-----------
                                                                        Joule
                                                                     -----------


                                                              1998 Annual Report

<PAGE>


Selected Financial Information                       Joule Inc. and Subsidiaries


<TABLE>
<CAPTION>
                                                     Year Ended September 30,
                                        ------------------------------------------------
                                           1998      1997      1996      1995      1994
                                        ================================================
                                              (In thousands, except per share data)
<S>                                      <C>       <C>       <C>       <C>       <C>    
Revenues .............................   $55,301   $48,590   $48,449   $43,641   $36,216
Net Income ...........................       706     1,066     1,026       938       710
Net Income Per Share Basic and Diluted      0.19      0.29      0.28      0.26      0.20
Total Assets .........................    12,913    10,843    10,809    10,802     8,576
Long Term Debt .......................       381       406       431       456       424
Total Liabilities ....................     6,021     4,657     5,710     6,883     5,609
                                        ================================================
</TABLE>

 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]

                                    Revenues
                                  (In millions)

                              Year
                              ----
                              '94          $ 36.2
                              '95          $ 43.6
                              '96          $ 48.4
                              '97          $ 48.6
                              '98          $ 55.3
        

<PAGE>


To Our Stockholders:


     Fiscal 1998 was once again a year of increasing  revenues for Joule Inc. We
achieved sales growth for the seventh consecutive year,  increasing sales by 14%
and passing the $50 million milestone.  In an industry where much of the revenue
growth being reported is a result of consolidations  and  acquisitions,  100% of
Joule's growth comes from internal,  organic growth--real growth of Joule in its
marketplace.  Our  organization is healthy and  expanding--based  on our service
performance and our strong, positive reputation in an expanding marketplace.

     Revenues for fiscal 1998 reached $55.3 million, an increase of $6.7 million
over fiscal 1997.  All segments of our Company  contributed  positively  to this
growth.  Technical Staffing  generated the greatest increase in revenue,  up 26%
from $13.1  million  in 1997 to $16.5  million  in 1998.  Commercial  Staffing's
revenues  grew by almost $2  million  and  Industrial  Services  increased  $1.4
million in revenue over 1997.  This trend in sales growth  continues into fiscal
1999.

     These  increases in revenue are the direct result of our Company's  program
to aggressively grow in each of our product areas through a combination of staff
expansion, service additions, and expansion of our geographic markets and market
penetration.

     o    Staff  Expansion:  To capitalize on the positive  economic  climate in
          1998, all three segments of our Company  increased  their  recruiting,
          sales  and  operations  staff in  order to  capture  and  service  our
          expanding  customer  requirements.  As  a  result  of  the  increasing
          productivity of new team members over time,  Joule's financial results
          should continue to improve.

     o    Additional Services:  During 1998 significant steps were taken in each
          Product Group to expand and diversify  service  offerings.  Industrial
          Services installed  equipment for Original Equipment  Manufacturers in
          28 states in 1998 and plans to expand  into more states  during  1999.
          Technical Staffing added additional  technical/scientific  disciplines
          and  client  services  during  1998.  Most  significantly,  Commercial
          Staffing's new Shuttle Transportation  Services were a major component
          of  1998's  investment  that  will  give  Joule  a  major  competitive
          advantage in providing  increased temporary personnel resources to our
          clients.  We anticipate this will  accelerate  this segment's  revenue
          growth in 1999 and beyond.

     o    Geographic  Expansion:  Joule  continued to maintain its leadership in
          its    traditional    geographic    market    by    opening    4   new
          Sales/Recruiting/Operations   locations  in  fiscal   1998.   Enhanced
          telemarketing   programs  expanded  our  client  base  regionally  and
          nationally.  Successes in new service  programs,  such as Industrial's
          installation  support programs for Original  Equipment  Manufacturers,
          point the way toward our anticipated growth in other segments.

     These programs represent significant  investments for the future success of
our  Company  and  were  the  major  reason  for  the  lower  operating  margins
experienced  in  1998.  We are  pleased  to  report  that  the  impact  of these
investments  on earnings has come to an end as we close fiscal 1998. As a result
our  Company  will be in a  stronger  earnings  position  once again in 1999 and
beyond.  We also incurred the financial costs relating to a legal matter that we
decided to bring to closure during the last quarter of fiscal 1998,  even though
we believe it was without merit.  1998's final net income of $0.19 per share was
disappointing compared to $0.29 per share in 1997, but we are confident that the
decisions and  investments  made in 1998 will prove to be the  foundation  for a
stronger Joule in 1999.

     Perhaps the most important investment made by Joule this year was the March
1998 announcement of Jack Wellman as our new Chief Operating  Officer.  Jack and
his Senior Management Team have brought a new level of enthusiasm and aggressive
optimism to Joule. There is a new spirit and vitality in our Company,  and as we
enter  fiscal  1999,  you will hear more about the "New  Joule." I have  enjoyed
working with Jack and his team these past eight months,  and I am convinced that
they will guide and direct Joule to new levels in the years ahead.

     Very truly yours,


     /s/ Emanuel N. Logothetis
     -------------------------
     Emanuel N. Logothetis
     Chairman and President

                                                                       page
                                                                       ---------
                                                                       one

<PAGE>


                         Joule solutions
                                   staffing services
               on-site coordination
                                             project management

----------------------------------------
            Commercial

       Services ranging from
     clerical, administrative,
    customer service and light
   industrial staffing to work
         force management.


