<PAGE>   1
                      SECURITIES AND EXCHANGE COMMISSION                       1
                             WASHINGTON, D.C. 20549
                                    FORM 10-K
(mark one)
 X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
   EXCHANGE ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended  December 31, 1996

                                  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 No. 0-1412
                               M. H. Rhodes, Inc.
             (Exact name of registrant as specified in its charter)

           Delaware                           06-0509270
(State or other jurisdiction of           (I.R.S.  Employer
incorporation)                             Identification No.)

99 Thompson Road, Avon, Connecticut                06001
(Address of principal executive office)            (Zip Code)

Registrant's telephone number, including area code (860) 673-3281

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

     Title of Each Class       Name of Exchange on Which Registered
             NONE                                NONE

Securities registered pursuant to Section 12(g) of the Act:
                 Common Stock Par Value $1.00 Share

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 is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of the
registrant was $229,529 on March 12, 1997 based on a bid price of $2.25 per
share reported by one of the firms that follow the stock of the Company. No
asked price was reported.

The number of shares of the registrant's common stock, $1.00 par value,
outstanding on March 12, 1997 was 202,599.

                       DOCUMENTS INCORPORATED BY REFERENCE

Part of the proxy statement for the Company's Annual Shareholders Meeting to be
held in May, 1997 has been incorporated by reference into Form 10-K, Part III,
Items 10, 11 and 12.

This report contains 33 pages in accordance with the sequential numbering
system. The exhibit index is located on sequentially numbered page 31.

<PAGE>   2
                                                                               2

                                     PART I
ITEM 1. BUSINESS

GENERAL

     M. H. Rhodes, Inc. (the "Company") manufactures mechanical and electrical
timers. The Company has been in business since 1930. The Company's Canadian
subsidiary, M. H. Rhodes (Canada) Limited, which also manufactures timers had
been in business since 1960. In 1990, the Company expanded its product lines by
acquiring machinery, equipment and inventory of the Ripley Company, Inc.
(Ripley) Photocontrol Division. On September 30, 1996 the Company ceased active
business operation for the Canadian subsidiary and transferred its assets and
liabilities to its parent company, M. H. Rhodes, Inc. The Company's Board of
Directors dissolved the Canadian subsidiary on December 31, 1996.

PRODUCTS

     PHOTOCONTROLS: Photocontrols are devices that are inserted on the tops of
street and roadway lights. Their prime purpose is to individually turn the light
on at certain darkness levels and off at dawn lightness. There are over
19,000,000 units in service in the United States. As predicted in 1996 the
electronic solid state photocontrol continues to gain market share in the U.S.
utility market. Ripley's total sales in 1996 for photocontrols was approximately
10% of the total U.S. utility photocontrol market of which 60% was electronic
solid state devices. Ripley also manufactures magnetic type photocontrols and
thermal type photocontrols which are still the majority of types sold into the
international market.

     TIMERS: Timers are used in commercial cooking equipment, HVAC applications,
bio-medical devices that require a set time interval with an opening and closing
of an electrical switch. Rhodes' mechanical timer line sales remained stable in
1996. Rhodes' sales to OEM's were 68% of total timer and switch sales. Rhodes'
OEM sales are made to "Original Equipment Manufacturers" who produce products
that require time devices in their products, i.e.: oven manufacturers, blender
manufacturers, battery chargers, etc. Much of 1996 was spent developing new
products for the mechanical timer variety which will be introduced in the first
quarter of 1997. These timers are projected to increase our timer sales by
approximately 14%. These products are designed to sell in unique niche markets
and will not be in competition with imports from China or Tunisia. Electronic
niche markets are being studied for applications that Rhodes can take advantage
of its larger OEM customer base.

SOURCE AND AVAILABILITY OF RAW MATERIALS

     The Company has never experienced a serious problem in obtaining raw
material and component parts, as there are generally many suppliers available to
meet the Company's requirements.

PATENTS AND TRADEMARKS

     The Company has held hundreds of patents over the past 66 years along with
registered trademarks. These are maintained and reviewed as they come up for
renewal. The Company retains a patent attorney who monitors all activities. The
Company has seven (7) trademarks which are actively used: MARK TIME, RHODES,
SUNSWITCH, LIGHT WATCHMAN and SPECTRUM INNOVATIONS. COMPETITOR AND SURVIVOR
SERIES are the newest additions for the Photocontrol and new consumer lines.


                                       I-1

<PAGE>   3
                                                                               3

BUSINESS CYCLE

     The Company business is not seasonal or cyclical.

CUSTOMERS

     The customer base consists of approximately 1,500 accounts. The loss of any
one customer would not have a material adverse financial effect on the
companies.


GOVERNMENT BUSINESS

     The Company does business with various municipal governments and U.S
Government agencies. No significant portion of this business is subject to
renegotiation of profits or termination at the election of a governmental
agency.

NET SALES BACKLOG

     The backlog at December 31, 1996 and 1995 was $3,435,000 and $2,809,000
respectively. The backlog includes orders which are deliverable over various
periods and which may be changed or cancelled in the future. However, based on
past experience, the effect of changes and cancellations is expected to be
minimal. It is anticipated that the backlog at December 31, 1996 will be filled
within the next 18 months.


COMPETITION

     All mechanical interval timers sold in the U.S. other than Rhodes are
imports. Rhodes produces all of its mechanical timers sold into the OEM,
electrical distributor, special distributors, government sales and parking meter
markets in Avon, Connecticut, U.S.A. This gives Rhodes a distinct advantage when
quantities requested have to be delivered in just-in-time quantities on a weekly
basis. It also allows Rhodes engineers to work with our customers on a first
name basis and be available for meetings within a one day requirement.

     As part of our consolidation of timer production in Avon, it was decided to
close Rhodes Canadian assembly operation which had produced losses in 1995 and
the first half of 1996. In doing so, the second half of 1996 became profitable
and now positions 1997 in a much brighter perspective to make the company once
again become profitable.

PRODUCT DEVELOPMENT

     During the year the Company continued to develop new products directed
toward niche markets. In the area of photocontrols, emphasis was placed on
electronic units that will meet the requirements of utilities located in the
Southern lighting belt areas, high heat applications, high humidity and
corrosive atmospheres.


                                       I-2

<PAGE>   4
                                                                               4

     In the timer line, new timers were developed for production in fire
fighting equipment which signals the firemen the amount of air supply they have
left in their oxygen equipment. Also timers were developed for extreme corrosive
atmospheric conditions where stainless steel, brass and protective coatings are
required. This is typical of our new development mission which is to develop
niche markets such as timers for handicap applications, medical devices and
other special requirements. 1997 will introduce several of these products.

