convertible preferred
 stock..................        25,000         250       --       --     2,254,123           --        --        --
Common shares issued....           --          --    182,500    1,825      330,363           --        --        --
Warrants exercised at
 $.90 per share.........           --          --     70,000      700       62,300           --        --        --
Warrants exercised at
 $1.00 per share........           --          --    110,000    1,100      108,900           --        --        --
Stock based
 compensation...........           --          --        --       --        38,700           --        --        --
Exercise of 8,500 stock
 options................           --          --      8,500       85       14,790           --        --        --
Retired shares and
 common stock
 subscribed.............           --          --       (177)      (2)        (576)          --     (3,333)   (5,000)
Net income available to
 common stockholders....           --          --        --       --           --      2,020,377       --        --
                           -----------   --------- ---------  -------  -----------  ------------   -------  --------
Balance, December 31,
 1997...................        25,000         250 5,228,973   52,289   19,562,462    (6,613,814)  367,500   507,916
Issuance of 15,000
 shares of Series A
 convertible preferred
 stock..................        15,000         150       --       --     1,443,040           --        --        --
Exercise of 72,357 stock
 options................           --          --     72,357      724      108,712           --        --        --
Reduction of common
 stock subscribed.......           --          --        --       --           --            --    (20,000)  (25,000)
Net income before
 preferred
 stock dividend.........           --          --        --       --           --      1,690,828       --        --
Preferred stock
 dividend...............           --          --        --       --           --       (400,000)      --        --
                           -----------   --------- ---------  -------  -----------  ------------   -------  --------
Balance, December 31,
 1998...................        40,000   $     400 5,301,330  $53,013  $21,114,214  $ (5,322,986)  347,500  $482,916
                           ===========   ========= =========  =======  ===========  ============   =======  ========
</TABLE>
 
          See accompanying notes to consolidated financial statements
 
                                      F-5
<PAGE>
 
                             BERGER HOLDINGS, LTD.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                Year Ended December 31
                                         --------------------------------------
                                             1998         1997         1996
                                         ------------  -----------  -----------
<S>                                      <C>           <C>          <C>
Cash flows from operating activities
  Net income before preferred stock
   dividend............................  $  1,690,828  $ 2,020,377  $ 1,654,501
  Adjustments to reconcile net income
   to net cash provided by (used in)
   operating activities
    Deferred income tax................      (647,201)  (1,000,000)    (500,000)
    Depreciation and amortization......     1,645,673      847,189      732,066
    Decrease in accounts receivable
     allowance.........................       (13,000)         --           --
  Change in operating assets and
   liabilities, excluding acquisitions
    Accounts receivable................      (726,341)       5,577     (348,676)
    Inventories........................      (189,212)    (459,116)    (540,253)
    Other current and long-term
     assets............................      (851,572)  (1,923,971)    (149,019)
    Accounts payable...................       709,860      140,226   (1,039,498)
    Accrued expenses...................       679,911      (95,199)     211,501
                                         ------------  -----------  -----------
Net cash provided by (used in)
 operating activities..................     2,298,946     (464,917)      20,622
                                         ------------  -----------  -----------
Cash flows from investing activities
  Acquisition of companies, net of cash
   acquired............................   (13,675,401)    (900,618)         --
  Acquisition of property and
   equipment, net of retirements.......    (2,381,810)    (652,715)    (444,706)
                                         ------------  -----------  -----------
Net cash used in investing activities..   (16,057,211)  (1,553,333)    (444,706)
                                         ------------  -----------  -----------
Cash flows from financing activities
  Dividends paid.......................      (400,000)         --           --
  Net proceeds (repayments) from
   working capital line................     5,176,618     (126,781)     209,297
  Net proceeds from equipment term
   loan................................     1,186,668    1,037,268           --
  Proceeds from issuance of convertible
   debt................................           --           --       175,000
  Proceeds from long-term debt.........     4,020,986    3,012,732          --
  Loan and mortgage repayments.........    (2,064,945)  (1,347,889)     (85,402)
  Gross proceeds from issuance of
   stock, private placements, stock
   warrants and stock options..........     1,634,286    2,820,370    1,264,696
  Costs of raising capital.............       (56,810)    (202,812)     (74,230)
                                         ------------  -----------  -----------
Net cash provided by financing
 activities............................     9,496,803    5,192,888    1,489,361
                                         ------------  -----------  -----------
Net increase (decrease) in cash........    (4,261,462)   3,174,638    1,065,277
Cash and cash equivalents, beginning of
 year..................................     4,411,347    1,236,709      171,432
                                         ------------  -----------  -----------
Cash and cash equivalents, end of
 year..................................  $    149,885  $ 4,411,347  $ 1,236,709
                                         ============  ===========  ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Cash paid during the year for
   interest............................  $  1,285,000  $   582,000  $   619,000
  Cash paid during the year for taxes..  $     23,890  $    34,119  $     5,575
                                         ============  ===========  ===========
</TABLE>
 
In 1998, the Company entered into capital leases aggregating $520,986.
 
In 1997, the Company entered into capital leases aggregating $27,417.
 
In 1996, the Company entered into capital leases aggregating $91,657.
 
          See accompanying notes to consolidated financial statements
 
                                      F-6
<PAGE>
 
                             BERGER HOLDINGS, LTD.
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1. BUSINESS ORGANIZATION
 
  Berger Holdings, Ltd. ("Company") was incorporated in the Commonwealth of
Pennsylvania on August 28, 1979.
 
  The Company operates primarily from a manufacturing facility in
Feasterville, Pennsylvania. The Company operates in one segment producing
aluminum, galvanized steel and copper roof drainage products. Berger sells to
wholesale building product distributors throughout the United States, its
territories and Canada, but is specifically concentrated in the Mid-Atlantic,
New England and Northeast corridor. The Company routinely grants credit to
these distributors.
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Principles of Consolidation
 
  The financial statements include the accounts of the Company and its wholly-
owned subsidiary, Berger Financial Corporation (a Delaware corporation formed
in 1994) and Berger Financial's wholly-owned subsidiary, Berger Bros Company,
a Pennsylvania corporation. All significant intercompany transactions and
balances have been eliminated.
 
