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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                --------------
                                    FORM 10-K
(Mark One)
[  X ]            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                  THE SECURITIES AND EXCHANGE ACT OF 1934
                  For the fiscal year ended September 28, 1997
                                       OR
[     ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                  THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                  For the transition period from ___________ to __________

                         Commission file number 0-20686

                         UNIROYAL TECHNOLOGY CORPORATION
             (Exact name of registrant as specified in its charter)

           Delaware                                   65-0341868
 (State or other jurisdiction of                      (I.R.S. Employer
  incorporation or organization)                      Identification No.)

 Two North Tamiami Trail, Suite 900
       Sarasota, Florida                              34236-5568
 (Address of principal executive offices)             (Zip Code)


                                 (941) 361-2100
              (Registrant's telephone number, including area code)

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

Title of each class                 Name of each exchange on which registered 
     None                                       Not Applicable

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

                     Common Stock, par value $.01 per share
                                (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 (29,405 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. [ ]

As of November 28, 1997 the  aggregate  market value of the voting stock held by
non-affiliates  of the registrant  (assuming for this purpose that all directors
and officers of the registrant and all holders of 5% or more of the common stock
of the registrant are affiliates)  was  approximately  $38,952,000  based on the
closing price for the stock on November 28, 1997. The foregoing aggregate market
value is based on  issuance  of only 97% of the shares  authorized  for  initial
issuance;  the  registrant  believes that the foregoing  aggregate  market value
would be  approximately  $40,812,000  if all  10,000,000  shares  authorized for
initial issuance had been issued.

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:

As of November 28, 1997, 13,121,517 shares of the registrant's common stock were
outstanding.

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.
 Yes   X    No 


                       DOCUMENTS INCORPORATED BY REFERENCE

Parts III - Portions of the registrant's definitive proxy statement to be issued
in connection with the registrant's annual meeting of stockholders to be held in
1998.

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<PAGE>
<TABLE>
<CAPTION>


                                TABLE OF CONTENTS



<S>                                                                             <C>
Part 1..........................................................................1
Item 1. Business................................................................1
     General....................................................................1
     Corporate Developments.....................................................1
          Disposition of Stock of PBGC..........................................1
          Exit From the Mishawaka Plant.........................................2
          Acquisition of C. Gunther Company.....................................2
          Acquisition of Lucite(R) S-A-R Business...............................2
          Acquisition of Townsend Plastics......................................2
          Sale of the Automotive Operations of the Coated Fabrics Segment.......2
          Settlement of Retiree Medical Claims..................................2
          Transaction with Emcore...............................................3
     Business Segments..........................................................3
          High Performance Plastics Segment.....................................3
          Coated Fabrics Segment................................................9
          Specialty Adhesives Segment...........................................11
     Employees..................................................................13
     Trademarks and Patents.....................................................13
     Research and Development...................................................14
     Backlog ...................................................................14
     Working Capital Items......................................................14
     Environmental Matters......................................................15
     History of Company.........................................................16
          Predecessor Companies.................................................16
          Reorganization........................................................17
Item 2. Properties..............................................................18
Item 3. Legal Proceedings.......................................................19
Item 4. Submission of Matters to a Vote of Security Holders.....................19

Part II.........................................................................19 
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters...19
Item 6. Selected Financial Data.................................................20
Item 7. Management's Discussion and Analysis of Financial Condition
        and Results of Operations...............................................21
        Results Of Operations...................................................21
          Comparison of Fiscal 1997 with Fiscal 1996............................21
          Comparison of Fiscal 1996 with Fiscal 1995............................22
          Liquidity and Capital Resources.......................................25
          Effects of Inflation..................................................25
          Forward Looking Information...........................................25
Item 8. Consolidated Financial Statements and Supplementary Data................25
Item 9. Changes in and Disagreements with Accountants on Accounting
        and Financial Disclosure................................................25

Part III........................................................................26 
Item 10. Directors and Executive Officers of the Registrant.....................26
Item 11. Executive Compensation.................................................26
Item 12. Security Ownership of Certain Beneficial Owners and Management.........26
Item 13. Certain Relationships and Related Transactions.........................26

Part IV.........................................................................26 
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.........26

Signatures......................................................................

Index to Financial Statements and Financial Statement Schedule..................

Exhibit Index...................................................................

</TABLE>


<PAGE>


Item 1.  Business

         General

                  Uniroyal Technology Corporation (the "Company") is a leader in
         the  development,  manufacture  and sale of a broad range of  materials
         employing  plastics and specialty  chemicals  technologies  used in the
         production  of  consumer,   commercial  and  industrial  products.  Its
         products,  many of which are based on proprietary  technology,  include
         thermoplastic  sheet for use in the  manufacture  of seating,  interior
         paneling and other  applications in the  transportation,  recreational,
         agricultural   and  industrial   vehicle  and  computer   manufacturing
         industries;  acrylic  sheet  for  use in the  manufacture  of  aircraft
         canopies,  cabin  windows  and  windshields,  tanning  beds and  bullet
         resistant enclosures; acrylic rods and tubes used in the manufacture of
         orthopedic devices and hard contact lenses; a wide selection of plastic
         vinyl coated fabrics for use in automobile and furniture manufacturing;
         and liquid  adhesives  and sealants for use in the  commercial  roofing
         industry  and in the  manufacture  of  furniture,  truck  trailers  and
         recreational   vehicles.   The  Company's   technologies  allow  it  to
         incorporate into its specialized  materials,  such as thermoplastic and
         acrylic sheets,  performance  characteristics  such as fire retardancy,
         static dissipation,  weatherability,  optical clarity, high strength to
         weight ratio,  light  filtration  capability and others required in the
         specialty  markets  on which  it  focuses.  The  Company  is a  leading
         supplier in such markets due to its ability to provide  materials  with
         such  performance  characteristics,  to customize such materials and to
         provide  technical and customer  support in connection  with the use of
         its products in manufacturing.

                  The  manufacturing  operations of the Company are conducted at
         eleven  sites  located in Indiana,  Delaware,  Iowa,  Connecticut,  New
         Jersey, California, Georgia, Ohio and Wisconsin, through three business
         segments:  High  Performance  Plastics,  Coated  Fabrics and  Specialty
         Adhesives.  The High  Performance  Plastics  Segment  of the  Company's
         business   consists   of   two   divisions:   Royalite   Thermoplastics
         ("Royalite"),   which   manufactures   specialty  and  general  purpose
         thermoplastic  sheet,  injection molding resins, color concentrates and
         extruded   profiles  and  Polycast   Technology   ("Polycast"),   which
         manufactures  acrylic  sheet for the  aerospace,  specialty and general
         purpose  markets as well as acrylic rods and tubes.  The Coated Fabrics
         Segment  manufactures  the Company's  line of vinyl coated  fabrics and
         vinyl  laminated  composites,   and  the  Specialty  Adhesives  Segment
         (formerly,  the Specialty  Foams and Adhesives  Segment),  manufactures
         liquid adhesives and sealants.

                  The Company's Fiscal 1997 net sales were approximately  $208.5
         million. Approximate net sales for each of the Company's three business
         segments during such period were as follows:  High Performance Plastics
         -  $118.8  million,  Coated  Fabrics  - $68.8  million,  and  Specialty
         Adhesives - $20.9  million.  For  certain  financial  information  with
         respect  to  the  Company's   business   segments,   see  "Note  17  to
         Consolidated  Financial Statements." The Company is the successor to an
         affiliated  group  of  reorganized  entities  from  which  the  Company
         acquired  all  of  its  businesses  in  1992  pursuant  to  a  plan  of
         reorganization  adopted on September  27,  1992.  See "- History of the
         Company."

         Corporate Developments

                  The  following  are  certain  corporate   developments   which
         occurred in Fiscal 1997. The descriptions of such  developments  should
         be read in conjunction  with the other parts of this Form 10-K and with
         the  Consolidated   Financial  Statements  and  Notes  to  Consolidated
         Financial Statements and other financial  information which form a part
         hereof.

                  Disposition of Stock of PBGC

                  On December 16, 1996, the Company redeemed 15 shares of Series
         B Preferred Stock held by the Pension Benefit Guaranty Corporation (the
         "PBGC") for $2.3 million. On February 4, 1997, the Company redeemed the
         remaining  20  shares  of Series B  Preferred  Stock for $3.0  million.
         Shortly  after the end of  Fiscal  1997,  the  Company,  directors  and
         officers  of the Company and certain  other  persons  acquired  all the
         Company's common stock owned by the PBGC.

<PAGE>

                  Exit from the Mishawaka Plant

                  On March 31, 1997, the Company vacated the Mishawaka,  Indiana
         plant. Earlier in the year the Company moved its adhesives  operations,
         the Royalite  headquarters  and certain  corporate  operations from the
         Mishawaka plant to the South Bend plant acquired during Fiscal 1996 and
         renovated  during  the  first  half of  Fiscal  1997.  The  Company  is
         realizing  substantial  cost savings and other  efficiencies  from this
         move.

                  Acquisition of C. Gunther Company

                  On March 31,  1997,  the  Company  acquired  all of the common
         stock of C. Gunther Company ("Gunther"), a distributor of mirror mastic
         adhesives,  for $1.7 million in cash and 100,000 shares of common stock
         of the Company.  Gunther was subsequently merged into the Company. Much
         of the production of the Gunther  products was moved into the Company's
         South Bend plant during  Fiscal  1997.  The results of  operations  are
         included in the Specialty Adhesive Segment. See "Note 6 to Consolidated
         Financial Statements."

                  Acquisition of Lucite(R) S-A-R Business

                  On August 29, 1997, the Company  acquired the Lucite(R)  Super
         Abrasion Resistant ("S-A-R") business of the Lucite(R) Acrylic Division
         of ICI Acrylics,  Inc. for $3.0 million,  consisting of $2.0 million in
         cash and a  promissory  note in the amount of $1.0  million  bearing an
         interest  rate of  eight  percent  (8%).  The  acquisition  will add an
         additional  level of value-added  products to the bullet  resistant and
         transportation industry products of the Polycast Technology Division of
         the Company's High Performance  Plastics Segment. See "Notes 6 and 9 to
         Consolidated Financial Statements."

                  Acquisition of Townsend Plastics

                  On September 5, 1997, the Company acquired  substantially  all
         of the assets of the Townsend Plastics Division of Townsend Industries,
         Inc.  near Des  Moines,  Iowa for a price of $4.5  million  in cash and
         300,000 shares of common stock of the Company. Townsend Plastics, which
         produces acrylic rods and tubes,  complements and has been consolidated
         with the Polycast Technology Division of the Company's High Performance
         Plastics Segment. In connection with this purchase, the Company amended
         its financing  agreement  with The CIT Group  Business/Credit,  Inc. to
         include a term note of $1.5 million. See "Notes 6 and 9 to Consolidated
         Financial Statements."

                  Sale of the Automotive Operation of the Coated Fabrics Segment

                  On May 15, 1997,  the Company agreed to sell certain assets of
         the automotive  interior trim  operation of the Coated Fabrics  Segment
         located  at  the  Company's  Stoughton,  Wisconsin  facility  for  $6.7
         million;  $4.7 million received in cash and a $2.0 million holdback. On
         October 17,  1997,  the Company  agreed to sell  certain  assets of the
         automotive  operation  of the  Coated  Fabrics  Segment  located at the
         Company's Port Clinton,  Ohio facility for approximately  $5.3 million.
         The  Company  should  receive  $4.3  million  in June  of 1998  and the
         remaining  amount in December of 1998, both based on obtaining  certain
         customer  approvals.   As  of  September  29,  1996,  the  Company  had
         established  reserves  for the  impairment  of assets to be disposed of
         related to the Port Clinton,  Ohio  automotive  operation of the Coated
         Fabrics  Segment.  The  Company  does not  expect to incur any  further
         significant gain or loss relating to the sales. For further description
         of the sale of the  automotive  operation of the Coated Fabrics Segment
         and litigation  surrounding the $2.0 million holdback,  see "Note 14 to
         Consolidated Financial Statements."

                  Settlement of Retiree Medical Claims

                  On  February  13,  1997 the Company  settled  litigation  with
         Uniroyal  Retiree  Benefits,  Inc.  ("URBI"),  an organization  that is
         unaffiliated with the Company. URBI administers a medical, prescription
         drug and life insurance  program for certain  retired  employees of the
         Predecessor   Companies  and  certain  affiliates  of  the  Predecessor
         Companies. This program is funded by the Company in accordance with the
         terms of an agreement  entered into by the predecessors of URBI and the
         Company in connection with the Predecessor Companies' Plan. The Company
         had  disputes  with  URBI   concerning   the   eligibility  of  certain
         participants  in URBI's medical plan and the level of payments due. The
         settlement agreement settled all previous claims asserted or assertable
         and provides a future  formula  pursuant to which the Company will make
         payments  to URBI in order for URBI to provide  medical,  drug and life
         benefits to participants in its programs.
<PAGE>

                  Transaction with Emcore Corporation

                  Through a technology  license dated  September  29, 1997,  the
         Company  has  acquired  from  Emcore  Corporation   ("Emcore")  certain
         technology  for  the  manufacture  of  epitaxial  wafers  used  in high
         brightness  light emitting  diodes (LEDs) for lamps and display devices
         for license fees  aggregating  up to  approximately  $5 million  during
         Fiscal 1998. A wholly owned  subsidiary  of the Company  plans to enter
         into a joint venture agreement with Emcore, whereby a joint venture, to
         be managed by the  subsidiary of the Company,  will  purchase  machines
         from Emcore and will sell and eventually  manufacture epitaxial wafers,
         lamps and display devices. Thomas J. Russell, the Chairman of the Board
         of Directors  of Emcore,  is a director  and major  stockholder  of the
         Company, and Howard R. Curd, the Chairman of the Board of Directors and
         Chief Executive Officer of the Company, is a director of Emcore.

         Business Segments

                  High Performance Plastics Segment

                  The  High  Performance   Plastics  Segment  of  the  Company's
         business accounted for approximately  $118.8 million  (approximately 57
         percent  (57%)) of the  Company's net sales in Fiscal 1997. It consists
         of two divisions:  the Royalite  Thermoplastics  Division ("Royalite"),
         which manufactures  thermoplastic products, and the Polycast Technology
         Division ("Polycast"), which manufactures acrylic products.

         Royalite - Thermoplastic Products

                  General

                  Royalite  is a leading  manufacturer  of custom  thermoplastic
         products.  Thermoplastics are polymers, such as acrylonitrile butadiene
         styrene  and   polyvinylchloride,   made  from  the  polymerization  of
         monomers,  which can be  reshaped  after  they have been  formed by the
         application  of  heat  and  are  used  in  the  manufacture  of a  wide
         assortment of commercial and consumer products. The division's products
         include  thermoplastic  sheet,  injection  molding  resins and extruded
         profiles.

                  Thermoplastic  sheet is  manufactured  by the  Company  from a
         variety of polymers and chemical additives and is constructed either of
         solid plastic, a core of inexpensive  plastic covered with a thin layer
         of  high-quality  thermoplastic  or a base or substrate of plastic foam
         surrounded   by   solid   thermoplastic.   It  is  sold  to   equipment
         manufacturers,  who incorporate  the sheet into their products;  custom
         fabricators,  who cut and form the sheet for specific  applications and
         supply finished components to original equipment  manufacturers (OEMs);
         and  distributors,  who resell raw sheet to equipment  manufacturers or
         custom fabricators. The Company manufactures two types of thermoplastic
         sheet:  specialized  sheet,  which is made by varying  the  polymer and
         chemical  components  of the  sheet  in  order  to  achieve  particular
         performance  characteristics;  and general purpose sheet, which is used
         by  manufacturers  for a variety of products not  requiring  particular
         performance characteristics.

                  Specialty  thermoplastic  sheet  is  sold by  Royalite  into a
         number of niche markets, depending upon the performance characteristics
         of the sheet.  The following is a chart  setting  forth the  particular
         performance   characteristics  and  the  related  applications  of  the
         specialized sheet:
<PAGE>
         Performance Characteristics                Principal Uses
         ---------------------------              ------------------
         flame and smoke retardancy           mass transportation vehicle
                                               seating and interior panels,
                                               aircraft interior trim and
                                               computer and other electronic
                                               equipment component housings

         static dissipation and 
          conductivity                        computer chip carriers, hard 
                                               drive housings and electronic
                                               tote boxes

         weatherability/temperature
          resistance                          marine and recreational vehicle 
                                               instrument panels, interior
                                               trim for agricultural and 
                                               other off road vehicles
                                               and exterior boat trim

          buoyant, hydrodynamic and/or 
           strength-to-weight ratio           canoes, kayaks, other
                                               watersport crafts, amusement park
                                               vehicles and large exterior
                                               equipment housings

         The Company believes it has a substantial share of the markets in which
         it competes  for  specialty  thermoplastic  sheet due to its ability to
         manufacture sheet with the wide variety of performance  characteristics
         set forth above;  the performance  characteristics  are, in many cases,
         customized to meet its customers'  exact  specifications.  Net sales of
         specialty  thermoplastic  sheet accounted for  approximately 66 percent
         (66%) of total  net sales of  thermoplastic  sheet by  Royalite  during
         Fiscal 1997.

                  The Company maintains a scientific and technical staff and the
         necessary  production  capabilities to design  specialty  thermoplastic
         sheet  with   performance   characteristics   to  suit  its  customers'
         specifications.  See "- Research and  Development."  In  addition,  the
         Company has advanced coloring technology, including a database of up to
         2,500 color formulas  developed by Royalite,  which enables it to color
         its thermoplastic sheet to match customer specifications  precisely and
         consistently.  The Company also has the ability to texturize  its sheet
         with what it believes  to be one of the most  extensive  selections  of
         embossing grains available in the market.

                  By contrast to specialty  thermoplastic sheet, general purpose
         thermoplastic sheet is used in the manufacture of numerous consumer and
         industrial products, such as luggage,  musical instrument and equipment
         cases, tote boxes and vehicle mud flaps,  which do not require that the
         thermoplastic  material  used in their  manufacture  possess any of the
         performance  characteristics  which  distinguish  specialty  sheet. The
         market for general purpose thermoplastic sheet is significantly broader
         than the market  for  specialty  thermoplastic  sheet due to the almost
         limitless  uses to which  such sheet may be put in the  manufacture  of
         products.   Such   market  is   generally   characterized   by  intense
         competition,  high volume and low margins.  The Company does not have a
         significant share of this market. Sales of general purpose sheet during
         Fiscal 1997 accounted for  approximately  37 percent (37%) of total net
         sales of Royalite.

                  In addition to the Company's extensive list of sheet products,
         it also produces  injection molding resins,  some of which use the same
         proprietary  formulations as the sheet products,  and extruded  profile
         products.

                  The Company  introduced  injection  molding resin  products as
         part of its "life cycle sourcing" strategy  implemented to satisfy each
         customer's  needs  for   thermoplastic   material  with  respect  to  a
         particular  product  from  the  product's   development  stage  through
         maturity,  including  matching  products to the  variety of  production
         methods  used at  different  volume  levels.  When a customer is in the
         initial  stages of  developing  a  product  requiring  a  thermoplastic
         component,  the Company  employs  its  technological  capabilities  and
         scientific  expertise  to design and produce  customized  thermoplastic
         sheet,  which the customer  then  generally  "thermoforms"  through the
         application of heat into  particular  applications  to be  incorporated
         into its final product. Due to its low cost, "thermoforming" is used in
         connection  with  the  manufacture  of  thermoplastic   components  not
         required in large volume  manufacturing  runs.  When a customer's  unit
         volume of a product  attains levels at which it becomes  economical for
         the customer to manufacture the thermoplastic  application by injection
         molding,   a  capital   intensive  but  more  efficient   process  than
         thermoforming, the Company can continue to supply the customer with the
         polymer resins and color  concentrates,  achieving the same  properties
         and color as when the application was produced  through  thermoforming.
         By using the Company's injection molding resins and color concentrates,
         which  have  been   customized  to  meet  the   customer's   particular
         specifications,  the customer  avoids any  disruption in its production
         that may result from having to qualify a  thermoplastic  material  from
         another manufacturer.
<PAGE>

                  Although  injection  molding resins  constitute  less than one
         percent  (1%) of net sales of  Royalite  for Fiscal  1997,  the Company
         believes that significant opportunities for growth exist in this market
         and that such product lines will enhance the division's specialty sheet
         lines by assuring customers that the Company will be able to meet their
         specialized  thermoplastic  needs throughout every stage of a product's
         life cycle.

                  Royalite also produces  extruded profile  products,  including
         both proprietary and general purpose  materials.  The products are used
         for  applications  requiring  flexibility and resilience,  such as boat
         dock bumpers and gaskets  which are sold to and used in  production  of
         acrylic sheet by Polycast.  This product line was  implemented to fully
         utilize the  division's  available  production  capacity at its Warsaw,
         Indiana facility. Even though sales of extruded profile products do not
         represent  a  significant  part of  Royalite's  business,  the  Company
         believes  that  significant  opportunities  for  growth  exist  in this
         market.

                  Competition

                  The market  for  thermoplastic  sheet in the United  States is
         highly competitive,  with companies competing primarily on the basis of
         product specifications,  price, customer service and technical support.
         The Company  competes  in this market  principally  by  maintaining  or
         increasing  its  market  share  in the  specialty  thermoplastic  niche
         markets described above. See "- Royalite - General."  Royalite competes
         effectively in this market by providing new custom product development,
         state-of-the-art  color  technology and strong customer service through
         technical  support.   The  division   maintains  highly   knowledgeable
         technical  representatives  who work directly with  customers to ensure
         that the division's  materials used in the  manufacture of a customer's
         product conform to the customer's  specifications  and work efficiently
         with the customers'  manufacturing  processes. In addition, the Company
         has polymer expertise and custom compounding  capabilities to customize
         the  performance   characteristics   and  color  of  its  thermoplastic
         products,  whereas many of its competitors do not have this capability.
         Its  technological  capabilities  have also  permitted  the  Company to
         develop  successful new products which enhance its  competitiveness  in
         this segment. For example, recently, Royalite introduced low smoke, low
         heat, fire retardant  material for aircraft and mass transit  interiors
         and  graffiti-resistant  seating  material,   developed  for  the  mass
         transportation  market.  The addition of injection  molding  resins and
         profile  products  and  implementation  of  life  cycle  sourcing  have
         enhanced  Royalite's  competitiveness  by assuring  customers  that the
         Company will be able to meet their thermoplastic needs throughout every
         stage of a product's life.

                  The Company is also able to compete  effectively  with respect
         to  price  due in part to its low  production  costs,  its  ability  to
         produce its own color  concentrates and savings  resulting from its use
         of recycled material in the manufacture of thermoplastic  sheet. See "-
         Royalite - Raw Materials." The Company's ability to internally  produce
         and laminate a thin layer of high quality  colored  thermoplastic  film
         over a less costly substrate  allows it to compete  favorably with most
         other specialty  thermoplastic sheet manufacturers,  which use a single
         layer of  relatively  expensive  colored  plastic  sheet to produce the
         desired end product.

                  The  Company's  principal  competitors  in the flame and smoke
         retardant thermoplastic product market are Empire, Kleerdex Company and
         Spartech  Corporation.  Goodrich  and HMS are the  Company's  principal
         competitors in the static control  thermoplastic  product  market,  and
         Primex  Plastics  Corp.  and  Spartech  Corporation  are the  Company's
         principal  competitors  in  the  general  purpose  thermoplastic  sheet
         market.  The Company's  competitors  have in the past  increased  their
         market  shares  in  the   thermoplastic   industry   generally  through
         acquisitions.

                  Marketing

                  Royalite's thermoplastic sheet products are marketed under the
         ROYALITE(R)  and  SPECTRUM(R)  brand  names.  Thermoplastic  sheet with
         specialized  characteristics  is also marketed under  individual  brand
         names, such as ROYALSTAT(R)  (thermoplastic sheet designed to dissipate
         or   conduct   static   electric   charges),   ROYALEX(R)   (multilayer
         thermoplastic sheet with a foam core and highly weather-resistant layer
         on one or both sides,  resulting  in a high  strength-to-weight  ratio,
         designed  for  recreational,  marine and  sporting  applications),  and
         ROYALTHOTIC(R)  (thermoplastic sheet designed to be thermoformed at low
         temperatures  to  permit  orthopedic  medical   practitioners  to  form
         individual patient orthopedic devices).
<PAGE>

                  Royalite markets its thermoplastic  products primarily through
         a national sales force of approximately 14 sales  representatives,  who
         are employees of the Company,  and through  wholesale  distributors  to
         whom  it  supplies  its  products   for  resale  to   fabricators   and
         manufacturers.  Representative customers of Royalite and representative
         end  users  of  its  products   include:   American   Seating  Company,
         Bombardier,  Inc., Caterpillar,  Inc., Commercial Plastics and Supplies
         Corp.,  Curbell Plastics,  a division of Curbell,  Inc., General Motors
         Corporation,  Hewlett-Packard  Company, Laird Plastics, Inc., McDonnell
         Douglas  Corporation,   National  Railroad  Passenger  Corp.  (Amtrak),
         Seagate Technology,  Inc., Sensormatic  Electronics Corporation and the
         U.S. Navy. The Company has a broad customer base for its  thermoplastic
         products and it does not believe  that it is dependent  upon any single
         customer or group of customers for sale of its thermoplastic  products.
         Pricing and terms offered to customers are  generally  consistent  with
         those found in the industry.

                  Manufacturing Facilities

                  The Company  manufactures its thermoplastic  products at three
         wholly  owned  facilities,  the  largest of which is located in Warsaw,
         Indiana.   The  Company's  other   thermoplastic   sheet  manufacturing
         facilities are located in Rome, Georgia and Redlands,  California.  See
         "Item 2. Properties."

                  Raw Materials

                  The  principal  raw  materials  used  by  the  Company  in the
         manufacture of thermoplastic  sheet,  injection  molding resins,  color
         concentrates and extruded profiles are acrylonitrile  butadiene styrene
         ("ABS") resins and polyethylene,  polypropylene  and  polyvinylchloride
         ("PVC") resins and alloys of such resins.  The Company has no long-term
         purchasing agreements with any suppliers for such raw materials,  other
         than GE Plastics (a division of General  Electric  Company)  from which
         the  Company  acquires a  substantial  portion of its ABS  resins.  The
         Company  purchases PVC resins and other raw materials from a variety of
         domestic and international suppliers.  These products are all currently
         readily available from a variety of suppliers.

                  The Company  recycles  scraps of  thermoplastic  material that
         result from  customers'  forming sheet for their specific  applications
         for use in the manufacture of new sheet. Recycled material is generally
         used by the Company to replace the raw materials  that would  otherwise
         be   required  to   manufacture   specialized   and   general   purpose
         thermoplastic sheet.  Recycled material is purchased from customers and
         brokers and is less expensive than new raw materials.

