UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

(Mark One)

            [X] Annual Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

                    For the fiscal year ended January 2, 1999

                                       OR

          [ ] Transition Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934
        For the transition period from ............... to ...............

                         Commission file Number 0-22053

                           GENERAL BEARING CORPORATION
                           ---------------------------
             (Exact name of registrant as specified in its charter)

            Delaware                                           13-2796245
-------------------------------                            ------------------
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                            Identification No.)

  44 High Street, West Nyack, New York                             10994
  ------------------------------------                             -----
(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number, including area code: (914) 358-6000

Securities registered pursuant to Section 12(b) of the Act: NONE

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

                      Common Stock $.01 par value per share
                      -------------------------------------
                                (Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
<PAGE>

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]

 At March 25, 1999 the aggregate market value of the Registrant's outstanding
common stock, $.01 par value per share, held by non-affiliates, was $6,200,000,
based on the closing sale price as reported March 25, 1999 on the NASDAQ Small
Cap Market.

At March 25, 1999, the Registrant had issued and outstanding 3,918,950 shares of
common stock, $.01 par value per share.

                       DOCUMENTS INCORPORATED BY REFERENCE

      None of the documents indicated on Form 10-K have been incorporated herein
by reference.
<PAGE>

                CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING
         INFORMATION FOR THE PURPOSE OF "SAFE HARBOR" PROVISIONS OF THE
                PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.

      The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements, which are statements other than those of
historical fact, including, without limitation, ones identified by the use of
the words: "anticipates," "estimates," "expects," "intends," "plans,"
"predicts," and similar expressions. In this Annual Report such statements may
relate to the recoverability of deferred taxes, likely industry trends, the
continued availability of credit lines, the suitability of facilities, access to
suppliers and implementation of joint ventures and marketing programs. Such
forward looking statements involve important risks and uncertainties that could
cause actual results to differ materially from those expected by the Company,
and such statements should be read along with the cautionary statements
accompanying them and mindful of the following additional risks and
uncertainties possibly affecting the Company: the possibility of a general
economic downturn, which is likely to have an important impact on historically
cyclical industries such as manufacturing; significant price, quality or
marketing efforts from domestic or overseas competitors; the loss of, or
substantial reduction in orders from, a major customer; the loss of, or failure
to attain additional quality certifications; changes in U.S. or foreign
government regulations and policies, including the imposition of antidumping
orders on the Company or any of its suppliers; a significant judgment or order
against the Company in a legal or administrative proceeding; and potential
delays in implementing planned sales and marketing expansion efforts and the
failure of their effectiveness upon implementation.
<PAGE>

                           GENERAL BEARING CORPORATION

                           ANNUAL REPORT ON FORM 10-K
                    FOR THE FISCAL YEAR ENDED JANUARY 2, 1999

                                TABLE OF CONTENTS

No.                                                                         Page
---                                                                         ----

PART I
  Item 1.  Business..........................................................  1
  Item 2.  Properties........................................................  7
  Item 3.  Legal Proceedings.................................................  7
  Item 4.  Submission of Matters to a Vote of Security Holders...............  9

PART II
  Item 5.  Market for Registrant's Common Equity and Related Stockholder
             Matters......................................................... 10
  Item 6.  Selected Financial Data........................................... 11
  Item 7.  Management's Discussion and Analysis of Financial Condition and
             Result of Operations............................................ 12
  Item 7a. Quantitative and Qualitative Disclosure about Market Risk......... 17
  Item 8.  Financial Statements and Supplementary Data ...................... 19
  Item 9.  Change in and Disagreements with Accountants on Accounting and
             Financial Disclosure............................................ 44

PART III
  Item 10. Directors and Executive Officers of the Registrant................ 45
  Item 11. Executive Compensation............................................ 48
  Item 12. Security Ownership of Certain Beneficial Owners and Management.... 49
  Item 13. Certain Relationships and Related Transactions.................... 50

PART IV
  Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.. 53
<PAGE>

                                     PART I

Item 1. Business.

      General Bearing Corporation ("Company") manufactures, assembles and
distributes a variety of bearing components and bearing products, including ball
bearings, tapered roller bearings, spherical roller bearings and cylindrical
roller bearings under the Hyatt(R) and The General(R) trademarks. The Company
supplies original equipment manufacturers ("OEMs") and the industrial
aftermarket principally in the United States ("U.S."). The Company's products
are used in a broad range of applications, including automobiles, railroad cars,
locomotives, trucks, office equipment, machinery and appliances.

      The Company operates in two divisions: the OEM Division, which supplies
OEMs, and the Distribution Division, which serves distributors that supply the
repair and maintenance aftermarket and small OEMs. Current OEM Division
customers include automotive and locomotive divisions of General Motors
Corporation ("GM"), Ford Motor Company ("Ford"), Trailmobile Corp.
("Trailmobile"), Great Dane Limited Partnership "(Great Dane"),Burlington
Northern/Santa Fe Railroad Co. ("Burlington Northern"), Union Pacific Railroad
("Union Pacific"), Xerox Corporation ("Xerox"), Pitney Bowes ("Pitney Bowes")
and Eastman Kodak ("Kodak"). The Distribution Division has customers ranging in
size from Motion Industries Inc. ("Motion Industries") and Applied Industrial
Technology, each of which has more than 400 outlets, to independent single
outlet operations. The Distribution Division's individual shipments are
typically smaller in volume but have higher gross margins.

      Through flexibility in manufacturing and sourcing, as well as attentive
customer service, the Company strives to be a reliable, innovative and cost
effective provider of bearing components and products to the approximately $5
billion per year U.S. bearing market. The Company's strategy to accomplish this
objective includes the following:

      * PROVIDE HIGH QUALITY PRODUCTS AND SUPERIOR CUSTOMER SERVICE.  The
      Company maintains a detailed and extensive Quality Assurance Program and
      has been certified to the M 1003 standard by the Association of American
      Railroads ("AAR") and the MIL-I-45208 standard by General Dynamics, a
      military contractor. The Company recently has obtained "Unconditional
      Approval" from the AAR for its tapered journal bearings. The Company also
      maintains ISO 9001 and QS 9000 registrations from the International
      Standards Organization ("ISO"). The Company also requires that both its
      affiliated and unaffiliated suppliers conform to Company and customer
      quality and engineering standards. Certain of the Company's products also
      have been specifically certified by the AAR for use in railroad cars. In
      addition, the Company has been qualified as an authorized supplier by
      leading automobile and truck trailer manufacturers (including GM, Ford,
      Great Dane, Trailmobile, Stoughton Trailers, Inc., and Strick
      Corporation), railroads (including Burlington Northern, Union Pacific, the
      Atchison, Topeka and Santa Fe Railway, Missouri Pacific Railroad Company,
      Southern Pacific Rail Corporation and Norfolk Southern Corp.) and national
      distributors of bearings, including Motion Industries and Applied
      Industrial Technology Inc. These certifications and qualifications, which
      often take significant time to obtain because of testing and other


                                       1
<PAGE>

      requirements, enable the Company to supply large markets currently served
      by a limited number of competitors.

      * PRESENCE IN CHINA. In 1987, the Company formed a joint venture, Shanghai
      General Bearing Co. Ltd. ("SGBC"), in the People's Republic of China
      ("PRC") to establish a low cost, quality controlled source for bearings
      and bearing components. The Company has formed other joint ventures in the
      PRC, and it continues to investigate joint venture opportunities. The
      Company believes that potential customers in the U.S. intending to
      establish or expand manufacturing and other facilities in the PRC have,
      and will continue to have, an incentive to purchase bearings from the
      Company in order to satisfy Chinese counter purchasing and local content
      requirements. In addition, on February 3, 1997, the U.S. Department of
      Commerce ("Commerce") granted the Company's joint venture, SGBC, partial
      revocation of the antidumping order affecting tapered roller bearings from
      the PRC. As a result of SGBC receiving zero or de minimis antidumping
      margins for the periods from 1990-1993 ("4th, 5th and 6th Reviews"),
      Commerce revoked the antidumping order as to SGBC in the 1993-1994 period
      ("7th Review"). As a result of the revocation, SGBC and the Company will
      no longer be required to participate in the annual reviews of the
      antidumping order conducted by Commerce. However, the Timken Company, the
      leading manufacturer and distributor in the United States of bearing
      components and products, has actions pending against the United States in
      the Court of International Trade challenging Commerce's final antidumping
      determination of the 7th Review. The Company believes its revocation
      provides it with a competitive advantage. See Legal Proceedings.

      * MANUFACTURING AND SOURCING FLEXIBILITY. The Company operates on the
      principle that a flexible method of combining product and component
      purchasing with its own manufacturing and assembly capabilities can
      provide customers with high quality products and cost advantages. The
      Company uses its manufacturing, engineering and purchasing expertise to
      determine the highest quality and most cost effective methods of
      production. The Company currently sources bearing components and products
      from over 20 factories outside the U.S. In order to maintain the Company's
      flexibility to change with the market, the Company typically limits the
      term of its supply contracts to one year.

PRODUCTS

      The Company and its joint ventures manufacture and market high quality,
precision ball and roller bearings used in a broad range of applications
including automotive and trucking (e.g., steering columns, wheels and axles),
rail car and locomotive (e.g., wheel and axle assemblies), appliances (e.g.,
fans and vacuum cleaners), lawn and garden implements (e.g., lawn mowers),
office equipment (e.g., copiers, mailing machines), consumer products (e.g.,
bicycles), medical equipment (e.g., wheelchairs), material handling (e.g.,
conveyor assemblies and hand trucks), power tools (e.g., drills and lathes),
chemical processing and the oil industry (e.g., drilling rigs).

      The Company sells approximately 1,500 products. The Company's product line
includes standard and metric precision ball bearings, double row ball bearings,
unground bearings, and special ball bearings. The Company offers its products in
standard, modified, and custom designs where appropriate. The Company produces
standard, special and niche market bearings. Special bearings are specifically
manufactured to


                                       2
<PAGE>

the requirements of a customer, as determined in cooperation with the Company's
engineering staff. Examples of these products include bearings for copier
machines, automotive steering columns, postal equipment and wheelchairs. Niche
bearings are bearings used in specific industries, and are produced by a limited
number of manufacturers. Under the "Hyatt"(R) brand the Company produces
selected tapered roller bearings (TRB's), tapered journal bearings, spherical
roller bearings and cylindrical roller bearings which are used in railroad,
truck trailer, automotive and other industrial applications.

MANUFACTURING AND SOURCING

      The Company primarily manufactures and assembles bearings at its
facilities in New York and at the Company's joint venture facility, SGBC, in
Shanghai, PRC. Certain imports from various locations have been subject to
antidumping duties since 1987, requiring importing companies to post cash
deposits. TRB's imported from SGBC, the Company's Chinese joint venture and
principal source of imported product, have not been subject to antidumping
duties since 1991.

      The Company obtains 72% of its bearing and component requirements from
various Chinese joint ventures. The Company currently relies on approximately 82
unaffiliated manufacturers to produce the remaining 28% of its requirements. The
Company produces approximately 40% of the bearings that it sells. The Company
has no long-term contracts with its unaffiliated manufacturing sources. The
Company attempts to maintain sourcing flexibility by not engaging in any
purchasing contracts that exceed one year.

CHINESE JOINT VENTURES

      The Company has entered into three joint ventures with manufacturers in
the PRC to enable it to secure a reliable source of high quality low cost
bearings and bearing components. In addition, World Machinery Company ("World"),
which owns 76.6% of the Company's common stock, has entered into two additional
joint ventures with a Chinese bearing manufacturer and the Company has
arrangements with such joint ventures. By entering into joint ventures, rather
than long-term manufacturing contracts, the Company is better able to monitor
and control production and quality assurance by having access to the factories
at both management and production levels. Furthermore, by sourcing from joint
ventures, the Company may not be required to incur inventory carrying costs,
since the joint ventures may hold all inventory until needed by the Company. The
joint ventures also provide a far less capital intensive alternative to building
Company-owned facilities.

      SGBC was established by the Company and Shanghai Roller Bearing Factory
("SRBF") in June 1987 as a joint venture limited liability company in accordance
with PRC law for an initial term of ten years, which has been extended to June
2008. SGBC produces tapered roller and ball bearings, which the Company imports
into the U.S. for further assembly, inspection, testing and distribution. The
Company contributed 25% of the initial capital of SGBC in the form of capital
equipment valued by the parties at $750,000 and the Company's joint venture
partner, SRBF, contributed 75% of the initial capital of SGBC in the form of
facilities and equipment, valued by the parties at $1,500,000 and $750,000,
respectively. Upon the receipt of $1,375,000 in dividends, the Company will
cease to receive any further dividends.


                                       3
<PAGE>

      The Company has the exclusive right to sell the products of SGBC in the
U.S. In 1996, 1997 and 1998, the Company imported $5.8 million, $5.8 million and
$10.3 million respectively, in bearings from SGBC. Purchases are made upon terms
and conditions established periodically by negotiation between the Company and
SGBC. Governance, operations, distributions and the dissolution of SGBC are
governed by PRC law and by SGBC's joint venture contract and articles of
association. SGBC's eight-member Board of Directors, which consists of five
directors chosen by SRBF and three directors chosen by the Company, exercises
authority over the joint venture by majority vote. Certain decisions involving
annual strategy, budgeting and production plans require the vote of at least one
Director chosen by the Company. Unanimous consent of the Board of Directors is
required for all fundamental corporate changes.

      Shanghai Pudong General Bearing Company ("SPGBC"), a joint venture between
General Bearing Corporation and Shanghai Xiua Industrial Corporation is located
in the Pudong Industrial Zone of Shanghai. This venture produces ball bearings
for sale in the U.S. by the Company. The Company entered into the agreement with
SPGBC in 1997, and contributed $150,000; 25% of the registered capital, in 1998.
The Company imported $1.6 million from SPGBC in 1998.

      Ningbo General Bearing Company ("NGBC"), a joint venture between General
Bearing Corporation and China Ningbo Genda Bearing Company, Ltd., was
established in early 1998. Located in Yuyao City, China, this venture
manufactures ball and roller bearings and their components. Initially, the
ventures production has been directed to electric motor bearings. In its second
stage, its production will be heavily weighted toward product for sale by the
Company to the U.S. automotive industry. The Company contributed $1 million;
33.3% of the registered capital. The Company imported $3.4 million from NGBC in
1998.

      In addition, World has entered into two additional joint ventures with a
Chinese bearing manufacturer. These joint ventures are suppliers to the Company.

      Rockland Manufacturing Company, ("Rockland") a joint venture between a
subsidiary of World and Wafangdian USA Ltd., was established in 1993 and exists
at the facilities of the Company. Rockland offers flexibility to the Company by
providing readily accessible inventory which the Company pays for at the time it
is needed to fill customer orders. The Company purchased $5.2 million from
Rockland in 1998.

      Wafangdian General Bearing Co., Ltd. ("WGBC"), is a joint venture between
World and Wafangdian Bearing Company. WGBC produces components for spherical
roller bearings and railroad bearings in the PRC. The Company sells the WGBC
bearings in the U.S. In its second stage, it is proposed that WGBC will produce
rear wheel automotive bearings with machinery purchased from GM's Delphi plant
in Bristol, Connecticut, also for sale in the U.S. by the Company.

