SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

For the Fiscal Year Ended June 30, 2000

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 No. 01-06855

                            WORKSAFE INDUSTRIES INC.

             (Exact name of registrant as specified in its charter)

      New York                           3842                        11-1874010
(State or other              (Primary Standard Industrial      (I.R.S. Employer
jurisdiction of incorporation    Classification Code      Identification Number)
or organization)                     Number)

            130 West 10th Street, Huntington Station, New York 11746
               (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (631) 427-1802

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

                                                           Name of Each Exchange
Title of Class                                             On Which Registered

a) $.12 par value common stock ("Common Stock")            Boston Stock Exchange

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

a) $.12 par value common stock ("Common Stock")

-------

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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by  Section  13 or 15 (d) of the  Exchange  Act of 1934  during  the
preceding twelve (12) months (or for such shorter period that the registrant was
required  to file  such  reports),  and  (2)  has  been  subject  to the  filing
requirements for the past ninety (90) days.

                           YES__X__           NO___

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

State registrant's revenues for its most recent fiscal year.    $27,101,030

The  aggregate  market  value of the  Common  Stock  held by  non-affiliates  is
approximately  $1,487,000.  Market  value is based  upon the price of the Common
Stock of the  registrant as of the close of business on September 29, 2000 which
was $.97 per share as reported by NASDAQ.

As of September 29, 2000 the number of shares outstanding of the Common Stock of
the registrant was 1,686,579 shares.  The number of shares has been adjusted for
prior stock splits and estimated rounding for fractional shares.

                                     PART I

Item 1.  BUSINESS

(a)  General Development of Business

Worksafe  Industries Inc. (the  "registrant"  or  "Worksafe"),  is a corporation
organized  and  existing  under the laws of the State of New York,  having  been
incorporated  on May 15, 1958. On December 17, 1998,  the name of the registrant
was changed from Eastco Industrial Safety Corp.

Worksafe,  through its wholly-owned  subsidiaries,  Disposable Safety Wear, Inc.
("Disposable"),  Safety Wear Corp.  ("Safety Wear"),  Eastco Glove Technologies,
Inc. ("Glove Technologies") and Puerto Rico Safety Equipment Corp. ("Puerto Rico
Safety  Equipment"),   manufactures  industrial  protective  clothing  products.
Worksafe  sells its products to  distributors.  Use of products sold by Worksafe
has in a large part resulted  from the adoption of OSHA and  insurance  industry
standards.

In  January  1999,  Worksafe  sold  certain  of the  assets of its  distribution
operation,  and the "Eastco" name, to Arbill Industries,  Inc. ("Arbill"),  thus
discontinuing  its  distribution  operation.   The  distribution  operation  had
specialized in the  distribution of industrial  safety products  manufactured by
third parties. The distribution  operation served a different customer base than
Worksafe's manufacturing operation, and was managed as a separate operating unit
with  its  own  identifiable   assets.  The  distribution   operation  had  been
experiencing  operating  losses during the previous  several years, and the sale
was intended to enable management to better devote their attention and resources
to the core  strategies  of the  manufacturing  operation.  The sales  price was
approximately $2,494,000, exclusive of related adjustments,  payments applicable
to rent and payments for open accounts receivable. Worksafe generally agreed not
to directly  compete with Arbill in the business  conducted by its  distribution
operation prior to the sale for a period of five years. Reference should be made
to Worksafe's  Form 8-K of January 11, 1999,  for a more detailed  discussion of
this transaction.

In connection with the completion of its fiscal 2000 year-end closing,  Worksafe
discovered an inventory discrepancy, between the physical count and its recorded
general ledger balance, of approximately $1,350,000.  This inventory discrepancy
has been charged  against  Worksafe's  operations  in fiscal 2000.  Worksafe has
engaged forensic consultants to assist in the determination of the cause of this
discrepancy.  This  investigation is presently ongoing.  However,  Worksafe does
have  $1,000,000 of insurance  coverage for employee  theft and  $1,000,000  for
third party theft. Worksafe has not yet filed a claim against its policies,  but
has notified the


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applicable  carriers of its intention to file a claim,  although there can be no
assurance  that the Company will be awarded any benefit as a result of any claim
filed.  In  addition,  Worksafe  has  made  certain  managerial  changes  at its
manufacturing  facilities,  and has hired  outside  consultants  to  review  its
operational structure for potential cost savings measures.

(b)  Financial Information about Industry Segments

Since the sale of the  distribution  operation  in  January  1999,  Worksafe  is
organized and operates in one business segment,  the manufacturing of protective
clothing  and  safety  products  that  are sold to  distributors  for end use by
manufacturers, utilities, hospitals and others.

(c)  Description of Business

The following is a discussion of the business activities conducted by Worksafe:

(i)  Manufactured  products are sold under the  Charkate/Worksafe,  Charkate(R),
     Worksafe(R)  and Cover-Up(R)  trade names.  Worksafe,  through  Disposable,
     Safety Wear and Puerto Rico Safety Equipment,  manufactures limited-use and
     reusable  industrial  protective apparel.  Limited-use  protective products
     include coveralls,  shirts,  pants,  headwear,  hoods, aprons,  smocks, lab
     coats,  hazardous material handler suits,  examination gowns, sleeves, shoe
     covers and other related items. Limited-use clothing is designed to protect
     the user from, among other things,  splash, dirt,  contamination and a wide
     range of other substances. Limited-use clothing is made primarily of a spun
     bonded  polyolefin  produced  solely  by E.I.  Dupont  DeNemours  & Company
     ("Dupont") under the trade name Tyvek(R).  Reusable  industrial  protective
     clothing  includes  items for the  protection  of various parts of the body
     which are  designed to shield the user from,  among other  things,  splash,
     dirt, contamination, heat, fire, cold and the outside environment. Reusable
     products include  coveralls,  gloves,  mitts,  shirts,  thermal  underwear,
     sleeves, coats, pants, leggings, spats, bibs, safety vests and a variety of
     other kinds of protective clothing and uniforms.


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       As a result of an  acquisition in April 1997,  Worksafe now  manufactures
       protective   knit   gloves   and   sleeves,   which   are   sold  by  the
       Charkate/Worksafe knit glove division.  These products are generally made
       of cotton and cotton  polyester,  composite  high  tensile  cut-resistant
       yarns and Kevlar(R) aramid fibers, as well as steel,  stainless steel and
       other  high  cut-resistant  composite  fibers.  The  products  may have a
       special  coating  and are used to protect  the  individual  from cuts and
       abrasions.  These  items are used in the meat  packing,  glass  handling,
       sheet metal, and automotive industries, to name a few, for the protection
       of the employee.

       Sales  of  manufactured  limited-use  clothing  and  related  limited-use
       products  accounted for approximately 70%, 67%, and 75% of Worksafe's net
       sales  for  the  fiscal  years  ended  June  30,  2000,  1999  and  1998,
       respectively.

       The  manufacturing  operation and  warehousing  facilities are located in
       Puerto Rico, Minnesota and Alabama,  and warehousing  facilities are also
       located in Texas, California and Louisiana.  Worksafe has also contracted
       the sewing of materials already cut by Worksafe to production  facilities
       in the  Republic of Mexico.  The  manufacturing  operation  is  primarily
       directed from Alabama, and its sales are directed from New York.

       Worksafe   utilizes   catalogs,    telemarketing   and   its   web   site
       (www.charkate.com)  to aid in its sales efforts.  Sales are also promoted
       through  trade shows,  mailings and  advertising  in trade  magazines and
       directories.  Worksafe  does  not  engage  in any  mail  order  business.
       Worksafe  primarily  sells  to  independent  distributors  that  sell  to
       end-users comprised of industrial,  commercial and governmental accounts.
       Worksafe  considers  industrial  accounts to be those businesses that are
       primarily  based upon  manufacturing  and  production,  while  commercial
       accounts are considered to be service businesses.  Worksafe also believes
       that  standards  established  by OSHA  and the  insurance  industry  have
       resulted in a need by others to purchase Worksafe's products.

(ii)   Worksafe has made no public  announcement of, or made public  information
       about,  any new products that would require the  investment of a material
       amount of its assets or which are otherwise material.

(iii)  Worksafe  is not  dependent  upon any one  vendor  as a  supplier  of raw
       materials,  other than Dupont,  which supplies Worksafe with Tyvek(R),  a
       material  used in various  lines of its  limited-use  products.  See (iv)
       immediately  below for  reference  to a certain  License  Agreement  with
       Dupont, which expires January 31, 2002, pursuant to which Dupont supplies
       raw  materials  to  Worksafe.   Management   believes  that  its  current
       relationship with Dupont is satisfactory. Loss of Dupont as a supplier of
       Tyvek(R) would have a material adverse effect on Worksafe's operations.


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(iv)   Puerto Rico Safety  Equipment is engaged in manufacturing in Puerto Rico.
       Under  the  Puerto  Rico  Industrial  Tax  Exemption  Act  of  1963  (the
       "Industrial Tax Act"), Puerto Rico Safety Equipment was granted a 17-year
       exemption,  beginning in January 1970, with respect to Puerto Rico income
       taxes on the production of safety clothing,  protective  sleeves,  coats,
       pants,  hoods,  jackets  and other  items.  On July 1, 1989,  Puerto Rico
       Safety Equipment was granted an extension of its exemption, and had a 90%
       exemption  from Puerto Rico income taxes for the ten-year  period  ending
       June 30, 1999. During this period, Puerto Rico Safety Equipment had a 75%
       exemption  from  Puerto  Rico  municipal  taxes on its real and  personal
       property utilized in operations. Puerto Rico Safety Equipment has applied
       for an  extension of this  exemption,  and is  currently  awaiting  final
       approval.  If granted, this exemption would be for a period of ten years,
       would  impose an income  tax rate of only 5% on taxable  income,  and may
       grant a 75%  exemption on the  corresponding  real and personal  property
       taxes, municipal taxes and other applicable taxes.

       Disposable was granted a 15-year exemption, beginning in June 1977, under
       the Puerto  Rico  Industrial  Tax Act with  respect to Puerto Rico income
       taxes on the production of limited-use clothing, and property used in its
       operations,  subject to the terms of the grant.  This  exemption has been
       extended  until June 20, 2006, and provides for a 90% exemption on Puerto
       Rico income  taxes,  and a 60%  exemption on  municipal,  real,  personal
       property and other applicable taxes.

       As Puerto Rico tax exemptions  are reduced or expire,  the registrant may
       be required  to pay taxes on income  earned in Puerto  Rico.  Worksafe is
       unable to predict the monetary impact of such exemptions being reduced or
       expiring.

       Puerto Rico Safety Equipment and Disposable have elected to apply Section
       936 of the Internal Revenue Code,  effective July 1, 1979. The provisions
       of Section 936 are  effective  until  revoked by the  registrant.  If the
       conditions of Section 936(a) are satisfied, the Section 936 credit equals
       the portion of United States income tax  attributable  to taxable  income
       from sources  outside the United States,  derived from the active conduct
       of a trade or business within a United States possession,  or the sale or
       exchange  of  substantially  all  of  the  qualified   possession  source
       investment income.  Dividends from operations,  payable to the registrant
       by each subsidiary,  are entitled to a 100% dividends received deduction,
       but are  subject to a 10%  withholding  tax in Puerto  Rico.  The Omnibus
       Budget  Reconciliation  Act of  1993  (the  "Omnibus  Act")  imposed  new
       limitations  on computing the Possession Tax Credit under Section 936 for
       tax years  beginning  after 1993. The registrant made an election in 1995
       which  reduced  the  credit to 60% of the 1994  level  and which  further
       phased out the credit by 5% in each subsequent  year, to a maximum credit
       of 40% in 1998.  Since the credit is a function  of future  earnings,  if
       any, the effect of such limitations cannot be determined at the


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       present  time. In addition,  the Omnibus Act subjects the 100%  dividends
       received deduction to the Alternative Minimum Tax Calculation.  The Small
       Business Job  Protection  Act of 1996 further  limits the  Possession Tax
       Credit for years beginning  after 2001, with the credit being  eliminated
       for tax years  beginning  after 2005. No dividends  have been declared on
       the aggregate  undistributed  earning of Puerto Rico Safety Equipment and
       Disposable,   which  through  June  30,  2000  aggregates   approximately
       $194,000.  No dividends are intended to be declared as it is management's
       intention  to  reinvest  the  earnings,  if any,  from such  subsidiaries
       indefinitely.  Worksafe believes that based upon current operations,  the
       Omnibus  Act will not have a  material  effect on it for the  foreseeable
       future.

       Worksafe is a party to a certain  Garment  Manufacturer  & Seller License
       Agreement  (the  "License  Agreement")  with  Dupont,  which,  subject to
       termination  for  cause  at any  time  and  other  specified  provisions,
       continues  in effect  until  January  31,  2002.  Pursuant to the License
       Agreement,  Dupont  provides  non-woven  fabric under its  trademark,  to
       Worksafe as licensee, for use in its manufacturing operations.

(v)    Worksafe does not consider its business to be seasonal.

(vi)   Worksafe is required to maintain  substantial  inventories (see Note 4 to
       Consolidated  Financial  Statements)  in  order  to  meet  the  immediate
       shipping  requirements  of its customers,  who require  products on short
       notice and who do not maintain inventories of the same. Worksafe believes
       that  other   companies  in  this  industry  also  maintain   substantial
       inventories.

(vii)  Worksafe is not dependent upon any single customer or several  customers,
       the loss of any one or more of which would have an adverse  effect on its
       business.  No one customer  accounts for more than 10% of Worksafe's  net
       sales for the fiscal year ended June 30, 2000.

(viii) The dollar amount of backlog orders estimated and believed to be firm was
       approximately   $2,326,000   as  of  June  30,   2000,   as  compared  to
       approximately $1,500,000 as of June 30, 1999. Worksafe expect to fill the
       entire backlog as of June 30, 2000 during the current fiscal year.

(ix)   No  material   portion  of  the   business  of  Worksafe  is  subject  to
       renegotiation of profits, termination of contracts or subcontracts at the
       election of the government.

(x)    In all of its product markets, Worksafe faces competition from larger and
       more established companies that have greater financial, managerial, sales
       and technical resources,  and certain markets for Worksafe's products are
       dominated by these  companies.  While larger  competitors  may be able to
       benefit from  economies of scale and  introduce new products that compete
       with  Worksafe's  products,  Worksafe's  management is accustomed to such
       competition and believes it will remain  competitive with such companies.
       Worksafe's  major  competitors  in price and service are  Kappler,  Inc.,
       Lakeland Industries,  Inc. and DuPont, in limited-use clothing sales, and
       Red Kap (a  subsidiary  of VF  Industries,  Inc.),  Topps  Mfg.  Co.  and
       Workrite Uniform Co., in reusable clothing sales.  Primary competitors in
       glove  manufacturing are Chicago  Protective  Apparel,  Inc., Steel Grip,
       Inc. and Ansell Golden Needles, Inc.

(xi)   During  the past  three  fiscal  years,  the  registrant  has not spent a
       material  amount on research and development  activities  relating to new
       products,  services or  techniques,  or for the  improvement  of existing
       products, services or techniques.

(xii)  Compliance  with  Federal,  State  and  local  environmental  laws is not
       expected to have a material effect on capital expenditures,  earnings and
       the  competitive  position of the  registrant.  Worksafe's  manufacturing
       facilities are subject to regulation and inspection standards established
       by OSHA.  Such  facilities  have not been inspected for  compliance  with
       OSHA.  Although   Worksafe's   management  believes  it  is  in  material
       compliance  with required  standards,  there can be no assurance that any
       inspection  would not reveal that Worksafe has failed to comply with OSHA
       and, as a result,  the registrant may be required to expend material sums
       to ensure compliance with OSHA regulations.


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(xiii) The total number of employees  employed by the  registrant as of June 30,
       2000 was approximately 245.

