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, 2000

[ ]  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,  2000  were
$12,835,411.

     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 $232,272.

     As of June 1, 2000 there were 1,104,940 shares of the issuer's Common Stock
outstanding.


                                      -2-
<PAGE>
TABLE OF CONTENTS

ITEM                                                                        PAGE

                                     PART I

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.................................................... 23
12. Certain Relationships and Related
    Transactions............................................................. 25
13. Exhibits and Reports on Form 8-K......................................... 27
    Signatures............................................................... 28

                                      -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 lieu 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 distributor of
surgical

                                      -4-

<PAGE>

instruments that had been in continuous operation since 1892. In 1986 the entire
operation was moved to West Chester, Pennsylvania. Medco became a Pennsylvania
Corporation 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>

     6.   Critical Specialties in 1999. The purchase was an asset purchase of
          certain inventory, customer lists, and right. This purchase is
          synergistic with the Company's low priced instrument and disposable
          lines.

     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 94.3% of the Company's revenue. The orthodontics division
accounts for 5.7% of the Company's revenue as a "catalog 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 or
finished in Germany and Pakistan. Instruments imported from Germany 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. Both products are used in the
physician marketplace.

     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,

                                      -6-

<PAGE>

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
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, was
introduced to customers during the fiscal year ended March 31, 2000. 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.

     In July 1999, the Company purchased inventory and selected assets of
Critical Specialties. The purchase is synergistic with the Company's low priced
instrument and disposable lines.

     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

                                      -7-

<PAGE>

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 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 is pursuing GPO contracts and during the past
year signed several local, regional and secondary 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 signed a national primary GPO contract. 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 have become
commodity

                                      -8-

<PAGE>

products due to the universal acceptance of these types of procedures as
standard, which reduces patient costs by 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
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 15 primary suppliers 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. Although the Company and its competitors
primarily sell instruments utilizing standard patterns, the Sklar product lines
include over 2000 items of unique design, pattern, or packaging utilizing the
Sklar Brand name.

     Disposable and Other Products

     Disposable products are purchased from approximately 40 vendors in the
United States and the world. Payment for these items is 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'

                                      -9-

<PAGE>

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.

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 13,000
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, OR grade, 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"

                                      -10-

<PAGE>

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 distribute its
new products to 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.

     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. Additionally, Sklar utilizes
the Internet to provide over 700 informational pages to the healthcare market.

     Sklar Brand Name

     The Company believes its Sklar brand name is well recognized and has been
highly respected for over 108 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 brand. The Company believes this
process to be effective in the marketplace and will streamline and lower the
costs of internal operations.

                                      -11-
<PAGE>



     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.

     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", "KnoKurl", "Sklar Tru-Punch",
"SklarZyme", "SklarTite", "SklarSpec", and "Sklar Sterile". The recognition of
these trademarks is considered to have significant commercial value. Revenue
(not including standard instruments) from Sklar branded products is expected to
exceed 25% of the Company's sales in 2001.

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

                                      -12-

<PAGE>

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.

     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 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. The company expends significant time
and effort in determining new product lines which will be compatible with
Sklar's core business and in determining which manufacturers can provide the
quality and service necessary to become a Sklar Brand new product.

Costs of Compliance to Environmental Regulations

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

Employees

     The Company currently has approximately seventy-five employees including
its principal executive officers. None of its employees are covered by
collective bargaining agreements. The

                                      -13-

<PAGE>

Company believes its employee relations are satisfactory. The Company provides a
401(k) savings plan with matching contribution and profit savings features.

Item 2.   Properties

     The Company's executive offices, warehouse, and 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. In November of 1999, Sklar leased
an additional 16,000 square feet of space to be used for warehousing disposables
and assembly of Sklar Sterile Products. The company leased the space for five
years at the extremely favorable rate of $65,000 per year under a triple net
lease. The below market favorable terms were granted to Sklar because the owner
of the building has the right to terminate the lease with ninety days notice if
their space requirements exceed their current usage. The Company believes its
current space sufficient, but if the ninety-day option were to be exercised, the
Company would have to replace the 16,000 square feet.

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.

     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.

     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

                                      -14-

<PAGE>

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. The court
case has begun with the final trial date in August of 2000. 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 is anticipated to be the fall of the year
2000.

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,
2000.