Administrative--

Office automation support, customer
service personnel, general clerical
and incoming call support.


Light Industrial--

Assembly line/production personnel,
freight forwarding handlers, and
production supervision.
----------------------------------------


----------------------------------------
              Technical

   Offers traditional staffing as
        well as single source
       management programs in
      three core disciplines:
     Engineering, Scientific and
      Information Technology.


Engineering--

Engineers, architects, designers, CAD
operators, inspectors, planners.


Scientific--

Chemists, biologists, clinical
researchers, lab technicians, food
scientists, chemical operators,
statistical programmers, clinical data
coordinators.


Information Technology--

Programmers, system analysts,
network engineers, PC techs, computer
operators, database administrators,
database analysts.
----------------------------------------


----------------------------------------
           Industrial

   On demand, project and work
   force management solutions
  of craft skilled personnel.

Industrial--

Electrician, welder, millwright,
mechanical machinist, mason,
rigger, fitter specialist and other
trade specialists.


Project Solutions--

Nationwide refurbishing and refitting
support of industrial facilities.


Outsourcing--

Term technical maintenance
support of heavy industrial or
manufacturing clients.
----------------------------------------


Company Vision

 . . . JOULE is a publicly  owned  American  Stock  Exchange  technical  staffing
services  company,  founded over 30 years ago, that  specializes in changing the
"fixed  overhead" of Fortune 500  companies  into  "variable  overhead"  through
outsourcing of non-core staffing needs.

     Outsourcing  allows a company to turn over  various  support  positions  to
specialized  outside vendors so that it can concentrate on building and managing
its core  business.  At the same time it enjoys the  benefit of a more  variable
cost structure along with improved quality since the outsourcing  vendor must be
competitive as well as specialized in its field.  Today's global economy demands
that companies  constantly strive to become more efficient and flexible in order
to survive and prosper.

     JOULE  accomplishes  this by supplying  thousands of employees each year to
its customers who are billed on an hourly basis. The staffing  services business
markets through its branches,  using the trademarks  "JOULE Staffing  Services,"
"JOULE Technical Staffing Services," and "JOULE Industrial Services."

     JOULE's  specialized  approach  in  providing  staffing  solutions  greatly
enhances its value and effectiveness in the present competitive environment.

     As companies have re-engineered their operations, market opportunities have
continued to develop for JOULE.  More and more companies in an increasing number
of  industries  are seeking  the  advantages  of  outsourced  staffing,  thereby
improving the quality of their support  services  while also better  controlling
their costs. JOULE believes this trend toward outsourcing will continue to offer
excellent growth opportunities for it in the future.


     page
---------
      two


<PAGE>

 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]

                                 Revenue Growth
                                  (In millions)

                               Year
                               ----
                               '94        $ 10.9
                               '95        $ 13.6
                               '96        $ 15.0
                               '97        $ 18.5
                               '98        $ 20.4
                                              
                                              
[3 PHOTOS]                                    
                                   

[PHOTO]
"Market expansion has played an integral role in Commercial  Staffing's  growth.
But as we grow, we remain  mindful of the importance of  personalized  solutions
for  our  business   partners.   Real  growth  begins  with   building   genuine
relationships of shared values, teamwork, integrity and commitment."

                                                               --Anthony Trotter
                                                                  Vice President


Commercial Staffing

     JOULE's growing network of Commercial Staffing branch offices work together
to satisfy our clients' staffing needs with a wide range of skilled personnel in
administrative, customer service and light industrial positions. By aligning the
branch offices, each with its own recruiting strengths,  JOULE is maximizing the
company-wide   recruitment   results.   This  alignment  strategy  serves  as  a
competitive advantage in bringing qualified personnel to our clients. To further
enhance our recruiting efforts, as well as our client services, JOULE now offers
transportation  services to and from job sites. The division's  growth continues
to be based upon  providing  highly  qualified  associates  and  delivering  the
highest level of service possible to our personnel and clients.


                                                                       page
                                                                       ---------
                                                                       three


<PAGE>

 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]

                                 Revenue Growth
                                 (In millions)

                                Year
                                ----
                                '94       $  6.5
                                '95       $  8.8
                                '96       $ 11.6
                                '97       $ 13.1
                                '98       $ 16.5
                          

[4 PHOTOS]


[PHOTO]
"Technical  Staffing  continued  to achieve  record  sales and  earnings for the
fourth  consecutive  year. This achievement is a testament to the entire staff's
dedication and commitment to quality and customer  service.  Our management team
continues to direct  significant  resources to the ongoing hiring,  training and
development  of our  recruiting  and sales  personnel in order to guarantee  our
clients a prompt  staffing  solution  with a quality  product  at a  competitive
price."
                                                            --Stephen Demanovich
                                                                  Vice President