(d)    Financial  Information  about Foreign and Domestic  Operations and Export
       Sales

Sales of the registrant's products are primarily in the United States.


Item 2.  PROPERTIES

The following properties are material to the business of Worksafe:

The  executive  offices  of  Worksafe  are  located  at 130  West  10th  Street,
Huntington  Station,  New York  (the  "Huntington  Property"),  and are owned by
Worksafe.  The Huntington Property contains approximately 30,000 square feet, of
which 25,000 square feet are being sublet to non-affiliates. The remaining 5,000
square feet are being used by  Worksafe  for its  executive  offices and for its
sales function.

On May 23, 2000, Worksafe refinanced the mortgage on the Huntington Property. In
connection  therewith,  Worksafe  mortgaged  the  premises to a new bank for the
amount of $650,000. See Note 8 to the Consolidated Financial Statements.  At the
time of the  refinancing,  the  principal  balance  on the then  existing  first
mortgage was  approximately  $349,000.  This  mortgage was held by 130 West 10th
Street Associates,  LLC ("Associates").  The wives of Messrs. Anthony P. Towell,
an executive officer and director of Worksafe, and Alan E. Densen, a director of
Worksafe, were members of Associates.  Charles Holzberg, a director of Worksafe,
was also a member of  Associates.  The  balance  of the  mortgage,  with  unpaid
interest totaling approximately $352,000, was satisfied by the new mortgage. The
principal balance of the mortgage on the Huntington Property as of June 30, 2000
was  $650,000.  Due to the fact that  Worksafe  is  currently  in default of the
financial  covenants in their line of credit  agreement  with  Congress,  should
Congress demand repayment of the amounts due under the line, the mortgage on the
Huntington Property would be in default and become due and payable.

The registrant's wholly-owned subsidiary,  Disposable,  leases a building, which
is used for  manufacturing and warehousing,  consisting of approximately  45,000
square  feet  in  Aguadilla,  Puerto  Rico,  from  the  Puerto  Rico  Industrial
Development Company. A lease was entered into for these premises on February 21,
1995,  effective for the ten-year period commencing  September 1, 1993. Rent for
the  twelve-month  period  ending  August 31,  2000 was at the  monthly  rate of
$11,178, and escalates to $13,041 in the final year of the lease.

The registrant's  wholly-owned  subsidiary,  Safety Wear,  leases  approximately
50,000  square feet in Decatur,  Alabama.  These  premises  are utilized for the
cutting and  warehousing of coveralls and other  limited-use  products.  Rent is
payable  at $13,500  per  month,  on a  month-to-month  basis.  A lease for this
location is currently being negotiated. Should these facilities not be available
in the  future,  Worksafe  believes  that  alternative  sites  will  be  readily
available at a comparative cost.

The  registrant's   wholly-owned  subsidiary,   Glove  Technologies,   subleases
approximately  9,500  square  feet in  Chaska,  Minnesota.  These  premises  are
utilized in connection  with the  manufacturing  of  protective  knit gloves and
related  operations.  This  sublease  terminates  on  December  31,  2001,  with
provisions  for  earlier  termination.  Rent is  currently  payable at a rate of
$5,150 per month.

The  registrant  believes that its  facilities  are adequate for its current and
immediate future needs.

Item 3.  LEGAL PROCEEDINGS

In the past, the registrant  used asbestos in the  manufacture of certain of its
products.  Such use was terminated by the registrant in the  mid-1980's.  It has
been alleged that asbestos is a cause of cancer, asbestosis,  mesothelioma,  and
other related diseases,  the symptoms of which may not appear for twenty or more
years. Since the early 1980's,


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numerous  lawsuits have been  instituted  against the  registrant by persons who
have been exposed to asbestos and asbestos products.

As of June 30,  2000,  Worksafe  estimates  that it is a party to  approximately
5,000 cases with respect to exposure to asbestos involving  approximately 18,000
plaintiffs.  Most of these cases also include Puerto Rico Safety  Equipment as a
defendant.

To date,  all of the  actions  against  the  registrant  have  been  brought  by
non-employees and are based upon personal injury claims. The pending actions are
for the most part in the Supreme  Court of the State of New York,  all  Counties
within the City of New York; United States District Court,  Eastern and Southern
Districts of New York, the Superior Court of New Jersey,  Middlesex County,  Law
Division;  the  Court of Common  Pleas of  Luzerne  County,  Trial  Division  of
Pennsylvania, and the Superior Court of California, County of San Francisco. The
number of first- party plaintiffs  referred to throughout this Form 10-K include
in various  instances,  husbands and wives. For the most part,  settlements have
usually  involved  one  settlement  for  both  spouses.  The  actions,  with the
exception  of one  pending  action,  involve  a  multitude  of  defendants.  The
complaints  allege  exposure to asbestos  and  asbestos  products  over  various
periods of time.  In general,  each  action  seeks  varying  amounts of damages,
unlimited,  or for  each  plaintiff  as high  as  $10,000,000  for  compensatory
damages,  and $10,000,000 for punitive  damages and more against each defendant.
The  registrant is likely to continue to become a party to  additional  asbestos
actions in the future.

From 1981 through June 30, 2000,  Worksafe  estimates that  approximately  7,000
actions  on behalf of  approximately  27,000  first-party  plaintiffs  have been
instituted against it concerning asbestos-related claims, and that approximately
1,000 actions  involving the claims of approximately  8,000 plaintiffs have been
settled or discontinued against the registrant.  During the year ending June 30,
2000,  the  registrant  estimates  approximately  1,700  actions  on  behalf  of
approximately  10,500  plaintiffs were instituted  against it, and approximately
140 cases  involving  approximately  600 plaintiffs were settled or discontinued
against the registrant.  The registrant  estimates that as of June 30, 2000, and
since  1981,  with the  exception  of defense  costs,  a total of  approximately
$2,600,000  has been  paid or  agreed to be paid in  settlements  to date,  with
regards to the  terminated  actions on behalf of Worksafe  (inclusive of actions
against Puerto Rico Safety Equipment, which totals approximately $2,000,000), by
the registrant's insurance carriers. In addition, and since 1981,  approximately
$43,000 has been paid by the registrant. The foregoing is based upon information
available to the registrant to date.  Through June 30, 2000, and since 1981, the
registrant has paid approximately $50,000 for legal and defense costs to counsel
appointed by the  insurance  carriers to defend it. Past results of  settlements
and defense  costs are not  necessarily  indicative  of future  settlements  and
defense costs, which the registrant is unable to predict.

The  registrant   believes  that  it  maintained  various  policies  of  primary
insurance,  in different amounts,  which provide coverage to the extent of their
respective terms for  asbestos-made,  product-related  personal injuries for the
periods April 1, 1968 to April 1, 1969, and March 11, 1971 to November 27, 1985.
The policies  range in amounts from $50,000 to $1,000,000.  The registrant  also
believes  that from August 10, 1972 to on or about August 11,  1986,  it has had
various  policies for excess coverage to the extent of their terms applicable to
asbestos  claims.  These  policies range in amounts from $500,000 to $10,000,000
for excess coverage.  There are gaps of  approximately  six weeks in the primary
coverage between March 11, 1971 to November 27, 1985,  approximately  thirty-six
months in the excess  coverage  between August 10, 1972 and August 11, 1986, and
an  additional  period of  approximately  thirteen  months for  excess  coverage
insurance  companies  in  liquidation,  where there is likely to be no coverage.
Reference  is made to Exhibits  99.06 and 99.07 for a schedule of the  foregoing
insurance policies  applicable to Worksafe.  The policies of insurance set forth
on Exhibits 99.06 and 99.07 are not applicable to all of the subsidiaries of the
registrant,  which have varying  coverage,  and such  subsidiaries may also have
been without  coverage  for various  times of their doing  business.  Not all of
these  policies are in the  possession of Worksafe.  The foregoing  exhibits are
incorporated  by  reference  and made a part hereof as referred to in Item 14 of
this Form 10-K.

A  schedule  of  insurance  believed  to be  applicable  to Puerto  Rico  Safety
Equipment is  designated  Exhibit  99.08.  Not all of these  policies are in the
possession of the  registrant.  No agreement has been reached with the insurance
companies  confirming  all of these  policies,  which  range  from  $100,000  to
$500,000 for primary  coverage and $1,000,000 to $5,000,000 for excess coverage.
The policies for Puerto Rico Safety Equipment cover the period


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March 11, 1971 to July 23, 1986,  with various gaps as described in the exhibit.
The  foregoing  exhibit is  incorporated  by reference and made a part hereof as
referred to in Item 14 of this Form 10-K.


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During  fiscal  1994,  the  registrant  reached a settlement  pertaining  to all
pending and future cases against it in the State of New York brought by one firm
of plaintiffs'  attorneys.  The settlement  does not apply to Puerto Rico Safety
Equipment  and is only  applicable to cases brought by the same law firm against
the  registrant  in the State of New York.  The  registrant  is to be  dismissed
without any payment in cases not  involving  any exposure to a power  generating
station  in the  State of New York  ("Powerhouse").  Where  there is  Powerhouse
exposure,  a payment of $100 is to be made for each alleged  non-malignant  case
and $300 for each malignant case. Where plaintiffs consist of two spouses,  such
is deemed one case.  Payment is to await appropriate  documentation of exposure,
releases from the plaintiffs  and the agreement of each plaintiff  whose case is
settled.  A copy of the letters  between  counsel for the registrant and counsel
for plaintiffs' attorneys setting forth this settlement is designated as Exhibit
99.11 and is  incorporated by reference and made a part hereof as referred to in
Item 14 of this Form 10-K.

An agreement  between the registrant and its primary insurance  carriers,  dated
March 26, 1990, became effective June 26, 1990 (the "Indemnity Agreement"). This
agreement does not apply to Puerto Rico Safety Equipment. The registrant entered
into the  Indemnity  Agreement in an effort to resolve  uncertainties  as to its
insurance  coverage that will cover asbestos  claims against the parent company,
where any  exposure  to  asbestos  is alleged  during  the period  1971 to 1985,
inclusive.  Further,  the  registrant  is  obligated  to share in the payment of
asbestos-related  claims against it.  Pursuant to the Indemnity  Agreement,  the
registrant is obligated to pay 12% of all attorneys' fees incurred on its behalf
and 17% of indemnity costs (which include judgment and settlement amounts).  The
balance of these costs are to be paid by the insurance  carriers which are party
to the Indemnity  Agreement.  The  Indemnity  Agreement is subject to the policy
limitations of each insurance policy,  and may be terminated at any time upon 90
days  notice  by  any of the  parties,  provided  that  termination  may  not be
effective  as to any  asbestos  action that has already been placed on the trial
calendar, unless it has a scheduled trial date more than 12 months from the date
the  notice  of  termination  is given.  A copy of the  Indemnity  Agreement  is
designated as Exhibit 99.09 and is  incorporated by reference in Item 14 of this
Form 10-K.

Effective  during May 1991, the registrant  entered into a Settlement  Agreement
and Release  (the  "Settlement  Agreement")  with Mount  Vernon  Fire  Insurance
Company  ("Mount  Vernon").  Pursuant  to the  Settlement  Agreement,  which  is
designated Exhibit 99.10 and is incorporated by reference and made a part hereof
as referred to in Item 14 of this Form 10-K,  the  registrant  discontinued  its
action against Mount Vernon.  Subject to the terms of the Settlement  Agreement,
Mount Vernon agreed to reimburse the registrant (where  applicable) for 6.25% of
attorneys'  fees  (52.08%  of the  registrant's  12%  share  referred  to in the
Indemnity  Agreement in the  previous  paragraph)  and 6.25% of  indemnification
costs (36.76% of registrant's  17% share referred to in the Indemnity  Agreement
in the previous  paragraph).  The Settlement  Agreement is not applicable to any
asbestos actions against the registrant where no exposure is alleged to products
manufactured or distributed by the registrant between April 1, 1968 and April 1,
1969,  and this agreement  does not apply to Puerto Rico Safety  Equipment.  The
Settlement Agreement may be terminated at any time upon 90 days notice, but such


                                      -10-
<PAGE>


notice is not applicable to asbestos actions placed on a trial calendar,  unless
such  has a trial  date  more  than 12  months  from  the  date  the  notice  of
termination is given. The Settlement Agreement provides that the limit available
under the policy is $100,000 plus attorneys' fees while the Settlement Agreement
is in effect. The Settlement Agreement is applicable only to the parent company.
As of June 30, 2000,  approximately  $38,000 has been reimbursed by Mount Vernon
for indemnification.

To date,  the claims  settled by Puerto Rico Safety  Equipment have been paid in
full by insurance. One of the carriers covering Puerto Rico Safety Equipment has
recently  requested a cost sharing  agreement with Puerto Rico Safety Equipment.
This request has been disputed by Puerto Rico Safety  Equipment and is currently
being negotiated.

Worksafe is unable to ascertain the total extent of its insurance  applicable to
asbestos  claims  against it or the extent to which its insurance  carriers will
provide coverage in the future.

The  registrant's  insurance may not provide coverage for punitive damages where
such damages are sought against it in pending  litigation.  Punitive damages are
allowable in addition to compensatory damages and are awarded as a punishment to
a defendant for the wrong in a particular  case as well as for the protection of
the public against similar acts, to deter the defendant from a repetition of the
wrongful act and to serve as a warning to others. Usually a wrong, aggravated by
an evil or wrongful motive or a willful and intentional  misdoing, or a reckless
indifference  equivalent  thereof,  is  required  for a court to award  punitive
damages.  Worksafe is unable to specify  whether its actions  would give rise to
punitive  damages.  Worksafe  believes that its actions  should not give rise to
punitive damages. However, there can be no assurance that this will be the case.

Worksafe is a party to an action entitled Rule v. The Bethleham Corporation,  et
al pending in the Court of Common Pleas, Bucks County, Pennsylvania. There are 4
defendants,  including  Worksafe,  in this action.  The action was instituted in
April  1997  and has been  referred  to both  Worksafe's  primary  and  umbrella
insurance carriers. The action is for injuries sustained while the plaintiff was
allegedly  wearing  clothing  manufactured  by Worksafe.  The  complaint in this
action seeks damages in an unspecified  amount in excess of $50,000 on each of 5
counts  and an  unspecified  amount on one  count.  Worksafe  believes  that its
primary and umbrella  coverage  will cover any  liability  that it may have with
respect to this claim.  Worksafe is a party to other  miscellaneous  litigation,
which it believes will not have a material adverse affect against it.

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

Not applicable.


                                      -11-
<PAGE>


                                     PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS

(a)    The  principal  market on which the Common Stock of Worksafe is traded is
       the NASDAQ  Small-Cap  Market and its symbol is WRKS. The following chart
       sets forth the high and low sale  prices  for the  periods  indicated  as
       determined from NASDAQ quotations:

                                   High              Low
                                 --------          --------
Fiscal Year Ended June 30,

         1999
         ----
First Quarter                    $   2.38          $   1.44
Second Quarter                       3.19              1.25
Third Quarter                        3.31              1.81
Fourth Quarter                       2.19              1.00

         2000
         ----
First Quarter                    $   2.06          $   1.00
Second Quarter                       1.38               .91
Third Quarter                        1.75              1.06
Fourth Quarter                       1.31               .81

(b)    The  approximate  number of holders  of record of the Common  Stock as of
       October 18, 2000 was 357. The registrant  believes there are in excess of
       1,000 beneficial holders of the Common Stock.

(c)    (1)    The  registrant  has no  present  intention  of  paying  any  cash
              dividends  in the  foreseeable  future and  intends to use its net
              income, if any, in its operations.

       (2)    The registrant is prohibited from paying  dividends under its loan
              agreement  with  Congress  Financial   Corporation   ("Congress").
              However, within the terms of its agreement,  Congress has approved
              a buy-back of 320,000 shares for up to $400,000.