         Polycast - Acrylic Products

                  General

                  Polycast manufactures high performance acrylic sheet, rods and
         tubes which are sold  principally  to custom  fabricators  and original
         equipment  manufacturers,  who heat and form the Polycast  product into
         shapes  for  specific  applications,  such as  aircraft  window  units,
         furniture  components and  orthopedic  braces.  The division's  acrylic
         products  have  a  unique   combination  of  physical   properties  and
         performance characteristics which are required by the manufacturers who
         use them as a component  of their  products.  For  example,  they weigh
         considerably  less  than,  but  are  superior  in  clarity  and  impact
         resistance  to,  glass.  They are  thermoformable,  remain stable under
         sustained  exposure to the elements and can be processed to transmit or
         filter ultraviolet light, depending on customer requirements.

                  The Company manufactures acrylic sheet for three markets - the
         aerospace market,  which includes the commercial and military aerospace
         industries,  in  which  the  division's  products  are  used  for  such
         applications  as  aircraft  cockpit  canopies  and  cabin  windows  and
         helicopter  windshields;  the specialty  acrylic  sheet  market,  which
         includes a variety of niche  markets in which the  division's  products
         are  used  in the  manufacture  of  boat  windscreens  and  enclosures,
         bullet-resistant  security enclosures for banks, convenience stores and
         other businesses,  hockey rink protective barriers,  furniture, tanning
         bed shields and municipal aquarium  transparent panels; and the general
         purpose  market for acrylic  sheet,  in which acrylic sheet is used for
         such applications as store displays and signage, where high performance
         characteristics  are  not  required  and  do  not  require  specialized
         manufacturing  techniques.  The  division's  acrylic rods and tubes are
         used for a  variety  of  applications,  including  the  manufacture  of
         lighting fixtures, furniture, medical instruments,  orthopedic devices,
         such as orthopedic  braces and lens materials used to replace defective
         lenses of the eye in cataract surgery and certain types of hard contact
         lenses.
<PAGE>
                      Polycast  manufactures  its acrylic  products through cell
         cast  manufacturing,  a  process  which  enables  it to  customize  the
         performance characteristics of its acrylic aerospace sheet, specialized
         sheet  and rods and  tubes,  to meet the  exact  specifications  of its
         customers  and to offer its products  with a broader  range of physical
         characteristics  than  can  be  achieved  through  other  manufacturing
         processes,  such as continuous cast,  extrusion and calender processes.
         For  example,  Polycast's  scientific  staff  have  used the cell  cast
         process to develop a  specialized  sheet  which  transmits  rather than
         filters ultraviolet rays for use in tanning beds and an aerospace sheet
         with  consistently high optical quality and exact color shading for use
         in  constructing   aerospace   transparencies   such  as  aircraft  and
         helicopter  window  products.  The  division  can  manufacture  acrylic
         products  in more than 60 colors and  acrylic  sheet in gauges  ranging
         from 0.030 to 6.00 inches.  Acrylic sheet manufactured by the cell cast
         process,  which is more labor intensive than continuous cast, extrusion
         or calender  processes,  generally  yields higher  margins than acrylic
         sheet produced by such other processes.

                      The division  markets its  aerospace  acrylic sheet in the
         military and commercial  aerospace  industries,  which require products
         meeting  precise  specifications.  The division is one of a few acrylic
         manufacturers  in the United States  qualified to produce acrylic sheet
         meeting   military   manufacturing   standards,    specifications   and
         requirements  ("MIL SPEC"), a designation made by the U.S. Navy's Naval
         Air  Development  Center  which is a  prerequisite  for  supplying  the
         military aerospace industry. The division and the Predecessor Companies
         have maintained this qualification since 1976. The division's aerospace
         acrylic  sheet  is  also  qualified  by  several  commercial  aerospace
         manufacturers,  including Bell-Helicopter, a division of Textron, Inc.,
         Boeing Company,  McDonnell-Douglas  Corporation  and Sikorsky  Aircraft
         Corporation  which  include a supplier's  products on their  "qualified
         product lists" only after such products have met MIL SPEC  requirements
         and passed the manufacturer's additional and more stringent testing and
         approval procedures.  Although unlikely,  any failure of the division's
         aerospace acrylic products to continue to meet required  specifications
         under which they are provided to an aerospace manufacturer could have a
         material adverse effect on the division.

                  The  division  sells  its  specialty  acrylic  sheet in a wide
         variety of niche markets,  including  manufacturers of boat windscreens
         and enclosures, bullet resistant enclosures and protective barriers for
         athletic  facilities,  furniture and tanning bed shields and aquariums.
         The division  markets its acrylic  products to such industries  through
         customization  of the performance and physical  characteristics  of its
         specialty sheet to meet customer specifications.

                  Competition

                  The division faces continuing  competition from North American
         producers and from certain foreign  producers,  particularly from Asian
         and South American  countries.  Many of these  competitors have greater
         resources  than  the  Company.   These  competitors  primarily  produce
         standard  sizes of general  purpose  acrylic sheet by continuous  cast,
         extrusion  or calender  processes.  The  division  concentrates  on the
         production of aerospace and specialty  acrylic sheet,  which in certain
         cases has unique  characteristics that cannot be obtained by such other
         manufacturing  processes.  Net sales of aerospace and specialty acrylic
         sheet accounted for  approximately  65 percent (65%) of total net sales
         by Polycast.

                  The Company believes that the division has a significant share
         of the niche  markets  in which it sells its  aerospace  and  specialty
         acrylic  sheet.  See "- Polycast - General." The  division's  principal
         competitors in the specialty  acrylic sheet market are AtoHaas Americas
         Inc. ("AtoHaas"), Cyro Industries, a division of Cytec Industries, Inc.
         ("Cyro") and ICI  Acrylics,  Inc., a subsidiary  of Imperial  Chemicals
         Industries  plc ("ICI").  The division's  principal  competitors in the
         acrylic  aerospace  sheet  market are Cyro,  Nordam,  Inc.  ("Nordam"),
         Pilkington  Aerospace Swedlow Division,  a subsidiary of Pilkington plc
         ("Pilkington") and Rohm Darmstadt GmbH.

                  In order to compete with  vertically  integrated  companies in
         the  aerospace  acrylic sheet  market,  such as Pilkington  and Nordam,
         which  manufacture such sheet as well as form it into finished aircraft
         window  products for sale to  commercial  aircraft  manufacturers,  the
         division  entered into an agreement in 1995 with PPG  Industries,  Inc.
         ("PPG"),  pursuant to which an  affiliate  of PPG in Italy uses acrylic
         window blanks  constructed  of Polycast(R)  aerospace  acrylic sheet to
         manufacture finished aircraft window systems for sale to the commercial
         aerospace  market.  The Polycast(R)  acrylic sheet is stretched to form
         window blanks by Aerospace  Composite  Technologies  Limited ("ACT") in
         England pursuant to an agreement with the Company and then sold to PPG.
         The  purchase  price paid by PPG for the  acrylic  blanks is based,  in
         part,  on PPG's  profits from sales of aircraft  windows  incorporating
         such blanks.  Both the agreement  with PPG and the  agreement  with ACT
         expire in 1998 but can be renewed for successive 12-month periods.

                  In the acrylic rod and tube market, the division's competitors
         are various small companies that typically produce only acrylic rod and
         tube products.
<PAGE>

                   AtoHaas,  Cyro and ICI, which are North American producers of
         acrylic sheet, also produce methyl  methacrylate  monomer ("MMA"),  the
         principal raw material used in the  manufacture of acrylic sheet,  rods
         and tubes, or certain of the components thereof, making it possible for
         them  to  absorb  increases  in the  cost  of  MMA  and  buy  in  large
         quantities,   thereby  availing  themselves  of  volume  discounts  not
         available to the  division.  Since the Company does not itself  produce
         MMA,  Polycast  is unable to  compete  effectively  with the low prices
         charged by these companies for general  purpose  acrylic sheet.  See "-
         Polycast - Raw Materials."

                  Marketing

                  Polycast's acrylic products are marketed under the POLYCAST(R)
         brand name. Acrylic products with special  performance  characteristics
         are  also  marketed  under  individual  brand  names,  such as  PILOTS'
         CHOICE(TM)  (aerospace  sheet with high optical quality) for helicopter
         windshields,  SOLACRYL(R)  (specialty sheet which transmits ultraviolet
         rays) for tanning bed shields,  POLYDOR(R)  (thermoformable sheet) used
         for  orthopedic  product  and  S-A-R  coatings  for  specialty  acrylic
         applications.  The  Company's  acrylic rods and tubes are also marketed
         under the TOWNSEND/GLASFLEX(TM) brand name.

                  The  division  markets  its  acrylic  sheets,  rods and  tubes
         primarily through five sales representatives,  who are employees of the
         division, and through wholesale distributors.

                  Representative    domestic    customers    of   Polycast   and
         representative end users of its acrylic products include Beech Aircraft
         Corp.,  Bell-Helicopter Textron, Inc., Boeing Company, Cadillac Plastic
         & Chemical Co., The Cessna Aircraft  Company,  Chris-Craft  Industries,
         Inc.,  Commercial  Plastics and Supply  Corp.,  Laird  Plastics,  Inc.,
         Llamas   Plastics,    Inc.,   Sensormatic   Electronics    Corporation,
         Sierracin/Sylmar  Corporation,  Sikorsky Aircraft Corporation,  Texstar
         Inc.,  Thunderbird Products Corp. and Wellcraft Marine.  Representative
         foreign  customers and end users  include  Airbus  Industries,  Alenia,
         Augusta  Helicopters,  Embraer and Hindustan  Aeronautics  Limited. The
         Company is not dependent  upon a single  customer or group of customers
         for sales of its acrylic products.

                  Manufacturing Facilities

                  The  division  manufactures  acrylic  sheet at its facility in
         Stamford,  Connecticut and finishes and further processes acrylic sheet
         for certain  applications  at its  facilities in Newport,  Delaware and
         Hackensack,  New Jersey;  the  Hackensack  facility  also serves as the
         principal  warehouse for acrylic sheet products.  Acrylic sheet is also
         manufactured,  along with  acrylic  rods and tubes,  at the  division's
         facility  in  Stirling,  New Jersey and  acrylic  rods and tubes at the
         division's  facility  in Pleasant  Hill,  Iowa.  The  Company  owns the
         manufacturing  and  processing  facilities  in  Stamford,   Hackensack,
         Stirling  and  Pleasant  Hill  and  leases  its  facility  in  Newport,
         Delaware.  The  division  leases  office  space  used for its  division
         headquarters  adjacent  to  its  Stamford,   Connecticut  manufacturing
         facility. See "Item 2. Properties."

                  Raw Materials

                  Since October 1, 1991, all of the division's  requirements  of
         MMA  have  been  purchased  from  ICI or its  predecessor  owner of the
         monomer business, E.I. duPont de Nemours & Co., currently pursuant to a
         supply  agreement which obligates the division to purchase from ICI and
         ICI to supply the division with its  requirements for MMA through March
         16, 2005,  subject to termination by the division upon eighteen months'
         advance notice or by ICI upon a three years' advance notice.  Under the
         supply  agreement,  the division is entitled to purchase MMA from other
         suppliers  that  offer the  product  at prices  lower than those ICI is
         willing to match. In addition,  the supply agreement  requires that any
         party that  acquires all or  substantially  all of ICI's assets used to
         manufacture  MMA assume the  obligations of ICI under the agreement and
         further requires that any party that acquires all or substantially  all
         of the Company's assets used to manufacture its acrylic sheet, rods and
         tubes assume the obligations of the division under the agreement.

                  In  the  event  that  ICI  elects  to  terminate   the  supply
         agreement, the Company believes that the division could obtain MMA from
         one or more alternate sources. However, each of the two major alternate
         domestic  manufacturers  and  certain  other  major  alternate  foreign
         manufacturers  of MMA  compete  (as does ICI) with the  division in the
         manufacture and sale of acrylic sheet.  Thus, there can be no assurance
         that the  division  would be able to obtain  MMA from  these  alternate
         sources  at  satisfactory  prices,  on a  reliable  basis  or on  terms
         otherwise satisfactory to the division.
<PAGE>

                  Coated Fabrics Segment

                  The Company's  Coated  Fabrics  Segment,  which  accounted for
         approximately  $68.8  million (33 percent  (33%)) of the  Company's net
         sales for  Fiscal  1997,  is a  leading  manufacturer  of vinyl  coated
         fabrics and vinyl  laminated  composites.  The segment's  product lines
         consist of products for the automobile  manufacturing  industry,  which
         accounted  for 61 percent  (61%) of total net sales of the  segment for
         Fiscal 1997,  and the well known  Naugahyde(R)  brand name vinyl coated
         fabric  products,  which  accounted  for 39 percent  (39%) of total net
         sales of the segment for such fiscal year.

                  General

                  The  segment's  automotive  product  line  consists of plastic
         vinyl  coated   fabrics  and  vinyl   laminated   composites   used  by
         manufacturers and custom  fabricators in the production of vehicle seat
         coverings,  door panels, arm rests, consoles and instrument panels. Its
         coated  fabrics  are  durable,   stain   resistant,   cost-   effective
         alternatives  to  leather  and cloth  coverings.  The  segment's  vinyl
         laminated   composites   are   durable,   easily   formed,   economical
         alternatives  to  fabric  coverings  used  for  applications   such  as
         automobile  instrument and door panels.  The materials  manufactured by
         the  segment  can be hand or  machine  sewn or glued  to an  underlying
         structure,   such  as  a  seat  frame  or  automobile  door  panel,  or
         thermoformed   to  cover   various   underlying   structures   or  into
         freestanding  shapes for a variety of applications,  and come in a wide
         range of colors  and  textures.  The  Company  has  decided to exit the
         automotive  operation of this segment.  The  operation  consists of the
         vinyl laminated  composite line manufactured in the Port Clinton,  Ohio
         and Stoughton, Wisconsin facilities. See "Corporate Developments - Sale
         of the Automotive  Operation of the Coated Fabric Segment" and "Note 14
         to Consolidated Financial Statements."

                  The segment's  Naugahyde(R) vinyl coated fabrics products have
         varying  performance  characteristics  and are sold in various  markets
         depending upon the performance  characteristics  required by end users.
         For example, for recreational products which are used outdoors, such as
         boats,  personal  watercraft,  golf carts and snowmobiles,  the segment
         sells  a   Naugahyde(R)   product  that  is  designed   primarily   for
         weatherability.  It also  manufactures  Naugahyde(R)  products that can
         withstand powerful cleaning agents,  which are widely used in hospitals
         and in other medical facilities. Flame and smoke retardant Naugahyde(R)
         vinyl  coated  fabrics  are  used  for  a  variety  of  commercial  and
         institutional furniture applications,  including hospital furniture and
         school bus seats.  In Fiscal 1996,  the segment  employed a designer to
         commence   development  of  additional  styles  and  patterns  for  its
         Naugahyde(R)  products  in order to  respond to  changing  needs of its
         customers.  This  resulted in the  introduction  of three new  patterns
         which were well received by the customers.

                  The segment is one of the few  manufacturers  that can produce
         coated  fabrics  through   composite,   continuous  cast  and  calender
         manufacturing  processes.  These  processes  allow it to produce coated
         fabrics  and  laminated  composites  with  different   characteristics:
         composite  manufacturing  produces a material  which is light in weight
         with sharply  defined  borders;  the continuous  cast method produces a
         material with a soft finish,  deep grain pattern and a wide temperature
         range and high  malleability  factors for  thermoforming;  and calender
         manufacturing  produces a material with less of a soft finish but which
         can be manufactured economically in high volume.

                  The segment has two  state-of-the-art  production  lines which
         produce coated fabrics and laminated composites in more than 600 colors
         and 45 textures and patterns.

                  The  segment's  automotive  products  are marketed to domestic
         automobile manufacturers as well as to foreign automobile manufacturers
         producing vehicles in the United States  ("transplant  manufacturers").
         The coated  fabrics and laminated  composites  which comprise this line
         are designed to meet the performance  specifications  set by automobile
         manufacturers  such  as  crisp  lines  or  soft  finishes  of  interior
         components  or the ability to  thermoform  the products  into  specific
         applications.  In Fiscal 1995,  the segment  introduced a new series of
         coated fabrics  products in response to performance  specifications  of
         General  Motors  Corporation  ("GM") for a coated  fabric with  limited
         propensity  to lose  cohesion upon exposure to heat and that would meet
         processability  requirements  but would  also be  lighter in weight and
         softer to the touch.  Such products had been in development  since 1992
         and in Fiscal 1995 represented a nominal amount of the segment's sales.
         In  Fiscal  1996,   sales  of  such   products  to  GM  accounted   for
         approximately  $6.0  million in net sales and  continued to increase in
         Fiscal 1997 to $16.2 million. The products are currently being provided
         to GM for use in several of its automobile models.
<PAGE>

                  In order to supply coated fabrics and laminated  composites to
         the domestic automotive market, a supplier must first satisfy extensive
         product standards and  specifications  established by the manufacturer.
         The  segment  and the  Predecessor  Companies  have had  products  that
         satisfied the standards of domestic  automobile  manufacturers for many
         years. In fact, the Company and its  predecessors  have supplied coated
         fabrics to GM for more than 30 years.  As a result of the  introduction
         of its new series of coated  fabrics  products,  sales to GM  increased
         substantially in Fiscal 1997.

                  Similar to the domestic  automotive  market,  a supplier  must
         first satisfy  extensive  quality and  manufacturing  specifications in
         order to supply coated  fabrics and laminated  composites to transplant
         manufacturers.  The  segment has  satisfied  these  standards  of Honda
         America  Manufacturing,  Inc. ("Honda") with respect to seat covers and
         laminated  composite  door and  instrument  panels and for Mazda  Motor
         Corporation with respect to seat covers and door panels.

                  Pursuant to a technical  collaboration  agreement with Okamoto
         Industries, Inc. ("Okamoto"), a Japanese manufacturer of coated fabrics
         products,  the  segment  holds an  exclusive  license to use  Okamoto's
         advanced  technology  for the  manufacture of certain coated fabrics in
         the United States and Canada until 2003. This  arrangement has provided
         the segment with the  capability  to  manufacture  materials  using the
         composite  production  process and has allowed it to supply  product to
         transplant  manufacturers such as Honda. The Company is required to pay
         Okamoto a royalty  on net sales of  certain  products  using  Okamoto's
         technology.

                  The coated  fabrics and  laminated  composites  market for the
         automobile  manufacturing  industry is characterized by long lead times
         for new products requiring  significant  working capital investment and
         extensive   testing,   qualification   and   approval   by   automobile
         manufacturers.  The segment  faces a significant  risk that  automobile
         manufacturers  might not select its new products  after it has incurred
         significant  cost for,  among other things,  research and  development,
         manufacturing  equipment,   training  and  facility-related   over-head
         expenses to develop  such  products.  Moreover,  even if the  segment's
         products  are   eventually   approved  and   purchased  by   automobile
         manufacturers,  its working capital  investment  might fail to generate
         revenues for several years while the segment develops such products and
         automobile  manufacturers  conduct  their  testing,  qualification  and
         approval procedures for such products.

                  Competition

                  The  Coated  Fabrics  segment  competes  with  respect  to its
         Naugahyde(R)  products  primarily  on the  basis of  style,  color  and
         quality,  as well as  price  and  customer  service  through  technical
         support and performance  characteristics  which meet customer needs. In
         Fiscal  1996,  it  employed  a  designer  to  commence  development  of
         additional styles and patterns in order to respond to changing needs of
         end-users of Naugahyde(R) products.

                  The segment competes in the domestic and transplant automotive
         markets for coated  fabrics and laminated  composites  primarily on the
         basis of price.  In the case of unique  product lines  developed by the
         segment,  such as the new product series  discussed  above, the segment
         competes  on  the  basis  of  the  performance  characteristics  of its
         products.  In the  domestic  and  transplant  automotive  markets,  the
         segment  generally  sells its coated  fabrics and laminated  composites
         directly to automobile manufacturers and to custom fabricators, who use
         the segment's coated fabrics and laminated  composites to make finished
         products,  such as  seats  and door  panels,  which  are  then  sold to
         automobile manufacturers.

                  The  segment's  principal  competitors  with  respect  to  its
         Naugahyde(R)  products are C.G.  Spradling & Company,  GenCorp Inc. and
         Morbern  Inc.  The  segment's  principal  competitors  in the  domestic
         automotive  markets  are  Canadian  General-Tower,  Ltd.  and  Sandusky
         Plastics,  Inc.,  and  its  principal  competitors  in  the  transplant
         automotive markets are O'Sullivan Corporation and foreign importers.

                  Marketing

                  The segment's  coated fabrics  products were introduced by one
         of its predecessors more than 45 years ago and today are marketed under
         several  nationally  recognized  brand names,  including  NAUGAHYDE(R),
         NAUGAFORM(R)  and DURAN(R).  BEAUTYGARD(R)  is the name under which the
         segment markets its cleaning  agent-resistant  coated fabrics,  and its
         flame and smoke  retardant  coated fabrics are marketed under the brand
         name FLAME BLOCKER(TM).
<PAGE>

                  The segment markets and sells its coated fabrics and laminated
         composites primarily through 11 national sales representatives, who are
         employees of the Company, and independent sales representatives. In the
         furniture  manufacturing  market, it generally sells its coated fabrics
         through  its  sales  representatives  and to  distributors  who sell to
         furniture  manufacturers,  upholsterers and fabric distributors,  which
         supply furniture  manufacturers.  Approximately 47 percent (47%) of the
         segment's   non-automotive   market   sales  in  Fiscal  1997  were  to
         distributors.

                  Representative customers and end users of the segment's coated
         fabrics and laminated  composites include  Bombardier,  Inc., Club Car,
         Inc., GM,  Harley-Davidson,  Inc.,  Honda,  Kawasaki Heavy  Industries,
         Inc.,  Mazda Motors of America,  Inc.,  Michigan Seat Co., Okamoto USA,
         Inc., Polaris Industries,  Inc., Shelby Williams  Industries,  Inc., TS
         Trim, Inc. and United Technologies Automotive Division.

                  Manufacturing Facilities

                  The  segment  manufactures  its coated  fabrics at  facilities
         located in Stoughton,  Wisconsin and Port Clinton,  Ohio. Both of these
         facilities are owned by the Company. See "Item 2. Properties."

                  Raw Materials

                  The principal raw materials for the segment's  coated  fabrics
         are casting paper, knit fabric, polyolefin foam, PVC plastic resins and
         plasticizers.  The segment  generally has multiple  sources for casting
         paper, knit fabric, PVC plastic resins,  and plasticizers.  The segment
         purchases polyolefin foam from Toray Industries,  Inc., which currently
         is the only  supplier of  polyolefin  foam approved by end users of the
         segment's  foam-based  products.  Although  the Company  believes  that
         polyolefin  foam  would be  available  from  alternative  suppliers  if
         polyolefin foam from Toray Industries, Inc. were to become unavailable,
         production of the  segment's  coated  fabrics and laminated  composites
         could be affected,  because the segment  would have to obtain  approval
         from its  customers of product using  polyolefin  foam  purchased  from
         alternative suppliers.

                  Specialty Adhesives Segment

                  The  Company's   Specialty  Adhesives  Segment  accounted  for
         approximately  $20.9 million (10 percent (10%)) of the Company's  total
         net sales for Fiscal 1997.

                  General

                  The Specialty Adhesives Segment (formerly,  the Specialty Foam
         and  Adhesives  Segment) is composed of three  general  product  lines:
         roofing adhesives and sealants,  industrial  adhesives and sealants and
         Gunther mirror mastics. The segment is one of the leading manufacturers
         of liquid adhesives and sealants for the commercial EPDM rubber roofing
         market.  The  segment's  adhesives  for this  market,  known as "splice
         adhesives" and "bonding  adhesives,"  are used to splice rubber roofing
         sheets  and to bond  them to the  underlying  structure.  They have the
         ability to withstand  the stress of  extensive  thermal  expansion  and
         contraction.  The Company believes that its patented splice adhesive is
         the best selling splice adhesive in the EPDM rubber roofing market.  In
         Fiscal 1997, sales of splice adhesives  represented 16 percent (16%) of
         the  total  net  sales of the  segment's  adhesives  and  sealants.  In
         addition,  the segment  manufactures more than 210 industrial adhesives
         and sealants in brush, roll, tube and spray-on form which are used in a
         number of different industries such as furniture  manufacturing,  truck
         trailer  and  recreational  vehicle  manufacturing,  foam  and  plastic
         fabrication and commercial and residential mirror installations.

                  Since moving to its newly  renovated  facility,  the segment's
         management  has been  aggressively  pursuing a  strategy  to add to its
         existing  product  lines of industrial  adhesives and sealants  through
         acquisition   and/or   development   of  new  products   which  satisfy
         unfulfilled  market needs. For example,  the segment commenced sales of
         water-based  adhesives  which it expects  will  become an  increasingly
         significant part of its business as environmental and worker health and
         safety requirements  become more stringent.  In a major strategic move,
         the Company  acquired,  on March 31, 1997,  the C. Gunther  Company,  a
         major  marketer  of  mirror  mastics  located  in Cary,  Illinois.  All
         operations  were  subsequently  moved from Cary to the Company's  South
         Bend  location.  See "-  Corporate  Developments  -  Acquisition  of C.
         Gunther Company."
<PAGE>

                  The segment  sells splice and bonding  adhesives  for the EPDM
         rubber  roofing  market  exclusively  to  Firestone  Building  Products
         Company,  a  division  of  Bridgestone/Firestone,  Inc.  ("Firestone"),
         pursuant to a five-year  contract which was entered into in Fiscal 1995
         and expires on February 20, 2000 (the "Firestone Agreement"). Under the
         terms of the  Firestone  Agreement,  Firestone is obligated to purchase
         from the  segment a minimum  of 80 percent  (80%) of its annual  volume
         requirements  of  splice  and  bonding  adhesives  for the EPDM  rubber
         roofing market. In Fiscal 1997, 1996 and 1995,  Firestone  purchased 79
         percent (79%), 83 percent (83%) and 69 percent (69%), respectively,  of
         the  Company's  total  net sales of  adhesives  and  sealants  for such
         periods.  Sales to Firestone during the fiscal year ended September 28,
         1997 represented eight percent (8%) of the Company's net sales for such
         fiscal year.  The loss of Firestone as a customer would have an adverse
         effect on the Company's  Specialty  Adhesives  Segment.  Firestone will
         acquire the Company's patent for splice adhesive upon expiration of the
         Firestone Agreement.

                  Competition

                  Pursuant to the exclusivity terms of the Firestone  Agreement,
         the Company does not compete with respect to its roofing  adhesives and
         sealants.  As to its  industrial  adhesives and  sealants,  the Company
         competes  principally  on  the  basis  of  price  and  the  performance
         characteristics of its products.

