United States
                       Securities and Exchange Commission
                             Washington, D. C. 20547

                                    FORM 10-K

|X|  Annual report  pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934 for the fiscal year ended September 27, 1998.

                                       or

|_|  Transition  report  pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934 for the transition  period from  _________________  to
     ________________.

                         Commission File number: 0-22048

                              STARCRAFT CORPORATION
             (Exact name of Registrant as specified in its charter)

             Indiana                                     34-1817634
  (State or other Jurisdiction                        (I.R.S. Employer
of Incorporation or Organization)                    Identification No.)

      Post Office Box 1903, 2703 College Avenue, Goshen, Indiana 46527-1903
                    (Address of Principal Executive Offices)

        Registrant's telephone number including area code: (219) 533-1105

           Securities registered pursuant to Section 12(b) ofthe Act:

                                      None

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

                         Common Stock, without par value
                          Common Share Purchase Rights
                                (Title of Class)

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained,  to the best of registrant's knowledge, in definitive proxy or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.   [X]

The aggregate market value of the issuer's voting stock held by  non-affiliates,
as of January 8, 1999, was $4,946,343.

The  number of shares of the  Registrant's  Common  stock,  without  par  value,
outstanding as of December 23, 1998, was 4,133,600 shares.


                                  Page 1 of 25

<PAGE>



                              STARCRAFT CORPORATION
                                    Form 10-K
                                      Index

                                     PART 1

Item 1.    Business
Item 2.    Properties
Item 3.    Legal Proceedings
Item 4.    Submission of Matters to a Vote of Security Holders

                              PART II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters
Item 6.    Selected Financial Data
Item 7.    Management's Discussion and Analysis of Financial 
               Condition and Results of Operation
Item 8.    Financial Statements and Supplementary Data
Item 9.    Changes in and Disagreements with Accountants on
               Accounting and Financial Disclosure

                             PART III

Item 10.   Directors and Executive Officers of the Registrant
Item 11.   Executive Compensation
Item 12.   Security Ownership of Certain Beneficial Owners and Management
Item 13.   Certain Relationships and Related Transactions

                              PART IV

Item 14.   Exhibits, Financial Statement Schedules, and Reports on form 8-K.

SIGNATURES


                                  Page 2 of 25

<PAGE>



                                     PART I

ITEM 1.           BUSINESS

Overview

The Company is a leading second-stage  manufacturer of custom van, sport utility
vehicle  ("SUV") and  pick-up  truck  conversions.  Starcraft  has  historically
specialized in upscale custom  vehicles and with its acquisition of the Imperial
product line in 1994,  now offers  products at all  consumer  price  levels.  In
addition,  the Company sells vehicle  conversions for the physically  challenged
through its National Mobility Corporation. The Company believes it is one of the
four largest van  conversion  manufacturers  in the U.S.  The Company  sells its
products to an extensive  network of  approximately  500  authorized  automotive
dealers  throughout the continental U.S. and overseas.  The Company believes the
Starcraft name has a long-standing reputation in the vehicle conversion industry
for high  quality.  In 1998,  the  Company  began  manufacturing  and  marketing
commercial shuttle buses.

Starcraft  traces its  history  to 1903 when Star Tank  Company  was  founded in
Goshen,  Indiana  as a maker of metal  farm  equipment.  Over the  course of the
century the  Company's  predecessor  became a leading  manufacturer  of aluminum
boats and  recreational  vehicles  and, in the late 1970's,  led the  automotive
conversion  industry by producing  luxury van  conversions  for middle and upper
income consumers.  In 1987, the predecessor's  management  completed a leveraged
buyout and, in 1988, sold the boat manufacturing  business. The resulting entity
was highly  leveraged  and  eventually  sought  protection  from  creditors in a
bankruptcy  reorganization  proceeding  in late 1990.  On January 18, 1991,  the
Company  purchased  the  assets  of  the  automotive  and  recreational  vehicle
divisions  (except for  Canadian  operations)  from  Starcraft  Van  Conversions
Corporation and its affiliates,  as  debtors-in-possession  (the "Predecessor"),
with bankruptcy court approval. The Company simultaneously sold the recreational
vehicle  division to a third party.  In July 1994,  the  Company's  wholly owned
subsidiary,  Imperial Automotive Group, Inc., acquired  substantially all of the
assets of Imperial Industries,  Inc. In February 1997, the Company purchased the
assets of National Mobility  Corporation in Elkhart,  Indiana.  In October 1997,
the Company started Tecstar,  Inc. with a partner.  The primary business purpose
of Tecstar is to supply conversion vehicles directly to the Big 3 automakers. In
February  1998,  the Company  started  manufacturing  and  marketing  commercial
shuttle buses at its Goshen manufacturing facility.

The Company  was  incorporated  in Indiana in 1990.  Its  executive  offices are
located  at  2703  College  Avenue,  Goshen,  Indiana,  46526;  telephone  (219)
533-1105.  The Company has two wholly-owned  operating  subsidiaries:  Starcraft
Automotive Group, Inc., and National Mobility Corporation.  The Company owns 51%
of Tecstar, Inc.

Starcraft's principal manufacturing facilities are in Goshen, Indiana.

Industry Information

The custom  vehicle  conversion  industry  developed  during  the early  1970's.
Starcraft's  Predecessor  was a leader in  transforming  the  industry  from one
oriented  toward younger  recreational  users to one oriented toward more mature
automotive  customers.  The Company believes retail prices of custom vans in the
United States for the 1998 model year generally  ranged from $20,000 to $40,000.
Retail  mark-ups  vary widely  among  dealers  and are not within the  Company's
control.

According to the Recreational Vehicle Industry Association ("RVIA"), the average
domestic  wholesale  price  to  dealers  of  a  van  conversion,  pick-up  truck
conversion and SUV conversion (including chassis) during the first nine calendar
months of 1998 were  $25,200,  $22,900  and  $31,500  respectively.  The Company
maintains two product lines in its conversion  business.  The Starcraft  product
line, emphasizing high-end, luxury vehicles,  averaged a $28,600 wholesale price
to dealers  during  1998  assuming an average  cost of chassis of  $20,000.  The
Imperial product line, representing primarily the entry level position, averaged
a $24,200 wholesale price.

According to RVIA statistics, domestic conversion products sold by manufacturers
during the three preceding fiscal years have declined as follows:


                                  Page 3 of 25

<PAGE>
<TABLE>
<CAPTION>


                                               1998              1997              1996
                                               ----              ----              ----
<S>                                         <C>               <C>               <C>    
         Industry unit sales                148,700           194,800           228,200
         Decline from prior year              (23.7%)           (14.6%)            (2.0%)
</TABLE>


The domestic  vehicle  conversion  industry has declined  steadily over the last
several years with a continued  decline in 1998.  The Company  believes that the
increased  popularity  of sport  utility  vehicles and factory  minivans,  price
pressure from higher chassis costs,  lower levels of conversion  inventory being
held on dealer lots and fewer  automotive  dealers selling  conversion  products
have adversely impacted the market. The Company believes that the changing level
of dealer  support is due to the  growing  availability  of  additional  vehicle
models  to stock on dealer  retail  lots such as sport  utility  vehicles  and a
general concern by dealers about the future of the conversion industry.

RVIA  statistics  are  based on  reports  of its  member  manufacturers  and its
estimates with respect to non-member  manufacturers.  The Company  believes RVIA
members produce 80% - 85% of conversion vehicles produced in the United States.

The Company is the leading  exporter of  conversion  vehicles.  Primary  markets
include Japan and Northern Europe.  The recent  strengthening of the U.S. dollar
and financial  turmoil in Asian markets have  negatively  impacted the Company's
export sales and profit margins.

The conversion industry is cyclical and is affected by the general trends of the
economy and  consumer  preferences  and  consumer  confidence  and trends of the
automotive and recreational  vehicle industries.  Consumer preferences for sport
utility  vehicles in recent years has adversely  affected  demand for conversion
products.  The level of disposable  consumer  income affects the Company's sales
because its products are  generally  considered  discretionary  expenditures  by
consumers.  In difficult  economic times,  consumers tend to spend less of their
income on discretionary  items.  Other economic factors affecting the demand for
the Company's products include the availability and price of gasoline, the level
of interest rates and the availability of consumer  financing.  Reduced gasoline
availability  could adversely  affect the demand for the Company's  products.  A
significant  increase  in the price of  gasoline  could  reduce  demand  for the
Company's  products  because  it  would  increase  the cost of  operating  these
products.  Because many consumers finance their purchase of vehicle conversions,
the  availability  of  financing  and  level  of  interest  rates  can  affect a
consumer's  purchasing  decision.  A decline in general  economic  conditions or
consumer  confidence can be expected to affect Starcraft's sales adversely.  The
Company  is  dependent  upon the OEMs to supply  its  requirements  for  vehicle
chassis.  Labor stoppages,  supply shortages and a variety of other factors that
influence  OEM  production  can affect the  availability  or timely  delivery of
vehicle chassis to the Company. 

Company Products

The Company  converts  fullsize vans  manufactured by each of the major original
equipment  manufacturers  ("OEMs"):  GMC Truck,  Chevrolet,  Dodge and Ford. The
Company manufactures minivan conversions on the GMC Safari, the Chevrolet Astro,
Chevrolet Venture and the Dodge Caravan. Starcraft also customizes Chevrolet and
GMC SUVs, along with several pick-up truck models for GMC,  Chevrolet,  Ford and
Dodge. The product contains a principal set of conversion features and a variety
of  optional  accessories  designed  by the  Company  in each model year to meet
prevailing  customer  preferences.  Starcraft van models fall  principally  into
three price ranges (conversion cost to dealer):  from $4,000 - $6,000,  $6,000 -
$9,000,  and $9,000 and above.  Imperial  models fall into the  following  price
ranges:  $2,000 - $3,000,  $3,000 - $4,000,  over  $4,000.  These  price  ranges
provide marketing  flexibility  allowing for different  demographics and varying
dealer marketing objectives.

The Company's National Mobility  Corporation ("NMC") converts fullsize vans with
wheelchair  lifts  and  low-  floor  minivans  for  the  physically   challenged
community.  The average conversion price to dealers for NMC products in 1998 was
$10,800.

In 1998 the Company began manufacturing  shuttle buses ranging in length from 20
to 35 feet with seating capacity for 12 to 25 passengers. Buses are offered with
a choice of interior and exterior storage areas,  wheelchair  lifts,  diesel and
gasoline engines, and various seat types,  arrangements and coverings. The buses
are  marketed  under the  Starcraft  trade name and are  primarily  marketed  to
churches, nursing homes and hotel resorts through commercial bus dealers.


                                  Page 4 of 25

<PAGE>


The  National  Mobility  and  shuttle  bus  operations  accounted  for 8% of the
Company's sales in 1998.

Company Strategy

The Company  believes it can grow by expanding its domestic  vehicle  conversion
business and  physically  challenged  vehicle market share,  further  developing
international  sales  opportunities  and  offering  additional  products  in new
markets,  such as shuttle  buses for airport and hotel use.  Through its Tecstar
joint venture,  the Company is also seeking to sell conversion vehicles directly
to OEM's.

Domestic Van Sales.  The Company will  continue to focus on core van  conversion
products and, through  aggressive  marketing and promotion,  will seek to expand
U.S. sales of conversion  vans.  While Starcraft  product lines will continue to
emphasize upscale custom van conversions, Imperial will continue a complementary
emphasis on mid- and  low-price  point  conversion  packages.  The Company  will
continue  to  seek  to  further  differentiate  its  Starcraft  lines  from  its
competition  by  emphasizing  total  value and quality  versus  unit  price.  By
offering both the Starcraft and Imperial  product lines,  the Company is able to
offer  dealers  a  full  price  range  of  conversion  vehicles  from  a  single
manufacturer.  Imperial will maintain its position in the entry level segment of
the  market.  In 1997,  the  Company  established  a  telemarketing  division to
effectively penetrate larger territories.

The Company will continue to focus on innovative product  development to enhance
customer  appeal and vehicle  quality and safety.  The Company will  continue to
seek to differentiate  itself from its competition by virtue of the resources it
devotes to training dealer personnel in selling, product knowledge,  service and
compliance.  Starcraft  utilizes  a  specially  equipped  service  van,  videos,
manuals,  other visual aids, and the classroom  instruction at its main facility
and at dealer locations  throughout the country.  The Company maintains a strong
customer  service  area  which  includes  warranty  claims and  approval,  parts
ordering and processing and customer information.  The Company maintains records
of Starcraft units sold as far back as 1978 and Imperial  maintains records back
to  1991,  which  was  the  inception  of  the  predecessor  company,   Imperial
Industries, Inc.

Domestic Truck and SUV  Conversions.  Although the Company's  conversions of SUV
and pick-up trucks have proven to be a popular line of products, the significant
increase in the number of models and the chassis  availability of these products
at  automotive  dealerships  have  reduced the demand for  conversions  of these
products.  Many of the OEM  sport  utility  models  now have  options  that were
historically  supplied  by the  conversion  industry.  As a result,  the Company
believes its overall sales of SUV and pick-up truck  conversions  will continue,
but will not be a significant  growth segment.  The Company will focus on select
models and OEMs where it feels it can  continue  to offer a unique  product at a
competitive price point.

National Mobility Corporation offers a product line aimed at a specific consumer
niche,  physically  challenged  persons.  By offering  additional  products  the
Company can maintain its strategy to the dealer of being a complete product line
and full service organization. The Company will target key automotive dealers in
each region to maintain market share and develop  cooperative  marketing  plans.
National  Mobility  will  continue to pursue the  distribution  of its  products
through governmental and commercial channels.

International  Vehicle Sales.  The Company intends to further promote  Starcraft
vehicles overseas,  especially in Central/Northern Europe and Japan. The Company
maintains  a  distribution  agreement  with  General  Motors  and Mitsui and Co.
(U.S.A.),  Inc. which the Company  believes makes Mitsui the sole distributor of
General Motors vans in Japan. Under this agreement Mitsui agreed to use its best
efforts  to promote  Starcraft  vans in Japan and  Starcraft  agreed to sell van
conversions in Japan solely through Mitsui.


The increase in the U.S. dollar  currency rate has put  significant  pressure on
the Company's  export sales.  In addition,  the continuing  turmoil in the Asian
financial  markets and  economies  have  negatively  impacted the demand for the
Company's  products.  The Company  continues  to  redesign  products to maintain
unique products in the marketplace and increase value for price to keep products
competitive  internationally.  In addition, the Company is targeting several new
markets to develop.


                                  Page 5 of 25

<PAGE>



Diversification.  With the decline in the conversion  industry and the Company's
sales , the Company  will attempt to diversify  itself  further with  additional
products targeted at new markets,  while manufacturing such products in existing
operating facilities.

The Company's shuttle bus operation was set-up in its main Goshen facility.  The
Company  also  developed  a  conversion  for the  taxi  industry  which is being
manufactured in its National Mobility operation.

Tecstar,  Inc. is a joint venture company  between  Starcraft and an engineering
firm. Tecstar's strategy is to set-up manufacturing facilities near OEM assembly
plants and manufacture  conversion vehicles directly for the OEM's. The vehicles
are  marketed  by the OEM  and  are  distributed  through  the OEM  distribution
channel.  Tecstar currently has three vehicle programs with facilities beginning
operations in Shreveport, Louisiana and Arlington, Texas.

Chassis and Other Suppliers

50%, 33% and 17% of the company's domestic vehicle conversion units in 1998 were
manufactured on General Motors, Dodge and Ford chassis, respectively. All of the
Company's export sales are associated with General Motors product.

The OEMs  supply  incomplete  chassis to  Starcraft  or other  manufacturers  or
dealers for restricted use. The Company obtains substantially all of its chassis
acquired for domestic sale from the OEMs pursuant to  consignment  or restricted
sale contracts. Under these contracts each OEM maintains strict control over the
disposition of chassis delivered to the Company for modification and the Company
is prohibited  from  delivering a converted  chassis  provided by the OEM to any
person  except  an  authorized  dealer  for  that  OEM.  All  of  the  Company's
consignment and restricted sale contracts with chassis  suppliers are terminable
by either party on short notice without cause.