EMPLOYEES

     As of December 31, 1996, the Company employed 94 persons, 93 in Avon,
Connecticut and 1 in El Paso, Texas. Of the Avon employees, 70 are represented
by the International Association of Machinists, with the balance being salaried
employees. The Company considers its relationship with its employees to be
satisfactory.


ITEM 2. PROPERTIES

     The Company owns factory, warehouse and office facilities, aggregating
92,000 square feet in Avon, Connecticut.

     In the Company's opinion, this facility is adequate for the Company's
present needs.


ITEM 3. LEGAL PROCEEDINGS

     None

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

     None


                                       I-3

<PAGE>   5
                                                                               5

EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table sets forth the names and ages of the Company's
Executive Officers.

     All Executive Officers serve for one-year terms or until their successors
are duly elected and qualified. Officers are elected annually at the meeting of
Directors, which immediately follows the Annual Meeting of Shareholders.

Name                        Company Position, Principal Occupation
----                        --------------------------------------

J. L. Morelli             was appointed President and Chairman of the
                          Board in April, 1989.  Previously, since
                          November, 1988, he was Acting General Manager,
                          and prior to this, Vice President of Operations
                          since January, 1987.  From 1985 to 1987, he was
                          Vice President of Operations with Rapid Power
                          Technologies, a manufacturer of power supplies.
                          Age 66.

H. B. Matles              has served as a Vice President of Marketing in
                          charge of the Company's consumer sales since
                          1973.  Age 60.

A. D. Springer            joined the Company in September, 1987 as
                          Controller was elected its Corporate
                          Controller/Treasurer in September, 1988 and
                          was elected its Vice President-Finance in May 1994.
                          Prior to joining the Company, he was with the
                          Arrow Hart Division of Cooper Industries for
                          15 years in various financial positions.  His
                          last position was Controller.  Age 57.

S. L. Vanasse             has served the Company as an administrative
                          employee since 1977.  In September, 1988, she
                          was elected Secretary of the Company.  She
                          had been elected Assistant Secretary in April,
                          1985.  Age 41.


                                       I-4

<PAGE>   6
                                                                               6

                                     PART II

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

     There is no generally recognized or established public trading market for
the common stock of the Company.

     The following chart reflects no payment of dividends over the past two
years and, in the absence of any known source of published information, the
range of bid prices for 1996 was supplied by a brokerage firm that follows the
stock of the Company. This information does not necessarily represent actual
transactions and may not reflect retail markups, markdowns, or commissions.

                                                    PRICES

<TABLE>
<CAPTION>
                                      High        Low      Dividend
                                    --------    --------   --------
<S>                                 <C>         <C>        <C>
1996
----
First Quarter    ..............     $  6 1/4    $  5 1/4
Second Quarter   ..............        6 1/4       5 1/4       .00
Third Quarter    ..............        5 1/4       4 3/4
Fourth Quarter   ..............        3 3/4       3 1/2

1995
----
First Quarter    ..............     $  6        $  5
Second Quarter   ..............        6           5           .00
Third Quarter    ..............        6           5
Fourth Quarter   ..............        6           5
</TABLE>

     As reported by one of the firms that follow the Company's stock, the bid
price for such stock was $2.25 on March 12, 1997. No asked price was reported.

     On March 12, 1997, there were approximately 667 record holders of the
Company's common stock. The number of record shareholders excludes individual
participants in security position listings.

Mellon Shareholders Services, L.L.C., 85 Challenger Rd., Overpeck Center,
Ridgefield Park, N.J. 07660 is the Company's Stock Registrar and Transfer Agent.
(1-800-288-9591)

     It had been the Company's policy prior to 1988 to pay an annual dividend of
$.10 per share. Pursuant to a loan agreement between the Company and the
Connecticut National Bank (K/N/A Fleet Bank) dated December 19, 1985, now the
Wilshire Credit Corporation, the Company has covenanted that it will not declare
or pay dividends exceeding in the aggregate 10% of its annual net earnings after
taxes. Due to this agreement no dividend was declared for 1995 (payable in 1996)
and for 1996 (payable in 1997). The Company may or may not declare future
dividends depending on its earnings, financial conditions and other factors.


                                      II-1

<PAGE>   7
                                                                               7

ITEM 6. SELECTED FINANCIAL DATA

M. H. RHODES, INC. AND M. H. RHODES (CANADA) LIMITED CONSOLIDATED(1)

<TABLE>
<CAPTION>
                                1996             1995             1994            1993            1992
                            ------------     ------------     ------------    ------------    ------------
<S>                         <C>              <C>              <C>             <C>             <C>
Net sales                   $  8,011,086     $  8,081,871     $  9,815,715    $ 10,304,525    $ 10,448,886

Net income(loss)                (177,373)        (895,488)          79,351         129,521        (678,353)

Per share earnings(loss)            (.88)           (4.38)             .38             .62           (3.23)

Total assets                   4,886,532        5,346,957        6,998,344       6,709,115       6,999,996

Long term
  obligations                    726,537          275,621        1,160,610       1,039,688          37,021

Cash dividends paid
  per share                          .00              .00              .00             .00             .00
</TABLE>

(1) M. H. Rhodes (Canada) Limited Financial Statements have been translated
    from Canadian to U.S. currency at applicable exchange rates.


                                      II-2

<PAGE>   8
                                                                               8

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

1996 Compared to 1995

     Consolidated Net Sales for 1996 decreased by 1% compared to 1995. The
principal reason for this slight decrease was the phaseout of active business
operations in the Canadian subsidiary at the end of the fourth quarter. Canadian
sales decreased due to this phaseout in the second half of 1996 by $100,000.
Higher sales are expected in 1997 as manufacturing has been transferred to the
parent and distribution has been revised.

     Gross profit as a percentage of Consolidated Net Sales was 19.4% in 1996
compared with 10.5% in 1995. The principal reasons for this were: (1) Inventory
obsolescence write-off of $50,000 compared to a 1995 write-off of $240,000. (2)
Stability in certain production lines whereas in 1995 relocation of these lines
was taking place at a cost of $46,000; (3) Significant decline in the inventory
decrease of $311,000 in 1996 compared to $1,242,000 in 1995 resulting in lower
non-cash accounting adjustments for prior years' items capitalized into
inventory that were charged to earnings for 1996 at $72,000 compared to 1995 at
$185,000; and, (4) Depreciation decreased as a result of assets being fully
depreciated.

     Selling, General and Administrative expenses as a percentage of Net Sales
were 20.0% in 1996 compared to 19.5%. The principal reason for this was higher
legal fees.

