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

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

                                   FORM 10-KSB

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

         For the fiscal year ended March 31, 1999

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

         For the transition period from ________ to _________

                           Commission File No. 1-6107

                                SKLAR CORPORATION
           (Name of Small Business Issuer as specified in its charter)



       Pennsylvania                                    44-0625447
(State or other jurisdiction of             (I.R.S. employer identification
incorporation or organization)                          Number)



                            889 South Matlack Street
                             West Chester, PA 19382
               (Address of principal executive offices) (Zip code)



                                 (610) 430-3200
              (Registrant's telephone number, including area code)

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

                                      None

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

                          Common Stock, $.10 par value
                                (Title of class)

<PAGE>

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

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will 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-KSB
or any amendment to this form 10-KSB. [ X ]

         Issuer's revenues for the fiscal year ended March 31, 1999 were
$13,206,557.

         State the aggregate market value of the voting stock held by
non-affiliates of the registrant as of a specified date within 60 days prior to
the date of the filing. There have been no reported trades within the last
twelve months on which to base a determination of market value. The Company
filed a Transaction Statement on Schedule 13E-3 and a related Proxy Statement
under Regulation 14(a) in connection with a proposed going private transaction
and related one for 50,000 reverse split of the Company's Common Stock. If
approved, the price to be paid for fractional shares in the transaction is $.46
per share. Based on such price per share, the aggregate market value of common
stock held by non-affiliates was $61,653.

         As of June 1, 1999 there were 1,104,940 shares of the issuer's Common
Stock outstanding.



                                      -2-

<PAGE>
<TABLE>
<CAPTION>
          TABLE OF CONTENTS

ITEM                                                                                                    PAGE

                                                                PART I
<S>      <C>                                                                                             <C>
1.       Business.....................................................................................     4
2.       Properties...................................................................................    14
3.       Legal Proceedings............................................................................    14
4.       Submission of Matters to a Vote of
         Security Holders.............................................................................    15

                                                                PART II

5.       Market for the Registrant's Common
         Equity and Related Stockholder
         Matters......................................................................................    16
6.       Management's Discussion and Analysis
         of Financial Condition and Results
         of Operations................................................................................    17
7.       Financial Statements.........................................................................    20
8.       Changes in and Disagreements with
         Accountants on Accounting and Financial
         Disclosure...................................................................................    20

                                                               PART III

9.       Directors and Executive Officers
         of the Registrant............................................................................    20
10.      Executive Compensation.......................................................................    22
11.      Security Ownership of Certain Beneficial
         Owners and Management........................................................................    25
12.      Certain Relationships and Related
         Transactions.................................................................................    26
13.      Exhibits and Reports on Form 8-K.............................................................    28
         Signatures...................................................................................    29
</TABLE>


                                      -3-
<PAGE>
PART I

Item 1.  Business

General

         The Company imports and distributes high quality medical and surgical
instruments, including dental and veterinary instruments in the United States.

Recent Developments

         The Company has filed a Transaction Statement on Schedule 13E-3 and a
related Proxy Statement under Regulation 14(a) in connection with a proposed
going private transaction and related one -for-50,000 reverse stock split of the
Company's Common Stock, which would result in the reduction of the number of
shares of Common Stock issued and outstanding from 1,104,940 shares to 12 shares
and a cash payment of $.46 per share, in live of the issuance of any
transactional shares of common stock following the reverse split. After the
reverse stock split, the Company will be able to cease being a reporting company
under the Exchange Act, and the Company would no longer file annual and
quarterly reports, proxy statements, and other documents with the SEC.

         In addition, the Company would no longer be required to comply with the
proxy rules of Regulation 14A promulgated under Section 14 of the Exchange Act,
and its officers, directors and 10% or greater stockholders would no longer be
subject to the reporting requirements and "short swing" security trading
restrictions under Section 16 of the Exchange Act. Continuing stockholders will
no longer be entitled to receive annual reports and proxy statements.

Organization

         The Misdom-Frank Corporation ("MFI") was incorporated in 1938 in the
State of Delaware to import and distribute high quality German surgical
instruments in the United States. The product line was subsequently broadened to
include dental and veterinary instruments. In 1983 MFI merged with Medco Jewelry
Corporation and the name of the Company was changed to Medco Group Incorporated
("Medco"). In 1984 the jewelry operation was closed. In 1985 Medco purchased
substantially all of the assets (other than real estate) and certain liabilities
of the J. Sklar Manufacturing Co., Inc. , a well-respected manufacturer and

                                      -4-
<PAGE>
distributor of surgical instruments that had been in continuous operation since
1892. In 1986 the entire operation was moved to West Chester, Pennsylvania.
Medco was subsequently reincorporated in Pennsylvania in 1990 and in 1993
changed its name to Sklar Corporation.

         The Company made the following acquisitions since 1986.

1.            Dental   Corporation  of  America  ("DCA")  Acquired  in  1990  to
              strengthen  the Company's  strategic  position in the dental sales
              segment.

2.            Simpson/Bayse ("S/B") in 1993. The Company purchased certain
              assets of S/B to expand its obstetrical and gynecological line and
              strengthen the Company's strategic position. Although the Company
              has ceased marketing under the Simpson/Bayse trade name, many of
              the products from the Simpson/Bayse line have been integrated into
              Sklar's product line.

3.            Herwig Division-General Medical Corporation ("GMC") in 1994. This
              purchase included inventory, certain assets and a marketing
              agreement whereby the Company supplied GMC with the surgical
              instrument needs of its customers for a fifty-month term. This
              agreement has since been extended for an additional fifty months.
              The purchase and marketing agreement opened GMC's supply chain to
              the Company, strengthening its position in primary and acute care
              markets and serves as a model for other large vendor
              relationships.

4.            Surgical Marketing Specialists, Inc. ("SMS") in 1996. The purchase
              was an asset purchase of certain inventory, customer lists, and
              rights. The focus of the purchase was to (i) meet the needs of the
              Company's customers in a consolidating medical supply environment
              and (ii) acquire product lines whose values could be leveraged
              with the Sklar brand name.

5.            Dittmar Inc. in 1999. The purchase was an asset purchase of
              certain inventory, customer lists, and rights. This purchase added
              a small incremental sales volume and a new I.V. product line for
              the Company's new catalog.



                                      -5-
<PAGE>

         The Company currently markets products through two divisions. The
surgical instrument division is made up of lines that are primarily hand held
surgical instruments, products that are complementary such as the instrument
care and cleaning line, line extensions such as sterile procedure kits, and new
low cost/low margin disposables such as scalpels and blades. The surgical
instrument division accounts for 94.1% of the Company's revenue. Due to the
combination of the Sklar brand name and the Company's relationships with the
largest full line medical products distributors, the Company believes itself to
be a "supply chain manager" rather than a traditional distributor. The
orthodontics division accounts for 5.9% of the Company's revenue as a "direct
seller" to a niche market of orthodontists.

Products

         The surgical instrument division is made up of the combined Sklar,
Dittmar, and SMS product lines. The Company strategy is to concentrate on
promoting instruments of general use for which demand is recurring such as
scissors, hemostats, and needle holders, rather than to emphasize instruments of
special use for which significant research and development expenditures are
required to compete with companies with greater financial resources. The major
medical areas of specialization utilizing the Company's instruments are
dermatology, cardiology, obstetrics and gynecology, plastic surgery, neurology,
orthopedics, ENT, microsurgery, laparoscopic, central supply, and general
surgery.

         Surgical instruments stocked by the Company are primarily manufactured
in Germany and Pakistan. German instruments are typically considered by
consumers to be of a higher quality and are primarily used in operating rooms.
Pakistani products are lower priced and used in those areas of the hospital
where disappearance rates are high and the requirement for precision is lower;
and in sterile procedure kits.

         During the last year the Company focused on strengthening its
relationships with key accounts and the addition of new product groups to its
product line. These products include specialty medical sponges, sterile
processing products, disposable gynecological instruments, instrument trays,
containers and related medical accessories. As with the new product groups
introduced the preceding last year, these new items were chosen to take
advantage of, (i) the consolidating medical supply environment, (ii) the



                                      -6-
<PAGE>

shifting age demographics of the general population and, (iii) the desirability
of disposable products that are safer for the healthcare worker, and save labor
and energy for the end user. The new items added to the line in the past two
years form a cohesive category that the Company has integrated into its new
"Disposable and Central Supply Catalog". This catalog, printed in June 1999,
will be introduced to customers during the current fiscal year. The Company
believes these new products, if they gain market acceptance, will increase the
Company's net sales. Although the sales from these products last year were not
sufficient to affect gross margin, as the sales from these new products
increase, the Company expects a decline in gross margin since disposable
products generally carry a lower percentage profit than non-disposable
instruments. While the Company has successfully test marketed several new
disposable products, there are no assurances that all of these new products will
find customer acceptance due to potential conflicts with existing distributor
product lines and existing group purchasing organization ("GPO") vendor
contracts.

         In March 1999, the Company purchased inventory and selected assets of
the Dittmar Instrument Company. While the incremental sales from Dittmar, do not
materially affect Sklar, the Company did acquire a new I.V. product line, which
is incorporated in its new catalog.

         The Company is currently developing independent Internet sites for the
Sklar and DCA brands. The sites provide a forum for the introduction of new
products, surgical resources for customers, customer assistance and a developing
online catalog, which will aid our distributor customers and end users.

         The Company continues to explore the acquisition of companies, and the
acquisition or development of additional products in order to augment its lines.
Sklar will attempt to leverage the value and marketability of acquired products
using the Sklar brand name, marketed through current distribution channels.