Under  restricted  sale contracts with the OEMs, the OEM retains the certificate
of origin and the  Company  has no right to obtain it or any other  evidence  of
title.  These  contracts  state that  vehicle  title  technically  passes to the
Company upon  acceptance of a chassis and the Company pays state  property taxes
on chassis, but the Company can only sell the chassis back to the OEM for resale
to an  authorized  dealer.  Except for  demonstration  vehicles,  the Company is
prohibited from making  modifications  to chassis under these contracts until it
matches them with a dealer order. In the past, the Company has obtained  waivers
of this  limitation  to permit  accumulation  of GMC or  Chevrolet  inventory in
connection  with model year changes or other periods of  anticipated  increasing
demand.  Prior to matching a chassis to a dealer order, the Company finances the
chassis  through  the OEM's  financing  affiliates  at nominal  rates.  Once the
Company  notifies the OEM that it has matched a chassis  with a dealer,  the OEM
"repurchases"  the  chassis,  crediting  the  Company's  account  with the OEM's
financing  affiliate and invoicing its dealer (the  Company's  customer) for the
price of the  chassis.  Upon  receiving  the  converted  vehicle,  the dealer is
obligated to pay the Company for the  improvements  the Company has made. If the
Company fails to match a chassis with a dealer order within 90 days, the finance
charge  the  Company  must pay  increases.  The past  90-day  finance  charge is
currently the prime rate plus 1%.

Historically,  the Company's international  conversion sales have been primarily
manufactured on General Motors chassis.  Generally,  the foreign purchaser is an
authorized dealer for General Motors and Starcraft.  The dealer submits an order
to General Motors' overseas sales affiliate (the "GM Export  Affiliate") for the
chassis together with specifications for a Starcraft  conversion.  The GM Export
Affiliate purchases the chassis from General Motors and forwards it to Starcraft
for second stage  manufacturing.  Starcraft invoices the GM Export Affiliate for
the completed  conversion,  and the GM Export Affiliate arranges for shipment of
the unit, at the GM Export  Affiliate's  expense,  from Starcraft to the foreign
dealer.

Starting in 1997,  General  Motors  changed its chassis system for the Company's
sales to Europe. The program encompasses 34% of the Company's 1998 export sales.
Under this  program,  the  Company  is the  "Manufacturer  of Record"  for units
imported into Europe and is required to arrange and be responsible  for all U.S.
export and  shipping  requirements.  The Company is  required  to  purchase  its
chassis  and the OEM assists in the  financing  of such  purchases.  The Company
continues to sell only to authorized  General Motors  dealers.  The Company does
not  believe  this new system  will have a  significant  impact on its  European
sales.



                                  Page 6 of 25

<PAGE>



A variety of factors  govern  chassis  ordering  and  availability.  Chassis are
ordered  from the OEM based on the  Company's  annual  sales  plan.  The plan is
broken down by OEM and vehicle model.  Vehicle  specifications are determined on
the basis of  historical  trend  analysis and analysis of the backlog of orders.
The  Company's  chassis  order  forecast  is shared  with each OEM to  determine
chassis  availability.  The OEMs confirm chassis  availability  and timing on an
annual basis.  After confirmation by the OEM, the Company orders a 90-day supply
prioritized  through a  central  computerized  system.  On a weekly  basis,  the
Company  releases the actual orders it requires and the OEMs  schedule  delivery
dates for the orders.  Chassis  allocation to the Company from the OEMs is based
on credit lines, prior usage and wholesale and retail sales rates.

The following  table sets forth for the periods  indicated the number of chassis
received by the Company under its restricted  sales contracts with the OEM's and
the dollar value in thousands thereof,  and, as of the end of such periods,  the
number of chassis held over 90 days and the dollar value in thousands thereof.

<TABLE>
<CAPTION>
                                                                  Year Ended
                                                               (Dollars in thousands)

                                        Sept. 27, 1998          Sept. 28, 1997          Sept. 29, 1996
                                     ---------------------  ---------------------  ----------------------
<S>                                           <C>                   <C>                     <C>   
Chassis Received                              7,132                 10,687                  17,179
Value of Chassis Received                  $142,640              $ 213,740               $ 305,300
Chassis Over 90 Days at period end              148                    433                     262
Value of Chassis Held Over 90 Days         $  2,960              $   8,660               $   4,615
</TABLE>


The conversion  process begins after a chassis is inspected and accepted and the
Company  has  received a  confirmed  order  from an  authorized  dealer  that is
compatible  with the chassis.  Generally,  the order is scheduled for production
typically  four to five days before work on the vehicle  commences  to allow for
completion  of  components  to be  installed  in the chassis and the purchase of
necessary assembly material.  The Company completes the conversion process in an
average of seven to eight days from the date that the vehicle is first scheduled
for production.

The Company is dependent  upon the OEMs to supply its  requirements  for vehicle
chassis.  Labor stoppages,  supply shortages and a variety of other factors that
influence  OEM  production  can affect the  availability  or timely  delivery of
vehicle  chassis to the Company.  In 1997,  chassis  availability  was generally
good. In 1998 chassis  availability  was  adversely  impacted late in the fiscal
year due to a labor stoppage at General Motors. The Company estimates that sales
were  adversely  impacted by $1.5 million due to chassis  shortages in 1998.  If
vehicle chassis are unavailable,  or if the Company must accept delivery earlier
or later than it otherwise would prefer,  sales could be adversely  affected and
financing  expenses  could  increase.  The  Company  must also  comply  with its
consignment  and  restricted  sale contracts with the OEMs pursuant to which the
OEMs  impose  certain  specifications  for the  Company's  vehicle  conversions,
including  gross vehicle  weight  standards.  Such  contracts  also restrict the
Company's  ability to dispose of completed  chassis and prohibit the transfer of
chassis  to  unauthorized  U.S.  and  foreign  dealers.  All  of  the  Company's
consignment and restricted sale contracts with chassis  suppliers are terminable
by either party on short  notice  without  cause.  The  availability  of the OEM
financing  rates  is  dependent  upon  the  Company's  compliance  with  its OEM
contracts and its ability to maintain satisfactory credit relationships with the
OEM's finance subsidiaries. Adverse changes in the Company's financial condition
or results of  operations  could cause such  financing  subsidiaries  to seek to
adversely  change the Company's  financing  terms or to terminate such financing
arrangements.  Such a change or termination could have a material adverse effect
on the Company's financial condition and results of operations.

Vehicle  converters  can be  penalized by the OEM for  manufacturing  overweight
vehicles and the National Highway Traffic Safety Administration  ("NHTSA") could
require  overweight  vehicles to be recalled.  See "Safety and Regulation." Such
standards  are imposed by the OEMs in part to help assure  that  vehicle  weight
does not exceed the capacity of the OEM's braking system.


                                  Page 7 of 25

<PAGE>



The export of  completed  vehicles to  unauthorized  foreign  dealers has been a
significant  issue in the  conversion  industry in recent years,  especially for
General  Motors.  In the past,  some  automotive  dealers have sold  vehicles to
brokers who, in turn, have sold them to unauthorized  dealers overseas.  General
Motors' financing subsidiary has indicated an intention to penalize or terminate
financing  arrangements  with  any  firm  deemed  responsible  for  unauthorized
exports.  The Company makes an effort to assure itself that none of its vehicles
are exported in an unauthorized  manner including  obtaining written  assurances
from certain dealers.  The Company has no control over the eventual  disposition
of its vehicles by dealers,  however,  so it cannot eliminate the possibility of
unauthorized  export.  These  efforts  nevertheless  should help assure that the
Company will not be deemed responsible for any unauthorized export.

The shuttle bus operation utilizes bailment or consignment arrangements with the
OEM's,  but must purchase the chassis prior to the start of  manufacturing.  The
shuttle  bus   operation  is  subject  to  the  same  risk  factors  of  chassis
availability as the Company's vehicle conversion business.

Supplies for the  components  and materials the Company  utilizes in its vehicle
conversions are generally available from several sources.  From time to time the
Company  experiences  delays in delivery of certain components or materials from
suppliers.  In 1998, the availability of certain hardwood  components  adversely
impacted the Company's production.

Manufacturing

The incomplete van chassis the Company  receives  directly from the OEMs have no
seats or floor covering or other interior  components.  The Company modifies the
exterior  and  interior of the  chassis  body to provide  passenger  comfort and
enhance  safety.  SUVs and  pick-up  trucks  received  have  full  interior  OEM
components.  The Company modifies these components and performs certain exterior
enhancements.

After a chassis is inspected  and  accepted,  tinted  vista bay windows,  raised
roof,  decorative decals and ground effects are installed.  Star-structure steel
bracing is installed for added  structural  support,  followed by rust proofing,
wiring,  insulation and vibration dampening materials. The vehicle's interior is
lined with fabric and  wood-accented  sidewalls  and  headliners.  The Company's
associates  assemble the complete vehicle interior in multiple  production lines
using the Company's own  manufactured  components  and parts supplied by others.
The  Company's  distinctive  hardwood  features,   contoured  seats,  carpeting,
curtains  and other  amenities  are  installed in each  vehicle,  along with the
customer's  selection  from  over 100  optional  accessories,  including  a wide
variety of  electronic  components  such as rear  heating and  air-conditioning,
television, video cassette player and other audio equipment.

Vehicle seating and upholstery are primarily manufactured at the Company's Emma,
Indiana  facility,  located 15 miles from its  Goshen,  Indiana  plant.  Company
associates cut and sew interior wall  coverings,  headliners,  curtains and seat
upholstery  from  leather,  cloth  and vinyl  materials.  The seat  padding  and
upholstery  are then  assembled on  pre-fabricated  frames.  Wire  harnesses are
manufactured  at the Goshen plant.  It also finishes its hardwood  components at
the Goshen plant.  The Company paints and finishes all of its custom  fiberglass
and polymer vehicle body  components,  such as raised roofs,  running boards and
other  ground   effects  which  are   manufactured   to  the  Company's   design
specifications  by  others.  This  water-filtered,  down draft  paint  system is
similar  to those of the  major  automotive  manufacturers  and is  designed  to
control environmentally harmful emissions.

In  December  1996  the  Company  consolidated  its  Imperial  Automotive  Group
manufacturing  operation into Starcraft Automotive Group's manufacturing complex
in Goshen,  Indiana.  The consolidation was designed to reduce excess production
capacity,  personnel count and fixed overhead  expenses.  The Company recorded a
$750,000  restructure  charge in the first  quarter  of fiscal  year  1997.  The
Company   estimates  it  realized   annual   overhead   expense   reductions  of
approximately $1.0 million from reduced facility and personnel costs during 1998
relative to 1997.

In June 1997 the Company closed its McGregor,  Texas manufacturing  facility and
sold  certain  assets of the  business.  The  Company  recorded a  $260,000  net
restructure  charge in the  third  quarter  of fiscal  year  1997.  The  Company
realized  savings from the closure of the Texas facility which lost $1.3 million
pretax in 1997. The consolidation  efforts were a result of the Company's belief
that the  conversion  industry  will  remain at  current  lower  levels  and the
elimination  of  excess  production   capacity  was  critical  to  returning  to
profitability.


                                  Page 8 of 25

<PAGE>



Production Associates.  The Company periodically employs associate training that
may include classroom instruction,  job certification and technical and personal
skills  training.  The  principal  objective  of  the  training  is  to  develop
associates  into  more  effective  members  of a team  dedicated  to  continuous
improvement in all facets to the Company's business.

The Goshen facility produced 45 custom vehicles per eight-hour shift during peak
production  periods  in 1998 and has  capacity  to produce up to 70 units in one
shift.

Sales and Marketing

Domestic.  The Company sells its custom vehicles to approximately 500 automobile
dealers  throughout the continental U.S. and overseas.  Custom vehicles are sold
through a network of regional  exclusive  sales  representatives  and  associate
representatives.  Each of its U.S.  dealers is an authorized  dealer for General
Motors,  Ford or Chrysler and most sell and service a full  complement  of cars,
SUVs and vans. During the past two years, the geographic areas of the U.S. where
the Company's  sales have been  strongest  include the Great Lakes region (i.e.,
Illinois,  Indiana, Michigan, New York, Ohio, Pennsylvania,  and Wisconsin), and
Oklahoma and Texas.

The Company's  direct sales efforts to dealers are  supplemented by a variety of
advertising and promotional  programs and  participation  in various  automobile
shows.  The  Company is also  refining a targeting  approach  to better  utilize
advertising  expenditures  by expanding its team selling  efforts and developing
new marketing  materials,  including videos.  In 1997 the Company  established a
telemarketing sales team in Ocala,  Florida to cost effectively focus on smaller
dealer activities and larger territories.

The  Company's  Starcraft  lines will  continue to be focused on luxury  vehicle
modifications  and will  seek to  increase  its  market  share of  high-end  van
conversions  for  which  Starcraft  vehicles  have  an  established  reputation.
Starcraft will also continue to be sensitive to changes in consumer preferences.
The Imperial  product lines enable the Company to participate  more fully in the
price-sensitive  segment of the  conversion  market and offer its dealers a full
price range of conversion  vehicles from one manufacturer.  The Company believes
competitive  factors in its  industry  include  price,  quality  and  variety of
product  line,  service and  warranty,  dealer  network and safety.  The Company
maintains a leading  position in the  conversion  industry  through high quality
workmanship,  innovation,  versatility in meeting customization requirements and
the diversity of its product line.

The Company will also target the mobility  market through its National  Mobility
subsidiary by offering fullsize vans and minivans for the physically challenged.
These  products will be  distributed  through both  automotive  dealerships  and
mobility centers. In addition,  the Company will participate in state government
quotes for mobility vehicles and pursue commercial applications.

International.  Starcraft exports converted  vehicles to 18 countries around the
world and employs an international  department which is exclusively  responsible
for the development of such sales. International sales fluctuate from country to
country and over time depending on import taxes and tariffs and  fluctuations in
currency  exchange  rates  as well as  local  economic  conditions.  Starcraft's
primary  overseas  markets are Japan and northern  Europe.  The Company exported
1,273,  1,584 and 2,543  conversions in 1998, 1997 and 1996,  respectively.  The
recent  increase in U.S.  currency and turmoil in Asian  financial  markets have
negatively impacted the Company's international sales.

The Company intends to further promote Starcraft and Imperial vehicles overseas.
The Company maintains a distribution agreement with General Motors and Mitsui by
which the Company  believes makes Mitsui the sole  distributor of General Motors
vans in Japan. This agreement will continue from year-to-year  unless terminated
on three months notice prior to the end of any such year.

The  Company's  shuttle  bus  products  are  marketed  and  distributed  through
approximately  20  independent  bus  dealers.  The majority of these bus dealers
carry other bus lines in addition to  Starcraft.  The Company  will  continue to
develop products to expand its customer base,  including  bidding for government
and large commercial contracts.


                                  Page 9 of 25

<PAGE>

Competition

The  United  States  conversion  vehicle  market is very  competitive  with four
principal national manufacturers and numerous local and regional  manufacturers,
many of which are relatively small companies serving local dealers.  The Company
estimates it has  approximately  55  competitors  in the  conversion  vehicle on
business.  The  Company  believes it is one of the four  largest van  conversion
companies in the United States. The others are Glaval Inc., Mark III Industries,
Inc. and Explorer Van Company.  The Company's  Starcraft lines generally feature
high-end,  luxury custom  vehicles  competing most directly with  Explorer.  The
Imperial  product  lines compete more directly in the entry level segment of the
conversion  market. The Company believes the number of competitors will continue
to decline as increased quality, financial and engineering standards are imposed
by the OEMs.

In   international   markets,   the  Company   competes  with  numerous  foreign
manufacturers  that produce  vehicles  comparable  to converted  vans,  although
custom  vans and SUV's  such as the  Company's  tend not to be  widely  produced
within its foreign markets.

