ANNUAL REPORT ON FORM 10-K

                    ITEM 8, ITEM 14 (a) (1) and (2), and (d)

                   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES


                          YEAR ENDED DECEMBER 31, 1997




                               RONSON CORPORATION

                              SOMERSET, NEW JERSEY



<PAGE>
<TABLE>
<CAPTION>
RONSON CORPORATION FIVE-YEAR SELECTED FINANCIAL DATA
----------------------------------------------------
Dollars (other than per share amounts) in thousands





                                          1997         1996         1995         1994         1993     
                                        --------     --------     --------     --------     --------
<S>                                     <C>          <C>          <C>          <C>          <C>        
Net sales .........................     $ 23,170     $ 25,454     $ 26,953     $ 25,583     $ 19,725

Earnings (loss) from
  continuing operations ...........          783          335        1,500        1,074         (821)

Total assets ......................       13,519       12,104       13,403       11,887        9,896

Long-term obligations .............        4,222        2,963        3,312        2,389        3,619

Per common share (3):
  Earnings (loss) from
       continuing operations (1,2):
       Basic ......................         0.26         0.09         0.77         0.52        (0.59)
       Diluted ....................         0.25         0.09         0.57         0.42        (0.59)

</TABLE>

(1)  Prior  years  have  been  restated  to  include  the  dilutive   effect  of
     outstanding stock options in accordance with SFAS #128.

(2)  Basic  Earnings  (Loss) per Common Share assumes no conversion of preferred
     shares to common  shares and  Diluted  Earnings  (Loss)  per  Common  Share
     assumes full conversion of all preferred  shares to common and includes the
     dilutive  effect of outstanding  stock options.  The assumed  conversion of
     preferred  shares  to  common  and  the  exercise  of  stock  options  were
     anti-dilutive  for the  years  ended  December  31,  1993  and  1996,  and,
     therefore,  they were excluded  from the  computation  of Diluted  Earnings
     (Loss) per Common Share for those years.

(3)  No dividends  on common  stock were  declared or paid during the five years
     ended December 31, 1997.
<PAGE>
   FORM 10-K -- ITEM 14 (a) (1) and (2)

   RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES

   LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES


   The following consolidated financial statements of Ronson Corporation and its
   wholly owned subsidiaries are included in Item 8:


         Consolidated Balance Sheets - December 31, 1997 and 1996

         Consolidated Statements of Operations - Years Ended
                  December 31, 1997, 1996 and 1995

         Consolidated  Statements of Cash Flows - Years Ended 
                  December 31, 1997, 1996 and 1995

         Notes to Consolidated Financial Statements

   The  following   consolidated   financial   statement   schedules  of  Ronson
   Corporation  and its wholly owned  subsidiaries  to be included in Item 14(d)
   will be filed by the Company by amendment before April 30, 1998.


         Schedule I                 Condensed Financial Information
                                            of Company

         Schedule II                Valuation and Qualifying Accounts


<PAGE>
                          INDEPENDENT AUDITORS' REPORT


   The Board of Directors and Stockholders
   Ronson Corporation

   We have  audited  the  accompanying  consolidated  balance  sheets  of Ronson
   Corporation  and  subsidiaries  as of  December  31,  1997 and 1996,  and the
   related consolidated  statements of operations and cash flows for each of the
   years in the  three-year  period ended  December 31,  1997.  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 audits 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  consolidated  financial  position  of  Ronson
   Corporation  and  subsidiaries  as of  December  31,  1997 and 1996,  and the
   consolidated  results  of  their  operations  for  each of the  years  in the
   three-year  period  ended  December  31, 1997 in  conformity  with  generally
   accepted accounting principles.


   /s/DEMETRIUS & COMPANY, L.L.C.
   -----------------------------
   DEMETRIUS & COMPANY, L.L.C.

   Wayne, New Jersey
   March 11, 1998
<PAGE>
<TABLE>
<CAPTION>
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
                                                                                                            
CONSOLIDATED BALANCE SHEETS
---------------------------
Dollars in thousands

                             ASSETS
                             ------

                                                                   December 31,
                                                               -------------------        
                                                                1997        1996*
                                                               -------     -------                               
<S>                                                            <C>         <C>
CURRENT ASSETS:
Cash .....................................................     $    32     $   116
Accounts receivable, less allowances for doubtful accounts
  of: 1997, $76; 1996, $64 ...............................       1,865       1,617

Inventories:
  Finished goods .........................................       2,260       2,428
  Work in process ........................................          62         160
  Raw materials ..........................................         695         520
                                                               -------     -------
                                                                 3,017       3,108
Other current assets .....................................         527         439

Current assets of discontinued operations ................         387         358
                                                               -------     -------
      TOTAL CURRENT ASSETS ...............................       5,828       5,638


PROPERTY, PLANT AND EQUIPMENT:
Land .....................................................          19          19
Buildings and improvements ...............................       3,742       3,638
Machinery and equipment ..................................       7,071       6,028
Construction in progress .................................          61          55
                                                               -------     -------
                                                                10,893       9,740

Less accumulated depreciation and amortization ...........       5,424       5,232
                                                               -------     -------
                                                                 5,469       4,508


INTANGIBLE PENSION ASSETS ................................         320         357

OTHER ASSETS .............................................         843         775


OTHER ASSETS OF DISCONTINUED OPERATIONS ..................       1,059         826
                                                               -------     -------
                                                               $13,519     $12,104
                                                               =======     =======
</TABLE>
See notes to consolidated financial statements.
* Reclassified for comparability.
<PAGE>
<TABLE>
<CAPTION>
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
                                                                                                                    
CONSOLIDATED BALANCE SHEETS
---------------------------
Dollars in thousands (except share data)


                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------
                              

                                                                       December 31,
                                                               -------------------------
                                                                  1997             1996
                                                               --------          -------  
<S>                                                             <C>            <C>       
CURRENT LIABILITIES:                                                             
Short-term debt .............................................  $  2,713        $   2,084
Current portion of long-term debt ...........................       368              598
Current portion of lease obligations ........................        91              108
Accounts payable ............................................     1,431            1,477
Accrued expenses ............................................     1,724            1,911
Current liabilities of discontinued operations ..............     1,106            1,753
                                                               --------          ------- 
     TOTAL CURRENT LIABILITIES ..............................     7,433            7,931
                                                                                 
LONG-TERM DEBT ..............................................     3,561            2,352
                                                                                 
LONG-TERM LEASE OBLIGATIONS .................................       183              250
                                                                                 
PENSION OBLIGATIONS .........................................       394              268
                                                                                 
OTHER LONG-TERM LIABILITIES .................................        36               36
                                                                                 
LONG-TERM LIABILITIES OF DISCONTINUED OPERATIONS ............        48               57
                                                                                 
COMMITMENTS AND CONTINGENCIES                                                    
                                                                                 
STOCKHOLDERS' EQUITY:                                                            
Preferred stock, no par value, authorized 5,000,000 shares:                      
  12% cumulative convertible, $0.01 stated value, outstanding                    
  1997, 36,518 and 1996, 837,595 ............................        --                8
                                                                
  Common stock par value $1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
                                                                                                                    
CONSOLIDATED BALANCE SHEETS
---------------------------
Dollars in thousands (except share data)(continued)


                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------
                              
                                                                                                      
                                                                                                 December 31,
                                                                                          -------------------------   
                                                             1997           1996            1997             1996  
                                                         ----------     ----------        --------          ------- 
<S>                                                      <C>            <C>               <C>              <C>      
    Authorized shares................................... 11,848,106     11,848,106                                          
    Reserved shares.....................................    139,618        941,445                                   
    Issued (including treasury).........................  3,225,607      1,863,939            3,226            1,864 
                                                                                                                     
  Additional paid-in capital............................                                     28,991           30,345 
  Accumulated deficit...................................                                    (27,153)         (27,936)
  Unrecognized net loss on pension plans................                                     (1,545)          (1,441)
  Cumulative foreign currency translation adjustment....                                        (61)             (36)
                                                                                           --------         -------- 
                                                                                              3,458            2,804   
  Less cost of treasury shares:                                                                                      
    1997, 62,332 and 1996, 62,105 common shares.........                                      1,594            1,594 
                                                                                           --------         -------- 
    TOTAL STOCKHOLDERS' EQUITY..........................                                      1,864            1,210            
                                                                                           --------         -------- 
                                                                                           $ 13,519         $ 12,104
                                                                                           ========         ========
</TABLE>
  See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
                                                                                                            