                                      -12-
<PAGE>


ITEM 6. SELECTED FINANCIAL DATA

        WORKSAFE INDUSTRIES INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                               Year Ended June 30,
--------------------------------------------------------------------------------------
                            2000             1999         1998        1997        1996
--------------------------------------------------------------------------------------
               (In thousands, for continuing operations, except for per share data)
--------------------------------------------------------------------------------------
      Operations
--------------------------------------------------------------------------------------
<S>                         <C>           <C>        <C>         <C>         <C>
Net sales                   $   27,101    $ 24,094   $ 24,807    $ 19,907    $ 17,889
--------------------------------------------------------------------------------------
Income/(loss) from
continuing operations           (1,671)         29        256        (621)        521
--------------------------------------------------------------------------------------
Basic income (loss) per
share from continuing
operations                        (.99)        .02        .15        (.44)        .87
--------------------------------------------------------------------------------------
Diluted income (loss) per
share from continuing
operations                        (.99)        .02        .15        (.44)        .87
--------------------------------------------------------------------------------------
Cash dividends per share(1)          0           0          0           0           0
--------------------------------------------------------------------------------------
<CAPTION>
                                 As of June 30,
--------------------------------------------------------------------------------------
                            2000             1999         1998        1997        1996
--------------------------------------------------------------------------------------
                    (In thousands, except for per share data)
--------------------------------------------------------------------------------------
  Financial condition
--------------------------------------------------------------------------------------
<S>                         <C>           <C>        <C>         <C>         <C>
Total assets                $   12,682    $ 11,806   $ 16,575    $ 13,381    $ 11,546
--------------------------------------------------------------------------------------
Long-term debt                     693         396        538         811         434
--------------------------------------------------------------------------------------
Stockholders' equity             1,373       3,044      3,899       4,387       2,604
--------------------------------------------------------------------------------------
Book value per share(2)           0.81        1.80       2.32        2.61        3.40
--------------------------------------------------------------------------------------
</TABLE>

----------
       (1)  Worksafe  has never  declared or paid a cash  dividend on its Common
Stock.  It is the policy of the Board of Directors to retain earnings for use in
Worksafe's  operations.  In addition,  Worksafe is  prohibited  from paying such
dividends  based on its loan agreement  with Congress.

     (2) Adjusted to reflect a 1 for 10 reverse stock split effective August 12,
1996.

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

Worksafe operated in the manufacturing and distribution  industry segments until
the end of its second fiscal quarter for the year ending June 30, 1999,  when it
sold its distribution  business.  Since such sale,  Worksafe  continues only its
manufacturing  operation.  For an understanding of the significant  factors that
influenced  Worksafe's  performance  during the past  three  fiscal  years,  the
following discussion should be read in conjunction with the consolidated


                                      -13-
<PAGE>


financial  statements,   including  the  related  notes  and  other  information
appearing elsewhere in this report.

Worksafe's  continuing  operations  now consist of its  manufacturing  operation
which produces  limited-use and reusable  industrial apparel and protective knit
gloves.  Worksafe maintains  facilities for warehousing and production in Puerto
Rico,  Alabama,  Mexico  (a  contractor),   Texas,  California,   Louisiana  and
Minnesota.

The  accompanying  financial  statements  for  fiscal  1999,  and 1998 have been
restated to reflect the former distribution division as a discontinued operation
and  Management's   Discussion  and  Analysis   discusses  only  the  continuing
operations.

Results of Operations

Fiscal 2000 Compared to Fiscal 1999

Net sales for fiscal 2000 were $27,101,000 as compared to $24,094,000 for fiscal
1999,  an increase of 12.5%.  This  increase in fiscal 2000 was primarily due to
increased  inventory to support an increase in customer  demand  resulting  from
industry consolidation,  sales of higher priced products, and the realization of
additional  sales  volume from  focusing  marketing  efforts in new and existing
markets and industry segments.

Gross profit of  $3,055,000,  or 11.3% of net sales,  for fiscal 2000  decreased
from the $3,434,000,  or 14.3% of net sales,  for fiscal 1999.  These decreases,
both in amount and as a percentage  of net sales,  were mainly due to a negative
inventory  discrepancy of $1,350,000,  or 5% of net sales, between the Company's
physical  inventory count and the amount  recorded on the general ledger,  which
was  discovered  in connection  with the  completion of the fiscal 2000 year-end
closing,  which has been  charged to cost of goods  sold.  Worksafe  has engaged
forensic  consultants  to  assist  in the  determination  of the  cause  of this
discrepancy.  This  investigation is presently ongoing.  However,  Worksafe does
have  $1,000,000 of insurance  coverage for employee  theft and  $1,000,000  for
third party theft. Worksafe has not yet filed a claim against its policies,  but
has notified the applicable carriers of its intention to file a claim,  although
there can be no assurance  that Worksafe will be awarded any benefit as a result
of any claim filed. In addition, Worksafe has made certain managerial changes at
its manufacturing  facilities,  and has hired outside  consultants to review the
operational structure for potential cost savings measures.

Selling,  general and administrative expenses for the fiscal year ended June 30,
2000  were  $4,059,000,  or  15.0%  of  net  sales,  compared  to  approximately
$2,915,000,  or 12.1% of net sales,  for the prior fiscal year. These increases,
both in amount and as a  percentage  of net sales,  were mainly due to increased
freight rates and fuel surcharges, increased sales orders on which Worksafe pays
the  freight,  increased  advertising  to support  sales  growth  and  increased
commissions and salaries.

Interest  expense was  $683,000 for fiscal  2000,  an increase of $119,000  when
compared to fiscal 1999. This increase was due to higher average borrowings from
Congress as well as higher  interest  rates in fiscal 2000 as compared to fiscal
1999.

Fiscal 1999 Compared to Fiscal 1998

Net sales for fiscal  1999,  were  $24,094,000  as compared to  $24,807,000  for
fiscal  1998, a decrease of 2.9%.  This  decrease in sales in fiscal 1999 was in
large part due to the fact that  manufacturing  inventory,  which normally would
have been sold directly to customers  during the second half of fiscal 1999, was
instead  transferred as part of the second quarter  transaction with Arbill, who
in turn sold the  inventory to their  customers.  In  addition,  in prior years,
Worksafe  realized  as part of its  manufacturing  sales,  the  sales  price  to
end-users.  Since the sale to Arbill of the  discontinued  operation,  the sales
price realized was the price to Arbill, a distributor,  where the sales price is
lower than the price to the end-user.

Worksafe's gross margin decreased to 14.3% for fiscal 1999 from 16.8% for fiscal
1998. These reductions were


                                      -14-
<PAGE>


the continuing results of the competitive environment in the marketplace as well
as the lower  margins on sales to  distributors  as opposed to  end-users.  In a
continued  effort to increase  margin levels,  Worksafe  continues to take major
steps to reduce overhead  expenses,  i.e., by producing more products in Mexico,
and increasing efficiencies in material utilization.

Selling,  general and administrative  expenses for the year ended June 30, 1999,
were  approximately  $2,915,000,  12.1%  of  sales,  compared  to  approximately
$3,391,000,  13.7% of sales,  for the same period last year.  This decrease as a
percentage  of sales was  mainly due to lower  salaries  and  related  benefits.
Worksafe took  advantage of more vendor  rebates in fiscal 1999, due to improved
cash availability.

Interest  expense was  approximately  $563,000 for fiscal  1999,  an increase of
approximately $2,000 when compared to fiscal 1998.

Income  from  continuing  operations  for fiscal  1999  decreased  to $29,000 as
compared to $256,000 for fiscal 1998.  This  decrease was a direct result of the
aforementioned decrease in sales and gross margins.


                                      -15-
<PAGE>


Liquidity and Capital Resources

As of June 30,  2000,  Worksafe  had a working  capital  deficit of  $552,000 as
compared to working capital of $850,000 as of June 30, 1999. The working capital
deficit is primarily  the result of the  $1,671,000  net loss incurred in fiscal
2000. A significant  factor giving rise to the fiscal 2000 net loss relates to a
$1,350,000 inventory discrepancy that management believes occurred in the fourth
quarter.  Management  intends  to  file a  claim  with  its  insurance  carriers
regarding this inventory  discrepancy,  however, there can be no assurance as to
the amount of recovery, if any, resulting from such claim.

Worksafe  has a  line  of  credit  agreement  (the  "Agreement")  with  Congress
Financial  Corporation  ("Congress"),  which expires in October  2002.  The line
provides for borrowings of up to $8,000,000,  with interest  payable  monthly at
 .75% in excess of prime  (9.5% as of June 30  2000),  and an unused  line fee of
1/4% per year. The limits on borrowings are 85% of eligible accounts  receivable
and 55% of eligible  inventory.  The maximum  amount  Worksafe can borrow on the
inventory  portion is $3,600,000.  The amounts  outstanding under the line as of
June 30, 2000 and June 30, 1999, were  approximately  $6,564,000 and $5,699,000,
respectively.  The loan is  subject  to certain  working  capital  and net worth
requirements and is  collateralized by all of the assets of Worksafe (except for
the Huntington Property,  which is subject to a first mortgage of $650,000). The
Agreement  prohibits  the payment of cash  dividends.  Worksafe is in  technical
default of certain loan  covenants  contained in the  Agreement  with  Congress,
whereby Congress has the right to demand  repayment.  To date,  Congress has not
demanded  repayment.  Should Congress demand  repayment of the amounts due under
the line, the mortgage on the Huntington Property would be in default and become
due and payable as well.

Congress  has been  advised  of the net loss and  technical  defaults  that have
caused Worksafe's  current negative working capital position.  While there is no
formal  agreement,  Congress  has  been  providing  Worksafe  with an  overdraft
facility,  and Worksafe has been in engaged in ongoing discussions with Congress
in an effort to obtain  additional  increases in availability.  Worksafe is also
considering  alternative  financing  sources  such as  strategic  investors  and
lenders.  There  can  be  no  assurance  that  Congress  will  not  declare  the
indebtedness  immediately  due payable,  and that there will be other sources of
financing for Worksafe.

Management  has been  developing a broad  operational  plan,  which provides for
personnel   reductions,   alternative  sources  of  lower  cost  raw  materials,
consolidation  of certain  manufacturing  operations,  reconfiguration  of sales
territories  and lower  sales  commissions.  Management  believes  that with the
successful execution of this plan, and the necessary financing arrangement, they
will have  sufficient  working capital to continue in operations for the next 12
months.  However, there can be no assurance that Worksafe will be able to obtain
the necessary  financing,  at favorable  terms,  needed to implement  this plan.
Additionally,  even with the necessary financing,  due to uncertainties involved
in the  execution  of this  plan,  many of which  are  outside  the  control  of
Worksafe,  there can be no assurance that Worksafe will be able to  successfully
implement this plan. As a consequence, Worksafe's independent public accountants
have  included a additional  paragraph in their audit opinion with regard to the
uncertainty as to Worksafe's ability to continue as a going concern.

Net cash used in operating  activities was  principally a result of the net loss
incurred during fiscal 2000.

Cash flows used in investing  activities was a result  purchases of property and
equipment. Worksafe has no material commitments for capital expenditures.

Cash flows  provided by financing  activities  were  principally a result of net
borrowings of from Congress.

On  September 9, 1999,  the Board of  Directors of Worksafe  approved a buy-back
plan of up to 320,000 shares of Worksafe's common stock to be purchased over the
next two years at the discretion of Worksafe.  Congress has authorized  Worksafe
to expend up to $400,000  for such  purchase.  No shares have been  purchased to
date.

At the present time, Worksafe, together with a variety of defendants, is a party
to various  asbestos-related  lawsuits involving a number of plaintiffs alleging
damages from exposure to asbestos products sold by Worksafe.


                                      -16-
<PAGE>


Worksafe  may  become  a party to  additional  asbestos-related  actions  in the
future. Worksafe is also party to a non-asbestos product liability action. While
as  indicated  in Item 3.  Legal  Proceedings,  of this  Form  10-K,  legal  and
settlement costs to Worksafe have not been material to date, Worksafe cannot, at
this  time,  determine  the  outcome  of these  uncertainties  which may have an
adverse effect upon its future liquidity.

FORWARD LOOKING STATEMENTS

From time to time,  information  provided by Worksafe or statements  made by its
employees, or information provided in it filing with the Securities and Exchange
Commission may contain  forward-looking  information.  Any statements  contained
herein or  otherwise  made that are not  statements  of  historical  fact may be
deemed to be forwarded-looking  statements.  Without limiting the foregoing, the
words "believes", "expects", "anticipates",  "plans" and similar expressions are
intended  to  identify  forward-looking  statements.  Worksafe's  actual  future
results may differ  materially from those projections or statements made in such
forward-looking  information  as a result of  various  risks and  uncertainties,
including, but not limited, to the following.

RISKS

Worksafe is a party to approximately 5,000 cases involving  approximately 18,000
plaintiffs  as of  June  30,  2000  with  respect  to  asbestos  litigation  and
additional  asbestos  actions continue to be brought against it. During the year
ended June 30, 2000 approximately 1,700 asbestos actions were instituted against
Worksafe  concerning  approximately  10,500  plaintiffs and additional  asbestos
actions are  anticipated  in the future.  To date,  Worksafe  believes  that its
insurance  coverage has been adequate for those actions  previously  terminated,
but there can be no assurances that such coverage


                                      -17-
<PAGE>


will continue to be adequate in the future.  Worksafe is unable to ascertain the
total extent of its insurance  applicable to asbestos  claims  against it or the
extent to which its  insurance  carriers  will  provide  coverage in the future.
There can be no  assurances  that asbestos  litigation  will not have an adverse
affect upon Worksafe.  For a more complete discussion on asbestos litigation and
Worksafe's  insurance  coverage,  reference is made to Item 3 of this Form 10-K,
and future filings under Forms 10-Q and Forms 10-K.

Worksafe has  competitors  that have greater  financial,  management,  sales and
technical  resources  than  Worksafe.  Worksafe's  success  also  depends  to  a
significant  degree  on the  contributions  of its key  management.  The loss of
services of one or more key members of management  could have an adverse  affect
upon Worksafe.  Worksafe is also  dependent upon Dupont which supplies  Worksafe
with  Tyvek  (R)  which is used for  various  lines  of  Worksafe's  limited-use
products.  Management  believes  that its  current  relationship  with Dupont is
satisfactory.  Loss of Dupont as a  supplier  of Tyvek (R) would have a material
adverse effect on Worksafe's  operations.  Worksafe is also required to maintain
substantial  inventory  for  its  operations  in  order  to meet  the  immediate
requirements of its customers who require products on short notice. There can be
no assurances that Worksafe will be able to maintain  sufficient  inventories or
that  Worksafe will not return to period where there is not  sufficient  working
capital to maintain its inventories to meet the needs of its customers.

Worksafe also enjoys the benefits of various tax incentives  with respect to its
operations  in Puerto Rico which are  described in Item 1 of Part I of this Form
10-K. As Puerto Rico's tax  exemptions  are reduced or expired,  Worksafe may be
required  to pay taxes on income  earned in Puerto  Rico.  Worksafe is unable to
predict the amount of such impact after such exemptions are reduced or expire.

Due to the  foregoing,  the  market  price of  Worksafe's  Common  Stock  may be
volatile at times in response to fluctuations of Worksafe's  operating  results,
changes in analyst  earnings  estimates,  market  conditions  as well as general
conditions and other factors general to Worksafe.

Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Worksafe's  principal financial  instrument is its revolving line of credit with
Congress  that  provides for  interest at the prime rate plus .75%.  Worksafe is
affected  by market  risk  exposure  primarily  through the effect of changes in
interest  rates on amounts  payable by the Company under the  revolving  line of
credit. A significant  rise in the prime rate could materially  adversely affect
Worksafe's business,  financial condition and results of operations.  As of June
30,  2000,  an  aggregate  principal  amount  of  approximately  $6,564,000  was
outstanding  under  the  revolver.   If  principal  amounts   outstanding  under
Worksafe's  revolving line of credit  remained at this level for an entire year,
and the prime increased or decreased, respectively, by 1%, Worksafe would pay or
save,  respectively,  an additional  $65,600 in interest in that year.  Worksafe
does not utilize  derivative  financial  instruments to hedge against changes in
interest rates or for any other purpose.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the Consolidated Financial Statements annexed hereto.

Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

Not applicable.

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a)  Identification of Directors

     The  following  sets  forth the names and ages of all of the  directors  of
Worksafe:


                                      -18-
<PAGE>


       Name                       Age     Office Held
       ----                       ---     -----------
       Lawrence Densen            42      President and Chief Executive Officer
       Alan E. Densen             66
       Anthony P. Towell          69      Senior Vice President and Secretary
       Jay Rothenberg             54
       James A. Favia             67
       Charles Holzberg           65
       Dr. Bruce Friedman         42

       The Board of Directors  is divided  into two classes.  The terms of James
       Favia,  Bruce  Friedman,  and Charles  Holzberg  do not expire  until the
       annual meeting  following  fiscal year ended June 30, 2001 and when their
       successors are chosen.  The terms of office of Lawrence  Densen,  Alan E.
       Densen and Anthony P. Towell expire following the next annual meeting and
       when their successors are chosen.

(b)    Identification of Executive Officers

       The following sets forth the names and ages of all executive  officers of
       the registrant and the positions held by each:

<TABLE>
<CAPTION>
                                          Officers and                                First Elected Officer
       Name                       Age     Position Held                               of Worksafe
       ----                       ---     -------------                               ---------------------
       <S>                        <C>     <C>                                         <C>
       Lawrence Densen            42      President and Chief Executive Officer       1986
       Anthony P. Towell          69      Senior Vice President and Secretary         1989
       Arthur Wasserspring        59      Vice President of Finance and
                                          Chief Financial Officer                     1997
       Richard Boyen(1)           59      Vice President of Manufacturing             1997
</TABLE>

----------
(1)    During October, 2000 his employment was terminated by the Company.

       All of the above  executive  officers  have been elected to serve until
       the next  annual  meeting  of the  Board of  Directors  or until  their
       respective successors are elected and qualified.

(c)    Not applicable.

(d)    Lawrence Densen is the son of Alan E. Densen.

(e)    Lawrence Densen became President and Chief Executive  Officer of Worksafe
       effective  March 1,  1997.  Prior  to this  time,  he  served  as  Senior
       Vice-President and from 1986 a Vice-President of Worksafe.  He has been a
       director of Worksafe since 1986. He is the son of Alan E. Densen.

       Alan E. Densen was Senior  Vice-President  until  April 1999,  has been a
       director of Worksafe since 1958 and  Co-Chairman of the Board since March
       1997.  From  1958  through  March 1, 1997  (except  for the  period  from
       September 1993 to January 1994 when he served as Senior  Vice-President),
       he served as President and Chief  Executive  Officer of Worksafe.  He was
       also Treasurer and Chief Financial  Officer of Worksafe  through 1992. He
       is the father of Lawrence Densen.

       Anthony P. Towell is a Senior  Vice-President  and has been  Secretary of
       Worksafe  since 1993, as well as  Vice-President  and  Co-Chairman of the
       Board since March 1997. From 1992 through February  1,1997,  he served as
       Worksafe's  Vice-President  of Finance,  Treasurer,  and Chief  Financial
       Officer,  and from 1989 to 1992 he served as its Vice- President.  He has
       been a director of Worksafe since 1989. In addition, he has


                                      -19-
<PAGE>


       been a director of  Windswept  Environmental  Group,  Inc.  ("Windswept")
       (formerly  Tradewinds,  Inc.) since November 1996. He was a director from
       1988 through September 1997 of Nytest  Environmental Inc.  ("Nytest"),  a
       hazardous waste testing  company.  Mr. Towell was a director of Ameridata
       Technologies,  Inc.  ("Ameridata"),  a provider of computer  products and
       services,  from 1991 to 1996.  Since January 1998,  Mr. Towell has been a
       director of GulfWest  Oil  Company,  an oil  exploration  and  production
       company.  The common  stock of  Windswept  and  GulfWest  Oil Company are
       registered under Section 12(g) of the Securities and Exchange Act of 1934
       (the "Exchange  Act"), and the common stock of Ameridata and GulfWest Oil
       Company were registered  respectively  under Section 12(g) and (b) of the
       Exchange Act.

       Jay Rothenberg has been a director of Worksafe since February 2000. He is
       President  of  Palm  Sales  Associates,  a  manufacturing  representative
       company selling various  industrial  products.  He devotes only a limited
       portion of his time to the business of Worksafe.

       James A. Favia has been a director of Worksafe  since July 26,  1995.  He
       has  been a  consultant  during  the  past  five  years  to  Donald & Co.
       ("Donald"), which has acted in the past as Worksafe's investment advisor.
       He is a chartered  financial  analyst  and has an MBA in finance  that he
       obtained  from New York  University  in 1959.  He devotes  only a limited
       portion of his time to the business of Worksafe.

       Charles  Holzberg has been a director of Worksafe since December 5, 1996.
       He has been President,  since 1975, of The Charles Holzberg Agency, Inc.,
       a general agent for the sale of life insurance. He devotes only a limited
       portion of his time to the business of Worksafe.

       Dr. Bruce  Friedman has been a director of Worksafe since April 16, 1997.
       Since 1988,  he has served as President  of the Flower Hill  Chiropractic
       Office,  P.C.,  where he is a  chiropractic  doctor.  He  devotes  only a
       limited portion of his time to the business of Worksafe.

                      COMPLIANCE WITH SECTION 16(a) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

Section  16(a) of the  Securities  Exchange Act of 1934  requires the  Company's
executive officers and directors, and persons who beneficially own more than ten
percent of the Company's  Common Stock, to file initial reports of ownership and
reports of changes in ownership  with the  Securities  and Exchange  Commission.
Executive officers, directors and greater than ten percent beneficial owners are
required by SEC  regulations  to furnish the Company  with copies of all Section
16(a)  forms  they  file.  Based  solely on a review of the copies of such forms
furnished  to  the  Company  and  written  representations  from  the  Company's
executive  officers and directors,  the Company  believes that during the fiscal
year ended June 30, 1999,  all Section 16(a) filing  requirements  applicable to
its executive officers, directors and greater than ten percent beneficial owners
were complied with,  with the exception that the extension  during December 1999
of the  exercise  date of  warrants  exercisable  at $5.623 per  share,  held by
Lawrence Densen,  Alan E. Densen and Anthony P. Towell until March 31, 2005, was
not reported until March 2000. This delay in filing Form 4's for such extensions
was inadvertent.

Item 11.  Executive Compensation

Summary Compensation Table

The following  describes the components of the total compensation of the CEO and
each other executive  officer of the Company whose total annual salary and bonus
exceeds $100,000.


                                      -20-
<PAGE>


                           Summary Compensation Table
<TABLE>
<CAPTION>

                  Annual Compensation                                                   Long term compensation
                  -------------------                                                   ---------------------
                                                                                Awards                             Payouts
                                                                       -----------------------------      --------------------------
                                                     Other                              Securities                         All
Name and                                             Annual            Restricted       underlying        LTIP             other
principal                  Salary     Bonus          compen-           stock            options/          payouts          compen-
position          Year     ($)        ($)            sation($)         award(s)($)      SARs(#)(1)        ($)              sation($)
--------          ----     ------     -----         ----------        ---------        ----------        ------           --------
<S>               <C>      <C>       <C>             <C>               <C>               <C>               <C>              <C>
Lawrence          2000     169,838      -0-          4,200             -0-                8,000            -0-              -0-
Densen,           1999     175,409   30,000          4,200             -0-               15,000            -0-              -0-
Pres/CEO          1998     121,441      -0-          4,200             -0-                1,500            -0-              -0-

Arthur            2000     102,921      -0-            -0-             -0-                  -0-            -0-              -0-
Wasser-           1999      98,526   20,000            -0-             -0-               10,000            -0-              -0-
spring,           1998      89,988      -0-            -0-             -0-                  -0-            -0-              -0-
VP of
Finance,
Treasurer
and CFO

Richard           2000     106,167      -0-            -0-             -0-                  -0-            -0-              -0-
Boyen,            1999     104,116      -0-            -0-             -0-                  -0-            -0-              -0-
VP of             1998      96,500      -0-            -0-             -0-                  -0-            -0-              -0-
Manufacturing
Operations
</TABLE>

----------

(1)    See below for all options  granted and  exercised  during the last fiscal
       year.

       Options/SAR Grant Table

               Option/SAR Grants and Exercises in Last Fiscal Year
                      Option/SAR Grants in Last Fiscal Year
                               [Individual Grants]

<TABLE>
<CAPTION>
            Number of               Percent of                                          Potential realizable value
            securities              total options/                                      at assumed annual rates
            underlying              SARs granted       Exercise                         of stock price apprecia-
            Options/SARs            in fiscal          or base        Expiration        tion for option term
Name        granted (#)             year               price($/Sh)    Date              5%                10%
-----       --------------          ------------       ------------   -----------       ----              -----
<S>             <C>                 <C>                <C>            <C>              <C>               <C>
Lawrence
Densen,         8,000               12%                1.0625         11/04/04         $10,848           $13,689


Arthur
Wasser-
spring             --               --                    --            --               --                --


Richard
Boyen              --               --                    --            --               --                --
</TABLE>


                                      -21-
<PAGE>


               Aggregated Option/sar Exercises in Last Fiscal Year
                          And Fy-end Option/sar Values

<TABLE>
<CAPTION>
                                                     Number
                                                     of securities                     Value
                                                     underlying                        unexercised in-
                                                     unexercised                       the-money options
                  Shares                             SARs at FY-end (#)                SARs at FY-end($)
                  acquired on       Value            exercisable /                     exercisable /
Name              exercise (#)      realized ($)     unexercisable(1)                  unexercisable
-----             --------------    -----------      -------------                     -------------

<S>                  <C>               <C>            <C>                                <C>
Lawrence
Densen               --                --             191,264/68,000                     -0-/-0-

Arthur
Wasser-
spring               --                --             29,200/32,000                      -0-/-0-

Richard
Boyen                --                --             9,700/32,000                       -0-/-0-
</TABLE>

--------------
(1)    Includes all options, rights and warrants owned by such person.

       Members of the board of  directors  who are not  employees of the Company
receive a fee of $500 for each board of directors meeting attended in person.

              EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL FEATURES

       As of July 1, 1995, Lawrence Densen entered into an employment  agreement
       ("Employment Agreement") which provided for him to serve as the Company's
       Vice  President  for a term of  five  years.  Effective  March  1,  1997,
       Lawrence Densen signed a modification  agreement (the "1997  Modification
       Agreement").  The 1997 Modification  Agreement of Lawrence Densen changed
       his  position  with  the  Company  to  President.  Pursuant  to the  1997
       Modification   Agreement,   the  Company  may  terminate  his  Employment
       Agreement  as a result of  physical or mental  disability,  or failure or
       inability  to perform  required  duties for a period of six (6) months in
       any  two-year  period.  At the end of each fiscal year during the term of
       the Employment Agreement, it is automatically extended for one additional
       year to be added at the end of the then current  term of the  agreements,
       unless the Board of  Directors  determines  not to extend the  Employment
       Agreements.  Lawrence Densen may also terminate his Employment  Agreement
       upon 30 days  written  notice.  He is also  entitled to receive an annual
       bonus,  which has been waived  through June 30, 2000,  equal to 3 1/3% of
       the  Company's  earnings  before  interest  and taxes for the fiscal year
       ended June 2000 and each  fiscal year  thereafter  during the term of the
       Employment  Agreement,  and he is also  entitled to .75% of the Company's
       revenues in excess of $20.5  million  which has also been waived  through
       June 30, 2000.

The Employment  Agreement  entered into by Lawrence Densen  includes  provisions
that provide for his right to terminate  his  Employment  Agreement  and thereby
receive additional compensation,  as provided below, in the event that he is not
elected or retained as President  or as a director of the  Company;  the Company
acts to materially reduce his duties and  responsibilities  under the Employment
Agreement; the Company changes its geographic location; his base compensation is
reduced  by 10% or more;  any  successor  to the  Company  fails to  assume  the
Employment  Agreement;  any other material breach of the Employment Agreement is
not cured by the Company  within 30 days;  and a "Change of  Control"  occurs by
which a person,  other than a person who is an officer  and/or  director  of the
Company as of the effective  date of the  agreement,  or a "group" as defined in
Section 13(d)(3) of the Securities


                                      -22-
<PAGE>


Exchange  Act of  1934,  becomes  the  beneficial  owner  of 20% or  more of the
combined voting power of the then  outstanding  securities of the Company or the
composition of the board of directors changes so that officers of the Company no
longer hold a majority of the seats.

In the event that Lawrence Densen  terminates his position because of any of the
aforesaid reasons other than a "Change of Control", or if the Company terminates
his  employment in any way that is a breach of the  Employment  Agreement by the
employer,   he  shall  be  entitled  to  receive,  in  addition  to  his  salary
continuation,  a cash  payment  equal to his total base  salary  plus  projected
expenses and bonuses for the  remainder of the term thereof,  payable  within 30
days of termination and all stock options, warrants and other stock appreciation
rights granted by the Company,  with the exception of qualified  incentive stock
option plans, to them shall become immediately  exercisable at an exercise price
of $0.10 per share.  In the event that he either  owns or is entitled to receive
any unregistered securities of the Company, than the Company shall register such
securities.  In the event that there is a "Change of Control",  Lawrence  Densen
shall be paid within 30 days thereof a one-time bonus equal to his total minimum
base salary for the next three years.

Arthur Wasserspring, Vice President of Finance and Richard Boyen, Vice President
of  Manufacturing  Operations each have employment  agreements with the Company.
The agreements each terminate January 31, 2002 and  automatically  continues for
an additional year to year thereafter, unless canceled by either party, at least
a year in advance.  Each  agreement  provides  that the employee  shall have the
right to terminate his employment  within six months of the withdrawal  from the
Company's  board of  directors of a majority of the board as  constituted  as of
February 1, 1997,  other than by reason of a voluntary  resignation or demise of
such  directors and receive a one-time bonus equal to one dollar less than three
times  the  present  value of the  base  amount  of the  employee's  salary,  as
determined  in  accordance  with Section 280G of the Internal  Revenue  Code, as
amended.  Each  agreement  also  provides  that the employee may  terminate  his
agreement and receive his compensation  until the end of the agreement,  and for
the vesting of all options and warrants,  if the employee is not retained in his
position as officer, his duties are immediately reduced, the geographic location
of where his duties are performed are changed,  any successor  employer does not
assume their  agreements or a material  breach of the agreement by the employer.
The Company  terminated  Richard  Boyen's  employment for cause during  October,
2000. This may give rise to a claim by Richard Boyen for damages.


                                      -23-
<PAGE>


Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

       (a) The following table sets forth, as of October 24, 2000, the ownership
with  respect  to each  person  known to own  beneficially  more  than 5% of the
Company's common stock:

<TABLE>
<CAPTION>
                           Name and Address of                Amount and Nature of               Percent
Title of Class             Beneficial Owner                   Beneficial Owner(1)                of Class(1)
--------------             --------------------               -------------------                -----------

<S>                        <C>                                <C>                                <C>
Common Stock               Lawrence Densen                    296,814(2)                         16%
$0.12 par value            130 W. 10th Street
                           Huntington Station, NY

Common Stock               Alan E. Densen                     258,566(2)                         14%
$0.12 par value            130 W. 10th Street
                           Huntington Station, NY

Common Stock               Anthony P. Towell                  289,266(2)                         16%
$0.12 par value            130 W. 10th Street
                           Huntington Station, NY
</TABLE>

(1)    Beneficial  ownership is determined  in accordance  with Rule 13d-3 under
       the Securities Exchange Act of 1934.