The market for the  Company's  shuttle  buses is highly  competitive.  The other
competitors in the bus industry are substantially  larger than the Company.  The
Company's  products are a very small  percentage of the bus market.  The Company
will  continue to position  its product as an  exceptional  quality,  high value
product targeting the high end user niche market. There can be no assurance that
the Company will be able to maintain or improve its competitive  position in the
bus market.

Tecstar competes against several much larger automotive parts suppliers. Tecstar
is highly  dependent on continuing to successfully  bid future  contracts as its
existing programs have two to four year terms.

Backlog and Seasonality

At  September  27, 1998,  the Company had a backlog of 441 unit orders  compared
with a backlog of 842 unit orders at September  28, 1997.  The backlog  declined
from prior year  levels due to reduced  market  activity,  chassis  availability
issues from the General  Motors labor  stoppage  and  customer  concern from the
Company's  production  constraints  in the  summer  arising  from  raw  material
component availability. The Company considers such orders to be reasonably firm.
All of the Company's  products are subject to certain  seasonal sales influences
and sales tend to be stronger  during  March  through  July.  The  Company  uses
off-season  sales  promotions  to market its  products  with a view to  reducing
seasonal swings in sales.

Warranties

The Company historically provided a three-year,  36,000 mile limited warranty on
its conversions. In 1997, the Starcraft products began offering a 5-year, 60,000
mile warranty on certain of its Starcraft  products.  The OEMs provide their own
standard  warranties  of the  chassis  and  engine.  At the  time of sale of its
product,  the Company estimates the costs to be incurred for product  warranties
and establishes  reserves for warranty  claims.  The Company  believes that such
reserves will adequately  cover any such warranty  claims.  The Company provides
complete owners' manuals to retail customers  covering the conversion package as
well as parts,  warranty and service  manuals for dealers.  The Company  keeps a
record of the paint,  upholstery and styles included in each vehicle  conversion
so that, when necessary,  it can re-create matching  replacement parts.  

Patents and Trademarks

IBS. In 1996,  the Company  received a U.S.  patent on IBS, which is designed to
reduce  significantly  the risk of seat back collapse in the event of a rear-end
collision  by  restraining  the seat back. A new seat belt  integrated  with the
conventional  seat  belt  system is  anchored  to the  vehicle  roof or wall and
traverses the seat back. In the event of collision,  the seat back is secured in
place. See "Research and Development."

Trademarks.  The Company's Predecessor manufactured boats, motor homes and other
recreational  vehicles  under  the  name  "Starcraft."  The  boat  manufacturing
business  was sold by the  Predecessor  to Brunswick  Corporation  in 1988 which
subsequently sold the business.  The Company initially acquired the recreational
vehicle  business  in the  Predecessor's  1991  reorganization  proceeding,  but
immediately  sold it to an RV company.  The  Predecessor's  Canadian  conversion
business was acquired by a Canadian firm. A corporation in the boating  industry
has independently registered and owns the "Starcraft" and related trademarks for
use with boats and marine  products and thus the Company has no control over the
quality of boats  produced  and sold under the  "Starcraft"  mark.  The  Company
retains  ownership  of  "Starcraft"  and related  registered  marks for use with
automotive  and  recreational  vehicle  products.  It licenses the owners of the
Predecessor's RV


                                  Page 10 of 25

<PAGE>



business and Canadian van conversion business to use these trademarks.  While it
has some  control  over the  quality  of its  licensees'  products,  it does not
control all aspects of their businesses.  The Canadian entity is required to pay
a royalty to the  Company and to purchase  its  components  from the Company (or
from others with the Company's approval). The Company is not permitted to export
to Canada and its Canadian licensee does not export to the United States.

Because of these considerations, there is a risk that the distinctiveness of the
"Starcraft"  mark could become  diluted or that its reputation for quality could
be adversely  affected if the quality of another  manufacturer's  products  sold
under the mark  declines.  The Company  believes,  however,  that  customers are
sufficiently  discerning  when  making a purchase  as  significant  as a vehicle
conversion  that confusion  between the Company and makers of other  "Starcraft"
products is unlikely. It also believes its licensees are currently in compliance
with their obligations under their license agreements.

Safety and Regulation

The manufacture,  distribution and sale of the Company's products are subject to
governmental  regulations  in the United States at the federal,  state and local
levels.  The most  extensive  regulations  are  promulgated  under the  National
Traffic and Motor Vehicle Safety Act which,  among other things,  empowers NHTSA
to require a manufacturer  to remedy  vehicles  containing  "defects  related to
motor  vehicle  safety" or  vehicles  which  fail to  conform to all  applicable
federal motor vehicle safety standards.

Federal Motor Vehicle Safety Standards are promulgated by the NHTSA. Many of the
Company's  conversion  components  were affected by these  standards.  Starcraft
engaged a testing  Company,  which also performs  testing for NHTSA, to test the
company's components. The Company's components subject to the new standards were
determined to meet or exceed them.  Promulgation of additional  safety standards
in the  future  could  require  the  Company  to incur  additional  testing  and
engineering  expenses  which could  adversely  affect the  Company's  results of
operations.  NHTSA can require automotive  manufacturers to recall products. The
Company has not experienced any material recalls.

The  Company's  international  sales are  subject to foreign  tariffs and taxes,
changes  in which are  difficult  to  predict  and which  can  adversely  affect
Starcraft sales.  Starcraft's  products must also comply with government  safety
standards imposed in its foreign markets.

Both federal and state authorities have various  environmental control standards
relating  to air,  water  and noise  pollution  that  affect  the  business  and
operations of the Company. In particular,  the Company generates paint,  varnish
and other finishing  wastes that it is required to dispose of in compliance with
environmental  regulations.  The Company  believes  that it has  complied in all
material  respects with applicable  environmental  regulations and standards and
does not currently  expect that any failure of compliance will have any material
adverse effect on the Company.

Like other automotive  manufacturers,  the Company may be subject to claims that
its  products  caused or  contributed  to damage or injury  sustained in vehicle
accidents or may be required to recall products  deemed unsafe.  Any such claims
in excess  of the  Company's  insurance  coverage  or  material  product  recall
expenses could adversely affect the Company's financial condition and results of
operations.

Employees

As  of  September  27,  1998,  the  Company  employed  550  people.   Of  these,
approximately  450 were  production line associates and 100 were salaried sales,
engineering  and  administrative  staff.  During peak  production  periods,  the
Company may increase its work force. Historically, the available labor force has
been  adequate to meet such  periodic  requirements.  The Company  considers its
relationships with its personnel to be satisfactory.



                                  Page 11 of 25

<PAGE>

ITEM 2.           PROPERTIES

The Company  owns its  properties  in Goshen,  and Emma,  Indiana and leases the
Elkhart property, as further described below.


                           Size of
Location                   Facility             Type of Operation
--------------------  ------------------        -----------------------------
Goshen, Indiana             454,400 s.f.        Executive Offices (20,420
                                                s.f.);   Manufacturing and
                                                Assembly
Emma, Indiana                42,700 s.f.        Sewing and Upholstery
                                                Manufacturing
Elkhart, Indiana             56,000 s.f.        Offices (2,600 s.f.);
(National Mobility)                             Manufacturing and Assembly


The Goshen and Emma production  facilities were constructed in the 1960's.  They
have been  maintained  and improved  upon from time to time and are presently in
satisfactory  condition and sufficient for the Company's  current  requirements.
The  Company  also  stores  chassis  on a 37-acre  lot it owns  near its  Goshen
production facility. See "Manufacturing."


The Elkhart  facility,  on  approximately  3 acres of land,  is leased for three
years  through  February  29, 2000 with five,  one-year  renewal  options at the
Company's discretion.  The lease contains an option to purchase the facility for
$800,000.  Monthly rent is $14,500 and the Company is  responsible  for property
taxes and building insurance.

ITEM 3.           LEGAL PROCEEDINGS

The Company does not anticipate that any pending legal proceeding to which it is
party will have any  material  adverse  effect on its  financial  conditions  or
results of operations.  The Company maintains product liability  insurance which
it currently considers adequate.

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

Not applicable.



                                     PART II

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

Common Stock is quoted on the NASDAQ Stock Market,  under the symbol  "STCR." As
of December 21, 1998, there were 85 shareholders of record of Starcraft's Common
Stock.

During 1998, the Company did not meet the new market capitalization requirements
for continued  listing on the NASDAQ National Market.  As a result, in September
1998 the Company's shares began trading on the NASDAQ Small Cap market.






                                  Page 12 of 25

<PAGE>


The  following  table sets forth the high and low bid prices per share of Common
Stock for the periods indicated.


Quarter Ended                    High                    Low
-------------                    ----                    ---
December 29, 1996               4.875                   2.875
March 30, 1997                  5.250                   3.469
June 29, 1997                   3.750                   2.500
September 28, 1997              3.750                   1.750
December 28, 1997               3.000                   2.000
March 29, 1998                  2.750                   1.750
June 28, 1998                   2.875                   2.125
September 27, 1998              2.313                   1.000


The foregoing quotations reflect  inter-dealer  prices,  without retail mark-up,
mark-down or commission and may not represent actual transactions.

Dividend Policy. The Company has paid no cash dividends since its initial public
offering.  The  Company  currently  intends  to retain  earnings  for use in the
operation and expansion of its business and therefore does not anticipate paying
cash  dividends  on Common  Stock in the  foreseeable  future.  The  payment  of
dividends  is  within  the  discretion  of the  Board of  Directors  and will be
dependent,  among  other  things,  upon  earnings,  capital  requirements,   any
financing agreement covenants and the financial condition of the Company.

Stock Repurchase.  In March 1995, the Company's Board of Directors  approved the
repurchase of up to 500,000 shares of the Company's outstanding shares of common
stock,  of which  153,000  shares  have been  acquired  to date.  No shares were
repurchased in 1997 or 1998.

Anti-Takeover   Provisions.   Indiana   law  and  the   Company's   Articles  of
Incorporation  and  Code  of  By-laws  contain   provisions  that  restrict  the
acquisition of control of the Company.  Such provisions can affect the rights of
shareholders  acquiring  substantial  interests  in the  Company's  shares.  For
example,  a  shareholder  who  acquires  more than 10% of the  Company's  shares
without  prior  board  approval  will be  limited in the timing and terms of any
transaction  it may enter into with the  Company  and will be subject to related
provisions.  Any  shareholder  who  effects  an  acquisition  after  which  such
shareholder holds more than 20% of the Company's outstanding shares will have no
voting rights in the shares acquired in such acquisition, unless such rights are
conferred  by the  disinterested  shareholders  at the next  annual  meeting (or
earlier special meeting).

SHAREHOLDER RIGHTS PLAN

In August 1997 the Company adopted a shareholders  Rights Plan issuing one right
for each  outstanding  share.  Each  right  entitles  the  registered  holder to
purchase from the Company one share of common stock at $15 per share, subject to
adjustment.  The rights  become  exercisable  if a person or group  (other  than
certain  related  persons)  acquires or announces a tender offer for  prescribed
percentages  of the Company's  shares or is declared an "adverse  person" by the
Company's  Board of Directors.  In these events,  each right holder may purchase
shares  with a value  equal to twice the  exercise  price.  Furthermore,  if the
Company  engages in certain  mergers or similar  business  combinations  a right
holder may purchase  shares of the  acquiring  company with a value of two times
the purchase price of the right. The rights expire on August 12, 2007.




                                  Page 13 of 25

<PAGE>

ITEM 6.           SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>

(dollars in thousand, 
except per share data)                                                Year Ended
                                    ---------------------------------------------------------------------------------
Income Statement Data                 Sept. 27,        Sept. 28,        Sept. 29,        Oct. 1,         Oct. 1,
                                         1998             1997            1996            1995             1994
                                    ---------------- ---------------- --------------- ---------------  --------------
Net Sales:
<S>                                    <C>             <C>             <C>             <C>              <C>         
     Domestic                          $     42,857    $      57,235   $      73,317   $      91,652    $     81,640
     Export                                  10,235           15,047          25,648          21,408          10,734
         Total Net Sales                     53,092           72,282          98,965         113,060          92,374
Cost of Goods Sold                           49,590           66,342          83,669          92,692          73,775
Gross Profit                                  3,502            5,940          15,296          20,368          18,599
Operating Expenses                            9,548           13,924          15,049          15,864          12,505
Restructuring and Goodwill
   Impairment Charges                          ----            5,926            ----            ----            ----
Operating Income (loss)                     (6,046)         (13,910)             247           4,504           6,094
Interest income (expense)                    ( 892)           ( 400)           (293)           (208)              99
Other income, Net                               100              194             176             214             104
Income (loss) Before Taxes                  (6,838)         (14,116)             130           4,510           6,297
Income Taxes (Credit)                          (79)          (2,814)              20           1,753           2,517

Net Income (loss)                           (6,759)         (11,302)             110           2,757           3,780

Weighted Common Shares                        4,134            4,127           4,142           4,261           4,193
     Outstanding
Earnings (loss) Per Share          $          (1.63)$         (2.74) $          0.03 $          0.65  $          0.90
Balance Sheet Data
                                    ---------------- ---------------- --------------- ---------------  --------------
Working Capital                     $         5,402  $         7,011  $        8,476  $        8,693  $        8,140
Total Assets                                 29,015           27,779          36,524          34,213          32,772
Long-term Debt                               10,777            5,696               0             323             196
Shareholders' Equity                          3,536           10,295          21,552          21,688          19,556
Book Value per Share                           0.86             2.49            5.23            5.20            4.58

</TABLE>


<PAGE>

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

The consolidated  statements of income summarize  operating results for the last
three years. This section of Management's Discussion highlights the main factors
affecting the changes in operating results during the three-year period.

1998 VERSUS 1997

<TABLE>
<CAPTION>


(Dollars in Thousands)                                                                      1997 to
                                                                                             1998
                                                 1998                    1997                Change
                                      -----------------------    ----------------------    --------- 
<S>                                     <C>            <C>        <C>            <C>         <C>    
Net Sales                               $ 53,092       100.0%     $72,282        100.0%      (26.5%)
Cost of goods sold                        49,590        93.4%      66,342         91.8%      (25.3%)
                                        --------       -----     --------        -----       -----  
Gross profit                               3,502         6.6%       5,940          8.2%      (41.0%)
Selling and promotion expenses             4,484         8.4%       7,243         10.0%      (38.1%)
General and administrative expenses        5,064         9.6%       6,681          9.2%      (24.2%)
Restructuring charges                          0         0.0%       1,010          1.4%         --
Goodwill impairment loss                       0         0.0%       4,916          6.8%         --
                                        --------       -----     --------        -----       -----  
Operating loss                            (6,046)      (11.4%)    (13,910)       (19.2%)     (56.5%)
Interest expense                            (892)       (1.7%)       (400)        (0.6%)     123.0%
Other income                                 100         0.2%         194          0.3%      (48.5%)
                                        --------       -----     --------        -----       -----  
Loss before taxes                         (6,838)      (12.9%)    (14,116)       (19.5%)     (51.6%)
Income tax credit                            (79)       (0.2%)     (2,814)        (3.9%)     (97.2%)
                                        --------       -----     --------        -----       -----  
NET LOSS                                ($ 6,759)      (12.7%)   ($11,302)       (15.6%)     (40.2%)
                                        ========       =====     ========        =====       =====  
</TABLE>

Net Sales

Net Sales for 1998 decreased  26.5% to $53.1 million from $72.3 million in 1997.
Vehicle  conversion  sales  declined  27.2%,  comprised  of a 28.2%  decline  in
domestic and 32.0%  decline in export.  The start-up of the shuttle bus business
generated $1.2 million in sales in 1998.

The Company's domestic sales declined consistent with the decline in the overall
conversion  market of 23.7% as reported  by the  Recreational  Vehicle  Industry
Association.  In  addition,  the  Company's  sales were  adversely  impacted  by
production  constraints  in the third quarter from shortages of key raw material
parts, primarily hardwood components.  The Company estimates that the production
issues negatively impacted the year's sales by approximately $7 million.