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
Dollars in thousands (except per share data)



                                                              Year Ended December 31,
                                                       -----------------------------------                                         
                                                          1997        1996 *       1995 *
                                                       --------     --------      --------
<S>                                                    <C>          <C>           <C>
NET SALES ........................................     $ 23,170     $ 25,454      $ 26,953
                                                       --------     --------      --------
Cost and expenses:
  Cost of sales ..................................       14,504       16,522        18,216
  Selling, shipping and advertising ..............        3,613        3,650         3,340
  General and administrative .....................        3,384        3,196         3,141
  Depreciation and amortization ..................          490          551           544
                                                       --------     --------      --------
                                                         21,991       23,919        25,241
                                                       --------     --------      --------
EARNINGS FROM CONTINUING OPERATIONS BEFORE
  INTEREST AND OTHER ITEMS .......................        1,179        1,535         1,712
                                                       --------     --------      --------
Other expense:
  Interest expense ...............................          523          762           541
  Other-net ......................................          107          567           168
                                                       --------     --------      --------
                                                            630        1,329           709
                                                       --------     --------      --------
EARNINGS FROM CONTINUING OPERATIONS
  BEFORE INCOME TAXES ............................          549          206         1,003

Income tax benefits-net ..........................          234          129           497
                                                       --------     --------      --------
EARNINGS FROM CONTINUING OPERATIONS ..............          783          335         1,500
                                                       --------     --------      --------

Loss from discontinued operations (net of current
  tax benefit of:  1997, $132;  and deferred
  income tax benefits of:  1996, $180; 1995, $110)         --         (1,190)         (860)
                                                       --------     --------      --------

NET EARNINGS (LOSS) ..............................     $    783     $   (855)     $    640
                                                       ========     ========      ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
                                                                                                            
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
Dollars in thousands (except per share data)(continued)



                                                              Year Ended December 31,
                                                       ----------------------------------- 
                                                          1997        1996 *       1995 *
                                                       --------     --------      --------
<S>                                                    <C>          <C>           <C>
EARNINGS (LOSS) PER COMMON SHARE:

Basic:
  Earnings from continuing operations ............     $   0.26     $   0.09      $   0.77
  Loss from discontinued operations ..............         --          (0.66)        (0.50)
                                                       --------     --------      --------
  Net earnings (loss) ............................     $   0.26     $  (0.57)     $   0.27
                                                       ========     ========      ========
Diluted:
  Earnings from continuing operations ............     $   0.25     $   0.09      $   0.57
  Loss from discontinued operations ..............         --          (0.66)        (0.33)
                                                       --------     --------      --------
  Net earnings (loss) ............................     $   0.25     $  (0.57)     $   0.24
                                                       ========     ========      ======== 
</TABLE>
See notes to consolidated financial statements.
* Reclassified for comparability.
<PAGE>
<TABLE>
<CAPTION>
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
Dollars in thousands

                                                                Year Ended December 31,
                                                        ---------------------------------
                                                          1997         1996 *      1995 *
                                                        -------      -------      -------
<S>                                                     <C>          <C>          <C>    
Cash Flows from Operating Activities:
Net earnings (loss) ...............................     $   783      $  (855)     $   640
Adjustments to reconcile net earnings (loss) to net
   cash provided by (used in) operating activities:
   Depreciation and amortization ..................         490          551          544
   Deferred income tax benefits ......................     (225)        (390)        (686)
   Increase (decrease) in cash from changes in:
      Accounts receivable .........................        (248)         323         (243)
      Inventories .................................         737        1,412       (1,424)
      Other current assets ........................         (73)         133           61
      Accounts payable ............................         (46)          49         (265)
      Accrued expenses ............................         (72)         (84)        (294)
   Net change in pension-related accounts .........         (56)         (30)      (1,669)
   Other ..........................................          57          137          389
   Discontinued operations ........................        (791)         685          357
                                                        -------      -------      -------
      Net cash provided by (used in) operating
         activities ...............................         556        1,931       (2,590)
                                                        -------      -------      -------
Cash Flows from Investing Activities:
      Net cash used in investing activities,
         capital expenditures .....................      (2,138)        (504)        (494)
                                                        -------      -------      -------

Cash Flows from Financing Activities:
Proceeds from long-term debt ......................       2,085          400        1,563
Proceeds from short-term debt .....................       1,431        1,847        8,818
Proceeds from exercise of stock options ...........        --             80           31
Payments of long-term debt ........................        (970)        (665)        (545)
Payments of long-term lease obligations ...........        (110)         (78)         (60)
Payments of short-term debt .......................        (938)      (2,959)      (6,845)
                                                        -------      -------      -------
       Net cash provided by (used in)
          financing activities .....................      1,498       (1,375)       2,962
                                                        -------      -------      -------
Net increase (decrease) in cash ...................         (84)          52         (122)

Cash at beginning of year .........................         116           64          186
                                                        -------      -------      -------

Cash at end of year ...............................     $    32      $   116      $    64
                                                        =======      =======      =======
</TABLE>
See notes to consolidated financial statements.
* Reclassified for comparability.
<PAGE>
   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   Note 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

         Principles of  Consolidation - The  consolidated  financial  statements
   include  the  accounts  of  Ronson   Corporation   (the  "Company")  and  its
   subsidiaries,  all of which are wholly owned. Its principal  subsidiaries are
   Ronson Consumer Products Corporation ("RCPC"), Woodbridge, New Jersey; Ronson
   Corporation of Canada, Ltd. ("Ronson-Canada"),  Mississauga,  Ontario, Canada
   (together  "Ronson  Consumer  Products");   Ronson  Aviation,  Inc.  ("Ronson
   Aviation"), Trenton, New Jersey; and Prometcor, Inc., ("Prometcor"), formerly
   known as Ronson  Metals  Corporation,  Newark,  New Jersey.  All  significant
   intercompany accounts and transactions have been eliminated in consolidation.

         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  liabilities  at the date of the
   financial statements and the reported amounts of revenues and expenses during
   the period. Actual results could differ from those estimates.

         Property and  Depreciation - Property,  plant and equipment are carried
   at cost and are  depreciated  over their  estimated  useful  lives  using the
   straight-line  method.  Capitalized leases are amortized over their estimated
   useful  lives using the  straight-line  method.  Leasehold  improvements  are
   amortized  over their  estimated  useful lives or the remaining  lease terms,
   whichever is shorter.  At December 31, 1997, aircraft and other related costs
   utilized by Ronson Aviation in its charter  operations and held for more than
   one year were  classified as property,  plant and  equipment.  The term notes
   payable  secured by the  above-mentioned  aircraft  were also  classified  as
   long-term  debt.  Certain  information in the prior year's balance sheets and
   statements  of  operations  and  cash  flows  have  been   reclassified   for
   comparability. The reclassification had no effect on earnings (loss).

         Inventories - Inventories, other than aircraft, are valued at the lower
   of average  cost or  market.  Aircraft  inventory  is carried at the lower of
   cost, specific identification, or market.

         Foreign  Currency  Translation  - All  balance  sheet  accounts  of the
   Company's foreign  subsidiary,  Ronson-Canada,  are translated at the current
   exchange rate as of the end of the year.  All income  statement  accounts are
   translated at average currency exchange rates.  Stockholders' Equity accounts
   are  translated  at historical  exchange  rates.  The  resulting  translation
   adjustment  is  recorded as a separate  component  of  Stockholders'  Equity.
   Transaction gains and losses are not significant in the periods presented.

         Fair Value of Financial Instruments - The Company has adopted Statement
   of Financial Accounting Standards ("SFAS") #107 "Disclosures about Fair Value
   of Financial  Instruments"  which  requires all entities to disclose the fair
   value of financial  instruments  for which it is practicable to estimate fair
   value.