                  The  segment's  principal  competitors  in the  adhesives  and
         sealants  market  for  EPDM  rubber  roofing   applications   are  Adco
         Technologies,  Inc.,  Ashland Chemical  Company and TACC  International
         Corp. In addition,  Carlisle Syntec  Systems,  supplies these adhesives
         primarily  for its  own  single-ply  roofing  system  and  consequently
         competes indirectly with the segment.  In the industrial  adhesives and
         sealants markets,  the segment's primary  competitors  include Imperial
         Adhesives,  Inc.,  Minnesota Mining and Manufacturing  Company,  Palmer
         Products Corp. and Sika Corporation.

                  Marketing

                  The segment's  industrial  adhesives and sealants are marketed
         under the brand name SILAPRENE(R).  Its water-based  adhesives are also
         marketed  under  the  brand  name  Hydra  Fast-En(TM).   The  segment's
         SILAPRENE(R)  products have  established name recognition in and hold a
         significant  share  of  the  recreational  vehicle  and  truck  trailer
         manufacturing  markets.  Hydra  Fast-En(TM)  adhesives are beginning to
         establish  market  share in the foam and plastic  fabrication  markets.
         Recognized  trademarks in the mirror and glass  industry,  purchased as
         part   of   the   C.   Gunther    acquisition,    are   Ultra/Bond(TM),
         Extra/Build(TM),   Prime-N-Seal(TM),   Premier(TM),   Mirror   &   More
         Cleaner(TM) and Seal-Kwik(TM).

                  The  segment's  roofing  adhesives  and  sealants are marketed
         under  Firestone's  brand  names.  The  Company  indirectly  controls a
         significant  share of the splice  adhesives and bond  adhesives  market
         through Firestone,  which continues to control significant market share
         of the EPDM rubber roofing market.

                  The segment  markets its  industrial  adhesives  and  sealants
         primarily  to  manufacturers   through  a  network  of  200  authorized
         distributors,   19  outside  sales   representatives   and  four  sales
         representatives  who are employees of the segment,  located  throughout
         the United  States and  Canada.  Pursuant to its  obligation  under the
         Firestone Agreement, the segment does not market its splice and bonding
         adhesives for the EPDM rubber roofing market.

                  The  segment's   roofing   adhesives   business  is  seasonal,
         increasing  in the  warmer  months  of the year due to an  increase  in
         roofing  and  other  construction  activities  in such  months,  and is
         sensitive to adverse weather conditions.

                  Manufacturing Facilities

                  On  July  17,  1996,  the  Company  acquired  a  manufacturing
         facility in South Bend,  Indiana  consisting of  approximately  240,000
         square feet for $1.8 million and spent an  additional  $6.7 million for
         building renovations,  new equipment and moving expenses.  The move was
         completed on February 18, 1997 and now provides a modern and  efficient
         manufacturing plant with significant  additional capacity, an excellent
         research center and office space for the Royalite segment  headquarters
         and certain other corporate operations. See "Item 2. Properties."
<PAGE>

                  Raw Materials

                  The  division's  adhesives  and  sealants use a variety of raw
         materials  such as rubber,  resins and  solvents,  which are  generally
         available from multiple sources.  The division's principal suppliers of
         such raw materials and containers  include  Cleveland  Steel  Container
         Corp., E.I. duPont de Nemours & Co. and Unocal Chemicals, a division of
         Unocal  Corp.  The  Company  believes  that  adequate  supplies  of raw
         materials  for its  adhesives  and  sealants  will be  available to the
         division from alternate suppliers. However, if the division is required
         to use alternate suppliers,  production could be affected while the raw
         materials  produced by such  alternate  suppliers  are qualified by the
         division to meet the product specifications of its customers.

         Employees

                  The  Company  has  approximately  1,100  employees,  including
         approximately 730 hourly wage employees and 370 salaried employees. The
         Company  believes that at the present time its workforce is adequate to
         conduct  its  business  and  that  its  relations  with  employees  are
         generally satisfactory.

                  The  Company is a party to a number of  collective  bargaining
         agreements.  Approximately  130 hourly wage  employees of the Company's
         acrylic sheet manufacturing  facility located in Stamford,  Connecticut
         are covered by an agreement  expiring on March 31, 2000 with  Teamsters
         Local 191, which is affiliated  with the  International  Brotherhood of
         Teamsters,  Chauffeurs,   Warehousemen  and  Helpers  of  America  (the
         "Teamsters").  Approximately 35 employees at the Company's  Hackensack,
         New Jersey  acrylic  sheet  manufacturing  and  warehouse  facility are
         covered  by  an  agreement  expiring  on  February  3,  2002  with  the
         Amalgamated  Clothing & Textile Workers Union of America (AFL-CIO).  At
         the  Company's  coated  fabrics   manufacturing   facility  located  in
         Stoughton,  Wisconsin,  another 142 hourly employees of the Company are
         covered by an agreement  expiring on September 17, 2001 with Local 1207
         of the United  Paperworkers  International  Union.  Separate agreements
         expiring  on April 20, 1999 with the United  Steel  Workers of America,
         United Rubber  Workers  Division (the "USWA")  cover  approximately  26
         hourly  wage   employees  at  the  Company's   adhesives  and  sealants
         manufacturing   facility   located   in  South   Bend,   Indiana,   and
         approximately   95  employees  at  the  coated  fabrics  and  laminated
         composites manufacturing facility located in Port Clinton, Ohio.

                  On July 20, 1995 the National Labor  Relations Board certified
         the United Paperworkers International Union as the exclusive collective
         bargaining   representative  for  the  hourly  wage  employees  at  the
         Company's  thermoplastic products plant in Warsaw, Indiana. The Company
         challenged   the  election  which  led  to  such   certification   and,
         accordingly,  did not  recognize  the union.  On October 24, 1996,  the
         United  States  Court of Appeals  for the  Seventh  Circuit  denied the
         Company's appeal.  The Company has since recognized the union and is in
         the process of negotiating a collective bargaining agreement with it.

                  Richard  D.  Kimbel,  the  former  President  of USWA Local 65
         (Mishawaka), is a director of the Company.

         Trademarks and Patents

                  The  Company  owns  and  controls   patents,   trade  secrets,
         trademarks, trade names, copyrights and confidential information, which
         in the  aggregate  are  material  to its  business.  The Company is not
         materially dependent, however, upon any single patent or trademark. The
         Company  has  several  trademarks  that have wide  recognition  and are
         valuable to its  business.  Among the  trademarks  that are of material
         importance  to the Company are  NAUGAHYDE(R),  NAUGAFORM(R),  DURAN(R),
         ROYALITE(R),  PILOTS' CHOICE(TM),  POLYCAST(R),  SILAPRENE(R),  GUNTHER
         ULTRA/BOND(TM) and GUNTHER  EXTRA/BUILD(TM).  The Company's  trademarks
         are  registered  in the  United  States  and  in a  number  of  foreign
         jurisdictions  with terms of registration  expiring  generally  between
         1997 and 2004. No trademark  registration of material importance to the
         Company  expired during Fiscal 1997. The Company  intends to renew in a
         timely manner all those trademarks that are required for the conduct of
         its  business.  The Company also holds more than 20 patents and pending
         patents worldwide.

                  The  Company  uses the  trade  name and  trademark  "Uniroyal"
         pursuant to a license from Uniroyal Goodrich Licensing Services, Inc.
<PAGE>

         Research and Development

                  The Company is actively  engaged in research  and  development
         programs  designed to develop new  products,  manufacturing  processes,
         systems and  technologies  and to enhance  its  existing  products  and
         processes.  Research and development is conducted  within each business
         segment of the Company. Investment in research and development has been
         an important  factor in  establishing  and  maintaining  the  Company's
         competitive  position in many of the specialized niche markets in which
         its products are  marketed.  For example,  the  Company's  research and
         development   efforts  have  led  to  the  development  of  water-based
         adhesives  (see  "-Business  Segments - Specialty  Adhesives"),  bullet
         resistant acrylic sheet,  acrylic sheet for use in commercial aquariums
         (see "-  Business  Segments  - High  Performance  Plastics  -  Polycast
         Division")  and the new coated  fabrics  product  line (see "- Business
         Segments - Coated  Fabrics").  The  Company  spent  approximately  $3.7
         million for research and  development  during  Fiscal 1997  compared to
         approximately $4.9 million during Fiscal 1996.

                  The  Company  currently  employs a staff of  approximately  37
         individuals in connection  with its research and  development  efforts.
         The individuals  include chemists,  process  development  engineers and
         laboratory  technicians and are responsible for new product development
         and improvement of production processes. The allocation of research and
         development staff among the Company's  business segments is as follows:
         15 at High  Performance  Plastics,  15 at Coated  Fabrics  and seven at
         Specialty Adhesives.

         Backlog

                  At  September  28,  1997,   the  Company  had  backlog  orders
         aggregating  approximately  $26.0 million, as compared to approximately
         $22.7   million  as  of  September  29,  1996.   Management   presently
         anticipates  that all backlog  orders will be filled within the next 12
         months. Backlog orders for each of the Company's business segments were
         as follows as of the indicated dates:

                                      September 28, 1997    September 29, 1996
                                      ------------------    ------------------
                                                    (in thousands)

         High Performance Plastics       $ 16,321                  $ 13,727
         Coated Fabrics                     5,923                     4,784
         Specialty Adhesives                3,805                     4,222
                                         --------                  --------
         Total                           $ 26,049                  $ 22,733
                                         ========                  ========

         Working Capital Items

                  Many of the markets in which the Company  competes,  including
         the aerospace  acrylic sheet market and the coated fabric and laminated
         composite  markets  for  the  automobile  manufacturing  industry,  are
         characterized by long lead times for new products requiring significant
         working  capital  investment  by the  Company  and  extensive  testing,
         qualification and approval by the Company's  customers and end users of
         its products.  The Company faces a significant  risk that customers and
         end users in such  markets may not select the  Company's  new  products
         after it has  incurred  significant  costs  for,  among  other  things,
         research  and  development,   manufacturing  equipment,   training  and
         facility-related overhead expenses to develop such products.

                  Moreover,  even  if  the  Company's  products  are  eventually
         approved and purchased by customers and end users in such markets,  the
         working  capital  investment made by the Company could fail to generate
         revenues for several years while the Company develops such products and
         its customers and end users conduct their  testing,  qualification  and
         approval  procedures for such products.  Although the Company  believes
         that cash  from its  operations  and its  ability  to borrow  under its
         revolving  credit agreement (see "Item 7.  Management's  Discussion and
         Analysis of Financial Condition and Results of Operations Liquidity and
         Capital Resources") will provide it sufficient liquidity to finance its
         efforts to develop new  products,  there can be no  assurance  that the
         Company's   operations   together  with  amounts  available  under  its
         revolving   credit   agreement  will  be  sufficient  to  finance  such
         development efforts and to meet the Company's other obligations.

         Environmental Matters

                  The  Company is subject to  federal,  state and local laws and
         regulations  designed to protect the  environment and worker health and
         safety. The Company's management  emphasizes  compliance with such laws
         and regulations and has instituted  programs  throughout the Company to
         provide  education  and training in  compliance  at and auditing of all
         Company facilities. Whenever required under applicable law, the Company
         has  implemented  product or process  changes or invested in  pollution
         control systems to ensure  compliance  with such laws and  regulations.
         Such  investments  may in the future provide  financial  returns to the
         Company as a result of increased efficiencies or product improvements.
<PAGE>

                  In  Fiscal  1997,   1996  and  1995,  the  amount  of  capital
         expenditures  related to  environmental  matters was immaterial and the
         amount of such  expenditures  is  expected to be  immaterial  in Fiscal
         1998. In the future,  as the requirements of applicable law impose more
         stringent  controls  at  Company  facilities,  expenditures  related to
         environmental  and worker  health and safety are  expected to increase.
         While the  Company  does not  currently  anticipate  having to make any
         material  capital  expenditures  in order to comply with these laws and
         regulations,  if the Company is  required  to do so, such  expenditures
         could have a material impact on its earnings or competitive position in
         the future.

                  In connection with its acquisition of a manufacturing facility
         in South Bend,  Indiana on July 17, 1996, the Company assumed the costs
         of remediation of soil and groundwater contamination resulting from the
         leaking of solvents  used in the  operation  of the plant by its former
         owner. The Company is conducting the remediation  voluntarily  pursuant
         to  an  agreement   with  the  Indiana   Department  of   Environmental
         Management.  The  Company  estimates  that such  remediation  will cost
         approximately  $1.0  million  over  a  five-to-seven-year   period.  In
         connection with its acquisition of the facility,  the Company placed in
         escrow in  accordance  with the terms of the  purchase  agreement  $1.0
         million  of the  $1.8  million  purchase  price to be  applied  to such
         remediation costs.

                  Pursuant to a 1992 settlement agreement with the United States
         Environmental   Protection  Agency  (the  "EPA"),   the  United  States
         Department of the Interior and the States of Wisconsin and Indiana (the
         "EPA Settlement Agreement") entered into in connection with the Plan of
         Reorganization of the Predecessor  Companies (see "- History of Company
         - Predecessor  Companies"),  the Predecessor  Companies compromised and
         settled (in exchange for Common Stock of the Company) substantially all
         of their pre-petition liabilities relating to disposal activities under
         Sections  106  and  107 of the  Comprehensive  Environmental  Response,
         Compensation & Liability Act  ("CERCLA"),  Section 3008 of the Resource
         Conservation  & Recovery Act  ("RCRA")  and similar  state laws for the
         cleanup  of 20  designated  sites not  owned by any of the  Predecessor
         Companies (the "Known Sites") and for natural resource damages at 15 of
         the 20 Known  Sites.  Pursuant  to the EPA  Settlement  Agreement,  the
         United States and the States of Indiana and Wisconsin agreed not to sue
         for response costs and, with the exception of five Known Sites, natural
         resource  damages at each of the Known Sites. In addition,  pursuant to
         Section  113(f)(2)  of CERCLA,  and as  provided  under the  Settlement
         Agreement,  the Predecessor Companies and the Company will be protected
         against contribution claims filed by private parties for any Known Site
         for matters covered by the EPA Settlement Agreement. The EPA Settlement
         Agreement  established  a  mechanism  for the  Company to  resolve  its
         liability for any other sites (the  "Additional  Sites"),  except those
         owned by the Company,  arising from pre-petition disposal activity. The
         Company  also  agreed  to share  with  such  governmental  parties  the
         proceeds of claims  relating to the Known  Sites made  against  certain
         insurers of the Predecessor Companies and their affiliates.

                  In the event  that the  United  States,  Wisconsin  or Indiana
         asserts a claim  against the  Predecessor  Companies or the Company for
         response costs associated with pre-petition  disposal activities at any
         Additional Site, the governmental  party will be entitled to pursue its
         claim in the  ordinary  course,  and the  Company  and the  Predecessor
         Companies will be entitled to assert all of their defenses. However, if
         and  when  the  Company  or any of the  Predecessor  Companies  is held
         liable,  and if the liability is determined to arise from  pre-petition
         disposal  activities,  the Company or such Predecessor  Company may pay
         the  liability in discounted  "plan  dollars"  (i.e.,  the value of the
         consideration  that the party  asserting such claim would have received
         if the liability  were treated as a general  unsecured  claim under the
         Plan of  Reorganization).  Such  payment  may be made in cash or in the
         Company's  stock,  or a combination  thereof,  at the Company's or such
         Predecessor  Company's option.  Claims arising from real property owned
         by the Company are not affected by the EPA Settlement Agreement.

                  In October 1996, the EPA sent the Company a General Notice and
         Special  Notice of Liability  concerning the Refuse  Hideaway  Landfill
         Superfund Site at Middleton,  Wisconsin. While a unit of Uniroyal, Inc.
         is believed to have sent  non-hazardous  waste to the site between 1978
         and 1984,  the  Company is not aware  that the unit sent any  hazardous
         materials to the site.  The Company does not presently  anticipate  any
         material  liability in connection  with the site, and in any event,  if
         the Company is found to have  liability  in  connection  with the site,
         such  liability  will be  subject  to the  terms of the EPA  Settlement
         Agreement. See "- History of Company - Predecessor Companies."
<PAGE>

                  The Company's  acquisition  of assets of Townsend  Plastics in
         September 1997 included the building in which the business  operates in
         Pleasant Hill,  Iowa. The seller retained the underlying real property,
         which is leased to the  Company  for a term of ten years.  The  Company
         also has an option to acquire such real  property  until  September 30,
         2007.   The   real   property   is   subject   to   a   RCRA   Facility
         Investigation/Corrective  Measures Study with Interim Measurers ordered
         by the EPA  pursuant to RCRA.  Two former  lessees of the  property are
         performing  corrective  measures on the real property to remediate soil
         and ground water  contamination.  The Company does not anticipate  that
         such  corrective  measures will interfere with the Company's use of the
         property.  The Company does not anticipate any liability to the Company
         in connection with such contamination or corrective measures as long as
         the Company remains a lessee of the property.

                  Based upon information available as of September 28, 1997, the
         Company believes that the costs of environmental  remediation for which
         it may be  liable  have  either  been  adequately  reserved  for or are
         otherwise  unlikely to have a material  adverse effect on the Company's
         operations, cash flows or financial position.

         History of Company

                  Predecessor Companies

                  The  Company's  businesses  trace their origins to a number of
         predecessor companies which eventually were reorganized pursuant to the
         Third  Amended Plan of  Reorganization  under the  Bankruptcy  Code for
         Polycast   Technology   Corporation  and  Its  Affiliated  Debtors  (as
         subsequently modified, the "Plan of Reorganization"). See "- History of
         the Company - Reorganization."

                  The Company's acrylic sheet business  originated in the 1960's
         in a  company  known  as  Polycast  Technology  Corporation  ("Polycast
         Technology"),  which subsequently  changed its name to The Jesup Group,
         Inc.  ("Jesup").  In 1984,  Jesup  acquired the business of  Shenandoah
         Plastics   ("Shenandoah"),   a  company   engaged  since  1967  in  the
         manufacture   of   thermoplastic   sheet,   and  Glasflex   Corporation
         ("Glasflex"),  a  manufacturer  since 1954 of acrylic  sheet,  rods and
         tubes.  These businesses  eventually became part of what is known today
         as the Company's High Performance Plastics Segment.

                  A substantial  portion of the thermoplastic  sheet business of
         the High  Performance  Plastics  Segment (other than that acquired from
         Shenandoah ), as well as the businesses of the Coated  Fabrics  Segment
         and the Specialty  Adhesives  Segment (formerly the Specialty Foams and
         Adhesives Segment),  originated in the chemical and plastics operations
         of  the  U.S.   Rubber   Company   (later  known  as   Uniroyal,   Inc.
         ("Uniroyal")),  which date from the mid-1940's.  These  operations were
         conducted by segments of Uniroyal  until 1985,  when Uniroyal  Plastics
         Company,  Inc.  ("UPC")  was  formed  by  Uniroyal  as  a  wholly-owned
         subsidiary  to  hold  these   operations.   In  October  1986,   Jesup,
         indirectly,  through its wholly  owned  subsidiary,  Uniroyal  Plastics
         Acquisition Corp. ("UPAC"),  acquired UPC from Uniroyal.  Following its
         acquisition of UPC, Jesup combined the  thermoplastic  sheet operations
         acquired  from UPC with its  existing  thermoplastic  sheet and acrylic
         sheet,  rod and tube  businesses  in a  subsidiary  known  as  Polycast
         Technology Corporation ("Old Polycast"). Jesup also transferred what is
         now the Coated Fabrics Segment of the Company's  business into Uniroyal
         Engineered  Products,  Inc.  ("Old UEP") and the adhesives and sealants
         business of what is now its Specialty  Adhesives  Segment into Uniroyal
         Adhesives and Sealants  Company,  Inc.  ("Old UAS").  The assets of the
         specialty  foam business were  transferred  from UPC to Ensolite,  Inc.
         ("Old Ensolite").  Old Polycast,  Old UEP, Old Ensolite and Old UAS are
         referred to herein as the "Predecessor  Companies." UPC is currently in
         bankruptcy   liquidation   and  is  an  affiliate  of  the  Predecessor
         Companies.  UPAC's plan of reorganization was substantially implemented
         in November 1993.

                  In October and November  1991, the  Predecessor  Companies and
         one other subsidiary of Jesup filed voluntary bankruptcy petitions with
         the  United  States  Bankruptcy  Court  for the  Northern  District  of
         Indiana,  South Bend Division (the "Bankruptcy Court") for relief under
         Chapter  11 of Title 11 of the United  States  Code,  as  amended  (the
         "Bankruptcy Code").
<PAGE>
                  Reorganization

                  The  Predecessor   Companies   sought   protection  under  the
         Bankruptcy  Code  primarily  as a  result  of their  inability  to meet
         significant obligations for retiree medical expenses,  unfunded pension
         obligations  and interest on  indebtedness  incurred in connection with
         the  acquisition of UPC. Prior to the  commencement  of the Predecessor
         Companies'  bankruptcy  proceedings (the  "Bankruptcy  Proceedings") in
         Fiscal 1991, these  non-operating  expenses,  combined with the loss of
         sales in  certain  economically  depressed  markets  (particularly  the
         automobile  markets),  caused a significant and increasing drain on the
         Predecessor  Companies'  working capital and resulted in certain of the
         Predecessor   Companies'   significantly   reducing  their   operations
         (including profitable, but working  capital-intensive,  operations such
         as the  application of coatings to fabric for  automotive  airbags) and
         certain  capital  expenditure  programs.  The segments  most  adversely
         affected by the decreased  working  capital  condition  were the Coated
         Fabrics and Specialty Adhesives Segments.

                  The plan of  reorganization  of the Predecessor  Companies was
         substantially  consummated on September 27, 1992.  Pursuant to the Plan
         of  Reorganization,  each  of  the  Predecessor  Companies  transferred
         substantially all of its assets to a newly organized  subsidiary of the
         Company with a name that was substantially identical to the name of its
         corresponding  Predecessor  Company.  In  exchange,  each of these  new
         subsidiaries,  including Polycast Technology Corporation  ("Polycast"),
         Uniroyal  Engineered  Products,  Inc. ("UEP"),  Uniroyal  Adhesives and
         Sealants Company, Inc. ("UAS") and Ensolite, Inc. ("Ensolite"),  agreed
         to assume certain of the liabilities of its  corresponding  Predecessor
         Company.  In addition,  the Company issued, or authorized for issuance,
         9,575,000  shares of its Common  Stock to holders of allowed  unsecured
         claims  against  the  Predecessor  Companies  and 50 shares of Series A
         Preferred  Stock  and 50  shares  of  Series B  Preferred  Stock to the
         Pension Benefit Guaranty  Corporation (the "PBGC"). On June 7, 1993, in
         conjunction  with the public  offering of the  Company's  11.75% Senior
         Secured Notes,  the Company  merged each of its operating  subsidiaries
         into the Company.  In May 1993 the Company called and repurchased  from
         the PBGC all of the outstanding  shares of Series A Preferred Stock and
         15 shares of the  outstanding  shares of Series B Preferred  stock.  On
         December 16, 1996,  the Company  repurchased an additional 15 shares of
         such  stock,  and on  February 4, 1997,  the  Company  repurchased  the
         remaining 20 shares of  preferred  stock.  On November  13,  1997,  the
         Company,  certain  officers  and  directors  of the Company and certain
         other persons purchased all of the common stock held by the PBGC.
         See "- Corporate Developments - Disposition of Stock of PBGC."

                  On November 8, 1993,  the Plan of  Liquidation  of UPAC became
         effective and was substantially consummated.  Pursuant to the UPAC Plan
         of   Liquidation,   the  Company   received  a  cash   distribution  of
         approximately  $6.8 million  following the liquidation of the assets of
         the UPAC estate and  accordingly  recorded income from the UPAC Plan of
         Liquidation in the amount of approximately $6.8 million.

                  In connection with matters  relating to UPAC's  acquisition of
         UPC, on May 6, 1993 the Company  entered  into a  settlement  agreement
         (the "Company Settlement") with Uniroyal, Inc., CDU Holding Liquidating
         Trust and Uniroyal Holding, Inc. (collectively, the "Uniroyal Parties")
         pursuant to which the Company and the Uniroyal Parties resolved certain
         existing and potential  disputes arising from the acquisition of UPC by
         UPAC from Uniroyal, Inc. Uniroyal, Inc. was dissolved in December 1986.
         CDU  Holding   Liquidating  Trust  and  Uniroyal  Holding,   Inc.  were
         affiliates of Uniroyal,  Inc. In connection  with the resolution of the
         matters covered by the Company  Settlement,  the Uniroyal  Parties paid
         $2.25 million in cash to the Company.  In exchange,  the Company agreed
         to certain  matters  involving the prosecution and settlement of claims
         under  insurance  policies,  including  certain  claims of the Uniroyal
         Parties that covered environmental  liabilities at certain of the Known
         Sites. See " Environmental  Matters." As a result of this agreement and
         related agreements reached with insurance  companies during Fiscal 1994
         as to  amounts  with  respect  to  environmental  claims,  the  Company
         recorded  as income  in Fiscal  1994  approximately  $1,176,000  and in
         Fiscal 1995 approximately $70,000, net of certain professional fees and
         other expenses.

                  The Company  Settlement  also  provides  that the Company will
         indemnify and hold  harmless the Uniroyal  Parties with respect to: (i)
         environmental  liabilities  associated  with  sites  that were owned or
         operated by the Company or the  Predecessor  Companies on or before May
         6, 1993;  and (ii) future  environmental  expenditures  by the Uniroyal
         Parties with respect to the  businesses of UPC, net of recoveries  from
         third parties (including insurance proceeds),  but only with respect to
         the portion of such expenditures,  if any, that exceeds $30 million and
         is less than $45 million. See " - Environmental Matters."
<PAGE>
                  Pursuant  to the  Company  Settlement,  the  Company  and  the
         Uniroyal  Parties  also  agreed  to  share on a 35  percent  (35%) - 65
         percent  (65%) basis,  respectively,  the costs of  providing  medical,
         prescription drug and life insurance benefits to certain retired former
         salaried  employees  of UPC or  Uniroyal  who are  class  members  in a
         federal class action lawsuit against  certain of the Uniroyal  Parties.
         The Company's  cost for providing such medical,  prescription  drug and
         life insurance benefits in Fiscal 1997 was approximately  $832,000. The
         Company and the Uniroyal Parties also mutually released each other from
         all  claims  and  causes of  action,  if any,  related to or arising in
         connection with the acquisition of UPC from Uniroyal in 1986 and all of
         the agreements entered into in connection therewith.

                  In a separate settlement agreement entered into on May 6, 1993
         (the "UPAC Settlement"), UPAC and Jesup (each of which was an affiliate
         of the Predecessor Companies) settled their claims against the Uniroyal
         Parties and certain of their  insiders  and  affiliates,  The  Uniroyal
         Parties and such insiders and affiliates are  collectively  referred to
         as the "Uniroyal Affiliated Parties".  Pursuant to the UPAC Settlement,
         the Uniroyal  Affiliated  Parties  paid $16.0  million in cash to UPAC.
         Such cash  constituted  the major portion of the  bankruptcy  estate of
         UPAC.