     The decrease in interest expense was due to a lower bank prime rate
involving the Company's line of credit (see Note 6) and the ESOP loan (see Note
8) in 1996 compared to 1995 and decreased borrowings. During 1996, the Company
paid down principal on its' ESOP loan by $170,000. The remaining balance on the
loan as of December 31, 1996 was $680,088. The State of Connecticut was paid
$47,000 in principal during 1996 and a balance of $242,825 remains as of
December 31, 1996. The line of credit was paid down $205,224 and the balance on
December 31, 1996 was $393,755.

     The increase in other expense was due to the write off of prior years'
amortization costs of $6,000.

     The Net Loss for 1996 was $177,373 compared to a Net Loss of $895,488 for
1995. In summary, the principal reasons for this 1996 loss were: (1) Non-cash
accounting adjustments during the first six months of 1996 for prior years'
items capitalized into inventory; (2) Canadian losses and the closing costs of
Canada; and (3) Higher legal fees. It should be noted that both the 1996 third
quarter and fourth quarter were profitable with a Net Income of $20,000 and
$42,000 respectively.

1995 Compared to 1994

     Consolidated net sales for 1995 decreased 18% compared to 1994. This
decrease in net sales was directly due to decreases in the following market
segments: OEM sales were down 21% or approximately $1,100,000; Retail and
Government sales were down 21% and 53% respectively. Although no major customers
were lost to competition, 1995 appeared to be a year where many of the Company's
customers reduced their conventional blanket orders and large volume buys and
proceeded to new smaller size production lots which is typical with J.I.T. (Just
in Time or Kaizan Production techniques which is being implemented throughout
the U.S.A.).


                                      II-3

<PAGE>   9
                                                                               9

     Gross profit as a percentage of consolidated net sales was 10.5% in 1995
compared with 19.0% in 1994. The principal reasons for this were: (1) The
decline in sales; (2) Relocation of certain production lines and inventory back
to Avon from Mexico; (3) Additional write off of obsolete and slow moving
inventory; and (4) Non-cash accounting adjustments for prior years' items
capitalized into inventory that were charged to earnings due to the significant
decrease in inventory in 1995.

     Selling, general and administrative expenses as a percentage of net sales
were 19.5% in 1995 compared to 17.0% in 1994. This increase was primarily due to
fixed expenses which did not decrease in the same proportion as the sales
decline.

     The increase in interest expense was due to a higher bank prime rate in
1995 compared to 1994 which increased borrowing costs on the line of credit and
the Employee Stock Ownership Plan (ESOP) loan.

     The decrease in other income was a result of: (1) A decrease in the amount
of machinery and equipment sold in 1995 compared to 1994; and (2) 1994 recorded
interest earned on cash deposits from the State of Connecticut Financial
Assistance Program which was used for tooling and equipment on the new
Photocontrol line.

     The net loss for 1995 was $895,488 compared to a net income of $79,351 for
1994. As stated above, the decrease in sales, an obsolete inventory write off,
accounting inventory adjustments, and relocation of production lines to Avon
contributed. Although the net loss was unfavorable, there were favorable sides
to 1995. These were a reduction in liabilities to the Company of $884,000 and a
decrease in inventories of $1,242,000.

LIQUIDITY

     The Company during 1996 reduced its borrowing availability under the
revolving line of credit from $1,000,000 to $650,000. The amount borrowed cannot
exceed 75% of acceptable Accounts Receivables. This line of credit is the source
for generating cash to meet liquidity needs. On December 31, 1996 the Company
had $393,755 borrowed under the revolver.

     Working capital increased $518,000 for the twelve month period ended
December 31, 1996. This increase was the result of a long term mortgage note
$510,096 classified as current in 1995 and at the end of 1996 reclassified back
to long term debt. The reason for this was in 1995 the Company was not in
compliance of certain covenants on a mortgage note and a technical default was
invoked. However, the technical default has since been waived and the
reclassification has been recorded.

     The inventory reduction of $311,000 provided the majority of cash generated
from operating activities. For investing activities, $50,000 of capital
expenditures were incurred. For financing activities, $445,000 was used in the
repayment of debt. The above resulted in the highest cash balances in several
years.


                                      II-4

<PAGE>   10
                                                                              10

CAPITAL RESOURCES

     Capital expenditures during 1996 were $50,000 compared to 1995 capital
expenditures of $16,000. During 1997, the Company expects capital expenditures
to be approximately $100,000, principally for tools and molds. Capital
expenditures will be funded through internal cash flows.

INFLATION

     The Company believes that inflation has not had a material effect on
operations.


                                      II-5

<PAGE>   11
                                                                              11

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The response to this item is submitted on pages II-9 thru II-19 of this
report.


                                    II-6

<PAGE>   12
                                                                              12

RIGGS & 
ASSOCIATES, LLP
---------------- 
CERTIFIED PUBLIC 
  ACCOUNTANTS 
AND CONSULTANTS
----------------                      INDEPENDENT AUDITORS' REPORT

                         To the Stockholders and Board of Directors of M.H.
                         Rhodes, Inc.:

                         We have audited the accompanying consolidated balance
                         sheets of M.H. Rhodes, Inc. (a Delaware corporation)
                         and subsidiary (the Company) as of December 31, 1996
                         and 1995 and the related consolidated statements of
                         operations, stockholders' equity and cash flows for the
                         years then ended. 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 audit. The
                         consolidated statements of operations, stockholders'
                         equity and cash flows for the year ended December 31,
                         1994 were audited by other auditors whose report dated
                         February 15, 1995 expressed an unqualified opinion
                         thereon.

                         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 M.H. Rhodes, Inc. and subsidiary
                         as of December 31, 1996 and 1995 and the results of
                         their operations and their cash flows for the years
                         then ended in conformity with generally accepted
                         accounting principles.


                                                Riggs & Associates, LLP

                         Hartford, Connecticut 
                         February 7, 1997



One State Street
Hartford, CT 06103
Telephone (860)549-8500
FAX (860)549-8501
                                      II-7

<PAGE>   13
                                                                              13

                           WHITTLESEY & HADLEY, P.C.
                          CERTIFIED PUBLIC ACCOUNTANTS
                             149 CHARTER OAK AVENUE
                        HARTFORD, CONNECTICUT 06106-5101
                                 (860) 522-3111
                               FAX (860) 728-0232


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of
M.H. Rhodes, Inc.:

        We have audited the accompanying consolidated balance sheet of M.H.
Rhodes, Inc. (a Delaware corporation) and subsidiary as of December 31, 1994,
and the related consolidated statements of operations, stockholders' equity and
cash flows for the year then ended. 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 audit.

