UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-Q

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

                 For the quarterly period ended December 31, 1997

                               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 0-2977

                        General Magnaplate Corporation
            -----------------------------------------------------
           (Exact name of registrant as specified in its charter)

               New Jersey                                22-1641813
     -------------------------------                 ------------------
     (State or other jurisdiction of                    IRS Employer
     incorporation or organization)                  Identification No.

     1331 U.S. Route 1, Linden, New Jersey                     07036
     -------------------------------------                   ---------
     (Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code: (908) 862-6200
                                                    --------------
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 the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of February 6, 1998 :

--------------------------------------------------------------------------------
Common Stock, No Par Value                                     4,918,794
        (Class)                                           (Number of Shares)

<PAGE>


                               INDEX OF DOCUMENTS


PART I -  FINANCIAL INFORMATION

ITEM 1 -  FINANCIAL STATEMENTS

                  Accountants' Report

                  Balance Sheet - End of Current Quarter

                  Balance Sheet - End of Prior Fiscal Year

                  Statement of Income

                  Statement of Changes in Financial Position

                  Notes to Consolidated Financial Statements

ITEM 2 -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               POSITION AND RESULTS OF OPERATIONS

PART II - OTHER INFORMATION

ITEM 1 -  LEGAL PROCEEDINGS - None

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

            Minutes of Annual Meeting of Shareholders Enclosed

ITEM 5 -  OTHER INFORMATION - Press Release - Enclosed

ITEM 6 -  EXHIBITS AND REPORTS ON FORM 8-K - None




<PAGE>




MAURIELLO, FRANKLIN & LOBRACE
 A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS











                         GENERAL MAGNAPLATE CORPORATION
                                       AND
                            WHOLLY-OWNED SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                                SIX MONTHS ENDED
                           DECEMBER 31, 1997 AND 1996



<PAGE>
MAURIELLO, FRANKLIN & LOBRACE
 A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS





                            45 Springfield Avenue, Springfield, New Jersey 07081
                                  Telephone (973) 379-5400    Fax (973) 379-3696


ACCOUNTANTS' REVIEW REPORT

To The Board of Directors of
  General Magnaplate Corporation:

         We have reviewed the accompanying  balance sheet of General  Magnaplate
Corporation  and Wholly-  Owned  Subsidiaries  as of  December  31, 1997 and the
related consolidated  statement of stockholders' equity for the six months ended
December  31, 1997 and the related  consolidated  statements  of income and cash
flows for the six months ended  December 31, 1997 and 1996, in  accordance  with
Statements  on  Standards  for  Accounting  and  Review  Services  issued by the
American Institute of Certified Public Accountants.  All information included in
these  financial  statements  is the  representation  of  management  of General
Magnaplate Corporation.

         A review  consists  principally  of inquiries of Company  personnel and
analytical  procedures  applied to financial data. It is  substantially  less in
scope than an audit in accordance with generally  accepted  auditing  standards,
the  objective of which is the  expression  of opinion  regarding  the financial
statements taken as a whole.  Accordingly,  we do not express such an opinion on
the December 31, 1997 and 1996 statements.

         Based on our  review,  we are not aware of any  material  modifications
that should be made to the accompanying  financial  statements in order for them
to be in conformity with generally accepted accounting principles.

         Our review was made for the  purpose of  expressing  limited  assurance
that there are no material  modifications  that should be made to the  financial
statements  in  order  for  them to be in  conformity  with  generally  accepted
accounting  principles.  The supplementary  information for the six months ended
December  31,  1997  and  1996  included  in  the   accompanying   supplementary
information is presented for supplementary  analysis purposes.  Such information
has been  subjected  to the inquiry  and  analytical  procedures  applied in the
review of the basic financial  statements,  and we are not aware of any material
modifications that should be made thereto.

         The  balance  sheet for the year ended June 30, 1997 was audited by us,
and we  expressed  an  unqualified  opinion on it in our report  dated August 8,
1997. We have not  performed any auditing  procedures on the balance sheet since
August 8, 1997.

                                               /s/ Mauriello, Franklin & LoBrace
                                               ---------------------------------
                                                   Mauriello, Franklin & LoBrace


January 23, 1998
<PAGE>
<TABLE>
<CAPTION>
                         GENERAL MAGNAPLATE CORPORATION
                                       AND
                            WHOLLY-OWNED SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS





                                                       December 31,      June 30,
         ASSETS                                            1997            1997
                                                       -----------     -----------
<S>                                                    <C>             <C>
Current assets:
  Cash and cash equivalents ......................     $   903,209     $ 1,216,824
  Marketable securities (Note 1) .................       3,169,234       2,875,776
  Accounts receivable--trade, net of
    allowance for doubtful accounts of
    $126,000 (June 30, 1997-$116,000) ............       1,429,688       1,426,471
  Inventories (Note 1) ...........................         302,172         303,088
  Prepaid expenses ...............................         114,770         170,806
  Other current assets ...........................         207,599         215,298
                                                       -----------     -----------

      Total current assets .......................     $ 6,126,672     $ 6,208,263

Property, plant, and equipment, at
  cost, net of accumulated
  depreciation (Notes 1 and 2) ...................       6,067,366       5,355,600

Cash surrender value of officers' life insurance .         806,173         752,148

Note receivable-officer (Note 7) .................         525,881         532,449

Note receivable-related party partnership (Note 7)         235,000         235,000

Other assets (Note 3) ............................         492,644         429,816
                                                       -----------     -----------

    Total assets .................................     $14,253,736     $13,513,276
                                                       ===========     ===========



</TABLE>

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
                         GENERAL MAGNAPLATE CORPORATION
                                       AND
                            WHOLLY-OWNED SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS



                                                         December 31,        June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY                         1997             1997
                                                        ------------      ------------
<S>                                                     <C>               <C>
Current liabilities:
  Broker loan payable .............................     $    486,561      $         0 
  Accounts payable ................................          249,584          196,179
  Accrued liabilities (Note 5) ....................          369,850          548,333
  Corporate income taxes payable ..................           72,837          168,389
                                                        ------------      -----------

    Total current liabilities .....................     $  1,178,832      $   912,901
                                                        ------------      -----------
Long-term liabilities:
  Rent security deposit ...........................     $      9,193      $     9,193
  Accrued deferred compensation (Note 6) ..........        1,225,242        1,139,698
                                                        ------------      -----------