      World has granted the Company options, exercisable prior to December 31,
1999, to purchase from World, its interest in Rockland and WGBC, for $400,000
and $846,000 (subject to adjustment based on change in accounts payable by WGBC
to World), respectively, representing the estimated capital contributions,
advances for administrative expenses and other costs paid by World with respect
to such


                                       4
<PAGE>

ventures prior to January 2, 1999; plus any additional capital contributions
made and administrative expenses incurred on behalf of the joint venture by
World after such date.

SALES, MARKETING AND CUSTOMERS

      The Company markets its products in the U.S. and abroad through 17
salaried sales employees as well as 28 commissioned independent sales
representative organizations, aggregating 98 sales persons. In addition, the
Company has 7 customer service representatives responsible for handling orders
and providing sales support. Products sold through the OEM Division bear The
General(R) label for ball bearings and the Hyatt(R) brand for all types of
roller bearings.

      The Company participates in trade shows sponsored by the Truck Maintenance
Council, American Trucking Association and the Railway Supply Association. The
Company spent $222,000 on advertising for fiscal 1998 and it anticipates that
its advertising expenditures for fiscal 1999 will be about the same.

      Current OEM customers include automotive and locomotive divisions of GM,
Ford, Trailmobile, Great Dane, Union Pacific, Burlington Northern, Xerox, Pitney
Bowes and Kodak. The OEM Division has approximately 400 customers. The
Distribution Division markets the same broad line of bearing products as the OEM
division. The Distribution Division has over 1,050 customers, ranging in size
from Motion Industries and Applied Industrial Technology, each of which has
approximately 400 stores in the U.S., to independent single outlet operations.
The OEM Division focuses on the transportation industry: e.g., truck trailer
manufacturers, railroad locomotive and freight car manufacturers and automotive
manufacturers. No customer accounted for more than 10% of the Company's
consolidated revenues for fiscal 1998.

      The Distribution Division generally ships product within 24 hours of the
time an order is placed. The OEM Division ships products within one to 365 days
from the date an order is placed. Actual shipments are dependent upon production
schedules of the Company's customers. The Company's arrangements with its North
American customers typically provide that payments are due within 30 days
following the date of shipment of goods. Foreign customers are generally
required to pay by letter of credit.

EMPLOYEES

      As of January 2,1999, the Company had 157 full-time employees, of whom 94
were engaged in production, shipping and receiving and maintenance, and 26 of
whom were engaged in sales and marketing. The balance of the Company's full-time
employees is primarily administration. 80 of the Company's employees engaged in
production, shipping and receiving, and maintenance, are subject to collective
bargaining and are represented by the United Brotherhood of Carpenters and
Joiners of America, AFL-CIO, Local 3127 ("Union"). The current collective
bargaining agreement with the Union expires on April 30, 2000. The Company
believes that relations with its employees, including those subject to
collective bargaining, are good. The Company has a 20 year relationship with the
Union and has never experienced a Union work stoppage.


                                       5
<PAGE>

COMPETITION

      The ball and roller bearing industry is highly competitive. The Company
believes that competition within the precision ball and roller bearing market is
based principally on quality, price and the ability to meet customer delivery
requirements. The Company's primary domestic and foreign competitors are Timken,
SKF USA Inc., NSK Corporation, American Koyo Corp., NTN Bearing Corporation of
America, the Torrington Company and FAG Holding Corporation. Management believes
that the Company's manufacturing and sourcing capabilities and its reputation
for consistent quality and reliability have positioned the Company for continued
growth in both market share and sales.

PATENTS, TRADEMARKS AND LICENSES

      Except for The General(R) trademark and the Hyatt(R) trademark, the
Company does not own any U.S. or foreign patents, trademarks or licenses that
are material to its business. The Company does rely on certain data, including
costing and customer lists, and the success of its business depends, to some
extent, on such information remaining confidential. Each employee who may have
access to confidential information is subject to a confidentiality agreement.

      The Company's use of the Hyatt(R) trademark is pursuant to a license with
General Motors. Under the Hyatt License, the Company has the right to use the
terms "Hyatt," "Hyatt Railway," "Hyatt Railway Products," "Hyatt Manufacturing,"
"Hyatt General" and various derivatives of "Hyatt" in connection with locomotive
journal boxes, traction motor bearings, component parts thereof, and other
products. The term of the Hyatt License extends until January 1, 2000, and may
be renewed at the option of the Company for an additional ten year term. The
Company paid GM an initial fee of $30,000 upon execution of the Hyatt License
and has paid or will pay an annual licensing fee to GM in an amount increasing
from $20,000 in 1990 to $35,000 in 1999. The fee payable by the Company upon the
exercise of its option to renew the Hyatt License is based upon a benchmark of
$27,500 indexed for inflation as of 1999.

ENVIRONMENTAL COMPLIANCE

      The Company's operations are subject to federal, state and local
regulatory requirements relating to pollution control and protection of the
environment. Based on information compiled to date, management believes that the
Company's current operations are in material compliance with applicable
environmental laws and regulations. See Legal Proceedings.


                                       6
<PAGE>

Item 2. Properties.

      The Company leases a facility located in West Nyack, New York, which has
approximately 190,000 square feet of floor space. Management believes that the
plant is adequate for the Company's present needs and anticipated expansion. The
West Nyack facility, which is used principally for administrative, assembly,
manufacturing, and distribution purposes, is owned by Gussack Realty Company
("Realty"). On November 1, 1996, the Company and Realty entered into a lease for
the West Nyack facility ("Lease"), which provides for an initial term expiring
on October 31, 2003, and is renewable at the option of the Company for an
additional six year term. The lease specifies a base rent of $4.81 per square
foot (or $913,000) annually, payable in monthly rent payments of $76,000. The
Lease provides for an increase in the rent every other year, commencing in 1998,
to the greater of (i) 106% of the next preceding year's rent or (ii) the
preceding years rent multiplied by a fraction the numerator of which is the
Consumer Price Index for the area including Rockland County or, if no such index
is published, for Northern Jersey ("CPI") in effect 90 days prior to November 1
of the new rent year and the denominator of which is the CPI in effect 90 days
prior to November 1 of the preceding year. The November 1998 increase amounted
to 106% of the next preceding year, resulting in rent of $5.0986 per square foot
(or $968,000) annually effective through October 31, 2000. Simultaneously, the
Company entered into a sublease with WMW Machinery Co. and World for
approximately 31,000 and 5,500 square feet of the West Nyack facility,
respectively. See "Item 13 - Certain Relationships and Related Transactions."
The Company anticipates WMW Machinery Co., Inc. vacating the 31,000 square feet
by the end of 1999, as the Company requires the use of the space for its own
needs.

Item 3. Legal Proceedings.

      Timken vs. United States

      On August 25, 1986, Timken, a U.S. producer of tapered roller bearings,
filed a petition on behalf of the U.S. tapered roller bearing industry with both
the ITC and Commerce seeking the imposition of antidumping duties on imports of
tapered roller bearings from Japan, Italy, the former Yugoslavia, Romania,
Hungary and the PRC. In May 1987, Commerce found that tapered roller bearings
from each of the aforementioned countries were being sold in the U.S. at less
than fair value, as determined by Commerce based upon an estimate of the foreign
market value of tapered roller bearings (i.e. the price at which the same or
similar merchandise is sold or offered for sale in the principal markets of the
home market country). Commerce subsequently issued an antidumping order imposing
duties on the unfairly traded tapered roller bearings equal to the percentage
difference between the selling prices in the U.S. and the foreign market value
of the imported tapered roller bearings during specified review periods. Among
others, the order named SGBC, the Company's joint venture in the PRC. Importers
subject to the antidumping order are required to post a cash deposit with the
U.S. Customs Service equal to the antidumping margin percentage multiplied by
the export price of any imported product covered by the dumping petition. On
February 3, 1997, Commerce granted the Company's joint venture, SGBC, partial
revocation of the antidumping order affecting tapered roller bearings from the
PRC. As a result of SGBC


                                       7
<PAGE>

receiving zero or de minimis antidumping margins for the 4th, 5th and 6th annual
reviews of the antidumping order ("Reviews"), Commerce revoked the antidumping
order as to SGBC in the 7th Review. As a result of the revocation, SGBC and the
Company will no longer be required to participate in the annual reviews of the
antidumping order conducted by Commerce. Timken filed actions against the United
States in the Court of International Trade challenging Commerce's final
antidumping determinations of the 4th, 5th, 6th and 7th reviews, including the
revocation as to SGBC.

On May 27, 1998, the Court of International Trade (CIT) issued a ruling in the
action challenging Commerce's determinations in the 4th, 5th and 6th Reviews.

In that portion of the ruling potentially applicable to the Company, the Court
affirmed the findings of Commerce but remanded certain issues back to Commerce
for redetermination. On August 25th, 1998 Commerce issued the final results of
its redeterminations, which did not materially affect the antidumping margins of
SGBC and had no impact on SGBC's partial revocation of the antidumping order. On
December 7, 1998, the CIT affirmed Commerce's remand determinations and the
action challenging Commerce's determinations in the 4th, 5th and 6th Reviews was
dismissed. Timken has filed an appeal with the U.S. Court of Appeals for the
Federal Circuit. The Company is not appearing in the appeal as none of the
issues on appeal directly affect SGBC's revocation.

In the CIT action challenging the results of the 7th review, all issues have
been briefed, CIT has heard oral argument and the parties are awaiting a ruling.

      Gussack Realty Company and General Bearing Corporation vs. Xerox

In 1995 Gussack Realty Company ("Realty") and the Company filed an action
against Xerox in the United States District Court for the Southern District of
New York related to the discharge by Xerox of contaminants into the subsurface
at a property in the vicinity of property formerly leased by the Company and
owned by Realty in Blauvelt, New York ("Blauvelt Property"). Realty and the
Company, among other things, allege that the subsurface discharge has adversely
affected the Blauvelt Property. The New York State Department of Environmental
Conservation ("DEC") has held Xerox responsible for such discharges and Xerox
has entered into several consent orders with DEC since 1984, agreeing, among
other things, to investigate and remediate the impact of the discharges. In
July, 1997, Xerox filed a counterclaim against the Company and Realty, seeking
contribution for Xerox's remediation costs based upon Xerox's allegation of a
discharge of contaminants into the subsurface at the Blauvelt facility .
Inasmuch as neither Realty nor the Company have any knowledge of any such
discharge and the New York State Department of Environmental Conservation has no
record of any such discharge, the Company believes the counterclaim to be
without merit and filed an Answer denying the allegations of the Counterclaim.

In September, 1997, Realty and the Company filed motions for partial summary
judgment on the complaint and seeking to dismiss the counterclaim on the ground
that it is barred by the applicable statute of limitations. Xerox responded to
the motions and filed its own motion for summary judgment.

On February 3, 1999, the Court denied all the above motions. Trial is scheduled
to commence on April 5, 1999.

Additionally, in October, 1997, the Company filed a motion with the United
States Bankruptcy Court for the Southern District of New York, seeking to hold
Xerox in Contempt and for sanctions, on the grounds


                                       8
<PAGE>

that the counterclaim filed by Xerox against the Company was discharged upon
confirmation of the Company's Chapter 11 Reorganization Plan in 1993. In its
response Xerox alleged that its counterclaims were not discharged and that even
if they were discharged, Xerox can use them to offset the Company's claims
against Xerox. Xerox also filed its own motion with the U.S. District Court
seeking to remove consideration of the bankruptcy motion from the bankruptcy
judge and have it decided by the District Court judge ("motion to withdraw the
reference"). On December 28, 1998, the District Court judge denied the motion to
withdraw the reference. On March 3, 1999, the Company filed a motion for partial
summary judgment before the U.S. Bankruptcy Court judge on the contempt matter.
Oral argument is scheduled for April 9, 1999. If the motion for summary judgment
is granted, some of Xerox' counterclaims will be barred.

While the company believes its legal position in the above action to be correct,
the company cannot predict the outcome of the litigation and intends to
vigorously defend its position.

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

      INAPPLICABLE


                                       9
<PAGE>

                                     PART II

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

      The Company's Common Stock has been quoted on the NASDAQ Small Cap market
under the symbol "GNRL" since the Company's initial public offering effective
February 7, 1997.

                                                 1998
                               ----------------------------------------
Stock Prices                           High                 Low
                               ----------------------------------------
      1st Quarter                     17 1/2               11 1/2
      2nd Quarter                     12 7/8                7 5/8
      3rd Quarter                      9 5/16               5
      4th Quarter                      8 1/4                4 5/8

      The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain any earnings for future growth
and, therefore, does not anticipate declaring or paying any cash dividends in
the foreseeable future.

      At February 3, 1999, the Company believes it had in excess of 800 holders
of its Common Stock.


                                       10
<PAGE>

Item 6. Selected Financial Data

      The selected financial data set forth below is derived from the Company's
consolidated financial statements and should be read in conjunction with the
consolidated financial statements and related notes included elsewhere in this
Annual report. See Management Discussion and Analysis of Results of Operations
and Financial Condition.

                           General Bearing Corporation
                             Selected Financial Data
                    (In Thousands Except for Per Share Data)

<TABLE>
<CAPTION>
                                                                                  Years Ended
------------------------------------------------------------------------------------------------------------------------------------
                                                December 31,      December 30,      December 28,       December 27,       January 2,
                                                   1994               1995              1996               1997              1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>               <C>                <C>               <C>               <C>     
Statement of Operations Data:
Sales                                              $ 37,032          $ 42,070           $ 38,362          $ 42,153          $ 45,461
Operating income                                   $    874          $    354           $  3,201          $  4,053          $  4,920
Income (loss) before extraordinary
   item and income tax (benefit)                   $    255          $ (2,229)          $  1,998          $  3,246          $  4,569
Net income (loss)                                  $    363          $ (1,729)          $  2,198          $  5,346          $  2,881
Net income (loss) per basic share
   (before extraordinary item)                     $    .08          $   (.58)          $    .73          $   1.41          $    .74
Net income (loss) per basic share                  $    .12          $   (.58)          $    .73          $   1.41          $    .74
Net income (loss) per diluted share                $    .12          $   (.58)          $    .73          $   1.38          $    .73
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                 Years Ended
------------------------------------------------------------------------------------------------------------------------------------
                                                  December 31,        December 30,     December 28,      December 27,     January 2,
                                                  1994                1995             1996              1997             1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>               <C>               <C>               <C>               <C>    
Balance Sheet Data:
Total Assets                                         $24,143           $27,086           $24,399           $26,802           $30,338
Long-term debt (excluding current
portion)                                             $ 5,218           $ 4,817           $ 4,493           $   910           $ 1,951
</TABLE>


                                       11
<PAGE>

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

Results of Operations

Fiscal 1998 compared to Fiscal 1997

      Sales. Sales for fiscal 1998 of $45,461,000 represents a 7.8% increase
over 1997. Sales in the OEM Division increased 19.9% over 1997 to $31,148,000
primarily as a result of higher sales volume to existing customers as well as
new contracts awarded during the year. The largest increase, in automotive ball
bearings, resulted from the beginning of shipments on a two- year, $14,000,000
contract with The Ford Motor Company. The Distribution Division was able to gain
a 5% price increase, however, softness in the industrial distribution
aftermarket during the second half of the year resulted in a net decrease in
sales of 11.5% from 1997 to $14,313,000. Overall, the Company's sales volume
increases were in tapered roller bearings, tapered journal bearings, "special"
and automotive ball bearings, and ball transfers. These increases were partially
offset by decreased sales of certain standard ball bearings and the elimination
of the mounted units product line.