         The Company's financial  instruments include cash, accounts receivable,
   accounts  payable,   accrued  expenses  and  other  current  liabilities  and
   long-term  debt.  The book  values  of cash,  accounts  receivable,  accounts
   payable and accrued expenses and other current liabilities are representative
   of their fair values due to the short-term maturity of these instruments. The
   book value of the Company's  long-term debt is considered to approximate  its
   fair value, based on current market rates and conditions.
<PAGE>
         Research  and  Development  Costs - Costs of  research  and new product
   development   are  charged  to   operations   as  incurred  and  amounted  to
   approximately  $141,000,  $134,000 and $135,000 for the years ended  December
   31, 1997, 1996 and 1995, respectively.

         Advertising  Costs - Costs of advertising  are expensed as incurred and
   amounted to approximately $446,000, $561,000 and $258,000 for the years ended
   December 31, 1997, 1996 and 1995, respectively.

         Income Taxes - In  accordance  with SFAS #109,  "Accounting  for Income
   Taxes",  in 1997, 1996 and 1995, the Company recorded net deferred income tax
   assets of $225,000, $390,000 and $686,000, respectively.

         Per Common  Share  Data - Basic  Earnings  (Loss) per Common  Share was
   computed by dividing earnings (loss) less cumulative  preferred  dividends by
   the weighted average number of common shares outstanding.

         Diluted  Earnings  (Loss) per Common  Share was  computed  by  dividing
   earnings (loss) by the weighted average number of common shares  outstanding,
   including the assumed  conversion of the preferred  shares into common shares
   and the dilutive effect of the outstanding stock options.

         The weighted  average number of shares used for these  computations was
   as follows:
<TABLE>
<CAPTION>

                                                 Year Ended December 31,
                                            1997         1996        1995
                                          ---------    ---------   ---------
<S>                                       <C>          <C>         <C>
        Average number of common shares:
         Basic                            2,957,995    1,791,535   1,719,867
         Diluted (1)                      3,130,093    2,641,160   2,613,577
</TABLE>

          (1)   The years ended  December 31, 1996 and 1995,  have been restated
                to include the dilutive  effect of outstanding  stock options in
                accordance with SFAS #128.



         Stock Options - The Company has elected to follow Accounting Principles
   Board Opinion #25,  "Accounting  for Stock Issued to Employees" (APB #25) and
   related Interpretations in accounting for its employee stock options because,
   as discussed below, the alternative fair value accounting  provided for under
   SFAS #123, "Accounting for Stock-Based Compensation",  requires use of option
   valuation  models that were not developed for use in valuing  employee  stock
   options.  Under APB #25, because the exercise price of the Company's employee
   stock options equals or exceeds the market price of the  underlying  stock on
   the date of grant, no compensation expense is recognized.

         Recent   Accounting   Pronouncements  -  In  June  1997  the  Financial
   Accounting  Standards  Board  issued  SFAS  #130,  "Reporting   Comprehensive
   Income",  and SFAS #131,  "Disclosures  about  Segments of an Enterprise  and
   Related Information",  both of which are effective for fiscal years beginning
   after  December 15,  1997.  The Company will adopt SFAS #130 and SFAS #131 in
   1998 as required. SFAS #130 and SFAS #131 will affect the Company's reporting
   of the  Unrecognized  Net  Loss on  Pension  Plans,  the  Cumulative  Foreign
   Currency  Translation  Adjustment,  and  information  regarding the Company's
   operating  segments.  Implementation  of  these  statements  will  not have a
   material  effect  on  the  Company's   financial   condition  or  results  of
   operations.
<PAGE>
   Note 2.  DISCONTINUED OPERATIONS:

         In  December  1989  the  Company  adopted  a plan  to  discontinue  the
   operations  in  1990  of one of its  New  Jersey  facilities,  Ronson  Metals
   Corporation,  subsequently  renamed  Prometcor,  and to  comply  with the New
   Jersey  Environmental  Industrial Site Recovery Act ("ISRA")  (formerly ECRA)
   and all other  applicable laws. As part of the plan to sell the properties of
   the Prometcor  discontinued  operations,  Prometcor has also been involved in
   the termination of its United States Nuclear  Regulatory  Commission  ("NRC")
   license.  The total costs and expenses  related to terminating  the Prometcor
   operations,  less the expected  gain from the eventual  sales of  Prometcor's
   assets, have been projected to be approximately  $4,260,000.  These costs and
   expenses consisted of: termination of Prometcor's operations;  maintenance of
   the Prometcor  property;  and  completion  of  compliance  by Prometcor  with
   environmental regulations.  In the fourth quarters of 1996, 1995, 1993, 1992,
   1991 and 1990;  the  amounts of  $1,370,000,  $970,000,  $625,000,  $200,000,
   $520,000 and $575,000,  respectively,  (which total  $4,260,000) were charged
   against the Company's Loss from  Discontinued  Operations,  prior to deferred
   income tax benefits. These charges between the beginning of 1990 and year end
   1996 were due  primarily  to:  costs  incurred;  previously  projected  costs
   related  to  compliance  with  the New  Jersey  Department  of  Environmental
   Protection ("NJDEP") requirements;  NRC related activities;  and the extended
   period  of  time  previously  projected  for  NJDEP  and NRC  clearance.  The
   liability for these costs and expenses  recorded in the financial  statements
   at December 31, 1997, was considered adequate by the Company, based upon: the
   results of testing  completed;  NJDEP and NRC  comments;  and  reports to the
   Company by its environmental counsel and environmental consultants.

         Although  the Company  believes it has accrued for all future  costs at
   Prometcor, the full extent of the costs and time required is not determinable
   until  additional  sampling and  remediation,  if any, has been completed and
   accepted by the NJDEP and by the NRC.

         Prometcor is being  accounted  for as a  discontinued  operation,  and,
   accordingly,  its operating  results are reported in this manner in all years
   presented in the accompanying Consolidated Statements of Operations and other
   related operating statement data.

         The  assets  and   liabilities   of  Prometcor  are  reflected  in  the
   Consolidated  Balance  Sheets under assets and  liabilities  of  discontinued
   operations.  At December 31, 1997,  Other Assets of  Discontinued  Operations
   consisted  primarily of land and buildings and net deferred income tax assets
   of  Prometcor.   The  Current  Liabilities  of  Discontinued  Operations  and
   Long-Term  Liabilities  of  Discontinued  Operations  at December  31,  1997,
   consisted   principally   of  $902,000  of  accrued   costs  related  to  the
   environmental   compliance   of  Prometcor   and  accrued  costs  related  to
   discontinuance of Prometcor.


   Note 3.  INCOME TAXES:

         At December 3l, 1997, the Company had, for federal income tax purposes,
   net operating loss  carryforwards of approximately  $11,350,000,  expiring as
   follows:  $4,000,000 in 1998;  $2,800,000 in 1999;  $800,000 in 2000 to 2001;
   $1,750,000 in 2005 to 2007; and $2,000,000 in 2009 to 2012.
<PAGE>
         In  addition,  the  Company  had  approximately  $63,000  of  available
   investment  tax credit  carryforwards  expiring as follows:  $20,000 in 1998;
   $32,000 in 1999 and $11,000 in 2000. In accordance with provisions enacted in
   the Tax Reform Act of 1986, the investment tax credit carryforwards available
   for future  periods have been reduced by 35%. The Company also had  available
   alternative minimum tax credit carryforwards of approximately $60,000.