    Total long-term liabilities ...................     $  1,234,435      $ 1,148,891
                                                        ------------      -----------

    Total liabilities .............................     $  2,413,267      $ 2,061,792
                                                        ------------      -----------

Commitments and contingencies (Note 9)

Stockholders' equity:
  Common stock--no par value
    Authorized--5,000,000 shares
    Issued--4,918,794 shares of which 10,000 shares
       are held in the treasury ...................     $    223,180      $   223,180
  Retained earnings ...............................       11,846,994       11,365,263

  Foreign currency translation adjustment (Note 1)          (164,955)        (136,959)
                                                        ------------      -----------
                                                        $ 11,905,219      $11,451,484
  Cost of treasury stock--10,000 shares ...........          (64,750)               0
                                                        ------------      -----------

    Total stockholders' equity ....................     $ 11,840,469      $11,451,484
                                                        ------------      -----------

    Total liabilities and stockholders' equity ....     $ 14,253,736      $13,513,276
                                                         ============     ===========

</TABLE>
                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
                                          GENERAL MAGNAPLATE CORPORATION
                                                        AND
                                             WHOLLY-OWNED SUBSIDIARIES

                                  CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                        SIX MONTHS ENDED DECEMBER 31, 1997




                                                                        Foreign
                                                                       Currency
                                    Common           Retained        Translation        Treasury
                                    Stock            Earnings         Adjustment          Stock
                                 ------------     ------------      ------------      ------------
<S>                              <C>              <C>               <C>               <C>
Balance,
  July 1, 1997 .............     $    223,180     $ 11,365,263      $   (136,959)     $          0

Add--net income ............                0          727,671                 0

Less--foreign currency
 translation adjustment ....                0                0           (27,996)

Purchase of 10,000 shares of
  treasury stock ...........                0                0                 0           (64,750)

Less--dividends paid
  of $.05 per share ........                0         (245,940)                0                 0
                                 ------------     ------------      ------------      ------------

Balance,
  December 31, 1997 ........     $    223,180     $ 11,846,994      $  (164,955)      $   (64,750)
                                 ============     ============      ============      ============



</TABLE>

                                  SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<PAGE>
<TABLE>
<CAPTION>
                               GENERAL MAGNAPLATE CORPORATION
                                             AND
                                  WHOLLY-OWNED SUBSIDIARIES

                              CONSOLIDATED STATEMENTS OF INCOME




                                          Six Months Ended           Three Months Ended
                                            December  31,               December  31,

                                       1997            1996           1997           1996
                                    ----------     ----------     ----------     ----------
<S>                                 <C>            <C>            <C>            <C>
Gross revenue:
  Sales .......................     $5,382,442     $4,974,478     $2,701,582     $2,543,418
  Royalty and license income ..        176,548        164,993        120,376         99,806
  Investment and other
    income, net (Note 1) ......        298,506        250,766        140,037        145,995
                                    ----------     ----------     ----------     ----------
                                    $5,857,496     $5,390,237     $2,961,995     $2,789,219
                                    ----------     ----------     ----------     ----------
Costs and expenses:
  Cost of sales ...............     $2,297,792     $2,084,455     $1,121,578     $1,028,982
  Selling and administration ..      2,088,337      1,951,780      1,067,129      1,024,978
  Depreciation and amortization        310,725        287,501        157,259        145,529
  Interest ....................          6,471            234          6,471              0 
                                    ----------     ----------     ----------     ----------

                                    $4,703,325     $4,323,970     $2,352,437     $2,199,489
                                    ----------     ----------     ----------     ----------

Income before corporate
  income taxes ................     $1,154,171     $1,066,267     $  609,558     $  589,730

Corporate income taxes
  (Notes 1 and 4) .............        426,500        377,500        226,900        200,800
                                    ----------     ----------     ----------     ----------

Net income ....................     $  727,671     $  688,767     $  382,658     $  388,930
                                    ==========     ==========     ==========     ==========

Earnings per share (Note 1) ...     $      .15     $      .13     $      .08     $      .08
                                    ==========     ==========     ==========     ==========

Weighted average shares
  outstanding .................      4,915,208      5,206,266      4,911,620      5,142,938
                                    ==========     ==========     ==========     ==========


</TABLE>
                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<PAGE>
<TABLE>
<CAPTION>
                               GENERAL MAGNAPLATE CORPORATION
                                             AND
                                  WHOLLY-OWNED SUBSIDIARIES

                            CONSOLIDATED STATEMENTS OF CASH FLOWS
                         SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996


                                                                    1997             1996
                                                               -----------      -----------
<S>                                                            <C>              <C>   
CASH FROM OPERATING ACTIVITIES:
  Net income .............................................     $   727,671      $   688,767
                                                               -----------      -----------
  Adjustments to reconcile net income to net cash
   provided by operating activities:
     Reserve for unrealized gain .........................     $   (59,531)     $   (51,863)
     Depreciation and amortization .......................         310,725          287,501
     Deferred tax credits ................................         (30,700)         (25,300)
     Accrued deferred compensation .......................          77,442           58,763
     Foreign currency translation adjustment .............         (27,996)         (13,830)
     Allowance for doubtful accounts .....................          27,565           14,505
     Increase  (decrease) in cash  resulting from
      changes in current assets and liabilities:
        Marketable securities ............................        (233,927)       1,668,577
        Accounts receivable ..............................         (30,782)        (170,725)
        Inventories ......................................             916              174
        Prepaid and other current assets .................          33,398           56,204
        Accounts payable and accrued liabilities .........        (125,078)        (458,851)
        Corporate income taxes payable ...................         (61,123)         (20,211)
                                                               -----------      -----------
          Total adjustments ..............................     $  (119,091)     $ 1,344,944
                                                               -----------      -----------
    Net cash provided by operating activities ............     $   608,580      $ 2,033,711
                                                               -----------      -----------
CASH FROM INVESTING ACTIVITIES:
  Additions to property, plant, and equipment ............     $(1,016,613)     $  (153,649)
  Additions to patent costs and other assets .............         (10,162)         (23,802)
  Collection (issuance) of note receivable--officer ......           6,176         (550,000)
  Additions to deferred compensation contracts ...........         (23,442)               0
  Increase in cash surrender value--life insurance .......         (54,025)               0
                                                               -----------      -----------
    Net cash used in investing activities ................     $(1,098,066)     $  (727,451)
                                                               -----------      -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                               GENERAL MAGNAPLATE CORPORATION
                                             AND
                                  WHOLLY-OWNED SUBSIDIARIES