      Gross Profit. Gross profit for fiscal 1998 of $13,996,000 represents a
7.1% increase over 1997. As a percentage of sales, gross profit (GP%) was 30.8%
for 1998 compared to 31.0% in 1997. Overall, the Company's GP% was favorably
affected by the Company's strategy to de-emphasize sales of low margin commodity
bearings. However, on an overall basis, GP% was adversely impacted by product
mix resulting from growth in sales to original equipment manufacturers combined
with softness in the industrial distribution aftermarket. Sales of the OEM
Division and the Distribution Division represented 69% and 31% of total sales,
respectively, in 1998 compared to 62% and 38%, respectively, in 1997. Both the
OEM and Distribution Divisions were favorably affected by the implementation of
a program to increase efficiency in plant operations. This program entailed the
consolidation of operations at the Company's West Nyack, New York facility which
resulted in a significant reduction of plant personnel and overhead costs as
well as simplification of tooling and quality control functions. Additionally,
the Company increased sourcing from joint ventures and believes that savings
associated with this lower cost sourcing method reduced cost of goods sold. GP%
for the OEM Division was 21.7% in 1998 compared to 22.8% in 1997. The effects of
product mix and introductory pricing necessary to increase market share offset
the cost reductions mentioned above. The Company intends to increase GP% in 1999
as a result of firmer pricing, cost reduction projects completed during 1998,
and new cost reduction projects already underway. GP% for the Distribution
Division was 50.5% in 1998 compared to 44.1% in 1997. This increase was due to
price increases and cost reductions.

      Selling, General and Administrative Expenses. Selling, general and
administrative expenses (S,G&A) as a percentage of sales were 20.0% for 1998
compared to 20.4% in 1997. This reduction reflects the effect of the increased
sales volume. S,G&A increased by $469,000. This is primarily attributable to
increases in commission, travel and salary expenses in the OEM Division to
support its current year and projected growth.


                                       12
<PAGE>

      Operating Income. Operating income for fiscal 1998 of $4,920,000
represents a 21.4% increase over 1997. The increase in the OEM Division of 58.8%
over 1997 to $2,150,000 was due primarily to the sales and gross profit changes
detailed above. Additionally, increased S,G&A of $445,000 was offset by the
elimination of one-time plant closing costs relating to the New Jersey plant
consolidation into New York of $403,000 incurred in 1997. Operating income in
the Distribution Division increased 2.6% over 1997 to $2,770,000 where the
increased GP% offset lower sales volume.

      Interest Expense. Interest expense was $747,000 in 1998 compared to
$851,000 in 1997. As a percentage of sales, interest was 1.6% for 1998 compared
to 2.0% in 1997. This decrease is primarily due to lower interest rates in 1998.

      Other. The Company recognized other income of $350,000 in 1998 from the
sale of fixed assets to WGBC.

      Income Tax (Benefit). The Company recorded income tax expense of
$1,688,000 for 1998 compared to a tax benefit of ($2,100,000) in 1997. The tax
benefit in 1997 resulted from the creation of a deferred tax asset related to
the anticipated use of net operating loss carry forwards. The tax expense in
1998 reflects a normal rate of taxation.

      Net Income. Income before taxes for 1998 increased 40.8% from 1997. Net
income for 1998 decreased to $2,881,000 or $.74 and $.73 per basic and diluted
share, respectively from $5,346,000 or $1.41 and $1.38 per basic and diluted
share, respectively in 1997. The decrease is primarily due to the accrual for
income taxes in 1998 compared to the tax benefit recorded in 1997.

Fiscal 1997 compared to Fiscal 1996

      Sales. The Company's sales increased 9.9% from $38.4 million in fiscal
1996 to $42.2 million in fiscal 1997. OEM Division sales increased 9.1% to $26.0
million in 1997 while Distribution Division sales increased 11.1% to $16.2
million. This was primarily due to an increase in the number of units sold, and
to a lesser degree to price increases. Sales of the OEM Division and the
Distribution Division represented 62% and 38% of total sales in fiscal 1997,
respectively, the same as fiscal 1996. The increase in sales between the two
periods reflected a significant recovery in truck trailer production which
resulted in an increase of truck trailer bearing sales of approximately $2.5
million. Other areas of significant increases in sales included journal box
bearings and related parts for the locomotive industry, $900,000; spherical
roller bearings for various heavy industrial applications, $700,000; and tapered
roller bearings for the truck and trailer aftermarket, $400,000. These increases
in sales were partially offset by a decrease in sales of tapered journal
bearings of $2.6 million.

      Gross Profit. The Company's GP% increased from 27.2% in fiscal 1996 to
31.0% in fiscal 1997. OEM Division GP% increased from 21.6% in 1996 to 22.8% in
1997 while Distribution Division GP% increased from 36.4% to 44.1%. The increase
in the Distribution Division reflects a 5% price increase. On an overall basis,
the increase was partially the result of a program to increase efficiency in
plant operations. This program entailed the consolidation of operations between
the Company's Union, New Jersey and West Nyack, New York facilities, (completed
December 1997), which simplified tooling, personnel and quality control
functions while reducing fixed costs. The increased gross profit as a percentage
of sales also reflects the Company's strategy to de-emphasize sales of low
margin commodity bearings. The Company operates on the principle that a flexible
method of combining product and component purchasing with its own manufacturing
and assembly capabilities can provide high-quality products and cost advantages.
The Company has increased its sourcing from joint venture partners and believes
that improvements in cost of sales and gross margins reflect, in part, cost
savings associated with such sourcing. In 1997, the Company concluded its
withdrawal from two unprofitable product lines. In conjunction with the sale or
disposition of these product lines, inventory reserves were reduced by $554,000.


                                       13
<PAGE>

      Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $7.6 million in fiscal 1996 to $8.6
million in fiscal 1997, and as a percentage of sales, such expenses increased
from 19.9% to 20.4%, respectively. Major areas, and their increases were:
salaries and fringes ($533,000), professional fees ($154,000) and advertising
($99,000).

      Operating Income. Operating income increased to $4.1 million in fiscal
1997 from $3.2 million in fiscal 1996. The OEM Division decreased 25.8% from
1996 to $1.4 million. The increased sales and GP% were offset by higher S,G&A,
plant closing costs of $403,000 and the inclusion of a customer damage recovery
of $401,000 recorded in 1996. For fiscal 1996, the Company had recovery of
$621,000 relating to a recall. The Distribution Division increased 96.3% over
1996 to $2.7 million primarily as a result of the increased sales and GP%
discussed above.

      Other Income (Expense). Other expenses decreased by 32.9% from
approximately $1.2 million in fiscal 1996 to $807,000 in fiscal 1997 almost
entirely due to a reduction of interest costs related to reduced borrowing
requirements.

      Income Tax (Benefit). For fiscal 1997, the Company recorded an additional
$2.1 million benefit as compared to the benefit recorded in fiscal 1996, of
$200,000, relating to the anticipated use of net operating loss carry-forwards.

      Net Income (Loss). As a result of the factors discussed above, net income
increased to $5.3 million, or $1.41 and $1.38 per share basic and diluted,
respectively in fiscal 1997, from net income of $2.2 million, or $.73 per share
basic and diluted, in fiscal 1996.

Financial Condition, Liquidity and Capital Resources

      During the three years ended January 2, 1999, the Company's primary
sources of capital have been net cash provided by operating activities, a term
loan, sale of common stock and financing from affiliates. Working capital
requirements also have been financed by a Revolving Credit Facility. The primary
demands on the Company's capital resources have been the need to fund inventory
and receivables growth created in normal business expansion. At December 27,
1997, and January 2, 1999, the Company had working capital of $8.9 million and
$13.1 million respectively.

      On February 7, 1997, the Company successfully sold 900,000 shares of
common stock to the public at $7 per share. The Company recognized net proceeds
of approximately $4.9 million after expenses from the offering. The Company used
these proceeds as working capital and to pay down debts.

      Historically, the Company has used cash provided by operations to fund a
portion of its operating requirements and capital expenditures. In 1998, cash
used in operating activities was $128,000. Cash provided from net income and
deferred income taxes was offset by increased inventory. The primary reasons for
the inventory increase are to support current and future demand for automotive
ball bearings and truck size tapered roller bearings.


                                       14
<PAGE>

      The Company also has relied on borrowings under its $15.0 million
Revolving Credit Facility with Bank of New York Commercial Corporation ("BNYCC")
to fund operations which sums are secured by the Company's accounts receivable,
inventory and various other assets. The Revolving Credit Facility allows for
borrowings, from time to time, not to exceed the lesser of $15.0 million or an
amount equal to the sum of (i) 85% of eligible receivables, as defined, (ii) 55%
of eligible inventory, as defined, consisting of raw materials, (iii) 55% of
eligible inventory, as defined, consisting of finished goods, and (iv) 55% of
eligible inventory, as defined, in transit under letters of credit less, (v) the
sum of the aggregate amount of outstanding letters of credit and, (vi) such
reserves as the lender may reasonably deem proper and necessary from time to
time. In 1997 the Company requested and obtained more favorable terms, including
interest rate reductions and lower fees, on the Revolving Credit Facility.
During April, 1998, the Company requested and obtained an extension of both the
amortization of the Term Loan and the termination of the Revolving Credit
Facility to April 7, 2000.

      At January 2, 1999, the Company had outstanding debt of $8,126,000 under
its Revolving Credit Facility and had further availability of approximately $3.6
million. The Revolving Credit Facility contains covenants that, among other
things, limit the Company's ability to incur additional indebtedness and
requires the Company to maintain certain levels of working capital and to
satisfy other financial tests. In 1998 the bank waived restrictions relating to
$1.25 million of loan repayments to World via cash payments of $400,000 and an
offset against accounts receivable from World of $850,000. At January 2, 1999,
the Company was in compliance with all loan convenants.

      Investment in Affiliates increased by $1,000,000 due to the Company's one
third ownership of a new joint venture, "Ningbo General Bearing Co. Ltd."
(NGBC). The Company anticipates that NGBC will supply competitively priced, high
quality bearings to the Company for resale. Investment in Affiliates also
increased by $150,000 for the Company's equity in Shanghai Pudong General
Bearing Co. Ltd. The Company's Investment in Shanghai General Bearing Co. Ltd.
was decreased $214,000 due to an equity distribution received during 1998.

      Cash used in investing activities also includes $906,000 for capital
expenditures. This was offset by receipt of $694,000 for equipment sold to an
affiliate. The Company financed an additional $504,000 of its fixed asset
purchases via capital lease. The Company anticipates that capital expenditures
for the 1999 fiscal year and the foreseeable future will be approximately
$500,000 to $750,000 per year. However, the Company, from time to time, may
consider the implementation of programs to expand its operations, which could
increase capital expenditures above this level.

      The Company believes that funds generated from continuing operations,
capital lease financing and borrowings under the existing and any future
revolving credit facilities will be sufficient to finance the Company's
anticipated working capital and capital expenditure requirements for at least
the next 24 months.


                                       15
<PAGE>

Year 2000 Compliance

      The "Year 2000" problem refers to and arises from deficient computer
programs and related products, such as embedded chips, which do not properly
recognize or process a year that begins with "20" instead of "19". If not
corrected, many computer applications could fail or create erroneous results.
The extent of the potential impact of the Year 2000 problem is not yet known,
and if not timely corrected, it could affect the global economy.

A. The Company's Readiness:

      1. (i) Information Technology (IT) systems: The Company has conducted a
comprehensive review of its computer systems to identify those that could be
affected by the Year 2000 issue. The Company believes that with minor
modifications (conversion and testing in progress) to the operating system and
existing software, the Year 2000 problem will not pose significant operational
problems for the Company's computer systems as so modified. (ii) Non IT systems:
Non IT systems are those which typically include "embedded" technology such as
micro controllers and chips. The Company currently is in the process of
evaluating the effect of the Year 2000 problem on non IT systems and estimates
completion by June 30, 1999.

      2. Third Parties: Due to the pervasive use of computers by the Company in
its dealings with suppliers, customers, financial institutions, and other third
parties, the Year 2000 problem could have a material impact on the Company if
not timely addressed by such third parties. To assess third party readiness, the
Company has surveyed its principal suppliers and financial institutions and
received responses which indicate that all such parties have adequately
addressed the problem. While the company has not surveyed its customers, it has
received surveys from its principal customers which indicate that they are also
addressing the problem.

B. Cost: The Company has not allocated anticipated year 2000 remediation costs
among the various systems which may be affected but believes that total
remediation costs will be immaterial.

C. Risks: The Company believes that the greatest risk presented by the year 2000
problem is from third parties, such as suppliers, financial institutions,
utility providers, etc. who may not have adequately addressed the problem. A
failure of any such third party's computer or other applicable systems in
sufficient magnitude could materially and adversely affect the Company. The
Company is not presently able to quantify this risk but believes that it is
minimal based upon the surveys it has received.

D. Contingency Plans: While the Company has no year 2000 contingency plans, per
se, and does not intend to create one, any problems encountered will be
addressed as expeditiously and efficiently as the circumstances permit.
Additionally, the Company normally keeps written back-up of all material
transactions which should facilitate continuation of business operations and
remediation of data loss in the event of a system failure.


                                       16
<PAGE>

Inflation

      The effect of inflation on the Company has not been significant during the
last two fiscal years.

Forward Looking Statements

      Except for historical information contained herein, statements contained
in this Form 10-K constitute forward-looking statements made pursuant to the
safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements involve material risks and uncertainties,
including, without limitation, statements as to management's beliefs,
strategies, plans, projections, expectations or opinions related to the
Company's future performance which are based on a number of assumptions that may
ultimately prove to be inaccurate.

Item 7a. Quantitative and Qualitative Disclosure about Market Risk

INTEREST RATE RISK

      The Company's primary market risks are fluctuations in interest rates and
variability in interest rate spread relationships (i.e., prime to LIBOR spreads)
on its bank debt (see Notes 6 and 8). The Company does not use derivative
financial instruments.

      The Company's management believes that fluctuations in interest rates in
the near term would not materially affect the Company's consolidated operating
results, financial position or cash flows as the Company has limited risks
related to interest rate fluctuations.

FOREIGN CURRENCY RISK

      The Company does not use foreign currency forward exchange contracts or
purchased currency options to hedge local currency cash flows or for trading
purposes. All sales arrangements with international customers are denominated in
U.S. dollars. Only a small fraction of the Company's purchases are denominated
in foreign currency. Due to this limited activity, the Company does not expect
any material loss with respect to foreign currency risk.