Markets

         The continuing trend in the healthcare industry is the move to managed
care and its resulting emphasis on cost reduction. This places significant


                                      -7-
<PAGE>

pressure on pricing as well as product utilization and has caused the
consolidation of distributors, GPO's, hospitals and other end users. Healthcare
is more often being provided in a variety of alternative care centers ranging
from sub-acute care to freestanding surgery centers to doctors' offices.
Management believes the Company is positioned to reach all of these markets. The
Company either has or is pursuing contracts and/or agreements with the major,
full line, distributors to these markets. Although the contracts and agreements
do not guarantee exclusivity, it has been the Company's experience that once its
products are accepted by the distributor, the products are sold ahead of the
competition. The Company's strategy is to leverage this effort through its own
inside and outside sales force that markets directly to the end user to cause
pull through demand. The Company has continued its pursuit of GPO contracts and
during the past year signed several local, regional and national contracts. To
date, the Company has just begun developing these contractual relationships and
they are currently not producing significant sales growth. It is the Company's
intention to continue to pursue GPO contracts, however the Company's late entry
to this market may place it at a disadvantage when competing against instrument
companies with existing contracts. Although the Company has signed local
contracts, it has not yet successfully executed regional and national GPO
contracts to the point of material sales growth. Generally hospitals belong to
local, regional and national buying groups. Sklar's risk is that although it has
local contracts, the regional and national purchasing contracts often override
these local agreements.

         The market for the Company's products is also affected by the aging
population. The increasing average age of the population increases the use of
cardiology, orthopedic, laparoscopic and neurology products. The Company is
attempting to strengthen these product lines by the addition of new items while
maintaining a strong presence in areas such as obstetrics and gynecology, as
well as the introduction of disposable products. The Company maintains and will
expand its products utilized in minimally invasive surgery which is both a
characteristic of preventive care and one of the key elements in reducing
hospital length of stay .

         The Company markets its products through the medical distribution
network of large and small dealers. The Company's products are advertised in
trade periodicals and also exhibited at industry trade shows. The Company has
approximately 5,000 active accounts. Approximately 4,000 of these are small


                                      -8-
<PAGE>

volume DCA customers. As a result of the continuing industry consolidation the
Company's sales are concentrated among its few largest customers which account
for approximately 56% of the Company's volume.

Sources of Supply

         Instruments

         Instruments are purchased from approximately 115 suppliers primarily in
Germany and Pakistan. Purchases from these vendors are paid for in Deutsche
Marks and U.S. dollars respectively. These instruments are produced to the
Company's exacting specifications, generally under non-exclusive arrangements.
Although the Company and its competitors primarily sell instruments utilizing
standard patterns which are not patented, the Sklar product lines include a
number of items of unique design with Sklar brand identity.

         Disposable and Other Products

         Disposable products are purchased from approximately 20 vendors in the
United States and the world. Payment for these items are made in U.S. dollars.
These products are not sourced from the traditional instrument vendors. The
disposable products carry the Sklar brand name and packaging with an ordering
lead-time of up to six months.

         Instrument Inventory and Lead-Time

         Although the changing healthcare market has enabled the Company to make
less of its purchases in foreign currency the Company's earnings can still be
affected by currency fluctuations. The substantial lead times between order date
and delivery date (ranging up to six months) require that the Company maintain
substantial inventory levels to serve its customers' needs. This is due to the
fact that high fill rates and quick delivery are key to maintaining competitive
advantage. The Company believes that its operations do not differ materially
from other companies in the industry with respect to inventory carrying costs.



                                      -9-
<PAGE>

Competition

        The Company is faced with two distinct types of competitors. One is the
"direct selling" company. The other is the "dealer oriented" company. The
"direct selling" companies are manufacturers that are typically divisions of
large corporations having their own sales force who call on and sell directly to
the end-user, primarily hospitals. The "dealer oriented" companies tend to be
smaller and with the exception of the Company, privately owned. The "direct
selling" companies account for approximately 70% of the sales to end users but
the Company believes the market share held by "dealer oriented" companies such
as itself, has been stable in recent years. The Company believes that the
"dealer oriented" companies control approximately 30% of the instrument market.
The Company believes that there are approximately three significant "dealer
oriented" companies and six "direct sales" companies.

Competitive Strengths

         The Company believes the following factors have been critical to its
success to date and will be important in realizing growth potential in the
future.

         Broad Product Offering

         The Company offers a broad range of products consisting of over 10,000
unique items (SKU's) for use in a wide range of procedures. Within the broad
range of products are distinct "grades" of products. The Company's customers may
purchase the same device in a low cost disposable version, the finest crafted
German version, or four grades and prices in between, depending upon the
application and the customer's budgetary requirements.

         Established Relationships With Distributors

         The Company either has contracts or agreements with the major industry
distributors or is pursuing them. These agreements provide for "preferred
status" or some form of "partnering" agreement, giving the Company access to the
distributors supply chain. Not only is this important in view of the pressure in
the healthcare industry to consolidate suppliers, it is the method by which the
Company will seek to put its new products into the market. The large
distributors have extensive sales forces allowing the Company to have access to
a significantly larger number of end users than would be possible through its
own sales organization.

                                      -10-
<PAGE>

         Leveraged Sales Organization

         The Company employs more than thirty-five sales and marketing
personnel. It develops specialty catalogs, extensive promotions and sample
programs in-house. Active coordination of these programs through the distributor
sales organization to the end user, leverages Sklar's sales effort into a much
larger presence in the market.

         Customer Service Focus

         The Company's sales and service operation provides customers with fast,
knowledgeable responses to their inquiries, fast and accurate order turnaround,
and is Electronic Data Interchange ("EDI") capable.

         Sklar Brand Name

         The Company believes its Sklar brand name is well recognized and has
been highly respected for over 107 years. Although the Company maintained the
lines it acquired through acquisitions for many years such as Herwig and Germain
Prime, it is currently reducing the number of SKU's in those lines to only the
products with the highest demand with the plan of eventually phasing the lines
out entirely. Additional lines that are completely different from the Sklar line
of hand-held surgical instruments, such as disposables, sterile kits, and
syringes, are being brought under the Sklar umbrella. The Company believes this
process to be effective in the marketplace and will streamline and lower the
costs of internal operations.

         The Leverage of the Sklar Brand Name and The Sales Organization Through
         New Products and Supply Chain Management.

         The Company believes its highly visible and well respected Sklar name
will enable it to continue to create successful partnering agreements with major
distributors further enhancing its sales organization. To take full advantage of
the supply chain it has created, the Company plans to continuously develop or
acquire new products that are branded Sklar and managed through the supply chain
to the end user.



                                      -11-
<PAGE>

         Patents and Trademarks

         The Company has no material patents. The Company has registered the
following trademarks: "Misdom-Frank", "Merit", "MIFCO", "Ralks", "Sklar",
"SklarCut", "SklarHone", "SklarKleen", "Sklar Polish", "SklarLite", "Sklar
Lube", "Sklar Soak", "Sklar Disinfectant", "Sklarlite", "SklarGrip",
"SklarEdge", "SklarFresh", "Sklar InstruGuard", "SurgiOR", "Econo", "SMS",
"Dittmar", "Herwig", "DCA", "TraGinAte", and "KnoKurl". The recognition of these
trademarks is considered to have significant commercial value.

Government Regulation

         The Company's products are medical devices and as such are subject to
the provisions of the Federal Food, Drug and Cosmetic Act ("FDCA") and
implementing regulation. Pursuant to the FDCA, the Food and Drug Administration
("FDA") regulates the manufacturing, distribution, labeling, and promotion of
medical devices in the U.S. Additionally, various foreign countries in which the
Company's products are or may be distributed impose additional regulatory
requirements.

         The FDCA provides that, unless exempted by regulation, medical devices
may not be distributed in the U.S. unless they have been approved or cleared for
marketing by the FDA. The vast majority of the Company's products are Class I
devices that have been exempted by regulation and do not require approval. A
very few products have been qualified for clearance to be marketed under section
510 (k). Under this section, the Company requires the manufacturer to provide a
pre-market notification that it intends to begin marketing the product and shows
that the product is substantially equivalent to another legally marketed
product.

         The FDCA requires that all medical device distributors register with
the FDA annually. Distributors must also comply with labeling requirements,
Quality System Regulations, and good manufacturing practices (GMP). The FDA
inspects medical device distributors and has authority to seize non-complying
medical devices, to enjoin and/or impose civil penalties on distributors


                                      -12-
<PAGE>

marketing non-complying medical devices, to criminally prosecute the violator
and to order recalls in certain instances. The Company believes it is in full
compliance with all FDCA, GMP, and Quality System Regulations.

          Since a large percentage of its products are imported, the Company is
also subject to regulation by the U.S. Customs Service, particularly relating to
"country of origin" markings. The Company believes it is in full compliance with
all regulations.

         To the extent they apply, the Company believes it is in compliance with
all regulatory requirements of OSHA, EPA, and others.

Research and Development

         Generally the Company is a distribution company and does not perform
research and development of new products.

Costs of Compliance to Environmental Regulations

         The Company incurs minimal costs associated with environmental laws and
regulations.

Employees

         The Company currently has approximately seventy employees including its
principal executive officers. None of its employees are covered by collective
bargaining agreements. The Company believes its employee relations are
satisfactory. The Company provides a 401(k) savings plan with matching
contribution and profit savings features.



Year 2000 Issues

         The Company has retained a consulting firm to assist the Company in
determining any Year 2000 weaknesses and to aid the Company in converting its
information systems from a mainframe/mini computer based system to a NT SQL
compliant database system. The Company uses a management information system to
process orders, and to control the purchasing and distribution functions of the
company's business. Additionally, the system provides information and reports
that management needs to monitor the operations and make informed decisions.