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

        In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of M.H. Rhodes, Inc.
and subsidiary as of December 31, 1994, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.



                                        Whittlesey & Hadley, P.C.


Hartford, Connecticut
February 15, 1995


                                      II-8




<PAGE>   14
                         M.H. RHODES, INC. AND SUBSIDIARY                     14
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1996 AND 1995

ASSETS
<TABLE>
<CAPTION>
                                                      1996             1995
                                                   -----------      -----------
<S>                                                <C>              <C>
CURRENT ASSETS:
  Cash and Cash Equivalents                        $   137,750      $    32,502
  Accounts Receivable, net of allowance
    for doubtful accounts of $26,670 in
    1996 and $20,186 in 1995                         1,091,401        1,252,210
  Inventories                                        2,839,417        3,150,262
  Prepaid Expenses and Other                            38,716           35,622
                                                   -----------      -----------

        TOTAL CURRENT ASSETS                         4,107,284        4,470,596

NET PROPERTY, PLANT AND EQUIPMENT                      759,042          844,307

OTHER ASSETS                                            20,206           32,054
                                                   -----------      -----------

       TOTAL ASSETS                                $ 4,886,532      $ 5,346,957
                                                   ===========      ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Notes Payable                                    $   393,755      $   598,979
  Current Portion of Long-term Debt                    256,173          947,331
  Accounts Payable                                     531,843          513,432
  Other Accrued Expenses                               321,295          324,909
                                                   -----------      -----------

       TOTAL CURRENT LIABILITIES                     1,503,066        2,384,651

LONG-TERM DEBT, less current portion                   726,537          275,621

OTHER NON-CURRENT LIABILITIES                          100,000          121,757

COMMITMENTS AND CONTINGENCIES

Redeemable Common Stock, $1.00 par value,
  73,321 and 68,592 shares outstanding
  in 1996 and 1995, respectively                        73,321           68,592

STOCKHOLDERS EQUITY:
  Common Stock, $1.00 par value, 400,000
    shares authorized, 300,880 issued and
    129,278 and 134,007 shares outstanding
    in 1996 and 1995, respectively                     227,559          232,288
  Paid-in Capital                                        3,697            3,697
  Retained Earnings                                  3,980,871        4,158,862
                                                   -----------      -----------
                                                     4,212,127        4,394,847
    Less: Treasury Stock, at cost 98,281
          shares in 1996 and 1995                   (1,048,431)      (1,048,431)
          Unallocated ESOP shares                     (680,088)        (850,080)
                                                   -----------      -----------

                                                     2,483,608        2,496,336
                                                   -----------      -----------
                                                   $ 4,886,532      $ 5,346,957
                                                   ===========      ===========
</TABLE>

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

                                      II-9

<PAGE>   15
                                                                              15

                        M. H. RHODES, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


<TABLE>
<CAPTION>
                                       1996            1995            1994
                                    -----------     -----------     -----------
<S>                                 <C>             <C>             <C>
NET SALES                           $ 8,011,086     $ 8,081,871     $ 9,815,715

COST OF SALES                         6,458,508       7,231,797       7,953,273
                                    -----------     -----------     -----------

   Gross profit                       1,552,578         850,074       1,862,442

SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES             1,600,849       1,577,616       1,664,239
                                    -----------     -----------     -----------

    Operating income (loss)             (48,271)       (727,542)        198,203

OTHER INCOME(EXPENSE):
  INTEREST EXPENSE                     (132,448)       (159,177)       (153,966)
  OTHER INCOME, (EXPENSE) net            (4,106)          1,873          28,323
                                    -----------     -----------     -----------
                                       (136,554)       (157,304)       (125,643)
                                    -----------     -----------     -----------
  Income (loss) before
    income taxes                       (184,825)       (884,846)         72,560

PROVISION (BENEFIT) FOR
  INCOME TAXES                           (7,452)         10,642          (6,791)
                                    -----------     -----------     -----------

  Net income (loss)                 $  (177,373)    $  (895,488)    $    79,351
                                    ===========     ===========     ===========

  Net income (loss) per share       $      (.88)    $     (4.38)    $       .38
                                    ===========     ===========     ===========
WEIGHTED AVERAGE NUMBER OF
  SHARES OUTSTANDING                    202,599         204,387         210,047
                                    ===========     ===========     ===========
</TABLE>


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


                                      II-10

<PAGE>   16
                                                                        16

                        M.H. RHODES, INC. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
                                    Common Stock     Paid-in    Retained       Treasury Stock          Unallocated
                                Shares    Par Value  Capital    Earnings       Shares   Cost           ESOP Shares    Total
                                ------    ---------  -------    --------       ------   ----           -----------    -----
<S>                             <C>       <C>        <C>        <C>            <C>      <C>            <C>            <C>
Balance, December 31, 1993      248,385   $248,385   $  3,697   $4,987,164     90,597   $  (981,196)   $(1,190,064)   $3,067,986

  Net Income                       --         --         --         79,351       --            --             --          79,351
  ESOP Expense                     --         --         --           --         --            --          169,992       169,992
  Translation adjustments          --         --         --        (20,060)      --            --             --         (20,060)
  Redeemable common stock        (5,061)    (5,061)      --           --         --            --             --          (5,061)
  Purchase of treasury stock       --         --         --           --        2,153       (18,839)          --         (18,839)
                                -------   --------   --------   ----------     ------   -----------    -----------    ----------

Balance, December 31, 1994      243,324    243,324      3,697    5,046,455     92,750    (1,000,035)    (1,020,072)    3,273,369

  Net loss                         --         --         --       (895,488)      --            --             --        (895,488)
  ESOP Expense                     --         --         --           --         --            --          169,992       169,992
  Translation adjustments          --         --         --          7,895       --            --             --           7,895
  Redeemable common stock       (11,036)   (11,036)      --           --         --            --             --         (11,036)
  Purchase of treasury stock       --         --         --           --        5,531       (48,396)          --         (48,396)
                                -------   --------   --------   ----------     ------   -----------    -----------    ----------

Balance, December 31, 1995      232,288    232,288      3,697    4,158,862     98,281    (1,048,431)      (850,080)    2,496,336

  Net loss                         --         --         --       (177,373)      --            --             --        (177,373)
  ESOP Expense                     --         --         --           --         --            --          169,992       169,992
  Redeemable common stock        (4,729)    (4,729)      --           --         --            --             --          (4,729)
  Translation adjustments          --         --         --           (618)      --            --             --            (618)
                                -------   --------   --------   ----------     ------   -----------    -----------    ----------