     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 voting on the reverse
split proposal. No date has yet been set, although the Company anticipates that
the meeting will be held in August 2000.


                                      -15-
<PAGE>
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, 2000 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
approximately 76.3% of the outstanding preferred stock. See Management's
Discussion and Analysis of Financial Condition and Results of Operations.

                                      -16-
<PAGE>

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:

<TABLE>
<CAPTION>
                               Income and Expense Items as a Percentage of Net Sales

                                              Years Ended March 31

                                                2000        1999
                                               ------      ------
<S>                                            <C>         <C>
     Net Sales                                 100.0%      100.0%
     Cost of Sales                              49.6        52.9
     Gross Profit                               50.4        47.1
     Selling, General & Admin. Expenses         46.5        43.4
     Other Expense                               0.3         0.0
     Income Before Interest & Taxes              3.6         3.7
     Interest Expense                            0.9         1.2
     Income Before Income Taxes                  2.7         2.5
     Net Income                                  2.4         2.1
</TABLE>


Results of Operations

2000 Compared to 1999:

     Net sales for 2000 decreased 2.9% from 1999. Competitive pressures
contributed greatly to this fact. Management believes the effect of these events
will be overcome by the

                                      -17-

<PAGE>

continued introduction of new disposable and sterile instrument product lines
and there will be no long-term effect on future sales growth.

     Cost of sales, as a percent of sales decreased from 52.9% in 1999 to 49.6%
in 2000. The exchange rate effect on purchases of German products continued in a
favorable direction. The Deutsche Mark dropped approximately 12.9% during this
period. This currency drop provided $112,247 of the company's earnings of
$308,152 versus 1999's $135,919 of $283,424 respectively. 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.

     Subsequent to March 31, 2000 year-end, a customer representing 13.3% of
Sklar's business announced that it was under contract to be purchased by a
company that owns an instrument company. Management believes that it is in risk
of losing the entirety of that business. If such a loss occurs, a major negative
effect on Sklar's earnings would likely result.

     Selling, general and administrative expenses for fiscal 2000 increased
$235,939 or 4.1% over fiscal 1999. Payroll expense was a contributing factor
with a 9.1% increase over the previous year. Professional fees dropped by 31% as
the fees in on-going litigation for the proposed going-private transaction has
become a more controlled expense.

Effects of Dollar Strength

     In 2000 and 1999 the Company purchased 52.0% and 51.4%, 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 engages in forward purchases of foreign currency to hedge
approximately 50% of its foreign currency exposure. During the year ended March
31, 2000, the Company's involvement in this activity, which generally equates to
two to three months of anticipated purchase payment, has historically provided
an effective hedge against the potential for increases in the cost of purchasing
German Deutsche Marks. The effect of forward contracts on earnings during the
year was immaterial.

                                      -18-

<PAGE>

     During 2000 the Deutsche Mark continued to weaken against the dollar
resulting in a $112,247 benefit to the Company due to settlement gains. A
similar effect of the dollar strengthening in fiscal 1999 resulted in a gain for
the year of $135,919. 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 2000 income level and recurring non-cash expense contributed
$588,000 to working capital, which amounted to $1,940,650 at March 31, 2000.
Increases in inventory quantities and prepaid expenses from 1999, aggregating
$247,000, were not completely offset by reductions in accounts receivable and
net increases in current liabilities

     The Company's peak short-term borrowing during 2000 existed at the
beginning of the year and generally decreased throughout the year with a spike
in borrowing in February. Available borrowing under the line of credit facility
amounted to $372,000 at March 31, 2000.

     Capital additions during fiscal 2000 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, 2000 borrowing
totaled $4,261,028. Management believes that cash flows from operations,
combined with amounts available under the current bank facility, will be
sufficient to meet the Company's liquidity needs in the foreseeable future.

                                      -19-

<PAGE>

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 54, 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 "turnaround" 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 turnaround of financially troubled
companies. His experience includes operations, sales and marketing.

     Michael Malinowski. Mr. Malinowski, age 46 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.

     Michael Viner. Michael Viner, age 52, 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

                                      -20-

<PAGE>

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 60, 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 65, 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 KME, 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 51, 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. -

     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, 2000 to those executive officers
whose salary and bonus exceeded $100,000 and the Chief Executive Officer.