                                      -13-
<PAGE>

Management has done preliminary tests on the current application software and
underlying database and found it to be Year 2000 compliant. It is anticipated
that full conversion to new hardware, software and operating environment will be
completed by September, 1999, with the final testing to be completed by October,
1999. Support software, including Sales Management software, Accounting
software, EDI software, and General Office software, is the most current
versions, all of which were purchased and installed during 1997 through 1999.
The Company believes these to be fully compliant. Testing of these products will
occur in the 3rd quarter of 1999.

         The Company's consulting firm will be communicating with key customers
to coordinate Year 2000 compliance with the EDI transmissions. The Company's
products contain no electronic parts and therefore, no compliance issues exist.

Item 2.  Properties

            The Company's executive offices, warehouse, and all operations are
presently located at 889 South Matlack Street, West Chester, Pennsylvania,
19382. The building consists of approximately 10,000 square feet of office space
and 12,500 square feet of warehouse space and is leased at an annual rental of
$232,800. The current lease expires December 11, 2008. The Company believes its
current space sufficient for the core business needs of handheld surgical
instruments. However, as the sales of the new disposable line increase,
additionally warehouse space will be required. The Company is currently in
negotiations to lease additional local warehouse space for these bulk products.

Item 3.  Legal Proceedings

         The Company filed suit in 1992 against the former principal of DCA for
violating the terms of a non-compete agreement signed as part of a re-negotiated
settlement for the purchase of DCA. The suit seeks the return of all monies paid
to the former principal. The case is currently under appeal to the Superior
Court of Pennsylvania and no assessment of the outcome of the case has been made
by counsel. Payments for DCA have been suspended since September 1996.
Settlement negotiations are currently ongoing and a satisfactory outcome is
anticipated.



                                      -14-
<PAGE>

         Settlement was reached prior to arbitration in the matter of the asset
purchase agreement with SMS. The settlement was to the satisfaction of the
Company although certain inventory has been written off as a result of its
non-saleable properties. Certain other inventory may be written off as well.

         The Company filed suit in the Court of Common Pleas for Chester County,
Pennsylvania against an entity knows as "Endo-Surgical Systems, Inc." ("ENDO")
in February of 1998. Endo is controlled by the Company's former Controller. The
suit alleges misappropriation of trade secrets and conversion, tortious
interference with existing contractual relations, and tortious interference with
prospective economic advantage. Injunctive relief is sought in addition to
damages, costs, and fees. In December of 1997, the Company also filed in the
court of Common Pleas for Chester County, a Writ of Summons against the former
controller, personally. The Company then conducted a fact-finding effort and, as
a result, a complaint was filed in May of 1998. The complaint alleges, among
other things, that the former Controller has violated the standards of conduct
in the practice of public accounting and engaged in misappropriation of trade
secrets and conversion, breach of fiduciary duties and confidential
relationship, tortious interference with existing contractual relationships,
tortious interference with prospective economic advantage, defamation and trade
libel, breach of contract, and fraud and misrepresentation. Injunctive relief,
damages, costs and fees are sought. Defendants in both cases have filed counter
claims and the litigation is ongoing. Trial date for this action has been
scheduled for September, 1999.

Item 4.  Submissions of Matters to a Vote of Security Holders

         No matters were submitted to a vote of the holders of the Company's
Common Stock during the fourth quarter of the Company's fiscal year ended March
31, 1999.

         The Company filed a preliminary proxy statement and a Schedule 13-E3
with the Commission on January 14, 1999 for the purpose of effectuating a
reverse split of its common stock. If effected, it will allow the Company to
cease to be a reporting company under Section 12. See Item 1. Recent
Developments. A special meeting of shareholders will be held for the purpose of


                                      -15-
<PAGE>

voting on the reverse split proposal. No date has yet been set, although the
Company anticipates that the meeting will be held in August, 1999.

PART II

Item 5.  Market for the Registrant's Common Stock and Related Security
         Holder Matters

         Except for limited or sporadic transactions, there is no established
public trading market for the Common Stock of the Company.

         As of June 1, 1999 the Company had 766 holders of record of its Common
Stock. The Company believes there are approximately 1000 beneficial owners of
the Company's Common Stock.

         The Company has not paid any dividends on its Common Stock and does not
foresee that it will pay dividends on its Common Stock in the near future. Under
the terms of the Company's bank agreements, the Company may not pay any
dividends without the consent of the bank. Additionally, under the terms of the
Company's Series A Preferred Stock issue, no dividends may be paid on the Common
Stock until full cumulative dividends have been paid upon the Preferred Stock.
Under the terms of the Company's Series A Preferred Stock, an annual dividend of
$12.50 per share accrues cumulatively on June 30. No dividends are payable
unless declared by the Board of Directors. On June 17, 1985 the Board of
Directors voted not to declare the first such dividend (which would have been
paid June 30, 1985). Due to operating cash requirements and bank restrictions,
the Board of Directors has continued to decline to declare dividends in all
subsequent years.

         Under the terms of the Preferred Stock, if there exists cumulative
unpaid preferred dividends, the holders of the Series A Preferred Stock, voting
separately as a class, are entitled to elect a number of additional directors to
the Board of Directors of the Company sufficient to cause such directors to be a
majority of the Board. Currently of the five Board members four are holders of
Preferred Stock. These Board members and Preferred Stockholders own or control


                                      -16-
<PAGE>

approximately 58.1% of the outstanding preferred stock. See Management's
Discussion and Analysis of Financial Condition and Results of Operations.



Item 6.  Management's Discussion and Analysis of Financial Conditions and
         Results of Operations

         The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition. This discussion should
be read in conjunction with the financial statements and notes thereto appearing
elsewhere herein.

         The following table sets forth, for the periods indicated, the
percentage of net sales for certain items in the Company's Statements of Income
for each period:

                           Income and Expense Items as a Percentage of Net Sales

                                            Years Ended March 31

                                                      1999         1998
         Net Sales                                   100.0%       100.0%
         Cost of Sales                                52.9         55.5
         Gross Profit                                 47.1         44.5
         Selling, General & Admin. Expenses           43.4         40.0
         Other Expense                                 0.0          0.1
         Income Before Interest & Taxes                3.7          4.4
         Interest Expense                              1.2          2.3
         Income Before Income Taxes                    2.5          2.1
         Net Income                                    2.1          1.8



                                      -17-
<PAGE>


Results of Operations

1999 Compared to 1998:

         Net sales for 1999 decreased 4.1% from 1998. Competitive pressures
contributed greatly to this fact. The loss of a major bulk commodity Pakistan
instrument customer during 1998 had a full year impact on sales in 1999.
Management believes that effect of these events will be overcome by the
introduction of the new disposable product line and there will be no long-term
effect on future sales growth.

         Cost of sales, as a percent of sales decreased from 55.5% in 1998 to
52.9% in 1999. Product mix accounts for part of this especially considering the
loss of low margin sales referred to above and the favorable effect that loss
had on gross margin percentages. The exchange rate effect on purchases of German
products continued in a favorable direction and the currency gain experienced in
1999 was $135,919 compared to $103,169 in 1998. Management believes that the
decrease in the cost of sales is a short term aberration. GPO contract pricing,
key account agreements, and the increasing influence of new disposable products
are still expected to reduce gross margin over the next few years.

         Selling, general and administrative expenses for fiscal 1999 increased
$222,972 or 4.0% from fiscal 1999. Payroll and fixed labor related costs were
consistent with the prior year. Professional fees related to ongoing litigation
and proposed going private transaction and related reverse stock split have
contributed largely to the increase.

Effects of Dollar Strength

         In 1999 and 1998 the Company purchased 51.4% and 40.7%, respectively,
of its medical instrument products in Deutsche Marks. Orders are placed in
Deutsche Marks and payment is made within three to six months after the order is
placed. The Company has engaged in forward purchases of foreign currency. During
the year ended March 31, 1999, the Company's involvement in this activity, which
generally equates to one to two months of anticipated purchase payment, provided
an effective hedge against the potential for increases in the cost of purchasing
German Deutsche Marks. The effect on earnings during the year was immaterial.


                                      -18-
<PAGE>

During 1999 the Deutsche Mark continued to weaken against the dollar resulting
in a $135,919 benefit to the Company. A similar effect of the dollar
strengthening in fiscal 1998 resulted in a gain for the year of $103,169. Should
the Deutsche Mark increase in cost relative to the dollar the Company would
expect a significant decrease in earnings and a higher cost of goods until the
effect could, if possible, be passed on to the customer as a price increase. In
today's highly competitive medical industry, there is no guarantee that the
Company would be able to pass on a price increase; therefore, the Company's
annual earnings can be affected by the volatility in the value of the dollar to
the Deutsche mark.

Liquidity and Capital Resources

         The Company primarily funds its operations by cash provided by
operating activities. The 1999 income level and recurring non-cash expense
contributed $640,000 to working capital, which amounted to $1,538,000 at March
31, 1999. Increases in trade accounts payable and accrued expenses from 1998,
aggregating $951,000, allowed the Company to eliminate the March 31, 1998 cash
overdraft and significantly pay down the credit line at March 31, 1999.

         The Company's peak short-term borrowing during 1999 existed at the
beginning of the year and generally decreased throughout the year with slight
spikes in borrowing in July and November. Available borrowing under the new line
of credit facility amounted to $758,000 at March 31, 1999. Further decreases in
certain remaining inventory product group redundancies through selloff may
further improve liquidity.

         Capital additions during fiscal 1999 were funded exclusively from
operations. It is felt that normal future capital additions can be funded from
operations. The remaining balance of the SBA loan, in the amount of $160,000,
was paid off during 1999.