Item 2. Properties

                  The  following  table sets forth the location,  size,  general
         character and nature of the Company's facilities:
<TABLE>
<CAPTION>

                                    SQUARE FEET               GENERAL CHARACTER                     OWNED OR
          LOCATION AND ENTITY       OF FACILITY                  OF PROPERTY                         LEASED
          <S>                           <C>           <C>                                              <C>

          Sarasota, Florida              11,000        Corporate offices                                Leased

          High Performance Plastics
            Segment
          South Bend, Indiana            12,000        Offices                                          Owned
          Stamford, Connecticut           5,500        Offices                                          Leased
          Stamford, Connecticut          81,000        Manufacture of cell cast acrylics                Owned
          Hackensack, New Jersey         46,000        Manufacture of cell cast acrylics                Owned
          Rome, Georgia                  45,000        Manufacture of thermoplastic products            Owned
          Redlands, California           60,000        Manufacture of thermoplastic products            Owned
          Stirling, New Jersey           50,000        Manufacture of acrylic sheet rods & tubes        Owned
          Warsaw, Indiana               225,000        Manufacture of thermoplastic products,           Owned 
                                                        custom compounding and warehouse
          Newport, Delaware              14,000        Manufacture of acrylics                          Leased
          Pleasant Hill, Iowa            49,000        Manufacture of acrylic rods & tubes              Owned(Ground Lease
                                                                                                         On Real Estate)
          Coated Fabrics Segment
          Stoughton, Wisconsin          198,275        Manufacture of coated fabrics products           Owned
          Port Clinton, Ohio            240,000        Manufacture of coated fabrics products           Owned

          Specialty Adhesives Segment
          South Bend, Indiana           240,000        Manufacture of adhesives and sealants            Owned
</TABLE>

             All of the owned  properties  are subject to the liens of mortgages
             securing the Company's  11.75% Senior  Secured Notes Due 2003.  See
             "Note 9 to Consolidated Financial Statements."

Item 3. Legal Proceedings

                  The Company is involved in certain proceedings in the ordinary
         course of its business  which,  if determined  adversely to the Company
         would, in the opinion of management, not have a material adverse effect
         on the Company or its operations.

                  In connection  with its  reorganization,  the Company  entered
         into a number of settlement  agreements,  including certain  agreements
         relating to environmental  matters.  See "Item 1. Business - History of
         the Company - Reorganization."

                  In  Fiscal  1997,  the  Company  settled  litigation  with the
         provider of medical,  prescription drug and life insurance  benefits to
         certain  retired  employees  of the  predecessor  Companies  and  their
         affiliates. See "Item 1. Business - Corporate Developments - Settlement
         of Retiree Medical Claims."

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

                  No matter was  submitted  during the fourth  quarter of Fiscal
         1997 to a vote of security holders, through the solicitation of proxies
         or otherwise.
<PAGE>

Part II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

                  Prior to the  effective  date of the  Plan of  Reorganization,
         none of the  Company's  common  stock,  par value  $.01 per share  (the
         "Common  Stock"),  was  issued,  and  consequently  there was no public
         market for the Common  Stock.  The Common Stock was admitted to trading
         on the Nasdaq National  Market System  ("Nasdaq") on September 28, 1992
         and trades under the symbol "UTCI." At the close of trading on November
         28, 1997, the price per share of Common Stock was $5.5625.  The Plan of
         Reorganization  provides  for the  issuance of a maximum of  10,000,000
         shares of Common  Stock in  settlement  of claims and other  matters in
         connection  with the Bankruptcy  Proceedings.  As of November 28, 1997,
         approximately  9,666,000 of such shares of Common Stock had been issued
         pursuant to the Plan of Reorganization (including shares transferred to
         the  Company's  treasury as a result of the  election by certain  claim
         holders, as provided under the Plan of Reorganization,  to receive cash
         in lieu of Common Stock).  The remaining  shares are being held pending
         resolution of certain retiree medical claims.

                  As of November 28,  1997,  there were 897 holders of record of
         shares of Common Stock.

                  The  following  table sets forth the high and low sales  price
         per share of the  Company's  Common Stock as reported by Nasdaq for the
         indicated dates:

<TABLE>
<CAPTION>
               
                                             Fiscal Year Ended                        Fiscal Year Ended
                                            September 28, 1997                        September 29, 1996
                                         --------------------------              --------------------------
                  <S>                   <C>                  <C>                 <C>                  <C>  
                  Quarter                High                 Low                 High                  Low
                  
                  First                 $3.250               $2.688              $4.375               $3.125
                  Second                $3.188               $2.500              $3.875               $3.125
                  Third                 $4.000               $2.125              $4.438               $3.375
                  Fourth                $4.750               $3.125              $3.750               $3.000
</TABLE>
               
                  The holders of record of shares of Common  Stock are  entitled
         to receive  dividends when and as declared by the Board of Directors of
         the Company,  provided that the Company has funds legally available for
         the  payment  of  such  dividends  and is not  otherwise  contractually
         restricted  from making payment  thereof.  The Company has not paid any
         cash dividends on the common stock in the last three fiscal years.  The
         Company's  ability to pay cash  dividends on Common Stock  currently is
         restricted  by the indenture in  connection  with the Company's  Senior
         Secured Notes. See "Note 9 to Consolidated Financial Statements."


<PAGE>


Item 6. Selected Financial Data

                  The following  historical  financial  data as of September 28,
         1997 and  September  29,  1996 and for each of the  three  years in the
         period ended  September  28, 1997 have been  derived from  consolidated
         financial  statements  of the Company  audited by Deloitte & Touche LLP
         and  contained  elsewhere in this Form 10-K.  The  selected  historical
         financial data presented  below as of October 1, 1995,  October 2, 1994
         and  September  26, 1993 and for the fiscal years ended October 2, 1994
         and  September  26,  1993  have been  derived  from  audited  financial
         statements of the Company.  All of the  financial  data set forth below
         should  be  read  in  conjunction  with  the   Consolidated   Financial
         Statements and related notes and other financial  information contained
         in this Form 10-K.
<TABLE>
<CAPTION>
                                          
                                                                       SELECTED FINANCIAL DATA
                                       ----------------- ---------------- -------------   --------------  ---------------

                                        September 28,     September 29,     October 1,      October 2,    September 26,
                                            1997              1996            1995            1994(1)         1993
                                       ----------------- ---------------- -------------   --------------  ---------------
                                                             (in thousands, except share and per share data)

Operating Data:
<S>                                        <C>             <C>             <C>             <C>            <C>
Net sales                                   $208,524        $209,348        $214,951        $197,536       $173,361
Depreciation and amortization(2)               8,304           9,848           9,521           8,356          8,872
Income (loss) before interest, income
  taxes and extraordinary item                10,594         (12,749)          9,549          15,414          6,462
Interest expense - net                        (9,384)         (9,773)        (10,029)        (10,109)        (9,295)
Income tax (expense) benefit                    (831)          8,121             189          (2,217)           853
Income (loss) before extraordinary
  item                                           379         (14,401)           (291)          3,088         (1,980)
Extraordinary gain                                 -               -             363             727              -
Net income (loss)                           $    379        $(14,401)       $     72        $  3,815       $ (1,980)
Income (loss) per common share and
  common stock equivalent:
Primary and fully diluted:
Income (loss) before
  extraordinary item                        $   0.03        $  (1.09)       $  (0.02)       $   0.22       $  (0.20)
Extraordinary gain                                -               -             0.02            0.05              -            
                                            --------        --------        --------        --------       -------- 
Net income (loss) per share                 $   0.03        $  (1.09)       $   0.00        $   0.27       $  (0.20)
                                            ========        ========        ========        ========       ========
                                               
Average number of shares used in
  computation(3)                          13,423,554      13,167,466      14,507,605      14,317,298      9,971,522
                                          ==========      ==========     ===========      ==========      =========
                                                                                                  
Balance Sheet Data:

Cash and cash equivalents                   $    244        $  2,023        $    291        $  4,249       $  3,683
Working capital                               33,358          29,148          31,292          34,454         25,665
Total assets                                 181,491         170,786         180,483         179,274        186,288
Long-term debt (including current
  portion)                                    89,647          72,775          76,763          79,371         89,953
Stockholders' equity                          40,032          43,499          57,669          57,533         53,936

<FN>
 (1) All Fiscal years presented are 52-week periods except for the fiscal year
     ended October 2, 1994 which was a 53-week fiscal year.

 (2) Excludes  amortization  of  reorganization  value in excess  of  amounts
     allocable  to  identifiable   assets  of  $754,000,   $765,000,   $769,000,
     $1,003,000  and  $714,000 for the fiscal  years ended  September  28, 1997,
     September  29, 1996,  October 1, 1995,  October 2, 1994 and  September  26,
     1993, respectively.

 (3) See "Note 2 to Consolidated Financial Statements."
</FN>
</TABLE>

<PAGE>

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

                  The  following   discussion  and  analysis  by  the  Company's
         management  should  be read  in  conjunction  with  "Item  6.  Selected
         Financial  Data" and "Item 8.  Consolidated  Financial  Statements  and
         Supplementary Data" appearing elsewhere in this Form 10-K.

         Results Of Operations

                  Comparison of Fiscal 1997 with Fiscal 1996

                  Net Sales.  The Company's  net sales  decreased in Fiscal 1997
         less than one percent  (1%) to $208.5  million  from $209.3  million in
         Fiscal 1996. During 1996 the Company sold its Ensolite  specialty foams
         division.  Included in 1996 are net sales of Ensolite of  approximately
         $17.2 million.  Excluding such sales from the prior period amounts, net
         sales of the Company's continuing businesses increased by approximately
         nine percent (9%). This increase is attributable to increased net sales
         in all three business segments of the Company.

                  Net sales in the High Performance  Plastics Segment  increased
         in Fiscal 1997 by  approximately  three percent (3%) to $118.8  million
         from $115.1 million in Fiscal 1996. Royalite had sales increases in its
         niche businesses including flame retardancy products principally in the
         mass transit market; weatherability products in the construction market
         and soft feel laminate  products sold in conjunction with the Company's
         Coated  Fabrics  Segment  into the truck  market.  These  increases  at
         Royalite  were  partially  offset by lower  sales in its  lower  margin
         general purpose products which was consistent with  management's  focus
         on higher margin specialty sheet.  Polycast experienced increased sales
         in its specialty  markets as well as increases from its acquisitions in
         Fiscal 1997. See "Item 1. Business Corporate Developments - Acquisition
         of Lucite(R) S-A-R Business and Acquisition of Townsend Plastics."

                  The Coated  Fabrics  Segment's  net sales  increased in Fiscal
         1997 approximately 17 percent (17%) to $68.8 million from $58.7 million
         in Fiscal 1996.  This increase  resulted  primarily from increased unit
         volume of  products  sold to the  automotive  industry.  This  increase
         resulted from car volume  increases in the transplant  industry and the
         Company's  introduction  of a new product line qualified for use in the
         manufacture of several  automobile models by General Motors.  See "Item
         1. Business - Corporate Developments - Sale of the Automotive Operation
         of the Coated Fabrics Segment and Business Segments Coated Fabrics." In
         addition,  the Company  experienced  sales  increases  of  Naugahyde(R)
         coated vinyl  products  primarily in the mass transit,  electronic  and
         athletic equipment markets.

                  Net sales in the  Specialty  Adhesives  Segment  decreased  in
         Fiscal 1997 by  approximately  41 percent  (41%) to $20.9  million from
         $35.5 million in Fiscal 1996. This decrease  resulted  principally from
         the Ensolite Sale. In Fiscal 1996,  net sales of  Ensolite(R)  products
         for the 8 month period  preceding  consummation of the Ensolite Sale on
         June 10, 1996, were approximately  $17.2 million.  Excluding such sales
         from the  prior  period  amounts,  net sales of  liquid  adhesives  and
         sealants  increased  approximately 14 percent (14%) from Fiscal 1996 to
         Fiscal 1997.  This increase in sales is primarily  attributable  to the
         acquisition  of C.  Gunther  Company  on March 31,  1997 (see  "Item 1.
         Business  -  Corporate   Developments."),   increased  sales  of  Hydra
         Fast-En(TM) products,  primarily in the truck body and trailer markets,
         increased bonding sales to Firestone,  reflecting  stronger  commercial
         roofing business and increased customer market share.

                  Income (Loss) Before Interest,  Income Taxes and Extraordinary
         Item. In Fiscal 1997,  the Company had income before  interest,  income
         taxes and  extraordinary  item of $10.6  million as  compared to a loss
         before interest,  income taxes and extraordinary  item of $12.7 million
         for Fiscal 1996.

                  Income before interest,  income taxes and  extraordinary  item
         for the High Performance  Plastics Segment  increased in Fiscal 1997 by
         approximately  50 percent  (50%) to $10.5  million from $7.0 million in
         Fiscal  1996  primarily  as a result of lower MMA costs on average  and
         lower operating costs for Polycast.  In Fiscal 1996,  Polycast incurred
         an  $808,000  charge for  estimated  back pay and  retraining  costs in
         connection  with the settlement of a strike at the Polycast  Division's
         Stamford, Connecticut facility and a temporary decline in manufacturing
         efficiency  at such facility in Fiscal 1996 as a result of the required
         retraining  of employees  returning  from the strike.  In addition,  in
         Fiscal  1996,  the Royalite  Division  incurred  certain  non-recurring
         professional and development costs.
<PAGE>

                  The Coated Fabrics  Segment's income before  interest,  income
         taxes and  extraordinary  item in Fiscal  1997 was  approximately  $2.1
         million  compared to a loss of  approximately  $19.0  million in Fiscal
         1996.  In  Fiscal  1996  the  Company  established   reserves  totaling
         approximately  $12.5  million  related to its decision to exit the Port
         Clinton, Ohio automotive operation. Excluding this reserve, the segment
         lost  approximately  $6.5 million from  operations  in Fiscal 1996.  In
         Fiscal  1996,  the  Company  suffered  a loss  of  sales  and  incurred
         additional  costs on  instrument  panels  for a  transplant  automotive
         company as a result of defective  adhesion materials provided by one of
         the  Company's  suppliers.   The  problems  caused  by  such  defective
         materials have been resolved.  The improvement in earnings is primarily
         related  to  the  increased  volume,   lower  scrap  costs  and  higher
         productivity from the increased volume.

                  Loss before interest,  income taxes and extraordinary item for
         the Specialty Adhesives Segment was $346,000 in Fiscal 1997 as compared
         to income of $70,000 in Fiscal 1996.  Excluding the gain on the sale of
         the Ensolite  Division in Fiscal 1996,  the segment lost $2.0  million.
         The   reduction  in  the  loss  before   interest,   income  taxes  and
         extraordinary item was due to the incremental  earnings from C. Gunther
         Company and operating efficiencies as a result of the relocation to the
         new South Bend  facility.  Energy  represented  a  significant  cost of
         operating the Mishawaka,  Indiana facility and due to configuration and
         applicable fire and safety  regulations,  the entire facility had to be
         heated and lighted even though the Company's  operations  occupied less
         than  50%  of  the   facility.   See  "Item  1.  Business  -  Corporate
         Developments - Exit from the Mishawaka Plant."

                  Amortization  of  reorganization  value in excess  of  amounts
         allocable to  identifiable  assets in Fiscal 1997 decreased to $754,000
         from $765,000 in Fiscal 1996. This decrease resulted from the write-off
         of the assets transferred in connection with the Ensolite Sale.

                  Approximately $958,000 of miscellaneous expense in Fiscal 1997
         was not allocated to any segment of the Company's business.  There were
         no such unallocated amounts in Fiscal 1996.

                  Interest Expense. Interest expense in Fiscal 1997 decreased to
         approximately  $9.4  million  from $9.8  million in Fiscal  1996 due to
         interest  income  earned  by the  Company  on the $5.0  million,  11.75
         percent (11.75%) note issued to the Company by RBX, Inc. as part of the
         purchase  price  of the  Ensolite  Sale.  See  "Note 5 to  Consolidated
         Financial Statements."

                  Income Tax  (Expense)  Benefit.  Income tax  expense in Fiscal
         1997 was  approximately  $831,000  as  compared  to a  benefit  of $8.1
         million in Fiscal  1996.  The  provisions  for income tax benefit  were
         calculated by the Company through use of the effective income tax rates
         based upon its actual income.

                  Comparison of Fiscal 1996 with Fiscal 1995

                  Net Sales. The Company's net sales decreased in Fiscal 1996 by
         approximately  three percent (3%) to $209.3 million from $215.0 million
         in Fiscal 1995.  While overall net sales  decreased  during the period,
         net sales in the Company's High Performance Plastics and Coated Fabrics
         Segments increased in the aggregate approximately three percent (3%) to
         $173.8 million in Fiscal 1996 from $168.3 million in Fiscal 1995.  Such
         increase was offset by decreased net sales in the  Specialty  Adhesives
         Segment  resulting  principally  from the  Ensolite  Sale,  the  prices
         received by the Company for its roofing  adhesives  and sealants  under
         the Firestone Agreement, which are generally lower than those which the
         Company had  historically  been able to obtain in the relevant  market,
         and the impact on the  commercial  roofing  sector  generally of severe
         winter weather conditions in the Northeastern  United States. See "Item
         1. Business - Business  Segments - Specialty  Adhesives" and "Note 5 to
         Consolidated Financial Statements."

                  Net sales in the High Performance  Plastics Segment  increased
         in Fiscal 1996 by  approximately  three  percent (3%) to  approximately
         $115.1  million from $112.2  million in Fiscal 1995.  This increase was
         principally  due to  increased  sales  prices  and unit  volume  of the
         Royalite Division's  specialty  thermoplastic  sheet.  Decreases in the
         unit volume of Royalite's general purpose thermoplastic sheet partially
         offset  such  increase.  Management  believes  that this  shift in unit
         volume  resulted,  in part, from its efforts to focus on the production
         of  specialty  sheet  for  sale in  niche  markets  rather  than on the
         production of general  purpose sheet.  See "Item 1. Business - Business
         Segments - High Performance Plastics - Royalite Division." Increases in
         unit volume sales of both specialty and general  purpose  acrylic sheet
         by the  Polycast  Division  also  contributed  to such  increase in net
         sales.  These increases were partially offset by decreased sales prices
         for aerospace specialty acrylic sheet in response to market conditions.
<PAGE>

                  The Coated  Fabrics  Segment's  net sales  increased in Fiscal
         1996  approximately  five  percent  (5%) to $58.7  million  from  $56.1
         million  in  Fiscal  1995.  This  increase  resulted  principally  from
         increased  sales prices for, and unit volume of,  products  sold to the
         automotive  industry.   Increased  sales  to  the  automotive  industry
         resulted  principally from the Company's  introduction of a new product
         line (see  "Item 1.  Business -  Business  Segments - Coated  Fabrics")
         qualified for use in the  manufacture of several  automobile  models by
         General  Motors.  This increase was  partially  offset by decreased net
         sales of Naugahyde(R)  coated vinyl products resulting primarily from a
         delay in developing  and marketing  products in new styles and patterns
         which in Fiscal 1996 were  generally in greater  demand than the styles
         and  patterns  offered  by the  Company.  In  response  to such  market
         conditions,  the Company employed a designer in 1996 in order to design
         and commence production of newer styles and patterns.

                  Net sales in the  Specialty  Adhesives  Segment  decreased  in
         Fiscal 1996 by  approximately  24 percent  (24%) to $35.5  million from
         $46.7 million in Fiscal 1995. This decrease  resulted  principally from
         the Ensolite Sale and the impact of severe winter weather conditions in
         the  Northeastern  United  States  on  the  commercial  roofing  sector
         generally.  See "Item 1.  Business  -  Business  Segments  -  Specialty
         Adhesives" and "Note 5 to Consolidated Financial Statements." In Fiscal
         1996 net sales of Ensolite(R) products for the 8 month period preceding
         consummation of the Ensolite Sale on June 10, 1996, were  approximately
         $17.2 million as compared to net sales of  approximately  $24.6 million
         during  Fiscal  1995.  Net  sales  of  liquid  adhesives  and  sealants
         decreased  approximately  17 percent  (17%) from  Fiscal 1995 to Fiscal
         1996.

                  (Loss) Income Before Interest,  Income Taxes and Extraordinary
         Item.  In Fiscal  1996,  the Company  incurred a loss before  interest,
         income  taxes and  extraordinary  item of $12.7  million as compared to
         income before  interest,  income taxes and  extraordinary  item of $9.5
         million for Fiscal 1995. This loss resulted from factors which impacted
         all of the Company's segments.  The performance of the High Performance
         Plastics  Segment  was  impacted   principally  by  a  back  pay  labor
         settlement  at Polycast  and costs of  implementing  quality  assurance
         programs  and improved  manufacturing  efficiency  at Royalite.  In the
         Coated  Fabrics  Segment,  the Company  established  reserves  totaling
         approximately  $12.5  million  related to its decision to exit the Port
         Clinton,  Ohio  automotive  operations.  See  "Note 14 to  Consolidated
         Financial  Statements."  In addition the Company  suffered  incremental
         losses resulting  primarily from production  problems  encountered as a
         result  of  defective  adhesion  materials  purchased  from  one of its
         suppliers.   In  the  Specialty  Adhesives  Segment,   performance  was
         adversely  affected  principally by the Ensolite Sale and the impact of
         the Firestone Agreement for all of Fiscal 1996. See "Item 1. Business -
         Business Segments - Specialty Adhesives - General."

                  Income before interest,  income taxes and  extraordinary  item
         for the High Performance  Plastics Segment  decreased in Fiscal 1996 to
         $7.0 million from $13.0 million in Fiscal 1995 primarily as a result of
         higher  MMA  costs on  average  and an  $808,000  charge  incurred  for
         estimated  back  pay  and  retraining  costs  in  connection  with  the
         settlement of a strike at Polycast's Stamford, Connecticut facility and
         a temporary decline in manufacturing efficiency at such facility during
         Fiscal  1996  as a  result  of the  required  retraining  of  employees
         returning from the strike. In addition, Royalite incurred approximately
         $560,000 in consulting  fees for production and  reengineering  studies
         relating to its Warsaw,  Indiana facility and certain  additional costs
         in connection with the  implementation  of improved quality  standards,
         training  and  support  programs  for  employees  and a more  efficient
         manufacturing process at such facility.

                  The Coated  Fabrics  Segment's  loss before  interest,  income
         taxes and extraordinary  item increased in Fiscal 1996 to approximately
         $19.0 million from a loss of approximately $4.9 million in Fiscal 1995.
         In Fiscal 1996 the Company established reserves totaling  approximately
         $12.5 million  related to its decision to exit the Port  Clinton,  Ohio
         automotive   operation.   The  automotive  products  business  incurred
         operating losses of approximately $7.6 million (before consideration of
         reserves  totaling $12.5 million  described  above) and $5.5 million in
         Fiscal 1996 and 1995,  respectively.  In addition, the increased losses
         resulted from  decreased  sales of  instrument  panels for a transplant
         automotive  customer  as  a  result  of  defective  adhesion  materials
         provided by one of the Company's suppliers and the continued incurrence
         of fixed costs  associated  with the operation of such facility at less
         than 50  percent  (50%) of its  capacity  as a result of the  decreased
         sales caused by such defective adhesion.  While the production problems
         caused by such defective materials have been  satisfactorily  resolved,
         the  Port   Clinton,   Ohio   facility  has  continued  to  operate  at
         significantly  reduced  levels as the  Company  sought to  recover  the
         segment's lost  automotive  sales and to expand the segment's  sales in
         the automotive sector generally.
<PAGE>

                  Income before interest,  income taxes and  extraordinary  item
         for the Specialty Adhesives Segment decreased in Fiscal 1996 to $70,000
         from  approximately $2.1 million in Fiscal 1995. This decrease resulted
         from the decreased sales resulting  principally  from the effect of the
         Ensolite Sale, the impact of reduced sales prices for roofing adhesives
         under  the  Firestone  Agreement  and the  effect  on the EPDM  roofing
         adhesives   market  of  severe   winter   weather   conditions  in  the
         Northeastern  United  States  which  caused  delays  in the  commercial
         roofing  industry  and  increased  costs  at the  Company's  Mishawaka,
         Indiana  manufacturing  facility  resulting  from general  energy price
         increases.  Energy prices  represented a significant  cost of operating
         the  Mishawaka,   Indiana  facility.   Due  to  its  configuration  and
         applicable fire and safety  regulations,  the entire facility had to be
         heated and lighted even though the Company's  operations  occupied less
         than 50 percent (50%) of the facility.  The Specialty Adhesives Segment
         relocated its operations  from the Mishawaka,  Indiana  facility to its
         facility  in South  Bend,  Indiana  in  February,  1997.  See  "Item 1.
         Business - Business  Segments -  Specialty  Adhesives  -  Manufacturing
         Facilities."  The  effects  of these  items  were  partially  offset by
         reduced costs of raw materials and an  approximately  $2.1 million gain
         from the Ensolite  Sale.  The gain from the Ensolite  Sale is net of an
         approximately $4.3 million reserve established in Fiscal 1996 for fixed
         asset  write-offs,   severance  and  incentive  packages  for  Ensolite
         employees to be terminated and facility clean-up costs. In prior years,
         the  Company   established   a  relocation   reserve  for  its  planned
         restructuring and move of the Specialty  Adhesives Segment.  Management
         believes  that  such  reserves  are  adequate  to cover the costs to be
         incurred in connection  with the relocation of the Specialty  Adhesives
         Segments to the new plant at South Bend, Indiana. See "Item 1. Business
         - Corporate  Developments - Exit from the Mishawaka  Plant and Business
         Segments - Specialty Adhesives - General."

                  Amortization  of  reorganization  value in excess  of  amounts
         allocable to  identifiable  assets in Fiscal 1996 decreased to $765,000
         from $769,000 in Fiscal 1995. The decrease  resulted from the write-off
         of the assets transferred in connection with the Ensolite Sale.

                  Approximately  $73,000 of miscellaneous  income in Fiscal 1995
         was not allocated to any segment of the Company's business.  There were
         no such unallocated amounts in Fiscal 1996.

                  Interest Expense. Interest expense in Fiscal 1996 decreased to
         approximately  $9.8  million  from $10.0  million in Fiscal 1995 due to
         interest  income  earned  by the  Company  on the $5.0  million,  11.75
         percent (11.75%) note issued to the Company by RBX, Inc. as part of the
         purchase  price  of the  Ensolite  Sale.  See  "Note 5 To  Consolidated
         Financial Statements."

                  Income  Tax  Benefit.  Income tax  benefit in Fiscal  1996 was
         approximately  $8.1 million as compared to $189,000 in Fiscal 1995. The
         provisions  for income  tax  benefit  were  calculated  by the  Company
         through the use of the effective income tax rates based upon its actual
         income.

                  Extraordinary    Gain   on   the   Extinguishment   of   Debt.
         Extraordinary  gain on the  extinguishment  of debt for Fiscal 1995 was
         $363,000. The amount represents the gain recognized by the Company as a
         result of open market purchases of  approximately  $7.5 million of face
         amount  of its  Senior  Secured  Notes  (see  "Note  9 to  Consolidated
         Financial Statements") net of the write-off of applicable debt issuance
         costs  and   unamortized   debt  discount   associated   therewith  and
         approximately $310,000 of income taxes.