<TABLE>
<CAPTION>

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

<S>                          <C>      <C>           <C>            <C>                 <C>            <C>             <C>
Don Taylor                   2000     $197,770      $20,000        $33,929             0              0               0
President                    1999     $163,096      $26,463        $20,090             0              0               0
                             1998     $163,765      $40,000        $12,540             0              0               0



Michael Malinowski           2000     $105,573      $72,848        $27,481             0              0               0
Vice Pres., Chief            1999     $100,993      $86,758        $65,706             0              0               0
Financial Officer            1998     $103,931      $34,500        $10,281
<FN>
(1)  For 2000, Mr. Taylor's Other Annual Compensation includes $ 12,943
     automobile allowance and $20,986 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 2000, Mr. Malinowski's Other Annual Compensation includes $6,495
     automobile allowance and $20,986 matching 401(k) contributions and the
     Company's profit sharing contribution.
</FN>
</TABLE>

                                      -22-
<PAGE>

Stock Option Grants

      The Company granted no stock options or stock appreciation rights in
the last fiscal year.

                       Aggregated Option Exercises in Last
                      Fiscal Year and FY-End Option Values

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



Item 11.    Security Ownership of Certain Beneficial Owners and Management

     The table below sets forth certain information as of June 1, 2000 regarding
the beneficial ownership, as defined in regulations of the Securities and
Exchange Commission, of (i) each

____________
1    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.

                                      -23-

<PAGE>

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, 2000,
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.

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

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

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

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

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

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

All directors and officers as a group      Preferred Common                 16,844 (1)                    76.3
                                                                           611,715                        55.4
<FN>
(1)  Includes 4,000 options to purchase Series A Subordinated Preferred Stock
     currently exercisable.
</FN>
</TABLE>

                                      -24-
<PAGE>

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.

Legal

     The Company obtained legal services from an individual who is the spouse of
the Company's President. Fees paid during the fiscal year ended March 31, 2000
amount to $10,827.

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 2000 and 1999. Two months rent are prepaid in the amount of
$38,800 at March 31, 2000.

Officer Advances

     The Company has advanced funds from time to time to certain of its officers
and directors. As of March 31, 2000 the total amount due to the Company from Don
Taylor, Michael Malinowski, and Michael Viner for funds advances was $334,559,
$25,326, and $48,000 respectively. The funds were advanced to Mr. Taylor and Mr.
Malinowski on a short-term basis and are non-interest bearing. The funds advance
to Mr. Viner bear a 10% interest rate with interest payments only through
September, 2000, followed by monthly installments through September, 2003. Mr.
Viner has outstanding interest due of $1,515 and an employee advance of $3,535.
As of March 31, 1999, the amounts due the Company from Mr. Taylor, Mr.
Malinowski and Mr. Viner were $323,096, $25,326 and $0 respectively.

                                      -25-
<PAGE>

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
$1,020,036 and $780,882 for 2000 and 1999, respectively, and Mr. Taylor received
for the same years from T/S Instrument, $293,500 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.
Viner to become an employee and Vice President of the Company. Mr. Viner joined
the Company as Vice Present on January 1, 1999.


                                      -26-
<PAGE>
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.

                                      -27-

<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/ Michael Malinowski
                                                      Michael Malinowski, C.F.O.

                                              Date:  July 14, 2000

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.

/s/ Don Taylor                   President and Director           July 14, 2000
    Don Taylor

/s/ Michael Malinowski           Executive Vice President,        July 14, 2000
    Michael Malinowski           Chief Financial
                                 Officer and Director


/s/ George Kellam                Director                         July 14, 2000
    George Kellam

/s/ William R. Knepshield        Director                         July 14, 2000
    William R. Knepshield

/s/ Albert Wicks                 Director                         July 14, 2000
    Albert Wicks


                                      -28-

<PAGE>

                   EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT


                                                                Percentage
Status               Company Name & Address                     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

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

                                      -29-


<PAGE>


                                SKLAR CORPORATION

                        CONSOLIDATED FINANCIAL STATEMENTS

                                 MARCH 31, 2000





                                      F-1
<PAGE>
                                SKLAR CORPORATION
                                 MARCH 31, 2000



                                    CONTENTS
                                                                          Page


Independent Auditors' Report                                                 F-3


FINANCIAL STATEMENTS:

   Consolidated Balance Sheet as of March 31, 2000                     F-5 - F-6

   Consolidated Statement of Income for the Years
       Years Ended March 31, 2000 and 1999                                   F-7

   Consolidated Statement of Stockholders' Equity for
      the Years Ended March 31, 2000 and 1999                         F-9 - F-10

   Consolidated Statement of Cash Flows for the
      Years Ended March 31, 2000 and 1999                                   F-11

   Notes to Consolidated Financial Statements                        F-12 - F-27






                                      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, 2000 and the related consolidated statements of
     income, stockholders' equity and cash flows for the years ended March 31,
     2000 and 1999. 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, 2000, and the consolidated
     results of its operations and its cash flows for the years ended March 31,
     2000 and 1999, in conformity with generally accepted accounting principles.




                                                STOCKTON BATES, LLP



Lancaster, Pennsylvania
June 29, 2000

                                      F-3
<PAGE>

                                SKLAR CORPORATION

                           CONSOLIDATED BALANCE SHEET







                                      F-4
<PAGE>

                                SKLAR CORPORATION
                           CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 2000


                                     ASSETS


CURRENT ASSETS:
   Cash                                                               $  203,707
   Accounts receivable                                                 1,902,002
   Inventories                                                         3,534,506
   Prepaid expense                                                       246,361
                                                                      ----------

         Total current assets                                          5,886,576





FIXED ASSETS                                                             656,690





GOODWILL                                                                 309,763





OTHER ASSETS                                                             232,304
                                                                      ----------


TOTAL ASSETS                                                          $7,085,333
                                                                      ==========

                                      F-5
<PAGE>
                                SKLAR CORPORATION
                           CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 2000


                      LIABILITIES AND STOCKHOLDERS' EQUITY


CURRENT LIABILITIES:
   Short-term borrowings                                              $  790,000
   Current portion of long-term debt                                     117,130
   Current portion of capital lease obligation                            15,978
   Accounts payable                                                    1,869,951
   Accrued expenses, taxes and other liabilities                       1,152,866
                                                                      ----------

         Total current liabilities                                     3,945,926


LONG-TERM PORTION OF CAPITAL
   LEASE PAYABLE                                                               0
                                                                      ----------

         Total liabilities                                             3,945,926
                                                                      ----------

CONTINGENT LIABILITIES                                                        --



STOCKHOLDERS' EQUITY:
   Series A preferred stock, par value $.01 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, 2000                                                           149,795
   Additional paid-in capital                                          2,165,958
   Retained earnings                                                     954,445
                                                                      ----------
                                                                       3,270,446
         Less treasury stock                                             131,038
                                                                      ----------

         Total stockholders' equity                                    3,139,408
                                                                      ----------


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $7,085,333
                                                                      ==========


                                      F-6
<PAGE>
                                SKLAR CORPORATION
                        CONSOLIDATED STATEMENT OF INCOME


<TABLE>
<CAPTION>
                                                           For the Years Ended
                                                               March 31,
                                                    ------------------------------
                                                        2000              1999
                                                    ------------      ------------
<S>                                                 <C>               <C>
NET SALES                                           $ 12,835,411      $ 13,206,557

   Cost of goods sold                                  6,365,535         6,982,450
                                                    ------------      ------------

GROSS PROFIT                                           6,469,876         6,224,107

   Selling, general and administrative expenses        5,967,752         5,731,813
                                                    ------------      ------------


INCOME FROM OPERATIONS                                   502,124           492,294


OTHER INCOME (EXPENSE):
   Other                                                 (35,096)          (32,213)
   Interest expense                                     (115,713)         (163,643)
   Settlement gain ( See Note B )                             --            28,786
                                                    ------------      ------------

         Other expense - net                            (150,809)         (167,070)
                                                    ------------      ------------


INCOME BEFORE TAXES                                      351,315           325,224

   Provision for income taxes                             43,163            41,800
                                                    ------------      ------------


NET INCOME                                               308,152           283,424

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


INCOME APPLICABLE TO COMMON SHARES                  $     32,177      $      7,449
                                                    ============      ============


PER SHARE DATA:
   Weighted average common shares outstanding          1,104,940           892,885
                                                    ------------      ------------

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

                                      F-7
<PAGE>


                                SKLAR CORPORATION

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY














                                      F-8
<PAGE>

                                SKLAR CORPORATION
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                 MARCH 31, 2000