Export sales declined due to price  pressures from the stronger U.S.  dollar and
reduced demand in Japan and Korea caused by the economic turmoil in Asia.

Gross Profit

Gross  profit  margin for 1998 was 6.6% of sales  compared to 8.2% in 1997.  The
decrease in gross margin as a percent of sales is primarily  attributable to the
impact of fixed plant overhead costs on the lower sales volume.

Selling and promotion expense

Selling and promotion expense for 1998 decreased 38.1% to $4.5 million primarily
due to the lower  domestic  sales volume.  The decrease in selling and promotion
expense as a percentage  of sales in 1998 is due to cost  reductions  from fixed
salesmen salaries and the elimination of the Texas operation.

General and Administrative Expense

General and  administrative  expense in 1998 was $5.1 million,  a 24.2% decrease
from 1997.  The decrease is primarily  attributable  to reductions in personnel,
partially offset by $487,000 of start-up expense from Tecstar.

Restructuring Charges

In  December  1996  the  Company  consolidated  its  Imperial  Automotive  Group
manufacturing  operation and its Texas  manufacturing  facility  into  Starcraft
Automotive  Group's  manufacturing  complex  in  Goshen,  Indiana.  The  Company
recorded a $1.0 million restructure charge in fiscal 1997.

Goodwill

Operating losses at Imperial, together with a strategic review of the conversion
industry,  resulted in an evaluation of the goodwill  related to the acquisition
of Imperial Industries, Inc. In 1997. As a


                                  Page 15 of 25

<PAGE>



result  of the  change  in the  domestic  market,  abandonment  of the  original
strategic operating plan for Imperial, cumulative operating losses and continued
weakness in the domestic vehicle  conversion  market, an impairment loss of $4.9
million was recorded in 1997 to write-off the remaining goodwill associated with
this acquisition.

Income taxes

The Company  recorded a minimal  income tax credit in 1998 as the tax carry-back
is fully utilized.  The 1997 income tax credit was recorded at a 19.9% effective
rate  primarily  due to the impact of a $2.5  million  valuation  allowance  for
deferred income taxes.

<TABLE>
<CAPTION>
1997 VERSUS 1996

(Dollars in Thousands)                                                                      1996 to
                                                                                             1997
                                               1997                       1996              Change
                                       -----------------------   ----------------------    ---------
<S>                                     <C>             <C>       <C>             <C>        <C>    
Net Sales                               $ 72,282        100.0%    $ 98,965        100.0%     (27.0%)
Cost of goods sold                        66,342         91.8%      83,669         84.5%     (20.7%)
                                        --------      -------     --------      -------     ------
Gross profit                               5,940          8.2%      15,296         15.5%     (61.2%)
Selling and promotion expenses             7,243         10.0%       8,252          8.4%     (12.2%)
General and administrative expenses        6,681          9.2%       6,797          6.9%      (1.7%)
Restructuring charges                      1,010          1.4%           0          0.0%      --
Goodwill impairment loss                   4,916          6.8%           0          0.0%      --
                                        --------      -------     --------      -------     ------
Operating income (loss)                  (13,910)       (19.2%)        247          0.2%      --
Interest expense                            (400)        (0.6%)       (293)        (0.3%)     36.5%
Other income                                 194          0.3%         176          0.2%      10.2%
                                        --------      -------     --------      -------     ------
Income (loss) before taxes               (14,116)       (19.5%)        130          0.1%      --
Income taxes (credit)                     (2,814)        (3.9%)         20          0.0%      --
                                        --------      -------     --------      -------     ------
NET INCOME (LOSS)                       ($11,302)       (15.6%)   $    110          0.1%      --
                                        ========      ========    ========      =======     ======
</TABLE>

Net Sales

Net  sales  for 1997 were  $72.3  million  compared  to $99.0  million  in 1996.
Domestic  sales  declined 21.9% to $57.2 million and export sales declined 41.3%
to $15.0  million.  The  Company's  average  sale per unit was $6,000 in 1997 on
12,000  sale units  versus  $6,100 in 1996 on 16,100 sale  units.  The  domestic
conversion  market continued to decline in 1997 due to the increased  popularity
and availability of sport utility vehicles and factory minivans,  price pressure
from higher chassis costs and lower levels of conversion inventory being held on
dealer retail lots.  The Company's  domestic sale units declined 23.3% versus an
industry  average of 14.6% as  reported  by the  Recreational  Vehicle  Industry
Association.  International sales in 1996 benefited from the early build of 1997
model year minivans for Japan totaling $6 million.

Gross Profit

Gross  profit  decreased  from  $15.3  million  (15.5% of sales) in 1996 to $5.9
million  (8.2% of sales) in 1997.  The  decrease in gross margin as a percent of
sales is  attributable  to the impact of fixed plant overhead costs on the lower
sales  volume  and  $1.0  million  of  incremental  carrying  costs  on  chassis
consignment inventory.

Selling and promotion expense

Selling and promotion  expense decreased $1 million to $7.2 million in 1997 from
1996 due to the lower domestic sales volume. This expense increased from 8.4% of
sales to 10.0% of sales due to the  impact  of fixed  salesmen  salaries  on the
lower sales volume.


                                  Page 16 of 25

<PAGE>



General and Administrative Expense

General  and  administrative  expense  decreased  7.0% in 1997  relative to 1996
before the impact of the  National  Mobility  acquisition  (1.7% after  National
Mobility). The decrease is primarily attributable to a reduction in personnel.

Restructuring Charges

In  December  1996 the  Company  completed  the  consolidation  of its  Imperial
Automotive  Group  manufacturing  operation  into Starcraft  Automotive  Group's
manufacturing  complex in Goshen,  Indiana.  The  consolidation  was designed to
reduce excess production capacity,  personnel count and fixed overhead expenses.
The  Company  recorded a  $750,000  restructure  charge in the first  quarter of
fiscal year 1997.

In June 1997 the Company closed its McGregor,  Texas manufacturing  facility and
sold  certain  assets of the  business.  The  Company  recorded a  $260,000  net
restructure  charge in the third  quarter of fiscal year 1997  primarily for the
write-down of leasehold improvements.

Goodwill Impairment Loss

Operating losses at Imperial, together with a strategic review of the conversion
industry,  resulted in an evaluation of the goodwill  related to the acquisition
of Imperial  Industries,  Inc. The July 1994 acquisition of Imperial Industries,
Inc.  was  viewed  at  that  time  as a  strategic  expansion  of the  Company's
production  capacity,  conversion  products lines, and sales and dealer network.
The  operating   strategy  was  to  allow  Imperial  to  remain  an  independent
manufacturing  and  operating   subsidiary  focused  exclusively  on  the  price
sensitive, entry level domestic market. However,  subsequent to the acquisition,
the  domestic  market  contracted,  gross  margins  deteriorated,  and  Imperial
experienced operating losses. In 1997, the manufacturing  operations of Imperial
were  consolidated  into the Starcraft  manufacturing  facility to reduce excess
capacity.  Further  integration  of the  manufacturing  operations,  as  well as
integration  and reduction of the sales,  dealer and general and  administration
functions, have occurred since this consolidation.

As a result of the change in the domestic  market,  abandonment  of the original
strategic operating plan for Imperial, cumulative operating losses and continued
weakness in the domestic vehicle  conversion  market, an impairment loss of $4.9
million was recorded in the fourth  quarter of 1997 to write-off  the  remaining
goodwill associated with this acquisition.

Income Taxes

The 1997 income tax credit was recorded at a 19.9%  effective rate primarily due
to the impact of a $2.5 million  valuation  allowance for deferred income taxes.
The effective rate in 1996 was 15.4% which benefitted from the implementation of
a foreign sales corporation subsidiary.

SEASONALITY AND TRENDS

The Company's  sales and profits are dependent on the automotive  markets in the
United States and overseas,  primarily Japan and northern Europe,  and the OEM's
ability to supply  vehicle  chassis.  The  business  tends to be  seasonal  with
stronger  sales in March  through July and is  influenced by a number of factors
including  atypical weather for any sales region and OEM programs  affecting the
price,  supply  and  delivery  of  vehicle  chassis.   General  Motors'  chassis
represented 58% of the Company's total unit shipments in 1998 compared to 65% in
1997.



                                  Page 17 of 25

<PAGE>



The Company's retail dealers had approximately 1,300 units on hand at the end of
1998  compared  to  3,600  at the  end of 1997  and  5,300  at the end of  1996.
Conversion  inventory  on dealer  retail  lots is down for the  entire  industry
relative  to prior  years.  The Company  believes  dealers  are  stocking  fewer
conversion  products because of the growing  availability of additional  vehicle
models such as sport utility vehicles and a general concern by dealers about the
future of the conversion industry.

The  strengthened  U.S.  dollar and recent turmoil in financial  markets in Asia
pressured  the  Company's  1998 export  sales and margins.  However,  new market
penetration and continued  development of existing markets,  especially  Europe,
should partially offset the Asia market decline in 1999. The domestic conversion
market is expected to continue to decline in 1999.

The Company  eliminated much excess production  capacity and reduced overhead in
1997 to address  the decline in  revenue.  In 1997 the  Company  began a plan to
diversify  both its  product  base and target  markets as it  acquired  National
Mobility Corporation.  National Mobility markets its products in both the retail
and government markets and has commenced  production of a taxi product.  In 1998
the Company continued to pursue its cost reduction and diversification  strategy
with the  introduction of the shuttle bus product and the Tecstar  program.  The
Company  plans to continue to develop  these new  products  and to increase  its
product offerings in the vehicle conversion commercial market.






LIQUIDITY AND CAPITAL RESOURCES

Operating  activities  used cash of $4.6 million  during 1998  compared to using
cash of $3.0 million in the prior year. The use of cash resulted  primarily from
the  pretax  operating  loss.  Receivables  decreased  $0.8  million  due to the
decrease in sales and production levels.  Inventories increased primarily due to
chassis  purchase  requirements  under the shuttle bus business and the European
conversion van sales  program.  Raw chassis in inventory at the end of September
1998 was $2 million  compared  to none at the end of last year.  This  inventory
growth  was  primarily  financed  by the  OEM  through  accounts  payable  which
increased $1.9 million over prior year levels.

The Company invested  $785,000 million in property and equipment during the year
primarily for information  systems ($430,000) and the shuttle bus plant start-up
($200,000).

The Company  acquired  National  Mobility  Corporation  of  Elkhart,  Indiana in
February  1997 for $1.2 million in cash,  assumption  of certain bank debt,  and
15,000 shares of the Company's Common Stock.

The Company's use of cash for operations  and investing  activities was financed
by bank debt. At the end of September 1998, bank debt was $11.8 million.



                                  Page 18 of 25

<PAGE>

On October 30, 1998, the Company entered into a new $14 million credit agreement
with a lending  institution.  The  agreement  is subject to renewal in  November
2001.   Revolving   advances  under  the  agreement  are  limited  to  specified
percentages of eligible receivables and inventories and are subject to a maximum
limit of $9.2 million.  The credit  agreement  also includes a $4.8 million term
loan which is payable in monthly  principal  installments  of $57,000  beginning
December 1, 1998.  The  revolving  borrowings  bear interest of either 1/2% over
prime or 3% over the  Eurodollar  rate.  The term loan bears  interest at either
3/4% over prime or 3.5% over the Eurodollar  rate. The borrowings are secured by
substantially all of the Company's assets. There is a fee of .25% of the average
unused portion of the maximum borrowing amount.  Pursuant to the agreement,  the
Company must, among other things, maintain a minimum level of tangible net worth
of $(3.2  million) as of January 3, 1999,  $(3.2  million) as of March 28, 1999,
$(350,000) as of June 27, 1999 and $700,000 as of October 3, 1999. Additionally,
the Company  must  generate  earnings  before  income  taxes,  depreciation  and
amortization  (EBITDA) of at least $(2.4  million),  $362,000,  $1.5 million and
$410,000 for the fiscal  quarters  ending January 3, 1999,  March 28, 1999, June
27,  1999 and October 3, 1999,  respectively.  If these  minimum  levels are not
maintained,  any outstanding  balances become payable upon demand of the lending
institution.  In order to maintain the minimum  levels of tangible net worth and
EBITDA   through  1999,   the  Company  needs  to  achieve   operating   results
substantially consistent with its 1999 operating plan.

On November 23, 1998, the Company entered into an amended credit  agreement with
its former  primary  lender.  The agreement  called for all  borrowings  over $3
million to be paid with  proceeds  from the $14  million  refinancing  described
above. The remaining $3 million is payable in monthly principal  installments of
$36,000  beginning  December 1, 1998. The note matures in November 2001 at which
time any remaining  principal balance is due. The note bears interest at 2% over
the bank's prime rate and is  subordinate  to the $14 million  credit  agreement
described  above. The note is partially  guaranteed by two  individuals,  one of
whom is a director  and  officer of the Company  and the other is  currently  an
outside director.  As incentive for their guarantees,  the Company issued to the
individuals  warrants to purchase a total of 400,000  shares of Common Stock for
$2.20 per share.  The warrants have a five year term and are  exercisable at the
date of the grant.

The current and long-term  notes payable on the September 27, 1998 balance sheet
reflect the above  modifications.  

On January 12, 1998, the Company  entered into an amended credit  agreement with
its  former  primary  lender  which  was  effective  as of  December  31,  1997.
Borrowings  were  limited to  specified  percentages  of  eligible  receivables,
inventories  and property and  equipment,  and were subject to maximum limits of
$15 million through March 30, 1998, $12 million from March 31, 1998 through June
29,  1998 and $10  million  thereafter.  Borrowings  under this  agreement  bore
interest at 1% over the bank's prime rate were secured by  substantially  all of
the Company's assets.

In addition to the  availability of bank  financing,  the Company has restricted
sales agreements with General Motors Acceptance Corporation,  Chrysler Financial
Corporation and Ford Motor Credit  Company.  Pursuant to these  agreements,  the
Company  obtains vehicle chassis from the OEM's for 90 days at nominal rates. If
the Company  fails to match a chassis  with a dealer  order within 90 days after
delivery of the chassis to the Company,  carrying charges increase to prime rate
plus 1%.

In 1995 the Board of Director's  approved the repurchase of up to 500,000 shares
of the Company's  outstanding  shares of Common Stock,  of which 153,000  shares
have been  acquired to date.  No shares  were  repurchased  in 1997.  Additional
shares are not expected to be acquired until the Company's debt is reduced.

The Company estimates that it will require $2 million to finance the start-up of
Tecstar in 1999. The Company's new financing  agreement is forecasted to satisfy
this requirement.




                                  Page 19 of 25

<PAGE>

The Company  believes that future cash flows from  operations,  funds  available
under its  revolving  credit  agreement,  and the continued use of OEM financing
arrangements  to manage its chassis  inventory will be sufficient to satisfy its
anticipated operating needs and capital improvements for 1999.

OTHER MATTERS

The Company is  dependent  on a  centralized  computer  which  provides  data in
support of vital company-wide operational and accounting functions.  Many of the
computer processes used to generate this data were programmed in-house following
the common practice of using only two digits to designate a year. Other software
purchased by the Company was written using the same convention. As the year 2000
approaches,   programs  with  such  date-related  logic  will  not  be  able  to
distinguish  between the years 1900 and 2000,  potentially  causing software and
hardware to fail,  generate erroneous  calculations or present information in an
unusable  form beyond  December 31, 1999. In 1997,  the Company  began  devoting
significant   resources  to  replace  its  current   system  with  a  new,  year
2000-compliant  enterprise  computer system.  It is expected that the new system
will be  operational  by June  1999.  The total cost of the  project,  including
hardware,   software  and  consulting  costs,  is  currently   estimated  to  be
approximately $1.1 million,  of which $900,000 has been incurred as of September
27,  1998.   These  costs  do  not  include  any  costs   associated   with  the
implementation  of  contingency  plans,  which  are  in  the  process  of  being
developed.