 Property and Equipment and Depreciation and Amortization
 
  Property and equipment are carried at cost. Depreciation is computed by
straight-line and accelerated methods using estimated useful lives of 5 to 30
years for buildings and improvements and 3 to 10 years for machinery and
equipment. Improvements are capitalized and expenditures for maintenance,
repairs and minor renewals are charged to expense when incurred. At the time
assets are retired or sold, the costs and accumulated depreciation are
eliminated and the resulting gain or loss, if any, is reflected in the
consolidated statement of operations.
 
 Cash and Cash Equivalents
 
  Cash and cash equivalents consist of all highly liquid instruments with
original maturities of three months or less.
 
 Revenue Recognition
 
  The Company records revenues on its products when goods are shipped.
 
 Goodwill
 
  Goodwill is amortized using the straight-line method over 10-25 years. The
Company assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over the remaining life can
be recovered through projected undiscounted future cash flows. The amount of
the impairment, if any, is measured based on projected discounted future
operating cash flows using a discount rate reflecting the Company's average
cost of funds or fair value of the asset, where appropriate. The assessment of
the recoverability of intangible assets will be impacted if estimated future
operating cash flows are not achieved.
 
 Other Assets
 
  Costs and payments pursuant to noncompetition arrangements entered into in
connection with business acquisitions are amortized over the terms of the
arrangements. Other intangibles include patents, capitalized acquisition costs
and acquired customer lists or markets. All intangibles are being amortized by
the straight-line method over periods not exceeding 15 years. The Company
assesses the recoverability of intangibles by determining whether the
amortization of the asset balance can be recovered through projected
undiscounted cash flows over its remaining life.
 
                                      F-7
<PAGE>
 
                             BERGER HOLDINGS, LTD.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
 Income Taxes
 
  Income taxes are accounted for under the asset and liability method. The
Company accounts for the recognition of deferred tax assets and liabilities
based on the expected future tax consequences of events that have been
included in the financial statements or tax returns. The provision (benefit)
for (from) deferred income taxes results from temporary differences which
consist of different tax bases for assets and liabilities than their reported
amounts in the financial statements. Such differences result in recognition of
income or expense in different years for tax and financial statement purposes.
Deferred tax assets are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled.
 
 Earnings Per Share
 
  Basic earnings per share are computed by dividing net income available to
common stockholders by the weighted average number of shares of common stock
outstanding during the year. Diluted earnings per common share reflects the
potential dilution of securities that could share in the earnings.
 
 Segment Disclosures
 
  In 1998, the Company adopted SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information." SFAS 131 establishes standards for
reporting information about operating segments and related disclosures about
products and services, geographic areas and major customers. SFAS No. 131
requires that companies disclose segment data based on how management makes
decisions about allocating resources to segments and measuring their
performance. The Company has one operating segment, which is engaged in the
production of aluminum, galvanized steel, painted steel and copper roof
drainage products.
 
 Reclassification
 
  Certain balances not affecting net income have been reclassed to conform to
the current year presentation.
 
 Management's Judgments and Accounting Estimates
 
  The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
3. ACQUISITIONS
 
  On December 7, 1998, the Company acquired certain assets of Sheet Metal
Manufacturing Co., Inc. (Sheet Metal), a manufacturer of roof drainage
products. The purchase price consisted of $3,675,401 in cash and a note
payable of approximately $900,000. The acquisition was funded by an increase
to the Company's credit facility and equipment term loan in an aggregate
amount of $4,063,093. This acquisition was accounted for as a purchase and the
excess of the fair value of the assets (goodwill) is being amortized on a
straight-line basis over 25 years.
 
  On January 2, 1998, the Company acquired the roof drainage manufacturing
segment of Benjamin Obdyke, Inc. (Obdyke). The purchase price was $10,000,000
cash, a note payable for $879,000, 125,000 shares of the Company's redeemable
common stock (see note 10 of the consolidated financial statements) and 50,000
warrants to purchase the Company's common stock at an exercise price of $4.42
per share. The acquisition was funded by an increase in the Company's credit
facility of $4,160,000, the issuance to private investors of 40,000 shares of
$100 Series A Preferred Stock, the issuance of $2,500,000 in 12.25% debentures
and the issuance of 300,000 common stock warrants with an exercise price of
$4.25 to holders of the preferred stock (see note 17 to the consolidated
financial statements). This acquisition was accounted for as a purchase and
the excess of the fair value of the assets (goodwill) is being amortized on a
straight line basis over 25 years.
 
                                      F-8
<PAGE>
 
                             BERGER HOLDINGS, LTD.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
  On February 7, 1997, the Company purchased a 100% interest in Real-Tool,
Inc. (Real Tool), a Virginia Corporation. The purchase price was $900,618 in
cash, a note payable for $750,000, 100,000 shares of the Company's common
stock, and a 6% royalty payment for all metal Real-Tool sales through the year
2012. The acquisition was accounted for as a purchase and the excess of the
fair value of assets (goodwill) is being amortized on a straight line basis
over 14 years, which is the remaining years left on the snow guard patent. The
acquisition was funded through operating cash.
 
  The following table presents the unaudited proforma results of operations as
if the acquisition of Obdyke, Sheet Metal and Real Tool had occurred at the
beginning of each respective period presented after giving effect to certain
adjustments, including amortization of goodwill and increased interest
expense. These proforma results have been prepared for comparative purposes
only and do not purport to be indicative of what would have occurred had the
acquisitions been made as of those dates or results which may occur in the
future.
 
<TABLE>
<CAPTION>
                                                          Years Ended December
                                                                   31,
                                                         -----------------------
                                                            1998        1997
                                                         ----------- -----------
   <S>                                                   <C>         <C>
   Net Sales............................................ $46,600,000 $51,816,778
                                                         =========== ===========
   Net Income........................................... $ 1,800,000 $ 2,727,844
                                                         =========== ===========
   Earnings Per Share
     Basic.............................................. $       .34 $       .54
                                                         =========== ===========
     Diluted............................................ $       .29 $       .42
                                                         =========== ===========
</TABLE>
 
4. INVENTORIES
 
  Inventories are valued at the lower of cost or market. Cost is determined
using the first-in, first-out method ("FIFO").
 