         In December , 1998, the Company secured a new credit facility from a
bank, which included a $2,000,000 line of credit, collateralized by the sum of
80% of qualifying accounts receivable plus 50% of eligible inventories. The
inventory component cannot exceed 50% of the borrowing base. Qualifying accounts
receivable and inventories used as a basis for the March 31, 1999 borrowing
totaled $4,573,777. Management believes that cash flows from operations,


                                      -19-
<PAGE>

combined with amounts available under the current bank facility, will be
sufficient to meet the Company's liquidity needs in the foreseeable future.

Item 7.  Financial Statements

         See the Financial Statements listed in the accompanying Index to
Financial Statements on Page F-1 herein. Information required by Schedules
called for under Regulation S-X is either not applicable or is included in the
Financial Statements or notes thereto.

Item 8.  Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosures

         Not Applicable.

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act

         The Directors and Executive Officers of the Company, their ages, their
principal occupations during the past five years or more, and directorships of
each in public companies in addition to the Company are as follows:

         Don Taylor. Mr. Taylor, age 53, was appointed to the Board in November
1988 and was elected President of the Company in January 1989. From 1986 to 1989
he was retained as a "turn around" consultant to the Company. From 1969 to 1982
he owned and operated a chain of drug stores. Additionally, from 1981 until 1986
he owned a consulting firm specializing in the turn around of financially
troubled companies. His experience includes operations, sales and marketing.

         Michael Malinowski.  Mr. Malinowski,  age 45 was appointed to the Board
in April,  1991, and has served as Executive Vice President since 1994 and Chief
Financial  Officer since 1998. He has been employed by the Company since 1986 in
the  positions  of  General  Manager  and  Vice  President  of  Operations.  Mr.
Malinowski has a background in computer systems  management and operations.  His
responsibilities  as  Chief  Financial  Officer  include  the  oversight  of the
financial department and Information Systems.



                                      -20-
<PAGE>

         Michael Viner. Michael Viner, age 51, has been Vice President of
Operations since January, 1999. Prior to joining the company and for the past
four years, Mr. Viner was engaged by the company as a consultant to advise the
company on various operations matters, including warehouse and regulatory
systems. Mr. Viner's background includes 30 years with consulting firms
specializing in productivity improvement and cost reduction for Fortune 500
companies.

         George Kellam.  Mr. Kellam, age 59, was appointed to the Board in 1993.
Mr. Kellam has been the owner and President of G&M. Enterprises,  Inc, a company
which specializes in the advertising and promotional business, for twenty years.

         William R.  Knepshield.  Mr.  Knepshield,  age 64, was appointed to the
Board in 1991.  Mr.  Knepshield  has  twenty-one  years  experience as the Chief
Executive  of  several  publicly  held  companies   involved  with  the  medical
technology field and the inventions of innovative medical devices.  From 1989 to
1993 Mr.  Knepshield  was president and Chief  Executive  Officer of KMI, Inc. a
company  involved in the  development  and sale of  sophisticated  microsurgical
instruments for  opthalmology.  Currently Mr.  Knepshield is president and Chief
Executive  Officer of WBSK,  Inc. which has developed and owns numerous  patents
pertaining to needles and the protection of healthcare workers.

         Albert Wicks.  Mr.  Wicks,  age 50, was appointed to the Board in 1990.
Mr. Wicks has been the owner,  President and Chairman of C&S Medical  Supply,  a
company  specializing in the  distribution of medical  supplies to the physician
market,  for  fourteen  years.  Prior to founding C&S Medical  Supply,  he spent
thirteen  years in sales and  management  of  Foster  Medical,  a  company  that
specializes in sales of supplies to physicians.

Terms of Office

         Directors are elected at each Annual Meeting of Shareholders and serve
for a term of two years. Officers serve at the pleasure of the Board of
Directors.

                                      -21-
<PAGE>
Item 10. Executive and Director Compensation

Summary Compensation Table

         The following table sets forth the aggregate cash compensation paid by
the Company for the fifty-two weeks ended March 31, 1999 to those executive
officers whose salary and bonus exceeded $100,000 and the Chief Executive
Officer.




                                      -22-
<PAGE>


<TABLE>
<CAPTION>
<S>                   <C>     <C>                 <C>           <C>                       <C>           <C>                   <C>
                                                                                                Long-Term Awards
                                         Annual Compensation                                       Compensation
Name and Principal                                             Other Annual          Restricted     Securities          All Other
Position                                                      Compensation             Stock        Underlying        Compensation
                      Year      Salary             Bonus          (1)                 Award(s)       Options

Don Taylor President  1999    $163,096            $26,463       $20,090                   0             0                     0
                      1998    $163,765            $40,000       $12,540                   0             0                     0
                      1997    $170,190               0          $14,561                   0             0                     0



Michael Malinowski    1999    $100,993            $86,758       $65,706                   0             0                     0
Vice Pres., Chief     1998    $103,931            $34,500       $10,281                   0             0                     0
Financial Officer     1997    $125,364                 0        $19,761

</TABLE>



(1)      For 1999, Mr. Taylor's Other Annual Compensation includes
         $5,851automobile allowance and $14,239 matching 401(k) contributions
         and the Company's profit sharing contribution. Profit sharing
         contributions are allocated among all participants in the 401(k) Plan.

         For 1999, Mr. Malinowski's Other Annual Compensation includes $46,000,
         representing the estimated market value of a 100,000 share stock grant
         which was valued at $.46 per share as determined by the Woodward Group
         in connection with reverse stock split. Also included is $5,467
         automobile allowance and $14,239 matching 401(k) contributions and the
         Company's profit sharing contribution.




                                      -23-
<PAGE>

Stock Option Grants

         The Company granted no stock options or stock appreciation rights in
the last fiscal year.
<TABLE>
<CAPTION>
                                                  Aggregated Option Exercises in Last
                                                 Fiscal Year and FY-End Option Values

                                                                                 # of Securities                       Value of
                                                                                 Underlying        Value of            unexercised
                                                                                 Unexercised       unexercised         in-the-money
                       Shares         Value       # of Securities Underlying     Options at        in-the-money        option at
                       acquired on    Realized    Unexercised Options at         FY-End            option at FY-End    FY-End
Name                   exercise (#)   ($) 1       FY-End Exercisable             Unexercisable     Exercisable         Unexercisable
----                   ------------   -------     ------------------             -------------     -----------         -------------
<S>                      <C>           <C>                     <C>                  <C>                   <C>             <C>
Don Taylor               100,000       21,000                     0                    0                     0               0
                         0              0        4,000 Preferred Shares                0                     *2              0
Michael Malinowski
                         100,000        26,000                    0                    0                     0               0
</TABLE>


Director Compensation

         Directors who are officers or employees of the Company receive no
additional compensation for service as members of the Board of Directors.
Directors who are not officers or employees of the Company receive such
compensation for their services as the Board of Directors may from time to time
determine. Non-employee directors receive a fee of $500 for each board and
shareholder meeting attended.

         The Company does not have a standing audit, nominating or compensation
committee.

__________________________
1    Value  determined  based on market  value of shares and  exercise  price of
     shares on exercise date.

2    Represents  options to purchase  shares of Series A  subordinate  preferred
     stock at $10.00 per share granted in 1988.  These options  expire  December
     31, 2002.  The Company is unable to determine the value of these options at
     FY-end.

                                      -24-
<PAGE>

Item 11. Security Ownership of Certain Beneficial Owners and Management

         The table below sets forth certain information as of June 1, 1999
regarding the beneficial ownership, as defined in regulations of the Securities
and Exchange Commission, of (i) each person who is known to the Company to be
the beneficial owner of more than 5% of any class of the Company's voting
securities, (ii) each director of the Company, and (iii) all directors and
executive officers as a group. On June 1, 1999, there were 1,104,940 shares of
the Company's Common Stock, 22,078 Shares of Series A Preferred Stock and 0
(zero) shares of Series B subordinated Preferred Stock outstanding. Unless
otherwise specified, the named beneficial owner has sole voting and investment
power. The information in the table below was furnished by the persons listed.
"Beneficial Ownership" as used herein has been determined in accordance with the
rules and regulations of the Securities and Exchange Commission and is not to be
construed as a representation that any of such shares are in fact beneficially
owned by any person.


                                      -25-
<PAGE>
<TABLE>
<CAPTION>
Names and Address of            Title of Class      Amount and Nature of     Percentage of Class
Beneficial Owner                                    Beneficial Owner
<S>                            <C>                       <C>                         <C>
Don Taylor                      Preferred Common           10,575 (1)                   40.6
241Clonmell-Upland Rd.                                    303,715                       27.5
West Grove, PA  19390

Michael Malinowski              Preferred Common            6,199                       28.1
613 Aberdeen Drive                                        258,000                       23.3
Kennett Square, PA  19348

George Kellam                   Preferred Common               20                   (Less than 1%)
1060 North State St.                                            0
Dover, DE  19901

William R. Knepshield           Preferred Common               50                   (Less than 1%)
11 Roselawn Lane                                                0
Malvern, PA  19355

Albert Wicks                    Preferred Common                0                   (Less than 1%)
1604 Dogwood Drive                                              0
West Lawn, PA  19607

Michael A. Viner                Preferred Common                0
425 Homestead Road                                         50,000                        4.5
Wilmington, DE  19805

All directors and officers as   Preferred Common           16,844 (1)                   64.6
a group                                                   611,715                       55.4
</TABLE>

(1)  Includes 4,000 options to purchase  Series A Subordinated  Preferred  Stock
     currently exercisable.



Item 12. Certain Relationships and Related Transactions

         The Company has entered into several transactions with affiliates. The
Company believes that the terms of the transactions with affiliates are on terms
at least as favorable as could have been obtained from unaffiliated third
parties. The Company will require that in the future, transactions with
affiliates will continue to be made on terms the Company believes are at least
as favorable as those obtainable from unaffiliated third parties.