                            CONSOLIDATED STATEMENTS OF CASH FLOWS
                         SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
                                        (continued)


                                                                    1997             1996
                                                               -----------      -----------
<S>                                                            <C>              <C>   
CASH FROM FINANCING ACTIVITIES:
  Proceeds from broker loan ..............................     $   500,000      $         0
  Principal payments on broker loan ......................         (13,439)               0
  Purchase of  treasury shares ...........................         (64,750)        (761,445)
  Dividends paid .........................................        (245,940)        (184,436)
                                                               -----------      -----------

    Net cash provided by (used in) financing activities ..     $   175,871      $  (945,881)
                                                               -----------      -----------

INCREASE (DECREASE) IN CASH ..............................     $  (313,615)     $   360,379
  Cash and cash equivalents, beginning ...................       1,216,824          680,570
                                                               -----------      -----------
  Cash and cash equivalents, ending ......................     $   903,209      $ 1,040,949
                                                               ===========      ===========


</TABLE>
                       SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>

                         GENERAL MAGNAPLATE CORPORATION
                                       AND
                            WHOLLY-OWNED SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1--Summary of Significant Accounting Policies

Principles of Consolidation

         The consolidated  financial  statements include the accounts of General
Magnaplate  Corporation  and  its  wholly-owned  subsidiaries;  accordingly  all
intercompany transactions and balances have been eliminated in consolidation.

Nature of Business

         The  Company  is in one  line  of  business.  It  provides  synergistic
coatings and other related services to its customers'  products from five plants
located in the United States and Canada.

Marketable Securities

         All marketable  securities are  considered  trading  securities and are
valued at fair  market  value in  accordance  with SFAS No.  115.  Realized  and
unrealized gains and losses are reported in current period income.  Market value
exceeded  cost  by  $76,637  and  $29,996  as of  December  31,  1997  and  1996
respectively.

Inventories

         Inventories  consist  principally  of  industrial  supplies and plating
solutions  which are valued at the lower of FIFO cost or market and are included
in Cost of Sales.

Depreciation and Amortization

         Property,  plant and equipment are stated at cost and  depreciation  is
provided  principally on a straight line basis using estimated  service lives of
3-5 years for  transportation  equipment,  5-10 years for factory  machinery and
office  equipment,  and 10-39 years for  buildings  and  building  improvements.
Expenditures for renewals and betterments are capitalized. Items of identifiable
property which are sold,  retired, or otherwise disposed of are removed from the
asset accounts, and any gains or losses thereon are reflected in income.

         Patents and  trademarks  are  amortized  on a straight  line basis over
periods not exceeding 10 years.
<PAGE>



                         GENERAL MAGNAPLATE CORPORATION
                                       AND
                            WHOLLY-OWNED SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 1--Summary of Significant Accounting Policies (Continued)

Corporate Income Taxes

         Taxes are provided  based on income  reported for  financial  statement
purposes,  including  deferred  taxes  which  are  principally  provided  due to
temporary differences between financial and tax reporting of certain revenue and
expense items.

Company Earnings Per Share

         Earnings  per share of common  stock  have been  computed  based on the
weighted average number of shares outstanding during the reporting periods after
giving effect to the 2 for 1 stock split effective December 2, 1997.

Statement of Cash Flows

         For purposes of the statement of cash flows, the Company  considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.

Foreign Currency Translation Adjustment

         Assets  and  liabilities  of the  subsidiary  operating  in Canada  are
translated  into U.S.  dollars  using the exchange rate in effect at the balance
sheet date. Results of operations are translated using the average exchange rate
prevailing  throughout the period.  The effects of exchange rate fluctuations on
translating  foreign  currency  assets and  liabilities  into U.S.  dollars  are
included as part of the Foreign  Currency  Translation  Adjustment  component of
shareholders'  equity,  while gains and losses  resulting from foreign  currency
transactions are generally included in income.

Use of Estimates

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure  of  contingent  assets  and  liabilities  at the  date of  financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.
<PAGE>



                         GENERAL MAGNAPLATE CORPORATION
                                       AND
                            WHOLLY-OWNED SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 2--Property, Plant and Equipment

Property, plant and equipment are as follows:
<TABLE>
<CAPTION>

                                                  December 31,         June 30,
                                                     1997                1997
                                                 -----------         -----------
<S>                                              <C>                 <C>
Land ...................................         $ 1,035,929         $   805,350
Buildings ..............................           3,683,585           3,366,208
Building improvements ..................           3,450,326           3,450,824
Factory machinery ......................           5,221,890           4,828,457
Office equipment .......................             939,326             911,058
Transportation equipment ...............             313,176             271,018
                                                 -----------         -----------

Total ..................................         $14,644,232         $13,632,915
Less--accumulated depreciation .........           8,576,866           8,277,315
                                                 -----------         -----------

Net ....................................         $ 6,067,366         $ 5,355,600
                                                 ===========         ===========
</TABLE>

Note 3--Other Assets

         Other assets are as follows:
<TABLE>
<CAPTION>

                                                       December 31,     June 30,
                                                           1997           1997
                                                         --------       --------
<S>                                                      <C>            <C>
Patents and trademarks, at cost, net of
     accumulated  amortization of $106,359
     and $100,481 ................................       $ 87,302       $ 83,018
Deferred income taxes ............................        260,100        233,100
   Deferred compensation contracts ...............        145,242        113,698
                                                         --------       --------

                                                         $492,644       $429,816
                                                         ========       ========

</TABLE>
<PAGE>



                         GENERAL MAGNAPLATE CORPORATION
                                       AND
                            WHOLLY-OWNED SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4--Corporate Income Taxes

      Components of corporate income taxes are as follows:


<TABLE>
<CAPTION>
                                      Six Months Ended        Three Months Ended
                                        December 31,              December 31,
                                  ---------------------     ----------------------
                                    1997         1996         1997          1996
                                  --------     --------     --------      --------
<S>                               <C>          <C>          <C>           <C>
     Current:
       Federal                    $398,700     $348,700     $208,500      $184,600
       State                        58,500       54,100       33,100        29,100
       Foreign                           0            0            0             0 
                                  --------     --------     --------      --------

                                  $457,200     $402,800     $241,600      $213,700
                                  --------     --------     --------      --------
     Deferred:
       Federal                    $(23,800)    $(19,600)    $(11,400)     $(10,000)
       State                        (6,900)      (5,700)      (3,300)       (2,900)
       Foreign                           0            0            0             0 
                                  ---------    --------     ---------     -------- 

                                  $(30,700)    $(25,300)    $(14,700)     $(12,900)
                                  --------     --------     --------      --------

     Total                        $426,500     $377,500     $226,900      $200,800
                                  ========     ========     ========      ========
</TABLE>
<PAGE>

                         GENERAL MAGNAPLATE CORPORATION
                                       AND
                            WHOLLY-OWNED SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         A  reconciliation  of the provision for corporate income taxes compared
with amounts computed at the US statutory tax rate is as follows:
<TABLE>
<CAPTION>
                                      Six Months Ended        Three Months Ended
                                        December 31,              December 31,
                                  ---------------------     ----------------------
                                    1997         1996         1997          1996
                                  --------     --------     --------      --------
<S>                               <C>          <C>          <C>           <C>
Based on U.S. statutory
  federal  tax rate               $392,400     $362,500     $207,232      $200,500
Increase (decrease) in taxes
 resulting from:
  State taxes, net of
  federal tax benefit               34,000       32,000       19,612        17,300
  Non-deductible (reportable)
    expenses (income)                  100      (17,000)          56       (17,000)
                                  --------     --------     --------      ---------
     Total                        $426,500     $377,500     $226,900      $200,800
                                  ========     ========     ========      ========

     Effective tax rate               37.0%        35.4%        37.2%         34.0%
</TABLE>
 
     The Canadian  subsidiary  has available  unused tax benefits in the form of
operating  loss  carryforwards  of $168,000 to reduce  future  Canadian  taxable
income. These carryforwards principally expire in 1999. Due to their uncertainty
of  realization,  these tax benefits have been reflected net of a 100% valuation
allowance.


Note 5--Accrued Liabilities

         Accrued liabilities are as follows:
<TABLE>
<CAPTION>

                                                           December         June 30,
                                                             1997             1997
                                                          ---------        --------- 
<S>                                                       <C>              <C>

                  Compensation                            $ 223,213        $ 435,256
                  Payroll, sales, and property taxes         72,212           61,718
                  401-k plan contribution                    41,296           19,954
                  Environmental and other costs              33,129           31,405
                                                          ---------        --------- 

                                                          $ 369,850        $ 548,333
                                                          =========        =========
</TABLE>
<PAGE>
                         GENERAL MAGNAPLATE CORPORATION
                                       AND
                            WHOLLY-OWNED SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6--Employee Benefits

         The Company  maintains a 401(k) savings plan which covers all full time
U.S.   employees.   The  Company  matches  50%  of  voluntary  pre-tax  employee
participant  contributions  up  to 4%  of  compensation  as  well  as  providing
discretionary  contributions  based on compensation for all employees.  Employer
discretionary  contributions,  which are forfeited  due to employee  termination
prior to the full seven year vesting period,  revert back to the Company.  Total
expense under the plan was $24,747 in 1997 and $27,721 in 1996.

         Pursuant to employment  contracts and letter  agreements  with officers
and key employees,  the Company maintains  non-qualified  incentive compensation
plans which are based on the  realization of pre-tax income and royalty  income.
Total expense under these plans was $262,524 in 1997 and $246,113 in 1996.

         The Company is obligated to provide a non-qualified  retirement pension
to its chief executive  officer.  Such obligation  provides a monthly benefit of
$7,100 and is payable for a period of fifteen  years to the  officer,  or to his
wife in the event of his death.  The Company is accruing the obligation over the
active term of  employment  of the  officer.  The Company is also  accruing  and
funding deferred compensation  contracts with two other officers based on 10% of
annual compensation.  Total expense under these three obligations was $77,442 in
1997 and $75,253 in 1996.

Note 7--Related Party Transactions

         The Company engaged in the following related party transactions:
<TABLE>
<CAPTION>
                                                                                        Six Months Ended
                                                                                           December 31,
                                                                                    -----------------------
                                                                                      1997            1996
                                                                                      ----            ----
<S>                                                                                 <C>             <C>
         Was charged computer  consulting services by an outside director of the
         Company;                                                                   $29,492         $19,304

         Accrued  interest income on an installment  note receivable of $235,000
         from a limited  partnership  who is controlled by a stockholder  of the
         Company.  The note is secured by a deed of trust on Texas real  estate,
         which was sold to the partnership. The note bears interest of 6.83% per
         annum collectible  annually for three years.  Thereafter the note shall
         be collected in (5) equal annual principal installments of $47,000 plus
         interest  of 6.83%  per  annum  commencing  July 1, 1999 with the final
         collection due July 1, 2003;                                               $ 8,025         $ 8,025
 
         Charged  interest income on a mortgage note receivable of $550,000 from
         its chief  executive  officer on December 16,  1996.  The note is to be
         repaid in (34) equal  monthly  installments  of $3,814  which  includes
         interest of 6.16% per annum commencing  February 1, 1997 with the final
         balloon  payment of $512,124  due December  16.  1999.  The  receivable
         balance at June 30, 1997 was  $544,996  and is secured by a real estate
         first mortgage.                                                            $16,707         $     0 
</TABLE>
<PAGE>
                         GENERAL MAGNAPLATE CORPORATION
                                       AND
                            WHOLLY-OWNED SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 8--Fair Value of Financial Instruments

Cash and Cash Equivalents,  Accounts  Receivable,  Accounts Payable, and Accrued
Liabilities--The  carrying amount  approximates  fair value because of the short
maturity of these instruments.

Marketable  Securities--The carrying amount approximates fair value because such
securities are valued based on market quotes.

Notes Receivable - Related Parties--The  carrying amount approximates fair value
because of similar  rates on issues  offered  to the  Corporation  under some or
similar provisions.