                                       17
<PAGE>

                           GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                       FOR THE YEAR ENDED JANUARY 2, 1999


                                       18
<PAGE>

Item 8. Financial Statements and Supplementary Data

                   Index to Consolidated Financial Statements
                                                                       Page
                                                                       ----

Report of Independent Certified Public Accountants ................... F-20

Consolidated Balance Sheets, December 27, 1997 and January 2, 1999 ... F-21

Consolidated Statements of Operations for the Years Ended 
December 28, 1996, December 27, 1997 and January 2, 1999 ............. F-22

Consolidated Statements of Stockholders' Equity for the Years Ended
December 28, 1996, December 27, 1997 and January 2, 1999 ............. F-23

Consolidated Statements of Cash Flows for the Years Ended
December 28, 1996, December 27, 1997 and January 2, 1999 ............. F-24

Summary of Significant Accounting Policies ........................... F-25 - 27

Notes to Consolidated Financial Statements ........................... F-28 - 42


                                       19
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



General Bearing Corporation
West Nyack, New York


We have audited the accompanying consolidated balance sheets of General Bearing
Corporation and subsidiaries as of December 27, 1997 and January 2, 1999, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended January 2, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of General Bearing
Corporation and subsidiaries as of December 27, 1997 and January 2, 1999, and
the results of their operations and their cash flows for each of the three years
in the period ended January 2, 1999, in conformity with generally accepted
accounting principles.



BDO Seidman, LLP


New York, New York
February 12, 1999


                                      F-20
<PAGE>

                           GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
               (In Thousands Except for Shares and Per Share Data)

<TABLE>
<CAPTION>
                                                                           December 27,       January 2,
                                                                              1997               1999
                                                                            --------           --------
<S>                                                                         <C>                <C>     
                     ASSETS
Current:
    Cash                                                                    $    118           $     29
    Accounts receivable - trade, less allowance for doubtful
       accounts of $235,000 and $200,000                                       5,473              5,772
    Inventories                                                               11,747             16,423
    Prepaid expenses and other current assets                                    879                358
    Advances to affiliates                                                     2,178                940
    Deferred tax asset                                                            --                437
                                                                            --------           --------

          Total current assets                                                20,395             23,959

Fixed assets, net                                                              2,387              3,277

Investment in affiliates                                                         713              1,695

Advances to affiliate                                                            398                423

Deferred tax asset                                                             2,880                956

Other assets                                                                      29                 28
                                                                            --------           --------

Total Assets                                                                $ 26,802           $ 30,338
                                                                            ========           ========

       LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
    Note payable - bank                                                     $  5,440           $  8,126
    Accounts payable:
       Trade                                                                   1,314              1,271
       Affiliates                                                                263                  3
       Parent                                                                    252                 94
    Accrued expenses and other current liabilities                             1,938              1,128
    Current maturities of long-term debt                                       2,253                286
                                                                            --------           --------

          Total current liabilities                                           11,460             10,908
                                                                            --------           --------

Long-term debt, less current maturities:
    Bank                                                                          --                557
    Other                                                                         --                440
    Affiliate                                                                    910                954
                                                                            --------           --------

          Total long-term liabilities                                            910              1,951
                                                                            --------           --------

Commitments and contingencies

Stockholders' equity:
    Preferred stock par value $.01 per share - shares
       authorized 1,000,000 none issued and outstanding                           --                 --
    Common stock par value $.01 per share - shares
       authorized 19,000,000, issued and outstanding 3,900,000 and
        3,918,950 shares                                                          39                 39
    Additional paid-in capital                                                28,592             28,758
    Deficit                                                                  (14,199)           (11,318)
                                                                            --------           --------

          Total stockholders' equity                                          14,432             17,479
                                                                            --------           --------

Total liabilities and stockholders' equity                                  $ 26,802           $ 30,338
                                                                            ========           ========
</TABLE>

           See accompanying summary of significant accounting policies
                 and notes to consolidated financial statements.


                                      F-21
<PAGE>

                           GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
               (In Thousands Except for Shares and Per Share Data)

<TABLE>
<CAPTION>
                                                                                      Years Ended
                                                                 -------------------------------------------------------
                                                                 December 28,          December 27,           January 2,
                                                                     1996                  1997                  1999
                                                                 -----------           -----------           -----------
<S>                                                              <C>                   <C>                   <C>        
Sales                                                            $    38,362           $    42,153           $    45,461
Cost of sales                                                         27,926                29,090                31,465
                                                                 -----------           -----------           -----------

     Gross profit                                                     10,436                13,063                13,996

Selling, general and administrative expenses                           7,636                 8,607                 9,076
Recovery - customer damage claims                                       (401)                   --                    --
Plant closing costs, net                                                  --                   403                    --
                                                                 -----------           -----------           -----------

     Operating income                                                  3,201                 4,053                 4,920
                                                                 -----------           -----------           -----------

Other (income) expense
     Interest, net, including $54, $21, ($13) to parent                1,223                   851                   747
     Equity in income of affiliate                                        --                   (25)                  (46)
     Other                                                               (20)                  (19)                 (350)
                                                                 -----------           -----------           -----------

Total Other (income) expense                                           1,203                   807                   351
                                                                 -----------           -----------           -----------

     Income before income taxes                                        1,998                 3,246                 4,569

Income tax (benefit)                                                    (200)               (2,100)                1,688
                                                                 -----------           -----------           -----------

     Net Income                                                  $     2,198           $     5,346           $     2,881
                                                                 ===========           ===========           ===========

Income per common share:
     Basic                                                       $       .73           $      1.41           $       .74
                                                                 -----------           -----------           -----------

     Diluted                                                     $       .73           $      1.38           $       .73
                                                                 -----------           -----------           -----------

Weighted average number of common shares

     Basic                                                         3,000,000             3,798,904             3,914,809
                                                                 -----------           -----------           -----------

     Diluted                                                       3,000,000             3,868,610             3,972,397
                                                                 -----------           -----------           -----------
</TABLE>

           See accompanying summary of significant accounting policies
                and notes to consolidated financial statements.


                                      F-22
<PAGE>

                           GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF CHANGES
                             IN STOCKHOLDERS' EQUITY
                        (In Thousands Except for Shares)

<TABLE>
<CAPTION>
                                                  Preferred Stock                 Common Stock           Additional
                                             -------------------------     -------------------------      paid-in
                                               Shares         Amount         Shares          Amount        capital         Deficit
                                             ----------     ----------     ----------     ----------      ----------     ----------
<S>                                           <C>           <C>            <C>            <C>             <C>            <C>
Balance, December 30, 1995                                                  3,000,000     $       30      $   23,655     $  (21,743)

Net income                                           --             --             --             --              --          2,198
                                             ----------     ----------     ----------     ----------      ----------     ----------

Balance, December 28, 1996                           --             --      3,000,000             30          23,655        (19,545)

Sale of 900,000 Common Shares                        --             --        900,000              9           4,937             --

Net income                                           --             --             --             --              --          5,346
                                             ----------     ----------     ----------     ----------      ----------     ----------

Balance, December 27, 1997                           --             --      3,900,000             39          28,592        (14,199)

Sale of 18,950 Common Shares-
     Stock Options Exercised                         --             --         18,950              0             132             --

Tax benefit- Stock Options
         Exercised                                   --             --             --             --              34             --

Net Income                                           --             --             --             --              --          2,881
                                             ----------     ----------     ----------     ----------      ----------     ----------

Balance, January 2, 1999                             --             --      3,918,950     $       39      $   28,758     $  (11,318)
                                             ==========     ==========     ==========     ==========      ==========     ==========
</TABLE>

           See accompanying summary of significant accounting policies
                and notes to consolidated financial statements.


                                      F-23
<PAGE>

                           GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                                                        Year ended
                                                                                                        ----------
                                                                                      December 28,      December 27,      January 2,
                                                                                         1996              1997              1999
                                                                                        -------           -------           -------
<S>                                                                                     <C>               <C>               <C>    
Cash flows from operating activities:
    Net income                                                                          $ 2,198           $ 5,346           $ 2,881
Add (deduct) noncash items charged(credited) to income:
    Deferred income taxes                                                                  (200)           (2,180)            1,521
    Depreciation and amortization                                                           557               511               490
    Equity in income of affiliate                                                            --               (25)              (46)
    Gain on disposal of fixed assets                                                        (18)              (36)             (316)

Add (deduct) changes in operating assets and liabilities:
    Accounts receivable                                                                   1,468              (898)             (299)
    Inventories                                                                           2,728             2,152            (4,676)
    Prepaid expenses and other assets                                                      (730)               42               521
    Due to (from) affiliates                                                                498            (3,661)              300
    Accounts payable and accrued expenses                                                (2,035)             (991)             (504)
    Accrued customer damage claims                                                       (1,565)               --                --
                                                                                        -------           -------           -------
        Net cash provided by (used in)
            operating activities                                                          2,901               260              (128)
                                                                                        -------           -------           -------
Cash flows from investing activities:
    Investment in affiliates, net                                                            --                --              (936)
    Fixed asset purchases                                                                  (681)             (605)             (906)
    Proceeds from sale of fixed assets                                                       21               351               694
                                                                                        -------           -------           -------

        Net cash used in investing activities                                              (660)             (254)           (1,148)
                                                                                        -------           -------           -------
Cash flows from financing activities:
    Proceeds from sale of common shares, net                                                 --             4,947               132
    Repayment of long-term debt - bank                                                     (223)             (223)             (223)
    Increase (decrease) in note payable - bank                                           (1,337)           (4,087)            2,686
    Repayment of long-term debt and other balances - parent                                (719)             (538)           (1,408)
                                                                                        -------           -------           -------

        Net cash provided by (used in) financing activities                              (2,279)               99             1,187
                                                                                        -------           -------           -------

Net (decrease) increase in cash                                                             (38)              105               (89)

Cash, beginning of year                                                                      51                13               118
                                                                                        -------           -------           -------

Cash, end of year                                                                       $    13           $   118           $    29
                                                                                        =======           =======           =======
</TABLE>

           See accompanying summary of significant accounting policies
                and notes to consolidated financial statements.


                                      F-24
<PAGE>

                           GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


The Company              General Bearing Corporation ("General") and
                         subsidiaries (collectively, the "Company")
                         manufactures, sources, assembles and distributes ball
                         bearings, including standard radial, electric motor
                         quality, tapered roller and traction motor ball
                         bearings, used in a broad range of industrial
                         applications. The Company supplies bearings to original
                         equipment manufacturers and to manufacturing
                         industries, railroad companies and the industrial
                         aftermarket primarily in the United States. The Company
                         also markets bearings for freight cars and locomotives
                         worldwide. At January 2, 1999, 76.6% of the Company is
                         owned by World Machinery Company ("World" or "Parent").

Principles of            The accompanying consolidated financial statements
Consolidation            include the accounts of General and two majority-owned
                         subsidiaries which are inactive at the end of fiscal
                         1998. Investments in 20%- to 50%-owned companies are
                         accounted for on the equity method and accordingly, all
                         dividends received are treated as a return of capital.

                         All significant intercompany accounts and transactions
                         have been eliminated.

Inventories              Inventories are stated at the lower of cost (first-in,
                         first-out method) or market.

Fixed Assets             The cost of depreciable plant and equipment is
                         depreciated for financial reporting purposes over the
                         estimated useful lives using the straight-line or
                         declining balance methods. The estimated lives for each
                         property classification are as follows:

                         -------------------------------------------------------
                         Machinery and equipment               3 to 10 years
                         Furniture and fixtures                     10 years
                         Transportation equipment               3 to 5 years
                         Leasehold improvements       Lesser of life of lease or
                                                                     useful life
                         =======================================================

                         Expenditures for maintenance, repairs and minor
                         renewals or betterments are charged against income.
                         Major renewals and replacements are capitalized.

Evaluating               The Company reviews the carrying values of its
Recoverability of        long-lived and identifiable intangible assets for
Long Lived Assets        possible impairment whenever events or changes in
                         circumstances indicate that the carrying amount of the
                         assets may not be recoverable. The Company assesses
                         recoverability of these assets by estimating future
                         nondiscounted cash flows. Any long-lived assets held
                         for disposal are reported at the lower of their
                         carrying amounts or fair value less cost to sell.


                                      F-25
<PAGE>

                           GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition      The Company recognizes revenue when products are
                         shipped.

Reporting Period         The reporting period for the Company is a 52-53 week
                         period. There were 52 weeks in the periods ended
                         December 28, 1996 and December 27, 1997, and 53 weeks
                         in the period ended January 2, 1999.

Income Taxes             The Company filed a consolidated Federal income tax
                         return with its Parent through the date of its initial
                         public offering, completed in February, 1997;
                         thereafter, it files its own federal return. State and
                         local tax returns are filed separately for the entire
                         year. Federal income taxes are calculated as if the
                         Company filed its tax return on a separate return basis
                         for all periods presented. 

                         Deferred income taxes reflect the net tax effect of
                         temporary differences between the carrying amounts of
                         assets and liabilities for financial reporting purposes
                         and the amounts used for income tax purposes.

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

Estimated Fair           Statement of Financial Accounting Standards ("SFAS")
Value of Financial       No. 107, "Disclosure About Fair Value of Financial
Instruments              Instruments", requires disclosures of fair value
                         information about financial instruments, for which it
                         is practicable to estimate the value, whether or not
                         recognized on the balance sheet. 

                         The fair value of financial instruments, including
                         cash, accounts receivable and accounts payable,
                         approximate their carrying value because of the current
                         nature of these instruments. The carrying amounts of
                         the Company's note payable - bank and long-term debt -
                         bank approximate fair value because the interest rates
                         on these instruments are subject to changes with market
                         interest rates. It is not practical to determine the
                         fair value of receivables from, payables to and
                         long-term debt payable to affiliates and other because
                         of the nature of their terms. The repayment terms to
                         affiliates are subject to managements' discretion.

Concentrations of        The Company extends credit based on an evaluation of
Risk                     the customer's financial condition, generally without
                         requiring collateral. Exposure to losses on receivables
                         is principally dependent on each customer's financial
                         condition. The Company monitors its exposure for credit
                         losses and maintains allowances for anticipated losses.
                         The Company obtains 72% of its bearing and component
                         requirements from various Chinese joint ventures.


                                      F-26
<PAGE>

                           GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Stock-Based              The Financial Accounting Standards Board Statement of
Compensation             Financial Accounting Standards No. 123, "Accounting for
                         Stock-Based Compensation" ("SFAS No. 123") requires
                         entities which have arrangements under which employees
                         receive shares of stock or other equity instruments of
                         the employer or the employer incurs liabilities to
                         employees in amounts based on the price of its stock to
                         either record the fair value of the arrangements or
                         disclose the proforma effects of the fair value of the
                         arrangements. The Company has adopted the disclosure
                         method of SFAS No. 123.