  As of December 31, 1998 and 1997, inventories consist of the following:
 
<TABLE>
<CAPTION>
                                                            1998        1997
                                                         ----------  ----------
   <S>                                                   <C>         <C>
   Raw materials........................................ $3,951,194  $1,422,501
   Finished goods.......................................  2,624,451   1,215,959
   Packaging materials and supplies.....................    122,775      60,006
   Less provision for obsolescence......................   (146,000)    (46,000)
                                                         ----------  ----------
                                                         $6,552,420  $2,652,466
                                                         ==========  ==========
</TABLE>
 
                                      F-9
<PAGE>
 
                             BERGER HOLDINGS, LTD.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
5. PROPERTY AND EQUIPMENT
 
  As of December 31, 1998 and 1997, property and equipment consists of the
following:
 
<TABLE>
<CAPTION>
                                                           1998        1997
                                                        ----------- -----------
   <S>                                                  <C>         <C>
   Land................................................ $   485,000 $   485,000
   Building............................................   5,347,021   3,842,865
   Machinery...........................................   6,560,651   5,295,593
   Furniture and fixtures..............................   1,236,825     503,011
   Trucks and autos....................................     824,516     567,477
   Dies................................................   1,044,231     631,366
   Equipment deposits..................................         --      500,000
   Leasehold improvements..............................   1,392,264     881,571
                                                        ----------- -----------
                                                         16,890,508  12,706,883
   Less accumulated depreciation.......................   7,101,493   6,096,755
                                                        ----------- -----------
                                                        $ 9,789,015 $ 6,610,128
                                                        =========== ===========
</TABLE>
 
  Depreciation expense for the years ended December 31, 1998, 1997 and 1996
was $1,022,569, $690,786 and $653,266, respectively.
 
  Total cost of machinery under capital leases included above as of December
31, 1998 and 1997 was $649,796 and $177,283, respectively. Accumulated
depreciation for machinery under capital leases included above as of December
31, 1998 and 1997 was $109,103 and $34,474, respectively.
 
6. OTHER ASSETS
 
  As of December 31, 1998 and 1997, other assets consist of the following:
 
<TABLE>
<CAPTION>
                                                             1998       1997
                                                          ---------- ----------
   <S>                                                    <C>        <C>
   Patents, customer lists, etc. ........................ $1,489,124 $  475,845
   Non-compete agreements................................  1,252,381        --
   Capitalized acquisition costs.........................    543,248    132,426
   Equipment deposits....................................  1,022,748    405,093
   Other.................................................     34,782     13,211
                                                          ---------- ----------
                                                          $4,342,283 $1,026,575
                                                          ========== ==========
</TABLE>
 
                                     F-10
<PAGE>
 
                             BERGER HOLDINGS, LTD.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
7. LONG-TERM DEBT
 
  As of December 31, 1998 and 1997, long-term debt consisted of the following:
 
<TABLE>
<CAPTION>
                                                             1998        1997
                                                          ----------- ----------
   <S>                                                    <C>         <C>
   $9,500,000 revolving line-of-credit expiring in
    January, 2001. Interest is due monthly at prime plus
    1/2% (prime was 7.75% as of December 31, 1998). This
    line is collateralized by 85% of eligible accounts
    receivable, 50% of eligible inventory, and any
    remaining uncollateralized property and equipment...  $ 6,624,294 $1,447,675
   Term loan, payable in 24 monthly installments of
    $44,333 plus interest at prime plus 1% through
    January 2001, and a balloon payment of $1,336,008
    due in January, 2001. This loan is collateralized by
    machinery and equipment.............................    2,400,000  1,213,332
   12.25% subordinated debenture, due January 2, 2003,
    interest is payable quarterly commencing February 1,
    1998 through maturity...............................    2,500,000  2,000,000
   Notes payable in connection with various acquisitions
    of assets. Due in quarterly installments of $310,170
    plus interest at 9% through January 2000............    1,611,939    187,500
   Mortgage note payable, principal and interest (7.25%)
    due in monthly payments of approximately $27,400
    through March, 2008 with a balloon of $1,374,838 due
    then................................................    2,943,589  1,612,218
   Capital leases, due in monthly installments of
    approximately $13,500, including interest, ranging
    from 2.90% to 11.0% through 2003; collateralized by
    certain equipment...................................      542,771     84,101
                                                          ----------- ----------
                                                           16,622,593  6,544,826
   Less current maturities..............................    2,062,286    522,679
                                                          ----------- ----------
                                                          $14,560,307 $6,022,147
                                                          =========== ==========
</TABLE>
 
  The 12.25% subordinated debenture (12.25% debenture) matures on January 2.
2004. The interest rate on the 12.25% debenture will increase on January 2,
2002 for $2,000,000 of the 12.25% debenture from 12.25% to 20% until maturity;
and on January 2, 2002 for $500,000 of the 12.25% debenture from 12.25% to
19.25%. The interest rate will decrease on $500,000 of the 12.25% debenture on
January 3, 2003 to 14% until maturity (see Note 17 to the consolidated
financial statements). The 12.25% debentures are not convertible into common
shares (See Note 17).
 
  Scheduled annual maturities of long-term debt as of December 31, 1998 are as
follows:
 
<TABLE>
<CAPTION>
       Year Ending December 31
       -----------------------
       <S>                                                           <C>
          1999.....................................................  $ 2,062,286
          2000.....................................................    1,106,005
          2001.....................................................    8,212,608
          2002.....................................................    2,755,417
          2003.....................................................      234,571
          Thereafter...............................................    2,251,706
                                                                     -----------
                                                                     $16,622,593
                                                                     ===========
</TABLE>
 
                                     F-11
<PAGE>
 
                             BERGER HOLDINGS, LTD.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
  The mortgage balance increased approximately $1,450,000 due to the
construction of new office space and the refinancing of the entire
Feasterville property with a financial institution. The increased mortgage
balance was refinanced at 7.25% compared to 10.25% previously.
 