Accrued  Deferred  Compensation--The  carrying  amount  approximates  fair value
because such liability is being valued based on current market values.

Note 9--Commitments and Contingencies

Litigation

         In April, 1991, a claim was served on the Canadian subsidiary,  General
Magnaplate  Canada,   Ltd.,  by  Dynasurf   International,   Inc.  for  $170,000
representing  the unpaid  contract  liability for the net assets acquired by the
Canadian  subsidiary from the sellers,  Carrigan  Industries,  Ltd. and Dynasurf
International, Inc. on January 2, 1990.

         The  Subsidiary has filed a counterclaim  for  environmental  and other
costs   incurred   which   resulted  from  the  seller  not  resolving   certain
environmental  issues  warranted  in  the  contract  of  purchase.   Further,  a
shareholder of Dynasurf International, Inc. has also filed a claim for breach of
oral contract of employment  for $119,000  which the Company has denied in their
related statement of defense.

         The Company  reached an out of court  agreement  with the plaintiffs on
September  9, 1996  wherein the  plaintiffs  were  collectively  paid the sum of
$65,000 in full  settlement  of their  claim.  Such  settlement  did not have an
adverse effect on the Company's financial statements.

Concentrations of Credit Risk

         The Company's financial  instruments that are exposed to concentrations
of credit risk consist  primarily of its cash,  marketable  securities and trade
receivables.

         The  Company's  cash  and  marketable  securities  are in  high-quality
securities  placed  with a wide  array of  institutions  with  high  credit  and
investment  ratings.  This  investment  policy limits the Company's  exposure to
concentrations of credit risk.
<PAGE>
                         GENERAL MAGNAPLATE CORPORATION
                                       AND
                            WHOLLY-OWNED SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         The trade  receivable  balances,  reflecting the Company's  diversified
sources of revenue,  are dispersed across many different  geographic areas. As a
consequence,  concentrations  of credit risk are limited.  The Company routinely
assesses the financial  strength of its customers and generally does not require
collateral to support its credit sales.

Lease Commitment

         The  Company  leases  warehouse  space in its New Jersey  facility to a
tenant under an operating  lease  expiring  December  31, 1999.  Minimum  future
rentals to be received on the lease as of June 30, 1997 are as follows:  1997-98
- $115,198; 1998-99 - $118,443; and 1999-00 - $60,844.



Note 10--Statement of Cash Flows
<TABLE>
<CAPTION>

                                                     Six Months Ended
                                                       December 31,
                                            ---------------------------
                                                1997             1996
                                            ----------       ----------
<S>                                         <C>              <C>
Supplementary data:
  Interest expense paid                     $    6,471       $      234
  Income taxes paid                            518,324          423,011



</TABLE>
<PAGE>
Item 2A - Management's Discussion and Analysis of Financial Position:

Financial Condition
Liquidity and Capital Resources
Six-Months ended December 1997

         Cash and cash  equivalents  decreased  to $903,209 at December 31, 1997
from $1,216,824 at June 30,1997.  For the period,  608,580 net cash was provided
by the operating  activities,  $1,098,066  was used in investing  activities and
$175,871 was provided by financing  activities.  During the past six months, the
registrant's  investment  activities were primarily comprised of $1,016,613 used
for additions to property,  plant and  equipment,  $10,162 used for additions to
patent costs and other assets,  $23,442 for  additions to deferred  compensation
contracts and $54,025 for additions to cash surrender value-life insurance.  The
$175,871 provided by financing  activities comprised of $64,750 for the purchase
of treasury  stock,  and  $245,940  used for payment of  dividends  and $486,561
provided by proceeds from broker loan net of principal payments.

         Working capital of $4,947,840  decreased  $347,522 or 7% during the six
months and the working capital ratio decreased to 5.20 to 1 from 6.80 to 1 as of
June 30, 1997.

         Stockholder's  equity per share at December 31, 1997  increased 3.4% to
$2.41 per share  compared with $2.33 at June 30, 1997. As previously  authorized
by the Board,  10,000  shares of GMCC stock was purchased at the cost of $64,750
and was held in the treasury during the current six month period.  A two for one
forward stock split also occurred in the current six month period.

         Management   believes  that  internal  cash  flow  and/or  income  from
marketable  securities  are  expected  to be  sufficient  to provide the capital
resources  necessary to support future  operating needs, and does not anticipate
any  capital  expenditures  which will have  significant  impact on future  cash
flows.


Item 2B - Management's Discussion and Analysis of Results of Operations :

         Quarter --- December 31, 1997 compared with December 31, 1996


         Sales  increased  this quarter as reflected in the current period sales
         of  $2,701,582  by $158,164 or 6.2% from the same quarter last year. We
         feel that  sales will  continue  to  increase  thru the  remaining  six
         months, based on an increase in customer contracts, volume and a larger
         sales force.  We are in full  production  with the Black and Decker OSD
         steam  iron  production  and  have  an  exclusive  trademark  agreement
         allowing them to use our MAGNAGLIDE mark.

         Royalty  income for the  quarter  was  $120,376,  an increase of 20.6%,
         compared  with the same  quarter  in  1996.  International  advertising
         continues  to be very  successful.  We are  continuing  to  investigate
         potential licensee  candidates in Italy,  Mexico and Korea.  Investment
         income was down  slightly by 4.2%,  which was  indicative  of the stock
         market at December 31. Management believes the investment  portfolio to
         be  sound,   diversified   and  less   susceptible  to  extreme  market
         fluctuations while providing dividend and interest income.
<PAGE>
         Reflecting the above, gross revenue for the latest quarter of this year
         of  $2,961,995  increased  $172,776 or 6.2% from the same  quarter last
         year.

         Total costs and expenses  were  $2,352,437  in the second  quarter,  an
         increase  of  $152,948  or 6.9% from the same  quarter  last year.  The
         primary  increase  is due  to  additional  employees  and  advance  raw
         material  purchases  to  accommodate  increased  production  and  costs
         associated with the new building purchase in Canada.

         Income before corporate income taxes was $609,558 in this year's second
         quarter,  an increase of $19,828 or 3.4% from the $589,730  achieved in
         last year's second  quarter.  Corporate  income taxes and the effective
         tax  rate in  this  year's  second  quarter  were  $226,900  and  37.2%
         respectively, compared with $200,800 and 34.0% in the second quarter of
         last year.