                  Liquidity and Capital Resources

                  For   Fiscal   1997,   the   Company's   operations   provided
         approximately  $3.4 million of cash as compared to  approximately  $3.8
         million used during  Fiscal  1996.  This  increase in cash  provided by
         operations for Fiscal 1997 resulted primarily from increased net income
         and was partially  offset by decreases in the reserves  established for
         the relocation to the South Bend facility.
<PAGE>

                  Net cash used in investing activities of the Company in Fiscal
         1997 was approximately $15.5 million as compared to approximately $10.5
         million  provided  during Fiscal 1996.  Approximately  $19.6 million of
         such cash in Fiscal  1996 was  provided  from the  Ensolite  Sale.  The
         primary use of cash during  Fiscal 1997 and Fiscal 1996 was to purchase
         property,  plant and  equipment.  The Company also used $8.0 million in
         Fiscal 1997 for  business  acquisitions.  The Company does not have any
         significant  specific  commitments for the purchase of property,  plant
         and equipment.

                  Net cash  provided by financing  activities  was $10.3 million
         during  Fiscal 1997 as  compared to  approximately  $4.9  million  used
         during Fiscal 1996. Cash was provided by the Company's revolving credit
         agreement,  term loan and partially offset by the use of cash to redeem
         the Preferred Stock. See "Item 1. Corporate  Developments - Disposition
         of Stock of PBGC."

                  The Company at September 28, 1997, had approximately  $244,000
         in cash and cash equivalents as compared to approximately  $2.0 million
         at  September  29,  1996.  Working  capital at  September  28, 1997 was
         approximately  $33.4 million compared to approximately $29.1 million at
         September 29, 1996. The Company had borrowings of  approximately  $15.2
         million under its $25 million  revolving  credit agreement at September
         28, 1997. See "Note 9 to Consolidated Financial Statements."

                  The Company  believes  that cash from its  operations  and its
         ability to borrow under the revolving  credit facility  mentioned above
         provide it  sufficient  liquidity  to  finance  its  existing  level of
         operations and meet its debt service obligations. However, there can be
         no  assurance  that the  Company's  operations  together  with  amounts
         available  under the  revolving  credit  facility  will  continue to be
         sufficient  to finance its existing  level of  operations  and meet its
         debt  service  obligations.  The  Company's  ability  to meet  its debt
         service and other obligations depends on its future performance,  which
         in turn, is subject to general  economic  conditions  and to financial,
         business and other  factors,  including  factors  beyond the  Company's
         control. If the Company is unable to generate sufficient cash flow from
         operations,  it may be  required to  refinance  all or a portion of its
         existing debt or obtain additional financing. There can be no assurance
         that the Company will be able to obtain such  refinancing or additional
         financing.

                  Effects of Inflation

                  The  markets  in  which  the  Company   sells   products   are
         competitive.  In particular,  the Company has encountered in connection
         with its sales of coated  fabrics to the  automotive  industry  and its
         sales of acrylics to the aerospace  industry,  effective  resistance to
         price increases  generally.  Thus, in an  inflationary  environment the
         Company may not in all  instances  be able to pass through to consumers
         general price increases, in which event the Company's operations may be
         materially  impacted if such conditions were to occur.  The Company has
         not in the past been adversely impacted by general price inflation.

                  Forward Looking Information

                  Statements  made  herein  that are  forward-looking  in nature
         within the meaning of the Private  Securities  Litigation Reform Act of
         1995 are subject to risks and  uncertainties  that could  cause  actual
         results to differ materially. Such risks and uncertainties include, but
         are not  limited  to,  those  related to  business  conditions  and the
         financial  strength of the various  markets served by the Company,  the
         level of spending  for such  products and the ability of the Company to
         successfully manufacture and market its products.

Item 8.  Consolidated Financial Statements and Supplementary Data

                  See Index to Consolidated Financial Statements on Page F-1.

Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

                  None.
<PAGE>


Part III

Item 10. Directors and Executive Officers of the Registrant

                  Information  with  respect  to  the  directors  and  executive
         officers  of the Company is  incorporated  herein by  reference  to the
         Company's  definitive proxy statement pursuant to Regulation 14A, which
         statement  will be filed not later  than 120 days  after the end of the
         fiscal year covered by this Report.

Item 11. Executive Compensation

                  Information   with  respect  to  executive   compensation   is
         incorporated  herein by reference  to the  Company's  definitive  proxy
         statement pursuant to Regulation 14A, which statement will be filed not
         later than 120 days after the end of the  fiscal  year  covered by this
         Report.

Item 12. Security Ownership of Certain Beneficial Owners and Management

                  Information   with  respect  to  the  security   ownership  of
         directors and executive  officers and  substantial  stockholders of the
         Company is incorporated herein by reference to the Company's definitive
         proxy  statement  pursuant to Regulation  14A, which  statement will be
         filed not later than 120 days after the end of the fiscal year  covered
         by this Report.

Item 13. Certain Relationships and Related Transactions

                  Information   with  respect  to  certain   relationships   and
         transactions  between  directors,  executive  officers and  substantial
         stockholders of the Company with the Company is incorporated  herein by
         reference  to the  Company's  definitive  proxy  statement  pursuant to
         Regulation  14A, which  statement will be filed not later than 120 days
         after the end of the fiscal year covered by this Report.

Part IV

Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
<TABLE>
<CAPTION>
<S>        <C>                                                                   <C>

(a)        Consolidated Financial Statements as of September 28, 1997
           and September 29, 1996 and for the Years Ended September 28,
           1997, September 29, 1996 and October 1, 1995:

           Independent Auditors' Report                                          F-2

           Consolidated Balance Sheets as of September 28, 1997 and
           September 29, 1996                                                    F-3

           Consolidated Statements of Operations for the Years Ended
           September 28, 1997, September 29, 1996 and October 1, 1995            F-5

           Consolidated Statements of Changes in Stockholders' Equity
           for the Years Ended September 28, 1997, September 29, 1996
           and October 1, 1995                                                   F-6

           Consolidated Statements of Cash Flows for the Years Ended
           September 28, 1997, September 29, 1996 and October 1, 1995            F-7

           Notes to Consolidated Financial Statements                            F-9

(b)        Consolidated Financial Statement Schedule:

           Independent Auditors' Report                                          S-1

           Schedule II - Valuation and Qualifying Accounts                       S-2
</TABLE>
<TABLE>
          <S>        <C>                                                                     
          (c)        Exhibits:

            2.1      Certificate of Ownership and Merger, dated June 7, 1993, of Polycast Technology
                     Corporation, Uniroyal  Engineered Products, Inc., Uniroyal Adhesives and Sealants,
                     Inc. and Ensolite, Inc. with the Company.  (6)
<PAGE>

            3.1      Amended and Restated  Certificate of  Incorporation of the Company as  corrected  by a  Certificate  of
                     Correction of the Amended and Restated  Certificate of Incorporation of the Company. (1)

            3.2      By-Laws of the Company, as amended to November 14, 1996.  (13)

            4.1      Indenture, dated as of June 1, 1993, between the Company and The Bank of New York,
                     as trustee. (6)

            4.2      Warrant Agreement, dated as of June 1, 1993, between the Company and The Bank of New
                     York, as warrant  agent. (6)

            10.1     Asset Acquisition Agreement, dated as of September 27, 1992, among Old Polycast,
                     Polycast and the  Company. (2)

            10.2     Asset Acquisition Agreement, dated as of September 27, 1992, among Old UEP, UEP and
                     the Company. (2)

            10.3     Asset Acquisition Agreement, dated as of September 27, 1992, among Old Ensolite,
                     Ensolite and the  Company. (2)

            10.4     Asset Acquisition Agreement, dated as of September 27, 1992, among Old UAS, UAS and
                     the Company. (2)

            10.5     Asset Acquisition Agreement, dated as of September 27, 1992, between Plastics
                     Support Corp. ("PSC")  and the Company. (2)

            10.6     Asset Acquisition Agreement, dated as of September 27, 1992, among U.E. Systems,
                     Inc., Ensolite and  the Company. (2)

            10.7     Amended and Restated Employment Agreement, dated as of April 25, 1995, between
                     Howard R. Curd and the  Company. (7)

            10.8     Amended and Restated Employment Agreement, dated as of April 25, 1995, between
                     Oliver J. Janney and  the Company. (7)

            10.9     Amended and Restated Employment Agreement, dated as of April 25, 1995, between
                     Robert L. Soran and the  Company. (7)

            10.10    Amended and Restated Employment Agreement, dated as of April 25, 1995, between
                     George J. Zulanas, Jr.  and the Company. (7)

            10.11    Joint Stipulation Between the Debtors and the United States of America on Behalf of
                     Its Agency, The  Internal Revenue Service, Regarding Treatment of Tax Claims. (3)

            10.15    Uniroyal Technology Corporation Employee Stock Ownership Plan. (4)

            10.16    Amended and Restated Uniroyal Technology Corporation 1992 Stock Option Plan. (13)

            10.21    Settlement Agreement among Old Polycast, Old UAS, Old UEP, Old Ensolite and the
                     Official  Retirees' Committee. (3)

            10.22    Settlement Agreement and Stipulated Order among Old Polycast,  Old UAS,  Old  UEP,  Old  Ensolite,  the
                     United States of America,  the State of Indiana and the State of Wisconsin. (3)
<PAGE>

            10.23    Plan Disbursing Agent Agreement, dated September 27,1992, among Old Polycast, Old
                     UAS, Old UEP, Old  Ensolite and the Company. (2)

            10.24    Technical Collaboration Agreement, dated June 20, 1988, between UPC and Okamoto
                     Industries, Inc. (3)

            10.25    Assignment of Technical Collaboration Agreement, among UPC, Old UEP, The Jesup
                     Group, Inc. and Okamoto  Industries, Inc. (3)

            10.26    Letter Amendment to Technical Collaboration Agreement, dated January 21, 1991,
                     between Old UEP and  Okamoto Industries, Inc. (3)

            10.27    Amendment No. 2 to Technical Collaboration Agreement, dated as of July 31, 1992,
                     between Old UEP and  Okamoto Industries, Inc. (3)

            10.28    Amended and Restated Uniroyal Technology Corporation 1992 Non-Qualified Stock Option
                     Plan.  (13)

            10.29    Agreement  dated August 20, 1993 among the Company, UPAC  and  the  Official   Committee  of  Unsecured
                     Creditors of UPAC.(5)

            10.30    Settlement Agreement dated December 6, 1993 among the Company, UPAC, Jesup and the
                     PBGC.(5)

            10.34    Uniroyal Technology Corporation Deferred Compensation Plan Effective as of August 1,
                     1995. (8)

            10.35    Split-Dollar Insurance Agreement dated as of August 15, 1995 by and between Uniroyal
                     Technology Corporation and Howard R. Curd. (9)

            10.39    Financing Agreement dated as of June 5, 1996 by and between The CIT Group/Business
                     Credit, Inc. and  Uniroyal Technology Corporation. (10)

            10.40    Amended and Restated Uniroyal Technology Corporation 1994 Stock Option Plan. (13)

            10.41    Amended and Restated Uniroyal Technology Corporation 1995 Non-Qualified Stock Option Plan.
                     (13)

            10.42    Asset Purchase Agreement between Rubatex Corporation and Uniroyal Technology
                     Corporation, dated June  5, 1996. (11)

            10.43    Amendment No. 3 to Technical Collaboration Agreement, dated March 1, 1996, between Uniroyal
                     Technology  Corporation and Okamoto Industries, Inc.  (13)

            10.44    Shareholder Rights Agreement,  dated as of December 18, 1996, between Uniroyal Technology  Corporation
                     and The Bank of New York, as rights agent. (12)

            10.45    First Amendment to Financing Agreement dated September 5, 1997 by and between The CIT
                     Group/Business Credit, Inc. and Uniroyal Technology Corporation.

            11.1     Statement Regarding Computation of Per Share Earnings

            23.1     Independent Auditors' Consent

            27.1     Financial Data Schedule
<PAGE>

<FN>
(1)      Incorporated by reference to Amendment No. 2 to the Company's Registration Statement on Form 10, dated
         September 25, 1992.
(2)      Incorporated by reference to Amendment No. 4 to the Company's Registration Statement on Form 10, dated
         October 1, 1992.
(3)      Incorporated by reference to the Company's Amendment No. 1 to the Company's Registration Statement on
         Form 10, dated September 17, 1992.
(4)      Incorporated by reference to the Company's Form 10-K, dated December 24, 1992.
(5)      Incorporated by reference to the Company's Form 10-K, dated December 17, 1993.
(6)      Incorporated by reference to the Company's Form 8-K, dated June 9, 1993.
(7)      Incorporated by reference to the Company's Quarterly Report  on Form 10-Q for the quarterly period ended
         April 2, 1995.
(8)      Incorporated by reference to the Company's Quarterly Report  on Form 10-Q for the quarterly period ended
         July 2, 1995.
(9)      Incorporated by reference to the Company's Form 10-Q dated August 14, 1995. Virtually identical
         agreements were entered into between the Company and each of Robert L. Soran, George J. Zulanas, Jr.,
         Oliver J. Janney and Martin J. Gutfreund.
(10)     Incorporated  by reference to the  Company's  Quarterly  Report on Form 10-Q for the  quarterly
         period  ended June 30, 1996 filed  August 13, 1996.
(11)     Incorporated by reference to the Company's Form 8-K, dated June 10, 1996.
(12)     Incorporated  by reference to the Company's  Registration  Statement on Form 8-A, dated December 20, 1996.
(13)     Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended September 29,
         1996.
</FN>
              (d) Reports on Form 8-K:

                  No  reports  on Form 8-K were  filed  during  the last  quarter of
                  Fiscal 1997.
</TABLE>

<PAGE>

Item 8.  Consolidated Financial Statements and Supplementary Data.
<TABLE>
<CAPTION>
         Index to Consolidated Financial Statements

         Consolidated   Financial  Statements  as  of  September  28,  1997  and
         September  29,  1996  and for  the  Years  Ended  September  28,  1997,
         September 29, 1996 and October 1, 1995:
                  <S>                                                               <C>
                   Independent Auditors' Report                                      F-2

                   Consolidated  Balance  Sheets as of  September  28,  1997 and
                   September 29, 1996                                                F-3

                   Consolidated  Statements  of  Operations  for the Years Ended
                   September 28, 1997, September 29, 1996 and October 1, 1995        F-5

                   Consolidated  Statements of Changes in  Stockholders'  Equity
                   for the Years Ended  September  28, 1997,  September 29, 1996
                   and October 1, 1995                                               F-6

                   Consolidated  Statements  of Cash  Flows for the Years  Ended
                   September 28, 1997, September 29, 1996 and October 1, 1995        F-7

                   Notes to Consolidated Financial Statements                        F-9

          Consolidated Financial Statement Schedule:

                   Independent  Auditors' Report                                     S-1

                   Schedule II - Valuation and Qualifying Accounts                   S-2

                   Schedules Omitted - Certain other schedules have been omitted
                   because  they are not  required  or because  the  information
                   required   therein   has  been   included  in  Notes  to  the
                   Consolidated Financial Statements.

</TABLE>
<PAGE>


INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
Uniroyal Technology Corporation
Sarasota, Florida


We have  audited  the  accompanying  consolidated  balance  sheets  of  Uniroyal
Technology  Corporation  and subsidiary (the "Company") as of September 28, 1997
and September 29, 1996, and the related  consolidated  statements of operations,
changes in  stockholders'  equity and cash flows for each of the three  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 financial  position of the Company as of
September 28, 1997 and September 29, 1996 and the results of its  operations and
its cash flows for each of the three  years in the period  ended  September  28,
1997, in conformity with generally accepted accounting principles.

As discussed in Note 2 to the  consolidated  financial  statements,  the Company
adopted Statement of Financial  Standards No. 121, Accounting for the Impairment
of  Long-Lived  Assets and for  Long-Lived  Assets to be Disposed Of, during the
year ended September 29, 1996.





/S/ DELOITTE & TOUCHE LLP
-------------------------
DELOITTE & TOUCHE LLP
Tampa, Florida
December 12, 1997


<PAGE>
<TABLE>
<CAPTION>
                                      UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARY
                                                CONSOLIDATED BALANCE SHEETS
                                                      (In thousands)


                                                          ASSETS

                                                                              September 28,         September 29,
                                                                                  1997                  1996
                                                                              -------------         -------------
<S>                                                                           <C>                   <C>

Current assets:
  Cash and cash equivalents (including restricted cash and cash
   equivalents of $764 at September 29, 1996)  (Note 2)                       $      244            $    2,023
  Trade accounts receivable (less estimated reserve for doubtful
   accounts of $257 and $369, respectively)   (Notes 2 and 9)                     28,784                25,094
  Inventories (Notes 2, 3 and 9)                                                  34,528                33,170
  Prepaid expenses and other current assets                                        1,192                 1,507
  Deferred income taxes (Notes 2 and 10)                                           6,944                 7,408
                                                                              ----------            ----------
    Total current assets                                                          71,692                69,202

Property, plant and equipment - net (Notes 2, 4 and 9)                            68,314                63,984
Property, plant and equipment held for sale (Note 2)                               9,346                10,832
Note receivable (Note 5)                                                           5,000                 5,000
Goodwill - net (Notes 2 and 6)                                                     7,350                    -
Reorganization value in excess of amounts allocable to identifiable
  assets - net (Note 2)                                                            7,534                 8,288
Deferred income taxes (Notes 2 and 10)                                             1,402                 1,485
Other assets (Notes 7 and 9)                                                      10,853                11,995
                                                                              ----------            ----------
TOTAL ASSETS                                                                  $  181,491            $  170,786
                                                                              ==========            ==========
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                      UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARY
                                          CONSOLIDATED BALANCE SHEETS (Continued)
                                             (In thousands, except share data)

                                           LIABILITIES AND STOCKHOLDERS' EQUITY


                                                                              September 28,        September 29,
                                                                                  1997                 1996
                                                                              -------------        -------------
<S>                                                                           <C>                  <C>

Current liabilities:
  Current portion of long-term debt (Note 9)                                  $    1,277           $      659
  Trade accounts payable                                                          15,551               16,549
  Accrued expenses:
    Compensation and benefits                                                     10,573               10,166
    Interest                                                                       3,019                2,861
    Taxes, other than income                                                       1,666                1,939
    State income taxes                                                               402                  259
    Other                                                                          5,846                7,621
                                                                              ----------           ----------
       Total current liabilities                                                  38,334               40,054

Long-term debt (Note 9)                                                           88,370               72,116
Other liabilities (Note 8)                                                        14,755               15,117
                                                                              ----------           ----------
       Total liabilities                                                         141,459              127,287
                                                                              ----------           ----------
Commitments and contingencies (Note 13)

Stockholders' equity (Notes 9 and 11):
 Preferred stock :
   Series B - 35 shares issued and outstanding at September 29, 1996 
   (redemption value of $150,000 per share); 1,000 shares
   authorized; par value $.0.01                                                        -                5,250
   Series C - 0 shares issued and outstanding; par value $0.01;
   450 shares authorized                                                               -                    -
 Common stock:
   13,707,360 and 13,233,912 shares issued or to be issued,
   respectively; par value $0.01; 35,000,000 shares authorized                       138                  133
 Additional paid-in capital                                                       54,037               52,517
 Deficit                                                                         (14,022)             (14,401)
                                                                              ----------           ----------
                                                                                  40,153               43,499
Less treasury stock at cost - 85,843 and 50,843 shares,
 respectively                                                                       (121)                   -
                                                                              ----------           ----------

      Total stockholders' equity                                                  40,032               43,499
                                                                              ----------           ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                    $  181,491           $  170,786
                                                                              ==========           ==========


                 See notes to consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                      UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARY
                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                      (In thousands, except share and per share data)

                                                                                    Fiscal Years Ended
                                                                    ----------------------------------------------------
                                                                      September 28,      September 29,     October 1,
                                                                          1997               1996             1995
                                                                      -------------      -------------     -----------
<S>                                                                   <C>                <C>               <C>
Net sales                                                             $  208,524         $  209,348        $  214,951
Costs, expenses and (other income):
  Costs of goods sold                                                    161,122            170,088           166,314
  Selling and administrative                                              27,545             28,626            26,783
  Amortization of reorganization value in excess of amounts
    allocable to identifiable assets                                         754                765               769
  Depreciation and other amortization                                      8,304              9,848             9,521
  Excess facility expense                                                     51                924             1,307
  Reorganization professional fees subsequent to
    effective date                                                           154                640               708
  Gain on sale of division (Note 5)                                            -             (2,102)                -
  Loss on assets to be disposed of (Note 14)                                   -              8,900                 -
  Curtailment loss (Note 14)                                                   -              3,600                 -
  Strike settlement and training expense                                       -                808                 -
                                                                      ----------         ----------        ----------
Income (loss) before interest, income taxes and extraordinary item        10,594            (12,749)            9,549

Interest expense - net                                                    (9,384)            (9,773)          (10,029)
                                                                      ----------         ----------        ----------
Income (loss) before income taxes and extraordinary item                   1,210            (22,522)             (480)

Income tax (expense) benefit (Notes 2 and 10)                               (831)             8,121               189
                                                                      ----------         ----------        ----------
Income (loss) before extraordinary item                                      379            (14,401)             (291)

Extraordinary gain on the extinguishment of debt - net
  (Note 9)                                                                     -                  -               363
                                                                      ----------         ----------        ----------
Net income (loss)                                                     $      379         $  (14,401)       $       72
                                                                      ==========         ==========        ==========
Income (loss) per common share and common stock
  equivalent (Notes 2 and 11)
  Primary and fully diluted:
  Income (loss) before extraordinary item                             $     0.03         $    (1.09)       $    (0.02)
  Extraordinary gain                                                           -                  -              0.02
                                                                      ----------         ----------        ----------
  Net income (loss)                                                   $     0.03         $    (1.09)       $     0.00
                                                                      ==========         ==========        ==========

  Average number of shares used in computation                        13,423,554         13,167,466        14,507,605
                                                                      ==========         ==========        ==========

                 See notes to consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                                 UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARY
                                            CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                                                   (In thousands)

                                                                     Additional
                                    Preferred Stock     Common        Paid-In                 Treasury  Stockholders'
                                       Series B          Stock        Capital      Deficit     Stock      Equity
                                       -----------      ---------    ----------   ---------   ---------   --------
  <S>                                    <C>           <C>           <C>          <C>         <C>         <C>
Balance at October 2, 1994               $  5,250      $    130      $ 52,196     $      -    $    (43)   $ 57,533
Common stock issued under
  stock option plans                            -             -             8            -           -           8
Amounts received pursuant
  to Directors' stock option plan               -             -            56            -           -          56
Stock dividends paid (Note 11)                                1            71          (72)          -           -
Net income                                      -             -             -           72           -          72
                                         --------      --------      --------     --------    --------    --------
Balance at October 1, 1995                  5,250           131        52,331            -         (43)     57,669
Common stock issued under
  stock option plans                            -             1            20            -           -          21
Common stock issued to
  employee benefit plan                         -             1           166            -          43         210
Stock dividends paid (Note 11)                  -             -             -            -           -           -
Net loss                                        -             -             -      (14,401)          -     (14,401)
                                         --------      --------      --------     --------    --------    --------
Balance at September 29, 1996               5,250           133        52,517      (14,401)          -      43,499
Common stock issued for
  acquisitions                                  -             4         1,483            -           -       1,487
Stock dividends paid (Note 11)                  -             1             -            -           -           1
Preferred stock redemption                 (5,250)            -             -            -           -      (5,250)
Amounts received pursuant
  to Directors' stock option plan               -             -            37            -           -          37
Purchase of treasury stock                      -             -             -            -        (121)       (121)
Net income                                      -             -             -          379           -         379
                                         --------      --------      --------     --------    --------    --------
Balance at September 28, 1997            $      -      $    138      $ 54,037     $(14,022)   $   (121)   $ 40,032
                                         ========      ========      ========     ========    ========    ========




                                                          See notes to consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                   UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARY
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                    (In thousands)

                                                                                Fiscal Years Ended
                                                              ------------------------------------------------
                                                               September 28,     September 29,      October 1,
                                                                   1997              1996             1995
                                                               -------------    -------------      ----------
<S>                                                              <C>              <C>              <C>

OPERATING ACTIVITIES:
  Net income (loss)                                              $    379         $(14,401)        $     72
  Adjustments to reconcile net income (loss) to net cash
    provided by (used in) operating activities:
      Depreciation and other amortization                           8,304            9,848            9,521
      Deferred tax expense (benefit)                                  547           (8,904)            (431)
      Recovery of doubtful accounts                                     -               (6)            (217)
      Amortization of reorganization value in excess of
        amounts allocable to identifiable assets                      754              765              769
      Amortization of Senior Secured Notes discount                   114              100               92
      Amortization of debt issuance costs                             431              457              466
      Gain on sale of division                                          -           (2,102)               -
      Loss on assets to be disposed of                                  -            8,900                -
      Curtailment loss                                                  -            3,600                -
      Extraordinary gain                                                -                -             (363)
      Other                                                           351              106              299
      Changes in assets and liabilities:
        Increase in trade accounts receivable                      (2,845)          (1,858)          (5,837)
        Increase in inventories                                      (398)          (2,456)          (2,995)
        Decrease (increase) in prepaid expenses
          and other assets                                            567             (359)           1,532
       (Decrease) increase in trade accounts payable               (1,080)             757            3,363
       (Decrease) increase in accrued expenses                     (2,804)           1,130             (773)
       (Decrease) increase in other liabilities                      (884)             609              920
                                                                 --------         --------         --------
Net cash provided by (used in) operating activities                 3,436           (3,814)           6,418
                                                                 --------         --------         --------
INVESTING ACTIVITIES:
  Purchases of property, plant and equipment                      (12,200)          (9,181)          (7,422)
  Proceeds from sale of assets                                      4,657           19,641                -
  Business acquisitions, net of cash acquired                      (7,986)               -                -
                                                                 --------         --------         --------
Net cash (used in) provided by investing activities               (15,529)          10,460           (7,422)
                                                                 --------         --------         --------
FINANCING ACTIVITIES:
  Repurchase of Senior Secured Notes                                 (243)               -           (6,223)
  Other increase (decrease) in debt - net                          14,428           (4,934)           3,261
  Proceeds from term loan                                           1,500                -                -
  Preferred stock redeemed                                         (5,250)               -                -
  Stock options exercised                                               -               20                8
  Purchases of treasury stock                                        (121)               -                -
                                                                 --------         --------         --------
Net cash provided by (used in) financing activities                10,314           (4,914)          (2,954)
                                                                 --------         --------         --------
Net (decrease) increase in cash and cash equivalents               (1,779)           1,732           (3,958)

Cash and cash equivalents at beginning of year                      2,023              291            4,249
                                                                 --------         --------         --------
Cash and cash equivalents at end of year                         $    244         $  2,023         $    291
                                                                 ========         ========         ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                              UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARY
                                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                (Continued)

Supplemental Disclosures:

Payments for income taxes and interest expense were as follows (in thousands):

                                                                             Fiscal Years Ended
                                                       --------------------------------------------------------------
                                                         September 28,          September 29,          October 1,
                                                               1997                  1996                 1995
                                                       -------------------    ------------------     ----------------
<S>                                                               <C>                  <C>

Income tax payments                                               $    82              $    570             $    155
Interest payments                                                   9,664                 9,549                9,784
</TABLE>
<TABLE>
<CAPTION>

Non-cash investing activities were as follows (in thousands):

                                                                             Fiscal Years Ended
                                                       --------------------------------------------------------------
                                                         September 28,          September 29,          October 1,
                                                               1997                  1996                 1995
                                                       -------------------    ------------------     ----------------
<S>                                                        <C>                      <C>                    <C>

Business acquisitions purchased with
  Company common stock                                     $  1,488                 $      -               $      -
Business acquisition purchased with
  note payable                                                1,000                        -                      -
</TABLE>

The  amounts  shown as payment  of debt is the net  activity  for the  Company's
revolving loan and term loan facilities which includes draws and payments on the
revolving loan facilities during the periods shown. The following summarizes the
activity of these facilities (in thousands):
<TABLE>
<CAPTION>

                                                                             Fiscal Years Ended
                                                       --------------------------------------------------------------
                                                         September 28,          September 29,          October 1,
                                                               1997                  1996                 1995
                                                       -------------------    -------------------    ----------------
<S>                                                          <C>                   <C>                   <C>
Term loan payments                                           $   (741)             $ (1,173)             $   (500)
Increase (decrease) in revolver loan balances                  15,169                (3,761)                3,761
                                                             --------              --------              --------
Other increase (decrease) in debt - net                      $ 14,428              $ (4,934)             $  3,261
                                                             ========              ========              ========
</TABLE>

The purchases of property, plant and equipment and the other increase (decrease)
in debt, net for the fiscal years ended  September 28, 1997,  September 29, 1996
and October 1, 1995 do not include $77,000,  $846,000 and $1,404,000  related to
property held under capitalized leases (Note 13).