(2)    Includes  100,000 shares of Common Stock for each Messrs.  L. Densen,  A.
       Densen,  and A.  Towell,  who are  each  trustees  under a  voting  trust
       agreement  dated April 17, 1997,  (the "Voting Trust  Agreement")  by and
       among Eastco Glove  Technologies,  Inc.,  the Company,  Steven Robins and
       Phillip Robins. The Voting Trust Agreement was a condition to the closing
       of a stock exchange  agreement  (the "Stock  Exchange  Agreement")  dated
       April 17,  1997,  by and  among  Eastco  Glove  Technologies,  Inc.,  the
       Company, Steven Robins and Phillip Robins. Pursuant to the Stock Exchange
       Agreement and the Voting Trust Agreement, 100,000 shares of the Company's
       Common  Stock  were  issued,  said  shares  being  issued in the names of
       Lawrence  Densen,  Alan E. Densen and Anthony P. Towell as trustees until
       the five (5) year term of the voting  trust  expires or Steven  Robins or
       Phillip Robins desires to sell the shares after one year pursuant to Rule
       144 of the Securities Act of 1933.


                                      -24-
<PAGE>


(b) The following  table sets forth as of October 24, 2000, the number of shares
of Common Stock owned by each of the present directors of the Company,  together
with certain information with respect to each:

                                                                      Shares
                               Director         Beneficially          Percent
Name                           Since            Owned  (1)            (1)
----                           -----            -----------           ------
Lawrence Densen                1986             296,814(2)            16%

Alan E. Densen                 1958             258,566(2)            14%

Anthony P. Towell              1989             289,266(2)            16%

Jay Rothenberg                 1999                9,000               *

James Favia                    1995               22,000               *

Charles Holzberg               1996               20,000               *

Dr. Bruce Friedman             1997               19,000               *

-------------------
*    Less than 1%

(1)    Beneficial  ownership is determined  in accordance  with Rule 13d-3 under
       the Securities Exchange Act of 1934.

(2)    Includes  100,000 shares of Common Stock for each Messrs.  L. Densen,  A.
       Densen,  and A.  Towell,  who are  each  trustees  under a  voting  trust
       agreement  dated April 17, 1997,  (the "Voting Trust  Agreement")  by and
       among Eastco Glove  Technologies,  Inc.,  the Company,  Steven Robins and
       Phillip Robins. The Voting Trust Agreement was a condition to the closing
       of a stock exchange  agreement  (the "Stock  Exchange  Agreement")  dated
       April 17,  1997,  by and  among  Eastco  Glove  Technologies,  Inc.,  the
       Company, Steven Robins and Phillip Robins. Pursuant to the Stock Exchange
       Agreement and the Voting Trust Agreement, 100,000 shares of the Company's
       Common  Stock  were  issued,  said  shares  being  issued in the names of
       Lawrence  Densen,  Alan E. Densen and Anthony P. Towell as trustees until
       the five (5) year term of the voting  trust  expires or Steven  Robins or
       Phillip Robins desires to sell the shares after one year pursuant to Rule
       144 of the Securities Act of 1933.

As of October 24, 2000,  the directors  and  executive  officers of the Company,
nine  persons,  owned of  record  and  beneficially  a total of  714,646  shares
representing  approximately  33% of the Common Stock of the Company.  The stated
ownership of these shares assumes the exercise of 598,694  shares  issuable upon
the  exercise  of options,  rights and  warrants  exercisable  within 60 days of
October 20,  2000,  but reflects  the  ownership of the shares  described in the
preceding footnote (2) above for each of the three directors named therein, only
once.


                                      -25-
<PAGE>


Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

A group of investors (the  "Associates")  held a first mortgage on the Company's
executive  offices in Huntington  Station,  New York in the principal  amount of
approximately  $352,000 as of May 23, 2000, which was satisfied as of that date.
The wife of Anthony P. Towell, an executive officer and director of the Company,
Charles  Holzberg,  director of the Company  and the wife of Alan E.  Densen,  a
director,  together own approximately 40% thereof.  During the fiscal year ended
June 30, 2000 and prior to payment in full of the  mortgage,  the  Company  paid
Associates  $71,092 in principal  and interest on the mortgage of which  $42,769
constituted interest. The first mortgage held by Associates, which was issued in
1992 and upon which interest was being paid at the rate of 14%, was scheduled to
come due on July 1, 1997, in the amount of  approximately  $434,000.  Associates
and the Company  agreed to extend the mortgage  for five years with  interest at
12% per  annum or 3% over  prime,  whichever  is  greater.  On May 23,  2000 the
Company  obtained  a new  mortgage  from a  non-affiliate  bank and paid off the
mortgage to Associates in full.

The Company has  extended  from March 31, 2000 to March 31,  2005,  the exercise
date of  warrants  to  acquire  41,618  shares at $5.623  held by each  Lawrence
Densen, Alan E. Densen and Anthony P. Towell.

Considering the circumstances of each transaction, the Company believes that all
transactions  heretofore with officers/directors and shareholders of the Company
and their affiliates have been made, and in the future will be made, on terms no
less favorable to the Company than those available from unaffiliated parties and
will be approved by a majority of the disinterested directors.

Item 14.  EXHIBITS AND REPORTS ON FORM 8-K

(a)    The following  exhibits are incorporated by reference to the registrant's
       Registration  Statement on Form SB-2 (No. 333-09517),  as filed on August
       2, 1996, and as amended:

<TABLE>
<CAPTION>
Exhibit           Description of Exhibit
-------           ----------------------
<S>               <C>
1.01              Form of Standby Agreement (with Royce Investment Group Inc.)
3.01              Certificate of Incorporation, as amended
3.01.1            Certificate of Amendment to Certificate of Incorporation filed August 12, 1996
3.01.2            Certificate of Amendment to Certificate of Incorporation dated February 15, 1989
3.02              By-Laws
3.02.1            Amendments to By-Laws adopted September 1996
4.06              Form of Underwriters (Royce Investment Group Inc.) Warrant
10.01             Employment Agreement with Alan E. Densen, dated as of July 1, 1995
10.02             Employment Agreement with Lawrence Densen, dated as of July 1, 1995
10.03             Employment Agreement with Anthony P. Towell, dated as of July 1, 1995
10.05             Amendment to Financing Agreements with Congress Dated July 1996
10.07             Form of Modification Agreement to Employment Agreements with Alan Densen, Lawrence Densen
                  and Anthony Towell and Waiver
99.01             1996 Incentive Stock Option Plan as amended to date
99.02             1996 Non-Qualified Stock Option Plan as amended to date
99.03             Form of Warrants held by Anthony Towell dated January 31, 1994 (and whose exercise date has been
                  extended to March 31, 2005)
99.04             Form of Option Agreements granted as of January 20, 1995, with Alan Densen, Anthony Towell and
                  Lawrence Densen
99.06             Primary insurance coverage for asbestos for Worksafe
99.07             Excess insurance coverage for asbestos for Worksafe
99.08             Insurance coverage for Puerto Rico Safety Equipment Corporation for asbestos
99.09             Defense and indemnity agreement dated March 26, 1990
99.10             Defense and indemnity agreement dated May, 1991
99.11             Letters between L'Abbate & Balkan, counsel for Eastco and Wilentz, Goldman & Spitzer, counsel
</TABLE>


                                      -26-
<PAGE>


       for  plaintiffs'  attorneys,  dated February 3, 1994, and March 14, 1994,
       respectively, with respect to settlement of New York cases

The  following  exhibits are  incorporated  by reference  to  Worksafe's  Annual
Reports on Forms 10-K for the periods indicated:

For the year ended June 30, 1998:

10.01.1   Modification  to employment  agreement with Alan E. Densen dated March
          1, 1997

10.02.1   Modification to employment  agreement with Lawrence Densen dated March
          1, 1997

10.03.1   Modification  to  employment  agreement  with  Anthony P. Towell dated
          March 1, 1997

10.10     Voting Trust agreement among Eastco  Industrial  Safety Corp., Alan E.
          Densen,  Anthony Towell,  Lawrence  Densen,  Steven Robins and Phillip
          Robins dated April 17, 1997

10.11     Employment agreement with Arthur Wasserspring dated February 1, 1997

10.12     Employment agreement with Richard Boyen dated February 1, 1997

10.13     Amendment #8 to Financing  Agreements  with Congress  Financial  Corp.
          dated April 17, 1997

For the year ended June 30, 1999:

4.01      Form of Common Stock Certificate

10.16     Amendment Number 10 to line of credit agreement with Congress

10.17     Amendment Number 11 to line of credit agreement with Congress

21.01     Subsidiaries of the Registrant


                                      -27-
<PAGE>


The following  exhibit is  incorporated by reference to Worksafe's Form 10-Q for
the quarterly period ended December 31, 1998:

3.01.3    Certificate  of  Amendment  to  Certificate  of  Incorporation   filed
          December 17, 1998


The following  exhibits are  incorporated  by reference to  Worksafe's  Form 8-K
filed on January 26, 1999:

10.14     Asset Purchase  Agreement between the registrant and Arbill Industries
          Inc. dated December 14, 1998 (without exhibits and schedules)

10.15     Amendment Number 9 to line of credit agreement with Congress


The following exhibits are annexed hereto:

10.04     Accounts   Financing   Agreement   (Security   Agreement),   Covenants
          Supplement  to  Accounts  Financing  Agreement  (Security  Agreement),
          Inventory  Loan   Agreement  and  Inventory  and  Equipment   Security
          Agreement   Supplement  to  Accounts  Financing   Agreement  (Security
          Agreement) executed as of October 1, 1991,with Congress.


                                      -28-
<PAGE>


                                   SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                 WORKSAFE INDUSTRIES INC.

                 By: /s/ LAWRENCE DENSEN                 Date: November 13, 2000
                     -------------------
                       LAWRENCE DENSEN
                       President and Chief Executive Officer

                 By: /s/ ARTHUR WASSERSPRING             Date: November 13, 2000
                     -----------------------
                       ARTHUR WASSERSPRING
                       Vice President of Finance
                          and Chief Financial Officer

In  accordance  with the  Exchange  Act,  this  report  has been  signed  by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.

                 By:  /s/ LAWRENCE DENSEN                Date: November 13, 2000
                      -------------------
                        LAWRENCE DENSEN
                        Director

                 By:  /s/ ALAN E. DENSEN                 Date: November 13, 2000
                      ------------------
                       ALAN E. DENSEN
                       Director

                 By: /s/ CHARLES HOLZBERG                Date: November 13, 2000
                     --------------------
                      CHARLES HOLZBERG
                      Director

                 By: /s/ JAY ROTHENBERG                  Date: November 13, 2000
                     ------------------
                       JAY ROTHENBERG
                       Director

                 By: /s/ ANTHONY P. TOWELL               Date: November 13, 2000
                     ---------------------
                      ANTHONY P. TOWELL
                     Director

                 By: /s/ JAMES A. FAVIA                  Date: November 13, 2000
                     ------------------
                       JAMES A FAVIA
                       Director

                 By: /s/ BRUCE FRIEDMAN                  Date: November 13, 2000
                     ------------------
                       BRUCE FRIEDMAN
                       Director


                                      -29-
<PAGE>


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Worksafe Industries Inc. and subsidiaries:

We have  audited  the  accompanying  consolidated  balance  sheets  of  Worksafe
Industries Inc. (a New York  corporation) and subsidiaries (the "Company") as of
June 30, 2000 and 1999, and the related  consolidated  statements of operations,
shareholders' equity (deficit) and cash flows for each of the three years in the
period ended June 30, 2000. These financial statements and the Schedule referred
to below 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial  position of Worksafe  Industries Inc. and
subsidiaries  as of June 30, 2000 and 1999, and the results of their  operations
and their  cash flows for each of the three  years in the period  ended June 30,
2000, in conformity with accounting  principles generally accepted in the United
States.

The  accompanying  consolidated  financial  statements for fiscal 2000 have been
prepared assuming the Company will continue as a going concern.  As discussed in
Note 1 to the financial statements,  the Company has suffered a significant loss
from continuing  operations in fiscal year 2000, has negative  working  capital,
and is in technical  default of certain loan covenants  contained in its line of
credit  agreement.  These  factors raise  substantial  doubt about the Company's
ability to continue as a going  concern.  Management's  plans in regard to these
matters are  described in Note 1. The  financial  statements  do not include any
adjustments that might result from the outcome of this uncertainty.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial statements taken as a whole.  Schedule II is presented for purposes of
complying  with the  Securities  and  Exchange  Commission's  rules and is not a
required  part  of the  basic  financial  statements.  This  schedule  has  been
subjected  to the  auditing  procedures  applied  in  the  audits  of the  basic
financial statements and, in our opinion, fairly states in all material respects
the  financial  data  required to be set forth  therein in relation to the basic
financial statements taken as a whole.


                                                          /s/ARTHUR ANDERSEN LLP


Melville, New York
November 8, 2000


                                                                               1
<PAGE>


WORKSAFE INDUSTRIES INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                         June 30,
                                                                              ----------------------------
                                ASSETS                                             2000            1999
                                                                              ------------    ------------
<S>                                                                           <C>             <C>
CURRENT ASSETS:
     Cash and cash equivalents                                                $         --    $    129,352
     Accounts receivable, net of allowance for doubtful
        accounts of $80,500 and $72,500, respectively                            4,202,401       3,485,813
     Inventories                                                                 5,263,245       4,582,581
     Other current assets                                                          598,516         812,868
     Net assets of discontinued operation                                               --         205,142
                                                                              ------------    ------------
                 Total current assets                                           10,064,162       9,215,756

PROPERTY, PLANT AND EQUIPMENT, net                                               2,161,123       2,112,886
EXCESS OF COST OVER NET ASSETS ACQUIRED                                            380,865         403,547
OTHER ASSETS                                                                        75,411          73,832
                                                                              ------------    ------------
                 Total assets                                                 $ 12,681,561    $ 11,806,021
                                                                              ============    ============

                 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
     Loans payable                                                            $  6,563,839    $  5,698,642
     Accounts payable                                                            3,710,860       2,289,220
     Accrued expenses and other liabilities                                        297,980         226,580
     Current portion of long-term debt                                              43,336         151,411
                                                                              ------------    ------------
                 Total current liabilities                                      10,616,015       8,365,853

LONG-TERM DEBT                                                                     692,964         396,447
                                                                              ------------    ------------
                 Total liabilities                                              11,308,979       8,762,300
                                                                              ------------    ------------

COMMITMENTS AND CONTINGENCIES (Note 9 and 11)

SHAREHOLDERS' EQUITY (DEFICIT):
     Preferred stock, $.01 par value; authorized 1,000,000 shares;
        no shares issued and outstanding
     Common stock, $.12 par value; authorized 20,000,000 shares;
        1,686,579 shares issued and outstanding                                    202,390         202,390
     Additional paid-in capital                                                  9,844,338       9,844,338
     Accumulated deficit                                                        (8,674,146)     (7,003,007)
                                                                              ------------    ------------
                 Total shareholders' equity                                      1,372,582       3,043,721
                                                                              ------------    ------------
                 Total liabilities and shareholders' equity (deficit)         $ 12,681,561    $ 11,806,021
                                                                              ============    ============
</TABLE>


The  accompanying  notes  are an  integral  part of these  consolidated  balance
sheets.