                                      -26-
<PAGE>

J.B. Associates

         The Company leases the space in which its executive office and
warehouse is located from J.B. Associates. J.B. Associates is owned by Don
Taylor. Mr. Taylor is President and director of the Company. Rent expense for
this building was $232,800 in both 1999 and 1998. Two months rent are prepaid in
the amount of $38,800 at March 31, 1999.

Officer Advances

         The Company has advanced funds from time to time to certain of its
officers and directors. As of March 31, 1999 the total amount due to the Company
from Don Taylor and Michael Malinowski for funds advances was $323,096 and
$25,326 respectively. The funds were advanced on a short-term basis and are
non-interest bearing. As of March 31, 1998, the amounts due the Company from Mr.
Taylor and Mr. Malinowski were $238,556 and $25,326 respectively.

T/S Instrument Co.

         The Company purchases medical instruments and repair services from a
company in which Don Taylor, the Company's President, was a minority
shareholder. Mr. Taylor receives payments on a note and a percentage of the
gross revenue of this company for a period of time as compensation for the sale
of his interest. The Company's purchases from T/S Instrument amounted to
$780,882 and $643,419 for 1999 and 1998, respectively, and Mr. Taylor received
for the same years from T/S Instrument, $139,184 and $344,799.

Stock Grants

         In November, 1998, the Company granted to Michael Malinowski 100,000
shares of common stock in connection with Mr. Malinowski's personal guarantee of
a $2,000,000 credit line with PNCBank.

         In June, 1998, the Company granted to Michael Viner, at the time a
consultant to the Company, 50,000 shares of common stock as an inducement to Mr.


                                      -27-
<PAGE>

Viner to become an employee and Vice President of the Company. Mr. Viner joined
the Company as Vice Present on January 1, 1999.

Item 13.          Exhibits and Reports on Form 8-K  [Electronic Filing Exhibits]

(a)      Exhibits

3(a)(1)  Restated Certificate of Incorporation of Registrant                (1)

3(a)(2)  Certificate of Amendment of Certificate of Incorporation
           of Registrant                                                    (2)

3(b)(1)  By-Laws of Registrant                                              (3)

3(b)(2)  Change name from Medco Group Incorporated to Sklar Corporation     (4)

4(a)(1)  Form of Common Stock Certificates                                  (5)

4(b)(2)  Form of Series A Preferred Stock Certificate                       (5)

21        Subsidiaries of the Registrant                                    (5)


   (b)   Reports on Form 8-K

                         None



(1)  Incorporated by reference from Registrant's Annual Report on Form 10-K for
     the year ended March 26, 1983.

(2)  Incorporated by reference from Registrant's Registration Statement on Form
     S-1, No. 2-90189.

(3)  Incorporated by reference from Registrant's Current Report on Form 8-K
     dated November 29, 1984.

(4)  Incorporated by reference from Registrant's Current Report on form 8-K
     dated December 12, 1993.

(5)  Incorporated by reference from Registrant's annual Report on Form 10-K for
     the year ended March 31, 1998.


                                      -28-
<PAGE>
                                   SIGNATURES



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

                                          Sklar Corporation, Inc.

                                          By: /s/ Don Taylor
                                              Don Taylor, President

                                          Date:  July 14, 1999

In accordance with the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the issuer
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S>                                        <C>                                                 <C>
/s/ Don Taylor                              President and Director                               July 14, 1999
     Don Taylor

/s/ Michael Malinowski                      Executive Vice President, Chief Financial            July 14, 1999
     Michael Malinowski                     Officer and Director


/s/ George Kellam                           Director                                             July 14, 1999
     George Kellam

/s/ William R. Knepshield                   Director                                             July 14, 1999
     William R. Knepshield

/s/ Albert Wicks                            Director                                             July 14, 1999
     Albert Wicks
</TABLE>





                                      -29-
<PAGE>
                             EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT

<TABLE>
<CAPTION>
<S>                                        <C>                                                 <C>
Status                                      Company Name & Address                               Percentage
                                                                                                of Ownership

INACTIVE                                    Sklar Purchasing Corporation                             100%
                                            889 S. Matlack Street
                                            West Chester, PA   19382

INACTIVE                                    Sklar Surgical Instrument Corporation                    100%
                                            889 S. Matlack Street
                                            West Chester, PA   19382

INACTIVE                                    Ralks Ltd.                                               100%
                                            889 S. Matlack Street
                                            West Chester, PA   19382

INACTIVE                                    Sales and Marketing Specialists, Inc.                    100%
                                            889 S. Matlack Street
                                            West Chester, PA   19382

</TABLE>




                                      -30-
<PAGE>

                                SKLAR CORPORATION

                        CONSOLIDATED FINANCIAL STATEMENTS

                                 MARCH 31, 1999











                                      F-1
<PAGE>
                                SKLAR CORPORATION
                                 MARCH 31, 1999

<TABLE>
<CAPTION>

                                    CONTENTS
                                                                                                                       Page

<S>                                                                                                                <C>
Independent Auditors' Report                                                                                            F-3


FINANCIAL STATEMENTS:

   Consolidated Balance Sheet as of March 31, 1999                                                                      F-5

   Consolidated Statement of Income for the Years
     Ended March 31, 1999 and 1998                                                                                      F-7

   Consolidated Statement of Cash Flows for the
     Years Ended March 31, 1999 and 1998                                                                                F-8

   Consolidated Statement of Stockholders' Equity for
     the Years Ended March 31, 1999 and 1998                                                                           F-10

   Notes to Consolidated Financial Statements                                                                   F-12 - F-26

</TABLE>


                                      F-2
<PAGE>

                          INDEPENDENT AUDITORS' REPORT


To the Stockholders
Sklar Corporation
West Chester, Pennsylvania

     We have  audited  the  accompanying  consolidated  balance  sheet  of Sklar
     Corporation as of March 31, 1999 and the related consolidated statements of
     income,  stockholders'  equity and cash flows for the years ended March 31,
     1999  and  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 based on our
     audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
     standards.  Those  standards  require that we plan and perform the audit to
     obtain reasonable assurance about whether the financial statements are free
     of material  misstatement.  An audit includes  examining,  on a test basis,
     evidence   supporting   the  amounts  and   disclosures  in  the  financial
     statements. An audit also includes assessing the accounting principles used
     and  significant  estimates made by  management,  as well as evaluating the
     overall  financial  statement  presentation.  We  believe  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  consolidated  financial
     position of Sklar  Corporation as of March 31, 1999,  and the  consolidated
     results of its  operations and its cash flows for the years ended March 31,
     1999 and 1998, in conformity with generally accepted accounting principles.




                                          STOCKTON BATES, LLP



Lancaster, Pennsylvania
June 17, 1999

                                      F-3
<PAGE>










                                SKLAR CORPORATION

                           CONSOLIDATED BALANCE SHEET












                                      F-4

<PAGE>
                                SKLAR CORPORATION
                           CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 1999


<TABLE>
<CAPTION>
                                     ASSETS


CURRENT ASSETS:
<S>                                                                                                       <C>
   Cash                                                                                                   $          63,344
   Accounts receivable                                                                                            1,906,287
   Inventories                                                                                                    3,341,331
   Prepaid expense                                                                                                  272,652
                                                                                                          -----------------

       Total current assets                                                                                       5,583,614







FIXED ASSETS                                                                                                        670,708









GOODWILL                                                                                                            439,248









OTHER ASSETS                                                                                                        198,050
                                                                                                          -----------------


TOTAL ASSETS                                                                                              $       6,891,620
                                                                                                          =================

</TABLE>


                                      F-5
<PAGE>
                                SKLAR CORPORATION
                           CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 1999
<TABLE>
<CAPTION>

                      LIABILITIES AND STOCKHOLDERS' EQUITY


CURRENT LIABILITIES:
<S>                                                                                                       <C>
   Short-term borrowings                                                                                  $         938,000
   Current portion of long-term debt                                                                                117,130
   Current portion of capital lease obligation                                                                       15,561
   Accounts payable                                                                                               2,157,953
   Accrued expenses and taxes                                                                                       817,182
                                                                                                          -----------------

       Total current liabilities                                                                                  4,045,826


LONG-TERM PORTION OF CAPITAL
   LEASE PAYABLE                                                                                                     14,538
                                                                                                          -----------------


       Total liabilities                                                                                          4,060,364
                                                                                                          -----------------

CONTINGENT LIABILITIES



STOCKHOLDERS' EQUITY:
   Series A preferred stock, par value $.01, per share, authorized
     35,000  shares,   24,825  issued  and  22,078   outstanding  248  Series  A
   subordinate preferred stock, no par value,
     authorized 4,000 shares, issued and outstanding 0                                                                -
   Common stock, par value $.10 share, authorized 1,500,000
     shares, 1,497,952 issued and 1,104,940 outstanding at March
     31, 1999 and 1,247,952 issued and 754,940 outstanding at
     March 31, 1998                                                                                                 149,795
   Additional paid-in capital                                                                                     2,165,958
   Retained earnings                                                                                                646,293
                                                                                                          -----------------

                                                                                                                  2,962,294
       Less treasury stock                                                                                          131,038
                                                                                                          -----------------

       Total stockholders' equity                                                                                 2,831,256
                                                                                                          -----------------


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                $       6,891,620
                                                                                                          =================
</TABLE>


                                      F-6

<PAGE>
                                SKLAR CORPORATION
                        CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
                                                                                            For the Years Ended
                                                                                                 March 31,
                                                                                      1999                       1998
<S>                                                                             <C>                       <C>
NET SALES                                                                       $      13,206,557         $      13,766,868

   Cost of goods sold                                                                   6,982,450                 7,640,866
                                                                                -----------------         -----------------

GROSS PROFIT                                                                            6,224,107                 6,126,002