  Scheduled annual maturities of capital leases as of December 31, 1998 are as
follows:
 
<TABLE>
<CAPTION>
       Year Ending December 31
       -----------------------
       <S>                                                              <C>
          1999........................................................  $121,611
          2000........................................................   123,565
          2001........................................................   114,651
          2002........................................................   107,442
          2003........................................................    75,502
          Thereafter..................................................       --
                                                                        --------
                                                                        $542,771
                                                                        ========
</TABLE>
 
8. ACCRUED EXPENSES
 
  As of December 31, 1998 and 1997, accrued expenses consist of the following:
 
<TABLE>
<CAPTION>
                                                               1998      1997
                                                            ---------- --------
   <S>                                                      <C>        <C>
   Payroll and related expenses............................ $  133,073 $ 89,702
   Accrued customer rebates................................    470,000  329,518
   Other accrued expenses..................................    538,860   42,803
                                                            ---------- --------
     Total accrued expenses................................ $1,141,933 $462,023
                                                            ========== ========
</TABLE>
 
9. INCOME TAXES
 
  The sources of temporary differences and the tax effect of each as of
December 31, 1998 and 1997 as follows:
 
<TABLE>
<CAPTION>
                                                            1998       1997
                                                         ---------- -----------
   <S>                                                   <C>        <C>
   Inventory reserves................................... $   18,400 $    18,400
   Net operating loss carryforwards.....................  2,114,768   2,429,871
   Depreciation and other...............................     82,033      75,533
                                                         ---------- -----------
     Subtotal...........................................  2,215,201   2,523,804
   Valuation allowance..................................        --   (1,023,804)
                                                         ---------- -----------
     Total net deferred tax asset....................... $2,215,201 $ 1,500,000
                                                         ========== ===========
</TABLE>
 
  The valuation allowance decreased by $1,023,804, $1,387,905 and $933,849
during the years ended December 31, 1998, 1997 and 1996, respectively. The
1997 gross valuation allowance amount has increased to $1,023,804 from the
originally reported $397,400, to reflect revised information regarding the
availability of net operating loss carry forwards. This change did not affect
the net balances reported. Based on the revised information available to
management and considering the factors at December 31, 1997, management
believes that the realization of the deferred tax benefit would require the
valuation allowance recognized at December 31, 1997.
 
                                     F-12
<PAGE>
 
                             BERGER HOLDINGS, LTD.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
  The net deferred asset has been recognized on the balance sheet as follows:
 
<TABLE>
<CAPTION>
                                                                December 31
                                                           ---------------------
                                                              1998       1997
                                                           ---------- ----------
   <S>                                                     <C>        <C>
   Current portion........................................ $  484,000 $  800,000
   Noncurrent portion.....................................  1,731,201    700,000
                                                           ---------- ----------
                                                           $2,215,201 $1,500,000
                                                           ========== ==========
</TABLE>
 
  As of December 31, 1998, the Company had carryforward net operating losses
of approximately $6,000,000, expiring through 2010. In addition, investment
tax credits of approximately $5,000 are available to apply against future
income taxes, if any, and expire in 2000.
 
  Provision for income taxes for 1998, 1997 and 1996 were as follows:
 
<TABLE>
<CAPTION>
                                           1998         1997         1996
                                        -----------  -----------  -----------
<S>                                     <C>          <C>          <C>
Current federal tax expense............ $    15,000  $    20,000  $    18,000
Current state tax expense..............      53,000        7,000        9,000
Deferred tax expense...................     308,603      360,905      483,000
Deferred, reduction of valuation
 allowance.............................  (1,023,804)  (1,387,905)  (1,000,000)
                                        -----------  -----------  -----------
  Tax (benefit)........................ $  (647,201) $(1,000,000) $  (500,000)
                                        ===========  ===========  ===========
</TABLE>
 
  Significant differences between taxes computed at the federal statutory rate
and the provision for income taxes were:
 
<TABLE>
<CAPTION>
                               Years Ended December 31,
                               ------------------------------
                                 1998       1997      1996
                               --------   --------   --------
   <S>                         <C>        <C>        <C>
   Taxes at U.S. Federal
    statutory rate...........      34.0%      34.0%     34.0%
   State income taxes,
     Net of federal benefit..      3.35%       0.0%      0.0%
   Other, net................     (1.26%)      1.0%      1.0%
   Valuation Allowance
    Reduction................     (98.1%)   (133.0%)   (78.0%)
                               --------   --------   -------
                                 (62.01%)    (98.0%)   (43.0%)
                               ========   ========   =======
</TABLE>
 
  Certain gains which were recognized as a result of the Company's emergence
from bankruptcy are not considered taxable income for either federal or state
purposes. Additionally, gains recognized from exchanging debt for common stock
are not considered taxable income. However, these gains reduce prior years'
net operating loss carryforwards.
 
  In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities and projected
future taxable income in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
periods which the deferred tax assets are deductible, along with reasonable
and prudent tax planning strategies and the expiration dates of carryforwards,
management believes it is more likely than not the Company will realize the
benefits of these deductible differences, net of the existing valuation
allowances, at December 31, 1998.
 
                                     F-13
<PAGE>
 
                             BERGER HOLDINGS, LTD.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
10. REDEEMABLE COMMON STOCK
 
  During 1998, the Company issued 125,000 shares of common stock in connection
with the acquisition of the roof drainage manufacturing segment of Benjamin
Obdyke, Inc. In conjunction with the transaction, the Company entered into a
repurchase agreement whereby the holder of the common stock has the option to
require the Company to repurchase the stock at $4.00. These shares have been
classified as redeemable common stock in the consolidated financial
statements.
 
11. EARNINGS PER SHARE
 
  Basic and diluted earnings per share for the years 1996 through 1998 are as
follows:
 
<TABLE>
<CAPTION>
                                                  1998       1997       1996
                                               ---------- ---------- ----------
   <S>                                         <C>        <C>        <C>
   Basic earnings per share
     Net income available to common
      stockholders...........................  $1,290,828 $2,020,377 $1,654,501
                                               ---------- ---------- ----------
     Weighted average common shares
      outstanding............................   5,367,546  5,057,828  3,720,149
                                               ---------- ---------- ----------
   Basic earnings per share..................  $     0.24 $     0.40 $     0.44
                                               ========== ========== ==========
   Diluted earnings per share
     Income before preferred stock dividend..  $1,690,828 $2,020,377 $1,654,501
                                               ---------- ---------- ----------
     Weighted average common shares
      outstanding............................   5,367,546  5,057,828  3,720,149
     Add: effect of vested and non-vested
         dilutive securities.................   1,214,442  1,500,498        --
     Add: effect of convertible preferred
      shares.................................     941,177      1,612        --
                                               ---------- ---------- ----------
                                                7,523,165  6,559,937  3,720,149
                                               ========== ========== ==========
   Diluted earnings per share................  $     0.22 $     0.31 $     0.44
                                               ========== ========== ==========
</TABLE>
 
  Stock equivalents which were exercisable at prices greater than the average
market price of the common shares during the year have been excluded from the
computation since the effect would be anti-dilutive. As of December 31, 1998,
there were 465,000 options meeting this criterion.
 