         Based on the above, net income of $382,658  decreased by $6,272 or 1.6%
         in the second  quarter of this year from the $388,930  achieved in last
         year's second quarter.

         Earnings per share remained constant with last year's second quarter at
         $.08.  During the current  three month period  10,000  shares of common
         stock were purchased and held in the treasury,  resulting in a weighted
         average of  outstanding  4,911,620  compared to 5,142,938  for the same
         period last year.

         Six Months --- December 31, 1997 compared with December 31, 1996:

         Gross revenue for this year's first six months of $5,857,496  increased
         $467,259 over last year, an increase of 8.7%.

         Total  costs  and  expenses  for the  current  six  month  period  were
         $4,703,325  an  increase  of  $379,355  or 8.7%  from last  year.  As a
         percentage of gross revenue,  total costs and expenses  remained at 80%
         from  1996.  Cost of Sales as a  percentage  of gross  revenue  for the
         latest  six  months  remained  at 39% from the  comparative  six  month
         period.  Selling and  administration  expenses remained at 36% of gross
         revenue in the latest period compared with last year.  Depreciation and
         amortization  also  remained at 5% of gross  revenue this year compared
         with 1996.

         As a result of the above,  gross income before  corporate  income taxes
         for the first six months of this year was  $1,154,171,  an  increase of
         $87,904 or 8.2% from last year.

         Corporate  income taxes in this year's first six months were  $426,500,
         compared  to  $377,500  for the  comparable  period  of last  year.  As
         detailed in note 4, this  year's  effective  tax rate was 37%  compared
         with 35% last year.

         As a result of the above,  net income of $727,671 this year was $38,904
         or 5.6% higher than the $688,767 achieved last year. Earnings per share
         were $.15 this year,  compared  with $.13 a share last year an increase
         of $.02 or 15.4%.  During the six month period  10,000 shares of common
         stock were purchased and held in the treasury,  resulting in a weighted
         average this year of 4,915,208 compared with 5,206,266 in 1996.
<PAGE>
         During the period General  Magnaplate  Canada  purchased a newer,  more
         modern  facility  located in Ajax,  Ont.,  which will allow for further
         expansion  of the  Canadian  market.  The  administrative  and  selling
         departments  are  relocating the first week of February and the factory
         should be moved and operational in the following few months.

         During the period we  purchased 25 new  computers  which enable all our
         facilities  to be  year  2,000  compliant,  with no  significant  costs
         associated with this.

         No other  significant  financial  matters are expected in future months
         that will have an adverse impact on earnings.

<PAGE>







                                   SIGNATURES




         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                                  GENERAL MAGNAPLATE CORPORATION
                                                             (Registrant)


DATE:  2/13/98


 
                                                      /s/Candida C. Aversenti
                                                      -----------------------
                                                         Candida C. Aversenti
                                                         President


DATE:  2/13/98  


 
                                                       /s/Susan E. Neri
                                                       ----------------
                                                       Susan E. Neri
                                                       Chief Accounting Officer
<PAGE>
                       MINUTES OF THE 1997 ANNUAL MEETING
                               OF SHAREHOLDERS OF
                         GENERAL MAGNAPLATE CORPORATION

         The  Annual  Meeting  of  the   Shareholders   of  General   Magnaplate
Corporation was held at the offices of the Company at 1331 U.S. Route 1, Linden,
New Jersey, on November 5, 1997 at 2:00 p.m., E.S.T., pursuant to due notice.

         Mrs. Candida C. Aversenti,  President of the Company, presided as Chair
of the Meeting, and Mr. Edmund V. Aversenti served as Secretary of the Meeting.

         The Chair  introduced  those  Officers and Directors of the Company who
were present.

         At the  request of the Chair,  the  Secretary  presented  a copy of the
Annual  Report,  the  Notice of Annual  Meeting of  Shareholders,  and the Proxy
Statement and Proxy Card,  together with an Affidavit of Ms. Patricia  Popovich,
Senior Account Administrator of Registrar and Transfer Company, duly sworn as to
the mailing on October 10,  1997,  of such Annual  Report,  the Notice of Annual
Meeting  of  Shareholders,  and the  Proxy  Statement  and  Proxy  Card for such
Meeting,  to each holder of record of the Common  Stock of the Company as of the
close of business  on October 3, 1997,  as shown by the  records  maintained  by
Registrar and Transfer Company, Cranford, New Jersey.

         Upon  motion duly made by Mr. E.  Partenope,  seconded by Mr. W. Alina,
and unanimously  carried, the reading of the Annual Report, the Notice of Annual
Meeting of Shareholders, the Proxy Statement and Proxy Card and the Affidavit of
Mailing thereof,  was waived. The Secretary was instructed to file the Affidavit
and annexed exhibits with the Minutes of the Meeting.

         The  Chair  requested  the  Secretary  to report  the  number of shares
present in person and by proxy.  The  Secretary  submitted  a list of holders of
record of the Common Stock of the Company as of the close of business on October
3, 1997, prepared and certified by Registrar and Transfer Company, Cranford, New
Jersey,  Transfer  Agent for the Company,  and stated the list would remain open
during the Meeting for  inspection by any  interested  shareholder.  He reported
that there were present, in person and by proxy, the holders of 2,292,457 shares
of Common Stock out of 2,459,397 shares of the Company's stock outstanding as of
October 3, 1997. The Secretary declared that not only was a quorum present,  but
noted that an extraordinary number, 93.2%, of the shareholders had responded and
were  present  in person  or by proxy,  whereupon  the Chair  declared  that the
Meeting was open for the conduct of business.

         The Chair stated that extra copies of the Annual Report to Shareholders
of the Company for the fiscal year  ending June 30,  1997,  including  financial
statements  audited by Mauriello,  Franklin & Lo Brace,  filed on Form 10-K with
the  Securities  and  Exchange  Commission,  as well as other  printed  material
concerning  products and services of the Company,  were  available for those who
wished to examine same.