Earnings Per             Earnings per common share are computed on the basis of
Common Share             the weighted average number of common shares
                         outstanding during the year. In 1997, the Financial
                         Accounting Standards Board issued Statement of
                         Financial Accounting Standards No. 128, Earnings per
                         Share. Statement 128 replaced the previously reported
                         primary and fully diluted earnings per share with basic
                         and diluted earnings per share. Unlike primary earnings
                         per share, basic earnings per share excludes any
                         dilutive effects of options, warrants, and convertible
                         securities. Diluted earnings per share is very similar
                         to the previously reported fully diluted earnings per
                         share.


                                      F-27
<PAGE>

                          GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Initial Public        In February, 1997, the Company completed an initial
   Offering              public offering ("IPO") in which 900,000 shares of
                         common stock were sold for $ 7 per share for a total
                         consideration of $ 6.3 million. Net proceeds received
                         by the Company amounted to approximately $ 4.9 million.
                         The Company has used a portion of these proceeds as
                         working capital and to pay down debt.

2. Inventories           Inventories consist of the following: (In Thousands)

<TABLE>
<CAPTION>
                                                                              December 27,   January 2,
                                                                                  1997          1999
                         ------------------------------------------------------------------------------
                         <S>                                                      <C>          <C>   
                         Finished goods                                           $7,529       $7,140

                         Raw materials, purchased parts and work-in-process        4,218        9,283
                         ------------------------------------------------------------------------------
                                                                                 $11,747      $16,423
                         ==============================================================================
</TABLE>

3. Fixed Assets          Fixed assets consist of the following: (In Thousands)

<TABLE>
<CAPTION>
                                                             December 27,   January 2,
                                                                 1997          1999
                         -------------------------------------------------------------
                         <S>                                    <C>           <C>   
                         Machinery and equipment                $3,888        $4,960

                         Furniture and fixtures                    370           380

                         Leasehold improvements                    589           674

                         Transportation equipment                   40           152
                         -------------------------------------------------------------
                                                                 4,887         6,166
                         Less:  Accumulated depreciation
                                  and amortization               2,500         2,889
                         -------------------------------------------------------------
                                                                $2,387        $3,277
                         =============================================================
</TABLE>

                         Included in machinery and equipment is construction in
                         process of $225,000 and an asset held for resale of
                         $600,000. The Company estimates that it will cost
                         $225,000 to complete construction in process.

                         Depreciation and amortization expense was $554,000,
                         $508,000, and $490,000 for the years 1996, 1997 and
                         1998, respectively.

                         The Company purchased, through affiliates, $145,000 and
                         $114,000 of machinery and equipment in 1997 and 1998,
                         respectively


                                      F-28
<PAGE>

                           GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Investment
   In Affiliates         Investment in affiliates consists of the following: (In
                         Thousands)


<TABLE>
<CAPTION>
                                                             December 27,   January 2,
                                                                 1997          1999
                         -------------------------------------------------------------
                         <S>                                     <C>           <C>   
                         Less than 50% - owned - at equity:

                         Shanghai General Bearing Co., Ltd. 
                         (25% - owned) (a)                       $  713        $  566

                         Ningbo General Bearing Co., Ltd. 
                         (33.3% - owned) (a)                         --           977

                         Shanghai Pudong General Bearing
                         Co., Ltd. (25% - owned) (a)                 --           152
                         -------------------------------------------------------------
                                                                 $  713        $1,695
                         =============================================================
</TABLE>

                        (a)   At January 2, 1999, the Company's investment in
                              Shanghai General Bearing Company Ltd., ("SGBC")
                              was $566,000. SGBC was formed in June 1987 for an
                              initial term of ten years. During 1996, the
                              Company extended the term to June 2008 and can
                              further extend the term for an additional ten year
                              interval upon six months notice and unanimous
                              consent of SGBC's board of directors. The Company
                              is not required to contribute additional capital.
                              Upon receipt of $1,375,000 in dividends, the
                              Company will cease to receive any further
                              dividends. Furthermore, after termination of the
                              joint venture, all equipment and machinery
                              contributed by the Company will be turned over to
                              the joint venture partner without compensation to
                              the Company. The advances primarily relate to
                              inventory purchases.

                               At January 2, 1999, the Company's investment in
                               Ningbo General Bearing Company Ltd., ("NGBC") was
                               $977,000. NGBC was formed in March 1998 for a
                               term of sixteen years. Upon expiration or early
                               termination of the business term, assets will be
                               distributed in the same proportion as their
                               respective paid investments to the registered
                               capital.

                               At January 2, 1999, the Company's investment in
                               Shanghai Pudong General Bearing Company Ltd.,
                               ("SPGBC") was $152,000. In 1998, the Company
                               recorded $150,000 of the dividends received from
                               SGBC as its investment in SPGBC. The advances
                               primarily relate to inventory that was returned
                               to SPGBC.


                                      F-29
<PAGE>

                          GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. Advances to           Advances to affiliates consists of the following: (In
   Affiliates            Thousands)

<TABLE>
                         <S>                                                         <C>             <C>   
                         Current:
                         Rockland Manufacturing Company (a)                             917             580

                         Shanghai General Bearing Co., Ltd. (see note 4)                391             254

                         Shanghai Pudong General Bearing Co., Ltd. 
                           (see note 4)                                                  --              16

                         Wafangdian General Bearing Co., Ltd. (a)                       870              --

                         WMW Machinery Co., Inc. (b)                                     --              90
                         ----------------------------------------------------------------------------------
                                                                                     $2,178          $  940
                         ==================================================================================
                         Long-term:
                         General IKL Corp. (see Note 13(e))                          $  398          $  423
                         ==================================================================================
</TABLE>

                         (a)   The companies are joint ventures of the Parent
                               and the advances are used primarily for inventory
                               purchases and administrative expenses. World has
                               granted to the Company two options, exercisable
                               prior to December 31, 1999, to purchase from
                               World its interest in their two joint ventures,
                               Rockland Manufacturing Company and Wafangdian
                               General Bearing Co., Ltd. ("WGBC"), for $400,000
                               and $846,000 (subject to adjustment based on
                               change in accounts payable by WGBC to World),
                               respectively, representing the estimated capital
                               contributions, advances for administrative
                               expenses and other costs paid by World with
                               respect to such ventures; provided, however, that
                               if any such option is exercised after January 2,
                               1999, the applicable purchase price shall be
                               adjusted, to include any additional capital
                               contributions made and administrative expenses
                               incurred on behalf of the joint venture by World
                               after such date.

                         (b)   WMW Machinery Company is a wholly owned
                               subsidiary of the Parent and the advances relate
                               primarily to administrative expenses.
<PAGE>

6. Note Payable -        The Company is obligated to a bank under a revolving
   Bank                  line of credit which expires on April 7, 2000 and a
                         term loan (see Note 8). The loan and security agreement
                         provides the Company with a secured line of credit of
                         up to $15 million for working capital, acceptances and
                         letters of credit. 

                         Borrowings under the credit line are based upon
                         percentage formulas relating to accounts receivable and
                         inventories. The maximum amount available is reduced by
                         the term loan balance outstanding. Interest on the
                         outstanding obligation is payable at either the bank's
                         prime rate plus a percentage, ranging from .25% to
                         1.75%, or LIBOR plus a percentage ranging from 1.75% to
                         2.75%. These percentages are determined annually based
                         upon the financial performance of the Company. The
                         average monthly rate in effect at January 2, 1999 was
                         LIBOR plus 2.25%, or 8.3%. The loan is secured by all
                         of the Company's inventories, accounts receivable,
                         general intangibles, and certain machinery and
                         equipment. The loan and security agreement also
                         contains certain restrictive covenants which include,
                         among others, the maintenance of financial ratios
                         relating to working capital and net worth, limitations
                         on capital expenditures and payment of dividends, and
                         prepayment penalties. In 1998, the Bank waived the
                         restrictions relating to $1.25 million of loan
                         repayments to World Machinery (Note 8). At January 2,
                         1999, the Company was in compliance with all loan
                         convenants.

                         As of January 2, 1999, borrowing under the credit line
                         amounted to $8,126,000.

                         Commitments under letters of credit amounted to
                         $1,309,000 at January 2, 1999.

7. Taxes on              The federal, state and local income taxes (benefits)
   Income                consist of the following:

<TABLE>
<CAPTION>
                         (In Thousands)                          Years Ended
                                                 -------------------------------------------
                                                 December 28,     December 27,    January 2,
                                                     1996            1997           1999
                         -------------------------------------------------------------------
<S>                                                <C>             <C>             <C>    
                         Deferred:

                            Federal                $  (189)        $(2,092)        $ 1,436

                            State and local            (11)            (88)             85
                         -------------------------------------------------------------------
                                                   $  (200)        $(2,180)        $ 1,521

                         Current:

                            Federal                     --              80              80

                            State and local             --              --              87
                         -------------------------------------------------------------------
                                                   $  (200)        $(2,100)        $ 1,688
                         ===================================================================
</TABLE>


                                      F-30
<PAGE>

                          GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         The major elements contributing to the difference
                         between Federal statutory rate and the Company's
                         effective tax rate are as follows:

<TABLE>
<CAPTION>
                                                                                       Year ended
                                                                         ---------------------------------------
                                                                         December 28,   December 27,  January 2,
                                                                             1996          1997          1999
                         ---------------------------------------------------------------------------------------
                         <S>                                                 <C>           <C>           <C>  
                         Statutory rate                                      34.0%         34.0%         34.0%

                         Increase (decrease) in valuation allowance
                           (due primarily to non-utilization
                           of net operating loss)                           (42.1)        (90.6)          --

                         Permanent and other differences                     (1.9)         (1.4)          2.9
                         ---------------------------------------------------------------------------------------
                         Effective rate                                     (10.0%)       (58.0%)        36.9%
                         =======================================================================================
</TABLE>

                         Temporary differences which give rise to deferred tax
                         assets and liabilities are as follows:

                         (In Thousands)

<TABLE>
<CAPTION>
                                                                             December 27,   January 2,
                                                                                 1997          1999
                         -----------------------------------------------------------------------------
                         <S>                                                    <C>           <C>   
                         Gross deferred tax assets:

                            Accounts receivable and inventory                   $   88        $  425

                            Net operating loss carry forwards                    2,954         1,065

                            Tax Credits                                             --            80

                            Other                                                   53             9
                         -----------------------------------------------------------------------------
                                                                                 3,095         1,579
                         Gross deferred tax liabilities:

                            Plant and equipment depreciation differences           215           186
                         -----------------------------------------------------------------------------
                         Net deferred tax asset                                 $2,880        $1,393
                         =============================================================================
</TABLE>

                         Management believes the deferred tax asset will be
                         fully realized in 1999 based on the Company's
                         historical earnings and future expectations of adjusted
                         taxable income.

                         As of January 2, 1999, the Company has Federal tax loss
                         carryovers of approximately $3.1 million expiring at
                         various dates through the year 2010.


                                      F-31
<PAGE>

                          GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. Long-term             (In Thousands)
   Debt

<TABLE>
<CAPTION>
                                                                                                          December 27,    January 2,
                                                                                                              1997           1999
                         -----------------------------------------------------------------------------------------------------------
                         <S>                                                                                  <C>          <C>   
                         Bank:
                            $1,560,000 three year loan from the same bank referred to
                               in Note 6. Interest is calculated at the bank's prime rate
                               plus 2%; 9.75% at January 2, 1999; principal of $18,570
                               plus interest is payable monthly, through April 1,2000
                               with final payment of  $501,510 due April 7, 2000                              $1,003       $  780

                            Less: Current maturities                                                           1,003          223
                         -----------------------------------------------------------------------------------------------------------
                                                                                                              $   --       $  557
                         ===========================================================================================================
                         Parent:
                            6% subordinated promissory notes due December 1998. Interest is accruable but
                               is to be paid annually only out of net income in excess of $400,000. The
                               notes are subordinated to the bank referred to in Note 6. In 1997, General
                               agreed to offset $1,500,000 of accounts receivable from World against this
                               loan. In 1998 General agreed to offset $850,000 of accounts receivable
                               from World against this loan, and paid the remaining $150,000                  $1,000       $   --

                            Noninterest-bearing promissory note, payable in annual installments of
                               $125,000 commencing December 1993. The 1993 and 1994 installments were
                               deferred until, and paid in, 1995. Repayment is subject to management
                               discretion and was waived for 1997. The 1997 and 1998
                               installments were paid in 1998                                                    250           --
                         -----------------------------------------------------------------------------------------------------------
                                                                                                              $1,250       $   --

                            Less: Current Maturities                                                           1,250           --
                         -----------------------------------------------------------------------------------------------------------

                                                                                                              $   --       $   --
                         ===========================================================================================================
                         Affiliates:

                            General-IKL Corp. (see Note 13(e))                                                $  910       $  954
                         -----------------------------------------------------------------------------------------------------------
                                                                                                              $  910       $  954
                         ===========================================================================================================
</TABLE>

                         The $440,000 in other long term debt is attributable to
                         the Company financing $504,000 of its fixed asset
                         purchase via capital lease (see note 14).


                                      F-32
<PAGE>

                          GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. Discretionary         The Company and certain of its affiliates maintain
   Profit Sharing        profit sharing plans covering eligible salaried and
   Plan                  nonunion employees. Contributions are made to the plans
                         at the discretion of the management of the Company. The
                         Company recorded contributions of $120,000 in 1996,
                         $180,000 in 1997 and $120,000 in 1998.

10. Provision for        In 1995, the Company was notified that certain wheel
    Customer             bearings supplied to the railroad industry did not meet
    Damage               specifications. As a result, substantially all these
    Claims               bearings previously sold, were recalled to be reworked.
                         In connection with this recall, the Company made a
                         special provision against earnings of $2,152,000, in
                         the year ended December 30, 1995, representing the
                         estimated liability for rework costs and customer
                         damage claims.

                         During the later part of 1996, the Company received
                         notice from various vendors that it will be reimbursed
                         for approximately $921,000 of costs relating to the
                         recall. The Company has included $220,000 in cost of
                         sales, $401,000 in operating income and reduced
                         interest expense by $81,000.

11. Plant Closing        In connection with the closing of its New Jersey
    Costs, Net           facility in October 1997, the Company recorded scrap
                         sales of $150,000, a gain on sale of equipment of
                         $50,000, and plant closing costs of $603,000.

12. Operating
    Items                Other (income) expense consists of: (In Thousands)

<TABLE>
<CAPTION>
                                                       December 28,   December 27,  January 2,
                                                           1996          1997          1999
                         ---------------------------------------------------------------------
                         <S>                              <C>           <C>           <C>   
                         Gain on sale of equipment        $  --         $  --         $(350)

                         Other                              (20)          (19)           --
                         ---------------------------------------------------------------------
                                                          $ (20)        $ (19)        $(350)
                         =====================================================================
</TABLE>

                         The Company incurred interest expense of $1,399,000,
                         $1,002,000 and $853,000 in 1996, 1997 and 1998
                         respectively.

                         In 1997 the Company liquidated two product lines which
                         in the prior year were partially reserved. Related to
                         these product lines, inventory reserves were reduced by
                         $554,000.