Balance, December 31, 1996      227,559   $227,559   $  3,697   $3,980,871     98,281   $(1,048,431)   $  (680,088)   $2,483,608
                                =======   ========   ========   ==========     ======   ===========    ===========    ==========

</TABLE>

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

                                     II-11
<PAGE>   17
                                                                              17

                        M. H. RHODES, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


<TABLE>
<CAPTION>
                                                   1996            1995            1994
                                                -----------     -----------     -----------
<S>                                             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                             $  (177,373)    $  (895,488)    $    79,351
                                                -----------     -----------     -----------
  Adjustments to reconcile net income (loss)
    to net cash provided by
    operating activities:
        Depreciation and amortization               137,057         178,190         214,887
        ESOP expense                                169,992         169,992         169,992
        Loss on sale of assets                          559              --              --
        Translation adjustments                        (618)          7,895         (20,060)
        Change in assets and liabilities:
          Accounts receivable                       160,809         296,793          (7,079)
          Inventories                               310,845       1,241,561        (423,193)
          Accounts payable, accrued expenses
            and other, net                           (3,475)       (628,369)        (11,020)
                                                -----------     -----------     -----------


              Net cash provided by
                operating activities                597,796         370,574           2,878

 CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                             (50,459)        (16,334)       (100,959)
   Proceeds from sale of property and
     equipment                                        3,377              --              --
                                                -----------     -----------     -----------

              Net cash used in investing
                activities                          (47,082)        (16,334)       (100,959)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from additional borrowings             7,698,882       7,973,328       9,435,839
  Proceeds from State of Connecticut
    Financial Assistance Package                         --              --         400,000
  Repayment of debt                              (8,144,348)     (8,252,831)     (9,727,052)
  Purchase of treasury stock                             --         (48,396)        (18,839)
                                                -----------     -----------     -----------

              Net cash provided by
                (used in) financing
                  activities                       (445,466)       (327,899)         89,948
                                                -----------     -----------     -----------

Net Increase(decrease) in cash                      105,248          26,341          (8,133)

CASH AND CASH EQUIVALENTS, beginning of year         32,502           6,161          14,294
                                                -----------     -----------     -----------

CASH AND CASH EQUIVALENTS, end of year          $   137,750     $    32,502     $     6,161
                                                -----------     -----------     -----------
</TABLE>

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

                                      II-12

<PAGE>   18
                                                                              18
                        M. H. RHODES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 1 - GENERAL:

     The Company manufactures timing devices and photoelectric lighting controls
     primarily for sale to distributors and original equipment manufacturers.
     These products are sold primarily in domestic and certain foreign markets.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     Principles of Consolidation - The consolidated financial statements include
      the accounts of M.H. Rhodes, Inc. (the Company) and its 96% owned
      subsidiary, M.H. Rhodes (Canada) Limited. All significant intercompany
      balances and transactions have been eliminated. As of September 30, 1996
      operations ceased at M. H. Rhodes (Canada) Limited and the Board of
      Directors voted for its dissolution. The Company purchased the minority
      stockholders interest and all assets, excluding fixed assets which were
      sold to outside parties, were transferred to the Company.

     Foreign currency translation - The financial statements of M.H. Rhodes
      (Canada) Limited have been translated from Canadian to U.S. currency at
      the applicable exchange rates. The resulting translation adjustments are
      recorded directly in a separate component of stockholders' equity.

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

     Inventories - Inventories are valued at the lower of cost or market using
      the first-in, first-out method of accounting.

     Property, plant and equipment - Depreciation is provided using
      straight-line and accelerated methods over estimated useful lives which
      range from 10 to 40 years for buildings and improvements and 3 to 10 years
      for machinery and equipment.

     Other assets - Other assets include transaction costs related to the
      Photocontrols acquisition and loan origination. The acquisition costs are
      being amortized on a straight-line basis over a ten-year period and the
      loan origination costs over eighteen months. The loan origination costs
      were fully amortized at December 31, 1995.

     Revenue Recognition - Revenues from sales of timing devices and
      photoelectric lighting controls is generally recognized upon delivery to
      the customer.

     Per share data - Net income(loss) per share is based on the weighted
      average number of shares outstanding during each year. The change in
      shares outstanding in 1995 and 1994 was due to the acquisition of treasury
      stock from terminated and/or retired employees who participated in the
      Employee Stock Ownership Plan (see Note 8).


                                     II-13

<PAGE>   19
                                                                              19
                        M.H. RHODES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 and 1994

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (continued):

     Income taxes - Deferred income taxes, which are included in other
      non-current liabilities in the accompanying consolidated balance sheets,
      are provided for timing differences in the recognition of certain expenses
      for financial reporting and income tax purposes, primarily related to the
      use of differing methods of recording depreciation, investment in M. H.
      Rhodes (Canada) Limited, reserve for obsolete inventory, and allowance for
      doubtful accounts.

     Concentration of Credit Risk - The Company maintains their cash and cash
      equivalents in high credit quality financial institutions. The balances,
      at times, may be in excess of federally insured limits.

     Fair Values of Financial Instruments - The Company values financial
      instruments as required by Statement of Financial Accounting Standards No.
      107, "Disclosure about Fair Values of Financial Instruments." The carrying
      amounts of cash and cash equivalents, accounts receivable, and current
      liabilities approximate fair value.

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

NOTE 3 - INVENTORIES:

      Inventories consist of the following at December 31:

<TABLE>
<CAPTION>
                                                    1996          1995
                                                 ----------    ----------
<S>                                              <C>           <C>
         Raw materials and component parts       $1,576,083    $1,404,565
         Work-in-process                            843,654     1,418,297
         Finished goods                             419,680       327,400
                                                 ----------    ----------
                                                 $2,839,417    $3,150,262
                                                 ----------    ----------
</TABLE>

NOTE 4 - NET PROPERTY, PLANT AND EQUIPMENT:

     Property, Plant and Equipment consists of the following at December 31:

<TABLE>
<CAPTION>
                                                    1996           1995
                                                 ----------     ----------
<S>                                              <C>            <C>
     Buildings and improvements                  $1,270,698     $1,270,698
     Machinery and equipment                      2,529,388      2,518,231
     Land                                            65,000         65,000
     Construction in progress                         8,250             --
                                                 ----------     ----------
                                                  3,873,336      3,853,929
     Less: Accumulated depreciation               3,114,294      3,009,622
                                                 ----------     ----------
                                                 $  759,042        844,307
                                                 ----------     ----------
</TABLE>