   Selling, general and administrative expenses                                         5,731,813                 5,508,841
                                                                                -----------------         -----------------


INCOME FROM OPERATIONS                                                                    492,294                   617,161


OTHER INCOME (EXPENSE):
   Other                                                                                  (32,213)                  (31,931)
   Interest expense                                                                      (163,643)                 (309,452)
   Settlement gain ( See Note B )                                                          28,786                    17,226
                                                                                -----------------         -----------------

       Other expense - net                                                               (167,070)                 (324,157)
                                                                                -----------------         -----------------


INCOME BEFORE TAXES                                                                       325,224                   293,004

   Provision for income taxes                                                              41,800                    40,000
                                                                                -----------------         -----------------


NET INCOME                                                                                283,424                   253,004

   Preferred dividend requirement                                                         275,975                   275,975
                                                                                -----------------         -----------------


INCOME (LOSS) APPLICABLE TO COMMON SHARES                                       $           7,449         $         (22,971)
                                                                                =================         =================


PER SHARE DATA:
   Weighted average common shares outstanding                                             892,885                   744,423
                                                                                -----------------         -----------------

   Basic and diluted income (loss) per share                                    $             .01         $            (.03)
                                                                                =================         =================
</TABLE>



                                      F-7
<PAGE>
                                SKLAR CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS

                Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
                                                                                            For the Years Ended
                                                                                                 March 31,
CASH FLOWS FROM OPERATING ACTIVITIES:                                                 1999                       1998
                                                                                -----------------         -----------------
<S>                                                                             <C>                       <C>
   Net income                                                                   $         283,424         $         253,004
                                                                                -----------------         -----------------
   Adjustments to reconcile net income to net cash provided by (used in)
     operating activities:
        Depreciation and amortization                                                     296,756                   293,280
        Provision for losses and returns on accounts receivable                           (13,000)                   39,000
        Stock grants                                                                       60,500                      -
        Gross settlement gain                                                             (28,786)                 (109,506)
        Obsolescence reserve                                                               50,000                    50,000
        Write down of goodwill                                                             50,000                    50,000
        Change in operating assets and liabilities:
          Accounts receivable                                                             654,219                  (118,971)
          Inventory                                                                      (249,288)                1,061,869
          Prepaid expenses                                                                (91,029)                   39,049
          Accounts payable                                                                407,529                  (907,320)
          Accrued expenses and taxes                                                      543,879                    82,903
                                                                                -----------------         -----------------

        Total adjustments                                                               1,680,780                   480,304
                                                                                -----------------         -----------------

        Net cash provided by operating activities                                       1,964,204                   733,308
                                                                                -----------------         -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                                                                  (220,395)                 (170,212)
   Settlement of prior acquisition                                                          -                       150,000
   Acquisition costs                                                                     (121,212)                        -
                                                                                -----------------         -----------------

        Net cash used in investing activities                                            (341,607)                  (20,212)
                                                                                -----------------         -----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash overdraft                                                                        (294,816)                   96,573
   Net payment on line of credit                                                       (1,147,000)                 (683,089)
   Principal payments of long-term debt and capital lease                                (175,322)                 (121,201)
   Stock options exercised                                                                 45,000                         -
                                                                                -----------------         -----------------

        Net cash used in financing activities                                          (1,572,138)                 (707,717)
                                                                                -----------------         -----------------

NET INCREASE IN CASH                                                                       50,459                     5,379

CASH, BEGINNING OF YEAR                                                                    12,885                     7,506
                                                                                -----------------         -----------------

CASH, END OF YEAR                                                               $          63,344         $          12,885
                                                                                =================         =================

</TABLE>

               The accompanying notes are an integral part of the
                       consolidated financial statements.


                                      F-8
<PAGE>
                                SKLAR CORPORATION

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
















                                      F-9
<PAGE>
                                SKLAR CORPORATION
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                 MARCH 31, 1999

<TABLE>
<CAPTION>
                                                                     Series A                                 Additional
                                                Series A           Subordinated            Common               Paid-In
                                                Preferred              Pfd.                 Stock               Capital
<S>                                        <C>                 <C>                   <C>                 <C>
Balances, March 31, 1997                    $            248    $                0    $       124,795     $       2,105,458


   Net income for the year
     ended March 31, 1998
                                            ----------------    ------------------    ---------------     -----------------


Balance, March 31, 1998                                  248                     0            124,795             2,105,458

   Stock grants                                                                                 5,000                35,500
   Stock options exercised                                                                     20,000                25,000



   Net income for the year
     ended March 31, 1999
                                            ----------------    ------------------    ---------------     -----------------


BALANCES, March 31, 1999                    $            248    $                0    $       149,795     $       2,165,958
                                            ================    ==================    ===============     =================

                     The accompanying notes are an integral

                                      F-10
<PAGE>

                                SKLAR CORPORATION
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                 MARCH 31, 1999




                                                                                      Total
     Retained                                             Treasury                Stockholders'
     Earnings                     Total                     Stock                    Equity

  $        109,865         $       2,340,366         $         (151,038)        $       2,189,328



           253,004                   253,004                                              253,004
  ----------------         -----------------         ------------------         -----------------


           362,869                 2,593,370                   (151,038)                2,442,332

                                      40,500                     20,000                    60,500
                                      45,000                                               45,000




           283,424                   283,424                                              283,424
  ----------------         -----------------         ------------------         -----------------


  $        646,293         $       2,962,294         $         (131,038)        $       2,831,256
  ================         =================         ==================         =================

</TABLE>



part of the consolidated financial statements.



                                      F-11
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999


Sklar  Corporation  is a  distributor  and  contract  manufacturer  of hand-held
surgical   instruments,   chemicals  for  the  care  and  cleaning  of  surgical
instruments,  and other  items for  surgical,  dental and  veterinary  use.  The
Company's primary market is for hand-held,  non-electronic  instruments utilized
in the surgical,  dental,  orthodontic and veterinary fields. A large portion of
the  instruments  are  imported  from  German  sources  and some from  Pakistani
sources.  Other items are purchased mostly from domestic sources.  Customers are
primarily hospital supply  distributors,  but the Company also targets end-users
for its orthodontic products.


A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICES:

Financial Statements:

         The financial  statements  include those of Sklar Corporation and Sales
         and Marketing Specialists, Inc., a wholly-owned subsidiary which served
         as a service company housing the Company's  outside sales force through
         December 1998.


Inventories:

         Inventories  are  stated  at the  lower of cost or  market.  Costs  are
         computed based upon weighted average  purchase prices,  and are used as
         the  basis for  charging  cost of goods  sold for the  items  sold from
         inventory.  Work-in-process inventory,  representing raw forgings to be
         manufactured into finished surgical instruments,  is stated at purchase
         plus related shipping costs to the manufacturer.


Equipment and Improvements:

         Equipment  and   improvements  are  stated  at  cost  less  accumulated
         depreciation  and  amortization.   Depreciation  and  amortization  are
         provided  generally on the straight-line  and accelerated  methods over
         the useful lives of the assets  which are  estimated to be three to ten
         years for  equipment  and the  shorter  of the life of the lease or the
         life of the asset for leasehold improvements.


                                      F-12
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999


A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICES: (Continued)

Goodwill and Other Assets:

         Goodwill  and  other  assets  are  stated  at  cost  less   accumulated
         amortization.  Amortization is provided on a straight-line  basis.  The
         Company  continually  evaluates  the  carrying  amount of  goodwill  by
         estimating the sum of expected future  undiscounted  cash flows related
         to specific  acquisitions and comparing it to originally  booked amount
         net of related accumulated amortization.


Cash Flow Information:

         For purposes of the statement of cash flows, the Company considers cash
in bank and on hand as cash equivalents.


Advertising Costs:

         The Company policy is to expense advertising costs as incurred.


Income (Loss) Per Share:

         Income loss per share is computed by dividing net income,  decreased by
         the amount required for payment of preferred dividends, by the weighted
         average number of shares of common stock outstanding.


Revenue Recognition:

         Revenue,  net of an allowance for estimated returns, is recognized upon
         the shipment of goods to customers.  The Company  records as additional
         revenue credits which cannot be applied to customers.

                                      F-13
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999

A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICES: (Continued)

Foreign Currency Translation Gains and Losses:

         The  Company  recognizes  transaction  gains and  losses at the time of
         settlement of the foreign  currency  transaction.  The Company  records
         translation  adjustments  of the expected  foreign  currency cash flows
         based upon the respective period end exchange rate. Gains and losses on
         settlement  activity and the  translation  adjustment for expected cash
         flows are adjusted to income.

Estimates:

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


B.  ACQUISITION AND SETTLEMENT:

Effective May 31, 1996, the Company  acquired certain assets and assumed certain
liabilities of Surgical Medical Specialists,  Inc. (SMS) in a transaction valued
at  $3,306,791.  The purchase  price was  allocated  $1,999,347 to inventory and
$1,307,444 to goodwill.  The purchase was financed by  $1,700,000  drawn against
the Company's  amended  credit line  agreement with  CoreStates  Bank,  $900,386
assumption of SMS vendor liabilities,  subject to the agreement, and $706,405 of
notes payable to the seller.  Subsequent to the  acquisition  it was  determined
certain  inventory may be  misrepresented or mislabeled and could not be sold in
the United States in accordance  with  regulations of the U.S.  Customs and Food
and Drug Administration.

On January 20, 1998, a settlement  agreement  was  negotiated  which  entailed a
significant  restructuring of the original  purchase.  As part of the settlement
the seller  forgave the  aforementioned  notes  payable by the  Company,  made a
$150,000 payment to the Company and a $100,000 payment to a certain vendor


                                      F-14
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999

B.  ACQUISITION AND SETTLEMENT: (Continued)

included  in the  original  assumed  liabilities.  Additionally,  the  seller is
prospectively  precluded  from  operating  in any  competitive  fashion with the
Company.  In a related  settlement  the Company  negotiated  the  forgiveness of
$134,301 of assumed vendor  liabilities  related to the original purchase with a
cash payment of $30,000.