13. Transactions         (a)   The Company made purchases of approximately $6.6
    with Affiliates            million, $10.0 million and $20.5 million from
                               affiliates in 1996, 1997 and 1998, respectively.
                               Accounts payable - affiliates relate primarily to
                               these purchases.

                         (b)   General shares office facilities and provides
                               services for an affiliate. General charged this
                               affiliate $120,000 per year in each of the 3
                               years ended January 2, 1999

                         (c)   General leases its corporate headquarters from
                               Gussack Realty Company ("Realty"), which is owned
                               by shareholders of World. Rent and real estate
                               taxes paid to the affiliate were approximately 
                               $939,000, $1,144,000 and $1,144,000 in 1996, 1997
                               and 1998, respectively (see Note 14).


                                      F-33
<PAGE>

                           GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         (d)   The Company made payments for and advances to
                               certain affiliates for payroll, benefits, and
                               other expenses. Such payments aggregated
                               $1,691,000, $1,102,000 and $1,227,000 for the
                               fiscal years ended 1996, 1997 and 1998,
                               respectively.

                         (e)   The amounts receivable from and payable to
                               General-IKL Corp., a corporate joint venture with
                               a manufacturer located in the former Republic of
                               Yugoslavia, are restricted due to the suspension
                               of economic activity with that country. The
                               Company accrues interest on the balances due to
                               and from this affiliate.

                         (f)   Gain on sale of equipment of $350,000 resulted
                               from equipment sold to Wafangdian General Bearing
                               Co., Ltd.

14. Commitments          (a)   Effective January 1996, the Company completed a
    and                        move to new facilities owned by Realty. Existing
    Contingencies              obligations under a long-term lease for the
                               previous facilities, also owned by Realty, were
                               waived.

                               The Company entered into a lease agreement with
                               Realty for its new premises effective November 1,
                               1996 for an initial term of seven years.
                               Concurrently, the Company entered into sublease
                               agreements with World and WMW Machinery Co.,
                               Inc., an affiliate.

                               Rent expense consists of the following: (In
                               Thousands)

<TABLE>
<CAPTION>
                                                                           Year ended
                                                              ---------------------------------------
                                                              December 28,  December 27,   January 2,
                                                                  1996          1997          1999
                         ----------------------------------------------------------------------------
                         <S>                                      <C>           <C>           <C> 
                         Gross rent paid (excluding taxes)        $771          $913          $925

                         Less: Reimbursed from affiliates           55           185           197
                         ----------------------------------------------------------------------------
                         Net rent expense                         $716          $728          $728
                         ============================================================================
</TABLE>

                         Minimum annual rentals and rental income under these
                         agreements are as follows: (In Thousands)

                                      Minimum  
                                       Annual         Rental
                         Year         Rentals         Income           Net Rent
                         -------------------------------------------------------
                         1999         $   968        $  (215)          $   753 

                         2000             977            (35)              942 

                         2001           1,026            (37)              989 

                         2002           1,036            (37)              999

                         2003             906            (33)              873
                         -------------------------------------------------------
                         Total        $ 4,913        $  (357)          $ 4,556
                         =======================================================


                                      F-34
<PAGE>

                         (b)   Capital Lease Obligations:

                               The Company leases certain equipment under
                               capital leases. The assets acquired under capital
                               leases have a cost of $504,000 and accumulated
                               depreciation of $25,000 as of January 2, 1999.

                               The following is a schedule, by year, of future
                               minimum lease payments under capitalized leases,
                               together with the present value of the net
                               minimum lease payments at January 2, 1999.

<TABLE>
<CAPTION>
                         Payments for the year ending: (In Thousands)
                         ------------------------------------------------------------------------------
                         <S>                                                                      <C>  
                         1999                                                                     $  92

                         2000                                                                       122

                         2001                                                                       122

                         2002                                                                       122

                         2003                                                                       122

                         2004                                                                        32
                         ------------------------------------------------------------------------------
                         Total minimum lease payments                                              $612

                         Less: Amount representing interest                                         108
                         ------------------------------------------------------------------------------
                         Present value of net minimum lease payments                               $504

                         Less: Current portion                                                       64
                         ------------------------------------------------------------------------------
                         Long-term lease obligations                                               $440
                         ==============================================================================
</TABLE>

                         The lease specifies that the Company pays interest only
                         until April 1, 1999.

                         (c)   The Company has a management consulting and
                               noncompetition agreement with a former officer
                               and stockholder. The agreement, which commenced
                               as of July 1, 1980, provides for quarterly
                               payments aggregating $35,000 per annum for twenty
                               years. As of January 2, 1999, future payments
                               required under the agreement total $61,000.


                                      F-35
<PAGE>

                          GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         (d)   Additionally, US Customs has a claim against the
                               Company, which the Company believes to be without
                               merit. The Company intends to vigorously defend
                               this claim and believes that the claim will not
                               have a material impact on the financial condition
                               of the Company.

                               World and Subsidiaries will undergo a 1996 tax
                               audit by the Internal Revenue Service in 1999.
                               The Company believes that the audit will not have
                               a material impact on the financial condition of
                               the Company.

                               In addition, the Company will undergo a 1995-1997
                               tax audit by the State of New York in 1999. The
                               Company believes that the audit will not have a
                               material impact on the financial condition of the
                               Company.

                         (e)   The Company is party to a trademark license
                               agreement which provides for increasing annual
                               fees of between $25,000 and $35,000 through 1999,
                               and $35,000 per year plus an inflation factor
                               thereafter until 2009. The agreement contains an
                               acceleration clause which provides for immediate
                               payment of all remaining fees in the event of
                               breach of contract.

                         (f)   The Company has guaranteed certain of Realty's
                               outstanding obligations of $888,000 to a bank and
                               other parties.

                         (g)   In 1995 Realty and the Company filed an action
                               against Xerox Corporation, for contamination
                               caused by Xerox of property formerly leased by
                               the Company and owned by Realty in Blauvelt, New
                               York. Xerox has counterclaimed alleging that the
                               Company contaminated the property and increased
                               remedial costs to Xerox. In September, 1997,
                               Realty and the Company filed motions for partial
                               summary judgment on the complaint and seeking to
                               dismiss the counterclaim on the ground that it is
                               barred by the applicable statute of limitations.
                               Xerox responded to the motions and filed its own
                               motion for summary judgment. On February 3, 1999,
                               the Court denied all the above motions. Trial is
                               scheduled to commence on April 5, 1999.
                               Management believes the counterclaim against the
                               Company to be entirely without merit and
                               anticipates that the claim will have no material
                               impact on the financial condition of the Company.

15. Stockholders'        In connection with the IPO (Note 1) of its common
    Equity               stock, the Company, on October 10, 1996, filed an
                         amendment to its Certificate of Incorporation,
                         increasing the authorized common shares from 10,600 to
                         19,000,000 and changing its $.10 par value per common
                         share to $.01 par value, and effecting a 3,000-for-one
                         stock split.

16. Stock Options        In September 1996, the Company adopted the 1996 Stock
                         Option and Performance Award Plan ("1996 Plan"), which
                         authorizes the granting to directors, officers and key
                         employees of the Company of incentive or non-qualified
                         stock options, performance shares, restricted shares
                         and performance units. The 1996 Plan covers up to
                         500,000 shares of common stocks.


                                      F-36
<PAGE>

                          GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         The exercise price of any incentive stock option
                         granted to an eligible employee may not be less than
                         100% of the fair market value of the shares underlying
                         such option on the date of grant, unless such employee
                         owns more than 10% of the outstanding common stock or
                         stock of any subsidiary or parent of the Company, in
                         which case the exercise price of any incentive stock
                         option may not be less than 110% of such fair market
                         value. No option may be exercisable more than ten years
                         after the date of grant and, in the case of an
                         incentive stock option granted to an eligible employee
                         owning more than 10% of the common stock or stock of
                         any subsidiary or parent of the Company, no more than
                         five years from its date of grant. Options are not
                         transferable, except upon the death of the optionee.
                         Upon death of the optionee, vested options are
                         exercisable according to the original term of the
                         option grant. In general, upon termination of
                         employment of an optionee, all options granted to such
                         person which are not exercisable on the date of such
                         termination immediately expire, and any options that
                         are exercisable expire three months following
                         termination of employment, if such termination is not
                         the result of death or retirement and one year
                         following such termination if such termination was
                         because of disability or retirement under the
                         provisions of any retirement plan that may be
                         established by the Company, or with the consent of the
                         Company.

                         The Company estimates the fair value of each stock
                         option at the grant date by using the Black-Scholes
                         option-pricing model with the following weighted
                         average assumptions used for grants in 1997: no
                         dividend yield, expected volatility of 35.0%, risk free
                         interest rates of 6.0% to 6.5% and expected lives of 5
                         to 10 years. For 1998, the weighted average assumptions
                         used for grants were: no dividend yield, expected
                         volatility of 37.3%, risk free interest rates of 4.7%
                         to 5.5% and expected lives of 5 to 10 years. If
                         compensation cost for the Company's stock option plan
                         had been determined in accordance with SFAS No. 123,
                         net income would have been reduced by approximately
                         $157,000 or $.04 per diluted share and $211,000 or $.05
                         per diluted share in 1997 and 1998, respectively.

                         The following table summarizes information about stock
                         options outstanding at January 2, 1999.

<TABLE>
<CAPTION>
                                                                  Options Outstanding
                                             -------------------------------------------------------------
                                                                     Weighted average
                                                                         remaining           Weighted
                                                    Number            contractual life    average exercise
                                                  Outstanding              (years)             price
                                             -------------------------------------------------------------
                         <S>                        <C>                      <C>               <C>
                         Exercise Prices

                           $7.00 to $7.70           189,550                  8.1               $ 7.18

                           $8.75 to $12.88           80,000                  9.3               $12.36
</TABLE>

                         Transactions under the stock option plan are summarized
                         as follows:


                                      F-37
<PAGE>

                          GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                        December 27, 1997                     January 2, 1999
                                                          -----------------------------------------------------------------------
                                                                     Shares           Weighted            Shares         Weighted
                                                                                       average                            average
                                                                                      exercise                           exercise
                                                                                         price                              price
                                                          -----------------------------------------------------------------------
                         <S>                                        <C>                  <C>             <C>                <C>  
                         Outstanding at beginning
                         of year                                         --                 --           257,500            $7.19

                         Granted                                    257,500              $7.19            94,000            12.32

                         Exercised                                       --                 --           (18,950)            7.00

                         Canceled                                        --                 --           (63,000)            8.18
                         --------------------------------------------------------------------------------------------------------
                         Outstanding at end of year                 257,500              $7.19           269,550            $8.72
                         ========================================================================================================
                         Options exercisable at year
                         end                                             --                 --            32,800            $7.27
                         ========================================================================================================
                         Weighted average fair
                         value of options granted
                         during the year                                                 $3.31                              $6.92
                         ========================================================================================================
</TABLE>

                         In connection with the Company's IPO, the Company
                         issued 90,000 warrants with an exercise price of $9.80.
                         These warrants expire in February 2002.


17. Earnings Per         Earnings per share was computed as follows: (In
    Share                Thousands Except Shares and Per Share Data)

<TABLE>
<CAPTION>
                                                                                                   Year Ended
                                                                                 ---------------------------------------------------
                                                                                 December 28,       December 27,        January 2,
                                                                                    1996               1997                 1999
                                                                                 ---------------------------------------------------
                         <S>                                                     <C>                 <C>                 <C>       
                         Net income (loss) available to common
                         stockholders                                            $    2,198          $    5,346          $    2,881
                                                                                 ---------------------------------------------------
                         Basic earnings per share computation:

                             Weighted Average Common shares outstanding           3,000,000           3,798,904           3,914,809

                             Basic earnings per share                            $      .73          $     1.41          $      .74
                                                                                 ---------------------------------------------------
                         Diluted earnings per share computation

                             Weighted Average Common shares outstanding           3,000,000           3,798,904           3,914,809

                             Incremental shares from assumed exercise
                             of dilutive options                                         --              69,706              57,588
                                                                                 ---------------------------------------------------
                                                                                  3,000,000           3,868,610           3,972,397
                                                                                 ---------------------------------------------------
                             Diluted earnings per share                          $      .73          $     1.38          $      .73
                                                                                 ---------------------------------------------------
</TABLE>

18. Supplemental         For the periods ended December 28, 1996, December 27,
    Cash Flow            1997 and January 2, 1999, the Company paid interest of
    Information          approximately $1,316,000, $940,000, and $864,000
                         respectively. During 1998, the Company entered into a
                         capital lease obligation of $504,000 for new equipment.


                                      F-38
<PAGE>

                          GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         The Company paid income taxes of $ -0- in 1996 and
                         $80,000 in 1997 and 1998, respectively.

19. Segment              During 1998, the Company adopted Statement of Financial
    Information          Accounting Standards No. 131 ("SFAS 131"), Disclosures
                         about Segments of an Enterprise and Related
                         Information. SFAS 131 supersedes SFAS 14, Financial
                         Reporting for Segments of a Business Enterprise,
                         replacing the "industry segment" approach with the
                         "management " approach. The management approach
                         designates the internal reporting that is used by
                         management for making operating decisions and assessing
                         performance as the source of the Company's reportable
                         segments.

                         The Company operates in two divisions: the OEM
                         Division, which supplies Original Equipment
                         Manufacturers (OEM's), and the Distribution Division,
                         which serves distributors that supply the repair and
                         maintenance aftermarket and small OEM's. The two
                         divisions supply principally in the United States.

                         The accounting policies of the segments are the same as
                         those described in the summary of significant
                         accounting policies. The Company evaluates segment
                         performance based on operating income.

                         The table on the following page presents information
                         about the Company's business segments.


                                      F-39
<PAGE>

                          GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       Segment Information: (In Thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                            1998
------------------------------------------------------------------------------------------------------------------------------------

                                                                  OEM         DISTRIBUTION          UNALLOCATED                TOTAL
<S>                                                            <C>                  <C>                   <C>                 <C>   
Net Sales from External Customers                              31,148               14,313                   --               45,461
Operating Income                                                2,150                2,770                   --                4,920
Depreciation/Amortization                                         327                  163                   --                  490
Capital Expenditures                                            1,056                   35                  319                1,410
Total Assets                                                   17,203                7,408                5,727               30,338

<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                            1997
------------------------------------------------------------------------------------------------------------------------------------

                                                                  OEM         DISTRIBUTION          UNALLOCATED                TOTAL
<S>                                                            <C>                  <C>                   <C>                 <C>   
Net Sales from External Customers                              25,978               16,175                   --               42,153
Operating Income                                                1,354                2,699                   --                4,053
Depreciation/Amortization                                         185                  323                   --                  508
Capital Expenditures                                              261                   62                  282                  605
Total Assets                                                   10,700                8,089                8,013               26,802

<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                            1996
------------------------------------------------------------------------------------------------------------------------------------

                                                                  OEM         DISTRIBUTION          UNALLOCATED                TOTAL
<S>                                                            <C>                  <C>                   <C>                 <C>   
Net Sales from External Customers                              23,805               14,557                   --               38,362
Operating Income                                                1,826                1,375                   --                3,201
Depreciation/Amortization                                         280                  274                   --                  554
Capital Expenditures                                              208                   78                  395                  681
Total Assets                                                   11,612                8,770                4,017               24,399

------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

In 1996 and 1997, the Company operated from two locations. One location housed
the OEM Division manufacturing operations while the other location represented
Distribution Division manufacturing and administrative functions. Depreciation
expense on unallocated capital expenditures was charged based on the physical
location of the assets. Following the consolidation of the Company's operations
into a single location in West Nyack, NY, 1998 depreciation expense was
allocated based on material, labor, and overhead.