Joule's

               success is driven by proactive 
----------------------                        


Technical Staffing

     JOULE Technical Staffing's  reputation for high-quality  staffing solutions
in Engineering,  Science and Information  Technology continues to facilitate our
expansion. This year, our key account development and niche marketing strategies
led to the  division's 26 percent sales growth over fiscal 1997 and sales growth
over the past four years of over 150 percent.  In an effort to offer our clients
a total technical staffing solution, we have expanded upon our core competencies
into permanent placement for scientific  professionals and nationwide  placement
of engineering  services.  These two new business  units are natural  extensions
that  capitalize  on the  growing  demand for  technical  professionals  and are
supported by our established  database of qualified technical  professionals and
our state-of-the-art  recruiting  technology.  Through these initiatives and our
continued  focus on  customer  service,  we  expect  continued  growth in client
acceptance and revenue in the future.

     page
---------
     four

<PAGE>


[PHOTO]


"Collectively we offer our clients more than 50 years of industrial contracting,
staffing, and maintenance  experience.  We have worked together to build a solid
reputation for fulfilling  customers'  requirements  with skilled craftsmen in a
timely, safe manner and at a competitive price.  Whether the project is moving a
plant to a new location, installing new equipment or maintaining a petrochemical
plant, we strive for total customer satisfaction."


                              [PHOTO]                                    [PHOTO]
                    --Joseph Vendetti                               --John Porch
Director of Operations, Hudson Valley    Director of Operations, Delaware Valley


 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]

                                   Revenues
                                 (In millions)
                            
                                Year
                                ----
                                '94       $ 18.8
                                '95       $ 21.2
                                '96       $ 21.9
                                '97       $ 17.0
                                '98       $ 18.4
         
recruiting programs
--------------------------------------------------------------------------------
          including state-of-the-art resume scanning and applicant screening and
                                                                  qualification.


Industrial Staffing

     JOULE Industrial  Staffing is a leading regional  provider of skilled craft
workers  and  project  support  services   necessary  for  the  installation  or
retrofitting of equipment and facilities.  Our services,  clients and geographic
reach  has  grown  with  the  continued  trend  toward  outsourcing.  To  ensure
high-quality  industrial  staffing  solutions  for our  clients,  JOULE  invests
heavily in every facet of our business, including recruiting,  training, safety,
and project  management.  This year,  we began  applying our expertise to assist
Original  Equipment  Manufacturers  install their  machinery in new and upgraded
industrial facilities around the country.  Acting as the Field Service Agent for
these clients,  JOULE's personnel install and maintain specialized  equipment at
facilities  nationwide.  These are just a few of the ways JOULE strives to offer
our clients a breadth of solutions and the highest level of service.

                                                                       page
                                                                       ---------
                                                                       five


<PAGE>

                                                     Joule Inc. and Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations

Results of Operations

     The following table sets forth the percentage relationship of certain items
in the Company's consolidated statements of income:

                                                   Year Ended September 30,
                                             -----------------------------------
                                                1998        1997        1996
                                             ===================================

Revenues ................................      100.0%      100.0%      100.0%
Costs, expenses and other
  Cost of services ......................       81.9        81.3        83.2
  Selling, general &
    administrative expenses .............       15.0        14.6        12.9
  Provision for legal settlement
    and related costs ...................        0.6        --          --
  Interest expense ......................        0.4         0.4         0.6
Income before income tax provision ......        2.1         3.7         3.3
Income tax provision ....................        0.8         1.5         1.2
Net income ..............................        1.3         2.2         2.1
                                            ===================================

     The Company's revenues are derived from providing staffing services to its
customers. Such services include providing commercial (office and light
industrial) workers, technical (engineering, scientific and information
technology) personnel, and industrial (skilled craft industrial plant and
facility maintenance) labor. Over 90% of revenue each year is billed on a direct
cost plus markup basis. Revenue increased 14% to $55.3 million in fiscal 1998
from $48.6 million in 1997. Revenue for 1996 amounted to $48.4 million.
Commercial staffing revenue increased 10% to $20.4 million in 1998 from $18.5
million in 1997, following a 23% increase in 1997 over 1996 revenue of $15.0
million. Technical staffing revenue increased 26% to $16.5 million in 1998,
compared to 1997 revenue of $13.1 million following a 13% increase over 1996
revenue of $11.6 million. Industrial staffing revenue in 1998 amounted to $18.4
million, an 8% increase over 1997 revenues of $17.0 million; 1997 revenue
declined 22% from $21.9 million in 1996, reflecting the adverse impact of the
wind down and completion of certain long term contracts.

     Cost of services were 81.9% and 81.3% of revenue in fiscal 1998 and 1997,
respectively, compared to 83.2% in 1996. These expenses consist primarily of
compensation to employees on assignment to clients and related costs, including
social security, unemployment taxes, general liability and workers' compensation
insurance, and other costs of services, including a van transportation service
initiated in 1998 to transport some commercial staffing workers to job sites.
Selling, general and administrative expenses amounted to $8.3 million in 1998,
compared to $7.1 million in 1997 and $6.2 million in 1996. Such expenses were
15.0%, 14.6% and 12.9% of revenues in 1998, 1997 and 1996, respectively. The
1998 and 1997 increases in selling, general and administrative expenses
principally reflect higher staff employee payroll related expenses reflecting
the Company's investment in additional staff in order to grow the business, as
well as current labor market conditions. Selling, general and administrative
expenses also include advertising, professional fees, depreciation, provision
for the allowance for doubtful accounts, rent, and other costs related to
maintaining the Company's branch offices. The provision for legal settlement and
related costs of $323,000 in 1998 relate to the Company's decision in October
1998 to settle a lawsuit. While the Company felt that the lawsuit was without
merit, it settled to contain legal expenses, which began to escalate during the
fourth quarter; total legal settlement and related costs provided for and
incurred in the fourth quarter amounted to $285,000.