At March  31,  1998,  the  Company  recorded  the  settlement  transaction  as a
reduction of goodwill to the extent of the  negotiated  reduction of liabilities
and receipt of cash payment.  Excess goodwill  amortization and accrued interest
expense  recorded  in 1997 have been  recorded as other  income in 1998,  net of
legal fees incurred related to the settlement.

During 1999,  an  agreement  was reached  with  another  vendor  included in the
original  assumed  liabilities  which  encompassed a cash payment of $120,000 in
complete  satisfaction  of  assumed  liabilities  approximating  $470,000.  This
settlement  agreement has also been recorded as a reduction of original goodwill
and results in other income of $28,786,  representing previously recorded excess
goodwill amortization.


C.  FINANCIAL INSTRUMENTS:

The Company's  financial  instruments subject to credit risk are primarily trade
accounts receivable and cash. Credit is granted to customers,  located primarily
in the  continental  United  States,  in the ordinary  course of  business.  The
Company  does not  require  collateral  or other  security  to support  customer
receivables.

At March 31, 1999, the Company had the following  concentrations of cash subject
to credit risk:

                  Germany                         $          15,651

                                      F-15

<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999



C.  FINANCIAL INSTRUMENTS: (Continued)

The Company  maintains  cash  balances  at two  financial  institutions.  One is
located in the United States and the other in Germany. The account in the USA is
insured by the Federal Deposit Insurance Corporation up to $100,000. The account
in Germany is  uninsured.  While the Company  usually  maintains its balances at
levels below the insured  amounts,  there may be times,  in the normal course of
business,  when the  Company's  deposits  at an  Institution  exceed the insured
amount.

The Company  routinely enters into forward contracts for German currency related
to its  inventory  purchasing  activity when  favorable  conditions  exist.  The
forward contracts are financial instruments with  off-balance-sheet  risk. Those
instruments  involve,  to varying degrees,  elements of market risk in excess of
the amount  recognized in the Statement of Financial  Position.  The contract or
notational  amounts of those  instruments  reflect the extent of involvement the
Company has in particular classes of financial instruments. The Company does not
anticipate any material adverse effect on its financial  position resulting from
its involvement in these instruments.

During the years ended March 31, 1999 and 1998,  the  Company's  involvement  in
this  activity,  which  generally  equates to one to two  months of  anticipated
purchase payment provided an effective hedge against the potential for increases
in the cost of  purchasing  German  Deutsche  Marks.  The effect on earnings was
immaterial.

At March 31, 1999,  the Company had no forward  contracts  to purchase  Deutsche
Marks.

The estimated fair value of the Company's financial instruments, both on and off
balance sheet, are summarized as follows:

<TABLE>
<CAPTION>
                                                                                              March 31, 1999
                                                                                     Carrying
                                                                                      Amount                  Fair Value
<S>                                                                             <C>                       <C>
                  Cash                                                          $          63,344         $          63,344
                  Long-term debt                                                $         117,130         $         128,000
</TABLE>



                                      F-16
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999



D.  ACCOUNTS RECEIVABLE:

Accounts receivable consists of the following at March 31, 1999:
<TABLE>
<CAPTION>
<S>                                                                                                       <C>
                  Trade receivables                                                                       $       1,650,978

                  Other receivables (including a
                     related party receivable of $348,422)                                                          349,309
                                                                                                          -----------------

                                                                                                                  2,000,287

                  Allowance for doubtful accounts
                     and sales returns                                                                               94,000
                                                                                                          -----------------


                                                                                                          $       1,906,287
                                                                                                          =================
</TABLE>


The related party  receivable  at March 31, 1999 includes  $323,096 due from the
Company's president and,$25,326 from the Company's chief financial officer.


E.  INVENTORIES:

Inventories consist of the following at March 31, 1999:
<TABLE>
<CAPTION>
<S>                                                                                                     <C>
                  German sourced surgical instruments (including
                     customs and freight of $110,084)                                                     $       1,613,696

                  Surgical instruments and products not sourced
                     from Germany (including customs and freight of $19,637)                                      1,495,398

                  Orthodontic products (including freight of $4,589)                                                250,701

                  Work-in-process inventory                                                                          81,536
                                                                                                          -----------------

                                                                                                                  3,441,331

                  Less valuation allowance                                                                          100,000
                                                                                                          -----------------

                                                                                                          $       3,341,331
                                                                                                          =================
</TABLE>


                                      F-17
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999


F.  FIXED ASSETS:
<TABLE>
<CAPTION>
Fixed assets at March 31, 1999 consist of:
<S>                                                                                                       <C>
                  Leasehold improvements                                                                  $         314,313
                  Furniture and fixtures                                                                            109,952
                  Equipment, including assets held under capital lease of $87,336                                   971,542
                  Computer software                                                                                 147,905
                                                                                                          -----------------

                                                                                                                  1,543,712

                  Less accumulated depreciation and amortization                                                    873,004
                                                                                                          -----------------


                                                                                                          $         670,708
                                                                                                          =================


G.  GOODWILL AND OTHER ASSETS:

Other assets consists of the following:

                  Catalog development costs (net)                                                         $          35,759
                  Acquisition costs (net)                                                                           144,652
                  Deposits                                                                                           17,639
                                                                                                          -----------------


                                                                                                          $         198,050
                                                                                                          =================
</TABLE>

The following table summarizes the lives and  amortization  expense for goodwill
and other assets:
<TABLE>
<CAPTION>
                                                                                         Amortization Expense
                                                                                        Year Ended March 31,
                                              Life in Years                      1999                            1998
                                             --------------               -------------------             -----------------
<S>                                               <C>                     <C>                             <C>
         Goodwill                                 15-20                   $            90,582             $         131,975
         Catalog development costs                21/2-5                               35,760                        58,622
         Acquisition costs                          5                                  10,812                        10,816
         Patents                                   161/2                                 864                           909
                                                                          -------------------             ----------------

         Total                                                            $           138,018             $         202,322
                                                                          ===================             =================
</TABLE>

                                      F-18
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999



G.  GOODWILL AND OTHER ASSETS: (Continued)

Additions to other assets arise from the  acquisition of companies or loans,  in
the case of  goodwill  and  acquisition  costs.  Prior to fiscal year 1996 costs
incurred in creating,  producing and distributing new and existing catalogs were
added to other assets.  Reductions in intangible assets result from amortization
over their useful or prescribed lives or from  adjustments  necessary to revalue
previously  recorded  amounts.  For the years ended March 31, 1999 and 1998, the
goodwill originally booked upon the acquisition of DCA was reduced by $50,000 to
reflect the decrease in value  consistent with the declining  volume and related
cash flow in that division.

Subsequent  to fiscal  year 1995  catalog  development  costs  are  expensed  as
incurred.

Advertising  expense,  including the amortization of catalog  development  costs
incurred  prior to 1996,  amounted to $489,331  and $271,808 for the years ended
March 31, 1999 and 1998, respectively.

Goodwill may also be reduced by an amount equal to the amount of federal tax net
operating  loss  carryforwards  used to reduce the Company's  federal income tax
liability to the extent that the benefit amount computed exceeds normal goodwill
amortization.


H.  SHORT-TERM BANK BORROWINGS:

At March 31, 1999, the Company's revolving line of credit facility of $2,000,000
was  available  to the  extent  of  collateral  by the sum of 80% of  qualifying
accounts  receivable plus 50% of inventories  (capped at 50% of borrowing base).
Qualifying  accounts  receivable and inventory used as a basis for the March 31,
1999 borrowing totaled $4,573,777. Unused available credit at March 31, 1999 was
$758,000 after considering outstanding letters of credit totaling $102,000.


                                      F-19
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999


H.  SHORT-TERM BANK BORROWINGS: (Continued)

Borrowings  from this line bear  interest  at the bank's  prime  rate.  Interest
expense on  short-term  bank  borrowings  for the years ended March 31, 1999 and
1998 amounted to $163,643 and $309,452, respectively.

The short-term  borrowing  facility  requires the Company to comply with certain
restrictive  covenants,  including  maintenance of various financial ratios. The
note is guaranteed by the Company's chief financial officer.

The following table shows the Company's  short-term bank borrowings for the past
two fiscal years:
<TABLE>
<CAPTION>
                                                                     Maximum               Average              Weighted
                                                 Interest            Amount                Amount                Average
                           Balance                Rate at           Outstanding       Outstanding            Interest
                           at End                 End of             During                During              Rate During
         March 31,         of Year                 Year           the Year (a)          the Year (b)          the Year (c)
      ------------      --------------         -------------    --------------        --------------        --------------
<S>      <C>            <C>                       <C>           <C>                   <C>                         <C>
         1999           $      938,000            7.75%         $    1,777,000        $    1,158,000              9.03%
         1998           $    2,085,000            9.75%         $    2,942,000        $    2,641,330              9.75%
</TABLE>

(a)      Based on the maximum amount outstanding at any month-end.

(b)      Average amount  outstanding during the year is computed by dividing the
         total of month-end outstanding principal balances by 12.

(c)      Average  interest rate for the year is computed by dividing  short-term
         interest expense by average aggregate short-term borrowings.