12. STOCK OPTIONS
 
  Under various plans, the Company may grant stock options to key executives,
directors, management personnel, other employees and consultants. Transactions
under the various stock option plans for the period indicated were as follows:
 
<TABLE>
<CAPTION>
                                       Wtd. Avg.            Wtd. Avg.            Wtd. Avg.
                              1998       Price     1997       Price     1996       Price
                            ---------  --------- ---------  --------- ---------  ---------
   <S>                      <C>        <C>       <C>        <C>       <C>        <C>
   Outstanding as of
    beginning of year...... 2,449,248    $1.71   2,261,998    $1.55   1,205,167    $1.50
   Options granted.........       --       --      195,750    $3.41   1,065,000    $1.60
   Options exercised or
    canceled...............  (107,798)   $1.51      (8,500)   $1.75      (8,169)   $1.50
                            ---------            ---------            ---------
   Outstanding as of
    December 31............ 2,341,450    $1.73   2,449,248    $1.71   2,261,998    $1.55
                            =========            =========            =========
   Exercisable as of
    December 31............ 1,341,450    $1.76   1,179,248    $1.81     736,998    $1.50
                            =========            =========            =========
</TABLE>
 
                                     F-14
<PAGE>
 
                             BERGER HOLDINGS, LTD.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
  The following table summarizes information about stock options outstanding
as of December 31, 1998:
 
<TABLE>
<CAPTION>
                                    Weighted
                                    Average
                      Number       Remaining        Weighted      Number       Weighted
      Range of      Of Options      Years of        Average     Of Options     Average
   Exercise Price   Outstanding Contractual Life Exercise Price Exercisable Exercise Price
   --------------   ----------- ---------------- -------------- ----------- --------------
   <S>              <C>         <C>              <C>            <C>         <C>
    $1.00-$2.99      2,143,100        8.87           $1.57       1,183,100      $1.52
    $3.00-$3.99        168,350        7.06           $3.39         128,350      $3.35
    $4.00-$4.55         30,000        4.00           $4.55          30,000      $4.55
                     ---------                                   ---------
                     2,341,450                                   1,341,450
                     =========                                   =========
</TABLE>
 
  The Company did not recognize compensation costs for stock based
compensation awards in 1998, 1997 and 1996. The Company accounts for such
compensation under the provisions of Accounting Principles Board Opinion No.
25. Had compensation cost for the Company's stock-based compensation plans
been determined based on the fair value at the grant dates for awards granted
in 1998 and 1997 consistent with SFAS 123 "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), the Company's net income and earnings per
share would have been reduced to the pro forma amounts indicated below:
 
<TABLE>
<CAPTION>
                                                           1998       1997
                                                        ---------- ----------
   <S>                                      <C>         <C>        <C>
   Income available to common
    stockholders........................... As reported $1,290,828 $2,020,377
                                            Pro forma   $1,290,828 $1,792,942
   Basic earnings per share................ As reported $      .24 $      .40
                                            Pro forma   $      .24 $      .35
   Diluted earnings per share.............. As reported $      .22 $      .31
                                            Pro forma   $      .22 $      .27
</TABLE>
 
  There were no officer options granted during 1998 or 1997. Grants made in
prior years were recognized in their entirety during the 1997 and 1996
proforma expense. The fair value of the options granted in 1997 used to
compute pro forma net income and earnings per share disclosures is the
estimated present value at the grant date using the Black-Scholes option
pricing model with the following weighted average assumptions: dividend yield
0%; expected volatility of 29% in 1997, a risk free interest rate of 6.2% in
1997; and it is expected that the options will be exercised immediately upon
vesting.
 
  During 1997, the Company entered into an agreement with First Colonial
Securities Group, Inc. ("FCSG") to provide corporate financing and investment
banking services. In connection with this agreement the Company granted to
FCSG, 100,000 common stock options exercisable at prices ranging from $3.25--
$4.55 per share. In accordance with SFAS 123, compensation of $38,700 was
recognized in 1997, which was charged to additional paid in capital.
 
13. COMMON STOCK AND WARRANTS
 
  In January, 1998 in connection with the purchase of certain Obdyke assets
the Company issued 300,000 warrants at an exercise price of $4.25. The Company
also issued 50,000 warrants to the previous owners of Obdyke's metal division
at an exercise price of $4.42. The warrants are immediately exercisable and
will expire two years from the date of issuance.
 
  In January, 1998 and December, 1997 the Company issued 40,000 shares of
Series A Convertible Preferred Stock for $100 per share. These shares have a
$100 per share liquidating preference. Each share is convertible at any time
into 23.53 common shares. Dividends on the preferred shares are cumulative,
provided at $10.00 per
 
                                     F-15
<PAGE>
 
                             BERGER HOLDINGS, LTD.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
share per annum and payable quarterly commencing March 31, 1998. On the fifth
anniversary of the original issue of the preferred shares the dividend rate is
scheduled to increase to $20.00 per share. The shares are redeemable at the
Company's option from January 2, 2000 to January 2, 2003, if the Company's
common stock's average sale price exceeds $9.00 per share over a period
specified in the agreement. Subsequent to January 2, 2003 the preferred shares
are redeemable at the Company's option. The redemption price is $105 per
share. (See Note 17 to the consolidated financial statements.)
 
  In connection with the acquisition of Real Tool, Inc. the Company issued
100,000 shares of common stock.
 
  In 1997 and 1996, the Company issued 82,500 and 133,000 shares, respectively
of common stock in exchange for consulting services. Additionally, in 1996 the
Company issued convertible debt aggregating $175,000, which was converted into
175,000 shares of common stock.
 