<TABLE>
<CAPTION>
                                                          Series A                               Additional
                                    Series A           Subordinated            Common             Paid-In
                                    Preferred               Pfd.               Stock              Capital
                                    ----------          ----------          ----------          ----------

<S>                                 <C>                 <C>                 <C>                 <C>
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

   Net income for the year
      ended March 31, 2000
                                    ----------          ----------          ----------          ----------



BALANCES, March 31, 2000            $      248          $        0          $  149,795          $2,165,958
                                    ==========          ==========          ==========          ==========
</TABLE>


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

                                      F-9
<PAGE>

                                SKLAR CORPORATION
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                 MARCH 31, 2000




                                                                Total
 Retained                                 Treasury           Stockholders'
 Earnings              Total                Stock              Equity
----------           ---------           ----------          ----------


   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


   308,152             308,152                                  308,152
----------          ----------          ----------           ----------



$  954,445          $3,270,446          $ (131,038)          $3,139,408
==========          ==========          ==========           ==========




                                      F-10

<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:                                      2000             1999
                                                                       -----------      -----------
<S>                                                                    <C>              <C>
   Net income                                                          $   308,152      $   283,424
                                                                       -----------      -----------
   Adjustments to reconcile net income to net cash provided
      by (used in) operating activities:
           Depreciation and amortization                                   364,607          296,756
           Provision for losses and returns on accounts receivable         (46,831)         (13,000)
           Stock grants                                                         --           60,500
           Gross settlement gain                                                --          (28,786)
           Obsolescence reserve                                                 --           50,000
           Write down of goodwill                                           50,000           50,000
           Change in operating assets and liabilities:
              Accounts receivable                                          110,578          738,459
              Inventory                                                   (167,801)        (249,288)
              Prepaid expenses                                             (78,778)         (91,029)
              Accounts payable                                              60,174          407,529
              Accrued expenses and taxes                                   (12,491)         543,879
                                                                       -----------      -----------

           Total adjustments                                               279,458        1,765,020
                                                                       -----------      -----------

           Net cash provided by operating activities                       587,610        2,048,444
                                                                       -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                                                   (224,253)        (220,395)
   Acquisition costs                                                        (1,410)        (121,212)
                                                                       -----------      -----------

           Net cash used in investing activities                          (225,663)        (341,607)
                                                                       -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash overdraft                                                               --         (294,816)
   Net payment on line of credit                                          (148,000)      (1,147,000)
   Principal payments of long-term debt and capital lease                  (14,121)        (175,322)
   Stock options exercised                                                      --           45,000
   Advances to related parties                                            (143,380)        (174,799)
   Repayment from related parties                                           83,917           90,559
                                                                       -----------      -----------

           Net cash used in financing activities                          (221,584)      (1,656,378)
                                                                       -----------      -----------

NET INCREASE IN CASH                                                       140,363           50,459

CASH, BEGINNING OF YEAR                                                     63,344           12,885
                                                                       -----------      -----------

CASH, END OF YEAR                                                      $   203,707      $    63,344
                                                                       ===========      ===========
</TABLE>

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

                                      F-11
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000


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 is 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. The company continually monitors
     inventory by product group and on-hand quantities to anticipated sales
     level to determine inventory impairment. Allowance for estimated impairment
     and/or specific write-off is recorded when management determines it to be
     appropriate.

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, 2000


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 except that
     on-hand quantities of printed catalogs are recorded as other assets until
     they are no longer current or expected to be used.


Income Per Share:

     Income 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.

                                      F-13
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000


A.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICES: (Continued)

     Prior to April 1, 1999, the company recorded as additional revenue credits
     which could not be applied to customers. Beginning April 1, 1999, the
     Company records credits which could not be applied to customers as other
     liabilities. The financial statement effect of this change in accounting
     was $51,000 for the year ended March 31, 2000.

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 reported as components of cost of goods sold.

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.

                                      F-14
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000


B.   ACQUISITION AND SETTLEMENT: (Continued)

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
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, 2000, the Company had the following concentrations of cash subject
to credit risk:

          Germany                                 $ 32,307
          United States                           $169,675

                                      F-15
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000



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, 2000 and 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 was
immaterial.