     Interest expense increased to $250,000 in 1998 after decreasing to $214,000
in 1997 from $311,000 in 1996. Effective tax rates for fiscal 1998, 1997 and
1996 were 40%, 40% and 37%. As a result of the above, net income was $706,000 or
$0.19 per share basic and diluted in 1998 compared with $1,066,000 or $0.29 per
share basic and diluted in 1997 and $1,026,000 or $0.28 per share basic and
diluted in 1996.

Liquidity and Capital Resources

     Current assets at September 30, 1998 were $9,125,000 as compared to
$7,105,000 at September 30, 1997 and current liabilities were $5,640,000
compared to $4,251,000 as of September 30, 1997. Employees typically are paid on
a weekly basis. Clients generally are billed on a weekly basis. The Company has
generally utilized bank borrowings to meet its working capital needs. The
Company has a $4,500,000 bank line of credit; loans thereunder are secured
principally by receivables with interest at LIBOR plus one and one-half percent
with a prime rate, less one quarter percent option; $3,100,000 was outstanding
under this line as of September 30, 1998.

     The Company believes that internally generated funds and available
borrowings will provide sufficient cash flow to meet its requirements for the
next 12 months.

Year 2000 Compliance

     The Company is a staffing company that provides employees to its customers.
The Company utilizes computer systems to track employee availability, to
generate and track sales, and for accounting purposes, including payroll and
billing. All of the Company's systems and hardware were purchased in recent
years. The Company has been assured by its providers that they are all Year 2000
compliant. The Company will continue to review its existing and new hardware and
software for Year 2000 compliance in the coming year. The financial impact of
ensuring Year 2000 compliance is not expected to be material to the Company's
financial condition. However, the failure of major customers or government
entities to remediate their systems on a timely basis could have a material
adverse effect on the Company.

Forward-Looking Information

     Certain parts of this document include forward-looking statements within
the meaning of the federal securities laws that are subject to risks and
uncertainties. Factors that could cause the Company's actual results and
financial condition to differ from the Company's expectations include, but are
not limited to, a change in economic conditions that adversely affects the level
of demand for the Company's services, competitive market and pricing pressures,
the availability of qualified temporary workers, the ability of the Company to
manage growth through improved information systems and the training and
retention of new staff, and government regulation.


     page
---------
      six


<PAGE>


Consolidated Balance Sheets                          Joule Inc. and Subsidiaries


<TABLE>
<CAPTION>
                                                                                      September 30,
                                                                                ---------------------------
                                                                                    1998          1997
                                                                                ===========================
<S>                                                                              <C>           <C>        
ASSETS
CURRENT ASSETS:
  Cash .......................................................................   $   233,000   $   139,000
  Accounts receivable, less allowance for doubtful accounts of
    $267,000 and $200,000 in 1998 and 1997, respectively .....................     8,549,000     6,820,000
  Prepaid expenses and other current assets ..................................       343,000       146,000
                                                                                ---------------------------
      Total Current Assets ...................................................     9,125,000     7,105,000
PROPERTY AND EQUIPMENT, NET ..................................................     3,707,000     3,633,000
GOODWILL AND OTHER ASSETS ....................................................        81,000       105,000
                                                                                ---------------------------
                                                                                 $12,913,000   $10,843,000
                                                                                ===========================

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Loans payable to bank ......................................................   $ 3,100,000   $ 1,295,000
  Accounts payable and accrued expenses ......................................       682,000     1,472,000
  Accrued payroll and related taxes ..........................................     1,833,000     1,291,000
  Income taxes ...............................................................            --       168,000
  Current portion of long term debt ..........................................        25,000        25,000
                                                                                ---------------------------
      Total Current Liabilities ..............................................     5,640,000     4,251,000
                                                                                ---------------------------
LONG TERM DEBT ...............................................................       381,000       406,000
                                                                                ---------------------------
      Total Liabilities ......................................................     6,021,000     4,657,000
                                                                                ---------------------------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Preferred stock, $.01 par value:
    Authorized 500,000 shares, none outstanding ..............................            --            --
  Common stock, $.01 par value:
    Authorized 10,000,000 shares--issued 3,816,000 shares in 1998 and 1997 ...        38,000        38,000
  Additional paid-in capital .................................................     3,658,000     3,658,000
  Retained earnings ..........................................................     3,585,000     2,879,000
                                                                                ---------------------------
                                                                                   7,281,000     6,575,000
LESS: Cost of 146,000 shares of common stock held in treasury in 1998 and 1997       389,000       389,000
                                                                                ---------------------------
      Total Stockholders' Equity .............................................     6,892,000     6,186,000
                                                                                ---------------------------
                                                                                 $12,913,000   $10,843,000
                                                                                ===========================
</TABLE>

See accompanying notes to consolidated financial statements.