                                      II-14

<PAGE>   20
                                                                              20

                        M. H. RHODES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


NOTE 5 - INCOME TAXES:


    The components of the provision (benefit) for income taxes at December 31
    are as follows:

<TABLE>
<CAPTION>
                                      1996             1995             1994
                                    ---------        ---------        ---------
<S>                                 <C>              <C>              <C>
Current:
 Federal                            $      --        $      --        $  77,406
 State                                  7,106           10,642           31,495
 Foreign                                   --               --            1,710
                                    ---------        ---------        ---------
      Total current                 $   7,106           10,642          110,611
                                    ---------        ---------        ---------
Deferred:
 Federal                            $ (14,558)              --        $ (56,315)
 State                                     --               --          (39,996)
 Foreign                                   --               --          (21,091)
                                    ---------        ---------        ---------
      Total deferred                  (14,558)              --         (117,402)
                                    ---------        ---------        ---------
                                    $  (7,452)       $  10,462        $  (6,791)
                                    ---------        ---------        ---------
</TABLE>

    An analysis of the provision (benefit) for income taxes at December 31 is as
    follows:

<TABLE>
<CAPTION>
                                          1996    1995    1994
                                          ----    ----    ----
<S>                                       <C>     <C>     <C>
    Federal provision at statutory
      rate                                  --%     --%    34%
    Net operating loss limitation           --      --     (5)
    State tax benefit                       --      --    (12)
    Benefit for Canadian loss               --      --    (26)
                                          ----    ----    ----
                                            --%     --%   (9)%
                                          ----    ----    ----
</TABLE>


     The Company has approximately $1,830,000 of net operating loss
     carryforwards available to reduce taxable income for Federal income tax
     reporting purposes which expire between 2003 and 2015. For State income tax
     purposes, the Company's net operating loss carryforwards are approximately
     $1,025,000, which expire between 1997 and 2001.


                                      II-15

<PAGE>   21
                       M. H. RHODES, INC. AND SUBSIDIARY                      21

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 5 - INCOME TAXES (continued):

    Deferred tax assets and liabilities at December 31 resulted from the
    following:

<TABLE>
<CAPTION>
                                             1996         1995
                                           --------     --------
<S>                                        <C>          <C>
    Deferred tax assets:
     Receivables                           $  8,818     $  6,788
     Inventory                               43,957      142,125
     Federal tax loss carryforwards         457,891      372,504
     State tax loss carryforwards           110,561       85,315
     Foreign tax loss carryforwards              --       18,000
     Other                                       --        5,020
                                           --------     --------
                                            621,227      629,752
     Less: Valuation allowance             (280,353)    (247,482)
                                           --------     --------
          Total deferred tax assets         340,874      382,270

     Deferred tax liabilities:
      Deferred Compensation                 261,409      285,813
      Property, plant and equipment          43,415       47,150
      Investment in subsidiary               35,418       62,251
      Debt issue costs                          632        1,614
                                           --------     --------
          Total deferred tax liabilities    340,874      396,828
                                           --------     --------
          Net deferred tax liabilities     $     --     $(14,558)
                                           --------     --------
</TABLE>

The Company paid approximately, $8,200, $10,900 and $13,100 for income taxes for
1996, 1995 and 1994 respectively.


NOTE 6 - NOTES PAYABLE:

     At December 31, 1996 and 1995, the Company had a note payable of $393,755
     and $598,979 respectively, under an accounts receivable asset backed
     revolver not to exceed the lesser of $650,000 or 75% of acceptable accounts
     receivable and $1,000,000 or 80% of acceptable accounts receivable,
     respectively. Interest is paid monthly at the prime rate (8.25% and 8.5% at
     December 31, 1996 and 1995, respectively), plus 1 1/2% and principal is due
     upon the collection of accounts receivable backing the outstanding
     advances. The revolving loan expires February 28, 1997. The note is
     guaranteed by M.H. Rhodes (Canada) Limited, and collateralized by a life
     insurance policy on a key officer of the Company, and by all other assets
     of the Company. The Company is charged interest at a minimum base borrowing
     of $400,000 even if outstanding borrowings fall below that threshold.


                                      II-16

<PAGE>   22
                                                                              22
                        M. H. RHODES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


NOTE 7 - LONG-TERM DEBT:


    Long-term debt consists of the following at December 31:

<TABLE>
<CAPTION>
                                               1996         1995
                                            ----------   ----------
<S>                                         <C>          <C>
    Mortgage note payable to bank due in
    monthly principal installments of
    $14,166, plus interest at 82-1/2%
    of the bank's prime rate through
    December, 2000 (see Note 8)             $  680,088   $  850,080

    Term note payable to State of
    Connecticut with interest at 6.5%
    due in monthly principal and
    interest installments of
    $5,323 commencing in February,
    1995 through January, 2001.                242,825      289,821

    Obligations under stock repurchase
    agreements with certain former
    employees due in annual installments
    plus interest at approximately 8%
    (see Note 8)                                59,797       83,051
                                            ----------   ----------
                                               982,710    1,222,952
    Less - Current portion                     256,173      947,331
                                            ----------   ----------
                                            $  726,537   $  275,621
                                            ----------   ----------
</TABLE>

    Aggregate principal payments of long-term debt for the next five years are
    as follows:

         Year ending December 31:

<TABLE>
<S>                                      <C>
         1997                            $  256,173
         1998                               241,358
         1999                               236,833
         2000                               231,212
         2001                                17,134
                                         ----------
                                         $  982,710
                                         ----------
</TABLE>


                                      II-17

<PAGE>   23
                                                                              23

                        M. H. RHODES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


NOTE 7 - LONG-TERM DEBT (continued):


     The mortgage note payable contains various financial covenants primarily
     related to the current ratio, net worth, liabilities to net worth, current
     maturity of long-term debt ratio and restrictions on payment of dividends.
     As of and for the year ended at December 31, 1996 and 1995 the Company was
     not in compliance with the stipulated net worth and current maturity of
     long-term debt covenants. On February 4, 1997, the lender waived the
     provisions of the net worth and current maturity of long-term debt
     covenants as of and for the year ended December 31, 1996.

     The Company has pledged, on a subordinated basis to the aforementioned
     accounts receivable asset backed revolving loan (see Note 6), substantially
     all assets as collateral for the mortgage note.

     The Company received $400,000 in financial assistance from the State of
     Connecticut, Department of Economic Development (The State) on March 24,
     1994. The State provided a $300,000 loan and a $100,000 grant to be used
     for new product tooling and equipment. The $100,000 grant, which is
     included with other non-current liabilities in the accompanying balance
     sheet, requires the fulfillment of certain conditions as set forth in the
     grant agreement. Failure to fulfill the conditions could result in the
     return of funds to the State along with a penalty charge of 7.5% per annum,
     per year the grant is outstanding.