At March 31, 2000, the Company had contracts maturing in April through July of
2000 to purchase 1,415,000 Deutsche Marks. Market movement creating unfavorable
terms approximating $23,000 was recorded as an increase in the cost of goods
sold.


                                      F-16
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000



C.  FINANCIAL INSTRUMENTS: (Continued)

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

                                            March 31, 2000
                                     ---------------------------
                                     Carrying
                                      Amount          Fair Value
                                     --------         ----------

          Cash                       $203,707          $203,707
          Long-term debt             $117,130          $135,000
          Forward Contracts          $ 23,000          $ 23,000


D.   ACCOUNTS RECEIVABLE:

Accounts receivable consists of the following at March 31, 2000:

          Trade receivables                        $1,529,101

          Other receivables (including
             related party of $407,885)               431,369
                                                   ----------

                                                    1,960,470

          Allowance for doubtful accounts
             and sales returns                         58,468
                                                   ----------


                                                   $1,902,002
                                                   ==========

The related party receivables at March 31, 2000 includes $334,559 due from the
Company's president, $25,326 from the Company's chief financial officer, and
$48,000 from the Company's Vice President of Operations.


                                      F-17
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000


E.  INVENTORIES:

Inventories consist of the following at March 31, 2000:

<TABLE>
<S>                                                                                <C>
          German-sourced surgical instruments (including
             customs and freight of $70,192)                                       $1,730,696

          Surgical instruments and products not sourced
             from Germany (including customs and freight of $24,346)                1,508,422

          Orthodontic products (including freight of $4,003)                          204,169

          Work-in-process inventory                                                   191,219
                                                                                   ----------

                                                                                    3,634,506

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

                                                                                   $3,534,506
                                                                                   ==========
</TABLE>

F.   FIXED ASSETS:

Fixed assets at March 31, 2000 consist of:

<TABLE>
<S>                                                                                <C>
          Leasehold improvements                                                   $  363,260
          Furniture and fixtures                                                      115,672
          Equipment, including assets held under capital lease of $87,336           1,114,905
          Computer software                                                           174,129
                                                                                   ----------

                                                                                    1,767,966

          Less accumulated depreciation and amortization                            1,111,276
                                                                                   ----------


                                                                                   $  656,690
                                                                                   ==========
</TABLE>


                                      F-18
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000



G.   GOODWILL AND OTHER ASSETS:

Other assets consists of the following:

          Catalogs                         $101,954
          Acquisition costs (net)           109,598
          Deposits                           20,752
                                           --------

                                           $232,304
                                           ========

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               2000                             1999
                                               --------------         ---------------                  --------------
<S>                                               <C>               <C>                              <C>
         Goodwill                                   15-20             $       105,522                  $       90,582
         Catalog development costs                 2 1/2-5                     35,759                          35,760
         Acquisition costs                            5                        35,054                          10,812
         Patents                                   16 1/2                          --                             864
                                                                      ---------------                  --------------

         Total                                                        $       176,335                  $      138,018
                                                                      ===============                  ==============
</TABLE>


Additions to other assets arise from the acquisition of companies, in the case
of goodwill and acquisition costs, or loan fees. 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, 2000 and 1999, the
goodwill originally booked upon the acquisition of DCA was reduced by $50,000 to
reflect the decrease in value consistent with related cash flow in that
division.

Subsequent to fiscal year 1995 catalog development costs are expensed as
incurred. On-hand quantities of printed catalogs are recorded as other assets
until they are no longer current or expected to be used.

                                      F-19
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000


G.   GOODWILL AND OTHER ASSETS: (Continued)

Advertising expense, including the amortization of catalog development costs
incurred prior to 1996, amounted to $288,812 and $270.945 for the years ended
March 31, 2000 and 1999 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, 2000, 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,
2000 borrowing totaled $4,261,028. Unused available credit at March 31, 2000 was
$372,000.

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, 2000 and
1999 amounted to $74,855 and $129,832, 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:


                                      F-20
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000



<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>
  2000          $  790,000          9.00%        $ 1,100,100          $   895,000          8.36%
  1999          $  938,000          7.95%        $ 1,777,000          $ 1,158,000          9.03%

<FN>
(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.
</FN>
</TABLE>


I.   LONG-TERM DEBT:

Long-term debt outstanding at March 31, 2000:

          DCA note, held by seller, interest at 20.1%              $ 117,130
                                                                   ---------

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

                                                                   $       0
                                                                   =========

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.