                                                                               2
<PAGE>


WORKSAFE INDUSTRIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                         For the Years Ended June 30,
                                                   --------------------------------------------
                                                        2000            1999            1998
                                                   ------------    ------------    ------------
<S>                                                <C>             <C>             <C>
NET SALES                                          $ 27,101,030    $ 24,093,811    $ 24,807,480

COST OF GOODS SOLD                                   24,046,504      20,659,453      20,644,336
                                                   ------------    ------------    ------------

               Gross profit                           3,054,526       3,434,358       4,163,144

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES          4,058,270       2,914,617       3,390,604
                                                   ------------    ------------    ------------

(LOSS) INCOME FROM OPERATIONS                        (1,003,744)        519,741         772,540

OTHER INCOME, net                                       (15,201)        (72,768)        (44,166)

INTEREST EXPENSE                                        682,596         563,451         561,128
                                                   ------------    ------------    ------------

(LOSS) INCOME FROM CONTINUING OPERATIONS             (1,671,139)         29,058         255,578

DISCONTINUED OPERATIONS:
     Loss from discontinued operations                     --        (1,454,167)       (744,063)
     Gain on sale of discontinued operation                --           532,972            --
                                                   ------------    ------------    ------------
               Net loss                            $ (1,671,139)   $   (892,137)   $   (488,485)
                                                   ============    ============    ============

BASIC AND DILUTED PER SHARE INFORMATION:
     (Loss) Income from continuing operations      $       (.99)   $        .02    $        .15
     Loss from discontinued operations                     --              (.87)           (.44)
     Gain on sale of discontinued operation                --               .32            --
                                                   ------------    ------------    ------------
     Net loss                                      $       (.99)   $       (.53)   $       (.29)
                                                   ============    ============    ============

WEIGHTED-AVERAGE SHARES OUTSTANDING:
     Basic                                            1,686,579       1,684,246       1,683,079
                                                   ============    ============    ============
     Diluted                                          1,686,579       1,691,452       1,696,336
                                                   ============    ============    ============
</TABLE>


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


                                                                               3
<PAGE>


WORKSAFE INDUSTRIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)


<TABLE>
<CAPTION>

                                                                      Common Stock         Additional                     Total
                                                               ------------------------     Paid-In      Accumulated   Shareholders'
                                                                Shares          Amount      Capital        Deficit        Equity
                                                               -----------   ----------    -----------   -----------   -------------
<S>                                                              <C>         <C>           <C>           <C>            <C>
BALANCE, June 30, 1997                                           1,683,079   $   201,970   $ 9,807,708   $(5,622,385)   $ 4,387,293
     Net loss                                                         --            --            --        (488,485)      (488,485)
                                                               -----------   -----------   -----------   -----------    -----------
BALANCE, June 30, 1998                                           1,683,079       201,970     9,807,708    (6,110,870)     3,898,808
     Stock-based compensation                                         --            --          32,500          --           32,500
     Shares issued upon exercise of stock options                    3,500           420         4,130          --            4,550
     Net loss                                                         --            --            --        (892,137)      (892,137)
                                                               -----------   -----------   -----------   -----------    -----------
BALANCE, June 30, 1999                                           1,686,579       202,390     9,844,338    (7,003,007)     3,043,721
     Net loss                                                         --            --            --      (1,671,139)    (1,671,139)
                                                               -----------   -----------   -----------   -----------    -----------
BALANCE, June 30, 2000                                           1,686,579   $   202,390   $ 9,844,338   $(8,674,146)   $ 1,372,582
                                                               ===========   ===========   ===========   ===========    ===========
</TABLE>


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


                                                                               4
<PAGE>


WORKSAFE INDUSTRIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                                 For the Years Ended June 30,
                                                                                     ----------------------------------------------
                                                                                          2000             1999             1998
                                                                                     ------------     ------------     ------------
<S>                                                                                  <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net (loss) income from continuing operations                                    $ (1,671,139)    $     29,058     $    255,578
     Adjustments to reconcile net (loss) income from continuing operations
         to net cash (used in) provided by operating activities:
         Depreciation and amortization                                                    280,709          244,621          236,307
         Provision for losses on accounts receivable                                       12,151           46,248           16,000
         Loss on disposal of fixed assets                                                    --             16,173             --
         Stock-based compensation expense                                                    --             32,500             --
         Net changes in assets and liabilities:
              Accounts receivable                                                        (728,739)          22,441       (1,012,890)
              Inventories                                                                (680,664)       1,789,045       (1,602,036)
              Other current assets                                                        214,352         (306,981)         (49,290)
              Other assets                                                                 (1,579)         (49,038)          36,544
              Accounts payable                                                          1,421,640       (1,099,830)       1,127,056
              Accrued expenses and other liabilities                                       71,400          (54,989)          57,772
                                                                                     ------------     ------------     ------------
                    Total adjustments                                                     589,270          640,190       (1,190,537)
                                                                                     ------------     ------------     ------------
                    Net cash (used in) provided by operating activities                (1,081,869)         669,248         (934,959)
                                                                                     ------------     ------------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Acquisition of property and equipment                                               (306,264)         (97,814)        (280,888)
                                                                                     ------------     ------------     ------------
                    Net cash used in investing activities                                (306,264)         (97,814)        (280,888)
                                                                                     ------------     ------------     ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Long-term debt borrowings                                                            650,000             --               --
     Long-term debt repayments                                                           (461,558)        (268,053)        (274,320)
     Borrowings under line of credit                                                   15,233,050       31,095,163       35,919,028
     Repayments under line of credit                                                  (14,367,853)     (33,586,363)     (33,146,861)
     Proceeds from exercise of stock options                                                 --              4,550             --
                                                                                     ------------     ------------     ------------
                    Net cash provided by (used in) financing activities                 1,053,639       (2,754,703)       2,497,847
                                                                                     ------------     ------------     ------------

Net cash (used in) provided by continuing operations                                     (334,494)      (2,183,269)       1,282,000
Net cash provided by (used in) discontinued operations                                    205,142           (4,218)      (1,171,133)
Net cash provided by sale of discontinued operations                                         --          2,093,714             --
                                                                                     ------------     ------------     ------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                     (129,352)         (93,773)         110,867

CASH AND CASH EQUIVALENTS, beginning of year                                              129,352          223,125          112,258
                                                                                     ------------     ------------     ------------

CASH AND CASH EQUIVALENTS, end of year                                               $       --       $    129,352     $    223,125
                                                                                     ============     ============     ============

SUPPLEMENTAL CASH FLOW INFORMATION:
     Cash paid during the year for -
         Interest                                                                    $    695,343     $    779,443     $    879,406
                                                                                     ============     ============     ============
         Income taxes                                                                $      5,430     $      3,832     $      8,454
                                                                                     ============     ============     ============
</TABLE>


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


                                                                               5
<PAGE>


WORKSAFE INDUSTRIES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000


1.   BUSINESS AND ORGANIZATION

Worksafe  Industries  Inc. and  subsidiaries  (the  "Company")  is a corporation
organized  and  existing  under the laws of the State of New York,  having  been
incorporated  since May 15,  1958.  The  Company  manufactures  limited-use  and
reusable  clothing  and  safety  products  sold to  distributors  for end use by
manufacturers, utilities, hospitals, glass handlers and others. Products include
headwear,  hoods,  coveralls,  aprons, lab coats, gloves, and suits for handling
hazardous materials. Most sales come from disposable apparel made of E.I. DuPont
DeNemours  Company's  Tyvek(R),  a spun  bonded  polyolefin.  Products  made  of
Tyvek(R) accounted for approximately 70%, 67% and 75% of net sales for the years
ended  June 30,  2000,  1999 and  1998,  respectively.  The  Company  has  sales
representatives  and  independent  distributors  in the United States and Puerto
Rico.

The  Company  has  incurred  a net  loss of  $1,671,139  in  fiscal  2000 and an
unaudited  loss of  approximately  $268,000 in the first quarter of fiscal 2001.
The net loss was primarily due to a negative inventory discrepancy,  between the
Company's  physical  inventory  count and the  amount  recorded  on the  general
ledger,  which was  discovered in connection  with the  completion of the fiscal
2000 year-end closing. Management believes that this discrepancy occurred in the
fourth  quarter.  The  Company  is  currently  investigating  the  cause of this
discrepancy  and has notified its insurance  carriers of its intention to file a
claim,  although  there can be no assurance that the Company will be awarded any
benefit as a result of any claim filed. The Company has negative working capital
and  negative  cash  flows  from  operations.  As a result,  the  Company  is in
technical  default of certain  loan  covenants  contained  in its line of credit
agreement with Congress Financial Corporation ("Congress"), whereby Congress has
the right to demand  repayment  of all amounts  outstanding  under the line.  To
date, Congress has not demanded repayment.

Congress  has been  advised  of the net loss and  technical  defaults  that have
caused the Company's current negative working capital  position.  While there is
no formal  agreement,  Congress has been providing the Company with an overdraft
facility,  and the Company has been engaged in ongoing discussions with Congress
in an effort to obtain additional increases in availability. The Company is also
considering  alternative  financing  sources  such as  strategic  investors  and
lenders.

Management  has been  developing a broad  operational  plan,  which provides for
personnel   reductions,   alternative  sources  of  lower  cost  raw  materials,
consolidation  of certain  manufacturing  operations,  reconfiguration  of sales
territories  and lower  sales  commissions.  Management  believes  that with the
successful execution of this plan, and the necessary financing arrangement, they
will have  sufficient  working capital to continue in operations for the next 12
months.  However,  there can be no  assurance  that the Company  will be able to
obtain the necessary  financing,  at favorable  terms,  needed to implement this
plan.  Additionally,  even with the necessary  financing,  due to  uncertainties
involved in the execution of this plan, many of which are outside the control of
the  Company,  there  can be no  assurance  that  the  Company  will  be able to
successfully  implement this plan. These factors raise  substantial  doubt as to
the Company's ability to continue as a going concern.

2.   SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The  consolidated   financial   statements  include  the  accounts  of  Worksafe
Industries  Inc.  and its  subsidiaries,  all of  which  are  wholly-owned.  All
significant  intercompany  balances and  transactions  have been  eliminated  in
consolidation.

Cash and Cash Equivalents

The Company  considers all highly  liquid debt  instruments  with  maturities of
three months or less to be cash equivalents.

Inventories

Inventories are stated at the lower of cost (determined on a first-in, first-out
basis) or market, which represents estimated net realizable value.


                                                                               6
<PAGE>


WORKSAFE INDUSTRIES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000


Depreciation and Amortization

Property,  plant and equipment are depreciated on a straight-line basis over the
estimated  useful  lives  of the  related  assets.  Leasehold  improvements  are
amortized on a straight-line  basis over the shorter of their  estimated  useful
lives or the remaining term of the lease.

Excess of Cost over Net Assets Acquired

The excess of cost over the net assets of a business  acquired  in April 1997 is
being  amortized on a straight-line  basis over its estimated  useful life of 20
years. In accordance with Statement of Financial  Accounting  Standards ("SFAS")
No. 121,  "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed  Of," the Company  periodically  evaluates  this asset for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying  amount may not be  recoverable.  Management  believes that there is no
impairment of this asset as of June 30, 2000.

Fair Value of Financial Instruments

The Company calculates the fair value of financial instruments and includes this
additional  information in the notes to financial statements when the fair value
is different than the book value of those financial  instruments.  When the fair
value  approximates book value, no additional  disclosure is made. Cash and cash
equivalents,  receivables, loans payable and long-term debt are reflected in the
consolidated  balance  sheets at amounts  considered by management to reasonably
approximate their fair value because of their relatively short-term  maturities,
recent incurrence or because they bear variable interest rates.

Stock-Based Compensation

The  Company  complies  with the  provisions  of SFAS No. 123,  "Accounting  for
Stock-Based  Compensation",  by continuing to apply the provisions of Accounting
Principles  Board  ("APB")  Opinion  No.  25,  "Accounting  for Stock  Issued to
Employees,"  while  providing the required pro forma  disclosures as if the fair
value method had been applied.

Comprehensive Income

The  Company   complies  with  the  provisions  of  SFAS  No.  130,   "Reporting
Comprehensive Income," which requires companies to report all changes in equity,
except those resulting from  investments by owners and  distributions to owners,
for the period in which they are recognized.  Comprehensive  income is the total
of net income and all other nonowner  changes in equity (or other  comprehensive
income)  such  as   unrealized   gains/losses   on   securities   classified  as
available-for-sale, foreign currency translation adjustments and minimum pension
liability  adjustments.  Comprehensive  and other  comprehensive  income must be
reported on the face of annual  financial  statements.  For the years ended June
30,  2000,  1999 and 1998,  there were no items that gave rise to  comprehensive
income.

Segment Information

The Company  complies with the  provisions of SFAS No. 131,  "Disclosures  about
Segments  of  an  Enterprise  and  Related  Information."  Reportable  operating
segments  are  determined  based  on  the  Company's  management  approach.  The
management  approach,  as defined by SFAS No.  131, is based on the way that the
chief operating  decision-maker  organizes the segments within an enterprise for
making operating decisions and assessing  performance.  The Company is organized
and operates in one operating segment,  the manufacturing of protective clothing
and safety products that are sold to distributors for end use by  manufacturers,
utilities,  hospitals and others. As a result,  no segment  information has been
provided for the years ended June 30, 2000, 1999 or 1998.


                                                                               7
<PAGE>


WORKSAFE INDUSTRIES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000


Earnings Per Share

In accordance with SFAS No. 128, "Earnings Per Share," basic net loss per common
share  ("Basic  EPS") is computed by dividing  net loss by the  weighted-average
number of common shares outstanding. Diluted net loss per common share ("Diluted
EPS") is computed by dividing net loss by the weighted-average  number of common
shares and dilutive common share  equivalents  and  convertible  securities then
outstanding.

Common stock  equivalents  were excluded from the computation for the year ended
June 30, 2000,  as the  inclusion of their  impact would be  anti-dilutive.  The
number of dilutive  common share  equivalents  included in diluted  earnings per
share  was  7,206  and  13,257  for the  years  ended  June 30,  1999 and  1998,
respectively.

Use of Estimates

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

Recently Issued Accounting Standards

Derivative Instruments

In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
"Accounting for Derivative  Instruments and Hedging Activities".  This statement
establishes  accounting  and  reporting  standards for  derivative  instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging  activities.  SFAS No. 133, as amended by SFAS No. 137, is effective for
all fiscal years beginning after June 15, 2000 and will not require  retroactive
restatement of prior period financial  statements.  This statement  requires the
recognition of all derivative instruments as either assets or liabilities in the
balance sheet measured at fair value.  Derivative instruments will be recognized
as gains or losses in the period of change. If certain  conditions are met where
the derivative  instrument has been designated as a fair value hedge,  the hedge
items may also be marked to market through earnings, thus creating an offset. If
the  derivative is designed and  qualifies as a cash flow hedge,  the changes in
fair value of the derivative instrument may be recorded in comprehensive income.
The Company does not presently make use of derivative instruments.

Shipping and Handling Costs

In September 2000, the Emerging  Issues Task Force ("EITF")  reached a consensus
with  respect to EITF Issue No.  00-10,  "Accounting  for  Shipping and Handling
Revenues  and Costs." The  purpose of this issue  discussion  was to clarify the
classification  of shipping  and  handling  revenues  and costs.  The  consensus
reached was that all shipping and handling billed to customers is revenue.

Further,  a  consensus  was reached  that the  classification  of  shipping  and
handling  costs is an  accounting  policy  decision  that  should  be  disclosed
pursuant to APB Opinion No. 22, "Disclosures of Accounting  Policies." A company
may adopt a policy of including  shipping  and  handling  costs in cost of goods
sold. If shipping costs are  significant  and are not included in costs of goods
sold,  a company  should  disclose  both the  amounts of such costs and the line
items on the statement of operations that included them.

This  issue  will  require  a  restatement  of  prior  periods  for  changes  in
classification.  This consensus is effective for the Company  beginning with the
fourth quarter of fiscal 2001. The Company is in the process of quantifying  the
impact of the adoption of this issue, which will not change previously  reported
(loss) income from operations or net loss.