         The Chair stated that the next order of business was the reading of the
Minutes of the last (1996) Annual Meeting of the Shareholders.  Upon motion made
by Mr. S.T. Aitken,  seconded by Mr. L. Campbell,  and unanimously  carried, the
reading of the Minutes of the 1996 Annual Meeting of Shareholders was waived.
<PAGE>

         The Chair  announced the  appointment  of Ms. V.  Corigliano and Mr. R.
Carlton  (shareholder)  as  Inspectors of Election.  The  Inspectors of Election
delivered their Oath of Office, which Oath of Office and Certificate thereof was
ordered filed with the Minutes of the Meeting.  The list of  shareholders of the
Company was  delivered to the  Inspectors  of Election,  and the Chair asked all
persons  present who were  shareholders of the Company and who had not sent in a
proxy, to identify themselves to the Inspectors of Election, and if they did not
wish to vote in person,  there were extra  proxies on hand which they could fill
in and give to the Inspectors of Election.

         The Chair then stated that the first item of business  was the election
of Seven (7) persons to serve as Directors of the Company. Upon Motion duly made
by Mr. C.P.  Covino,  and seconded by Mr. W. Alina,  the following  persons were
nominated to serve as Directors of the Company until the next Annual  Meeting of
Shareholders, and until their successors shall be elected and shall qualify:

                  S. Thomas Aitken            Harold F. Levin
                  Candida C. Aversenti        Edward A. Partenope Jr.
                  Edmund V. Aversenti, Jr.    James H. Wallwork
                  Charles P. Covino


         The Chair called for any further nominations and, there being none, and
the nominees having accepted their  nomination,  upon motion duly made by Ms. T.
Aitken and seconded by Mrs. A. Dente, and unanimously carried,  nominations were
closed.

         The ballots were  submitted to the  Inspectors  of Election.  After the
Ballots were  tabulated,  the  Inspectors of Election  reported to the Secretary
that the result of the vote taken at such Meeting was as follows:

No. of Shares Voting By Proxy          For         Against        Abstain
-----------------------------          ---         -------        -------

S. Thomas Aitken                    2,286,677        940           5240
Candida C. Aversenti                2,288,477        940           3440
Edmund V. Aversenti, Jr.            2,286,477        940           5440
Charles P. Covino                   2,288,677        940           3240
Harold F. Levin                     1,187,048      824,801        281,008
Edward A. Partenope, Jr.            2,286,877        940           5040
James H. Wallwork                   2,286,677        940           5240

         The  Inspectors of Election  also reported to the Secretary  that 8,000
shares had been voted in person in favor of the nominees  (included in the above
totals),  and that no  shares  had been  voted  for any  person  other  than the
nominees.  The Report of the Inspectors of Election was ordered filed with these
Minutes.

         The  Secretary  reported  the  results  to the  Meeting,  and the chair
thereupon  announced  that the  Seven  (7)  persons  nominated  had  received  a
plurality of the votes cast at the Meeting and had been duly  elected  Directors
of the Company to hold office until the 1998 Annual Meeting of  Shareholders  in
accordance with the By-Laws and to serve until their successors shall be elected
and shall qualify.
<PAGE>

         The Chair stated that the next item of business was ratification of the
selection of the Company's  independent auditors for the fiscal year ending June
30, 1998, adding that Mauriello,  Franklin & Lo Brace of Springfield, New Jersey
had served as the Company's  independent  auditors nearly thirty years,  and for
the fiscal year ended June 30, 1997.  She indicated  that the Board of Directors
had selected the same firm as the Company's independent auditors for the current
fiscal  year,  subject to the vote of the  shareholders.  A motion was then duly
made by Mr. W. Alina, and seconded by Mr. E. Aversenti,  for confirmation of the
selection  of  Mauriello,  Franklin  & Lo  Brace  as the  Company's  independent
auditors for the current fiscal year ending June 30, 1998.

         Balloting  for  the  confirmation  of the  selection  of the  Company's
independent  auditors then took place, after which the ballots were submitted to
the Inspectors of Election.  After the ballots were tabulated, the Inspectors of
Election reported to the Secretary that 2,286,813 shares had been voted by proxy
in favor of the selection of the Company's independent auditors, that 940 shares
had been  voted  against,  and that  5,104  shares  had  voted to  abstain.  The
Inspectors of Election  also  reported to the Secretary  that no shares had been
voted in person in favor of or in opposition to the selection. The Report of the
Inspectors of Election was ordered filed with these minutes.

         The Secretary reported the vote and the Chair thereupon  announced that
Mauriello,  Franklin & Lo Brace having received a plurality of the votes cast at
the Meeting,  had been duly elected and confirmed as the  Company's  independent
auditors for the current fiscal year ending June 30, 1998.

         The Chair stated that Mr. Glen Wohlrob, a member of Mauriello, Franklin
& Lo  Brace  was  present  at the  Meeting  and  was  available  to  respond  to
appropriate questions.

         There being no questions  asked or matters to be considered,  the Chair
stated she wished to thank all those  present for  attending  the  meeting,  the
shareholders  for  their  confidence  in the  Company  and  its  officials,  and
particularly  all the  officers,  staff,  and employees of the Company for their
loyal support.

         The Chair then proposed  that she would  entertain a motion to adjourn,
for which a motion was made by Mr. T.  Aitken,  seconded  by Mr. R.  Carlton and
unanimously carried.

         The Chair then declared the Annual Meeting of  Shareholders  officially
adjourned.
<PAGE>
                           [GRAPHIC -- COMPANY LOGO]

                                 MAGNAPLATE NEWS

                                                      1331 U.S. Route #1        
                                                      Linden, New Jersey 07036  
                                                      Telephone: 908-862-6200   
Dedicated to the Future Needs of Mankind              Fax: 908-862-6110         
        Through Surface Enhancement                   http://www.magnaplate.com 
                                                      e-mail:info@magnaplate.com
                                                                                
 
                               NASDAQ SYMBOL GMCC

          General Magnaplate Corporation announces a 53.8% increase in
                 dividends; reports record-high 6-month revenues

Linden, NJ, February 11, 1998 - General Magnaplate  Corporation (Nasdaq: GMCC) -
a world  leader  in the  development  and  application  of  surface  enhancement
technology for the aerospace,  food,  pharmaceutical,  and industrial  markets -
announces that its Board of Directors has declared a dividend of $0.05 per share
to  stockholders  of record  February 27, 1998 and payable March 13, 1998.  This
represents a 53.8% increase in dividends over the prior fiscal year. The company
also announced another  record-high of $5,857,496 in gross revenue, up 8.7% over
the same period last year.  Six-month  net income rose by 5.6% and  earnings per
share were up 15.4%. A 2-for-1 stock split also took place in the past six-month
reporting period.