         The income tax  benefits  (expenses)  consisted  of the  following  (in
   thousands):
<TABLE>
<CAPTION>

                                                    Year Ended December 31,
                                                    1997     1996    1995
                                                    ----     ----    ----
<S>                                                <C>      <C>     <C>
   Current:
          Federal. . . . . . . . . . . . . . . . . $  --    $  --   $  --
          State. . . . . . . . . . . . . . . . . .   141      (81)    (79)
                                                   -----    -----   -----
                                                     141      (81)    (79)
                                                   -----    -----   -----
   Deferred:
          Federal. . . . . . . . . . . . . . . . .   170      342     557
          State. . . . . . . . . . . . . . . . . .    55       48     129
                                                   -----    -----   -----
                                                     225      390     686
                                                   -----    -----   -----
                                                     366      309     607
   Allocated to discontinued operations. . . . . .   132      180     110
                                                   -----    -----   -----
          Income tax benefits-net. . . . . . . . . $ 234    $ 129   $ 497
                                                   =====    =====   =====
</TABLE>

         The  reconciliation  of estimated income taxes attributed to continuing
   operations  at the United States  statutory  tax rate to reported  income tax
   benefits (expenses) is as follows (in thousands):
<TABLE>
<CAPTION>
                                                   Year Ended December 31,
                                                    1997     1996    1995
                                                    ----     ----    ----
<S>                                                <C>      <C>     <C>
   Tax expense amount computed using
     statutory rate. . . . . . . . . . . . . . . . $(187)   $ (70)  $(341)
   State taxes, net of federal benefit . . . . . .   (93)     (53)    (52)
   Operations outside the US . . . . . . . . . . .     2        4     100
   Recognition of deferred income tax assets:
     Federal . . . . . . . . . . . . . . . . . . .   170      162     447
     State . . . . . . . . . . . . . . . . . . . .    55       48     129
   Discontinued operations and other . . . . . . .   287       38     214
                                                   -----    -----   -----
   Income tax benefits-net . . . . . . . . . . . . $ 234    $ 129   $ 497
                                                   =====    =====   =====
</TABLE>
<PAGE>
         The tax effects of temporary  differences that give rise to significant
   portions  of  the  deferred   income  tax  assets  and  deferred  income  tax
   liabilities are presented below (in thousands):
<TABLE>
<CAPTION>
                                                                December 31,
                                                               1997    1996
                                                              ------  ------

<S>                                                           <C>     <C>
    Deferred income tax assets:
      Inventories,  principally  due to  additional  costs
        inventoried  for tax purposes  pursuant to the 
        Tax Reform Act of 1986 and valuation reserves
        for financial reporting purposes. . . . . . . . . . . $  167  $  221
      Compensated absences, principally due to accrual for
        financial reporting purposes. . . . . . . . . . . . .    115     108
      Compensation, principally due to accrual
        for financial reporting purposes. . . . . . . . . . .     93     157
      Accrual of discontinued operations costs, principally
        related to compliance with NJDEP and NRC
        requirements. . . . . . . . . . . . . . . . . . . . .    360     562
      Net operating loss carryforwards. . . . . . . . . . . .  4,452   4,783
      Investment tax credit carryforwards . . . . . . . . . .     63      83
      Other . . . . . . . . . . . . . . . . . . . . . . . . .    187     125
                                                              ------  ------
        Total gross deferred income tax assets. . . . . . . .  5,437   6,039
        Less valuation allowance. . . . . . . . . . . . . . .  3,059   4,035
                                                              ------  ------
        Net deferred income tax assets. . . . . . . . . . . .  2,378   2,004
                                                              ------  ------
    Deferred income tax liabilities:
      Pension expense, due to contributions in excess of
        net accruals. . . . . . . . . . . . . . . . . . . . .    570     542
      Other . . . . . . . . . . . . . . . . . . . . . . . . .    153      32
                                                              ------  ------
        Total gross deferred income tax liabilities . . . . .    723     574
                                                              ------  ------
        Net deferred income taxes . . . . . . . . . . . . . . $1,655  $1,430
                                                              ======  ======
</TABLE>
         A valuation  allowance is provided when it is more likely than not that
   some portion or all of the deferred income tax assets will not be realized. A
   valuation  allowance  has been  established  based on the  likelihood  that a
   portion of the deferred  income tax assets will not be realized.  Realization
   is dependent on generating  sufficient  taxable income prior to expiration of
   the  loss  carryforwards.   Management  has  assessed  the  Company's  recent
   operating earnings history and expected future earnings.  Based on these past
   and future  earnings,  on the expected  completion of compliance by Prometcor
   with  environmental  regulations  and on tax  planning  strategies,  although
   realization  is not assured,  management  believes it is more likely than not
   that  $2,378,000  of the  deferred  income  tax asset will be  realized.  The
   ultimate  realization of the deferred income tax asset will require aggregate
   taxable  income  of  approximately  $3,600,000  in  the  years  prior  to the
   expiration of the net operating loss carryforwards in 2012. The amount of the
   deferred income tax asset considered realizable, however, could be reduced in
<PAGE>
   the near term if estimates of future taxable  income during the  carryforward
   period are reduced.  A portion of the deferred income tax asset is the result
   of a tax planning  strategy for state income tax purposes of merging  certain
   of the Company's  subsidiaries resulting in realization of net operating loss
   carryforwards.  The  valuation  allowance  was  reduced  from  $4,035,000  at
   December 31, 1996, to $3,059,000 at December 31, 1997, but was increased from
   $3,902,000 at December 31, 1995, to $4,035,000 at December 31, 1996.

         Of the net  deferred  income tax assets,  approximately  $269,000  were
   classified  as current and  $1,386,000  were  classified  as  non-current  at
   December 31, 1997.

   Note 4.  SHORT-TERM DEBT:

            Composition (in thousands): 
<TABLE>
<CAPTION>
                                                             December 31,
                                                           1997       1996
                                                         -------   -------
<S>                                                      <C>       <C>
        Revolving loans (a). . . . . . . . . . . . . . . $ 2,170   $ 1,086
        Notes payable, commercial finance companies (b).     543       998
                                                         -------   -------
        Total short-term debt. . . . . . . . . . . . . . $ 2,713   $ 2,084
                                                         =======   =======
</TABLE>


         (a) In January 1995 RCPC  entered  into an  agreement  with Summit Bank
   ("Summit")  for a  Revolving  Loan and a Term Loan  (refer to Note 5(b) below
   regarding the Term Loan).  On March 6, 1997,  RCPC and Summit extended RCPC's
   Revolving Loan by over three years to June 30, 2000.  The extended  agreement
   also  amended  certain  other  terms of the  Revolving  Loan  agreement.  The
   Revolving Loan of $2,047,000 at December 31, 1997,  provides a line of credit
   up to $2,500,000 (an increase in 1997 of $500,000 from the prior  $2,000,000)
   to RCPC based on accounts  receivable  and inventory.  The balance  available
   under  the  Revolving  Loan is  determined  by the level of  receivables  and
   inventory.  The Revolving Loan  currently  bears interest at the rate of 1.5%
   above  Summit's  prime rate (8.5% at December  31,  1997).  Prior to the 1997
   amendment,  the interest rate on the loan was 2% above  Summit's  prime rate.
   The Revolving Loan is payable on demand under an agreement which expires June
   30,  2000.  The  Revolving  Loan and Term Loan are  secured  by the  accounts
   receivable,  inventory and machinery and equipment of RCPC; a second mortgage
   on the land,  buildings and  improvements  of RCPC;  and the guarantee of the
   Company. At December 31, 1997, RCPC also had outstanding Letters of Credit of
   $50,000.  The Summit agreement also has restrictive  covenants  which,  among
   other  things,  limit the  transfer  of assets  between  the  Company and its
   subsidiaries.

         In July 1997 RCPC and Summit  amended the Revolving  Loan  agreement to
   provide  $400,000 in additional loan  availability.  The $400,000  additional
   available  loan is being  reduced in monthly  amounts of $14,583 from October
   1997 to March 1998 and $20,833 from April 1998 to June 1999. The  outstanding
   amount under the agreement for the  additional  available loan of $356,000 as
   of December 31, 1997, is included in the balance of the Revolving Loan in the
   paragraph above.

         In November 1995 Ronson-Canada  entered into an agreement with Canadian
   Imperial Bank of Commerce ("CIBC") for a line of credit of C$250,000. In 1997
   Ronson-Canada and CIBC extended  Ronson-Canada's  Revolving Loan to 1998. The
<PAGE>
   extended  agreement  also amended  certain other terms of the Revolving  Loan
   agreement. The Revolving Loan balance of $123,000 (C$176,000) at December 31,
   1997,  by  Ronson-Canada  under the line of credit is secured by the accounts
   receivable and inventory of  Ronson-Canada,  and the amounts  available under
   the line are based on the level of accounts  receivable  and  inventory.  The
   loan  bears  interest  at the rate of 1.5%  (down from the prior 2%) over the
   CIBC prime rate (6% at December  31,  1997).  The line of credit,  payable on
   demand,  is guaranteed  by the Company.  The CIBC  agreement has  restrictive
   covenants  which,  among  other  things,  limit the  transfer  of assets from
   Ronson-Canada to RCPC and the Company.