Due to the  uncertainty  of the year 2000  readiness of  third-party  suppliers,
customers  and  financial  institutions,  the  Company  is  currently  unable to
determine  whether the  consequences  of year 2000 failures will have a material
impact on the  Company's  operations.  The Company is  attempting  to assess the
status  of  its  significant  third  party  vendors,   customers  and  financial
institutions through the use of questionnaires.  Management expects this process
to be complete by  mid-1999.  It is  anticipated  that the  Company's  year 2000
project will reduce the risk of significant business interruptions, but there is
no assurance  that this outcome will be achieved.  Failure to detect and correct
all internal  instances of  non-compliance  or the inability of third parties to
achieve timely  compliance  could result in the  interruption of normal business
operations  which could,  depending  on its  duration,  have a material  adverse
effect on the Company's financial condition or results of operations.

DISCUSSION OF FORWARD-LOOKING INFORMATION

The   discussion   above   includes   forward-looking    statements   respecting
restructuring cost estimates,  future personnel and facility expense reductions,
anticipated tax refunds,  domestic and international market and economic trends,
the  Company's  product and target  market  diversification  plans,  anticipated
capital expenditures,  the adequacy of capital resources and other matters. From
time to time,  Starcraft  may make oral or  written  forward-looking  statements
regarding its anticipated sales, costs, expenses, earnings and matters affecting
its condition and operations.  All such forward- looking  statements are subject
to a number of material  factors which could cause the statements or projections
contained  therein to be materially  inaccurate.  Such factors include,  without
limitation, the following:

General  Operating  Contingencies.  The  Company  may not be able to attract and
retain  employees with sufficient  skills to conduct its operations  efficiently
and may from  time to time be  subject  to work  slow-downs  or  stoppages.  The
Company  may be  adversely  affected  by delay or  unavailability  of  supply of
numerous  component  parts.  The Company  will not always be able to satisfy its
capital requirements with internally generated funds and may, from time to time,
need to rely on bank financing and other third party capital resources. There is
no assurance  that such  resources will always be available to the Company or as
to the terms that will apply to any  financing,  or as the Company's  ability to
continue to comply with such terms over time.

Acquisitions  and  Diversification.  The Company may be engaged in  negotiations
from  time to time  regarding  prospective  acquisitions  of van  conversion  or
related  businesses.  Such acquisitions could be material to the Company and, if



                                  Page 20 of 25

<PAGE>



effected,  could have a material effect on the Company's  financial condition or
results of  operations.  There is no assurance as to when or whether the Company
will  be able  to  effect  acquisitions,  whether  it  will be able to  generate
requisite funding to effect such acquisitions,  or as to the terms on which such
acquisitions may be effected.  A significant aspect of the Company's strategy is
to diversify its product  offerings  into new product  lines,  such as taxis and
shuttle buses. The Company has less experience  manufacturing and marketing such
products  than it has in its  core  conversion  vehicle  business.  There  is no
assurance that such new product lines will be profitable.

Economic Conditions.  The van conversion industry is cyclical and is affected by
the  general  trends  of the  economy  and  consumer  preferences  and  consumer
confidence and trends of the automotive and recreational vehicle industries both
domestically  and in  international  markets.  The level of disposable  consumer
income affects the Company's sales because its products are generally considered
discretionary  expenditures by consumers. In difficult economic times, consumers
tend to spend  less of their  income  on  discretionary  items.  Other  economic
factors affecting the demand for the Company's products include the availability
and price of  gasoline,  the level of  interest  rates and the  availability  of
consumer  financing.  A decline  in  general  economic  conditions  or  consumer
confidence can be expected to affect Starcraft's sales adversely.

Supply and Financing of Vehicle Chassis.  The Company is dependent upon the OEMs
to  supply  its  requirements  for  vehicle  chassis.  Labor  stoppages,  supply
shortages  and a variety of other  factors that  influence  OEM  production  can
affect the availability or timely delivery of vehicle chassis to the Company. If
vehicle chassis are unavailable,  or if the Company must accept delivery earlier
or later than it otherwise would prefer,  sales could be adversely  affected and
financing  expenses  could  increase.  The  Company  must also  comply  with its
consignment  and  restricted  sale contracts with the OEMs pursuant to which the
OEMs  impose  certain  specifications  for the  Company's  vehicle  conversions,
including  gross vehicle  weight  standards.  Such  contracts  also restrict the
Company's  ability to dispose of completed  chassis and prohibit the transfer of
chassis  to  unauthorized  U.S.  and  foreign  dealers.  All  of  the  Company's
consignment and restricted sale contracts with chassis  suppliers are terminable
by either party on short  notice  without  cause.  The  availability  of the OEM
financing  rates  is  dependent  upon  the  Company's  compliance  with  its OEM
contracts and its ability to maintain satisfactory credit relationships with the
OEM's finance subsidiaries. Adverse changes in the Company's financial condition
or results of  operations  could cause such  financing  subsidiaries  to seek to
change  adversely the Company's  financing  terms or to terminate such financing
arrangements.  Such a change or termination could have a material adverse effect
on the Company's financial condition and results of operations.

Regulation.  The Company is subject to various foreign, federal, state and local
regulations.  In particular,  van conversion  components produced by the Company
are required to comply with Federal Motor Vehicle  Safety  Standards and similar
safety  standards  imposed in its foreign  markets.  Promulgation  of additional
safety  standards  in the future could  require the Company to incur  additional
testing and  engineering  expenses  which could  adversely  affect the Company's
results  of  operations.  The  Company's  international  sales can be  adversely
affected  by changes in foreign  import  tariffs and taxes and  fluctuations  in
exchange  rates.  The  Company  must  comply  with  certain  Federal  and  state
regulations  relating to the  disposition of hazardous  wastes  generated in its
production   processes.   The  Company's   failure  to  comply  with  applicable
regulations  or changes in current  regulations,  including  the adoption of new
safety or  environmental  standards,  could have material  adverse effect on the
Company's results of operations.

Competition.  The United States vehicle conversion  industry is very competitive
with several principal nationwide  manufacturers and numerous local and regional
competitors.  There is no  assurance  the Company  will be able to maintain  its
current competitive position in the vehicle conversion market.


                                  Page 21 of 25

<PAGE>



Potential Product Liability.  Like other automotive  manufacturers,  the Company
may be subject to claims that its products  caused or  contributed  to damage or
injury  sustained  in vehicle  accidents  or may be required to recall  products
deemed unsafe. Any such claims in excess of the Company's  insurance coverage or
material product recall expenses could adversely affect the Company's  financial
condition and results of operations.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Not Applicable.



<PAGE>



ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                         Report of Independent Auditors




Board of Directors
Starcraft Corporation and Subsidiaries
Goshen, Indiana


We have  audited  the  accompanying  consolidated  balance  sheet  of  Starcraft
Corporation  and   Subsidiaries  as  of  September  27,  1998  and  the  related
consolidated statements of operations,  shareholders' equity, and cash flows for
the year ended September 27, 1998. These consolidated  financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these  consolidated  financial  statements based on our audit. The
consolidated  financial statements of Starcraft  Corporation and Subsidiaries as
of September  28, 1997 and for the years ended  September 28, 1997 and September
29, 1996 were audited by other  auditors  whose  report  dated  January 12, 1998
expressed an unqualified opinion on those statements.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Starcraft  Corporation  and  Subsidiaries  as of  September  27,  1998  and  the
consolidated results of their operations and their cash flows for the year ended
September 27, 1998 in conformity with generally accepted accounting principles.




                                               /s/ Crowe, Chizek and Company LLP

Elkhart, Indiana
November 23, 1998



<PAGE>



To the Board of Directors
Starcraft Corporation

We have  audited  the  accompanying  consolidated  balance  sheets of  Starcraft
Corporation  and   Subsidiaries  as  of  September  28,  1997  and  the  related
consolidated statements of operations,  shareholders' equity, and cash flows for
each of the two years in the period ended September 28, 1997. 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
Starcraft  Corporation  and  Subsidiaries  as of  September  28,  1997  and  the
consolidated  results of their  operations  and their cash flows for each of the
two years in the period ended  September 28, 1997 in conformity  with  generally
accepted accounting principles.

\s\Ernst & Young

January 12, 1998
Fort Wayne, Indiana

<PAGE>


                     STARCRAFT CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                    September 27, 1998 and September 28, 1997

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

<TABLE>
<CAPTION>
                                                                1998                1997
                                                                ----                ----
                                                                      (in thousands)
ASSETS

Current assets

<S>                                                       <C>              <C>         
     Cash and cash equivalents                            $      1,369     $        608

     Trade receivables, less allowance for

       doubtful accounts:  1998 - $40; 1997 - $81                6,160            3,977

     Manufacturers' rebates receivable                             569              692

     Recoverable income taxes                                      417            3,300

     Inventories                                                10,857            9,270

     Other                                                         401              444
                                                          ------------     ------------

         Total current assets                                   19,773           18,291

Property and equipment
     Land, buildings and improvements                            5,927            5,857
     Machinery and equipment                                     6,224            5,608
                                                          ------------     ------------
                                                                12,151           11,465
     Less accumulated depreciation                               4,305            3,491
                                                          ------------     ------------
                                                                 7,846            7,974

Goodwill, at amortized cost                                      1,355            1,453

Other assets                                                        41               61
                                                          ------------     ------------

                                                          $     29,015     $     27,779
                                                          ============     ============

</TABLE>



<PAGE>



                 See accompanying notes to financial statements.


<PAGE>

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)
                    September 27, 1998 and September 28, 1997

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

<TABLE>
<CAPTION>
                                                                  1998            1997
                                                                  ----            ----
                                                                     (in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
<S>                                                       <C>              <C>         
     Current maturities of long-term debt                 $      1,023     $          -
     Accounts payable, trade                                     8,244            6,354
     Accrued expenses
         Warranty                                                1,766            1,337
         Compensation and related expenses                         322              484
         Taxes                                                     971            1,060
         Other                                                   2,045            2,045
                                                          ------------     ------------
         Total current liabilities                              14,371           11,280

Long-term debt                                                  10,777            5,696

Deferred income taxes                                              331              508

Shareholders' equity
     Preferred stock, no par value:  2,000,000 shares
       authorized but unissued
     Common stock, no par value:
         Authorized shares - 10,000,000 shares
         Issued and outstanding shares - 4,133,600              14,016           14,016
     Additional paid-in capital                                  1,008            1,008
     Accumulated deficit                                       (11,488)          (4,729)
                                                          ------------     ------------
                                                                 3,536           10,295
                                                          ------------     ------------

                                                          $     29,015     $     27,779
                                                          ============     ============
</TABLE>

See accompanying notes to financial statements.


<PAGE>



                      CONSOLIDATED STATEMENTS OF OPERATIONS
         For the years ended September 27, 1998, September 28, 1997 and
                               September 29, 1996

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

<TABLE>
<CAPTION>


                                                                           1998            1997            1996
                                                                           ----            ----            ----
                                                                           (in thousands, except per share data)
Net sales
<S>                                                                    <C>            <C>              <C>         
     Domestic                                                          $     42,857   $     57,235     $     73,317
     Export                                                                  10,235         15,047           25,648
                                                                       ------------   ------------     ------------
                                                                             53,092         72,282           98,965

Cost of goods sold                                                           49,590         66,342           83,669
                                                                       ------------   ------------     ------------


Gross profit                                                                  3,502          5,940           15,296

Operating expenses
     Selling and promotion                                                    4,484          7,243            8,252
     General and administrative                                               5,064          6,681            6,797
     Restructuring charges                                                        -          1,010                -
     Goodwill impairment loss                                                     -          4,916                -
                                                                       ------------   ------------     ------------


Operating income (loss)                                                      (6,046)       (13,910)             247

Nonoperating (expense) income
     Interest, net                                                             (892)          (400)            (293)
     Other income, net                                                          100            194              176
                                                                       ------------   ------------     ------------
                                                                               (792)          (206)            (117)
                                                                       ------------   ------------     ------------


Income (loss) before income taxes                                            (6,838)       (14,116)             130

Federal and state income taxes (credit)                                         (79)        (2,814)              20
                                                                       ------------   ------------     ------------


Net income (loss)                                                      $     (6,759)  $    (11,302)    $        110
                                                                       ============   ============     ============


Earnings (loss) per common share, basic                                $     (1.63)   $      (2.74)    $        .03

Earnings (loss) per common and common
  equivalent share, assuming dilution                                  $     (1.63)   $      (2.74)    $        .03


</TABLE>

See accompanying notes to financial statements.


<PAGE>
<TABLE>
<CAPTION>



                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For the years ended September 27, 1998,  September 28, 1997 and
                               September 29, 1996

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


                                                                           1998            1997            1996
                                                                           ----            ----            ----
                                                                                      (in thousands)
Cash flows from operating activities
<S>                                                                    <C>              <C>               <C>      
Net income (loss)                                                      $     (6,759)    $  (11,302)       $     110
Adjustments to reconcile net income (loss)
  to net cash from operating activities
     Depreciation and amortization                                            1,018          1,199            1,087
     Noncash restructuring charges                                                -            611                -
     Goodwill impairment loss                                                     -          4,916                -
     Deferred income taxes                                                     (177)           583               51
     Change in operating assets and liabilities
         Receivables                                                            823          2,465           (2,810)
         Inventories                                                         (1,587)         4,494              205
         Accounts payable                                                     1,890         (3,369)           2,947
         Accrued expenses                                                       178         (2,512)             110
         Other                                                                   30           (113)             163
                                                                       ------------   ------------     ------------

              Net cash from operating activities                             (4,584)        (3,028)           1,863

Cash flows from investing activities
Purchase of property and equipment                                             (785)        (1,407)            (932)
Purchase of assets of National Mobility Corporation                               -         (1,756)               -
Proceeds from sale of property and equipment                                     26             60               36
                                                                       ------------   ------------     ------------
     Net cash from investing activities                                        (759)        (3,103)            (896)

Cash flows from financing activities
Proceeds from revolving credit agreement                                     11,604         12,200            7,800
Payments of revolving credit agreement                                       (5,500)        (6,504)          (7,800)
Payments of long-term debt                                                        -           (323)            (610)
Repurchase of common stock                                                        -              -             (246)
                                                                       ------------   ------------     ------------
     Net cash from financing activities                                       6,104          5,373             (856)
                                                                       ------------   ------------     ------------

Net change in cash and cash equivalents                                         761           (758)             111

Cash and cash equivalents at beginning of year                                  608          1,366            1,255
                                                                       ------------   ------------     ------------

Cash and cash equivalents at end of year                               $      1,369   $        608     $      1,366
                                                                       ============   ============     ============

Supplemental disclosure of cash flow information
     Interest paid                                                     $        770        $   376        $     304
     Income taxes paid                                                           10            140               60

</TABLE>

See accompanying notes to financial statements.


<PAGE>



                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
              For the years ended September 27, 1998, September 28,
                           1997 and September 29, 1996

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

<TABLE>
<CAPTION>


                                               Outstanding                  Additional     Retained
                                                 Common        Common         Paid-In      Earnings
                                                 Shares         Stock         Capital      (Deficit)       Total
                                              --------------  -------------(in thousands)-----------     ----------
<S>                                             <C>          <C>           <C>           <C>            <C>       
Balance, October 2, 1995                         4,171,600    $   14,104    $    1,008    $    6,576     $   21,688
     Net income                                          -             -             -           110            110
     Repurchase and retirement
       of 53,000 shares of common stock            (53,000)         (133)            -          (113)          (246)
                                            --------------    ----------    ----------    ----------     ----------


Balance, September 29, 1996                      4,118,600        13,971         1,008         6,573         21,552
     Net loss                                            -             -             -       (11,302)       (11,302)
     Issuance of 15,000 shares
       of common stock                              15,000            45             -             -             45
                                            --------------    ----------    ----------    ----------     ----------


Balance, September 28, 1997                      4,133,600        14,016         1,008        (4,729)        10,295

     Net loss                                            -             -             -        (6,759)        (6,759)
                                            --------------    ----------    ----------    ----------     ----------


Balance, September 27, 1998                      4,133,600    $   14,016    $    1,008    $  (11,488)    $    3,536
                                            ==============    ==========    ==========    ==========     ==========
</TABLE>

See accompanying notes to financial statements.