  The Company entered into an agreement through December 31, 1997 with a
shareholder to provide management support, strategic planning and assistance
in raising capital. Under the terms of the agreement, the Company provided
75,000 unregistered shares, in 1996, and paid this consultant $75,000 in 1995.
The Company revised this contract, effective January 1, 1997. Under the
revised contract, the Company issued 37,500 shares of common stock in 1997 to
satisfy all obligations under this contract.
 
  As of December 31, 1998, total outstanding warrants were 725,000. The
exercise price of these warrants ranged from $1.00 to $4.42 and expire at
various dates through 2003.
 
  Stock warrant transactions are summarized as follows:
 
<TABLE>
<CAPTION>
                                                           Stock    Wt Avg Price
                                                          Warrants  per Warrant
                                                          --------  ------------
   <S>                                                    <C>       <C>
   Outstanding, January 1, 1997..........................  555,000     $1.35
     Exercised........................................... (180,000)     0.96
                                                          --------     -----
   Outstanding, December 31, 1997........................  375,000      1.53
     Issued..............................................  350,000      4.27
                                                          --------     -----
   Outstanding, December 31, 1998........................  725,000     $2.86
                                                          ========     =====
</TABLE>
 
  At December 31, 1998, $482,916 is due from officers for stock subscribed,
relating to loans for the exercise of options and the purchase of stock. The
balance due on certain subscriptions can be forgiven at the discretion of the
Board of Directors or if during the period 1998 through 1999, operating
earnings goals are met as follows:
 
    1) If per share operating earnings are at least 110% of 1996 per share
  operating earnings, $58,333 will be forgiven or,
 
    2) If per share operating earnings are at least 120% of 1996 per share
  operating earnings, the entire balance will be forgiven.
 
  There was no forgiveness in 1998 or 1997 for these subscriptions.
 
                                     F-16
<PAGE>
 
                             BERGER HOLDINGS, LTD.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
14. COMMITMENTS AND CONTINGENCIES
 
  The Company leases certain real property and equipment under noncancellable
operating leases. Under certain leasing arrangements, the Company pays
property taxes, insurance and maintenance related to the leased property. Rent
expense for the years ended December 31, 1998, 1997 and 1996 was $614,077,
$185,000 and $106,000, respectively. As of December 31, 1998, minimum rental
commitments under long-term, noncancellable operating leases are as follows:
 
<TABLE>
<CAPTION>
       Year Ending December 31
       -----------------------
       <S>                                                            <C>
          1999......................................................  $  830,440
          2000......................................................     824,315
          2001......................................................     812,228
          2002......................................................     804,053
          2003......................................................     416,214
          Thereafter................................................     240,246
                                                                      ----------
                                                                      $3,927,496
                                                                      ==========
</TABLE>
 
  The Company's current involvement in legal proceedings are those which arise
in the ordinary course of business. In the opinion of management, the outcome
of these matters will not have a material adverse effect on the financial
position, results of operation, or liquidity of the Company.
 
  The Company participates in a multi-employer pension plan covering
substantially all of its union employees. The union employees comprise 68% of
the Company's workforce which are represented by two unions. The Company makes
monthly payments as required into the multi-employer plan trust established
for union employees. Under the Employee Retirement Income Security Act of
1974, as amended by the Multi-Employer Pension Plan Amendments Act of 1980, an
employer is liable for a proportionate part of the plan's unfunded vested
benefits liability. The Company's share of the unfunded liability related to
Local 107 Multi-Employer Pension Plan, is $58,000. The Company's share of the
unfunded liability related to Local 169's Multi-Emplyer Pension Plan is
$500,000. The Company's union agreements expire on December 31, 2001.
 
15. CONCENTRATION OF CREDIT RISK ARISING FROM CASH DEPOSITS
 
  The Company maintains cash balances at a financial institution located in
the Delaware Valley area. The accounts at the institution are insured by the
Federal Deposit Insurance Corporation up to $100,000. During the year, the
Company's cash balances periodically exceed the insured limit.
 
16. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
 
  The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
 
 Accounts Receivable and Accounts Payable
 
  The carrying amount approximates fair value because of the short maturity of
those instruments.
 
 Long-Term Debt
 
  The fair value of the Company's long-term debt is estimated based on the
current rates available to the Company for debt of the same remaining
maturities. As of December 31, 1998, the carrying value of this debt,
aggregating $16,622,593 approximates the fair value.
 
                                     F-17
<PAGE>
 
                             BERGER HOLDINGS, LTD.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
17. SUBSEQUENT EVENT
 
  During the first quarter of 1999, and effective as of January 1, 1999, the
Company entered into an agreement to convert 40,000 shares of Series A
Preferred Stock to 10% Subordinated Convertible Debentures (10% debentures)
due December 31, 2003. The 10% debentures are convertible at any time into
23.53 common shares for each $100 of 10% debentures outstanding on the
conversion date subject to specified anti-dilution adjustments.
 
  Simultaneously with the conversion of the Series A Preferred Stock, the
Company extended the exercise date on 300,000 common stock warrants from
January 2, 2003 to December 31, 2003; and extended the maturity date on the
12.25% debentures from January 2, 2003 to December 31, 2003. The increase in
interest rates to 20% and 19.25% respectively on the 12.25% debentures were
extended from January 2, 2001 for $2,000,000 of the 12.25% debenture to
January 2, 2002; and were extended from January 3, 2001 for $500,000 of the
12.25% debenture to January 2, 2002. The interest rate decrease from 19.25% to
14% on $500,000 of the 12.25% debenture will be extended to January 2, 2003
rather than the original date of January 3, 2002.
 
18. SUPPLEMENTARY INFORMATION (UNAUDITED)
 
  This table summaries the unaudited results of operations for each quarter of
1998 and 1997.
 