Six Months Report to Shareholders - December 31, 1997

                   Condensed Comparative Statement of Income -
                          Six Months Ended December 31

                                           1997             1996
                                        ----------       ----------

         Gross Revenue                  $5,857,496       $5,390,237
         Income Before Taxes             1,154,171        1,066,267
         Net Income                        727,671          688,767
         Earnings Per Share                  $0.15            $0.13

         Average Shares Outstanding      4,915,208        5,206,266

                   Condensed Comparative Statement of Income -
                         Three Months Ended December 31

                                           1997             1996
                                        ----------       ----------

         Gross Revenue                  $2,961,995       $2,789,219
         Income Before Taxes               609,558          589,730
         Net Income                        382,658          388,930
         Earnings Per Share                  $0.08            $0.08

         Average Shares Outstanding      4,911,620        5,142,938

<PAGE>
                           [GRAPHIC -- COMPANY LOGO]

                                 MAGNAPLATE NEWS
                                                 
                                                      1331 U.S. Route #1        
                                                      Linden, New Jersey 07036  
                                                      Telephone: 908-862-6200   
Dedicated to the Future Needs of Mankind              Fax: 908-862-6110         
        Through Surface Enhancement                   http://www.magnaplate.com 
                                                      e-mail:info@magnaplate.com
                                                                                


        General Magnaplate's innovative technological advances in surface
       enhancement for lightweight metals and composites has converted an
    industry pioneer into one of the nation's heavyweight high-tech companies


Changes in the  nation's  economic  infrastructure  over the last few years have
fueled the emergence of many high-tech,  niche companies; and they are beginning
to play a much  greater  role in the  future  success  of many  segments  of the
economy.  General  Magnaplate is fast being  recognized as one of those emerging
companies who offer specialized  technological assistance to meet the demand for
improvements  in product  performance  and quality by companies who want to stay
alive in a global competitive atmosphere.

         "Originally,  Magnaplate's  business was  concentrated in the aerospace
and nuclear  industries" says company founder and CEO Charles P. Covino. "But as
the world's population grows and as markets for goods and services increase,  we
are witnessing  parallel  increases in the need for our unique  technologies  to
improve the wearlife and  performance  of metal  components of equipment used in
those burgeoning markets."

        Pioneered for NASA and its space program,  General Magnaplate  developed
proprietary  "Synergistic"  Surface  Enhancement  Technology  that  hardens  the
exterior of such lighter metals as aluminum,  titanium and some alloys of steel.
The coatings which Magnaplate applies create protective surfaces that help parts
wear longer, resist corrosion,  conduct heat and electricity better, and survive
in  environments  which  would  destroy  any  unprotected  metal  or even  other
conventional protective coatings.

        Today, as a result of increased awareness of the company's technological
achievements,  manufacturers  worldwide  and in every  sector  of  industry  are
enthusiastically  embracing  the goal of improved  product  performance  through
surface  enhancement,  and in the process, are turning Magnaplate into a leading
high-tech company with both niche strength and reach.

        Rapid  company  growth is  reflected  in expanded use of its coatings on
products  as  diverse  as a new line of  easier-gliding  steam  irons by Black &
Decker,  with whom  Magnaplate  has  recently  signed a major  contract to treat
hundreds  of  thousands  of  soleplates  with  a  super-slippery,  MAGNAGLIDE(R)
coating.
<PAGE>

        All five of its plants in the US and  Canada,  as well as its  licensees
around the world are being  sought out to solve  surface  enhancement  problems.
Magnaplate's  strong cash  position  and  steadily  increasing  revenues and net
profits stemming from its worldwide growth in sales has permitted it to complete
extensive  expansions to plant and  production  facilities.  The most recent was
purchase of new plant facilities in Canada to handle the rapidly  expanding need
for its specialized technologies in the Canadian market.

        Magnaplate's  newest  enhancement  technology,  PLASMADIZE(R),  has been
playing  an  increasingly  significant  role in  helping  to  revolutionize  the
utilization of  composites.  Developed as a result of a direct request by one of
the world's largest aircraft  manufacturers,  PLASMADIZE  permits the release of
composites  from lay-up  molds  without  damaging the highly  sophisticated  and
highly expensive molds. Although less than 5% of aircraft components are made of
composites, their use is rapidly expanding - not only for aircraft, but also for
trains,  buses, autos and trucks. To prepare for this new market for PLASMADIZE,
a multi-million  dollar  expansion  program is under way to extend  Magnaplate's
PLASMADIZE capabilities to all of its plants throughout North America.

        Magnaplate  is  also  currently  developing  a new  low-cost  method  of
fabricating molds to make composite structures. According to Covino, 'We believe
this  new  way to  make  composite  structures  will  reduce  the  cost  of mold
fabrication by more than 50 percent. It will also permit rapid design changes as
assembly and structures are put into production."

        "As Magnaplate has increased its marketing program  throughout the world
- both through  conventional media and the Internet,' says Magnaplate  President
Candida C.  Aversenti,  "we are seeing a marked  increase  in the demand for our
service  around the  globe."  The  company's  agreements  with its  Swedish  and
Japanese licensees have just been expanded and extended. "We continually monitor
regions  around  the  world  in  search  of new  business  opportunities,"  says
President  Aversenti.  "The results of our expanded marketing and sales programs
are reflected in our strong six-month statement."

        "Despite the  purchase of a new building for our Canadian  plant and the
expenditure  of additional  capital for upgrades in that operation as well as in
expansions of our Wisconsin and Texas facilities,  our performance at the fiscal
half-year mark", continued Aversenti, "was outstanding.  Revenues increased 8.7%
and net income 5.6%.  Earnings per share  increased  15.4%,  and a 2-for-1 stock
split was  declared.  Dividends  are up 53.8% over the prior fiscal year.  We're
confident  that we're  perfectly  positioned  - right on the  threshold of a new
period of major growth."