                                                                      page
                                                                      ----------
                                                                      seven


<PAGE>


Consolidated Statements of Income                    Joule Inc. and Subsidiaries

<TABLE>
<CAPTION>
                                                                            Years Ended September 30,
                                                                   --------------------------------------------
                                                                        1998           1997           1996
                                                                   ============================================
<S>                                                                 <C>            <C>            <C>         
REVENUES ........................................................   $ 55,301,000   $ 48,590,000   $ 48,449,000
                                                                   --------------------------------------------
COSTS, EXPENSES, AND OTHER:
  Cost of services ..............................................     45,273,000     39,485,000     40,293,000
  Selling, general and administrative expenses ..................      8,262,000      7,113,000      6,231,000
  Provision for legal settlement and related costs ..............        323,000             --             --
  Interest expense ..............................................        250,000        214,000        311,000
  Other .........................................................         17,000          2,000        (13,000)
                                                                   --------------------------------------------
Income before income tax provision ..............................      1,176,000      1,776,000      1,627,000
Income tax provision ............................................        470,000        710,000        601,000
                                                                   --------------------------------------------
Net income ......................................................   $    706,000   $  1,066,000   $  1,026,000
                                                                   ============================================
Basic and diluted earnings per share ............................   $       0.19   $       0.29   $       0.28
                                                                   ============================================
Average common shares outstanding--basic ........................      3,670,000      3,664,000      3,648,000
Average common shares and common equivalents outstanding--diluted      3,672,000      3,666,000      3,651,000
                                                                   ============================================
</TABLE>


See accompanying notes to consolidated financial statements.

Consolidated Statements of
Changes in Stockholders' Equity

<TABLE>
<CAPTION>
                                                           Shares of                Additional
                                                            Common        Common      Paid-in       Retained       Treasury
                                                             Stock        Stock       Capital       Earnings         Stock
                                                        ======================================================================
<S>                                                        <C>           <C>         <C>           <C>            <C>       
Balances, September 30, 1995.........................      3,760,000     $38,000     $3,502,000    $  787,000     $(408,000)
  Net Income.........................................             --          --             --     1,026,000            --
  Issuance of 4,000 Treasury Shares..................          4,000          --             --            --        19,000
  Exercise of Stock Options..........................         47,000          --        135,000            --            --
                                                        ----------------------------------------------------------------------
Balances, September 30, 1996.........................      3,811,000      38,000      3,637,000     1,813,000      (389,000)
  Net Income.........................................             --          --             --     1,066,000            --
  Exercise of Stock Options..........................          5,000          --         21,000            --            --
                                                        ----------------------------------------------------------------------
Balances, September 30, 1997.........................      3,816,000      38,000      3,658,000     2,879,000      (389,000)
  Net Income.........................................             --          --             --       706,000            --
                                                        ----------------------------------------------------------------------
Balances, September 30, 1998.........................      3,816,000     $38,000     $3,658,000    $3,585,000     $(389,000)
                                                        ======================================================================
</TABLE>


See accompanying notes to consolidated financial statements.

     page
---------
    eight


<PAGE>


Consolidated Statements of Cash Flows                Joule Inc. and Subsidiaries

<TABLE>
<CAPTION>
                                                                              Years Ended September 30,
                                                                     --------------------------------------------
                                                                          1998           1997          1996
                                                                     ============================================
<S>                                                                   <C>            <C>            <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income ......................................................   $   706,000    $ 1,066,000    $ 1,026,000
  Adjustments to reconcile net income to net
    cash flows provided by (used in) operating activities:
      Depreciation and amortization ...............................       558,000        453,000        400,000
      Provision for losses on accounts receivable .................        93,000         87,000        109,000
      Changes in operating assets and liabilities:
        Accounts receivable .......................................    (1,822,000)      (231,000)       277,000
        Prepaid expenses and other assets .........................      (203,000)       206,000          7,000
        Accounts payable and accrued expenses .....................      (790,000)      (642,000)       680,000
        Accrued payroll and related taxes .........................       542,000        197,000         11,000
        Income taxes ..............................................      (168,000)       168,000        (77,000)
                                                                     --------------------------------------------
          Net cash flows provided by (used in) operating activities    (1,084,000)     1,304,000      2,433,000
                                                                     --------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisitions of property and equipment ..........................      (602,000)      (288,000)      (695,000)
                                                                     --------------------------------------------
          Net cash flows used in investing activities .............      (602,000)      (288,000)      (695,000)
                                                                     --------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase (decrease) in loans payable to bank ....................     1,805,000     (1,048,000)    (1,762,000)
  Payment of long term debt .......................................       (25,000)       (25,000)       (25,000)
  Proceeds from exercise of stock options .........................            --         21,000        154,000
                                                                     --------------------------------------------
          Net cash flows provided by (used in) financing activities     1,780,000     (1,052,000)    (1,633,000)
                                                                     --------------------------------------------
NET CHANGE IN CASH ................................................        94,000        (36,000)       105,000
CASH, BEGINNING OF PERIOD .........................................       139,000        175,000         70,000
                                                                     --------------------------------------------
CASH, END OF PERIOD ...............................................   $   233,000    $   139,000    $   175,000
                                                                     ============================================
SUPPLEMENTAL CASH FLOW INFORMATION:
  Interest paid ...................................................   $   244,000    $   223,000    $   318,000
                                                                     ============================================
  Income taxes paid ...............................................   $   714,000    $   374,000    $   763,000
                                                                     ============================================

NON-CASH TRANSACTIONS:
  During fiscal 1997, the Company acquired land and buildings
    in settlement of a $1,750,000 receivable.
</TABLE>


See accompanying notes to consolidated financial statements.