<TABLE>
<CAPTION>
                              First       Second      Third      Fourth      Total
                            ----------  ---------- ----------- ---------- -----------
   <S>                      <C>         <C>        <C>         <C>        <C>
   1998
   Net Sales............... $7,014,455  $9,739,325 $10,273,223 $8,581,306 $35,608,309
   Operating income........    135,293     872,838     976,183    207,431   2,191,745
   Income (loss) available
    to common
    stockholders...........   (153,511)    453,123     494,557    496,659   1,290,828
   Basic earnings (loss)
     Per share............. $    (0.03) $     0.08 $      0.09 $     0.10 $      0.24
   Diluted earnings
     Per share............. $    (0.03) $     0.07 $      0.08 $     0.10 $      0.22
 
<CAPTION>
                              First       Second      Third      Fourth      Total
                            ----------  ---------- ----------- ---------- -----------
   <S>                      <C>         <C>        <C>         <C>        <C>
   1997
   Net Sales............... $4,499,323  $5,514,006 $ 5,878,929 $4,855,759 $20,748,017
   Operating income........    296,080     585,390     597,297    108,860   1,587,627
   Income available to
    common stockholders....    164,424     641,332     658,449    556,172   2,020,377
   Basic earnings
     Per share............. $     0.03  $     0.13 $      0.13 $     0.11 $      0.40
   Diluted earnings
     Per share............. $     0.03  $     0.10 $      0.10 $     0.08 $      0.31
</TABLE>
 
                                     F-18
<PAGE>
 
        Report of Independent Auditors on Financial Statement Schedules
 
To the Board of Directors and Stockholders of Berger Holdings, Ltd.
 
  Under date of March 3, 1999, we reported on the consolidated balance sheet
of Berger Holdings, Ltd. and subsidiary as of December 31, 1998, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year then ended. In connection with our audit of the
aforementioned consolidated financial statement, we also audited the related
consolidated financial statement schedule, as of December 31, 1998, as listed
in the accompanying index (item 14). This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our audit.
 
  In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
 
KPMG
 
Philadelphia, PA
March 3, 1999
 
                                      S-1
<PAGE>
 
  2. Financial statement schedules--The following consolidated financial
statement schedules are included herein:
 
                                  SCHEDULE II
 
                             BERGER HOLDINGS, LTD.
                       VALUATION AND QUALIFYING ACCOUNTS
 
             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   Charged                 Balance at
                         Beginning   Cost and   to Other                    End
      Description        of Period   Expense   Accounts(1) Deductions(2) of Period
      -----------        ---------- ---------- ----------- ------------- ----------
<S>                      <C>        <C>        <C>         <C>           <C>
1998 Accounts
 Receivable--
  Allowance for doubtful
   accounts.............  $43,000    $ 5,930    $    --       $18,930     $ 30,000
  Inventory reserves....   46,000        --      100,000          --       146,000
1997 Accounts
 Receivable--
  Allowance for doubtful
   accounts.............  $43,000    $12,107    $    --       $12,107     $ 43,000
  Inventory reserves....   46,000        --          --           --        46,000
1996 Accounts
 Receivable--
  Allowance for doubtful
   accounts.............  $43,000    $   999    $    --       $   999     $ 43,000
  Inventory reserves....   46,000        --          --           --        46,000
</TABLE>
--------
(1) Includes reserves for inventory of business acquired.
(2) Write off of uncollectible accounts.
 
  All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are included in the financial statements or the
notes thereto and therefore have been omitted.
 
                                      S-2
<PAGE>
 
3. Exhibits
 
<TABLE>
<CAPTION>
 Exhibit
 Number                Title                          Method of Filing
 -------               -----                          ----------------
 <C>     <C>                                <S>
   2(a)  Debtor's Third Amended Joint Plan  Incorporated by reference to
         of Reorganization                  Exhibit 1 of the Company's Current
                                            Report on Form 8-K filed on March
                                            31, 1993 (the "March 1993 8-K")
 
   2(b)  Third Amended Disclosure           Incorporated by reference to
         Statement for Debtor's Amended     Exhibit 2 of the March 1993 8-K
         Joint Plan of Reorganization
 
   2(c)  Settlement Agreement by and        Incorporated by reference to
         between the Registrant and         Exhibit 4 of the March 1993 8-K
         Meridian Bank
 
   3(a)  Articles of Incorporation          Incorporated by Reference to
                                            Exhibit 3 of the Registration
                                            Statement on Form S-18 filed
                                            February 15, 1983 (File No. 2-
                                            81851-W) (the "1983 Registration
                                            Statement")
 
   3(b)  Articles of Amendment dated        Incorporated by reference to
         November 29, 1989                  Exhibit 3(b) of the Annual Report
                                            on Form 10-K for the year ended
                                            December 31, 1989 (the "1989 Form
                                            10-K")
 
   3(c)  Articles of Amendment effective    Incorporated by reference to
         July 30, 1990                      Exhibit 3(c) to Amendment No. 1 to
                                            the Registration Statement on Form
                                            S-1 filed on October 15, 1990
                                            ("Pre-Effective Amendment No. 1")
                                            (File No. 33-35898)
 
   3(d)  Amended and Restated Bylaws        Incorporated by reference to
                                            Exhibit 3(d) of the Registration
                                            Statement on Form S-1 filed June
                                            16, 1993 (the "1993 Form S-1")
                                            (File No. 33-64468)
 
   3(e)  Articles of Amendment dated July   Incorporated by reference to
         22, 1993                           Exhibit 3(e) of the Annual Report
                                            on Form 10-K for the year ended
                                            December 31, 1993 (the "1993 Form
                                            10-K")
 
   3(f)  Articles of Amendment dated        Incorporated by reference to
         December 29, 1997                  Exhibit 3(f) of the Annual Report
                                            on Form 10-K for the year ended
                                            December 31, 1997
 
   4(a)  Form of 1993 Private Placement     Incorporated by reference to
                                            Exhibit 4(g) of the 1993 Form S-1
 
   4(b)  Form of Consulting Warrant by and  Incorporated by reference to
         between the Company and Universal  Exhibit 4(h) of the 1993 Form S-1
         Solutions, Inc.
 