Net cash used in financing  activities for the fiscal years ended  September 28,
1997,  September  29,  1996 and  October 1, 1995 do not  include  the  dividends
declared on the Series B Preferred  Stock since they were paid with the issuance
of 73,448,  115,657 and 125,588 shares,  respectively,  of the Company's  common
stock (see Note 11). Net cash used in financing  activities for the fiscal years
ended  September  28, 1997 and October 1, 1995 do not include  25,000 and 36,409
options  purchased  pursuant  to  the  1992  Non-Qualified  Stock  Option  Plan,
respectively.  No such  options  were  purchased  during the  fiscal  year ended
September 29, 1996.

                 See notes to consolidated financial statements.



<PAGE>


                 UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the  Fiscal  Years  Ended   September  28,  1997,
                     September 29, 1996, and October 1, 1995


1.       THE COMPANY

         Uniroyal Technology  Corporation,  a Delaware corporation,  through its
         operating divisions,  Royalite  Thermoplastics  ("Royalite"),  Polycast
         Technology  ("Polycast"),  Uniroyal  Engineered  Products  ("UEP")  and
         Uniroyal Adhesives and Sealants ("UAS") and its wholly owned subsidiary
         ULC  Corporation  (collectively,  the  "Company"),  is  engaged  in the
         manufacture and sale of high performance  plastics,  coated fabrics and
         specialty adhesives. During Fiscal 1997 the Company sold certain assets
         of the  Stoughton,  Wisconsin  automotive  division  and agreed to sell
         certain  assets of the Port Clinton,  Ohio  automotive  division of its
         Coated Fabrics  Segment (Note 14).  During Fiscal 1996 the Company sold
         substantially  all  the  assets,  net of  certain  liabilities,  of its
         Ensolite closed cell foam division (Note 5).

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Consolidation

         The  consolidated  financial  statements  include  the  accounts of the
         Company and its subsidiary.  All significant intercompany  transactions
         and balances have been eliminated.

         Fiscal Year End

         The Company's  fiscal year ends on the Sunday following the last Friday
         in  September.  The dates on which the  fiscal  year ended for the past
         three fiscal years were  September  28,  1997,  September  29, 1996 and
         October 1, 1995.

         Use of Estimates

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

         Cash and Cash Equivalents

         Cash  and cash  equivalents  includes  all  highly  liquid  investments
         purchased with an original maturity of three months or less. Restricted
         cash and cash  equivalents  are the net  proceeds  from the sale of the
         Ensolite  Division placed in escrow in accordance with the terms of the
         indenture agreement for the Company's Senior Secured Notes (Note 9).

         Fair Value of Financial Instruments

         The  estimated  fair  value of  amounts  reported  in the  consolidated
         financial  statements  have  been  determined  using  available  market
         information and valuation  methodologies,  as applicable.  The carrying
         value of all current assets and liabilities approximates the fair value
         because of their  short-term  nature.  The fair  values of  non-current
         assets and liabilities approximate their carrying value.

         Trade Accounts Receivable

         The Company  grants  credit to its  customers  generally in the form of
         short-term trade accounts receivable. The creditworthiness of customers
         is evaluated  prior to the sale of inventory.  There are no significant
         concentrations of credit risk to the Company.

         Inventories

         Inventories  are  stated  at the  lower  of  cost  or  market.  Cost is
         determined  using a monthly  average  basis or  standard  costs  (which
         approximates  actual  costs) for raw  materials  and  supplies  and the
         first-in,  first-out  ("FIFO")  basis of accounting  or standard  costs
         (which  approximates  actual  costs) for work in process  and  finished
         goods.

         Property. Plant and Equipment

         Property, plant and equipment are stated at cost. The cost of property,
         plant and equipment  held under capital leases is equal to the lower of
         the net present value of the minimum  lease  payments or the fair value
         of the leased  asset at the  inception  of the lease.  Depreciation  is
         computed under the straight-line method based on the cost and estimated
         useful lives of the related assets  including assets held under capital
         leases.

         During March 1995 the Financial  Accounting  Standards  Board  ("FASB")
         adopted Statement of Financial  Accounting  Standards ("SFAS") No. 121,
         Accounting for the  Impairment of Long-Lived  Assets and for Long-Lived
         Assets to Be Disposed Of. SFAS No. 121 establishes accounting standards
         for  the  impairment  of  long-lived   assets,   certain   identifiable
         intangibles  and  goodwill  related to those assets to be held and used
         and for long-lived  assets and certain  identifiable  intangibles to be
         disposed of. In  accordance  with SFAS No. 121,  during the fiscal year
         ended  September 29, 1996, the Company  established  reserves  totaling
         approximately  $8,900,000  related  to its  decision  to exit  the Port
         Clinton,  Ohio automotive operation of the Coated Fabrics Segment (Note
         14). Other than the  establishment  of these reserves,  the adoption of
         SFAS  No.  121 did  not  have a  significant  effect  on the  Company's
         consolidated financial statements.

         Property, Plant and Equipment Held for Sale

         Property,  plant and equipment  held for sale is stated at the lower of
         cost or fair value less cost to sell.

         Amortization

         Debt discount and debt issuance costs are amortized  using the interest
         method over the life of the related debt.  Patents and  trademarks  are
         being  amortized  using the  straight-line  method over periods ranging
         from 7 to 20 years. Reorganization value in excess of amounts allocable
         to identifiable  assets is amortized on a  straight-line  basis over 15
         years.   Reorganization   value  in  excess  of  amounts  allocable  to
         identifiable  assets is reported  net of  accumulated  amortization  of
         $3,947,000 and $3,193,000 at September 28, 1997 and September 29, 1996,
         respectively.  Goodwill is amortized on a  straight-line  basis over 25
         years. Goodwill is reported net of accumulated  amortization of $48,000
         at September 28, 1997.

         Research and Development Expenses

         Research  and  development   expenditures  are  expensed  as  incurred.
         Research and development  expenditures were $3,674,000,  $4,918,000 and
         $4,689,000  for the fiscal years ended  September  28, 1997,  September
         29, 1996 and October 1, 1995 respectively.

         Employee Compensation

         The cost of post-retirement benefits other than pensions are recognized
         in the  consolidated  financial  statements  over an employee's term of
         service with the Company.

         Income Taxes

         The Company  utilizes the asset and liability  method of accounting for
         income taxes.  Under the asset and liability  method,  deferred  income
         taxes  are   recognized   for  the  tax   consequences   of  "temporary
         differences"  by applying  enacted  statutory  tax rates  applicable to
         future years to differences  between the financial  statement  carrying
         amounts  and the tax basis of  existing  assets  and  liabilities.  The
         effect on  deferred  taxes of a change in tax  rates is  recognized  in
         income in the period that includes the enactment date.

         The  Company  has  recorded  a  deferred  tax  asset  of  approximately
         $8,346,000.  Realization is dependent on generating  sufficient taxable
         income  prior to  expiration  of loss  carryforwards  available  to the
         Company. Although realization is not assured, management believes it is
         more  likely  than not  that  all of the  deferred  tax  asset  will be
         realized.  The amount of the deferred tax asset considered  realizable,
         however,  could be  reduced  in the near  term if  estimates  of future
         taxable income during the carryforward period are reduced.

         Stock-Based Compensation

         In October 1995 FASB issued SFAS No. 123,  Accounting  for  Stock-Based
         Compensation,  which is  effective  for fiscal  years  beginning  after
         December  15,  1995.  Under  SFAS No.  123,  the  Company  may elect to
         recognize  stock-based  compensation expense based on the fair value of
         the awards or continue to account for  stock-based  compensation  under
         Accounting Principles Board ("APB) Opinion No. 25, Accounting for Stock
         Issued  to  Employees,  and  disclose  in  the  consolidated  financial
         statements the effects of SFAS No. 123 as if the recognition provisions
         were adopted. The Company has not adopted the recognition provisions of
         SFAS No. 123.

         Net Income (Loss) Per Common Share

         The  computations  of primary and fully diluted income per common share
         for the fiscal years ended  September  28, 1997 and October 1, 1995 are
         based on the  weighted  average  number of  common  shares  issued  and
         outstanding  (or to be issued  pursuant to the Plan, as defined in Note
         13) less the average  number of shares held in treasury  for the period
         and also include the assumed  conversion of the then outstanding Series
         B Preferred  Stock,  if any, and the exercise of all stock  options and
         warrants  having  exercise prices less than the average market price of
         the common  stock using the  treasury  stock  method.  The  convertible
         preferred  stock  issued to the Pension  Benefit  Guaranty  Corporation
         ("PBGC"),  the warrants and stock options were  considered to be common
         stock equivalents.  Primary and fully diluted loss per common share for
         the fiscal  year ended  September  29,  1996 do not include the assumed
         conversion  of the Series B  Preferred  Stock nor the  exercise  of the
         warrants and the employee  stock  options since their  inclusion  would
         have been  anti-dilutive.  (See Note 11 for  information  regarding the
         redemption of the Series B Preferred Stock.)

         New Accounting Pronouncements

         FASB has issued SFAS No. 128, Earnings Per Share,  which is required to
         be adopted for financial  statement  periods  ending after December 15,
         1997. SFAS No. 128 requires that the primary and fully diluted earnings
         per share be  replaced  by "basic" and  "diluted"  earnings  per share,
         respectively.  The basic calculation  computes earnings per share based
         only on the weighted  average number of shares  outstanding as compared
         to primary earnings per share which included common stock  equivalents.
         The diluted  earnings per share  calculation  is computed  similarly to
         fully diluted  earnings per share.  Management does not anticipate that
         SFAS No. 128 will have a significant impact on earnings per share.

         In February 1997,  FASB issued SFAS No. 129,  Disclosure of Information
         about Capital Structure. SFAS No. 129 requires a company to explain the
         privileges and rights of its various outstanding securities, the number
         of shares issued upon conversion,  exercise or satisfaction of required
         conditions  during the most recent  annual fiscal  period,  liquidation
         preferences  of  preferred  stock and other  matters  with  respect  to
         preferred  stock.  The  Company  has  adopted  SFAS  No.  129 in  these
         consolidated financial statements.

         In June 1997, FASB issued SFAS No. 130, Reporting Comprehensive Income.
         SFAS No.  130  established  standards  for  reporting  and  display  of
         comprehensive   income   and   its   components   in  a  full   set  of
         general-purpose  financial statements.  Comprehensive income is defined
         as the change in equity of a business during a period from transactions
         and circumstances related to non-owner sources and includes all changes
         in equity during a period except those  resulting  from  investments by
         owners and  distributions  to owners.  SFAS No.  130 is  effective  for
         fiscal years  beginning  after  December 15, 1997. The adoption of SFAS
         No.  130 is not  expected  to have a material  effect on the  Company's
         consolidated financial statements.

         In June 1997, FASB issued SFAS No. 131,  Disclosures  about Segments of
         an Enterprise  and Related  Information.  SFAS No. 131 requires  public
         entities to report certain information about operating segments,  their
         products and services,  the geographic  areas in which they operate and
         their  major  customers,   in  complete  financial  statements  and  in
         condensed interim financial statements issued to shareholders. SFAS No.
         131 is effective for fiscal years  beginning  after  December 15, 1997.
         The adoption of SFAS No. 131 is not expected to have a material  effect
         on the Company's consolidated financial statements.

         Reclassifications

         Certain prior years' amounts have been reclassified to conform with the
         current year's presentation.

3.       INVENTORIES

         Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>

                                                                             September 28,        September 29,
                                                                                 1997                 1996
                                                                           ------------------   ----------------
          <S>                                                                      <C>                 <C>

          Raw materials, work in process and supplies                              $ 21,851            $ 21,458
          Finished goods                                                             12,677              11,712
                                                                                   --------            --------
          Total                                                                    $ 34,528            $ 33,170
                                                                                   ========            ========
</TABLE>
<PAGE>

4.       PROPERTY, PLANT AND EQUIPMENT

         Property,   plant  and   equipment   consisted  of  the  following  (in
         thousands):
<TABLE>
<CAPTION>

                                                          Estimated
                                                           Useful            September 28,         September 29,
                                                            Lives                1997                  1996
                                                       ----------------    ------------------    ------------------
           <S>                                           <C>                      <C>                  <C>
           Land and improvements                             -                    $  5,442            $  5,014
           Buildings and improvements                    3-40 years                 21,958              16,083
           Machinery, equipment and office
             furnishings                                 3-15 years                 67,122              56,770
           Construction in progress                          -                       2,941               8,484
                                                                                  --------            -------- 
                                                                                    97,463              86,351
           Accumulated depreciation                                                (29,149)            (22,367)
                                                                                  --------            --------
           Total                                                                  $ 68,314            $ 63,984
                                                                                  ========            ========
</TABLE>

         On July 17,  1996,  the Company  acquired a  manufacturing  facility in
         South Bend, Indiana for cash of approximately $1,800,000. Renovation of
         the  facility  was  completed  in Fiscal  1997.  The Company  moved its
         adhesives  and  sealants  division  and  the   thermoplastic   products
         division's  headquarters  as well as certain other  Company  operations
         from their  leased  facility  in  Mishawaka,  Indiana to the South Bend
         facility during the second quarter of Fiscal 1997.

         In prior years, the Company had established  reserves for the estimated
         costs for asset  write-offs,  property  clean-up  costs and  relocation
         costs  associated with the Company's move of its adhesives and sealants
         division totaling $1,658,000 as of September 29,1996. Such amounts were
         classified as current and were  included in other  accrued  expenses in
         the accompanying  consolidated financial statements as of September 29,
         1996. No material amounts were outstanding as of September 28, 1997.



5.       SALE OF ENSOLITE DIVISION

         Pursuant to an asset purchase  agreement,  the Company sold on June 10,
         1996  substantially  all the assets net of certain  liabilities  of its
         Ensolite  closed-cell foam division to Rubatex Corporation  ("Rubatex")
         for  $25,000,000  consisting of cash in the amount of $20,000,000 and a
         promissory  note of the parent of  Rubatex in the amount of  $5,000,000
         (the  "Ensolite  Sale").  Interest  on the  promissory  note is payable
         semi-annually  at 11.75% per annum.  The promissory note matures on May
         1, 2006. Cash proceeds from the sale were used to pay off the Company's
         borrowings  under its revolving  credit  agreement.  The remaining cash
         proceeds,  net of  amounts  placed  in escrow  in  accordance  with the
         Company's  indenture  agreement  for the  Senior  Secured  Notes,  were
         invested  in  short-term   highly  liquid   investments.   The  Company
         recognized a pre-tax gain on the sale of  approximately  $2,102,000 net
         of  transaction  costs,  the  write-down  of certain  fixed  assets not
         acquired by Rubatex and after  consideration  of reserves for severance
         and incentive packages for Ensolite employees,  facility clean-up costs
         and the  recognition  of  Ensolite's  pro rata  share of the  Company's
         transition  obligation  net  of a  curtailment  gain  of  approximately
         $664,000 in accordance  with SFAS No. 106,  Employer's  Accounting  for
         Postretirement  Benefits  Other Than Pensions.  In connection  with the
         Ensolite  sale,   Rubatex   received  an  option  to  purchase  certain
         additional  equipment  housed  at  the  Company's  Mishawaka,   Indiana
         manufacturing  facility  for  $250,000  which it exercised in November,
         1996. The purchase  price was adjusted for changes in working  capital,
         as defined in the asset purchase agreement, between October 1, 1995 and
         June 10, 1996.  The change in working  capital  resulted in  additional
         proceeds  and  select   assets  paid  to  the  Company  by  Rubatex  of
         approximately  $700,000.  Such amount has been  included in the pre-tax
         gain on sale.  The Company and Rubatex  also  entered  into an earn-out
         agreement  whereby the  Company  could earn  between  $.15 and $.20 per
         board foot of  Ensolite  products  produced by Rubatex in excess of the
         base volume as defined in such  agreement  during each of the four year
         periods  following  the closing of the Ensolite  Sale. In no event will
         the total amount  earned by the Company  under the  earn-out  agreement
         during the forty-eight  month period  following the closing of the sale
         exceed  $3,000,000.  The Company earned  approximately  $353,000 net of
         expenses under the earn-out agreement during Fiscal 1997.

         In conjunction  with the Ensolite Sale, the Company entered into a toll
         manufacturing  agreement with Rubatex.  The Company  produced  Ensolite
         products  for  the  benefit  of  Rubatex  at  its  Mishawaka,   Indiana
         manufacturing   facility  through  March  17,  1997.  The  Company  was
         reimbursed by Rubatex for the variable costs incurred in the production
         of  Ensolite  products  and was paid a fixed  amount for  manufacturing
         period  costs based on actual  costs  incurred  by the  Company  during
         Fiscal  1995 and  adjusted  for  inflation.  In  addition  the  Company
         provided  certain  support  services to Rubatex and was  reimbursed  by
         Rubatex for the costs of certain of such services.

6.       BUSINESS ACQUISITIONS

         On March 31, 1997 the Company  acquired  100% of the common stock of C.
         Gunther  Company,  a  manufacturer  of  mirror  mastic  adhesive,   for
         $1,650,000  in cash and 100,000  shares of common stock of the Company.
         The purchase price was adjusted for changes in working  capital between
         January  31,  1997 and March  31,  1997,  as  defined  in the  purchase
         agreement.  This  resulted  in an  increase  in the  purchase  price of
         $86,500  which was paid in cash.  C. Gunther  Company was  subsequently
         merged into the Company in September of 1997.

         On August 29, 1997 the Company  acquired the Lucite(R)  Super  Abrasion
         Resistant  ("S-A-R")  acrylic coating business of the Lucite(R) Acrylic
         Division of ICI Acrylics, Inc. for $3,000,000, consisting of $2,000,000
         in cash and an  unsecured  promissory  note for  $1,000,000  bearing an
         interest  rate of 8% (Note 9).  The  purchase  price was  adjusted  for
         inventory  changes and the pro-ration of prepaid expenses as defined in
         the purchase  agreement.  This  resulted in an increase in the purchase
         price of $122,000 which was paid in cash.

         On  September  5, 1997 the Company  acquired  substantially  all of the
         assets of the Townsend Plastics Division of Townsend Industries,  Inc.,
         a  manufacturer  of acrylic rods and tubes,  for $4,485,000 in cash and
         300,000 shares of common stock of the Company.  In connection with this
         purchase,  the Company  amended its  financing  agreement  with The CIT
         Group/Business  Credit, Inc. to include a term note of $1,500,000 (Note
         9).

         The above  business  combinations  were  accounted  for by the purchase
         method in accordance with APB Opinion No. 16. The results of operations
         of  the  above  named  businesses  are  included  in  the  consolidated
         financial  statements  from their  respective  purchase dates in Fiscal
         1997.

         The Company  acquired the following assets and liabilities (net of cash
         received) in the above transactions (in thousands):
<TABLE>
          <S>                                                                       <C>

          Accounts receivable                                                       $    845
          Inventory                                                                      960
          Property, plant and equipment                                                2,555
          Goodwill                                                                     7,398
          Note payable                                                                (1,000)
          Other liabilities                                                           (1,284)
                                                                                    -------- 
          Net value of purchased assets                                                9,474
          Value of common stock issued                                                (1,488)
                                                                                    -------- 
          Cash paid for acquisitions                                                $  7,986
                                                                                    ======== 
</TABLE>

         The acquired  goodwill will be amortized over the estimated useful life
         of the assets of 25 years.

         The  acquisitions  were completed  during the latter part of the fiscal
         year.  Management  has made its best estimate of the purchase  price at
         this time;  however,  certain estimates may change during the course of
         Fiscal 1998.

         The pro forma effect of these  acquisitions on the Company's net sales,
         income before  extraordinary  item,  net income and earnings per share,
         had the acquisitions  occurred on September 30, 1996, is not considered
         material.

7.       OTHER ASSETS

         Other assets consisted of the following (in thousands):
<TABLE>
<CAPTION>

                                                                            September 28,         September 29,
                                                                                1997                  1996
                                                                          -----------------     -----------------
          <S>                                                                    <C>                    <C>

          Patents and trademarks                                                 $  5,220               $  5,322
          Debt issuance costs                                                       3,675                  4,110
          Other                                                                     1,958                  2,563
                                                                                 --------               --------
          Total                                                                  $ 10,853               $ 11,995
                                                                                 ========               ========
</TABLE>

         Patents and trademarks are reported net of accumulated  amortization of
         $2,492,000 and $2,142,000 at September 28, 1997 and September 29, 1996,
         respectively.  During the  fiscal  year ended  September  28,  1997 the
         Company wrote off $13,000 of debt issuance costs in connection with the
         $250,000  acquisition  of face value of the  Company's  Senior  Secured
         Notes.  During the fiscal year ended  October 1, 1995 the Company wrote
         off $466,000 of debt issuance costs in connection  with the acquisition
         of $7,497,000 of face value of the Company's Senior Secured Notes (Note
         9). Debt issuance  costs are shown net of accumulated  amortization  of
         $1,933,000 and $1,502,000 at September 28, 1997 and September 29, 1996,
         respectively.

8.       OTHER LIABILITIES

         Other liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>

                                                                            September 28,        September 29,
                                                                                1997                 1996
                                                                          ------------------    -----------------
          <S>                                                                   <C>                    <C>

          Accrued retirement benefits                                           $ 13,420              $ 13,217
          Taxes, other than income                                                 1,335                 1,900
                                                                                --------              --------
          Total                                                                 $ 14,755              $ 15,117
                                                                                ========              ========
</TABLE>

9.       LONG-TERM DEBT

         Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>

                                                                            September 28,         September 29,
                                                                                1997                  1996
                                                                           ------------------     ---------------
          <S>                                                                   <C>                    <C>
          11.75% Senior Secured Notes, principal due June 1, 2003, 
            interest due semi-annually on December 1 and June 1                 $ 72,253               $ 72,503
          Revolving credit agreement                                              15,169                      -
          Secured term loan                                                        1,500                      -
          Unsecured promissory note                                                1,000                      -
          Unamortized debt discount                                               (1,012)                (1,130)
                                                                                --------               --------
                                                                                  88,910                 71,373
          Other obligations                                                          737                  1,402
                                                                                --------               --------
                                                                                  89,647                 72,775
          Less current portion                                                    (1,277)                  (659)
                                                                                --------               --------
          Long-term debt                                                        $ 88,370               $ 72,116
                                                                                ========               ========
</TABLE>

         Debt  amounts  become  due during  subsequent  fiscal  years  ending in
         September as follows (in thousands):
<TABLE>
                             <S>                                                <C>

                             1998                                               $  1,277
                             1999                                                    995
                             2000                                                    955
                             2001                                                 15,179
                             2002                                                      -
                             Subsequent years                                     72,253
                             Less unamortized debt discount                       (1,012)
                                                                                --------
                             Total debt                                         $ 89,647
                                                                                ========
</TABLE>

         On June 7, 1993,  the Company  consummated a public  offering of 80,000
         units,  consisting of  $80,000,000  aggregate  principal  amount of its
         11.75%  Senior  Secured  Notes Due 2003  ("Senior  Secured  Notes") and
         warrants  to  purchase  an  aggregate  of 800,000  shares of its common
         stock. The warrants issued with the Senior Secured Notes are detachable
         and therefore were allocated a portion of the proceeds in the amount of
         approximately $1,566,000 which was an estimate of their market value at
         the time they were  issued.  The  proceeds  allocated to the notes were
         approximately  $78,434,000  resulting in a note discount of $1,566,000,
         which is being amortized using the interest method.  The effective rate
         of interest on the notes based on the allocated proceeds was calculated
         to be  approximately  12.09%.  The notes  will  mature on June 1, 2003.
         Interest  is payable  on June 1 and  December 1 of each year at 11.75%.
         The  notes are  collateralized  by a lien on  substantially  all of the
         non-cash  assets of the Company (other than trade accounts  receivable)
         and  net  cash  proceeds  of the  sale of  collateral.  The  notes  are
         redeemable  at the option of the  Company,  in whole or in part,  on or
         after June 1, 1998, at 104.41 % of the principal  amount,  declining to
         par on and after June 1, 2001. The indenture contains certain covenants
         which  limit,  among  other  things,  the  Company's  ability  to incur
         additional debt, pay cash dividends,  make certain other payments, sell
         its assets and redeem its capital stock.  The Company was in compliance
         with these covenants at September 28, 1997 and September 29, 1996.

         During the fiscal year ended  September  28, 1997 the Company  acquired
         $250,000 of face value of the Senior  Secured Notes through open market
         purchases,  the effect of which was not  material  to the  consolidated
         financial statements.  During the fiscal year ended October 1, 1995 the
         Company  acquired  $7,497,000 of face value of the Senior Secured Notes
         through  open  market  purchases.   These  purchases   resulted  in  an
         extraordinary  gain of approximately  $363,000 (net of the write-off of
         applicable  debt issuance  costs,  unamortized  debt discount and other
         transaction  costs totaling $601,000 and net of applicable income taxes
         of  $310,000).  The Company  did not acquire any such notes  during the
         fiscal year ended September 29, 1996.