         Based on the amount of the loans outstanding and the levels of accounts
   receivable and inventory at December 31, 1997,  Ronson Consumer  Products had
   unused borrowings  available at December 31, 1997, of about $60,000 under the
   Summit and CIBC lines of credit described  above.  (Refer to Note 5 below for
   information  regarding the book value of assets pledged as collateral for the
   debt in (a) above.)

         (b) At  December  31,  1997,  the  notes  payable,  commercial  finance
   companies,  consisted  of notes  payable by Ronson  Aviation as  follows:  1)
   $346,000  due to Raytheon  Aircraft  Credit  Corp.;  2) $31,000 due to Cessna
   Finance Corporation  ("Cessna");  and 3) $166,000 due to Green Tree Financial
   Servicing  Corporation  ("Green  Tree").  Notes  payable to these  commercial
   finance  companies  by Ronson  Aviation are each  collateralized  by specific
   aircraft,  and the notes are repaid  from the  proceeds  from the sale of the
   aircraft. The notes bear interest at rates of 1% to 1.75% over the prime rate
   except that the Green Tree notes bear  interest at the rate of 11%. The notes
   are secured by aircraft  inventory  of Ronson  Aviation  with a book value of
   $650,000 at December 31, 1997,  and the notes due to Cessna are guaranteed by
   the Company.

         On August 28, 1997,  Ronson  Aviation  entered  into an agreement  with
   Summit  for a  Revolving  Loan and a Term  Loan  (refer  to Note  5(b)  below
   regarding the Term Loan). The Revolving Loan, which had not yet been utilized
   at  December  31,  1997,  provides a line of credit up to  $400,000 to Ronson
   Aviation  based on the level of its accounts  receivable.  The Revolving Loan
   currently  bears interest at the rate of 1.5% above Summit's prime rate (8.5%
   at  December  31,  1997) and is payable on demand  under an  agreement  which
   expires  August 31, 2000. The Revolving Loan and Term Loan are secured by the
   accounts  receivable,   inventory  and  machinery  and  equipment  of  Ronson
   Aviation,  and the guarantees of the Company and RCPC.  The Summit  agreement
   also contains restrictive covenants.

         Ronson Aviation had no outstanding loans under the new Summit Revolving
   Loan. Based on the level of accounts  receivable,  Ronson Aviation had unused
   borrowings of about  $270,000 under the Summit line of credit at December 31,
   1997.

         At December 31, 1997, the weighted  average interest rate for the total
   short-term debt was 9.89%.
<PAGE>
   Note 5.  LONG-TERM DEBT:
<TABLE>
<CAPTION>
            Composition (in thousands):                       December 31,
                                                            1997       1996
                                                          -------    -------
<S>                                                       <C>        <C>
          Mortgage loan payable, Summit (a) . . . . . . . $ 1,248    $ 1,276
          Term notes payable, Summit (b). . . . . . . . .     296        100
          Mortgage loan payable, BONY/NCD . . . . . . . .      --        348
          Notes payable, bank (c) . . . . . . . . . . . .   2,385      1,076
          Other . . . . . . . . . . . . . . . . . . . . .      --        150
                                                          -------    -------
                                                            3,929      2,950
          Less portion in current liabilities . . . . . .     368        598
                                                          -------    -------
          Balance of long-term debt . . . . . . . . . . . $ 3,561    $ 2,352
                                                          =======    =======
</TABLE>
         (a) On December 1, 1995,  the Company and RCPC  entered into a Mortgage
   Loan  agreement with Summit in the original  amount of  $1,300,000.  The loan
   with a balance of  $1,248,000  at December  31,  1997,  is secured by a first
   mortgage on the land,  buildings and  improvements  of RCPC and is payable in
   sixty  monthly  installments  of  $11,589,  including  interest,  and a final
   installment on December 1, 2000, of $1,155,000.  The loan bears interest at a
   fixed rate of 8.75%.

         (b) In January 1995 RCPC entered into a Term Loan agreement with Summit
   in the original  amount of $225,000.  The Term Loan with a balance of $25,000
   at  December  31,  1997,  is payable in monthly  installments  of $6,250 plus
   interest  through April 1998, and the Term Loan bears interest at the rate of
   2% over the prime rate. (Refer to Note 4(a) above.)

         In August 1997 Ronson Aviation  entered into a Term Loan agreement with
   Summit in the original  amount of  $285,000.  The Term Loan with a balance of
   $271,000 at December 31, 1997, is payable in twenty-four monthly installments
   of $4,750 plus  interest  from October 1, 1997,  and a final  installment  on
   September 30, 1999, of $171,000.  The Term Loan bears interest at the rate of
   1.5% above Summit's  prime rate.  (Refer to Note 4(b) above.) The proceeds of
   the Term Loan were used to repay the balance  remaining of the prior mortgage
   loan due from Ronson Aviation to Bank of New York/National Community Division
   ("BONY/NCD").

         (c) The notes  payable,  bank,  consisted of five term loans payable by
   Ronson  Aviation to Summit.  The notes bear interest at the rate of 1.5% over
   the prime rate, are collateralized by specific aircraft with a net book value
   of $3,110,000 at December 31, 1997, and are guaranteed by the Company. Two of
   the notes in the amount of  approximately  $599,000 at December 31, 1997, are
   payable  in monthly  installments  totalling  $6,375  plus  interest  through
   October 2000 with a final payment of about  $383,000 on October 5, 2000.  The
   other three notes in the amount of  approximately  $1,786,000 at December 31,
   1997,  are payable in monthly  installments  totalling  $15,008 plus interest
   through  November 2002 with a final payment of about $900,000 on December 20,
   2002.

         At December 31, 1997,  fixed assets with a net book value of $4,648,000
   and  accounts  receivable  and  inventories  of  $5,009,000  are  pledged  as
   collateral for the debt detailed in Notes 4 and 5 above.
<PAGE>
         Net  assets  of  consolidated   subsidiaries,   excluding  intercompany
   accounts, amounted to approximately $2,440,000 at December 31, 1997, of which
   approximately $2,400,000 was restricted as to transfer to the Company and its
   other  subsidiaries  due to various  covenants  of their debt  agreements  at
   December 31, 1997.

         Long-term  debt  matures  during the next five years as follows:  1998,
   $368,000;  1999,  $502,000;  2000,  $1,813,000;  2001,  $180,000;  and  2002,
   $1,066,000.


   Note 6.  LEASE OBLIGATIONS:

         Lease  expenses in continuing  operations,  consisting  principally  of
   office and warehouse rentals,  totalled  $476,000,  $539,000 and $468,000 for
   the years ended  December 31,  1997,  1996 and 1995,  respectively.  Sublease
   income  amounted to $27,000,  $168,000  and  $142,000  for the same  periods,
   respectively.

         At December 31, 1997, the Company's future minimum lease payments under
   operating  and  capitalized  leases with initial or remaining  noncancellable
   lease  terms in  excess  of one year are  presented  in the  table  below (in
   thousands):
<TABLE>
<CAPTION>

                                                  Operating     Capitalized
                                       Total        Leases         Leases
                                     -------      --------       --------
<S>                                  <C>          <C>            <C>
       Year Ending December 31:
       1998 . . . . . . . . . . .    $   421      $    304       $    117
       1999 . . . . . . . . . . .        372           255            117
       2000 . . . . . . . . . . .        316           231             85
       2001 . . . . . . . . . . .         93            93             --
       2002 . . . . . . . . . . .          1             1             --
                                     -------      --------       --------
       Total Obligations. . . . .    $ 1,203      $    884            319
                                     =======      ========
       Less:  Amount representing
              interest. . . . . .                                      45
                                                                 --------
       Present value of capitalized
          lease obligations . . .                                $    274
                                                                 ========
</TABLE>
         Capitalized lease property included in the Consolidated  Balance Sheets
   is presented below (in thousands):
<TABLE>
<CAPTION>
                                                    December 31,
                                                 1997       1996
                                                -----      -----
<S>                                             <C>        <C>
       Machinery and equipment . . . . . . . .  $ 613      $ 574
       Less accumulated amortization . . . . .    141         90
                                                -----      -----
                                                $ 472      $ 484
                                                =====      =====
</TABLE>
<PAGE>
   Note 7.  RETIREMENT PLANS:

         The Company and its subsidiaries have several trusteed retirement plans
   covering substantially all employees. The Company's funding policy is to make
   minimum annual  contributions  as required by applicable  regulations.  Plans
   covering union members  generally provide benefits of stated amounts for each
   year of service.  The Company's salaried pension plan provides benefits using
   a formula which is based upon employee  compensation.  On June 30, 1985,  the
   Company amended its salaried pension plan so that benefits for future service
   would no longer accrue. A defined  contribution  plan was established on July
   1, 1985, in conjunction with the amendments to the salaried pension plan.