                                                                       page
                                                                       ---------
                                                                       nine


<PAGE>


Notes to Consolidated Financial Statements           Joule Inc. and Subsidiaries


Note 1--Summary of Significant Accounting Policies:

     Basis of Presentation--The consolidated financial statements include the
accounts of JOULE INC. and its wholly owned subsidiaries. All significant
intercompany transactions have been eliminated in consolidation.

     Use of Estimates--The preparation of accrual basis financial statements
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 financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

     Property and Equipment--Property and equipment are stated at cost.
Depreciation has been provided primarily by the straight-line method, at rates
based upon estimated useful lives of 3 to 5 years for automotive equipment and 5
to 10 years for machinery, equipment, furniture and fixtures. Improvements to
leasehold property are amortized utilizing the straight-line method over the
remaining lease term or the useful lives of related property, whichever is
shorter. Buildings are depreciated over 30 years.

     Revenue Recognition--Revenue is recorded as services are rendered.

     Income Taxes--The Company accounts for income taxes pursuant to the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" which utilizes the liability method and results in the
determination of deferred taxes based on the estimated future tax effects of
differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates currently in effect.

     Earnings Per Share--Statement of Financial Accounting Standards No. 128,
"Earnings per Share," which became effective for fiscal 1998, establishes new
standards for computing and presenting earnings per share (EPS). The new
standard requires the presentation of basic EPS and diluted EPS and the
restatement of previously reported EPS amounts. Basic EPS is calculated by
dividing income available to common shareholders by the weighted average number
of shares of common stock outstanding during the period. Income available to
common shareholders used in determining basic and diluted EPS was $706,000 in
1998, $1,066,000 in 1997 and $1,026,000 in 1996. The weighted average number of
shares of common stock used in determining basic EPS was 3,670,000 in 1998,
3,664,000 in 1997 and 3,648,000 in 1996. Diluted EPS is calculated by dividing
income available to common shareholders by the weighted average number of shares
of common stock outstanding plus additional common shares that could be issued
in connection with potentially dilutive securities. Income available to common
shareholders used in determining diluted EPS was $706,000 in 1998, $1,066,000 in
1997 and $1,026,000 in 1996. The weighted average number of shares of common
stock used in determining diluted EPS was 3,672,000 in 1998, 3,666,000 in 1997
and 3,651,000 in 1996 and reflects additional shares in connection with stock
option plans (2,000 shares in 1998, 2,000 shares in 1997 and 3,000 shares in
1996). During 1998, 1997 and 1996, 152,000, 27,000, and 9,000 shares have been
excluded from the above calculations because they were antidilutive.

     Goodwill--Goodwill is being amortized over a period of approximately ten
years. Amortization of goodwill amounted to $24,000 in 1998, 1997 and 1996,
respectively.

     Long-Lived Assets--The provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets" (SFAS
121) require, among other things, that an entity review its long-lived assets
and certain related intangibles for impairment whenever changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable. The
Company does not believe that any such changes have occurred.


Note 2--Property and Equipment:

     Property and equipment consists of:

                                                            September 30,
                                                    ----------------------------
                                                       1998             1997
                                                    ============================

Machinery and equipment ......................       $2,740,000       $2,494,000
Furniture and fixtures .......................          565,000          550,000
Automotive equipment .........................        1,316,000        1,062,000
Building and leasehold improvements ..........          361,000          292,000
Buildings ....................................        1,834,000        1,834,000
Land .........................................          671,000          671,000
                                                    ----------------------------
                                                      7,487,000        6,903,000
Less: Accumulated depreciation
  and amortization ...........................        3,780,000        3,270,000
                                                    ----------------------------
                                                     $3,707,000       $3,633,000
                                                    ============================


Note 3--Loans Payable to Bank and Long Term Debt:

     The Company has an annual renewable line of credit of $4,500,000 that bears
interest at LIBOR plus one and one-half percent, with a prime rate less
one-quarter percent option. The average interest rate at September 30, 1998 was
7.16%. At September 30, 1998, $1,400,000 of the line of credit was unused, all
of which was available for use. Related borrowings are collateralized
principally by accounts receivable.

     There is a mortgage loan for $406,000 on the Company's staffing operations
building. At September 30, 1998, $25,000 was due within one year and classified
as a current liability. Principal payments approximating $25,000 per year will
be made until December 1999, when there will be a balloon payment due for the
balance. The interest rate is the bank's prime rate plus 1 1/2%.