         On June 5, 1996, the Company entered into a revolving  credit agreement
         with The CIT  Group/Business  Credit Inc.  ("CIT"),  pursuant to which,
         subject  to the  satisfaction  of  certain  borrowing  conditions,  the
         Company  may  borrow  the  lesser  of  $25,000,000  or 85% of  eligible
         accounts  receivable  but in no event at any time  more than 75% of the
         Company's  Accounts,  as  defined  in  the  agreement,   determined  in
         accordance with generally accepted accounting  principles.  Interest is
         payable  monthly  at prime plus .5% per annum or at the LIBOR rate plus
         2.75% if the  Company  elects to  borrow  funds  under a LIBOR  Loan as
         defined in the agreement.  The loan matures on June 5, 2001. All of the
         Company's trade accounts  receivable are pledged as collateral for this
         loan.  The  agreement  restricts  the  creation  of certain  additional
         indebtedness.  The Company was in compliance  with the covenants  under
         this agreement at September 28, 1997. At September 28, 1997 the Company
         had  approximately  $7,237,000  available  under the  revolving  credit
         agreement.  The Company had $15,169,000 of outstanding borrowings under
         this  agreement at September 28, 1997.  The Company had no  outstanding
         borrowings under this agreement at September 29, 1996.

         On  September  5, 1997,  in  connection  with the  purchase of Townsend
         Plastics (Note 6), the Company amended the financing agreement with CIT
         to include a term note of $1,500,000  ("Term  Note").  The Term Note is
         payable in twelve equal quarterly  installments  beginning December 31,
         1997.  Interest on the Term Note is payable  monthly at prime plus .25%
         per annum or at the  LIBOR  rate plus  2.75% if the  Company  elects to
         borrow funds under a LIBOR loan as defined in the agreement.

         In  connection  with the purchase of the  Lucite(R)  S-A-R  business on
         August 29, 1997 (Note 6), the Company  issued an  unsecured  promissory
         note in the  principal  amount of  $1,000,000  payable to ICI Acrylics,
         Inc. The  principal  amount of the note,  together with interest at the
         rate of 8% per annum,  is payable in three  installments  on the first,
         second and third anniversary date of the note.

         The Company leases certain machinery and equipment under non-cancelable
         capital  leases which extend for varying  periods up to 5 years.  Other
         obligations include remaining capitalized lease obligations of $737,000
         and  $1,402,000  as of  September  28,  1997 and  September  29,  1996,
         respectively (Note 13).



<PAGE>

10.      INCOME TAXES

         The effective tax rate differs from the  statutory  federal  income tax
         rate for the following reasons (in thousands):
<TABLE>
<CAPTION>

                                                                         Fiscal Years Ended
                                                         ---------------------------------------------------------
                                                           September 28,       September 29,        October 1,
                                                               1997                1996               1995 
                                                         ----------------    -----------------    ----------------
          <S>                                               <C>                  <C>                 <C>    
          Income tax calculated at the statutory
            rate applied to income (loss) before
            income tax and extraordinary item               $    408             $ (7,657)           $   (163)

          Increase (decrease) resulting from:
            Exclusion of extraordinary gain
            on the extinguishment of debt                         -                     -                 310

            Amortization of reorganization  value
            in excess of amounts allocable to
            identifiable assets                                  155                  145                 145

            State income tax                                     354                 (593)                  -
            Other                                                (86)                ( 16)               (171)
                                                            --------             --------            --------
          Income tax expense (benefit)                      $    831             $ (8,121)           $    121
                                                            ========             ========            ========
</TABLE>

         Income tax expense (benefit) consisted of the following  components (in
         thousands):
<TABLE>
<CAPTION>

                                                                         Fiscal Years Ended
                                                         ---------------------------------------------------------
                                                           September 28,       September 29,        October 1,
                                                               1997                1996               1995
                                                         ------------------  ------------------   ----------------
          <S>                                               <C>                  <C>                  <C>
          Current
            Federal                                         $      -             $    119             $      -
            State                                                284                  532                  242
                                                            --------             --------             --------
              Total                                         $    284             $    651             $    242
                                                            ========             ========             ========
          Net deferred tax (benefit) expense
            Federal                                         $    477             $ (7,647)            $   (106)
            State                                                 70               (1,125)                 (15)
                                                            --------             --------             --------
              Total                                         $    547             $ (8,772)            $   (121)
                                                            ========             ========             ========
          Total
            Federal                                         $    477             $ (7,528)            $   (106)
            State                                                354                 (593)                 227
                                                            --------             --------             --------
              Total                                         $    831             $ (8,121)            $    121
                                                            ========             ========             ========
</TABLE>

         The total  income tax  expense of  $121,000  for the fiscal  year ended
         October  1,  1995  includes  an  expense  in  the  amount  of  $310,000
         applicable to the extraordinary item (Note 9).


<PAGE>


         The components of the deferred tax assets and liabilities  consisted of
         the following (in thousands):
<TABLE>
<CAPTION>

                                                                            September 28, 1997
                                                         -----------------------------------------------------------
                                                             Assets             Liabilities             Total
                                                         ----------------    ------------------    -----------------
          <S>                                              <C>                   <C>                   <C>
          Current
            Accrued expenses deductible in future
              period                                       $  6,944              $      -              $  6,944
                                                           ========              ========              ========   
          Non-Current
            Acquired tax loss carryforward benefits        $  7,872              $      -              $  7,872
            Net operating loss carryforward                   4,553                     -                 4,553
            Book basis in excess of tax basis of
              assets                                              -                (8,123)               (8,123)
            Long-term accrual of expenses
              deductible in future periods                    4,972                     -                 4,972
            Valuation allowance                              (7,872)                    -                (7,872)
                                                           --------              --------              --------
                Total                                      $  9,525              $ (8,123)             $  1,402
                                                           ========              ========              ========
</TABLE>
<TABLE>
<CAPTION>

                                                                            September 29, 1996
                                                         -----------------------------------------------------------
                                                             Assets             Liabilities             Total
                                                         ----------------    ------------------    -----------------
          <S>                                              <C>                   <C>                   <C>
          Current
            Accrued expenses deductible in future
              period                                       $  7,408              $      -              $  7,408
                                                           ========              ========              ========
          Non-Current
            Acquired tax loss carryforward benefits        $  7,872              $      -              $  7,872
            Net operating loss carryforward                   4,906                     -                 4,906
            Book basis in excess of tax basis of
              assets                                              -                (7,931)               (7,931)
            Long-term accrual of expenses
              deductible in future periods                    4,510                     -                 4,510
            Valuation allowance                              (7,872)                    -                (7,872)
                                                           --------              --------              --------
                Total                                      $  9,416              $ (7,931)             $  1,485
                                                           ========              ========              ========
</TABLE>

         The ultimate realization of the acquired tax loss carryforward benefits
         is uncertain and subject to interpretation of the tax law as it applies
         to the Company's bankruptcy reorganization.

         The net operating and acquired tax loss carryforward benefits expire in
         various  years  ending  in 2010.  The  acquired  tax loss  carryforward
         benefits  consist of tax net operating loss  carryforwards  and pension
         contribution deductions.  The acquired net operating loss carryforwards
         are  subject  to  an  annual  limitation  arising  from  the  Company's
         September 27, 1992 bankruptcy reorganization.  The annual limitation on
         utilization  of the acquired net operating  loss  carryforward  for tax
         purposes  is  approximately  $1,600,000  per year.  Utilization  of the
         acquired  tax loss  carryforward  benefits  in future  periods  will be
         applied to reduce  reorganization  value in excess of amounts allocable
         to identifiable assets.

11.      STOCKHOLDERS' EQUITY

         The Company's certificate of incorporation provides that the authorized
         capital stock of the Company  consists of  35,000,000  shares of common
         stock and 1,000 shares of preferred  stock,  each having a par value of
         $0.01 per share. At September 28, 1997, approximately 13,373,000 shares
         of common stock had been issued. Approximately 334,000 shares of common
         stock are reserved for issuance  pending  resolution of disputed claims
         in the bankruptcy proceedings (Note 13).

         The holder of the Series B  Preferred  Stock was  entitled to vote as a
         separate  class of  shareholders  for the purpose of  electing  certain
         directors to the Board of Directors of the Company.  A holder of Series
         B Preferred Stock had no preemptive or preferential  rights to purchase
         or subscribe to any  additional  shares of capital stock except for the
         conversion rights described below.

         The  Company had the right to redeem all or any portion of the Series B
         Preferred  Stock at any time following 30 days' notice to the holder of
         such Preferred Stock by (a) paying $150,000 per share for each share of
         Series B  Preferred  Stock that the  Company,  in its sole  discretion,
         elected to redeem;  and (b) issuing  all common  stock  dividends  then
         accrued but unpaid on the Preferred  Stock to be redeemed.  The Company
         had the right, but no obligation,  to redeem, at its option, any or all
         whole or  fractional  shares  of  Preferred  Stock.  In the  event of a
         liquidation of the Company,  the holder of the Preferred Stock would be
         entitled to receive,  following all  distributions  to creditors of the
         Company required under Delaware law, a liquidation  payment of $150,000
         per  share  plus  all  accrued  but  unpaid   dividends  prior  to  any
         distributions to common stockholders.

         On  December  16,  1996 the  Company  redeemed  15  shares  of Series B
         Preferred  Stock  for  $2,250,000.  On  February  4,  1997 the  Company
         redeemed  the  remaining  20  shares of  Series B  Preferred  Stock for
         $3,000,000.

         The holders of record of shares of common stock are entitled to receive
         dividends  when  and as  declared  by the  Board  of  Directors  of the
         Company,  provided that the Company has funds legally available for the
         payment of dividends and is not otherwise contractually restricted from
         the payment of dividends.  The Company's  ability to pay cash dividends
         on common stock  currently is restricted by the indenture in connection
         with the Senior Secured Notes.

         From  September  1, 1992,  the  holder of shares of Series B  Preferred
         Stock was  entitled  to receive an annual  dividend  equal to 8% of the
         redemption price for outstanding shares of Series B Preferred Stock, as
         applicable,  payable  only in shares of common  stock  which  number of
         shares is based on the average of the last  reported bid prices for the
         30 calendar days preceding the declaration  date. The Company  declared
         such dividends, on a quarterly basis through February 1997.

         During the fiscal years ended  September  28, 1997,  September 29, 1996
         and October 1, 1995, the Company  declared stock dividends of $220,000,
         $420,000  and  $420,000,  respectively,  resulting  in the  issuance of
         73,448, 115,657 and 125,588 shares of common stock, respectively, at an
         average price per common share of $3.00, $3.63 and $3.34, respectively.
         The $220,000 and $420,000 of dividends declared during the fiscal years
         ended  September  28,  1997 and  September  29,  1996 were  charged  to
         additional  paid-in  capital.  Of the  $420,000 of  dividends  declared
         during the fiscal  year ended  October 1, 1995,  $72,000 was charged to
         retained earnings and the remaining  $348,000 was charged to additional
         paid-in capital.

         On December  18, 1996,  the Board  designated a new series of preferred
         stock of the Company  termed  Series C Junior  Participating  Preferred
         Stock, $.01 par value ("Series C Preferred") and reserved 450 shares of
         the  Series C  Preferred  for  issuance.  At the same  time,  the Board
         declared  a  dividend  of a right to  acquire  1/100,000  of a share of
         Series C  Preferred  to the holder of each  share of common  stock (the
         "Rights")  under a Shareholder  Rights Plan. The Rights will trade with
         the  common  stock  and  be  detachable   from  the  common  stock  and
         exercisable  only in the  event  of an  acquisition  of or grant of the
         right to acquire 15% or more of the common stock by one party or common
         group or a tender offer to acquire 15% or more of the common stock.

         Warrants

         The Company has 800,000  warrants  outstanding to purchase an aggregate
         of 800,000  shares of its Common  Stock at a price  equal to $4.375 per
         share  subject  to  adjustments   under  certain   circumstances.   All
         outstanding warrants are exercisable at any time on or prior to June 1,
         2003, at which time they will  terminate and become void.  The warrants
         are  detachable  from the Senior  Secured  Notes and,  therefore,  were
         allocated  a portion of the  proceeds  in the  amount of  approximately
         $1,566,000,  which was their market value at the time they were issued.
         This amount was added to additional  paid-in  capital.  As of September
         28,1997 no warrants had been exercised.

         Stock Compensation Plans

         At September 28, 1997,  the Company has four  stock-based  compensation
         plans,  which are described  below. The Company applies APB Opinion No.
         25  and  related   interpretations   in   accounting   for  its  plans.
         Accordingly,  no compensation cost has been recognized for these plans.
         Had  compensation  cost been determined  based on the fair value at the
         grant dates for awards under those plans  consistent with the method of
         FASB  Statement  No. 123, the  Company's net income (loss) and earnings
         per share would have been  reduced to the pro forma  amounts  indicated
         below (in thousands, except earnings per share information):
<TABLE>
<CAPTION>

                                              Fiscal 1997     Fiscal 1996
<S>                                                 <C>        <C>       
Net income (loss) -       As reported              $  379      $ (14,401)
                          Pro forma                $  308      $ (14,434)

Earnings per share -      As reported              $ 0.03      $   (1.09)
                          Pro forma                $ 0.02      $   (1.10)
</TABLE>


         The Company has reserved  1,363,636 shares of common stock to be issued
         and sold pursuant to the 1992 Stock Option Plan that was adopted by the
         Company on September  27, 1992.  Generally,  of the options  under this
         plan  granted,  60% vested on May 1, 1994 and the  remainder  vested on
         November 1, 1995. Vesting provisions for any additional options will be
         determined  by the Board of Directors of the Company at the time of the
         grant of such options.  The stock options are exercisable over a period
         determined by the Board of Directors or its Compensation Committee, but
         no longer than ten years after the date granted.

         During the fiscal year ended  September 26, 1993,  the Company  adopted
         the 1992  Non-Qualified  Stock Option Plan  available  for  non-officer
         directors.  This plan provides  that  directors who are not officers of
         the Company are entitled to forego up to 100% of their annual  retainer
         in exchange  for options to purchase the  Company's  common stock at an
         option price of 50% of the market price of the underlying  common stock
         at the date of grant.  The options are  exercisable  for a period of 10
         years starting with the date of the grant of each option.

         During the fiscal year ended October 2, 1994,  the Company  adopted the
         1994 Stock  Option Plan  available  for certain  key  employees  of the
         Company.  The  Company has  reserved  approximately  812,000  shares of
         common stock to be issued under this plan,  provided that the aggregate
         number of options that may be granted  under the 1994 Stock Option Plan
         and all other stock option plans of the Company for  employees  may not
         at  any  time  exceed  in the  aggregate  15%  of  the  then  currently
         authorized common stock  outstanding,  on a fully diluted basis.  Stock
         options  granted under this plan are  exercisable  until not later than
         January 1, 2004.

         During the fiscal year ended  September 29, 1996,  the Company  adopted
         the 1995 Non-Qualified Stock Option Plan available for directors.  Each
         director  is  granted  an  option  to  purchase  10,000  shares  of the
         Company's  common  stock in the case of the  initial  grant  and  5,000
         shares for any  subsequent  grant.  The initial grant occurred upon the
         adoption of this plan or, in the case of new  directors,  30 days after
         becoming an eligible  director of the Company.  Options  granted  under
         this plan have a term of three years and may be  exercised  nine months
         after the date of the grant. This plan terminates on February 14, 2006.
         No director who is not an officer of the Company may receive options to
         purchase more than an aggregate of 10,000 shares of Common Stock in any
         calendar year under all of the Company's Stock Option Plans.

         The fair value of each  option  grant is  estimated  on the date of the
         grant using the Black-Scholes  option-pricing  model with the following
         weighted-average  assumptions  used for grants in fiscal years 1996 and
         1997, respectively: expected volatility of 45.89% and dividend yield of
         0% for both years,  risk-free  interest  rates of 5.656% and 6.042% and
         expected  life of 10 years except for the 1995 Plan options  which have
         an expected life of 3 years.
<PAGE>

         The following table  summarizes all stock option  transactions  for the
         Fiscal years ended September 28, 1997 and September 29, 1996:

<TABLE>
<CAPTION>

                                                        Fiscal 1997                            Fiscal 1996
                                              --------------------------------       -------------------------------
                                                          Weighted-Average                          Weighted-Average
                                              Shares       Exercise Price            Shares          Exercise Price
                                             ---------------------------------       -------------------------------
<S>                                          <C>                   <C>              <C>                   <C>  
Outstanding at Beginning of Year             1,707,973             $3.45            1,650,561             $3.45
Grants                                         296,570             $2.89               93,000             $3.39
Exercised                                            -                 -               (6,862)            $2.94
Forfeited                                     (109,293)            $3.48              (28,726)            $3.60
                                             ---------                              ---------                  
Outstanding at End of Year                   1,895,250             $3.36            1,707,973             $3.45
                                             =========                              =========                  
Exercisable at End of Year                   1,603,676                              1,484,502
                                             =========                              =========
Weighted-average fair value of
  options granted during the year             $   1.75                                $  0.99
</TABLE>

         The  following  table  summarizes  information  about stock  options at
         September 28, 1997:
<TABLE>
<CAPTION>

                                            Options Outstanding                                 Options Exercisable
                       -------------------------------------------------------   -------------------------------------
                           Number         Weighted-Average    Weighted-Average        Number          Weighted-Average
Range of Exercise      Outstanding at         Remaining          Exercise         Exercisable at        Exercise
Prices                     9/28/97        Contractual Life         Price              9/28/97              Price
                       --------------     ----------------    ----------------     --------------     ----------------
<S>                        <C>                <C>                  <C>                <C>                    <C>  
$2.625 - $3.125            670,772            6.8 Years            $2.80              387,198                $2.76
$3.250 - $4.000            742,452            5.9 Years            $3.37              738,452                $3.36
$4.125 - $4.500            482,026            6.0 Years            $4.13              478,026                $4.13
                         ---------                                                  ---------
                         1,895,250            6.3 Years            $3.36            1,603,676                $3.44
                         =========                                                  =========
</TABLE>

         Employee Stock Ownership Plan

         The  Company  has  established  the  Uniroyal  Technology   Corporation
         Employee Stock  Ownership Plan (the "ESOP").  The ESOP is a stock bonus
         plan  intended  to  encourage  eligible  employees  to save  for  their
         retirement and to increase their proprietary interest in the Company by
         accumulating  the Company's  common stock.  Employees  eligible for the
         initial  distribution  generally  were all  employees  employed  by the
         Company on or after January 1, 1993,  excluding  executive  officers of
         the Company.

         The Company made an initial  contribution to the ESOP of 425,000 shares
         of common stock. Future contributions by the Company are discretionary.
         The initial  contribution  has been allocated to eligible  employees of
         the Company  ratably based upon the respective  compensation  levels of
         the eligible  employees.  Shares allocated to each participant  account
         under the ESOP will become vested upon the participant's  completion of
         three years of cumulative service with the Company. The Company did not
         make any  contributions  to the ESOP  during  the  fiscal  years  ended
         September 28, 1997, September 29, 1996 and October 1, 1995. The Company
         did not have any ESOP expense  during the fiscal years ended  September
         28, 1997, September 29, 1996 and October 1, 1995.

12.      EMPLOYEE COMPENSATION

         Post-retirement Health Care and Life Insurance Benefits

         Certain retired employees are currently  provided with specified health
         care and life  insurance  benefits.  Generally,  the plan  provides for
         reimbursement of approved medical and prescription drug costs not fully
         covered by Medicare. The plan also provides for certain deductibles and
         co-payments. The life insurance benefits provide for amounts based upon
         the retirees' compensation at the time of their retirement. Eligibility
         requirements for such benefits vary by division,  but generally provide
         that benefits are available to employees who retire after a certain age
         with specified years of service or a combined total of age and years of
         service.  The Company has the right to modify or  terminate  certain of
         these  benefits.  The  Company's  policy is to pay the actual  expenses
         incurred  by the  retirees;  the  Company  does not  intend to fund any
         amounts in excess of those  obligations.  The Company is also obligated
         to provide benefits to certain salaried  retirees of Uniroyal  Plastics
         Company,  Inc.  ("UPC") which is currently in  liquidation  proceedings
         under Chapter 7 of the U.S.  Bankruptcy Code and is an affiliate of the
         Predecessor   Companies   (defined  in  Note  13)  or  Uniroyal,   Inc.
         ("Uniroyal")  (not  affiliated  with the Company) who are class members
         under a federal  district court order.  The Company and Uniroyal agreed
         to share on a  35%-65%  basis,  respectively,  the  costs of  providing
         medical,  prescription  drug  and  life  insurance  benefits  to  these
         retirees.  The  Company  is further  obligated  to make  payments  to a
         Voluntary Employee Benefits Association ("VEBA") established to provide
         benefits to certain retirees of the Predecessor Companies and UPC.

         The  Company  adopted  SFAS No. 106 as of  September  27,  1992,  which
         requires that the cost of the  foregoing  benefits be recognized in the
         Company's  consolidated financial statements over an employee's service
         period with the Company.  The Company  determined  that the accumulated
         post-retirement benefit obligation  ("Transition  Obligation") of these
         plans  upon  adoption  of SFAS No.  106 was  $28,085,000.  The  Company
         elected  to defer the  recognition  of the  Transition  Obligation  and
         amortize it over the greater of the average remaining service period or
         life  expectancy  period of the  participants,  which is expected to be
         approximately  16 years.  In connection with the Ensolite Sale (Note 5)
         the  Company  recognized  approximately  $4,500,000  of the  Transition
         Obligation  relating to this employee group as reduction to the gain on
         the sale. In connection with the sale of the automotive division of the
         Coated Fabrics Segment (Note 14), the Company recognized  approximately
         $3,600,000  in  Fiscal  1996 of the  Transition  Obligation  and  other
         expenses relating to this employee group.

         The following  table  summarizes the  accumulated  post-retirement  and
         benefit  obligation  included  in  the  Company's  balance  sheets  (in
         thousands):
<TABLE>
<CAPTION>

                                                                            September 28,           September 29,
                                                                                1997                    1996
                                                                         ------------------      ------------------
<S>                                                                         <C>                     <C>
          Accumulated post-retirement benefit obligation:
            Retirees                                                       $ 25,925                 $ 25,919
            Fully eligible active plan participants                           5,939                    4,836
            Other active plan participants                                    2,357                    2,904
            Unrecognized prior service cost                                     276                      290
            Unamortized transition obligation                               (12,250)                 (16,613)
            Unrecognized net loss                                            (7,562)                  (6,859)
                                                                           --------                 --------
            Accrued post-retirement benefit obligation                     $ 14,685                 $ 10,477
                                                                           ========                 ========
</TABLE>

         The net periodic  post-retirement  benefit cost  contains the following
         components (in thousands):
<TABLE>
<CAPTION>

                                                                          Fiscal Years Ended
                                                       --------------------------------------------------------------
                                                          September 28,         September 29,         October 1, 
                                                              1997                  1996                1995 
                                                       -------------------    ------------------    -----------------
          <S>                                                <C>                   <C>                <C>

          Service cost                                       $     67              $    205           $    196
          Interest cost on projected benefit
            obligation                                          2,315                 2,366              2,202
          Amortization of unrecognized transition
            obligation                                          1,134                 1,651              1,755
          Other - net                                             191                   362                140
                                                             --------              --------           --------
          Net periodic post-retirement benefit
            cost                                             $  3,707              $  4,584           $  4,293
                                                             ========              ========           ========

</TABLE>
         All post-retirement  benefits are based on actual costs incurred except
         for a certain  group of retirees  which is covered  under an  agreement
         providing   payments  based  on  the  number  of   beneficiaries.   For
         measurement  purposes,  an approximate  6.1% annual rate of increase in
         the cost of covered  health  care  benefits  was  assumed for years one
         through  two,  approximately  5.9% for  years  three  through  five and
         approximately  4.9%  thereafter.   The  health  care  cost  trend  rate
         assumption  has a  significant  effect  on the  amounts  reported.  For
         example,  increasing the health care trend rate by one percentage point
         in each year would  increase the  accumulated  post-retirement  benefit
         obligation as of September 28, 1997 by $2,263,000  and the net periodic
         post-retirement benefit cost by $179,000.

         The weighted  average discount rate used in determining the accumulated
         post-retirement benefit obligation for the fiscal years ended September
         28, 1997 and September 29, 1996 was 7.0% and 7.75%,  respectively.  The
         weighted  average  discount rate used in  determining  the net periodic
         post-retirement  benefit cost for the fiscal years ended  September 28,
         1997,  September 29, 1996 and October 1, 1995 was 7.75%, 7.0% and 7.0%,
         respectively.

         Other Benefit Plans

         The  Royalite,  UEP and UAS  divisions  provide  additional  retirement
         benefits  to  substantially  all of their  employees  and the  Polycast
         Division provides such benefits to certain of its employees through two
         defined  contribution  savings  plans.  The plans  provide for employee
         contributions and employer matching  contributions to employee savings.
         Employer  contributions are generally either 2% of salaried and certain
         non-union hourly participants' gross earnings or rates per hour ranging
         generally  from $.05 to $.51 based on years of  service.  The  expenses
         pertaining to these plans amounted to approximately $649,000,  $699,000
         and  $670,000  for the  fiscal  years  ended  in 1997,  1996 and  1995,
         respectively.

         In addition,  the Company  provides a savings plan under Section 401(k)
         of the  Internal  Revenue  Code.  The savings  plan covers all eligible
         salaried and non-union wage employees of the Company.  The savings plan
         allows all  eligible  employees to defer up to 15% of their income on a
         pre-tax basis  through  contributions  to the savings  plan.  For every
         dollar an employee  contributes,  the Company may  contribute an amount
         equal to 25% of each  participant's  before-tax  obligation up to 6% of
         the participant's compensation.  Such employer contribution may be made
         in cash or in Company  common  stock.  The expenses  pertaining to this
         savings plan were approximately $141,000, $228,000 and $174,000 for the
         fiscal years ended 1997, 1996 and 1995.  During Fiscal 1996 the Company
         contributed  60,648  shares of its common  stock with a market value of
         approximately  $212,000 to the savings  plan.  The Company did not make
         any such contributions during the fiscal years ended 1997 and 1995.

13.      COMMITMENTS AND CONTINGENCIES

         Bankruptcy Proceedings

         On September  27, 1992 the company  acquired the  businesses of certain
         direct and indirect subsidiaries of The Jesup Group, Inc. ("Jesup") for
         $54,400,000  of  the  Company's  common  and  preferred  stocks.  These
         subsidiaries  (collectively,   the  "Predecessor  Companies")  are  the
         current operating divisions of the Company.  The Predecessor  Companies
         previously filed petitions with the United States  Bankruptcy Court for
         the Northern District of Indiana,  South Bend Division (the "Bankruptcy
         Court") seeking protection from their creditors under Chapter 11 of the
         United States  Bankruptcy Code. On August 20, 1992 the Bankruptcy Court
         approved the Third Amended Plan of  Reorganization  under Chapter 11 of
         the  Bankruptcy  Code  for  Polycast  Technology  Corporation  and  its
         Affiliated Debtors (the "Plan"). The Plan was substantially consummated
         at the close of business on September 27, 1992 (the "Effective Date").