I.  LONG-TERM DEBT:

Long-term debt outstanding at March 31, 1999:
<TABLE>
<CAPTION>
<S>                                                                                                      <C>
                  DCA note, held by seller, interest at 20.1%                                             $         117,130
                                                                                                          -----------------

                  Less current portion                                                                              117,130
                                                                                                          -----------------

                                                                                                          $               0
                                                                                                          =================
</TABLE>

                                      F-20
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999

I.  LONG-TERM DEBT:(Continued)

The DCA note represents the balance of a 1992 renegotiated contract.  Presently,
the Company  believes that the former owner of DCA has assisted and is assisting
another company to compete in a business  substantially  similar to the business
of Sklar.  Accordingly,  Sklar has filed legal action  against the former owner.
The Company has not made payments on this obligation since September 1996 and is
pursuing legal remedies to the alleged  infringement of the purchase  agreement.
The Company had paid all previous  payments due, under  protest,  upon advice of
counsel.  Settlement  negotiations  are  currently  ongoing  and a  satisfactory
outcome is anticipated.


J.  LEASE COMMITMENTS:

The  Company  leases  its office and  warehouse  location  on a net basis from a
related  party under an  operating  lease  expiring in 2008.  Additionally,  the
Company leases certain equipment,  including a vehicle,  under various operating
leases expiring in 1999 through 2002.

The Company  leases  computer  equipment  under a capital lease  included in the
equipment caption on the accompanying consolidated balance sheet.

The asset and  liability  are  recorded at the net present  value of the minimum
lease payments,  based on the interest rate approximating  9.5%, implicit in the
lease.  Amortization  of assets  acquired under the capital lease is included in
depreciation expense.



                                      F-21
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999


J.  LEASE COMMITMENTS: (Continued)

Future minimum annual rentals under all the aforementioned lease arrangements at
March 31, 1999 are as follows:
<TABLE>
<CAPTION>
                                                                                      Total
                                                                                 Noncancellable
                                                           Capital                  Operating                   Related
                                                            Lease                    Leases                      Party
<S>      <C>                                         <C>                        <C>                       <C>
         2000                                        $           15,561         $         261,573         $         232,000
         2001                                                    18,501                   258,725                   232,000
         2002                                                     -                       250,703                   232,000
         2003                                                     -                       233,429                   232,000
         Later Years                                              -                     1,299,857                 1,299,800
                                                     ------------------         -----------------         -----------------

                                                                 34,062         $       2,304,287         $       2,227,800
                                                                                =================         =================
         Less amount representing
            interest                                              3,963

         Present value of capital
            lease obligation                                     30,099

            Less current portion                                 12,961

         Long-term obligation                        $           17,138
                                                     ==================
</TABLE>

Total rent  expense for the years ended March 31, 1999 and 1998 was $284,286 and
$259,252, respectively.


K.  STOCKHOLDERS' EQUITY:

Preferred stock accrues cumulative  dividends at $12.50 per year.  Dividends are
payable each June 30, only if declared by the Board of  Directors.  Dividends in
arrears on preferred  stock were  $4,139,625 at March 31, 1999. No dividends may
be paid on the common  stock until  cumulative  dividends  have been paid on the
preferred stock. The preferred stock may be redeemed at the Company's option for
$100 per share,  and is entitled to a liquidation  preference of $100 per share,
$2,207,800 aggregate, plus cumulative dividends.


                                      F-22
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999


K.  STOCKHOLDERS' EQUITY: (Continued)

During the year ended March 31, 1999,  the Company  Board of  Directors  granted
150,000  shares of common stock  (100,000  from  treasury and 50,000  previously
unissued) to current employees. Compensation expense, related to the grants, was
charged in the amount of $60,500 based upon the then estimated  fair value.  The
number of shares  outstanding and the earnings per share  calculation  have been
adjusted,  effective  on the  respective  grant  dates,  to reflect  these stock
grants.

Treasury  stock is recorded  at cost.  The number of shares of stock held in the
treasury was as follows at March 31, 1999:

     Series A Preferred                                                2,747
     Common Stock                                                    393,012

The Company filed a preliminary  proxy  statement and a Schedule  13-E3 with the
Commission on January 14, 1999 for the purpose of  effectuating  a reverse split
of its common  stock.  If  effected,  it will allow the Company to cease to be a
reporting company under Section 12.


L.  STOCK OPTIONS:

Under the 1983  Incentive  Stock Option Plan,  the Company may grant  options to
purchase  shares of common  stock.  The plan is  intended  to attract and retain
qualified personnel and to provide incentive to individuals who are deemed to be
in a position to make a significant contribution to the Company's operations.

Options for 200,000 shares  previously  granted in 1993 and 1994, were exercised
during the year  ended  March 31,  1999 at an average  price of $.225 per share.
200,000  shares of  previously  unissued  stock were issued and common stock and
additional paid-in capital were adjusted accordingly.

In 1988, the Board granted to Mr. Donald  Taylor,  options for 4,000 shares of a
then new class of  subordinated  preferred  stock.  These  options have not been
exercised as of March 31, 1999.

                                      F-23
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999

M.  EMPLOYEE BENEFIT PLANS:

The Company  maintains an employee  retirement  plan under which  employees  may
defer a portion of their annual  compensation  pursuant to Section 401(K) of the
Internal Revenue Code. The Company matches  employee  contributions up to 50% of
the first 6% of  eligible  compensation.  There is also a  discretionary  profit
sharing feature  incorporated into the plan.  Eligible  employees are those with
more  than one year of  service  and who work more  than  1,000  hours per year.
Company  contributions  to the plan  amounted to $177,480 and $65,823  including
discretionary  profit sharing  contributions of $130,000 and $40,000 in 1999 and
1998, respectively.


N.  INCOME TAXES:

As a  result  of the  merger  of  Medco  Jewelry  Corporation  and  Misdom-Frank
Corporation,  management  believes  there may be federal  net  operating  losses
carryforwards  available to Medco Jewelry Corporation at the date of merger that
have transferred to Sklar  Corporation.  Such loss  carryforwards and additional
post-merger operating losses totaling approximately $1,036,000,  which expire in
tax years 2000 ($50,000),  2001 ($14,000),  2002 ($461,000) and 2004 ($511,000),
are available as deductions  from federal  taxable  income of future years.  For
financial statement  purposes,  the net operating loss carryforwards may be used
to reduce goodwill if an excess benefit is realized. There are no operating loss
carryforwards  for state tax  purposes.  In fiscal 1999 and 1998,  $352,000  and
$350,000, respectively, of the available federal net operating loss carryforward
was applied to reduce federal taxable income. As a result, no federal income tax
was paid by the  Company in these  years.  The  Company's  federal  tax  filings
through March 31, 1993 have been audited by the Internal Revenue Service.

The  Company  accounts  for its income  taxes under the  asset/liability  method
mandated by Financial  Accounting Standards Board Statement No. 109, "Accounting
for Income  Taxes".  Under  this  method a deferred  tax asset or  liability  is
recorded on the tax effects of temporary  differences  between the tax bases and
financial  reporting  amounts  of assets  and  liabilities.  Measurement  of the
deferred tax assets and liabilities is based on the effective tax rates when the
underlying  temporary   differences  occur.  These  temporary   differences  are
primarily due to the net operating loss  carryforwards  and the use of allowance
accounts for financial statement purposes.

                                      F-24
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999



N.  INCOME TAXES: (Continued)

Deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
                                                                                                March 31,
                                                                                      1999                       1998
<S>                                                                             <C>                       <C>
         Total deferred tax asset                                               $         475,000         $         717,000
         Less valuation allowance                                                         475,000                   717,000
                                                                                -----------------         -----------------
            Net deferred tax asset                                                              0                         0
         Total deferred tax liability                                                           0                         0
                                                                                -----------------         -----------------

            Total deferred tax asset                                            $               0         $               0
                                                                                =================         =================
</TABLE>

The net change in the valuation  allowance for the year ended March 31, 1999 was
a reduction of $242,000.

Permanent differences arise due to the amortization of goodwill,  which accounts
for  approximately  75% of the difference  between pre-tax  financial  statement
income and income for tax purposes.


O.  RELATED PARTY TRANSACTIONS:

The Company has the following transactions with related parties:

(a)  The partners in J.B.  Associates,  the owner of the Company  premises,  are
     directors of Sklar Corporation. Rent expense for this building was $232,800
     in 1999 and 1998.  Two months  rent are prepaid in the amount of $38,800 at
     March 31, 1999.

(b)  The Company has  outstanding  notes  receivable  from current  officers and
     directors amounting to $348,422 at March 31, 1999.

                                      F-25
<PAGE>




                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999

O.  RELATED PARTY TRANSACTIONS: (Continued)

(c)  The  Company  purchases  medical  instruments  and repair  services  from a
     company  in which  the  president  had  been a  minority  shareholder.  The
     president  receives a percentage of the gross revenue of this company for a
     period  of  time  as  compensation  for the  prior  sale  of his  interest.
     Purchases from this company  amounted to $780,882 and $653,419 for 1999 and
     1998, respectively.

(d)  During 1998, the Company paid $4,500 to the former wife of the president.


P.  SIGNIFICANT CUSTOMER INFORMATION:

Three customers of the Company provided significant sales volume in 1999 and two
in 1998.  During these fiscal  years sales to one customer  comprised  32.1% and
38.6%, respectively, of the Company's total sales. The second customer accounted
for 13.0% and 12.9% of the respective  years' total sales.  The new  significant
customer accounted for 11.2% of 1999's total sales.


Q.  FOREIGN CURRENCY TRANSACTION AND TRANSLATION GAINS:

Gains  recognized  from  foreign  currency  activity  amounted to  $135,919  and
$103,169 in 1999 and 1998, respectively.


R.  SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:

A capital  lease  obligation  of $46,623 was incurred in 1998,  when the Company
entered into a lease for new computer equipment.

S.  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Interest paid amounted to $121,404 and $288,617 in 1999 and 1998, respectively.

Income   taxes  paid   amounted  to  $48,423  and  $40,895  in  1999  and  1998,
respectively.



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