         The following table sets forth the plans'  aggregate  funded status and
   amounts  recognized  in  the  Company's   Consolidated   Balance  Sheets  (in
   thousands):
<TABLE>
<CAPTION>
                                                            December 31,
                                                           1997      1996
                                                         -------   -------
<S>                                                      <C>       <C>
        Accumulated benefit obligation, including vested
          benefits of: 1997, $4,704; 1996, $4,596.  .  . $ 4,709   $ 4,599
        Less plan assets at fair value  .  .  .  .  .  .   4,185     4,085
                                                         -------   -------
        Accumulated benefit obligation in excess of
          plan assets  .  . .  .  .  .  .  .  .  .  .  .    (524)     (514)
        Unrecognized net obligation at 1/1/85 being
          recognized over 15 to 18 years.  .  .  .  .  .     156       193
        Unrecognized prior service cost .  .  .  .  .  .     164       164
        Unrecognized net loss from past experience
          different from that assumed and effects of
          changes in assumptions  .  .  .  .  .  .  .  .   1,545     1,441
                                                         -------   -------
        Prepaid pension net recognized in the
          Consolidated Balance Sheets.  .  .  .  .  .  . $ 1,341   $ 1,284
                                                         =======   =======
</TABLE>

         Plan assets primarily include  widely-held common stocks, U.S. Treasury
   Securities,  171,300 shares of common stock of the Company,  and money market
   funds.

         Accounts   corresponding  to  the  additional  minimum  liability  were
   recorded in the Consolidated Balance Sheets as follows (in thousands):
<TABLE>
<CAPTION>

                                                           December 31,
                                                        1997        1996
                                                      -------     -------
<S>                                                   <C>         <C>
        Intangible Pension Assets .  .  .  .  .  .  . $   320     $   357
        Unrecognized Net Loss on Pension Plans.  .  .   1,545       1,441
                                                      -------     -------
                                                      $ 1,865     $ 1,798
                                                      =======     =======
</TABLE>
<PAGE>
         If the additional minimum liability recorded exceeds unrecognized prior
   service  cost  and  the  unrecognized  net  obligation  at  transition,  that
   difference,  an  unrecognized  net  loss,  is to be  reported  as a  separate
   component  of  Stockholders'  Equity.  This  unrecognized  net  loss is being
   amortized over future periods as a component of pension expense.

         The Company's  Consolidated  Statements of Operations  included pension
   expense consisting of the following components (in thousands):
<TABLE>
<CAPTION>
                                               Year Ended December 31,
                                          1997          1996         1995
                                          ----          ----         ----
<S>                                    <C>           <C>          <C>
        Service cost.  .  .  .  .  .   $    17       $    18      $    17
        Interest cost  .  .  .  .  .       333           339          350
        Actual return on plan assets      (177)         (154)        (467)
        Net amortization and deferral      105            62          467
                                       -------       -------      -------
        Net pension expense  .  .  .   $   278       $   265      $   367
                                       =======       =======      =======
</TABLE>

         The weighted  average  discount rates used in determining the actuarial
   present value of the accumulated  benefit obligation were 7%, 7.25% and 7.25%
   in 1997, 1996 and 1995, respectively. The estimated long-term rates of return
   on assets were 6.9%, 6.7% and 7.3% in 1997, 1996 and 1995, respectively.

         The Company contributes to its defined contribution plan at the rate of
   1% of each covered employee's  compensation.  The Company also contributes an
   additional  amount  equal to 50% of a covered  employee's  contribution  to a
   maximum of 1% of compensation. Expenses of about $70,000, $66,000 and $65,000
   for this plan were recorded in 1997, 1996 and 1995, respectively.


   Note 8.  COMMITMENTS AND CONTINGENCIES:

         On  February  28,  1997,  the  Ronson   Corporation   Retirement   Plan
   ("Retirement Plan") completed the sale of its Salisbury, North Carolina, land
   for cash  proceeds,  net of  related  expenses,  of about  $800,000.  The net
   proceeds of the sale of the  property  satisfied a  substantial  portion of a
   1994  settlement  with the United States  Department of Labor ("DOL") and the
   Internal Revenue Service ("IRS").  The $144,000 balance of the settlement was
   paid by the Company in 1997.

         Ronson Aviation is subject to the New Jersey  Underground  Storage Tank
   Law which requires  upgrades to existing  underground  storage tanks in 1998.
   The Company  expects the cost of  upgrading or  replacing  Ronson  Aviation's
   fueling facilities to require expenditures of approximately $325,000.

         On August 31, 1995,  the Company  received a General Notice Letter from
   the United States  Environmental  Protection Agency ("USEPA"),  notifying the
   Company  that the USEPA  considered  the Company  one of about four  thousand
   Potentially Responsible Parties ("PRP's") for waste disposed of prior to 1980
   at a landfill in Monterey Park,  California,  which the USEPA designated as a
   Superfund  site  ("Site").  The USEPA  identified  manifests  dated from 1974
   through 1979 which allegedly  indicate that waste originating at the location
   of  the  Company's  former  Duarte,  California,   hydraulic  subsidiary  was
   delivered  to the Site.  The Company sold the Duarte,  California,  hydraulic
   subsidiary to the Boeing  Corporation  in 1981.  As a result of  successfully
<PAGE>
   challenging  the USEPA's  original  volumetric  allocation,  on September 29,
   1995,  the  USEPA  reduced  the  volume  of waste  attributed  to the  Duarte
   facility,  Ronson Hydraulic Units Corporation  ("RHUCOR-CA"),  and determined
   the volume to be "de  minimis".  In  addition,  counsel  for this  matter has
   informed the Company that factual  arguments are available that could further
   reduce the amount of waste attributed to the hydraulic  subsidiary,  and that
   arguments  also exist that the  subsequent  owners of the facility  should be
   required to pay a  significant  portion,  or  possibly  all, of the costs the
   USEPA determines to be due as a result of RHUCOR-CA's  waste having been sent
   to the Site. Although the Company's final contribution amount, if any, is not
   yet  determinable,  in the  General  Notice  Letter,  the  USEPA  offered  to
   partially  settle the matter if the Company paid  $212,000,  which would have
   been full  settlement  of the  Fifth  Partial  Consent  Decree.  This  offer,
   however,  was made  prior  to the  USEPA  reduction  of the  volume  of waste
   allocated to RHUCOR-CA  and prior to the USEPA  determination  that the waste
   volume is "de minimis".  Because the USEPA has determined  that the volume of
   waste  generated by the facility  and sent to the Site is "de  minimis",  and
   because  the USEPA has sent a General  Notice  Letter to another  PRP for the
   same  waste,  the Company  believes  that the cost,  if any,  will not have a
   material effect on the Company's financial position.

         The  Company is  involved in various  lawsuits  and  claims.  While the
   amounts  claimed may be  substantial,  the ulitmate  liability  cannot now be
   determined because of the considerable  uncertainties that exist.  Therefore,
   it is possible that results of operations or liquidity in a particular period
   could be  materially  affected by certain  contingencies.  However,  based on
   facts currently  available  including the insurance coverage that the Company
   has in place,  management  believes that the  outcome of these  lawsuits  and
   claims will not have a material  adverse  effect on the  Company's  financial
   position.

         The Company has an employment  contract  with an officer.  The contract
   expires on December 3l, 2000.  Base salaries in the years 1998, 1999 and 2000
   are $494,773, $529,408 and $566,466,  respectively, and the contract provides
   for additional compensation and benefits,  including a death benefit equal to
   two years' salary.