                                      F-40
<PAGE>

                          GENERAL BEARING CORPORATION
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20. Quarterly         (In Thousands, except per share data)
    Financial                     (unaudited)
    Data

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
1998                                    Net Sales              Gross Profit            Net Income                  Diluted Earnings
                                                                                                                          Per Share
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                        <C>                     <C>                               <C> 
First Quarter                             $10,337                    $3,030                  $627                              $.15

Second Quarter                             11,011                     3,828                   670                               .17

Third Quarter                              11,382                     3,564                   768                               .20

Fourth Quarter                             12,731                     3,574                   816                               .21
-----------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
1997                                    Net Sales              Gross Profit            Net Income                  Diluted Earnings
                                                                                                                          Per Share
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                       <C>                     <C>                               <C> 
First Quarter                              $9,593                    $2,858                  $867                              $.25

Second Quarter                             11,476                     3,633                 1,453                               .37

Third Quarter                              10,527                     3,364                 1,418                               .35

Fourth Quarter                             10,557                     3,208                 1,608                               .41
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Fourth Quarter 1998:     The sales volume increase was primarily due to the
                         Company's achievement of full contract quarterly
                         volumes with the Ford Motor Company on a two year $14
                         million contract to supply certain ball bearings.

Second Quarter 1997:     The sales volume increase was attributable to
                         significant sales increases in spherical roller
                         bearings, traction motor bearings and railroad
                         components.

Full Year 1997:          1997 net income and earnings per share was affected by
                         a $2.1 million tax benefit versus a normal tax charge
                         incurred in 1998.


                                      F-41
<PAGE>

                          Supplementary Financial Data
                            Furnished Pursuant to the
                            Requirements of Form 10-K


                                      F-42
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


General Bearing Corporation
West Nyack, New York


      The audits referred to in our report dated February 12, 1999 relating to
the consolidated financial statements of General Bearing Corporation and
subsidiaries, which is referred to in Item 8 of this Form 10- K, includes the
audits of the accompanying financial statement schedule for each of the three
years in the period ended January 2, 1999. This financial statement schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based upon our audits.

      In our opinion, such financial statement schedule presents fairly, in all
material respects, the information set forth therein for each of the three years
in the period ended January 2, 1999.




                                                       BDO Seidman, LLP



New York, New York
February 12, 1999


                                       43
<PAGE>

                           GENERAL BEARING CORPORATION

                                AND SUBSIDIARIES

Schedule II - Valuation and Qualifying Accounts (In Thousands)

<TABLE>
<CAPTION>
               Column A                             Column B              Column C             Column D            Column E
               --------                             --------              --------             --------            --------

                                                                             Add
                                                                          ----------
                                                    Balance at            Charged to
                                                   Beginning of           Costs and                                Balance at
              Description                             Period               Expenses          Deductions (1)       End of Period
              -----------                          -------------          -----------        --------------       -------------
<S>                                                     <C>                  <C>                  <C>                 <C>  
Year Ended December 28, 1996
   Allowance for Doubtful Accounts ...........          $ 255                $  56                $  76               $ 235
                                                        -----                -----                -----               -----
                                                        $ 255                $  56                $  76               $ 235
                                                        =====                =====                =====               =====

Year Ended December 27, 1997
   Allowance for Doubtful Accounts ...........          $ 235                   --                   --               $ 235
                                                        -----                -----                -----               -----
                                                        $ 235                   --                   --               $ 235
                                                        =====                =====                =====               =====

Year Ended January 2, 1999
   Allowance for Doubtful Accounts ...........          $ 235                ($ 31)               $   4               $ 200
                                                        -----                -----                -----               -----
                                                        $ 235                ($ 31)               $   4               $ 200
                                                        =====                =====                =====               =====
</TABLE>

Note: (1) Uncollectible accounts written off net of recoveries.

Item 9. Changes in and disagreements with Accountants on Accounting and
        Financial Disclosures

      Since the Company's inception, there has not been any Form 8-K filed under
      the Securities and Exchange Act of 1934 reporting a change in accountants
      in which there was a reported disagreement on any matter of accounting
      principles or practices or financial statement disclosure.


                                       44
<PAGE>

                                    PART III

Item 10. Directors and Executive Officers

      The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
      NAME                           AGE    POSITION
      ----                           ---    --------
      <S>                            <C>    <C>                                  
      Seymour I. Gussack ..........  75     Chairman of the Board of Directors
      David L. Gussack ............  41     President and Director
      Robert E. Baruc .............  47     Director
      Peter Barotz.................  71     Director
      Nina M. Gussack..............  43     Director
      Barbara M. Henagan...........  40     Director*
      William F. Kurtz ............  40     Vice President -- Director of Operations
      Joseph J. Hoo................  64     Vice President -- Advanced Technology and China Affairs
      Barry A. Morris..............  44     Chief Financial Officer
      John E. Stein, Esq...........  42     Secretary
</TABLE>

      * Barbara M. Henagan was elected March 30, 1999.

      Jerome Johnson, who was a Director, resigned effective March 3, 1999.

      Set forth below is certain additional information with respect to the
Directors, and executive officers.

      SEYMOUR I. GUSSACK founded the Company in 1958 and has served as Chairman
of the Board of Directors and a Director of the Company since its formation.
Seymour I. Gussack is also the Chairman of the Board of Directors and a Director
of World and a partner of Realty. See "Certain Relationships and Related
Transactions" and "Principal Stockholder." Seymour I. Gussack's son is David L.
Gussack, President of the Company and a Director.

      DAVID L. GUSSACK became President of the Company in 1993 and has been a
Director of the Company since 1987. David L. Gussack has held various positions
with the Company since 1983, including Executive Vice President from 1991 to
1992, General Manager of the OEM Division from 1988 to 1990, Supervisor and
Coordinator, Hyatt Absorption Project from 1987 to 1988, Plant Manager from 1986
to 1987, Office Facilities Manager from 1985 to 1986, and Manager of Special
Projects from 1983 to 1985. David L. Gussack is a Secretary and a Director of
SGBC and Hyatt-ZWZ, respectively. He also is a partner of Realty. See "Certain
Relationships and Related Transactions." David L. Gussack is a graduate of the
University of Pennsylvania. David L. Gussack's father is Seymour I. Gussack,
Chairman of the Board of Directors of the Company.


                                       45
<PAGE>

      WILLIAM F. KURTZ has served as Vice President -- Director of Operations.
He served as Vice President--Technical Services of the Company from 1993-1997.
Mr. Kurtz was also a Chief Engineer of the Company from 1989 to 1993 and Senior
Project Engineer of the Company from 1988-89. He is a graduate of Manhattan
College (B.E. and M.E. in Mechanical Engineering) and a licensed professional
engineer.

      JOSEPH J. HOO has served as Vice President -- Advanced Technology and
China Affairs of the Company since August 1995. Mr. Hoo served as General
Manager, Industrial Products Division, from 1991 to 1995 and as Chief
Metallurgist from 1987 to 1991. Mr. Hoo is a graduate of the National University
of Japan (B.S. in Engineering) and University of Michigan (M.S.E. in Metallurgy
and Engineering).

      BARRY A. MORRIS was appointed Chief Financial Officer of the Company in
July, 1998. Prior to joining the Company, Mr. Morris served as Director of
Financial Services at the U.S. headquarters of BTR, plc, United Kingdom. He
holds a Master of Business Administration from the University of Connecticut and
a B.S. in Accounting from American International College.

      JOHN E. STEIN was elected secretary in July, 1998. From April, 1995 to
January, 1997, Mr. Stein served as Staff Counsel to the Company. Since February,
1997, he has served as General Counsel. Mr. Stein is a graduate of the State
University of New York, Purchase, (B.A. in Philosophy) and Brooklyn Law School
(J.D.). He is a member of the bars of New York, New Jersey and District of
Columbia.

      ROBERT E. BARUC has been a Director of the Company since February 1997.
Since April 1994, Mr. Baruc has been an Executive Vice President of Unapix
Entertainment, Inc., an independent distributor of film and television
programming. Since August 1993, he has been the President and Chief Executive
Officer of A Pix Entertainment, Inc. From December 1992 to August 1993, Mr.
Baruc was President of Triboro Entertainment Group, a company engaged
principally in home video distribution. From January 1991 to December 1992, Mr.
Baruc primarily acted as an independent consultant to the entertainment
industry. He is the son-in-law of Seymour I. Gussack and the brother-in-law of
David L. Gussack and Nina M. Gussack.

      PETER BAROTZ has been a Director of the Company since December 30, 1997.
For the past 25 years, Mr. Barotz has been the President of Panda Capital
Corporation.

      NINA M. GUSSACK has been a Director of the Company since February 1997.
Ms. Gussack has been litigation partner at the law firm of Pepper, Hamilton, &
Scheetz in Philadelphia, Pennsylvania since 1986. She is a graduate of the
University of Pennsylvania (B.S. in History and M.S. in Secondary Education) and
Villanova University School of Law (J.D.). She is a member of the Pennsylvania
bar. She is the daughter of Seymour I. Gussack and the sister of David L.
Gussack.

      BARBARA M. HENAGAN was elected a Director of the Company on March 30,
1999. Mrs. Henagan has been Senior Managing Director of Bradford Ventures Ltd.
since 1992. Mrs. Henagan is Chairman of the Board of Travis International. She
is also a Director of Central Sprinkler Corporation, Hampton Industries,
Paramount Cards Inc., V-Span, Inc. and Batteries Batteries, Inc. Mrs. Henagan is
a graduate of Princeton University and Columbia University's MBA program.

      Seymour I. Gussack and David L. Gussack were each officers of the Company
at the time the Company filed for protection from creditors under Chapter 11 of
the U.S. Bankruptcy Code in 1991.


                                       46
<PAGE>

      Directors hold office until the next annual meeting of stockholders
following their election, or until their successors are elected and qualified.
Officers are elected annually by the Board of Directors and serve at the
discretion of the Board of Directors.

      The standing committees of the Board of Directors are the Audit Committee
and the Compensation/ Stock Option Committee.

      The Audit Committee of the Board of Directors consists of three directors,
David L. Gussack, Robert E. Baruc and Barbara M. Henagan. The Audit Committee's
function is to review and report to the Board of Directors with respect to the
selection and the terms of engagement of the Company's independent public
accountants, and to maintain communications among the Board of Directors, such
independent public accountants, and the Company's internal accounting staff with
respect to accounting and audit procedures, the implementation of
recommendations by such independent public accountants, the adequacy of the
Company's internal controls and related matters. The Audit Committee also
reviews certain related party transactions and any potential conflict of
interest situations involving officers, directors or stockholders beneficially
owning more than 10% of an equity security of the Company.

      The Compensation/Stock Option Committee consists of Messrs. Peter Barotz
and Robert E. Baruc, each of whom is an independent Director. The
Compensation/Stock Option Committee's function is to review and approve annual
salaries and bonuses for all employees with salaries in excess of $100,000 and
review, approve and recommend to the Board of Directors the terms and conditions
of all employee benefit plans or changes thereto, including the granting of
stock options pursuant to the Company's 1996 Option Plan.


                                       47
<PAGE>

Item 11. Executive Compensation

      The following table sets forth the aggregate compensation paid for
services rendered in all capacities to the Company's executive officer who
received compensation of $100,000 or more during the fiscal year ended January
2, 1999:

<TABLE>
<CAPTION>
                                 ANNUAL COMPENSATION(1)                             LONG-TERM COMPENSATION
                                 ----------------------                             ----------------------

                                                                                Restricted
                                      Fiscal                                      Stock         Stock         All Other
Name and Principal Position            Year           Salary         Bonus        Awards       Options#      Compensation
---------------------------           ------         -------         ------       ------       --------      ------------
<S>                                    <C>           <C>             <C>            <C>         <C>              <C>
David L. Gussack, President            1998          181,981         10,379         --          20,000           --

<CAPTION>
Option Grants in Last Fiscal Year
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          Potential Realized Value
                                                                                                             at Assumed Annual
                                                                                                            Rates of Stock Price
                                                                                                          Appreciation for Option
                                              Individual Grants                                                      Term
------------------------------------------------------------------------------------------------------------------------------------
                              Number of           % of Total
                              Securities            Options
                              Underlying          Granted to
                               Options           Employees in       Exercise or        Expiration
     Name                      Granted            Fiscal Year       Base Price            Date              5%              10%
------------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>                   <C>             <C>               <C>             <C>               <C>     
David Gussack                   20,000                24.4            12.875            3/31/2008       $161,900          $410,300

<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
------------------------------------------------------------------------------------------------------------------------------------

                                                                                       Number of
                                                                                      Securities
                                                                                       Underlying                 Value of
                                                                                       Unexercised           Unexercised In-the-
                                                                                       Options at             Money Options at
                                                                                     January 2, 1999           January 2, 1999
                                                                                ----------------------------------------------------
                              Shares Acquired on
                                   Exercise               Value Realized              Exercisable/              Exercisable/
     Name                              #                         $                    Unexercisable             Unexercisable
------------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                       <C>                 <C>                             <C>
David Gussack                          0                         0                   11,250 / 53,750                 N/A
</TABLE>

(1) Perquisites and other personal benefits are not included because they do not
exceed the lesser of $50,000 or 10% of the total base salary and annual bonus
for the named executive officer.


                                       48
<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management.

      The following table sets forth, as of the date of this Report certain
information concerning the beneficial ownership of Common Stock as to each
director and current executive officer of the Company, and each person who, to
the Company's knowledge, beneficially owns more than 5% of the outstanding
Common Stock.

<TABLE>
<CAPTION>
                                                             NUMBER OF
                                                             SHARES
NAME AND ADDRESS OF                                          BENEFICIALLY       PERCENTAGE OF SHARES
BENEFICIAL OWNER                                             OWNED (1)          BENEFICIALLY OWNED(1)
----------------                                             ---------          ---------------------
<S>                                                          <C>                      <C>  
World Machinery Company...............................       3,000,000(2)             76.6%
 44 High Street, West Nyack, New York 10994

Seymour Gussack.......................................       3,016,200(3)(4)          77.0%

David Gussack.........................................       3,015,300(3)(4)          76.9%

Nina M. Gussack.......................................           6,000(4)               *

Robert E. Baruc.......................................             500                  *

William Kurtz.........................................             200                  *

Barry A. Morris.......................................           1,000                  *

All Directors and Executive
 Officers as a Group..................................      3,029,200
</TABLE>

* Less than 1%

(1) Pursuant to Rule 13d-3 under the U.S. Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared voting
power (including the power to vote or direct the voting) and/or sole or shared
investment power (including the power to dispose or direct the disposition) with
respect to a security whether through a contract, arrangement, understanding,
relationship or otherwise.