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


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. In November of 1999,
the company leased additional warehouse space from an unrelated party under a
triple net lease expiring in 2004. The lease has a ninety-day termination clause
at the option of the owner. 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.

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>
          2001                              $   18,501          $  323,544          $  232,800
          2002                                      --          $  315,522          $  232,800
          2003                                      --             298,248             232,800
          2004                                      --             297,676             232,800
          Later Years                               --           1,104,811           1,299,800
                                            ----------          ----------          ----------

                                                18,501          $2,304,287          $2,231,000
                                                                ==========          ==========
          Less amount representing
             interest                            2,523
          Present value of capital
             lease obligation                   15,978
          Less current portion                  15,978
                                            ----------

          Long-term obligation              $        0
                                            ==========
</TABLE>

Total rent expense for the years ended March 31, 2000 and 1999 was $326,282 and
$284,286, respectively.

                                      F-22
<PAGE>

                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000


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 $4,415,601 at March 31, 2000. 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.

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
recorded 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, 2000:

          Series A Preferred                 2,747
          Common Stock                     393,012

It is the intention of the Board of Directors to cancel all stock that remained
in the treasury at March 31, 2000.

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.


                                      F-23
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000

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, 2000.

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 six months of service and who work more than 500 hours per six-month
period. Company contributions to the plan amounted to $163,707 and $177,480
including discretionary profit sharing contributions of $110,000 and $130,000 in
2000 and 1999, 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 $346,000, which expire in
tax year 2004 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

                                      F-24
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000



N.   INCOME TAXES: (Continued)

operating loss carryforwards for state tax purposes. In fiscal 2000 and 1999,
$352,000 and $384,000, respectively, of the available federal net operating loss
carryforward were applied to reduce federal taxable income. As a result, the
Company paid no federal income tax in these years. The Internal Revenue Service
has audited the Company's federal tax filings through March 31, 1997.

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.

Deferred tax assets and liabilities are as follows:

                                                         March 31,
                                                --------------------------
                                                  1999              1999
                                                --------          --------

          Total deferred tax asset              $172,000          $475,000
          Less valuation allowance               172,000           475,000
                                                --------          --------
             Net deferred tax asset                    0                 0
          Total deferred tax liability                 0                 0
                                                --------          --------

             Total deferred tax asset           $      0          $      0
                                                ========          ========

The net change in the valuation allowance for the year ended March 31, 2000 was
a reduction of $303,000.

Permanent differences arise due to the amortization of goodwill, which accounts
for approximately 77% of the difference between pre-tax financial statement
income and income for tax purposes.


                                      F-25
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000

O.   RELATED PARTY TRANSACTIONS:

The Company has the following transactions with related parties:

     (a)  J.B. Associates, the owner of the Company premises, is owned by Don
          Taylor, President and Director of the Company. Rent expense for this
          building was $232,800 in 2000 and 1999. Two months rent are prepaid in
          the amount of $38,800 at March 31, 2000.

     (b)  The Company has outstanding notes receivable from current officers and
          directors amounting to $407,885 at March 31, 2000.


     (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 $1,020,036 and
          $780,882 for 2000 and 1999, respectively.

     (d)  The Company obtained legal services from an individual who is the
          spouse of the Company's President. Fees paid during the fiscal year
          ended March 31, 2000 amount to $10,827.


P.   SIGNIFICANT CUSTOMER INFORMATION:

Three customers of the Company provided significant sales volume in 2000 and
1999. During these fiscal years, sales to one customer comprised 29.5% and
32.1%, respectively, of the Company's total sales. The second customer accounted
for 18.1% and 13.0% of the respective years' total sales. The third customer
accounted for 13.3% and 11.2% of 1999's total sales respectively.


                                      F-26
<PAGE>
                                SKLAR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000


Q.   FOREIGN CURRENCY TRANSACTION AND TRANSLATION GAINS:

Gains recognized from foreign currency activity amounted to $112,247 and
$135,919 in 2000 and 1999, respectively.

R.  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Interest paid amounted to $73,886 and $121,404 in 2000 and 1999, respectively.

Income taxes paid amounted to $51,104 and $48,423 in 2000 and 1999,
respectively.







                                      F-27