<PAGE>
Note 9.  STOCKHOLDERS' EQUITY:

   A summary  of  activity  within  Stockholders'  Equity  for the  years  ended
December 31, 1997, 1996 and 1995 is as follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
                                                  1997                             1996                            1995
                                       -------------------------      --------------------------     -------------------------- 
                                         Shares          Amount         Shares          Amount         Shares          Amount
                                       ----------      ---------      ----------      ----------     ----------      ----------
<S>                                    <C>             <C>            <C>             <C>            <C>             <C>        
Preferred stock issued:
  Balance at beginning of year ...        837,595      $       8         847,308      $        8        873,267      $        9
  Shares exchanged in Exchange
       Offer for common stock ....       (800,844)            (8)             --              --             --              --
  Conversion of preferred stock
       to common stock ...........           (233)            --          (9,713)             --        (25,959)             (1)
                                       ----------      ---------      ----------      ----------     ----------      ----------
  Balance at end of year .........         36,518             --         837,595               8        847,308               8
                                       ==========      ---------      ==========      ----------     ==========      ----------

Common stock issued:
  Balance at beginning of year ...      1,863,939          1,864       1,820,893           1,821      1,767,934           1,768
  Exercise of stock options ......             --             --          33,333              33         27,000              27
  Shares exchanged in Exchange
       Offer for preferred stock .      1,361,435          1,362              --              --             --              --
  Conversion of preferred stock
       to common stock ...........            233           --             9,713              10         25,959              26
                                       ----------      ---------      ----------      ----------     ----------      ----------
  Balance at end of year .........      3,225,607          3,226       1,863,939           1,864      1,820,893           1,821
                                       ==========      ---------      ==========      ----------     ==========      ----------

Additional paid-in capital:
  Balance at beginning of year ...                        30,345                          30,308                         30,329
  Exercise of stock options ......                            --                              47                              4
  Shares exchanged in Exchange
       Offer for common stock ....                        (1,354)                             --                             --
  Conversion of preferred stock
       to common stock ...........                            --                             (10)                           (25)
                                                       ---------                      ----------                     ---------- 
  Balance at end of year .........                        28,991                          30,345                         30,308
                                                       ---------                      ----------                     ---------- 
Accumulated deficit:
  Balance at beginning of year ...                       (27,936)                        (27,081)                       (27,721)
  Net earnings (loss) ............                           783                            (855)                           640
                                                       ---------                      ----------                     ---------- 
  Balance at end of year .........                       (27,153)                        (27,936)                       (27,081)
                                                       ---------                      ----------                     ---------- 
Unrecognized net loss
  on pension plans:
  Balance at beginning of year ...                        (1,441)                         (1,403)                        (1,595)
  Expensed during the year .......                           141                             125                            153
  Unrecognized net gain (loss)
       during the year ...........                          (245)                           (163)                            39
                                                       ---------                      ----------                     ---------- 
  Balance at end of year .........                        (1,545)                         (1,441)                        (1,403)
                                                       ---------                      ----------                     ---------- 
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                  1997                             1996                            1995
                                       -------------------------      --------------------------     -------------------------- 
                                         Shares          Amount         Shares          Amount         Shares          Amount
                                       ----------      ---------      ----------      ----------     ----------      ----------
<S>                                    <C>             <C>            <C>             <C>            <C>             <C> 
Cumulative foreign currency
  translation adjustment:
  Balance at beginning of year ...                           (36)                            (26)                           (26)
  Loss on foreign currency
      translation ................                           (25)                            (10)                            -- 
                                                       ---------                      ----------                     ---------- 
  Balance at end of year .........                           (61)                            (36)                           (26)
                                                       ---------                      ----------                     ---------- 

Treasury stock (at cost):
  Balance at beginning of year ...         62,105         (1,594)         62,087          (1,593)         62,035         (1,593)
  Shares purchased ...............            227             --              18              (1)             52             --
                                       ----------      ---------      ----------      ----------     -----------     ---------- 
  Balance at end of year .........         62,332         (1,594)         62,105          (1,594)         62,087         (1,593)
                                       ==========      ---------      ==========      ----------     ===========     ----------

TOTAL STOCKHOLDERS' EQUITY .......                    $    1,864                       $   1,210                     $    2,034
                                                      ==========                       =========                     ==========


</TABLE>
<PAGE>
   Note 10.  PREFERRED STOCK:

         Each share of 12% Cumulative  Convertible  Preferred Stock has a stated
   value of $0.01  per  share and a  liquidation  preference  of $1.75 per share
   ($64,000 at December 31, 1997, in the aggregate) plus accrued dividends.  The
   shares are non-voting and have a right to cumulative  dividends at the annual
   rate of $0.21 per share.  The  holders of the  preferred  shares  may, at any
   time,  convert each preferred share into one share of common stock unless the
   preferred  shares  were  previously  redeemed.  The Company has the option to
   redeem all or part of the  preferred  stock at $2.25 per share  plus  accrued
   dividends.

         On November 15, 1996,  the Company issued an Offer to owners of its 12%
   Cumulative  Convertible Preferred Stock to exchange their shares of preferred
   stock for shares of common  stock at the rate of 1.7  shares of common  stock
   for each  share  of  preferred.  The  Company's  Exchange  Offer  expired  on
   September  30,  1997.  After the  expiration  of the Offer,  the  Company had
   accepted  800,844  shares of  preferred  stock for  exchange  and had  issued
   1,361,435 shares of common stock under the Company's Exchange Offer.

         Dividends in arrears at December 31, 1997,  totalled  $1.1025 per share
   of preferred stock (twenty-one quarters at $0.0525 per share per quarter), or
   approximately  $40,000  in the  aggregate.  If the  Company  had not done the
   Exchange  Offer,  the  aggregate  dividends in arrears  would have been about
   $923,000.


   Note 11.  STOCK OPTIONS:

         The Company has three  incentive  stock option plans which  provide for
   the grant of options to purchase  shares of the Company's  common stock.  The
   options may be granted to officers and other key employees of the Company and
   its  subsidiaries  (including  directors  if they are also  employees  of the
   Company or one of its  subsidiaries) at not less than 100% of the fair market
   value  on the  date  on  which  options  are  granted.  In  August  1996  the
   stockholders  approved the adoption of the  Company's  1996  Incentive  Stock
   Option Plan which  provides for the grant of options for up to 100,000 shares
   of common stock. In August 1987 the stockholders approved the adoption of the
   Company's  1987  Incentive  Stock  Option  Plan  and,  in  November  1983 the
   stockholders  approved the adoption of the  Company's  1983  Incentive  Stock
   Option Plan, each of which provides for the grant of options for up to 66,666
   shares of common  stock.  After  January 21,  1997,  no further  options were
   permitted to be granted under the 1983 and 1987 plans.  Options granted under
   the 1983 and 1987 plans are  exercisable  at any time  within five years from
   the date of grant, at which time such options  expire.  Options granted under
   the 1996 plan are exercisable after six months from the date of the grant and
   within five years of the grant date, at which time such options  expire.  All
   options are vested on the date of the grant.

         Pro forma  information  regarding  earnings  (loss) per common share is
   required  by SFAS  #123,  and  has  been  determined  as if the  Company  had
   accounted for its employee  stock options under the fair value method of that
   statement. No options were granted by the Company in 1997, and, therefore, no
   estimated  compensation  would be applicable  in 1997. In 1996 and 1995,  the
   fair  value for these  options  was  estimated  at the date of grant  using a
   Black-Scholes  option  pricing  model  with the  following  weighted  average
   assumptions for 1996:  risk-free interest rate of 6.5%; dividend yield of 0%;
   volatility  factor of the expected market price of the Company's common stock
   of 0.5; and a weighted average expected life of the option of five years.
<PAGE>
         The  Black-Scholes  option  valuation  model was  developed  for use in
   estimating the fair value of traded options which are fully transferable.  In
   addition,  option  valuation  models  require the input of highly  subjective
   assumptions  including  the  expected  stock  price  volatility.  Because the
   Company's employee stock options have characteristics significantly different
   from those of traded  options,  and because  changes in the subjective  input
   assumptions can materially  affect the fair value  estimate,  in management's
   opinion,  the existing  models do not  necessarily  provide a reliable single
   measure of the fair value of its employee stock options.