<PAGE>



                     STARCRAFT CORPORATION AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                    September 27, 1998 and September 28, 1997
                      (In thousands, except per share data)
--------------------------------------------------------------------------------

NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Business and Principles of  Consolidation:  Starcraft  Corporation and
Subsidiaries  (Company)  are second stage  manufacturers  of custom van,  pickup
truck and sport utility vehicle conversions, and shuttle buses. The consolidated
financial  statements  include the  accounts of  Starcraft  Corporation  and its
wholly owned subsidiaries: Starcraft Automotive Group, Inc., Imperial Automotive
Group,  Inc.  (Imperial),  Starcraft  Southwest,  Inc.,  and  National  Mobility
Corporation.  All significant  intercompany  accounts and transactions have been
eliminated in consolidation. Additionally the Company has a controlling interest
in Tecstar, Inc. which is also included as a part of the consolidated  financial
statements.

The Company's  customers operate in the automotive  industry.  The Company sells
conversion units throughout the United States,  and export sales are principally
to locations in Japan and northern Europe. Credit is extended to customers based
on an  evaluation  of the  customer's  financial  condition,  and when credit is
extended  collateral  generally is not required.  Sales to the Company's largest
customer were $5,579, $9,541 and $18,526 in 1998, 1997 and 1996, respectively.

Cash Equivalents:  Cash equivalents include all highly liquid investments with a
maturity when purchased of three months or less.

Inventories:  Inventories  are  stated at the lower of cost or  market.  Cost is
determined  by the  last-in,  first-out  (LIFO)  method for certain  inventories
($10,081 and $8,962 at September 27, 1998 and September 28, 1997,  respectively)
and by the first-in, first-out (FIFO) method for all other inventories.

Property and Equipment:  Property and equipment are stated at cost. Depreciation
is computed  principally by the  straight-line  method over the estimated useful
lives of the assets. The Company is depreciating buildings over periods of 15 to
50 years,  building  improvements  over periods of 5 to 20 years,  and equipment
over periods of 3 to 12 years.

Goodwill:  Goodwill is amortized by the straight-line method over a period of 15
years and is stated net of accumulated amortization of $155 and $57 at September
27,  1998 and  September  28,  1997,  respectively.  The Company  evaluates  the
recoverability based on undiscounted projected operating cash flows when factors
indicate that an impairment  may exist.  During the fourth  quarter of 1997, the
Company wrote off the remaining  goodwill  associated  with the  acquisition  of
Imperial Industries, Inc. as more fully described in Note 8.

Warranties:  The Company  follows the policy of accruing an estimated  liability
for warranties at the time the warranted products are sold.

Revenue  Recognition:  The  Company  generally  manufactures  products  based on
specific orders from  customers.  Shipments are generally made by common carrier
after receiving  authorization from the customer, and revenue is recognized upon
shipment. Net sales do not include the cost of consigned chassis (see Note 10).


<PAGE>



                     STARCRAFT CORPORATION AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                    September 27, 1998 and September 28, 1997
                      (In thousands, except per share data)

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


NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
  (Continued)

Stock Based  Compensation:  The Company  periodically grants stock options for a
fixed  number of shares to  employees.  The Company  accounts  for stock  option
grants  in  accordance  with  Accounting   Principles   Board  Opinion  No.  25,
"Accounting for Stock Issued to Employees" ("APB 25").

Use of Estimates:  Preparation  of the financial  statements in accordance  with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Earnings  Per Common  Share:  Basic and diluted  earnings  per common  share are
computed under an accounting standard effective beginning with the quarter ended
December  28,  1997.  All prior  earnings  per common  share  amounts  have been
restated  to be  comparable.  Basic  earnings  per common  share is based on net
income available to common  shareholders  divided by the weighted average number
of common shares  considered to be outstanding  during the period.  The weighted
average  number of common  shares  outstanding  were  4,133,600,  4,127,350  and
4,142,402  for the years  ended  September  27,  1998,  September  28,  1997 and
September 29, 1996,  respectively.  Diluted  earnings per common share shows the
dilutive effect of any additional  potential  common shares issuable under stock
options. The Company's  outstanding  incentive stock options were not considered
in the computations of earnings per share, assuming dilution because the effects
of assumed exercise would have been antidilutive.

Seasonality  The  Company's  business is seasonal.  Sales are  generally  higher
during the spring and summer months of the year.

Fiscal Year:  The Company's  fiscal year ends on the Sunday closest to September
30. The years ended  September  27, 1998,  September  28, 1997 and September 29,
1996 each contain 52 weeks.


NOTE 2 - INVENTORIES

The  composition  of inventories at September 27, 1998 and September 28, 1997 is
as follows:

                                     1998            1997
                                     ----            ----

     Raw materials              $      4,631     $      4,654
     Chassis                           2,006                -
     Work-in-process                   2,584            1,667
     Finished goods                    1,636            2,949
                                ------------     ------------

                                $     10,857     $      9,270
                                ============     ============

The use of the LIFO method of determining  the cost of inventories  did not have
material effect on inventories at September 27, 1998 and September 28, 1997.


<PAGE>



NOTE 3 - DEBT ARRANGEMENTS

On October 30, 1998,  the Company  entered into a new $14,000  credit  agreement
with a lending  institution.  The  agreement  is subject to renewal in  November
2001.   Revolving   advances  under  the  agreement  are  limited  to  specified
percentages of eligible receivables and inventories and are subject to a maximum
limit of $9,200.  The credit agreement also includes a $4,800 term loan which is
payable in monthly principal installments of $57 beginning December 1, 1998. The
note matures in November 2001 at which time any remaining  principal  balance is
due The revolving  borrowings bear interest of either 1/2% over prime or 3% over
the  Eurodollar  rate. The term note bears interest at either 3/4% over prime or
3.5% over the Eurodollar rate. The borrowings are secured by  substantially  all
of the Company's assets. There is a fee of .25% of the average unused portion of
the maximum borrowing amount. Pursuant to the agreement, the Company must, among
other  things,  maintain a minimum level of tangible net worth of $(3,200) as of
January 3, 1999,  $(3,200) as of March 28, 1999,  $(350) as of June 27, 1999 and
$700 as of October 3, 1999.  Additionally,  the Company must  generate  earnings
before  income  taxes,  depreciation  and  amortization  (EBITDA)  of  at  least
$(2,400),  $362, $1,518 and $410 for the fiscal quarters ending January 3, 1999,
March 28,  1999,  June 27,  1999 and  October  3, 1999,  respectively.  If these
minimum levels are not maintained,  any outstanding balances become payable upon
demand of the lending  institution.  In order to maintain the minimum  levels of
tangible  net worth and  EBITDA  through  1999,  the  Company  needs to  achieve
operating results substantially consistent with its 1999 operating plan.

On November 23, 1998, the Company entered into an amended credit  agreement with
its former primary lender.  The agreement  called for all borrowings over $3,000
to be paid with  proceeds  from the $14,000  refinancing  described  above.  The
remaining $3,000 is payable in monthly  principal  installments of $36 beginning
December 1, 1998.  The note matures in November 2001 at which time any remaining
principal  balance is due.  The note bears  interest at 2% over the bank's prime
rate and is subordinate to the $14,000 credit  agreement  described  above.  The
note is  partially  guaranteed  by two  individuals,  both  whom  are  currently
directors and one of whom is an officer of the Company. (See Note 13)

The current and long-term  notes payable on the September 27, 1998 balance sheet
reflect the above modifications.

On January 12, 1998, the Company  entered into an amended credit  agreement with
its  former  primary  lender  which  was  effective  as of  December  31,  1997.
Borrowings  were  limited to  specified  percentages  of  eligible  receivables,
inventories  and property and  equipment,  and were subject to maximum limits of
$15,000  through  March 30,  1998,  $12,000 from March 31, 1998 through June 29,
1998 and $10,000 thereafter. Borrowings under this agreement bear interest at 1%
over the  bank's  prime  rate  and  were  secured  by  substantially  all of the
Company's assets. This credit agreement was further amended on November 23, 1998
(see above).


<PAGE>



NOTE 3 - DEBT ARRANGEMENTS (Continued)

The carrying amount of the Company's long-term debt approximates fair value.

Interest expense was  approximately  $892, $403 and $305 in 1998, 1997 and 1996,
respectively.

Long-term debt is due as follows:

            Fiscal Year Ending

                  1999                    $     1,023
                  2000                          1,116
                  2001                          1,023
                  2002                          8,638


NOTE 4 - INCOME TAXES

Federal and state income taxes (credits), all of which were domestic, consist of
the following:

                                    1998             1997            1996
                                    ----             ----            ----
         Current
              Federal           $        (61)   $     (2,770)    $       (103)
              State                      159            (627)              55
                                ------------    ------------     ------------
                                          98          (3,397)             (48)
         Deferred
              Federal                   (154)            508               54
              State                      (23)             75               14
                                ------------    ------------     ------------
                                        (177)            583               68
                                ------------    ------------     ------------

                                $        (79)   $     (2,814)    $         20
                                ============    ============     ============

The provisions for income taxes are different from amounts that would  otherwise
be computed  by  applying a federal  statutory  rate of 34% to income  taxes.  A
reconciliation of the differences is as follows:
<TABLE>
<CAPTION>

                                                                 1998             1997            1996
                                                                 ----             ----            ----

<S>                                                          <C>             <C>              <C>         
         Rate applied to pretax income (loss)                $     (2,325)   $     (4,799)    $         44
         State taxes - net                                           (196)           (701)              46
         Foreign sales corporation                                      -             (36)            (205)
         Net operating loss for which no
           benefit was recognized                                   2,231               -                -
         Temporary differences for which
           no benefit was recognized                                  254           2,544                -
         Other, net                                                   (43)            178              135
                                                             ------------    ------------     ------------

                                                             $        (79)   $     (2,814)    $         20
                                                             ============    ============     ============
</TABLE>



<PAGE>



NOTE 4 - INCOME TAXES (Continued)

The composition of the deferred tax assets and liabilities at September 27, 1998
and September 28, 1997 is as follows:

<TABLE>
<CAPTION>


                                                                                  1998            1997
                                                                                  ----            ----

<S>                                                                          <C>              <C>          
         Deferred tax liabilities
              Accelerated depreciation                                       $       (460)    $       (484)
              Inventory basis difference                                             (331)            (331)
              Other                                                                     -              (57)
                                                                             ------------     ------------
                                                                                     (791)            (872)
         Deferred tax assets
              Inventory                                                               275              216
              Nondeductible accruals
                  Warranty                                                            689              276
                  Other                                                               487              455
              Goodwill                                                              1,587            1,741
              Alternative minimum tax credit carryforward                             220              220
              Net operating loss carryforward                                       2,231                -
                                                                             ------------     ------------
         Total deferred tax assets                                                  5,489            2,908
         Valuation allowance                                                       (5,029)          (2,544)
                                                                             ------------     ------------
                                                                                      460              364
                                                                             ------------     ------------

         Net deferred tax asset (liability)                                  $       (331)    $       (508)
                                                                             ============     ============

</TABLE>
The  alternative  minimum tax  carryforward  of $220 has no expiration  date for
income tax purposes.  The net operating loss  carryforward  of $2,231 expires in
2018.


NOTE 5 - COMPENSATION PLANS

The Company sponsors a qualified  profit-sharing  plan, more commonly known as a
401(k) plan, for all of its employees with over six months of service.  The plan
provides  for a  discretionary  matching  contribution  by  the  Company  of the
employee's salary deduction,  up to 6% of compensation.  Also, the plan provides
for an additional discretionary contribution annually as determined by the Board
of Directors.  The amounts  charged to expense for this plan were  approximately
($250), $361 and $107 in 1998, 1997 and 1996, respectively.



<PAGE>

NOTE 6 - STOCK OPTION PLANS

The Company  maintains two stock  incentive  plans under which stock options are
granted to key employees and directors.  The plans  authorize the grant of stock
options for up to 630,000 shares of the Company's  common stock.  The options in
these two plans  have five year  terms and become  fully  exercisable  after six
months.  The Company  also  sponsors a qualified  stock  option plan with 40,000
shares of common stock reserved for options to certain sales representatives who
are not employees of the Company. These options have five year terms.

Under the three  plans,  options  may not be granted at prices  below 85% of the
current  market  value of the stock at the date of grant.  All  options  awarded
through  September 27, 1998 have been at fair market value on the date of grant.
For each of the three years in the period ended  September 27, 1998,  the effect
of the stock options in computing earnings per common share was antidilutive.

A summary of the Company's stock option activity and related information for the
years ended  September  27,  1998,  September  28, 1997 and  September  29, 1996
follows:

<TABLE>
<CAPTION>


                                            1 9 9 8                     1 9 9 7                      1 9 9 6
                                            -------                     -------                      -------
                                                 Weighted                     Weighted                    Weighted
                                                  Average                      Average                     Average
                                                 Exercise                     Exercise                    Exercise
                                    Options        Price        Options         Price        Options        Price
                                    -------        -----        -------         -----        -------        -----

<S>                                  <C>         <C>              <C>        <C>              <C>         <C>    
Outstanding at
  beginning of year                  407,349     $  5.65          375,349    $   6.24         311,850     $  8.02
Granted                              188,849        1.85          124,500        3.40         176,500        4.38
Canceled                             (85,000)       4.41          (92,500)       5.02        (113,001)       8.26
Expired                              (58,349)       8.15                -           -               -            -
                                 -----------     -------      -----------    --------     -----------     --------
Outstanding at
  end of year                        452,849     $  3.97          407,349    $   5.65         375,349     $  6.24
                                 ===========     =======      ===========    ========     ===========     =======
Exercisable at end of year           383,515     $  4.22          302,149    $   6.46         359,849     $  6.21
                                 ===========     =======      ===========    ========     ===========     =======
</TABLE>

As of September 27, 1998,  there were 267,349 options  outstanding with exercise
prices which ranged from $1.625 to $4.00. The weighted-average exercise price of
these options is $2.34, and the weighted-average  remaining  contractual life is
4.1 years. As of September 27, 1998, there were 185,500 options outstanding with
exercise prices which ranged from $4.25 to $7.75. The weighted-average  exercise
price of these options is $6.32, and the weighted-average  remaining contractual
life is 1.8 years.



<PAGE>



NOTE 6 - STOCK OPTION PLANS (Continued)

The  Company  has  elected  to  follow  APB 25 and  related  interpretations  in
accounting for its employee stock options.  Under APB 25 no compensation expense
has been  recognized  because the exercise price of the Company's  stock options
has  equaled  the  market  price of the  underlying  stock on the date of grant.
Proforma information  regarding net income and earnings per share is required by
FASB Statement No. 123,  "Accounting for Stock-Based  Compensation," ("FAS 123")
and has been  determined  as if the Company had  accounted for its stock options
issued in 1998 and 1997 under the fair value  method of FAS 123.  The fair value
was estimated as of the date of grant using a Black-Sholes  option pricing model
with the following assumptions:

                                             1998                 1997
                                             ----                 ----

         Risk-free interest rate         4.52% - 5.63%        6.04% - 6.77%
         Dividend yield                       0%                   0%
         Volatility factor               54.8% - 59.8%        40.9% - 48.8%
         Expected option life               4 years              4 years

For purposes of proforma disclosures, the estimated fair value of the options is
amortized to expense over the options'  vesting period.  The Company's  proforma
information follows:

                                                   1998         1997       1996
                                                   ----         ----       ----

         Proforma net income (loss)              $(6,912)     $(11,469)    $13
         Proforma net income (loss) per share     $(1.67)      $ (2.78)    $0.00


NOTE 7 - SHAREHOLDER RIGHTS PLAN

In August 1997 the Company adopted a Shareholders  Rights Plan issuing one right
for each  outstanding  share.  Each  right  entitles  the  registered  holder to
purchase from the Company one share of common stock at $15 per share, subject to
adjustment.  The rights  become  exercisable  if a person or group  (other  than
certain  related  persons)  acquires or announces a tender offer for  prescribed
percentages  of the Company's  shares or is declared an "adverse  person" by the
Company's  Board of Directors.  In these events,  each right holder may purchase
shares  with a value  equal to twice the  exercise  price.  Furthermore,  if the
Company  engages in certain  mergers or similar  business  combinations  a right
holder may purchase  shares of the  acquiring  company with a value to two times
the purchase price of the right. The rights expire on August 12, 2007.