Note 4--Stock Option Plans:

     The Company's 1991 Stock Option Plan provides for the grant of
non-qualified or incentive stock options covering up to an aggregate of 500,000
shares of common stock to directors, officers, and other employees of the
Company. The option price cannot be less than the fair market value of the stock
at the time the options are granted. At September 30, 1998, there were 215,000
stock options outstanding at prices ranging from $3.50 to $5.38 of which 15,000
options are exercisable. There were also 4,000 stock options outstanding at
September 30, 1998 from a previous stock option plan at a price of $2.63. In
1997 and 1996, 5,000 and 47,000 options were exercised, respectively and, in
1998, 15,000 options were cancelled. In 1998 and 1997, 110,000 options were
granted in each year at prices ranging from $4.00 to $5.38.


     page
---------
      ten


<PAGE>


     Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," became effective for the fiscal year beginning
October 1, 1996, and permits an entity to continue to account for employee
stock-based compensation under APB Opinion No. 25, "Accounting for Stock Issued
to Employees," or adopt a fair value based method of accounting for such
compensation. The Company has elected to continue to account for stock-based
compensation under Opinion No. 25. Accordingly, no compensation expense has been
recognized in connection with options granted. Had compensation expense for
options granted subsequent to October 1, 1995 under the Company's stock option
plans been determined based on the fair value at the date of grant in accordance
with Statement No. 123, the Company's net income and net income per share would
have been as follows:

                                    1998             1997             1996
                                 =============================================
Net income
    As reported................   $706,000        $1,066,000       $1,026,000
    Pro forma..................    671,000         1,062,000        1,023,000
Net income per share,                                              
  basic and diluted                                                
    As reported................       0.19              0.29             0.28
    Pro forma..................       0.18              0.29             0.28
                                 =============================================

     The fair value of options granted is estimated on the date of grant using
the Black-Scholes option pricing model. The weighted average fair values of
options granted in fiscal 1998, 1997 and 1996 were $5.25, $4.23 and $4.00,
respectively, based upon the following weighted average assumptions: expected
volatility (50% in 1998, and 25% in 1997 and 1996), risk-free interest rate
(7.5% in 1998, and 6.5% in 1997 and 1996), expected life (3 years in 1998, 1997
and 1996), and expected dividend yield (0% in 1998, 1997 and 1996).


Note 5--Income Taxes:

     Comparative analyses of the provision for income taxes follows:

                                                 September 30,
                                 ---------------------------------------------
                                    1998              1997             1996
                                 =============================================
Current:
  Federal......................   $364,000          $551,000         $454,000
  State and Local..............    106,000           159,000          147,000
                                 ---------------------------------------------
                                  $470,000          $710,000         $601,000
                                 =============================================

     The provision for income taxes varied from the tax computed at the U.S.
Federal statutory rates of 34% in fiscal 1998, 1997 and 1996 for the following
reasons:

                                                 September 30,
                                 ---------------------------------------------
                                    1998              1997             1996
                                 =============================================
U.S. Federal Tax at
  statutory rates.......          $400,000          $604,000         $553,000
State income taxes, net of
  Federal tax benefit...            70,000           106,000           98,000
Utilization of operating loss
  carryforward..........                --                --          (52,000)
Other...................                --                --            2,000
                                 ---------------------------------------------
                                  $470,000          $710,000         $601,000
                                 =============================================


Note 6--Commitments and Contingencies:

     The Company's facilities are leased under noncancellable terms expiring
through 2001. Rent expense was $181,000, $286,000, and $273,000 for the years
ended September 30, 1998, 1997 and 1996, respectively.

     Aggregate rentals for the remaining lease terms at September 30, 1998 are
as follows:

Year Ending September 30,
--------------------------------------------------------------------------------
1999 ................................................................    130,000
2000 ................................................................    104,000
2001 ................................................................     57,000
                                                                       ---------
                                                                        $291,000
                                                                       =========

     The provision for legal settlement and related costs of $323,000 in 1998
relate to the Company's decision in October 1998 to settle a lawsuit. While the
Company felt that the case was without merit, it settled to contain legal
expenses, which began to escalate during the fourth quarter; total related
litigation costs provided for and incurred in the fourth quarter amounted to
$285,000,


Note 7--Transactions with Major Stockholders and Affiliates:

     The Company rented facilities from certain of its stockholders and their
affiliates for approximately $50,000, $199,000 and $199,000 for each of the
years ended September 30, 1998, 1997 and 1996. At September 30, 1998 the Company
had related lease commitments of $16,000 and $1,000 for the years ending
September 30, 1999 and 2000. Further, in 1997 the Company entered into a three
year lease with the purchaser of property formerly owned by an affiliate. Annual
rentals under this lease approximate $133,000. The Company subleases most of
this space to the affiliate which reimbursed the Company approximately $118,000.

     The Company paid certain major stockholders Board of Director's fees of
$15,000, $16,000 and $21,000 for the years 1998, 1997 and 1996; accounts
receivable include amounts due from a major stockholder of $33,000, $22,000 and
$67,000 at September 30, 1998, 1997 and 1996, respectively.

     During the year ended September 30, 1997 the Company acquired land and
building from Kahle Engineering Corp. (Kahle), an affiliate, which the Company
had previously leased for use in its operations, in settlement of a receivable
of $1,750,000 due from Kahle. The appraised value of the property approximated
the receivable.


Note 8--Geographic Information:

     The Company is engaged in the staffing services business, providing
personnel to business and industry. The Company derived 70%, 71% and 68%, of its
revenues from services provided to customers in New Jersey in 1998, 1997 and
1996, respectively.


                                                                       page
                                                                       ---------
                                                                       eleven


<PAGE>


Report of Independent Accountants


To the Stockholders and
Board of Directors of Joule Inc.