         The Company's pro forma results of operations  after adjustment for the
   estimated  compensation  expense under SFAS #123 for the years ended December
   31, 1997,  1996 and 1995 were as follows (in  thousands,  except for earnings
   (loss) per share information):
<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                                 1997(1)     1996        1995
                                                -------    -------     -------
<S>                                             <C>        <C>         <C>
   Pro forma Results of Operations:
     Earnings from continuing operations.....   $   783    $   210     $ 1,495
     Loss from discontinued operations.......        --     (1,190)       (860)
                                                -------    -------     -------
        Net earnings (loss)..................   $   783    $  (980)    $   635
                                                =======    =======     =======
   Pro forma Earnings (Loss) per Common Share:
     Basic:
       Earnings from continuing operations...   $  0.26    $  0.02     $  0.77
       Loss from discontinued operations.....        --      (0.66)      (0.50)
                                                -------    -------     -------
       Net earnings (loss)...................   $  0.26    $ (0.64)    $  0.27
                                                =======    =======     =======
     Diluted:
       Earnings from continuing operations...   $  0.25    $  0.02     $  0.57
       Loss from discontinued operations.....        --      (0.66)      (0.33)
                                                -------    -------     -------
       Net earnings (loss)...................   $  0.25    $ (0.64)    $  0.24
                                                =======    =======     =======
</TABLE>

   (1) Since no options were issued in 1997, no proforma  adjustments  have been
       made above.


<PAGE>
         A  summary  of  the  Company's   stock  option   activity  and  related
   information for the three years ended December 31, 1997, is as follows:
<TABLE>
<CAPTION>

                                                Number of    Weighted Average
                                                 Options      Exercise Price
                                                ---------    ----------------
<S>                                              <C>             <C>
        Outstanding at beginning of year 1995... 106,232         $ 1.58
          Granted...............................   5,500           1.63
          Exercised............................. (27,000)          1.18
          Expired............................... (14,666)          1.20
                                                 -------
        Outstanding at December 31, 1995........  70,066           1.82
          Granted...............................  87,200           2.88
          Exercised............................. (33,333)          2.39
          Expired............................... (20,083)          1.49
                                                 -------
        Outstanding at December 31, 1996........ 103,850           2.59
          Expired...............................    (750)          2.88
                                                 -------
        Outstanding and Exercisable
         at December 31, 1997................... 103,100         $ 2.58
                                                 =======         ======
</TABLE>

         Exercise prices for options outstanding as of December 31, 1997, ranged
   as follows:  13,900 options at $1.20 per share,  15,500 options from $1.63 to
   $2.25  per share and  73,700  options  from  $2.88 to $3.16  per  share.  The
   weighted average contractual life of those options is 3 years.


   Note 12.  STATEMENTS OF CASH FLOWS:

                  Certificates  of deposit  that have a  maturity  of 90 days or
   more are not considered  cash  equivalents  for purposes of the  accompanying
   Consolidated Statements of Cash Flows.

                  Supplemental  disclosures  of  cash  flow  information  are as
   follows (in thousands):
<TABLE>
<CAPTION>

                                                   Year Ended December 31,
                                                   1997      1996     1995
                                                   ----      ----     ----
<S>                                               <C>       <C>      <C>
        Cash Payments for:
           Interest  .  .  .  .  .  .  .  .  .    $ 508     $ 747    $ 478
           Income taxes .  .  .  .  .  .  .  .       45        85        1

        Financing & Investing Activities
           Not Affecting Cash:
           Capital lease obligations incurred.       26       361       --
           Note payable as deposit on equipment
             to be leased  .  .  .  .  .  .  .       --        --      118
</TABLE>
<PAGE>
   Note 13.  INDUSTRY SEGMENTS INFORMATION:

                  Financial  information by industry segment is summarized below
   (in thousands):
<TABLE>
<CAPTION>

                                                Year Ended December 31,
                                          1997           1996 *          1995 *
                                       --------        --------        --------
<S>                                    <C>             <C>             <C>
Net sales:
 Consumer Products .............       $ 15,304        $ 16,534        $ 15,065
 Aviation Services .............          7,866           8,920          11,888
                                       --------        --------        --------
          Consolidated .........       $ 23,170        $ 25,454        $ 26,953
                                       ========        ========        ========
Earnings (loss) before
 general corporate
 expenses and other:
 Consumer Products .............       $  2,346        $  2,837        $  2,807
 Aviation Services .............            272              (7)            246
                                       --------        --------        --------
          Consolidated .........          2,618           2,830           3,053
General corporate
 expenses ......................         (1,439)         (1,295)         (1,341)
Interest expense ...............           (523)           (762)           (541)
Other expense-net ..............           (107)           (567)           (168)
                                       --------        --------        --------
Earnings from continuing
 operations before
 income taxes ..................       $    549        $    206        $  1,003
                                       ========        ========        ========
Depreciation and
 amortization expense
 identified to segments:
 Consumer Products .............       $    240        $    219        $    201
 Aviation Services .............            233             318             331
                                       --------        --------        --------
                                            473             537             532
 Corporate .....................             17              14              12
                                       --------        --------        --------
         Consolidated ..........       $    490        $    551        $    544
                                       ========        ========        ========
Assets identified
 to segments:
 Consumer Products .............       $  5,787        $  5,306        $  5,681
 Aviation Services .............          5,788           5,007           6,331
                                       --------        --------        --------
                                         11,575          10,313          12,012
 Corporate .....................            498             607             502
 Discontinued Operations .......          1,446           1,184             889
                                       --------        --------        --------
          Consolidated .........       $ 13,519        $ 12,104        $ 13,403
                                       ========        ========        ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                Year Ended December 31,
                                          1997           1996 *          1995 *
                                       --------        --------        --------
<S>                                    <C>             <C>             <C>
Capital additions
 identified to segments:
 Consumer Products .............       $    134        $    619        $    229
 Aviation Services .............          2,028             204             262
                                       --------        --------        --------
                                          2,162             823             491
 Corporate .....................              2              42               3
                                       --------        --------        --------
         Consolidated ..........       $  2,164        $    865        $    494
                                       ========        ========        ========
</TABLE>

* Reclassified for comparability.



            The above segments are comprised as follows:

                  Consumer  Products  -  consists  of  packaged  fuels,  flints,
        refillable  lighters and ignitors,  a penetrant spray lubricant,  a spot
        remover,  and  a  surface  protectant,  which  are  distributed  through
        distributors,  food brokers, automotive and hardware representatives and
        chain  stores.  Consumer  Products is a  principal  supplier of packaged
        flints and lighter fuels in the United States and Canada.

                  Aviation  Services - represents the chartering,  servicing and
        sales of fixed wing aircraft and servicing of helicopters.  Aircraft are
        sold through Company sales personnel.  Aviation Services provides a wide
        range  of  general  aviation  services  to  the  general  public  and to
        government  agencies  located  in  the  vicinity  of its  facilities  in
        Trenton, New Jersey.

                  Discontinued  Operations - represents  the  operations  of the
        Company's  metals  segment.  The  segment  is being  accounted  for as a
        discontinued  operation,  and  accordingly,  its  operating  results are
        reported in this manner in all years presented. (Refer to Note 2 above.)

                  The  Company  performs  ongoing  credit   evaluations  of  its
        customers' financial condition and generally requires no collateral from
        its customers.

                  For the years ended  December  31, 1997 and 1996,  sales which
        amounted to approximately 10% and 14%, respectively, of Consolidated Net
        Sales were made by Ronson  Consumer  Products  to  various  units of one
        customer.  No other customer accounted for more than 10% of Consolidated
        Net Sales for the years ended  December  31, 1997 and 1996.  No customer
        represented  more than 10% of Consolidated  Net Sales for the year ended
        December 31, 1995.

<PAGE>

        Note 14.  CONCENTRATIONS:

              Ronson Consumer Products currently purchases lighter products from
        manufacturers in Spain, Peoples Republic of China and Korea. Since there
        are a number of sources of similar lighter products, management believes
        that other  suppliers  could  provide  lighters on comparable  terms.  A
        change of  suppliers,  however,  might  cause a delay in delivery of the
        Company's  lighter  products and,  possibly,  a short-term loss in sales
        which could have a short-term adverse effect on operating results.