                                                                               8
<PAGE>


WORKSAFE INDUSTRIES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000


3.   DISCONTINUED OPERATIONS

In  January  1999,  the  Company  sold  its  distribution   division  to  Arbill
Industries,  Inc.  ("Arbill"),  realizing  net cash  proceeds  of  approximately
$2,094,000.  In addition,  the Company also received a $315,000 note receivable.
This division  specialized in the  distribution  of industrial  safety  products
manufactured  by third  parties.  The sale  resulted in a gain of  approximately
$533,000.  As a result of this  transaction,  the fiscal 1999 and 1998 operating
results, net assets and cash flows of the distribution  division are reported as
a discontinued operation.

Summarized financial information for this discontinued  operation as of June 30,
1999 and 1998, and for the fiscal years then ended is as follows:

                                                       1999            1998
                                                  ------------    -------------
     Net sales                                    $  4,240,767    $   9,531,558
     Gross profit                                      569,721        1,553,008
     Loss from discontinued operations              (1,454,167)        (744,063)
     Current assets                                    205,142        4,302,161
     Total assets                                      205,142        4,325,654
     Current liabilities                                 --           1,109,821
     Net assets of discontinued operations             205,142        3,215,833

4.   INVENTORIES

Inventories consist of the following as of June 30, 2000 and 1999:

                                                      2000             1999
                                                  -----------     -------------
     Raw materials                                $   981,235     $   1,571,734
     Work-in-process                                  955,236         1,040,826
     Finished goods                                 3,326,774         1,970,021
                                                  -----------     -------------
              Total                               $ 5,263,245     $   4,582,581
                                                  ===========     =============

5.   PROPERTY, PLANT AND EQUIPMENT, NET

Property,  plant and equipment is comprised of the following as of June 30, 2000
and 1999:

<TABLE>
<CAPTION>
                                                                                       Estimated
                                                                                         Useful
                                                            2000          1999        Life in Years
                                                       -----------    -----------     -------------
     <S>                                               <C>            <C>                 <C>
     Land                                              $   382,000    $   382,000            N/A
     Building and leasehold improvements                   936,232        867,009         5 - 40
     Machinery and equipment                             2,278,193      2,144,065         3 - 10
     Furniture and fixtures                                262,115        159,196         7 - 10
                                                       -----------    -----------
                                                         3,858,540      3,552,270

     Less: Accumulated depreciation and amortization    (1,697,417)    (1,439,384)
                                                       -----------    -----------
                                                       $ 2,161,123    $ 2,112,886
                                                       ===========    ===========
</TABLE>

Depreciation and amortization expense for property,  plant and equipment for the
fiscal  years  ended June 30,  2000,  1999 and 1998  amounted  to  approximately
$258,000, $222,000 and $214,000, respectively.


                                                                               9
<PAGE>


WORKSAFE INDUSTRIES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000


6.   INCOME TAXES

The Company  records income taxes in accordance  with SFAS No. 109,  "Accounting
for Income Taxes," which requires  recognition of deferred tax  liabilities  and
assets based on  differences  between the  financial  accounting  and income tax
bases of assets and liabilities  using enacted tax rates in effect for the years
in which the differences are expected to reverse.

While SFAS No. 109  requires  the  recognition  of a deferred  tax asset for the
benefit of net operating loss carryforwards, it also requires the recognition of
a valuation allowance when it is more likely than not that such benefit will not
be realized.  As a result of the Company's  history of losses,  a full valuation
allowance,  equal to the net deferred tax assets,  has been  recorded as of June
30, 2000 and 1999.

Deferred  income  taxes  relate  to  the  following  temporary  differences  and
carryforwards as of June 30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                   2000           1999
                                                               -----------    -----------
     <S>                                                       <C>            <C>
     Deferred tax assets:
          Net operating loss carryforwards                     $ 3,192,000    $ 2,584,000
          Allowance for doubtful accounts and credits               44,000         92,000
          Tax basis adjustments to inventory                       115,000         89,000
          Other accruals                                            30,000         22,000
                                                               -----------    -----------
                                                                 3,381,000      2,787,000
                                                               -----------    -----------

     Deferred tax liabilities:
          Accelerated depreciation of property and equipment       152,000         55,000
                                                               -----------    -----------
                                                                   152,000         55,000
                                                               -----------    -----------

          Balance                                                3,229,000      2,732,000
          Less: Valuation allowance                             (3,229,000)    (2,732,000)
                                                               -----------    -----------
     Net deferred income taxes after valuation allowance       $      --      $      --
                                                               ===========    ===========
</TABLE>

Two wholly-owned  Puerto Rico-based  subsidiaries  have been granted  exemptions
from  paying  Puerto  Rico  income  taxes  under  provisions  of the Puerto Rico
Industrial Tax Exemption Act of 1963,  provided that such subsidiaries  continue
to meet the terms and  conditions of their grants.  One  subsidiary's  exemption
expired on June 30, 1999.  This  subsidiary has applied for an extension of this
exemption and is awaiting approval.  If granted,  the extension would be for ten
years and would impose an income tax rate of 5% on the taxable  income,  and may
grant the Company a 75% exemption on the corresponding  property tax,  municipal
tax and other taxes.  The second  subsidiary  has received a 90% exemption  from
Puerto  Rico  income and  property  taxes and a 60%  exemption  from Puerto Rico
municipal  income  taxes  until  June 2006.  These  subsidiaries  have  elected,
pursuant  to Section  936 of the  Internal  Revenue  Code,  to  receive  credits
equivalent to the amount of federal income taxes that would  otherwise be due on
their income.

The Omnibus Budget Reconciliation Act of 1993 (the "Act") imposes limitations on
computing the  Possession  Tax Credit under Section 936 for tax years  beginning
after 1993. In addition,  the Act makes the 100%  dividends  received  deduction
subject to the  Alternative  Minimum Tax  calculation.  The Small  Business  Job
Protection  Act of 1996  further  limits  the  Possession  Tax  Credit for years
beginning  after 2001,  with the credit being  eliminated in the years beginning
after 2005.

Dividends,  if paid by the  Puerto  Rico-based  subsidiaries,  are  subject to a
withholding tax of 10%. However,  no taxes have been provided on their aggregate
undistributed  earnings  (approximately  $194,000 as of June 30, 2000), as it is
management's intention to reinvest such earnings indefinitely.


                                                                              10
<PAGE>


WORKSAFE INDUSTRIES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000


The  following  is a  reconciliation  between  the tax  benefit  at the  federal
statutory tax rate and the effective tax rate:

<TABLE>
<CAPTION>
                                                                               For the Years Ended June 30,
                                                                       -------------------------------------------
                                                                          2000             1999             1998
                                                                       ---------        ---------        ---------
     <S>                                                               <C>              <C>              <C>
     Income tax benefit at the statutory rate                          $(568,000)       $(303,000)       $(166,000)
     Effect of net operating loss of Puerto Rico-based
       subsidiaries for which there is no current tax benefit            161,000          177,000          256,000
     Effect of domestic net operating loss for which there is no
       current tax benefit                                               407,000          126,000             --
     Benefit of utilization of net operating loss carryforwards             --               --            (90,000)
                                                                       ---------        ---------        ---------
                       Actual income tax expense                       $    --          $    --          $    --
                                                                       =========        =========        =========
</TABLE>

As of June 30,  2000,  the  Company  has net  operating  loss  carryforwards  of
approximately $8,400,000 for federal income tax purposes. The Company's domestic
operations  generated  taxable  income in  fiscal  1998,  for which it  utilized
approximately  $337,000 of net operating loss carryforwards.  Such carryforwards
expire from 2005 through 2020. As a result of the private placement  offering in
June 1996, the amount of the loss carryforwards  which can be utilized to offset
future taxable income will be limited to  approximately  $345,000 per year, plus
any loss carryforwards incurred after June 30, 1996. However, to the extent such
annual limitation is not utilized in any year, it may be further carried forward
until the carryforward would have otherwise expired.

7.   LOANS PAYABLE

Loans payable as of June 30, 2000 and 1999 are comprised of borrowings under the
Company's  line  of  credit  agreement  with  Congress   Financial   Corporation
("Congress").

The Company  amended and extended  its line of credit  agreement  with  Congress
during  June  1999.  The line,  which  expires  in October  2002,  provides  for
borrowings of up to $8,000,000  with  interest  payable  monthly at 1% above the
prime rate (9.5% as of June 30, 2000), plus an unused line fee of 1/4% per year.
Borrowings are limited to 85% of eligible accounts  receivable,  as defined, and
55%  of  eligible  inventory,  as  defined.  The  maximum  amount  of  inventory
borrowings is $3,600,000.  The loans are subject to certain  working capital and
tangible  net worth  requirements  and are  collateralized  by all assets of the
Company not previously  pledged under other loan agreements.  The loan agreement
prohibits  the payment of  dividends by the  Company.

As of June 30,  2000,  the  Company is in  technical  default  of  certain  loan
covenants  contained  in its line of credit  agreement  with  Congress,  whereby
Congress has the right to demand repayment of all amounts  outstanding under the
line. To date, Congress has not demanded repayment.


                                                                              11
<PAGE>


WORKSAFE INDUSTRIES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000


8.   LONG-TERM DEBT

Long-term debt is comprised of the following as of June 30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                                                            2000           1999
                                                                                                        --------       --------
            <S>                                                                                         <C>            <C>
            Mortgage payable, with interest at 9.15% per annum,
               collateralized by the underlying premises, improvements and fixtures (a)                 $650,000       $   --
            Mortgage payable, with interest at 12% per annum, collateralized by land,
               building and personal property (b)                                                           --          377,426
            Mortgage  payable,  with  interest  at 1 1/4% above  the  prime  rate,
               collateralized by all assets of the Puerto Rico-based subsidiaries (c)                       --           29,931
            Term loan,  with interest at 1 1/4% above the prime rate,  collateralized
               by all assets of the Company not previously pledged (d)                                      --           30,759
            Guaranteed payments for the 1997 acquisition of the glove manufacturing
               division (e)                                                                               40,500        100,167
            Other                                                                                         45,800          9,575
                                                                                                        --------       --------
                              Total                                                                      736,300        547,858
                                                                                                        ========       ========
                              Less: Current portion                                                       43,336        151,411
                                                                                                        --------       --------
                                       Noncurrent portion                                               $692,964       $396,447
                                                                                                        ========       ========
</TABLE>

     Maturities of long-term debt are as follows:

              Year Ending June 30:
                     2001                 $ 43,336
                     2002                   41,879
                     2003                   26,828
                     2004                   24,608
                     2005                  599,649
                                          --------
                           Total          $736,300
                                          ========

(a)  The  mortgage  commenced  on May  23,  2000,  and  is  payable  in  monthly
     installments  of $5,911  including  interest at 9.15% per annum,  beginning
     July 1, 2000 and  continuing  until  May 1,  2005,  with a final  principal
     payment of approximately $584,000 payable on June 1, 2005. Provided that no
     defaults occur,  the Company has the option to extend the maturity date for
     five  years.  The  proceeds  received  were  used,  in part,  to satisfy an
     existing mortgage.

     Additionally,  under  the terms of the  mortgage,  should  Congress  demand
     repayment of the line of credit  (Note 7), the Company  would be in default
     of the mortgage, which would become due and payable in full.

(b)  The  mortgage,  as  amended,  with  monthly  payments  of $6,223  including
     interest  at 12.0%  per  annum  until  July  2002,  at which  point a final
     principal payment of approximately  $275,000 was payable,  was paid in full
     in May 2000 with the proceeds  from a new  mortgage.  Approximately  38% of
     this mortgage was held by a group of investors which included the spouse of
     a certain officer and director,  the spouse of another director,  a current
     director,  and a past  director of the  Company.  Interest on the  mortgage
     aggregated  approximately $39,000,  $47,000 and $46,000 for the years ended
     June 30, 2000, 1999 and 1998, respectively.

(c)  The  mortgage  was  payable in  monthly  installments  of $7,690  including
     interest,  until  October 1999.  The funds  received were used for the 1997
     acquisition of the glove manufacturing division.

(d)  The term loan was  payable  in  monthly  installments  of $7,483  including
     interest,  until  October 1999.  The funds  received were used for the 1997
     acquisition of the glove manufacturing division.


                                                                              12
<PAGE>


WORKSAFE INDUSTRIES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000


(e)  This amount is comprised of guaranteed  payments due to two  individuals in
     connection with the 1997 acquisition of the glove  manufacturing  division.
     One  individual  is entitled to 10% of the glove  manufacturing  division's
     income before taxes, as defined,  for the five-year period  commencing July
     1, 1997, up to a maximum of $180,000, but in no event less than $18,000 per
     year. In 1997, the Company  accrued for the $90,000  minimum  payment.  The
     second individual entered into a consulting  agreement with the Company for
     the three-year  period commencing April 17, 1997, which called for a fee of
     $50,000 per year,  payable in monthly  installments.  In 1997,  the Company
     accrued for the entire  $150,000  required  payment,  the final  payment of
     which was made in fiscal 2000.  The  $240,000  aggregate  minimum  payments
     accrued were due regardless of continued  employment.  No imputed  interest
     was recorded on these payments as the effect would not have been material.

9.   SHAREHOLDERS' EQUITY

Preferred Stock

In August 1996,  the  shareholders  of the Company  approved an amendment to the
Company's   Certificate  of  Incorporation  to  authorize  1,000,000  shares  of
preferred stock. As of June 30, 2000, no preferred shares have been issued.

Common Stock

In October 1996, the Company sold, pursuant to a combination  shareholder rights
and public offering,  703,591 units at $5.00 per unit, with each unit consisting
of one share of common stock and one Class B warrant.  Each warrant entitled the
holder to purchase one share of common  stock at an exercise  price of $6.25 per
share  during the period from one year to three years after the closing  date of
the offering.  These warrants  expired in October 1999. The Company also sold to
the offering agent/underwriter, for a total value of $7.00, warrants to purchase
70,359 units. The warrants are exercisable at $6.00 per unit until October 2001.
In addition,  the Company entered into a one-year consulting  agreement with the
offering agent/underwriter for approximately $70,000.

Private Placements

In June  1996,  the  Company  issued,  in a private  placement,  10 1/2 units at
$57,000 per unit.  Each unit consists of 38,000  shares of the Company's  common
stock.  The net proceeds to the Company,  net of fees to the placement agent and
other expenses,  were approximately  $501,000. The proceeds were used to repay a
$500,000 bridge loan obtained in May 1996. In July 1996,  three additional units
were sold for net proceeds of  approximately  $165,000.  In connection  with the
foregoing transactions, the Company issued three-year warrants to purchase 2,500
shares of common  stock at $10.00  per  share,  all of which  expired in October
1999.

Other Warrants

In May 1996,  warrants to purchase  9,003 shares of the  Company's  common stock
were  granted  to  each  of  the  Company's   then  President  and  two  of  the
Vice-Presidents,  in exchange for their guarantees on over-advances by Congress.
The warrants are exercisable until February 23, 2001 at $5.35 per share.

In July 1995, the Company issued to a consulting firm, which was the employer of
a then-new  director  of the  Company,  a five-year  warrant to purchase  12,500
shares of the Company's  common stock at $12.50 per share.  This warrant expired
subsequent to June 30, 2000.

In January 1994, a corporate officer/director of the Company purchased a warrant
from a prior  lender of the  Company,  and then sold  one-third  portions of the
warrant to each of two other corporate officers of the Company.  The warrant was
for the purchase of 124,854  shares at $5.62 per share.  During fiscal 2000, the
expiration date of this warrant was extended from March 31, 2000 until March 31,
2005. This modification was immaterial to the fair value of the warrant.


                                                                              13
<PAGE>


WORKSAFE INDUSTRIES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000


Incentive Stock Option Plans

The  Company's  1992  Incentive  Stock Option Plan  provided for the granting of
options for up to 20,000  shares of the  Company's  common stock until  December
2002.  As of June 30,  2000,  options to purchase 300 shares at $27.50 per share
are  outstanding  and  exercisable.  The  Company  has  agreed  not to issue any
additional options under this plan.