     The Company paid approximately $135,661, $173,388 and $138,200 for interest
     in 1996, 1995 and 1994, respectively.


NOTE 8 - EMPLOYEE STOCK OWNERSHIP PLAN:

     The Company established a non-contributory Employee Stock Ownership Plan
     (ESOP) for qualified non-union employees effective January 1, 1983, and in
     1985, the ESOP acquired approximately 55% of the Company's outstanding
     stock. The funds required to finance this purchase were loaned to the ESOP
     by the Company using funds borrowed from a bank on the same terms as the
     bank debt. (see Note 7).

     At the time of the purchase, the Company recorded unallocated ESOP shares
     of $2,550,000 for current and future ESOP contributions as a deduction from
     stockholders' equity. Contributions to the ESOP are based upon the terms of
     the bank debt, resulting in ESOP expense of $169,992 per year. Interest
     expense for the related note payable was $65,495, $69,781 and $65,155 in
     1996, 1995 and 1994, respectively.


                                      II-18

<PAGE>   24

                                                                              24

                        M. H. RHODES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


NOTE 8 - EMPLOYEE STOCK OWNERSHIP PLAN (continued):

     The ESOP allows salaried employees to earn shares of the Company's stock
     while they are employed by the Company. Upon the cessation of their
     employment, former employees can require the Company to purchase their
     vested shares at an appraised value ($7.50 per share at December 31, 1995)
     payable over a five-year period. The amount owed to such former employees
     for their shares is included in long-term debt in the accompanying balance
     sheet (see Note 7).

     Shares of the plan are released for allocation to participants as
     compensation based on annual principal payments of $169,992 made on the
     ESOP debt. At December 31, 1996, 79,574 shares are allocated, 5,245 shares
     are committed to be released and 18,105 shares are held in suspense. The
     value of unearned ESOP shares at December 31, 1996 is estimated to be
     $135,790.

NOTE 9 - REDEEMABLE COMMON STOCK:

     In connection with the ESOP, 73,321 and 68,592 shares of common stock have
     been classified as redeemable at December 31, 1996 and 1995, respectively.
     These shares represent the vested portion of all common stock held by
     employees with the right to put those shares to the Company upon cessation
     of their employment (see Note 8).

NOTE 10 - CONTINGENCIES:

     The Company is subject to legal proceedings, claims and liabilities,
     including environmental matters, which are incidental to its business. It
     is management's opinion that the disposition of these matters will not have
     a material effect on the Company's consolidated financial position or
     results of operations.

NOTE 11 - PENSION PLAN:

     Under the terms of an agreement with the International Association of
     Machinists, the Company contributes specified amounts to union-administered
     pension funds. Contributions were $45,189, $28,397 and $37,244 in 1996,
     1995 and 1994, respectively. Since this plan is a multiemployer plan,
     actuarial present values of accumulated plan benefits and other information
     for a particular employer are not available.


                                      II-19

<PAGE>   25
                                                                              25

ITEM 9. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT

     The Board of Directors of M. H. Rhodes, Inc. approved the recommendation of
the Registrant's Officers to dismiss Whittlesey & Hadley, P.C., 147 Charter Oak
Avenue, Hartford, Connecticut, 06106 as its independent accountants and to
engage the accounting firm of Riggs Mahoney & Sabol, One State Street, Hartford,
Connecticut, 06103 as independent accountants for the Registrant for 1995. The
engagement of Whittlesey & Hadley,P.C. 147 Charter Oak Avenue, Hartford,
Connecticut, 06106 has ceased as of January 31, 1996.

     Whittlesey & Hadley, P.C. served as auditors for the Registrant since 1993.
During none of the years for which Whittlesey & Hadley, P.C. served as
independent auditors for the Company nor for the subsequent interim period
preceding the replacement of Whittlesey & Hadley, P.C., were there any
disagreements between the Registrant and Whittlesey & Hadley, P.C. on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure that would have caused them to make reference in
their report to the subject matter of the disagreement. There were no
"reportable events" (within the meaning of the applicable rules and regulations
of the Securities and Exchange Commission) during the two years ended December
31, 1994 or the subsequent interim period.

     Whittlesey & Hadley, P.C.'s report on the financial statements as of
December 1993 and 1994 for the years then ended was unqualified.

     The registrant has requested that Whittlesey & Hadley, P.C. furnish it with
a letter addressed to the SEC stating whether it agrees with the above
statements. A copy of Whittlesey & Hadley, P.C.'s letter to the SEC dated
January 31, 1996 is filed as Exhibit 1 to the Form 8-K.

     The Registrant's Audit Committee of the Board of Directors approved the
change in the accountants.


                                      II-20

<PAGE>   26
                                                                              26

                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information required by this Item with respect to Directors is incorporated
by reference in the Company's Proxy Statement for the Annual Shareholders
meeting to be held in May, 1997, pursuant to General Instruction G to Form 10-K.
Information concerning Executive Officers is included at the end of Part I of
this Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

     Information required by this Item is incorporated by reference in the
Company's Proxy Statement for the Annual Shareholders meeting to be held in May,
1997.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

     Information required by this Item is incorporated by reference in the
Company's Proxy Statement for the Annual Shareholders meeting to be held in May,
1997.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     None.


                                      III-1

<PAGE>   27
                                                                              27

                                     PART IV

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

  A. The following documents are filed as a part of this report:

  1. Financial Statements                                          Page No.
     --------------------                                          --------

     The following Consolidated Financial Statements of M.H.
          Rhodes, Inc. and Subsidiaries are included in Item 8:      II-6

     Opinion of Independent Public Accountants.                      II-7-8

     Consolidated Balance Sheets - December 31, 1996 and 1995.       II-9

     Consolidated Statements of Operations -
          Years ended December 31, 1996, 1995 and 1994.              II-10

     Consolidated Statements of Stockholders' Equity -
          Years ended December 31, 1996, 1995 and 1994.              II-11

     Consolidated Statements of Cash Flows -
          Years ended December 31, 1996, 1995 and 1994.              II-12

     Notes to Consolidated Financial Statements.                     II-13-19


  2. Supplementary Data and Financial Statements Schedules

     All Schedules are omitted because of the absence of conditions under which
     they are required or because the required information is given in the
     Financial Statements or Notes thereto.