<PAGE>



NOTE 8 - RESTRUCTURING CHARGES AND GOODWILL IMPAIRMENT

In December 1996 the Company consolidated its Imperial  manufacturing  operation
located in Elkhart,  Indiana into the Company's facility in Goshen,  Indiana. In
June 1997 the Company  closed its  McGregor,  Texas plant and sold the assets of
that plant. The Company recorded $1,010 of restructuring charges related to such
activities primarily for employee termination and other costs ($179),  leasehold
asset  write-offs  ($326) and the  recognition  of remaining  contractual  lease
obligations  ($505).  The contractual  lease  obligations  primarily  pertain to
remaining rent and associated contractual costs at the former Imperial location.
The remaining  liability for contractual lease obligations at September 27, 1997
was paid during fiscal 1998.

Operating losses at Imperial, together with a strategic review of the conversion
industry,  resulted in an evaluation of the goodwill  related to the acquisition
of Imperial  Industries,  Inc. The July 1994 acquisition of Imperial Industries,
Inc.  was  viewed  at  that  time  as a  strategic  expansion  of the  Company's
production  capacity,  conversion  products lines, and sales and dealer network.
The  operating   strategy  was  to  allow  Imperial  to  remain  an  independent
manufacturing  and  operating   subsidiary  focused  exclusively  on  the  price
sensitive,  entry level domestic conversion market.  However,  subsequent to the
acquisition,   the  domestic   market  has   contracted,   gross   margins  have
deteriorated,  and Imperial  has  experienced  operating  losses.  In 1997,  the
manufacturing  operations  of  Imperial  were  consolidated  into the  Starcraft
manufacturing  facility to reduce excess  capacity.  Further  integration of the
manufacturing  operations,  as well as  integration  and reduction of the sales,
dealer and  general  and  administration  functions,  have  occurred  since this
consolidation.

As a result of the change in the domestic  market,  abandonment  of the original
strategic operating plan for Imperial, cumulative operating losses and continued
weakness in the domestic vehicle  conversion  market, it was determined that the
goodwill was not  recoverable,  and  therefore,  a goodwill  impairment  loss of
$4,916 was  recorded  in the fourth  quarter of 1997 to write off the  remaining
goodwill associated with this acquisition.


NOTE 9 - BUSINESS COMBINATION

On February  28,  1997,  the  Company  acquired  the assets and assumed  certain
liabilities  of National  Mobility  Corporation,  a  manufacturer  of conversion
vehicles  for the  physically  challenged.  The  purchase  price of the acquired
assets was $1,200 in cash,  assumption  of certain  bank debt,  and  issuance of
15,000 shares of the Company's common stock. The excess of the total acquisition
cost over the fair value of the net assets  acquired is recorded as goodwill and
is being amortized over 15 years using the straight-line method.



<PAGE>



NOTE 9 - BUSINESS COMBINATION (Continued)

The  acquisition  was recorded  using the  purchase  method of  accounting,  and
accordingly,  the results of operations of National Mobility Corporation for the
year ended  September 27, 1998 and for the seven months ended September 28, 1997
are included in the consolidated  financial  statements.  The purchase price has
been  allocated  to  assets  acquired  and  liabilities  assumed  based on their
respective  fair  values  at the  date of  acquisition.  The  allocation  of the
purchase price is summarized as follows:

         Current assets                 $      2,448
         Property and equipment                  200
         Goodwill                              1,510
         Current liabilities                  (2,357)
                                        ------------

                                        $      1,801
                                        ============

On the basis of a proforma  consolidation of the results of operations as if the
acquisition  had taken place at the  beginning of 1996,  consolidated  net sales
would have been  $102,978 for 1996 and $73,771 for 1997.  Consolidated  proforma
income  (loss)  and  earnings  (loss) per share  would not have been  materially
different from the reported amounts for 1998 and 1997. The proforma  information
is not  necessarily  indicative  of what  the  actual  consolidated  results  of
operations  might  have  been  if the  acquisition  had  been  effective  at the
beginning of 1996.


NOTE 10 - CONSIGNMENT ARRANGEMENTS

The  Company  obtains  vehicle  chassis  for  modification  from  major  vehicle
manufacturers  (OEMs) under consignment and restricted sales  agreements.  These
agreements generally provide that (i) the Company may not obtain certificates of
origin or other evidence of ownership of chassis, (ii) modification must conform
to standards specified by OEMs, and (iii) modifications  generally are performed
only after a sale has been negotiated with an OEM approved  dealer.  The Company
generally ships converted chassis only after dealer acceptance has been approved
by the OEM. The OEMs bill the dealer and provide warranty for the chassis.

Consistent with the practice in the industry,  the Company  accounts for chassis
as consignment inventory. Accordingly, the Company records chassis inventory and
related obligations only in the event they are required to purchase chassis from
the OEM.  Provisions  for  decline  in chassis  value are  recognized  when,  in
management's estimation,  such provisions are necessary.  Provisions for decline
in chassis value,  chassis inventory,  and chassis sales are not material to the
accompanying financial statements.



<PAGE>




NOTE 10 - CONSIGNMENT ARRANGEMENTS (Continued)

At September  27, 1998,  the Company has  possession of chassis in the aggregate
amount of $8,720 (of which $2,960 related to chassis on consignment  for periods
exceeding 90 days) and has total chassis line  availability  between $34,500 and
$44,000  based on the time of year.  Carrying  charges on  consignment  chassis,
which are presented in cost of goods sold, were approximately $1,030, $2,740 and
$1,729 in 1998,  1997 and  1996,  respectively.  The OEMs  have also  instituted
incentive rebates to second-stage  manufacturers  based on the number of chassis
delivered  to  dealers.   Those  incentives   reduced  cost  of  goods  sold  by
approximately $731, $751 and $1,135 in 1998, 1997 and 1996, respectively.


NOTE 11 - COMMITMENTS AND CONTINGENCIES

The Company leases  certain of its  facilities  and equipment.  The total rental
expense for 1998,  1997 and 1996 is $270,  $688 and $490,  respectively.  Rental
commitments at September 27, 1998 for long-term  noncancelable  operating leases
are as follows:

                           1999           $        204
                           2000                     96
                           2001                      5
                                          ------------

                                          $        305
                                          ============

The Company is subject to various legal  proceedings  and claims with respect to
such matters as product  liabilities  and other  actions  which arise out of the
normal course of its  business.  Management  and its legal counsel  periodically
review the  probable  outcome of pending  proceedings  and the costs  reasonably
expected to be incurred. The Company accrues for these costs when it is probable
that a liability  has been incurred and the amount of the loss can be reasonably
estimated.  In the opinion of  management,  any ultimate  cost to the Company in
excess of amounts accrued will not materially affect its consolidated  financial
position, cash flows or results of operations.

The Company's commitments with respect to its chassis arrangements are described
in Note 10.


NOTE 12 - RESEARCH AND DEVELOPMENT

The  Company  incurs  costs to improve  the  appeal and safety of its  products.
Research and development costs are charged to operations when incurred.  Amounts
charged to operations were  approximately  $520, $824 and $893 in 1998, 1997 and
1996, respectively.



<PAGE>


                                                
NOTE 13 - SUBSEQUENT EVENT

On November 20, 1998 the Company  issued  warrants to purchase  shares of Common
stock to two  individuals  as  incentive  for  their  partial  guarantee  of the
Company's  long-term debt (See Note 3). The  individuals can both purchase up to
200,000  shares of Common stock of the Company for $2.20 per share which was the
ten day average  market price  preceding the date of grant.  The warrants have a
five year term and are exercisable at the date of grant.


NOTE 14 - UNAUDITED FINANCIAL INFORMATION

Presented below is certain unaudited  quarterly  financial  information for 1998
and 1997.
<TABLE>
<CAPTION>


                                                                            Quarter Ended
                                               December 28,         March 29,         June 28,         September 27,
                                                   1997               1998              1998               1998
                                               ------------         ---------         --------         -------------

<S>                                            <C>               <C>                <C>                <C>         
         Net sales                             $     13,419      $     14,464       $     11,820       $     13,389
         Gross profit (loss)                          1,205             1,656                856               (215)
         Net loss                                    (1,137)             (821)            (1,281)            (3,520)
         Loss per common share                        (0.28)            (0.19)             (0.31)             (0.85)

                                                                            Quarter Ended
                                               December 29,         March 30,         June 29,         September 28,
                                                   1996               1997              1997               1997
                                               ------------         ---------         --------         -------------

         Net sales                             $     17,669      $     18,552       $     23,465       $     12,596
         Gross profit (loss)                          2,028             1,120              2,843                (51)
         Net loss                                    (1,342)           (1,552)              (692)            (7,716)
         Loss per common share                        (0.33)            (0.37)             (0.17)             (1.87)
</TABLE>

Adjustments  in the fourth  quarter of the fiscal year ended  September 27, 1998
included  the start up loss  related to  Tecstar,  Inc.  and  certain  accruals.
Adjustments  in the fourth  quarter of the fiscal year ended  September 28, 1997
included a goodwill impairment loss.




<PAGE>

NOTE 15 - MANAGEMENT'S PLAN REGARDING CONTINUING OPERATIONS

At September 27, 1998 and for the year then ended, the Company had negative cash
flow from  operations,  recurring losses from operations and no additional funds
available under its prior loan agreement.

Future  operations  of the Company are  intended  to  continue.  The Company has
refinanced  its existing debt with a new lending  institution  (see Note 3). The
new agreement  gives the Company  availability  of funds for near term operating
losses and working  capital needs (subject to borrowing base  limitations).  The
new agreement also includes  financial  covenants that are less restrictive than
similar covenants with its former lender. Management intends to reduce operating
losses  and   ultimately   return   the   Company   to   profitability   through
diversification  of their  products  and  markets,  and through  continued  cost
reductions.  If future actual results fail to meet management's plan, additional
losses could occur.




<PAGE>


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

Previously reported.



                                  Page 22 of 25

<PAGE>



                                    PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Incorporated  by reference to the  Registrant's  proxy  statement filed with the
Securities and Exchange Commission on January 8, 1999.

ITEM 11.          EXECUTIVE COMPENSATION

Incorporated  by reference to the  Registrant's  proxy  statement filed with the
Securities and Exchange Commission on January 8, 1999.

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT

Incorporated  by reference to the  Registrant's  proxy  statement filed with the
Securities and Exchange Commission on January 8, 1999.

ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Incorporated  by reference to the  Registrant's  proxy  statement filed with the
Securities and Exchange Commission on January 8, 1999.



                                  Page 23 of 25

<PAGE>



                                     PART IV

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

(a)      The following documents are filed as part of the report:

         Financial  Statements  (as of September 27, 1998 and September 28, 1997
         and for the fiscal  periods  ended  September  27, 1998,  September 28,
         1997, and September 29, 1996):

         Reports of Independent Auditors
         Balance Sheets
         Statements of Operations
         Statements of Cash Flows
         Statements of Shareholders' Equity
         Notes to Financial Statements

(b)      Reports on Form 8-K

         Registrant  filed a report on Form 8-K on July 24,  1998,  reporting  a
         change of its independent auditors.

(c)      The exhibits filed herewith or incorporated by reference herein are set
         forth on the Exhibit Index immediately following the signature page.

(d)      The  following  financial  statement  schedule is filed as part of this
         report:

         (i)      Schedule II -- Valuation and Qualifying Accounts and Reserves.

         All other  schedules  for  which  provision  is made in the  applicable
         accounting  regulations of the  Securities and Exchange  Commission are
         not required under the related  instructions  or are  inapplicable  and
         have been omitted.



                                  Page 24 of 25

<PAGE>


                     STARCRAFT CORPORATION AND SUBSIDIARIES

                                   SCHEDULE II
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                             (Dollars in Thousands)
<TABLE>
<CAPTION>



                               Balance at              Charged to            Deductions from         Balance at Close
                           Beginning of Period         Operations             Additions to              of Period
                                                                              Reserves (a)
Allowance for doubtful accounts - 
deducted from accounts  receivable,  trade, in
the consolidated balance sheets:
------------------------------------------------------------------------------------------------------------------------
<C>                               <C>                     <C>                     <C>                      <C> 
52 weeks ended                    $ 81                    $ --                    $ 41                     $ 40
September 27, 1998
52 weeks ended                    $ 51                    $ 30                    $ --                     $ 81
September 28, 1997
52 weeks ended                    $ 57                    $ --                    ($ 6)                    $ 51
September 29, 1996
</TABLE>

(a)    Write-off of bad debts, less recoveries.




<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) the Securities  Exchange Act
of 1934, as amended,  the Registrant has duly caused this report to be signed on
behalf of the undersigned, thereto duly authorized.

                                           STARCRAFT CORPORATION

DATE: January 11, 1999               By:   /s/ Kelly L. Rose
                                           --------------------------------
                                           Kelly L. Rose,
                                           Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities indicated on this 28th day of December, 1998.

1)        Principal Executive Officer:

   By:    /s/   Kelly L. Rose              Chairman, Chief Executive Officer
          Kelly L. Rose

2)        Principal Financial/
          Accounting Officer:

   By:    /s/   Michael H. Schoeffler      President, Chief Financial Officer, 
          Michael H. Schoeffler            Treasurer, Secretary

3)        The Board of Directors:

   By:    /s/   Kelly L. Rose              Director
          Kelly L. Rose

   By:    /s/   Frank K. Martin            Director
          Frank K. Martin

   By:    /s/   G. Raymond Stults          Director
          G. Raymond Stults

   By:    /s/   David J. Matteson          Director
          David J. Matteson

   By:    /s/   Allen H. Neuharth          Director
          Allen H. Neuharth





                                  Page 25 of 25

<PAGE>


                                     PART IV

                                  EXHIBIT INDEX

Reference to                                                       Sequential
Regulation S-K                                                       Page
Exhibit Number                      Document                         Number

     3.1       Registrant's  Articles of  Incorporation,  as
               amended. Incorporated by reference to Exhibit
               3.1 to the  Registrant's  Form  10-K  for the
               year ending October 1, 1995.                           *

     3.2       Registrant's  Code of  By-Laws,  as  amended.
               Incorporated  by  reference to Exhibit 3.2 to
               the  Registrant's  Form  10-K for the  fiscal
               year ending September 29, 1996.                        *

     4.1       Article 6 - "Terms of Shares" and Article 9 -
               "Provisions     for     Certain      Business
               Combinations" of the Registrant's Articles of
               Incorporation,  as amended.  Incorporated  by
               reference to Exhibit 3.1 to the  Registrant's
               Form  10-K for the  year  ending  October  1,
               1995.                                                  *

     4.2       Article III - "Shareholder Meetings", Article
               VI -  "Certificates  for  Shares" and Article
               VII - "Corporate  Books and Records - Section
               3" of the  Registrant's  Code of By-Laws,  as
               amended. Incorporated by reference to Exhibit
               3.2 to the  Registrant's  Form  10-K  for the
               fiscal year ending September 29, 1996.                 *

     4.3       Amended and Restated Credit Agreement between
               the  Registrant  and Bank  One  Indianapolis,
               N.A.,  dated November 30, 1994.  Incorporated
               by   reference   to   Exhibit   4.6   of  the
               Registrant's  Form 10-K for the  fiscal  year
               ending October 2, 1994.                                *

     4.4       First   Amendment  to  Amended  and  Restated
               Credit  Agreement  between the Registrant and
               Bank One,  Indianapolis,  N.A. dated March 7,
               1995.  Incorporated  by  reference to Exhibit
               10(2) to the  Registrant's  Form 10-Q for the
               quarter ending April 2, 1995.                          *