The  Company's  1994  Incentive  Stock Option Plan  provides for the granting of
options for up to 10,000  shares of the  Company's  common  stock until  January
2004. As of June 30, 2000,  options to purchase 8,500 shares at $10.63 per share
are outstanding and exercisable.

In August 1996,  the  shareholders  approved the adoption of the 1996  Incentive
Stock Option Plan,  which  provides for the granting of options to key employees
for up to 300,000  shares of the  Company's  common stock until May 2006.  As of
June 30,  2000,  277,900  stock  options  were  granted to employees at exercise
prices ranging from $1.30 to $2.63, of which 241,900 are  exercisable.  Of these
options,  10,000 will vest over the next two years;  the remaining  options will
vest based upon the Company achieving certain sales and income requirements,  or
in five years, whichever is earlier.

Options granted under the incentive stock option plans must be exercised  within
such  periods,  as stated in the plans,  and in any event,  must be exercised no
later than 10 years after the date they are granted.  The plans provide that the
exercise price of the options may not be less than 100% of the fair market value
of common stock at the date of grant,  or 110% in the case of an incentive stock
option  granted to any employee  owning more than 10% of the voting power of all
classes of stock of the Company.

Transactions  under the above  Incentive  Stock Option plans are  summarized  as
follows:

<TABLE>
<CAPTION>
                                                                   June 30, 2000          June 30, 1999         June 30, 1998
                                                                 -------------------   --------------------  -------------------
                                                                            Weighted               Weighted             Weighted
                                                                             Average               Average               Average
                                                                            Exercise               Exercise             Exercise
                                                                  Shares     Price      Shares      Price     Shares      Price
                                                                 -------    --------   -------     --------  -------     -------

     <S>                                                         <C>         <C>       <C>         <C>       <C>         <C>
     Outstanding at beginning of year                            289,300     $ 2.66    239,900     $ 2.58    241,065     $ 2.66
          Granted                                                   --         --       76,200       2.19      1,400       2.58
          Forfeited                                                 (200)      2.50     (7,000)      2.50       (400)      2.25
          Exercised                                                 --         --       (3,500)      1.30       --         --
          Expired/Canceled                                        (2,400)      2.43    (16,300)      2.44     (2,165)     12.08
                                                                                                   ------    -------     ------

     Outstanding at end of year                                  286,700     $ 2.66    289,300     $ 2.66    239,900     $ 2.58
                                                                 =======               =======                ======
     Exercisable at end of year                                  250,700     $ 2.65    140,200     $ 2.83     68,300     $ 3.41
                                                                 =======               =======                ======
     Weighted-average fair value of
        options granted                                             $ --                 $2.04                 $2.34
</TABLE>

Other Stock Options

1996 Stock Options

In August 1996, the shareholders approved the adoption of the 1996 Non-Qualified
Stock Option Plan,  which provides for the granting of options for up to 300,000
shares of the Company's  stock until August 2006.  As of June 30, 2000,  180,000
non-qualified   stock   options  were  granted  to  employees   under  the  1996
Non-Qualified  Stock Option Plan at exercise  prices ranging from $2.25 to $3.44
per share, of which 158,292 are exercisable as of June 30, 2000.


                                                                              14
<PAGE>


WORKSAFE INDUSTRIES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000


1995 Stock Options

In January 1995, the Board of Directors granted, to the Company's then President
and two  Vice-Presidents,  ten-year  non-qualified  options to purchase  249,708
shares at $5.17 per share, of which 124,854 are exercisable as of June 30, 2000.
The  remaining  options  are  exercisable  after  five  years,  but  may  become
exercisable sooner upon the Company achieving certain pretax earnings targets.

Other  non-qualified  options  outstanding  and exercisable as of June 30, 2000,
under prior year grants,  aggregate 3,108 shares at exercise prices ranging from
$16.88 to $30.00 per share.

Non-qualified stock option activity is summarized as follows:

<TABLE>
<CAPTION>
                                                                   June 30, 2000          June 30, 1999         June 30, 1998
                                                                 -----------------     -------------------   ------------------
                                                                            Weighted               Weighted             Weighted
                                                                             Average               Average               Average
                                                                            Exercise               Exercise             Exercise
                                                                  Shares     Price      Shares      Price     Shares      Price
                                                                 -------    --------   -------     --------  -------     -------
     <S>                                                         <C>         <C>       <C>         <C>       <C>         <C>

     Outstanding at beginning of year                            432,816    $ 4.14     376,816    $ 3.84     395,816     $ 4.17
          Granted                                                   --        --        56,000      2.38      21,000       3.44
          Forfeited                                                 --        --          --        --       (32,000)      2.25
          Expired/Canceled                                          --        --          --        --        (8,000)      2.25
                                                                                                  ------     -------     ------

     Outstanding at end of year                                  432,816    $ 4.14     432,816    $ 4.14     376,816     $ 3.84
                                                                 =======               =======               =======
     Exercisable at end of year                                  286,254    $ 3.81     225,654    $ 4.10     159,062     $ 4.86
                                                                 =======               =======               =======
     Weighted-average fair value of options granted
                                                                    $ --                 $1.62                            $3.13
</TABLE>

The following table summarizes information about stock options outstanding as of
June 30, 2000:

<TABLE>
<CAPTION>
                                                 Options Outstanding                    Options Exercisable
                                   ---------------------------------------------    --------------------------
                                       Number         Weighted         Weighted       Number          Weighted
                                     Outstanding      Average           Average     Exercisable       Average
                                       as of          Remaining        Exercise        as of          Exercise
        Range of Exercise Prices      6/30/00      Contractual Life      Price        6/30/00          Price
        ------------------------     -----------   ----------------    ---------    -----------       --------

        <S>              <C>           <C>              <C>              <C>          <C>              <C>
        $ 1.30      -    $  1.95        25,400          0.15             $1.30         25,400          $1.30
          1.96      -       2.94       411,500          6.71              2.48        353,792           2.48
          2.95      -       4.43        21,000          7.78              3.44         21,000           3.44
          4.44      -       6.65       249,708          4.56              5.11        124,854           5.11
         10.00      -      15.01         8,500          4.56             10.63          8,500          10.63
         15.02      -      22.52         2,000          5.07             16.88          2,000          16.88
         22.53      -      33.80         1,408          4.52             29.47          1,408          29.47
</TABLE>


                                                                              15
<PAGE>


WORKSAFE INDUSTRIES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000


If the Company had elected to recognize  compensation  cost for option grants to
its  employees,  officers and directors  under the fair value method of SFAS No.
123,  rather than to continue to apply the provisions of APB Opinion No. 25, net
loss and the related per share information would have been reported as indicated
by the following pro forma amounts:

<TABLE>
<CAPTION>
     For the Year Ended June 30,                      2000           1999             1998
     -------------------------------------     -------------    -------------    --------------
     <S>                                       <C>              <C>             <C>
     Net loss:
          As reported                          $  (1,671,139)   $    (892,137)   $    (488,485)
          Pro forma                               (1,820,187)      (1,220,337)        (649,562)

     Basic and diluted net loss per share:
          As reported                          $        (.99)   $        (.53)   $        (.29)
          Pro forma                            $       (1.08)   $        (.72)   $        (.39)

</TABLE>

The fair value of each stock  option  grant is estimated as of the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions:

                                                     June 30,
                                     -------------------------------------------
                                       2000*          1999             1998
                                     ------------ --------------  --------------
     Risk-free interest rate            --            4.86%            6.56%
     Expected lives                     --            6.27               10
     Expected volatility                --            82.7%            96.2%
     Expected dividend yields           --               0%               0%


       *      There were no stock option grants during fiscal 2000.

10.  COMMITMENTS AND CONTINGENCIES

Rent

The  Company is  obligated  through  August  2004 under  several  non-cancelable
operating  leases covering  office,  factory and warehouse  facilities.  Minimum
annual rentals under such leases are as follows:

     Year Ending June 30:
     --------------------
              2001                             $    365,383
              2002                                  343,425
              2003                                  236,741
              2004                                   26,081

Rent expense,  including  month-to-month  rentals,  was approximately  $499,000,
$341,000 and  $412,000 for the fiscal years ended June 30, 2000,  1999 and 1998,
respectively.


                                                                              16
<PAGE>


WORKSAFE INDUSTRIES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000


Employment Agreements

The Company has employment  agreements,  which  commenced on July 1, 1995,  with
three of its officers.  On March 1, 1997,  these  officers were appointed to new
positions with certain  changes to their  agreements,  and two new officers were
elected.  The following is a summary of these  employment  agreements as of June
30, 2000:

<TABLE>
<CAPTION>
          Officer                                           Expiration Date       Annual Salary
          ---------------------------------------           ---------------       -------------
<S>                                                         <C>                    <C>
          President (a)                                     July 1, 2001           $  175,000
          Former Senior Vice-President (b)                  July 1, 2001           $   50,000
          Senior Vice-President and Secretary (c)           July 1, 2001           $   40,000
          Vice-President of Finance                         January 31, 2001       $  106,000
          Vice-President of Manufacturing                   January 31, 2001       $  110,000
</TABLE>

     (a)  This officer is entitled to a bonus of 3 1/3% of the Company's  income
          before  taxes and  interest and a bonus of 3/4% of net sales in excess
          of $20,500,000.

     (b)  This officer is entitled to a bonus of 3 1/3% of the Company's  income
          before taxes and interest.

     (c)  This officer is entitled to a bonus of 3 1/3% of the Company's  income
          before taxes and interest.

Each of the agreements  provides for minimum annual increases of 10%, commencing
at various dates, and has automatic renewal provisions.

In  addition,  should an unrelated  party obtain more than 20% of the  Company's
then outstanding stock, other than by transactions initiated by the Company, the
following will occur for officers (a), (b) and (c) above:

     (a)  Each will be paid a one-time  bonus equal to his  minimum  base salary
          for the next three years

     (b)  All rights (options,  warrants,  etc.) will become  immediately vested
          and exercisable

The  remaining  two  officers,  should a majority of the Board of  Directors  be
replaced,  other than by voluntary resignation or their demise,  terminate their
agreements  within six months of such occurrence and receive a one-time bonus of
three times their current salary.

All bonuses for the years ended June 30, 2000, 1999 and 1998 have been waived.

Subsequent  to June 30,  2000,  the Company  terminated  the  Vice-President  of
Manufacturing.

Stock Buy-Back Plan

In September 1999, the Company's Board of Directors  approved a buy-back plan of
up to 320,000  shares of the Company's  common stock,  to be purchased  over the
next two years at the  discretion of  management.  Congress has  authorized  the
Company to expend up to $400,000 for such  purchases.  As of June 30,  2000,  no
such shares have been purchased.

11.  PROFIT SHARING PLAN

The Company's  qualified  profit  sharing  plan,  which is provided for eligible
full-time  employees,  includes a 401(k) salary deferral feature that requires a
matching contribution from the Company of up to $500 per employee for the 401(k)
feature. It also provides for discretionary profit sharing  contributions by the
Company,  as  approved  by the  Board of  Directors.  Contribution  expense  was
approximately  $12,000,  $18,000 and $16,000 for the fiscal years ended June 30,
2000, 1999 and 1998, respectively.


                                                                              17
<PAGE>


WORKSAFE INDUSTRIES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000


12.  LITIGATION

As of June 30, 2000, the Company, together with a multitude of other defendants,
was a defendant in  approximately  5,000 lawsuits,  in actions by  approximately
18,000  first-party  plaintiffs  alleging  exposure  to  asbestos  and  products
containing asbestos sold by the Company over unspecified periods of time.

As of June 30, 2000,  and since 1981, the Company  estimates that  approximately
7,000 actions on behalf of approximately 27,000 first-party plaintiffs have been
instituted  against it for  asbestos-related  claims, and that approximately 700
actions and the claims of  approximately  3,000  plaintiffs have been terminated
(the foregoing  numbers assume the  consummation  of pending  settlements).  The
Company  estimates  that,  with  the  exception  of  defense  costs,  a total of
approximately  $2,600,000 has been agreed to in settlements to date with regards
to the terminated actions, of which all but approximately  $43,000 has been paid
by the  Company's  insurance  carriers.  At June 30, 1999,  the Company had paid
approximately  $50,000 for legal and defense costs, to counsel  appointed by the
insurance carriers to defend it.

The Company  entered  into an  agreement  with its primary  insurance  carriers,
whereby its liability is limited to 12% of the cost of the defense liability and
17% of the  settlement  claim of certain  litigation.  The  agreement,  which is
subject to the policy limitations on each insurance policy, may be terminated at
any time upon 90 days notice by any of the parties,  provided  that  termination
may not be effective  as to any asbestos  action that has already been placed on
the trial  calendar,  unless it has a  scheduled  trial date more than 12 months
from the date the notice is given. In May 1991, the Company reached an agreement
with Mount Vernon Fire Insurance  Company ("Mount  Vernon"),  one of its primary
insurance carriers,  with respect to its pending and future asbestos litigation.
Mount Vernon agreed to contribute 6.25% to the Company's defense costs and 6.25%
to its indemnity costs for so long a period of time as $100,000 in aggregate has
not been paid for indemnity  costs.  This  agreement  applies only to the period
Mount Vernon provided  insurance  coverage,  which was between April 1, 1968 and
April 1, 1969.  However,  because past results of settlements  and defense costs
are not  necessarily  indicative of future  settlements  and defense costs,  and
because,  as of this date,  management  is still unable to fully  ascertain  the
extent of insurance coverage,  neither management nor counsel is able to predict
the outcome of these matters or the range of any potential  liability that might
result.  In addition,  based on past history,  management  believes it is likely
that there will be additional asbestos actions against the Company.

To date, the claims settled by one of the Puerto  Rico-based  subsidiaries  have
been paid in full by insurance. One of the carriers covering this subsidiary has
requested a cost sharing  agreement with this subsidiary.  This request has been
disputed by the subsidiary and is currently being negotiated.

After consultation with counsel,  management feels that in the majority of these
matters,  the ultimate  liability,  if any, after available  insurance coverage,
would not have a material  adverse effect on the Company's  financial  position.
However,  there can be no assurance that the Company's  insurance  coverage will
adequately  cover  these  cases,  or that the  Company's  insurance  will  cover
punitive damages, should they be awarded.

The  Company  is party to other  product  liability  litigation  arising  in the
ordinary course of business for which management feels it has adequate insurance
coverage.


                                                                              18
<PAGE>


                                                                     SCHEDULE II

WORKSAFE INDUSTRIES INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 2000, 1999 AND 1998
(in thousands)


<TABLE>
<CAPTION>
------------------  ---------------------  ---------------------  --------------------  ------------------
   Column A              Column B                Column C              Column D            Column E
------------------  ---------------------  ---------------------  --------------------  ------------------
                                              Additions:
                         Balance at         Charged to costs                               Balance at
  Description         beginning of year       and expenses         Deductions (1)          end of year
------------------  ---------------------  ---------------------  --------------------  ------------------
<S>                            <C>                  <C>                   <C>                 <C>
    2000
    ----

Allowance for
doubtful accounts              $ 73,000             $ 12,000              $ 4,000             $ 81,000
------------------  ---------------------  ---------------------  --------------------  ------------------

    1999
    ----

Allowance for
doubtful accounts              $ 75,000             $ 46,000             $ 48,000             $ 73,000
------------------  ---------------------  ---------------------  --------------------  ------------------

    1998
    ----

Allowance for
doubtful accounts              $ 59,000             $ 16,000             $  --                $ 75,000
------------------  ---------------------  ---------------------  --------------------  ------------------
</TABLE>

(1)  Deductions  relate  to  uncollectible  accounts  charged  off to  valuation
     accounts, net of recoveries.

This schedule should be read in conjunction with the  accompanying  consolidated
financial statements and notes thereto.


                                                                              19