         As a  result  of the  bankruptcy  and the  consummation  of the Plan at
         September 27 1992, the Company recorded certain  adjustments to present
         its  consolidated   financial  statements  at  September  27,  1992  in
         conformity  with  Statement of Position  90-7  "Financial  Reporting by
         Entities in Reorganization  Under the Bankruptcy Code" ("SOP 90-7"), of
         the  American  Institute  of Certified  Public  Accountants.  Under the
         provisions  of SOP 90-7,  the Company was required to adopt fresh start
         reporting as of September 27, 1992 because (i) the reorganization value
         of the Company  (approximate fair value on the Effective Date) was less
         than  the  total  of all  post-petition  liabilities  and  pre-petition
         allowed claims and (ii) holders of the voting shares of the Predecessor
         Companies before the Effective Date received less than 50 percent (50%)
         of the voting shares of the Company.

         Notwithstanding  the confirmation and  effectiveness of the Predecessor
         Companies'  Plan, the Bankruptcy  Court continues to have  jurisdiction
         to, among other things,  resolve  disputed  pre-petition  claims and to
         resolve other  matters that may arise in  connection  with or relate to
         the  Predecessor  Companies'  Plan.  The Company has resolved,  through
         negotiation or through dismissal by the Bankruptcy Court, approximately
         $38,000,000 in disputed  claims.  Approximately  9,666,000  shares have
         been issued to the holders of unsecured  claims against the Predecessor
         Companies in settlement  of the allowed  unsecured  claims  against the
         estates of the  Predecessor  Companies and to the Company's  ESOP.  The
         Company retained  approximately 86,000 shares of common stock which are
         included in treasury stock. The remaining approximate 334,000 shares of
         the  original  10,000,000  shares  allocated  for  the  disposition  of
         bankruptcy  claims  are  being  held  pending   resolution  of  certain
         miscellaneous claims.

         Litigation

         Approximately  130 hourly  employees  at the  Company's  acrylic  sheet
         manufacturing  facility in Stamford,  Connecticut  are  represented  by
         Teamsters  Local  191,  which  is  affiliated  with  the  International
         Brotherhood  of  Teamsters,  Chauffeurs,  Warehousemen  and  Helpers of
         America  (the  "Teamsters").  The  Teamsters  declared a strike on July
         11,1994  and called off the strike  December  10,1994.  The Company and
         Teamsters  settled  their dispute in June 1996.  The Company  agreed to
         settle the claim of the striking  employees  for back pay following the
         receipt of release of claims from such  employees.  The Company settled
         its  obligation  to the  employees  in August  1996  with a payment  of
         approximately $808,000, inclusive of employment taxes of $58,000.

         The Company is also  engaged in  litigation  arising  from the ordinary
         course of business.  Management  believes the ultimate  outcome of such
         litigation  will not have a material  adverse effect upon the Company's
         results of operations, cash flows or financial position.

         Environmental Factors

         The Company is subject to a wide range of federal, state and local laws
         and  regulations  designed to protect the environment and worker health
         and safety. The Company's management  emphasizes  compliance with these
         laws and  regulations.  The Company has instituted  programs to provide
         guidance and training and to audit compliance with  environmental  laws
         and  regulations at Company owned or leased  facilities.  The Company's
         policy  is to  accrue  environmental  and  cleanup-related  costs  of a
         non-capital  nature when it is probable  both that a liability has been
         incurred and that the amount can be reasonably estimated.

         The  Company  may  become   subject  to  claims   relating  to  certain
         environmental  matters. The operations of the Predecessor Companies and
         certain of their  affiliates  produced waste materials  that,  prior to
         1980, were disposed of at some 36 known  unregulated  sites  throughout
         the United  States.  After 1980,  waste  disposal  was limited to sites
         permitted under federal and state  environmental  laws and regulations.
         If any of the disposal sites (unregulated or regulated) are found to be
         releasing  hazardous  substances  into the  environment,  under current
         federal and state  environmental laws, the appropriate company might be
         subject to liability for cleanup and containment costs.

         Prior to the effective date of the Predecessor Companies' Plan, several
         sites were  identified  where there were potential  liabilities for the
         cost of  environmental  cleanup.  In  most  instances,  this  potential
         liability  resulted  from  the  alleged  arrangement  for the  off-site
         disposal of hazardous substances by Uniroyal, Inc.

         Pursuant to a settlement agreement with the United States Environmental
         Protection Agency ("EPA"), the United States Department of the Interior
         and  the  States  of  Wisconsin   and  Indiana  (the  "EPA   Settlement
         Agreement"),  entered into in connection with the Plan, the Predecessor
         Companies  compromised and settled (in exchange for common stock of the
         Company)  substantially  all of  the  pre-petition  liabilities  of the
         Predecessor  Companies and the Company relating to disposal  activities
         under Sections 106 and 107 of the Comprehensive  Environmental Response
         Compensation and Liability Act ("CERCLA"), Section 3008 of the Resource
         Conservation  and  Recovery  Act  ("RCRA")  and similar  state laws for
         cleanup of the remaining unsettled 20 designated sites not owned by any
         of the  Predecessor  Companies  (the  "Known  Sites")  and for  natural
         resource  damages  at 15 of the 20  Known  Sites.  Pursuant  to the EPA
         Settlement  Agreement,   the  Predecessor  Companies  and  the  Company
         received from the United States and the States of Indiana and Wisconsin
         a covenant not to sue for  response  costs and,  with the  exception of
         five Known Sites,  natural resource damages at each of the Known Sites.
         In addition,  pursuant to Section 113(f)(2) of CERCLA,  and as provided
         under the EPA Settlement  Agreement,  the Predecessor Companies and the
         Company will be protected against  contribution claims filed by private
         parties  for any Known Site for matters  covered by the EPA  Settlement
         Agreement. The EPA Settlement Agreement established a mechanism for the
         Company to resolve its liability for any other sites,  except for those
         owned  by  the  Company   (the   "Additional   Sites"),   arising  from
         pre-petition  disposal activity.  The Company also agreed to share with
         such  parties the  proceeds of claims  relating to the known sites made
         against  certain  insurers  of  the  Predecessor  Companies  and  their
         affiliates.

         In the event that the United  States,  or the State of Wisconsin or the
         State  of  Indiana  asserts  a  claim  against  any of the  Predecessor
         Companies  or  the  Company  for   response   costs   associated   with
         pre-petition   disposal   activities  at  any   Additional   Site,  the
         governmental party will be entitled to pursue its claim in the ordinary
         course, and the Company and the Predecessor  Companies will be entitled
         to assert all of their  defenses.  However,  if and when the Company or
         any of the Predecessor  Companies is held liable,  and if the liability
         is  determined  to arise from  pre-petition  disposal  activities,  the
         Company or such  Predecessor  Company may pay the claims in  discounted
         "plan dollars"  (i.e.,  the value of the  consideration  that the party
         asserting  such claim would have received if the liability were treated
         as a general  unsecured claim under the Plan). Such payment may be made
         in cash or securities,  or a combination  thereof,  at the Company's or
         such Predecessor Company's option. The Company is not aware of any such
         claims related to Additional Sites.

         Claims arising from real property owned by the Company are not affected
         by the EPA Settlement Agreement.  In connection with the acquisition of
         a manufacturing  facility in South Bend,  Indiana,  the Company assumed
         costs of remediation of soil and ground water  contamination  which the
         Company   estimates  will  cost  not  more  than   $1,000,000   over  a
         five-to-seven  year  period.  The Company has placed  $1,000,000  in an
         escrow  account to be used for such  clean-up  in  accordance  with the
         terms of the purchase agreement.  As of September 28, 1997, the Company
         had incurred approximately $235,000 of related remediation costs.

         The Company's  acquisition of assets of Townsend  Plastics in September
         1997 (Note 6) included the  building in which the business  operates in
         Pleasant Hill,  Iowa. The seller retained the underlying real property,
         which is leased to the  Company  for a term of ten years.  The  Company
         also has an option to acquire such real  property  until  September 30,
         2007.   The   real   property   is   subject   to   a   RCRA   Facility
         Investigation/Corrective  Measures Study with Interim Measurers ordered
         by the EPA  pursuant to RCRA.  Two former  lessees of the  property are
         performing  corrective  measures on the real property to remediate soil
         and ground water  contamination.  The Company does not anticipate  that
         such  corrective  measures will interfere with the Company's use of the
         property.  The Company does not anticipate any liability to the Company
         in connection with such contamination or corrective measures as long as
         the Company remains a lessee of the property.

         Based on  information  available as of September 28, 1997,  the Company
         believes that the costs of known environmental matters either have been
         adequately  provided  for or are  unlikely  to have a material  adverse
         effect on the Company's operations, cash flows or financial position.

         Leases

         The Company is a party to  non-cancelable  lease  agreements  involving
         equipment.  The  leases  extend for  varying  periods up to 5 years and
         generally  provide for the payment of taxes,  insurance and maintenance
         by the  lessee.  Generally  these  leases  have  options to purchase at
         varying dates.

         The  Company's  property  held under  capitalized  leases,  included in
         property,  plant and  equipment  (Note 4) consists of the following (in
         thousands):
<TABLE>
<CAPTION>
                                                                            September 28,          September 29,
                                                                                1997                   1996
                                                                         -----------------       ----------------

<S>                                                                       <C>                      <C>
          Machinery, equipment and office furnishing                      $  2,397                 $  1,445
          Construction in progress                                               -                      969
          Less accumulated amortization                                       (568)                    (308)
                                                                          --------                 --------
                                                                          $  1,829                 $  2,106
                                                                          ========                 ========
</TABLE>

         The   approximate   minimum  future  lease   obligations  on  long-term
         non-cancelable  capital lease  obligations  included in long-term  debt
         (Note 9) during  subsequent  fiscal years  ending in  September  are as
         follows (in thousands):
<TABLE>
<CAPTION>
                            Fiscal Year
                              <S>                                               <C>
                              1998                                              $    491
                              1999                                                   182
                              2000                                                   128
                              2001                                                    10
                                                                                --------
                                                                                     811
                              Less imputed interest                                   74
                                                                                --------
                                Total                                           $    737
                                                                                ========
</TABLE>

         Interest is imputed  using the rate that would equate the present value
         of  the  minimum  lease  payments  to the  fair  value  of  the  leased
         equipment.

         The Company leases  equipment,  vehicles and warehouse and office space
         under  various  lease  agreements,  certain  of which  are  subject  to
         escalations  based upon  increases in specified  operating  expenses or
         increases in the Consumer Price Index.  The approximate  future minimum
         rentals under non-cancelable  operating leases during subsequent fiscal
         years ending in September are as follows (in thousands):
<TABLE>
<CAPTION>
                            Fiscal Year
                              <S>                                               <C>
                              1998                                              $    886
                              1999                                                   492
                              2000                                                   444
                              2001                                                    80
                              2002                                                    41
                              Subsequent years                                        21
                                                                                --------
                                Total                                           $  1,964
                                                                                ========
</TABLE>

         Rent expense was  approximately  $1,264,000,  $1,592,000 and $1,643,000
         for the years ended September 28, 1997,  September 29, 1996 and October
         1, 1995 respectively.

         Officers' Compensation

         On August 1, 1995 the Company implemented a Deferred  Compensation Plan
         providing  certain key employees the  opportunity  to participate in an
         unfunded deferred compensation program. Under the program, participants
         may defer a portion of their base  compensation and bonuses earned each
         year. Amounts deferred will earn interest at 12% per annum. The program
         is not  qualified  under  Section 401 of the Internal  Revenue Code. At
         September 28, 1997 and September 29, 1996  participant  deferrals which
         are  included  in  accrued   liabilities  were  $334,000  and  $173,000
         respectively.  The expense  during the fiscal year ended  September 28,
         1997, September 29, 1996 and October 1, 1995 was $161,000, $156,000 and
         $17,000, respectively.

         Also during the fiscal year ended  October 1, 1995,  split  dollar life
         insurance  contracts  were purchased on the lives of the five executive
         officers.  Insurance  premiums of $186,000 were paid during each of the
         fiscal years ended  September 28, 1997 and September 29, 1996, of which
         $531,000 and $356,000,  respectively,  has been  capitalized to reflect
         the cash surrender value of these contracts net of loan balances.

         As of September 28, 1997,  the Company had  employment  contracts  with
         four officers of the Company,  providing  for total annual  payments of
         approximately $1,453,000 plus bonuses through September 1, 1998.

14.      AGREEMENT TO  SELL  CERTAIN ASSETS OF  THE AUTOMOTIVE  DIVISION OF THE
           COATED FABRICS SEGMENT

         During the fourth  quarter of Fiscal  1996  Management  of the  Company
         concluded  that,  based not only on its  decision to sell,  but also on
         discussions with interested buyers, a sale of the automotive  operation
         of the Coated Fabrics  Segment was probable.  Further,  on December 11,
         1996, the Board of Directors  approved the closure of the Port Clinton,
         Ohio operation  ("Port  Clinton") of the Coated Fabrics  Segment during
         the fiscal year ending  September  28, 1997 in the event a sale did not
         occur.   Port  Clinton  incurred   operating  losses  of  approximately
         $7,640,000 and $5,540,000  during the fiscal years ended  September 29,
         1996 and October 1, 1995.

         In accordance  with SFAS No. 121, the Company  recorded a write-down of
         long-lived  assets of the facility  totaling  approximately  $8,900,000
         during the fiscal year ended  September 29, 1996. The carrying value of
         the long-lived  assets to be disposed of was $9,346,000 as of September
         28, 1997 and $10,832,000 as of September 29, 1996.

         In connection with the probable sale of the automotive operation of the
         Coated  Fabrics  Segment in Fiscal  1996,  Management  believed  that a
         curtailment would result from the associated  expected reduction in the
         plan  participants.  In  accordance  with  SFAS No.  106,  the  Company
         recognized approximately $3,600,000 of a curtailment loss in connection
         with the  probable  sale of the  Coated  Fabrics  Segment's  automotive
         operation during the fiscal year ended September 29, 1996.

         On May 15,  1997 the  Company  agreed  to sell  certain  assets  of the
         automotive  division  of the  Coated  Fabrics  Segment  located  at the
         Company's Stoughton,  Wisconsin, facility ("Stoughton") to Textileather
         Corporation,  a subsidiary of Canadian  General-Tower,  Limited ("CGT")
         for $6,657,500.  The Company received $4,657,500 in cash and a holdback
         of $2,000,000  to be paid  pursuant to the terms of a supply  agreement
         and to bear  interest  at the rate of 9% per annum.  Under the terms of
         the supply agreement, the Company has agreed to continue to manufacture
         and  supply  Stoughton  automotive  products  to  its  customers  until
         Textileather  Corporation  can  transfer  production  of the  Stoughton
         automotive  products to its own facility.  The $2,000,000  plus accrued
         interest  is  payable  in stages  and  contingent  upon the  successful
         transfer of certain  automotive  programs to Textileather  Corporation.
         The first installment was due September 30, 1997. The Company requested
         payment and was denied payment by CGT. On October 10, 1997, the Company
         filed suit against CGT and Textileather Corporation in the Dane County,
         Wisconsin Circuit Court. The Company is seeking damages for non-payment
         of the holdback and declaratory and injunctive  relief.  On October 30,
         1997, the defendants filed their answer,  basically denying the claims.
         Discovery has begun in this matter.  Due to its  contingent  nature and
         associated  litigation,  the Company has not  recorded  the  $2,000,000
         holdback receivable as of September 28, 1997. The Company can also earn
         up to an additional $1,198,000 under this agreement upon realization of
         certain  sales  (as  outlined  in  the   agreement)   by   Textileather
         Corporation during Fiscal 1998.

         On October 17, 1997 the Company  further  agreed to sell certain assets
         at Port  Clinton  to CGT for  $5,325,000  plus the  value of  purchased
         inventories and plus or minus adjustments  contingent upon the transfer
         of certain  automotive  programs  to CGT as  defined in the  agreement.
         Under the agreement with CGT the Company  should receive  $4,270,000 in
         June of 1998 upon obtaining  certain  customer  approvals and resulting
         transfer to CGT of purchased  assets that relate to the Company's  door
         panel  programs.  The Company should receive  $1,055,000 in December of
         1998 upon obtaining certain customer  approvals and resulting  transfer
         to CGT of  purchased  assets  that relate to the  Company's  instrument
         panel programs.

         Management  believes  that the  write-down to  long-lived  assets,  the
         curtailment loss and other reserves recorded relating to this agreement
         for sale remain  appropriate  at September 28, 1997,  the net effect of
         which  resulted in no  significant  gain or loss during the fiscal year
         ended September 28, 1997. Other than the potential  contingent payments
         that the Company may receive, Management believes that the Company will
         not  have  any  further  significant  gain or loss  upon  the  ultimate
         completion of the sale.

15.      RELATED PARTY TRANSACTIONS

         The Company  has an  agreement  with an  investment  banking  firm that
         employs a relative  of one of the  Company's  executive  officers.  The
         agreement  retains the  investment  banking  firm to provide  financial
         advisory services to the Company for the period January 1, 1997 through
         December  31,  2000.  The  Company  incurred  expenses  related to this
         agreement  of  approximately  $274,000  during  the  fiscal  year ended
         September 28, 1997 and $258,000  related to a similar  agreement during
         the fiscal year ended  September  29, 1996.  In  addition,  see Note 16
         regarding a related  party  transaction  that  occurred  subsequent  to
         September 28, 1997.

16.      SUBSEQUENT EVENT

         Through a technology  license dated September 29, 1997, the Company has
         acquired from Emcore Corporation  ("Emcore") certain technology for the
         manufacture of epitaxial  wafers used in high brightness light emitting
         diodes   (LEDs)  for  lamps  and  display   devices  for  license  fees
         aggregating up to approximately $5 million during Fiscal 1998. A wholly
         owned  subsidiary  of the Company  plans to enter into a joint  venture
         agreement with Emcore,  whereby a joint  venture,  to be managed by the
         subsidiary of the Company,  will purchase machines from Emcore and will
         sell and eventually  manufacture  epitaxial  wafers,  lamps and display
         devices.  Thomas J. Russell,  the Chairman of the Board of Directors of
         Emcore, is a director and major stockholder of the Company,  and Howard
         R. Curd,  the  Chairman of the Board of Directors  and Chief  Executive
         Officer of the Company, is a director of Emcore.

<PAGE>


17.      SEGMENT INFORMATION

         Identifiable assets by segment are those assets that are used solely in
         the Company's  operations  in each segment.  The Company did not derive
         10% or more of its sales  from any  single  customer  during the fiscal
         years ended September 28, 1997, September 29, 1996 and October 1, 1995.

         Segment data for the fiscal years ended  September 28, 1997,  September
         29, 1996 and October 1, 1995 are as follows (in millions):
<TABLE>
<CAPTION>
                                                                        Fiscal Years Ended
                                                     --------------------------------------------------------------
                                                      September 28,             September 29,         October 1,
                                                          1997                      1996                1995
                                                     ---------------         ------------------    ---------------
         <S>                                           <C>                      <C>                    <C>
         Net sales:
           High performance plastics                   $  118.8                 $  115.1               $  112.2
           Coated fabrics                                  68.8                     58.7                   56.1
           Specialty adhesives                             20.9                     35.5                   46.7
                                                       --------                 --------               --------
             Total                                     $  208.5                 $  209.3               $  215.0
                                                       ========                 ========               ========
         Operating income (loss):
           High performance plastics                   $   10.5                 $    7.0               $   13.0
           Coated fabrics                                   2.1                    (19.0)                  (4.9)
           Specialty adhesives                             (0.3)                     0.1                    2.1
           Unallocated                                     (1.7)                    (0.8)                  (0.7)
                                                       --------                 --------               --------
             Total                                     $   10.6                 $  (12.7)              $    9.5
                                                       ========                 ========               ========
         Identifiable assets:
           High performance plastics                   $   92.0                 $   80.9               $   80.1
           Coated fabrics                                  43.7                     46.4                   51.0
           Specialty adhesives                             15.0                      9.3                   24.9
           Corporate                                       30.8                     34.2                   24.5
                                                       ========                 ========               ========
             Total                                     $  181.5                 $  170.8               $  180.5
                                                       ========                 ========               ========
         Depreciation and amortization:
           High performance plastics                   $    4.9                 $    4.4               $    4.0
           Coated fabrics                                   1.9                      3.7                    3.6
           Specialty adhesives                              0.9                      1.6                    1.9
           Unallocated                                      1.4                      0.9                    0.8
                                                       ========                 ========               ========
             Total                                     $    9.1                 $   10.6               $   10.3
                                                       ========                 ========               ========
         Capital expenditures:
           High performance plastics                   $    3.0                 $    3.9               $    4.5
           Coated fabrics                                   1.2                      2.4                    1.3
           Specialty adhesives                              7.3                      1.8                    0.8
           Corporate                                        0.8                      2.0                    2.2
                                                       --------                 --------               --------
             Total                                     $   12.3                 $   10.1               $    8.8
                                                       ========                 ========               ========
</TABLE>

<PAGE>


INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
Uniroyal Technology Corporation
Sarasota, Florida

We  have  audited  the  consolidated   balance  sheets  of  Uniroyal  Technology
Corporation  and  subsidiary  (the  "Company")  as of  September  28,  1997  and
September  29, 1996,  and the related  consolidated  statements  of  operations,
changes in stockholders' equity and cash flows for the years ended September 28,
1997, September 29, 1996, and October 1, 1995 and have issued our report thereon
dated December 12, 1997  (included in this Form 10-K).  Our audits also included
the accompanying  consolidated financial statement schedule listed in Item 14 of
this  Form  10-K.  This  consolidated   financial   statement  schedule  is  the
responsibility of the Company's management.  Our responsibility is to express an
opinion  based  on our  audits.  In our  opinion,  such  consolidated  financial
statement  schedule,  when  considered  in  relation  to the basic  consolidated
financial statements taken as a whole,  presents fairly in all material respects
the information set forth therein.



/S/ DELOITTE & TOUCHE LLP
-------------------------
DELOITTE & TOUCHE LLP
Tampa, Florida
December 12, 1997



 <PAGE>
<TABLE>
<CAPTION>
                                                                                                              SCHEDULE II


                                                   UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARY
                                                         VALUATION AND QUALIFYING ACCOUNTS
                                                                 (in thousands)




                                          COLUMN A          COLUMN B          COLUMN C        COLUMN D       COLUMN E
                                          --------          --------          --------        --------       --------

                                                                              ADDITIONS
                                            BALANCE AT    CHARGED (CREDITED)   CHARGED
                                           BEGINNING OF       TO COSTS AND     TO OTHER                   BALANCE AT
                                              PERIOD           EXPENSES         ACCTS.     DEDUCTION     END OF PERIOD
              DESCRIPTION
                                                                                (a)           (b)

<S>                                           <C>              <C>           <C>          <C>               <C>
  Year ended September 28, 1997
    Estimated reserve for
    doubtful accounts                         $    369         $      -      $     53     $   (165)         $    257
                                              ========         ========      ========     ========          ========
  Year ended September 29, 1996
    Estimated reserve for
    doubtful accounts                         $    437         $     (6)     $     27     $    (89)         $    369
                                              ========         ========      ========     ========          ========

  Year ended October 1, 1995
    Estimated reserve for
    doubtful accounts                         $    629         $   (217)     $    114     $    (89)         $    437
                                              ========         ========      ========     ========          ========

<FN>

(a)       Amount represents recovery of amounts previously written-off.
(b)       Amount includes write-off of uncollectible accounts.
</FN>
</TABLE>





                                       
<PAGE>

                                   SIGNATURES

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

                          UNIROYAL TECHNOLOGY CORPORATION



Date:  December 19, 1997                           By:  /S/ Howard R. Curd
                                                        ------------------
                                                        Howard R. Curd, Chief
                                                          Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.




/S/ Robert L. Soran                       /S/ Curtis L. Mack    
-------------------------------           --------------------------------------
Robert L. Soran, Director, President      Curtis L. Mack, Director
  and Chief Operating Officer             Date:  December 19, 1997
Date:  December 19, 1997



/S/ George J. Zulanas                     /S/ Roland H. Meyer
-----------------------                   -------------------------------------
George J. Zulanas, Jr., Executive         Roland H. Meyer, Director
  Vice President and Chief                Date:  December 19, 1997
  Financial Officer
Date:  December 19, 1997



/S/ Howard R. Curd                        /S/ John A. Porter
-----------------------                   -------------------------------------
Howard R. Curd, Director, Chairman        John A. Porter, Director
  of the Board and Chief                  Date:  December 19, 1997
  Executive Officer
Date:  December 19, 1997



/S/ Peter C. B. Bynoe                    /S/ Thomas J. Russell
-----------------------                  ---------------------------------------
Peter C. B. Bynoe, Director              Thomas J. Russell, Director
Date:  December 19, 1997                 Date:  December 19, 1997



/S/ Richard D. Kimbel
-----------------------
Richard D. Kimbel, Director
Date:  December 19, 1997


<PAGE>

                                POWER OF ATTORNEY

Each person whose  signature to this report appears below hereby appoints Howard
R. Curd, Robert L. Soran and Oliver J. Janney, and each individually, any one of
whom  may  act  without   the   joinder  of  the   others,   as  his  agent  and
attorney-in-fact  to sign on his behalf  individually and in the capacity stated
below and to file all  amendments  to this report,  which  amendments  make such
changes and additions to this report as such agent and attorney-in-fact may deem
necessary and appropriate.




/S/ Howard R. Curd                             /S/ Peter C. B. Bynoe
-------------------------                      ---------------------------------
Howard R. Curd, Director, Chairman             Peter C.B. Bynoe, Director
  of the Board and Chief                       Date:  December 19, 1997
  Executive Officer
Date:  December 19, 1997



/S/ Robert L. Soran                            /S/ Richard D. Kimbel
-------------------------                      ---------------------------------
Robert L. Soran, Director, President           Richard D. Kimbel, Director
  and Chief Operating Officer                  Date:  December 19, 1997
Date:  December 19, 1997



                                               /S/ Curtis L. Mack
                                               ---------------------------------
                                               Curtis L. Mack, Director
                                               Date:  December 19, 1997



                                               /S/ Roland H. Meyer
                                               ---------------------------------
                                               Roland H. Meyer, Director
                                               Date:  December 19, 1997


                                               /S/ John A. Porter
                                               ---------------------------------
                                               John A. Porter, Director
                                               Date:  December 19, 1997


                                               /S/ Thomas J. Russell
                                               ---------------------------------
                                               Thomas J. Russell, Director
                                               Date:  December 19, 1997