     Separate Financial Statements and Supplemental Schedules of the Company are
     omitted since the Company is primarily an operating Company and its
     subsidiary, included in the Consolidated Financial Statements being filed,
     does not have a minority equity interest or indebtedness to any person
     other than the Company in an amount which exceeds five percent of the total
     assets as shown by the Consolidated Financial Statements as filed herein.


                                      IV-1

<PAGE>   28
                                                                              28

  3. Exhibits                                       Cross Reference Information
     --------                                       ---------------------------

     (3) Articles of Incorporation and By-Laws      Filed as Exhibit to Form
                                                    10 filed on April 27, 1965

     (4A) Specimen Common Stock Certificate         Filed as Exhibit 4A to
                                                    Form 10-K, File No. 0-1412
                                                    dated March 25, 1987.
     (4B) Loan Agreement, Term Loan Note and
          Open End Mortgage Between the Company
          and The Connecticut National Bank                  **
          dated December 19, 1985


     (4C) Loan Agreement 5-Year Term Loan Note      Filed as Exhibit 4C to
          and Open End Mortgage Between the         Form 10-K, File No. 0-1412
          Company and The Connecticut National      dated March 27, 1990.
          Bank dated December 7, 1989

     (4D) Loan Agreement, Eighteen month            Filed as Exhibit 4D to
          Accounts Receivable Asset Backed          Form 10-K, File No. 0-1412
          Revolver between the Company and          dated March 30, 1994.
          Affiliated Business Credit Corporation
          dated October 21, 1993.

     (4E) Loan Agreement/Grant, 7-year loan         Filed as Exhibit 4E to
          between the Company and the State of      Form 10-K, File No. 0-1412
          Connecticut, dated March 24, 1994.        dated March 30, 1994.

     (4F) Loan Modification Agreement, Term Loan    Filed as Exhibit 4F to
          Note and Open End Mortgage Between the    Form 10-K,  File No. 0-1412
          Company and The Connecticut National      dated March 30, 1994.
          Bank (K/N/A Shawmut Bank) dated
          December 19, 1985, modified on
          October 21, 1993.


     (11) Statement re: computation per share earnings filed with this report

     (16) Letter re: Change in certifying Accountants  Pg. filed as Exhibit 16
          to form 10-K, File No. 0-1412 dated March 30, 1994

     (21) Subsidiaries of Company filed with this report

     ** Incorporated by reference in Exhibit 4 to Schedule 13D, dated December
27, 1985, filed by M. H. Rhodes, Inc. Employee Stock Ownership Trust for the
Non-Bargaining Unit Employee Group of the M. H. Rhodes, Inc. Employee Stock
Ownership Plan for the Non-Bargaining Unit Employee Group. This Schedule 13D was
filed with the SEC on December 30, 1985. Exhibit 4 is found at pages 98, et seq.
of such filing in accordance with the sequential numbering system.


                                      IV-2

<PAGE>   29
                                                                              29

  B. Reports on Form 8-K

     No reports on Form 8-K were filed by the registrant during the last quarter
     of the period covered by this report.


                                      IV-3

<PAGE>   30
                                                                              30

                                   SIGNATURES

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

                                    M. H. RHODES, INC.

                                    By: /s/ Joseph L. Morelli
                                        ----------------------------
                                        Joseph L. Morelli, President
                                        and Chief Executive Officer
                                        March 25, 1997

     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.

                                    By: /s/ Joseph L. Morelli
                                        ----------------------------
                                        Joseph L. Morelli, President
                                        and Chief Executive Officer
                                        March 25, 1997


                                    By: /s/ Allan D. Springer
                                        ---------------------------------
                                        Allan D. Springer, Vice President
                                        Finance and Chief Financial
                                        Officer/Principal Accounting
                                        Officer
                                        March 25, 1997


                                    By: /s/ Edward J. Doyle
                                        -------------------------
                                        Edward J. Doyle, Director
                                        March 25, 1997


                                    By: /s/ Anthony J. Campanelli
                                        -------------------------------
                                        Anthony J. Campanelli, Director
                                        March 25, 1997


                                    By: 
                                        -------------------------
                                        Harold T. LeMay, Director
                                        March   , 1997

<PAGE>   31
                                                                              31

                                  EXHIBIT INDEX


                                                    Sequential Numbering
                                                    System, Page number or
Exhibit Number                                      Cross Reference Information
--------------                                      ---------------------------

     (3) Articles of Incorporation and By-Laws      Filed as Exhibit to Form
                                                    10 filed on April 27, 1965

     (4A) Specimen Common Stock Certificate         Filed as Exhibit 4A to
                                                    Form 10-K, File No. 0-1412
                                                    dated March 25, 1987.

     (4B) Loan Agreement, Term Loan Note and
          Open End Mortgage Between the Company
          and The Connecticut National Bank                  **
          dated December 19, 1985


     (4C) Loan Agreement 5-Year Term Loan Note      Filed as Exhibit 4C to
          and Open End Mortgage Between the         Form 10-k, File No. 0-1412
          Company and The Connecticut National      dated March 27, 1990.
          Bank dated December 7, 1989

     (4D) Loan Agreement, Eighteen Month            Filed as Exhibit 4D to
          Accounts Receivable Asset Backed          Form 10-K, File No. 0-1412
          Revolver between the Company and          dated March 30, 1994.
          Affiliated Business Credit
          Corporation dated October 21, 1993.

     (4E) Loan Agreement/Grant, 7-year loan         Filed as Exhibit 4C to
          between the Company and the State         Form 10-K, File No. 0-1412
          of Connecticut, dated March 24, 1994.     dated March 30, 1994.

     (4F) Loan Modification Agreement, Term Loan    Filed as Exhibit 4D to
          Note and Open End Mortgage Between the    Form 10-K, File No. 0-1412
          Company and The Connecticut National      dated March 30,  1994.
          Bank (K/N/A Shawmut Bank) dated
          December 19, 1985, modified on
          October 21, 1993.

     (11) Statement re: computation per share earnings filed with this report

     (16) Letter re: Change in certifying Accountants    Pg. filed as Exhibit
          16 to form 10-K, File No. 0-1412 dated March 30, 1994

     (21) Subsidiaries of Company filed with this report

     ** Incorporated by reference in Exhibit 4 to Schedule 13D, dated December
27, 1985, filed by M. H. Rhodes, Inc. Employee Stock Ownership Trust for the
Non-Bargaining Unit Employee Group of the M. H. Rhodes, Inc. Employee Stock
Ownership Plan for the Non-Bargaining Unit Employee Group. This Schedule 13D was
filed with the SEC on December 30, 1985. Exhibit 4 is found at pages 98, et seq.
of such filing in accordance with the sequential numbering system.