(2) Seymour I. Gussack, the Company's Chairman of the Board, David L. Gussack,
the Company's President and Nina Gussack, a Director of the Company own or
control approximately 19.6% and 17.6% and 17.6%, respectively, of the Common
Stock of World. The remaining children of Seymour I. Gussack and his spouse own
or control an additional approximately 23.5% of the stock of World. The estate
of Harold S. Geneen, a former Director of the Company, and Joseph J. Hoo, Vice
President -- Advanced Technology and China Affairs of the Company, own
approximately 19.6% and 2.0% of the Common Stock of World, respectively.


                                       49
<PAGE>

(3) Includes for each of Seymour I. Gussack and David L. Gussack, 3,000,000
shares beneficially owned by World. Seymour I. Gussack and David L. Gussack are
the two directors of World and each may be deemed to share with the other the
power to vote and dispose of the shares owned by that corporation. Seymour I.
Gussack and David L. Gussack disclaim beneficial ownership of the shares of
Common Stock owned by World.

(4) Includes 5,000 shares of Common Stock owned by Realty over which Seymour I.
Gussack, David L. Gussack, and Nina M. Gussack as general partners of Realty,
may be deemed to share the power to vote and dispose of. Each of Seymour I.
Gussack, David L. Gussack and Nina M. Gussack disclaim beneficial ownership of
the shares of Common Stock owned by Realty.

Item 13. Certain Relationships and Related Transactions

BANKRUPTCY AND RESULTING OBLIGATIONS TO WORLD

      In connection with the Plan of Reorganization, the Company issued to
World, which prior to this Offering owned all of the Company's Common Stock, a
Secured Note for $2.5 million, an Installment Note for $750,000, and 1,000
shares of Common Stock (3,000,000 shares after giving effect to the 3000-for-one
stock split effective October 10, 1996) in exchange for the discharge of an
obligation World acquired for approximately $2.0 million from Wells Fargo, which
provided financing for the purchase by the Company in March 1987 of Hyatt and
for working capital. Interest on the Secured Note accrues annually but is only
payable with respect to any fiscal year to the extent the Company's net income
exceeds $400,000. The Company made a payment of $1.5 million in 1997 against the
$2.5 million Secured Note. The $1 million balance was settled in 1998 ($150,000
cash payment and $850,000 offset against accounts receivable from World). The
balance of $250,000 on the $750,000 Installment Note was paid in 1998.

LEASES WITH REALTY

      The Company leases a facility located at West Nyack, New York comprising
189,833 square feet owned by Realty, whose partners include Seymour I. Gussack,
David L. Gussack and Nina M. Gussack, each a member of the Board of Directors of
the Company. The Company and Realty entered into the Lease effective as of
November 1, 1996, which provides for an initial term expiring on October 31,
2003, renewable at the option of the Company for an additional six year term.
The Company pays rent of $4.81 per square foot (or $913,000) annually, payable
in monthly rent payments of $76,000. Although the Company has not obtained a
formal appraisal, based upon an informal survey conducted by a real estate
broker, the Company believes that the rent charged it by Realty approximates
fair market rents in the area. The Lease provides for an increase every other
year, commencing in 1998, to the greater of: (i) 106% of the next preceding
year's rent; or (ii) the preceding year's rent multiplied by a fraction the
numerator of which is the CPI for the area including Rockland County or if no
such index is published, for Northern New Jersey in effect 90 days prior to
November 1 of the new rent year and the denominator of which is the CPI in
effect 90 days prior to November 1 of the preceding year. The November 1998
increase amounted to 106% of the next preceding year, resulting in rent of
$5.0986 per square foot (or $968,000) annually effective through October 31,
2000.


                                       50
<PAGE>

      The Company is the guarantor with respect to a mortgage loan currently in
the principal amount of $513,000 from the Job Development Authority of Rockland
County and a mortgage loan currently in the principal amount of $375,000 from
the Industrial Development Authority of Rockland County on the property in
Blauvelt, New York. These mortgage loans were created for the purpose of
building a facility in 1983 which the Company subsequently occupied for 12 years
until 1996.

SUBLEASES TO WMW MACHINERY CO. AND WORLD

      The Company currently subleases 30,949 square feet and 5,500 square feet
at the West Nyack facility to WMW Machinery Co., a subsidiary of World, and
World, respectively, pursuant to subleases in each case effective November 1,
1996. The subleases are coterminous with the Lease. The sublease with WMW
Machinery Co. provides for rent of $5.50 square feet or $170,000 per year until
November 1998, payable to the Company in equal monthly installments. The
sublease with World provides for rent of $33,000 per year until November 1998,
payable to the Company in equal monthly installments. Each sublease provides for
an increase in rent every other year, commencing in 1998, to the greater of: (i)
106% of the next preceding year's rent; or (ii) the preceding year's rent
multiplied by a fraction the numerator of which is the CPI in effect 90 days
prior to November 1 of the next rent year and the denominator of which is the
CPI in effect 90 days prior to November 1 of the preceding year. The November
1998 rent increase amounted to 106% of the next preceding year rent, or
$180,000 and $35,000 annually to WMW Machinery Co., Inc. and World, respectively
through October 2000. The subleases with WMW Machinery Co., Inc and World expire
on October 31, 2003; however, the Company anticipates WMW Machinery Co., Inc.
vacating the 31,000 square feet by the end of 1999, as the Company requires the
use of the space for its own needs.

OTHER TRANSACTIONS WITH WORLD AND WORLD AFFILIATES

      The Company made payments for and advances to World, World subsidiaries
and joint ventures and certain affiliates for payroll, benefits and other
expenses. Such payments aggregated approximately $1,227,000 for 1998. The
advances bear interest at the rate of 8% per annum which is accrued monthly. In
certain cases, the obligation to repay advances made by the Company were
satisfied by offsetting the price of bearings or bearing products purchased from
joint ventures obligated to the Company. The Company's purchases from World
affiliates aggregated $5.2 million for 1998. The Company anticipates that it
will continue to purchase bearings from joint ventures in which World has an
interest and to make advances to or for the benefit of World and such joint
ventures for the payment of their expenses related to the supply of products to
the Company. These advances either have or will be repaid by World or the joint
venture or will be offset against the price of bearings purchased by the
Company.

      World has also granted to the Company options, exercisable prior to
December 31, 1999, to purchase from World its interest in two joint ventures,
Rockland and WGBC, for $400,000 and $846,000 (subject to adjustment based on
change in accounts payable by WGBC to World), respectively, representing the
estimated capital contributions, advances for administrative expenses and other
costs paid by World with respect to such ventures prior to January 2, 1999; plus
any additional capital contributions made and administrative expenses incurred
on behalf of the joint venture by World after such date.


                                       51
<PAGE>

TAX SHARING AGREEMENT

      The Company has been, and will be, included in the consolidated federal
income tax returns filed by World during all periods in which it has been or,
will be, a wholly-owned subsidiary of World ("Affiliation Years"). Upon the
completion of the IPO, the Company ceased to be included in the consolidated
federal income tax returns filed by World, and will file on a separate basis. As
a result, the Company and World have entered into an agreement ("Tax Sharing
Agreement") providing for the manner of determining payments with respect to
federal income tax liabilities and benefits arising during the Affiliation
Years. Under the Tax Sharing Agreement, the Company has paid, or will pay, to
World an amount equal to the Company's share of World's consolidated federal
income tax liability, generally determined on a separate return basis, for the
tax years which have ended and the portion of the tax year preceding
consummation of the IPO, and World will pay the Company for the use of the
Company's losses, and credits arising in such periods, in each case net of any
amounts theretofore paid or credited by World or the Company to the other with
respect thereto. In the event that World's consolidated federal income tax
liability for any Affiliation Year is adjusted upon audit or otherwise, the
Company will bear any additional liability or receive any refund which is
attributable to adjustments of items of income, deduction, gain, loss or credit
of the Company. World shall permit the Company to participate in any audits or
litigation with respect to Affiliation Years, at the Company's expense, to the
extent that such audit or litigation could result in an indemnification payment
from the Company to World.

REGISTRATION RIGHTS AGREEMENT

      World has certain rights with respect to the registration under the
Securities Act of 1933, as amended ("the Act") of shares of Common Stock owned
by it ("Registrable Shares"). Such rights will be exercisable by any person or
entity (together with World, "Holders") acquiring Registrable Shares from World,
including any options, warrant to purchase, or other security exchangeable for
or convertible into Registrable Shares other than pursuant to an effective
registration statement under the Act. If the Company proposes to register any
securities under the Act (other than a registration on Form S-4 or Form S-8),
whether or not for its own account, the Holders are entitled to include
Registrable Shares, subject to the right of the managing underwriter of any such
offering to exclude, due to market conditions, some or all of such Registrable
Shares from such registration. In addition, commencing February 7, 1998, the
Holders will have the right to require the Company to prepare and file
registration statements under the Act with respect to the Registrable Shares.
The right may be requested by any Holder holding Registrable Shares aggregating
at least 50,000 shares of the Company's Common Stock outstanding at the date of
the Company's Initial Public Offering. The Company generally is required to bear
the expenses (except underwriting discounts and commissions and fees and
expenses of separate counsel) of all such registrations, whether or not
initiated by any Holder.


                                       52
<PAGE>

                                     PART IV

Item 14. Financial Statements, Financial Statement Schedules, Exhibits and
         Reports on Form 8-K

(a) 1. Financial Statements (included in Part II of this report):

            Report of Independent Certified Public Accountants dated February
            12, 1999.

            Consolidated Balance Sheets for years ended December 27, 1997
            and January 2, 1999.

            Consolidated Statements of Operations for years ended December 28,
            1996, December 27, 1997 and January 2, 1999.

            Consolidated Statement of Changes in Stockholders' Equity at
            December 30, 1995, December 28, 1996, December 27, 1997 and January
            2,1999.

            Consolidated Statement of Cash Flows for year ended December 28,
            1996, December 27, 1997 and January 2, 1999.

            Summary of Significant Accounting Policies and Notes to Consolidated
            Financial Statements.

(a) 2. Financial Statement Schedules (included pursuant to Item 14(d) at page 45
       of this report):

            Schedule II - Valuation and Qualifying Accounts

(a) 3. Exhibits:

            Reference is made to the Exhibit Index commencing on page 56, filed
            pursuant to Item 14(c). The Exhibits include the following
            management contract or compensatory plan or arrangement required to
            be filed as an exhibit to this report: 1996 Stock Option and
            Performance Award Plan.

(b) Reports on Form 8-K:

            On October 24, 1997, the Company filed a Report on Form 8-K, dated
            October 21, 1997, reporting the dismissal of Ferro, Berdon &
            Company, LLP, and the reinstatement of BDO Seidman, LLP, as the
            Company's principal independent certified public accountant.


                                       53
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized, on March
30, 1999.

                   GENERAL BEARING CORPORATION
                   By: /s/ David L. Gussack
                      ---------------------------
                   David L. Gussack, President
                   (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report on Form 10-K has been signed below by the following persons on behalf of
the registrant and in the capacities indicated, on March 30, 1999.

         Signatures               Title                          Date       
         ----------               -----                          ----       
                                                                 
   /s/ Seymour I. Gussack         Chairman of the Board of       March 30, 1999
-------------------------------   Directors                      --------------
       Seymour I. Gussack                                        
                                                                 
                                                                 
  /s/ David L. Gussack            President and Director         March 30, 1999
-------------------------------   (Principal Executive Officer)  --------------
      David L. Gussack                                           
                                                                 
                                                                 
  /s/ Barry A. Morris             Chief Financial Officer        March 30, 1999
-------------------------------                                  --------------
      Barry A. Morris                                            
                                                                 
                                                                 
  /s/ Barbara M. Henagan          Director                       March 30, 1999
-------------------------------                                  --------------
      Barbara M. Henagan                                         
                                                                 
                                                                 
  /s/ Nina Gussack                Director                       March 30, 1999
-------------------------------                                  --------------
      Nina Gussack                                               
                                                                 
                                                                 
  /s/ Peter Barotz                Director                       March 30, 1999
-------------------------------                                  --------------
      Peter Barotz                                               
                                                                 
                                                                 
 /s/ Robert E. Baruc              Director                       March 30, 1999
-------------------------------                                  --------------
     Robert E. Baruc                                             


                                       54
<PAGE>

                                  EXHIBIT INDEX

NOTE: Except as to those items marked with an "*", which are filed herewith, all
Exhibits have been previously filed with the Company's Registration Statement on
Form S-1 effective February 7, 1997 (Registration No. 333-15477), or the
Company's Annual Report on Form 10-K for fiscal year 1996.

    Exhibit No.      Description of Exhibit
    -----------      ----------------------

      3.1            Second Restated Certificate of Incorporation

      3.2            By-Laws of the Company

      4.1            Specimen Stock Certificate

      10.1           Loan and Security Agreement dated December 20, 1993 by and
                     among the Bank of New York Commercial Corporation, the
                     Company and Hyatt Railway Products Corp., including
                     amendments 1 through 8 thereto

      10.2           Contract dated June 1988 by and between Shanghai Rolling
                     Bearing Factory and the Company, including Agreement for
                     the Revision and Amendment to the Contract

      10.3           Lease Agreement dated November 1, 1996 by and between
                     Gussack Realty Company and the Company relating to West
                     Nyack, New York premises

      10.4           Lease dated March 15, 1988 by and between Lamington
                     Associates II and the Company relating to the Union, New
                     Jersey premise

      10.5           Sublease Agreement dated November 1, 1996 between the
                     Company and World Machinery Company

      10.6           Sublease Agreement dated November 1, 1996 between the
                     Company and WMW Machinery Co.

      10.9           1996 Stock Option and Performance Award Plan

      10.10          Form of Representative's Warrant

      10.11          Form of Registration Rights Agreement between the Company
                     and World (previously filed exhibit as 4.2)

      10.12          Form of Tax Sharing and Indemnification Agreement between
                     the Company and World Machinery Company

      10.13          Amendment Letter dated March 7, 1997 between the Company
                     and Bank of New York Commercial Corporation

      10.14          Amendment No. 9 dated June, 1997 to the Loan and Security
                     Agreement between the Company and Bank of New York
                     Commercial Corporation.*

      10.15          Amendment No. 10 dated March 20, 1998 to the Loan and
                     Security Agreement between the Company and Bank of New York
                     Commercial Corporation.*

      10.16          Amendment Letter dated April 7, 1998 to the Loan and
                     Security Agreement between the Company and Bank of New York
                     Commercial Corporation.*


                                       55
<PAGE>

      10.17          Amendment No. 11 dated May, 1998 to the Loan and Security
                     Agreement between the Company and Bank of New York
                     Commercial Corporation.*

      10.18          Amendment No. 12 dated April 1, 1999 to the Loan and
                     Security Agreement between the Company and Bank of New York
                     Commercial Corporation.*

      21             List of Subsidiaries of the Company

      23             Consent of Independent Certified Public Accountants*

      27             Financial Data Schedule*


                                       56
<PAGE>