   4(c)  Form of 1993 Private Placement     Incorporated by reference to
         Warrant No. 2                      Exhibit 4.9 of the Registration
                                            Statement on Form S-3 filed January
                                            21, 1994 (the "Form S-3") (File No.
                                            33-82152)
 
   4(d)  Form of Consulting Warrant         Incorporated by reference to
                                            Exhibit 4.10 of the Form S-3
 
  10(a)  Lease Agreement between Berger     Incorporated by reference to
         Bros. Company and Feasterville     Exhibit 10(i) of the 1989 Form 10-K
         Associates dated May 30, 1989
 
  10(b)  Addendum to Lease Agreement        Incorporated by reference to
         between Berger Bros. Company and   Exhibit 10(j) of the 1989 Form 10-K
         Feasterville Associates dated May
         30, 1989
 
</TABLE>
<PAGE>
 
<TABLE>
<CAPTION>
 Exhibit
 Number                Title                          Method of Filing
 -------               -----                          ----------------
 <C>     <C>                                <S>
  10(c)  Cobra Ridge Vent Sale Agreement    Incorporated by reference to
                                            Exhibit 10(r) of the Annual Report
                                            on Form 10-K for the year ended
                                            December 31, 1993
 
  10(d)  Employment Agreement between       Filed Herewith
         Berger Holdings, Ltd. and
         Theodore A. Schwartz
 
  10(e)  Employment Agreement between       Filed Herewith
         Berger Holdings, Ltd. and Joseph
         F. Weiderman
 
  10(f)  Employment Agreement between       Filed Herewith
         Berger Holdings, Ltd. and Paul L.
         Spiese, III
 
  10(g)  Stock Purchase Agreement, dated    Incorporated by Reference to
         as of February 7, 1997, by and     Exhibit 2.1 of the Company's Report
         between Berger Holdings, Ltd. and  on Form 8-K filed on February 20,
         Roger M. Cline                     1997 (the "February 1997 8-K")
 
  10(h)  Amendment to Stock Purchase        Incorporated by Reference to
         Agreement, dated as of February    Exhibit 2.2 of of the February 1997
         7, 1997, by and between Berger     8-K
         Holdings, Ltd. and Roger M. Cline
 
  10(i)  Asset Purchase Agreement dated as  Incorporated by reference to
         of December 3, 1997, by and among  Exhibit 2.1 of Company's Report on
         the Registrant, Obdyke and the     Form 8-K filed on January 20, 1998,
         Shareholders of Obdyke             as amended (the "January 1998 Form
                                            8-K")
 
  10(j)  Preferred Stock Purchase           Incorporated by reference to
         Agreement, dated as of December    Exhibit 2.2 to the January 1998
         17, 1997, by and among the         Form 8-K
         Registrant, Tandem and Argosy
 
  10(k)  Debenture Purchase Agreement,      Incorporated by reference to
         dated as of December 17, 1997, by  Exhibit 2.3 to the January 1998
         and among the Registrant, Tandem   Form 8-K
         and Argosy
 
  10(l)  Amended and Restated Loan and      Incorporated by reference to
         Security Agreement, dated as of    Exhibit 2.4 to the January 1998
         January 2, 1998, by and among      Form 8-K
         Berger Financial Corp., a
         Delaware corporation, Berger
         Bros. Company, a Pennsylvania
         corporation and Summit Bank, N.A.
 
  10(m)  Amendment to Amended and Restated  Incorporated by reference to
         Loan and Security Agreement,       Exhibit 2.2 to the Company's
         dated as of December 31, 1998, by  Current Report on Form 8-K, dated
         and among Berger Financial Corp.,  December 22, 1998
         a Delaware Corporation, Berger
         Bros Company, A Pennsylvania
         corporation and Summit Bank, N.A.
 
  21     Subsidiaries of the Company        Incorporated by reference to
                                            Exhibit 22 to the 1989 Form 10-K
 
  23.1   Consent of KPMG LLP                Filed Herewith
 
  23.2   Consent of Goldenberg Rosenthal    Filed Herewith
         LLP
 
  27     Financial Data Schedule            Filed Herewith (EDGAR version only)
</TABLE>
<PAGE>
 
  All other exhibits for which provision is made in the applicable regulations
of the Securities and Exchange Commission are not required under the related
instructions or are inapplicable and therefore have been omitted.
 
(b) Reports on Form 8K:
 
  Current Report on Form 8-K, filed with the Securities and Exchange
Commission on November 25, 1998, reporting on Item 4 of Form 8-K, as amended
by a Current Report on Form 8-K/A, filed December 7, 1998, reporting on Item 4
of Form 8-K.
 
  Current Report on Form 8-K, filed with the Securities and Exchange
Commission on December 22, 1998, reporting on Items 2 and 7 of Form 8-K, as
amended by a Current Report on Form 8-K/A, filed February 22, 1999, reporting
on Items 2 and 7 of Form 8-K. This Current Report on Form 8-K/A contains the
financial statements of Sheet Metal Manufacturing Company, Inc. as of and for
the nine months ended September 30, 1998 and the years ended December 31,
1997, 1996 and 1995, as well as certain pro-forma financial information, all
relating to the Sheet Metal Acquisition.
<PAGE>
 
                                  SIGNATURES
 
  Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Form 10-K to be signed on its behalf by the
undersigned, thereunto duly authorized on the 30th day of March, 1998.
 
                                          Berger Holdings, Ltd.
 
                                                /s/ Theodore A. Schwartz
                                          By: _________________________________
                                                    Theodore A. Schwartz
                                                  Chief Executive Officer
 
  Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
 
<TABLE>
<CAPTION>
              Signature                          Title                   Date
              ---------                          -----                   ----
 
<S>                                    <C>                        <C>
     /s/ Theodore A. Schwartz          Chief Executive Officer      March 30, 1999
______________________________________  and Chairman of the Board
         Theodore A. Schwartz           (Principal Executive
                                        Officer)
 
     /s/ Paul L. Spiese, III           Director                     March 30, 1999
______________________________________  Vice President
         Paul L. Spiese, III
 
     /s/ Joseph F. Weiderman           President, Chief Operating   March 30, 1999
______________________________________  Officer and Director
         Joseph F. Weiderman
 
         /s/ Larry Falcon              Director                     March 30, 1999
______________________________________
             Larry Falcon
 
     /s/ Jacob I. Haft, M.D.           Director                     March 30, 1999
______________________________________
         Jacob I. Haft, M.D.
 
       /s/ Dr. Irving Kraut            Director                     March 30, 1999
______________________________________
           Dr. Irving Kraut
 
           /s/ Jay Seid                Director                     March 30, 1999
______________________________________
               Jay Seid
 
       /s/ John Paul Kirwin            Director                     March 30, 1999
______________________________________
           John Paul Kirwin
 
   /s/ Francis E. Wellock, Jr.         Chief Financial Officer      March 30, 1999
______________________________________  (Principal Financial and
       Francis E. Wellock, Jr.          Accounting Officer)
</TABLE>
 
                                      S-1