     We have audited the accompanying consolidated balance sheets of Joule Inc.
(a Delaware corporation) and subsidiaries as of September 30, 1998 and 1997 and
the related consolidated statements of income, changes in stockholders' equity
and cash flows for each of the three years in the period ended September 30,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these 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 financial statements referred to above present fairly,
in all material respects, the financial position of Joule Inc. and subsidiaries
as of September 30, 1998 and 1997, and the results of their operations and their
cash flows for each of the three years in the period ended September 30, 1998 in
conformity with generally accepted accounting principles.



/s/ Arthur Andersen LLP
Roseland, New Jersey
November 19, 1998



Stock Market Information                             Joule Inc. and Subsidiaries

Market for Registrant's Common Equity
and Related Stockholder Matters

     The Company's Common Stock is traded on the American Stock Exchange under
the symbol JOL. The high and low sales prices for the Common Stock as reported
by the American Stock Exchange were as follows:

                                                         High             Low
                                                      ==========================
Calendar 1996
  Fourth Quarter.................................       5 1/4            3 5/8
                                                      --------------------------
Calendar 1997
  First Quarter..................................       4 3/4            3 5/8
  Second Quarter.................................       3 15/16          3 1/8
  Third Quarter..................................       5 1/4            3 7/16
  Fourth Quarter.................................       6 1/4            4 1/2
                                                      --------------------------
Calendar 1998
  First Quarter..................................       5 3/4            4 1/2
  Second Quarter.................................       5 1/2            3 1/2
  Third Quarter..................................       4 1/8            2 7/8
  Fourth Quarter (through December 2)............       3 3/8            2 5/8
                                                      ==========================

     As of December 7, 1998, there were approximately 600 holders of the
Company's Common Stock. No cash dividends have been declared on the Common
Stock.


     page
---------
   twelve


<PAGE>


Corporate Data                                       Joule Inc. and Subsidiaries


Board of Directors

Richard P. Barnitt
Financial Consultant

Paul L. DeBacco
President
Michael Christopher Group, Inc.

Robert W. Howard
Chairman of the Board
Reisen Lumber Industries, Inc.

Emanuel N. Logothetis
Chairman of the Board, President and
Chief Executive Officer

Nick M. Logothetis
President
Chartwell Consulting Group

Steven Logothetis
Attorney


Officers

Emanuel N. Logothetis
Chairman of the Board, President and
Chief Executive Officer

John G. Wellman, Jr.
Executive Vice President and
Chief Operating Officer

Bernard G. Clarkin
Vice President, Chief Financial Officer
and Secretary

John F. Logothetis
Vice President

Stephen Demanovich
Vice President

Anthony W. Trotter
Vice President

Corporate Information

For a copy of Form 10-K or other information
about the Corporation, contact:

Investor Relations
Secretary
JOULE INC.
1245 Route 1 South
Edison, New Jersey 08837
(732) 548-5444

E-Mail Address: JOL@Jouleinc.com
              or
Visit our web site at www.Jouleinc.com.


Auditors

Arthur Andersen LLP
101 Eisenhower Parkway
Roseland, New Jersey 07068

Transfer Agent & Registrar

Continental Stock Transfer & Trust Co.
2 Broadway
New York, New York 10275-0491

JOULE Common Stock is traded on the
American Stock Exchange under the
symbol JOL.


Annual Meeting

The annual meeting of JOULE Inc. will
be held on Wednesday, February 3, 1999
at 10:30 a.m., at the Pines Manor,
Edison, New Jersey.


Joule Inc. Offices

Headquarters
1245 Route 1 South
Edison, New Jersey 08837
(732) 548-5444
Fax (732) 494-6346

1235 Route 1 South
Edison, New Jersey 08837
(732) 906-0906

362 Parsippany Road
Parsippany, New Jersey 07054
(973) 428-8100

The Atrium
80 Route 4 East
1st Floor, Suite 105
Paramus, New Jersey 07652
(201) 845-0900

429 East Broad Street
Gibbstown, New Jersey 08027
(609) 423-7500
(215) 342-3300

1333 New Road
Northfield, New Jersey 08225
(609) 383-1433

2333 Whitehorse-Mercerville Road
Trenton, New Jersey 08619
(609) 588-5900

77 Main Street
P.O. Box 7
Fishkill, New York 12524
(914) 897-3900

2400 West Cypress Creek Road
Suite 100
Ft. Lauderdale, Florida 33309
(954) 492-1110

4300-A Ridge Road
Baltimore, Maryland 21236
(410) 284-3400

1722 Route 70 East
Cherry Hill, New Jersey 08003
(609) 489-3002

411 38th Street
Union City, New Jersey 07087
(201) 330-0333

359 Passaic Street
Passaic, New Jersey 07055
(973) 458-1771

47 Commercial Avenue--Unit #3
New Brunswick, New Jersey 08901
(732) 846-4810

3214 River Road
Camden, New Jersey 08105
(609) 614-0199

Box 216, Route 1
2205 15th Street
Lawrenceville, Illinois 62439
(618) 943-7344


Designed by Curran & Connors, Inc.


<PAGE>


-----------
   Joule
-----------




1245 Route 1 South
Edison, New Jersey 08837
732-548-5444