     4.5       Second  Amendment  to  Amended  and  Restated
               Credit  Agreement dated April 6, 1996,  among
               Starcraft  Corporation,  Starcraft Automotive
               Group, Inc.  Imperial  Automobile Group, Inc.
               and Bank One, Indianapolis, N.A. Incorporated
               by  reference to the  Registrant's  Form 10-Q
               for the Quarter Ended March 31, 1997.                  *

     4.6       Third   Amendment  to  Amended  and  Restated
               Credit Agreement, effective January 31, 1997,
               among   Starcraft   Corporation,    Starcraft
               Automotive Group, Inc.,  Imperial  Automobile
               Group, Inc. and Bank One, Indianapolis,  N.A.
               Incorporated by reference to the Registrant's
               Form  10-Q for the  Quarter  Ended  March 31,
               1997.                                                  *

     4.7       Fourth  Amendment  to  Amended  and  Restated
               Credit  Agreement,  effective  June 29, 1997,
               among   Starcraft   Corporation,    Starcraft
               Automotive Group, Inc.,  Imperial  Automobile
               Group, Inc. and Bank One, Indianapolis,  N.A.
               Incorporated  by  reference to Exhibit [ ] of
               the  Registrant's  Form  10-K for the  fiscal
               year ending September 28, 1997.                        *

     4.8       Fifth   Amendment  to  Amended  and  Restated
               Credit  Agreement,   effective  December  31,
               1997, among Starcraft Corporation,  Starcraft
               Automotive Group, Inc.,  Imperial  Automobile
               Group, Inc. and Bank One, Indianapolis,  N.A.
               Incorporated  by  reference to Exhibit [ ] of
               the  Registrant's  Form  10-K for the  fiscal
               year ending September 28, 1997.                        *

<PAGE>


     4.9       Seventh  Amendment  to Amended  and  Restated
               Credit  Agreement,  dated as of February  27,
               1998 , among Starcraft Corporation, Starcraft
               Automotive Group, Inc.,  Imperial  Automotive
               Group,  Inc.  and  Bank  One,  Indiana,  N.A.
               Incorporated  by reference to Exhibit 10.1 of
               the  Registrant's  Form 10-Q for the  quarter
               ending March 29, 1998.                                 *

     4.10      Eighth  Amendment  to  Amended  and  Restated
               Credit  Agreement,   effective  November  23,
               1998, among Starcraft Corporation,  Starcraft
               Automotive Group, Inc.,  Imperial  Automobile
               Group, Inc. and Bank One, Indianapolis,  N.A.         [ ]

     4.11      Rights  Agreement,  dated  as of  August  12,
               1997, between Registrant and Harris Trust and
               Savings Bank,  as Rights Agent.  Incorporated
               by  reference to the  Registrant's  8-A filed
               September 9, 1997.                                     *

     4.12      Promissory  Note  from  Starcraft  Automotive
               Group, Inc. to Bank One, Indiana,  N.A. dated
               November 23, 1998.                                    [ ]

     4.13      Guaranty of Kelly L. Rose to the  obligations
               of Starcraft  Automotive  Group, Inc. to Bank
               One, Indiana, N.A. dated November 23, 1998.           [ ]

     4.14      Guaranty   of   Gerald   R.   Stults  to  the
               obligations  of Starcraft  Automotive  Group,
               Inc.  to  Bank  One,   Indiana,   N.A.  dated
               November 23, 1998.                                    [ ]

     4.15      Loan  and  Security  Agreement  by and  among
               Starcraft  Automotive Group,  Inc.,  National
               Mobility Corporation,  Starcraft Corporation,
               Imperial  Automotive Group, Inc. and Foothill
               Capital Corporation,  dated October 30, 1998.         [ ]

     4.16      Secured   Promissory   Note  from   Starcraft
               Automotive  Group, Inc. and National Mobility
               Corporation to Foothill  Capital  Corporation
               dated October 30, 1998.                               [ ]

     10.1(a)   The Starcraft  Automotive  Corporation  Stock
               Incentive Plan.                                        **

     10.1(b)   The   Starcraft    Corporation   1997   Stock
               Incentive Plan.  Incorporated by reference to
               Exhibit 10.1(b) to the Registrant's From 10-K
               for the  fiscal  year  ending  September  29,
               1996.                                                  *

<PAGE>

     10.2      Form of Tax  indemnification  agreement among
               the  Registrant,  Mr.  Kash,  Mr.  Rose,  Mr.
               Newberry and Mr. Hardin, dated as of July 21,
               1993.  Incorporated  by  reference to Exhibit
               10.7   of   the   Registrant's   registration
               statement on Form S-1, Reg. No. 33- 63760.             *

     10.3(a)   Employment Agreement with Kelly L. Rose dated
               June 2, 1993.  Incorporated  by  reference to
               Exhibit  10.10(a)  of the  Registrant's  Form
               S-1.                                                   **

     10.3(b)   Employment Agreement with Kelly L. Rose dated
               December 12, 1996.  Incorporated by reference
               to Exhibit 10.3(b) to the  Registrant's  From
               10-K for the fiscal year ending September 29,
               1996.

     10.3(c)   Form  of   First   Addendum   to   Employment
               Agreement  with Kelly L. Rose,  December  31,
               1997.  Incorporated  by  reference to Exhibit
               10.1 of the  Registrant's  Form  10-Q for the
               fiscal year ending March 29, 1998.                     *

     10.3(d)   Second Addendum to Employment  Agreement with
               Kelly L. Rose, effective December 15, 1997.            [ ]

     10.3(e)   Consulting  Agreement  with Allen H. Neuharth
               dated  September  15, 1993.  Incorporated  by
               reference   to   Exhibit   10.3(k)   of   the
               Registrant's  Form 10-K for the  fiscal  year
               ending October 2, 1994.                                *

     10.3(f)   Employment  Agreement  between the Registrant
               and Michael H.  Schoeffler  dated January 16,
               1995.  Incorporated  by  reference to Exhibit
               10.3(m) of the Registrant's Form 10-K for the
               year ending October 1, 1995.                           *

     10.3(g)   Employment  Agreement  between the Registrant
               and Michael H. Schoeffler  dated December 12,
               1996.  Incorporated  by  reference to Exhibit
               10.3(e) to the Registrant's Form 10-K for the
               fiscal year ending September 29, 1996.                 *

     10.4      Inventory Loan and Security  Agreement by and
               between the  Registrant  and  General  Motors
               Acceptance    Corporation,     as    amended.
               Incorporated by reference to Exhibit 10.13 of
               the Registrant's Form S-1.                             **

     10.5      Agreement by and between the  Registrant  and
               General Motors  Acceptance  Corporation dated
               February 7, 1991.  Incorporated  by reference
               to  Exhibit  10.14 of the  Registrant's  Form
               S-1.                                                   **

     10.6      Intercreditor   Agreement   between   General
               Motors  Acceptance  Corporation and Bank One,
               Indianapolis,   N.A.  dated  July  21,  1992.
               Incorporated by reference to Exhibit 10.16 of
               the Registrant's Form S-1.                             **





<PAGE>




     10.7      Authorized  Converter Pool Agreement  between
               the  Registrant  and Ford Motor Company dated
               May  7,  1991  and   amended   May  7,  1991.
               Incorporated by reference to Exhibit 10.17 of
               the Registrant's Form S-1.                             **

     10.8      Wholesale  Financing  and Security  Agreement
               between the  Registrant and Ford Motor Credit
               Company dated April 17, 1991. Incorporated by
               reference    to   Exhibit    10.18   of   the
               Registrant's Form S-1.                                 **

     10.9      Intercreditor  Agreement  between  Ford Motor
               Credit  Company  and Bank One,  Indianapolis,
               N.A.  dated July 17,  1992.  Incorporated  by
               reference    to   Exhibit    10.20   of   the
               Registrant's Form S-1.                                 **

     10.10     Truck   Consignment   Agreement  between  the
               Registrant  and  Chrysler  Corporation  dated
               August 29, 1991. Incorporated by reference to
               Exhibit 10.21 of the  Registrant's  Form S-1.          **

     10.11     License   Agreement   by  and   between   the
               Registrant  and   AlliedSignal,   Inc.  dated
               February 18, 1993.  Incorporated by reference
               to  Exhibit  10.22 of the  Registrant's  Form
               S-1.                                                   **

     10.12     Agent    Agreement   by   and   between   the
               Registrant,  Mitsui & Co. (U.S.A.),  Inc. and
               Mitsui  & Co.,  Ltd.  dated  March  1,  1993.
               Incorporated by reference to Exhibit 10.23 of
               the Registrant's Form S-1.                             **

     10.13     License   Agreement   by  and   between   the
               Registrant   and  Starcraft  RV,  Inc.  dated
               September 12, 1991. Incorporated by reference
               to  Exhibit  10.24 of the  Registrant's  Form
               S-1.                                                   **

     10.14     License   Agreement   by  and   between   the
               Registrant    and   Starcraft    Recreational
               Products,   Ltd.   dated  January  18,  1991.
               Incorporated by reference to Exhibit 10.25 of
               the Registrant's Form S-1.                             **

     10.15     Contract for Conditional  Sale of Real Estate
               by and between the  Registrant and the Harold
               A. Schrock Revocable Trust dated December 20,
               1991   and   amended   February   28,   1992.
               Incorporated by reference to Exhibit 10.26 of
               the Registrant's Form S-1.                             **





<PAGE>




     10.16(a)  Directors'  Share  Plan,  restated  effective
               October 1, 1995. Incorporated by reference to
               exhibit  10.16(a)  of the  Registrant's  Form
               10-K for the year ending October 1, 1995.              *

     10.16(b)  Directors'    Compensation    Deferral   Plan
               effective  October 1, 1995.  Incorporated  by
               reference   to   Exhibit   10.16(b)   of  the
               Registrant's  Form  10-K for the year  ending
               October 1, 1995.                                       *

     10.17     Ford  Authorized   Convertor  Pool  Agreement
               between Imperial  Automotive  Group, Inc. and
               Ford   Motor  Co.   dated   June  29,   1994.
               Incorporated by reference to Exhibit 10.19 of
               the  Registrant's  Form  10-K for the  fiscal
               year ending October 2, 1994.                           *

     10.18     Inventory Loan and Security Agreement between
               Imperial  Automotive  Group, Inc. and General
               Motors Acceptance  Corporation dated June 20,
               1994.  Incorporated  by  reference to Exhibit
               10.20 of the  Registrant's  Form 10-K for the
               fiscal year ending October 2, 1994.                    *

     10.19     Ford  Authorizing  Converter  Pool  Agreement
               between   Ford   Motor   Co.   and   Imperial
               Automotive  Group,  Inc. dated June 29, 1994.
               Incorporated by reference to Exhibit 10.21 of
               the  Registrant's  Form  10-K for the  fiscal
               year ending October 2, 1994.                           *

     10.20     Intercreditor   Agreement   between   General
               Motors  Acceptance  Corporation  and Bank One
               Indianapolis,   N.A.  dated  July  15,  1994.
               Incorporated by reference to Exhibit 10.24 of
               the  Registrant's  Form  10-K for the  fiscal
               year ending October 2, 1994.                           *

     10.21     GMC  Truck  Special   Vehicle   Manufacturers
               Agreement by and between Starcraft Automotive
               Group,  Inc. and GMC Truck Division,  Truck &
               Bus Group,  General Motors  Corporation dated
               February 1, 1995.  Incorporated  by reference
               to  Exhibit  10.21 of the  Registrant's  Form
               10-K for the year ending October 1, 1995.              *





<PAGE>




     10.22     GMC  Truck  Special  Vehicle   Manufacturer's
               Agreement between Imperial  Automotive Group,
               Inc. and the GMC  division of General  Motors
               Corporation   effective   February  1,  1995.
               Incorporated by reference to Exhibit 10.22 of
               the  Registrant's  Form  10-K  for  the  year
               ending October 1, 1995.                                *

     10.23     Lease between Imperial Automotive Group, Inc.
               and  Beck  Real  Estate   Corporation   dated
               February 3, 1995.  Incorporated  by reference
               to Exhibit 10 to the  Registrant's  Form 10-Q
               for the quarter ending January 1, 1995.                *

     10.24     Guaranty of Starcraft  Automotive Group, Inc.
               to the  obligations of Starcraft  Corporation
               to  General  Motors  Acceptance   Corporation
               dated  February  9,  1995.   Incorporated  by
               reference    to   Exhibit    10.23   of   the
               Registrant's  Form  10-K for the year  ending
               October 1, 1995.                                       *

     10.25     Guaranty of Starcraft  Automotive Group, Inc.
               to the  obligations  of  Imperial  Automotive
               Group,   Inc.to  General  Motors   Acceptance
               Corporation    dated    February   9,   1995.
               Incorporated by reference to Exhibit 10.25 of
               the Registrants Form 10-K for the year ending
               October 1, 1995.                                       *

     10.26     Promissory   Note  from  the   Registrant  to
               Imperial  Industries,  Inc.  dated  April  1,
               1995.  Incorporated  by  reference to Exhibit
               10(3) to the  Registrant's  Form 10-Q for the
               quarter ending April 2, 1995.                          *

     10.27     Chevrolet Quality Approved Converters Program
               Agreement by and between Starcraft Automotive
               Group,  Inc. and  Chevrolet  Motor  Division,
               General  Motors  Corporation  dated April 10,
               1995.  Incorporated  by  reference to Exhibit
               10.27 of the  Registrant's  Form 10-K for the
               year ending October 1, 1995.                           *





<PAGE>



     10.28     Chevrolet Quality Approved Converters Program
               between Imperial  Automotive  Group, Inc. and
               Chevrolet    division   of   General   Motors
               Corporation    dated    April    10,    1995.
               Incorporated by reference to Exhibit 10.28 of
               the  Registrant's  Form  10-K  for  the  year
               ending October 1, 1995.                                *

     10.29     Agreement  between  Chrysler  Corporation and
               Starcraft  Automotive  Group, Inc. dated July
               1, 1995. Incorporated by reference to Exhibit
               10.29 of the  Registrant's  Form 10-K for the
               year ending October 1, 1995.                           *

     10.30     Pool  Company   Wholesale  Finance  Plan  and
               Security  Agreement  between  Chrysler Credit
               Corporation and Starcraft  Automotive  Group,
               Inc.  dated  July 1,  1995.  Incorporated  by
               reference    to   Exhibit    10.30   of   the
               Registrant's  Form  10-K for the year  ending
               October 1, 1995.                                       *

     10.31     Agreement  between  Chrysler  Corporation and
               Imperial Industries, Inc. dated July 1, 1995.
               Incorporated by reference to Exhibit 10.31 of
               the  Registrant's  Form  10-K  for  the  year
               ending October 1, 1995.                                *

     10.32     Pool  Company   Wholesale  Finance  Plan  and
               Security  Agreement  between  Chrysler Credit
               Corporation  and  Imperial  Industries,  Inc.
               dated July 1, 1995. Incorporated by reference
               to  Exhibit  10.32 of the  Registrant's  Form
               10-K for the year ending October 1, 1995.              *

     10.33     Warrant to Purchase 200,000 Shares of Common
               Stock  of  Starcraft  Corporation,  issued  to
               Kelly L. Rose, dated November 23, 1998.                [ ]

     10.34     Warrant to Purchase 200,000 Shares of Common
               Stock of Starcraft  Corporation,  issued to G.
               Ray Stults, dated November 23, 1998.                   [ ]


     11        Computation of Earnings Per Share.                     [ ]

     21        Subsidiaries of the Registrant.                        [ ]

     23.1      Consent of Crowe,  Chizek and Company LLP.             [ ]

     23.2      Consent of Ernst & Young LLP.                          [ ]

     27        Financial Data Schedule                                [ ]
---------------

*        Incorporated by reference as indicated in the description.

**       Incorporated  by reference to the  exhibit,  bearing the  corresponding
         exhibit number to the Registrant's  registration statement on Form S-1,
         Reg. No. 33-63760, unless another exhibit number is listed in the above
         description.