SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB/A3

                     ANNUAL REPORT UNDER SECTION 13 OR 15(d)
              OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended January 31, 1999         Commission File Number 1-4338

                              EAC INDUSTRIES, INC.
             (Exact name of registrant as specified in its charter)

           New York                                     21-0702336
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

      2111 Claridge Lane
        Northbrook, IL                                    60062
(Address of principal executive offices)                (Zip Code)

          Registrant's telephone number, including area code: 847-509-8657
          Securities registered pursuant to Section 12(B) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  Common Stock, $.10
par value (Title of Class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrants' knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]

Issuers revenues for the most recent fiscal year - $4,324,714.
The aggregate market value of voting stock held by non-affiliates of the
registrant as of April 30, 1999 was approximately $135,000.

Indicate by check mark whether the registrant has filed all documents and
reports required by Sections 12, 13, or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes X No ___.

As of April 30, 1999, the registrant had outstanding 2,885,521 shares of Common
Stock ($.10 par value).

                                      - 1 -


<PAGE>

                                     PART I
                                     ------

ITEM 1.   BUSINESS

The Registrant (also referred to as "EAC" or "the Company") was organized in
1958 as a New York corporation. The common stock of the Company is currently
traded on the over-the-counter market and the principal market makers are Bishop
Rosen & Company and Troster, Singer Corporation.

The Company currently has one operating subsidiary, Flexible Printed Products,
Inc. ("Flexible"). The business and certain of the assets of Flexible were
acquired on December 11, 1994. Flexible produces and prints on plastic, pre-cure
in-mold heat transfer labels for the identification and decoration of rubber and
silicone hoses, belts and tire patches. Flexible's sales were backlogged at
approximately $60,000 at January 31, 1999 and $75,000 at January 31, 1998.
Flexible believes that it can fulfill its 1999 backlog on a timely basis.
Flexible faces strong competition in its business and its competition has been
mainly on the basis of quality, service and price. Flexible employs 14 persons,
none of whom are represented by unions.

In June 1998, the Company completed the sale of substantially all of the assets
of Goodren Label Corporation (formerly Athena Packaging Inc.). Goodren Label
Corporation ("Athena"), is a wholly owned subsidiary of the Company which was in
the business of producing printed, laminated, embossed and hot stamped labels,
wraps, seals and decals for the cosmetics, pharmaceutical and health and beauty
aids industries. The aggregate sales price of $277,000 including inventory
valued at the lower of cost or market. Simultaneously with the sale, the Company
entered into a consulting agreement, valued at $75,000, with the buyer which
terminated 180 days after the closing

On March 1, 1999, the Company completed the sale of the operating assets of
Goodren Products Corporation ("Goodren"), a wholly owned subsidiary of the
Company, for a price of $400,000 plus the assumption of all trade payable
liabilities. Goodren was in the business of designing and providing
point-of-purchase advertising displays and wall decorations on semi-durable
plastic.

FINANCIAL CONDITION OF THE COMPANY
The Company's financial condition has declined from January 31, 1998. The
primary reasons for this decline were: (a) the decline in sales and gross profit
margins at Goodren and Flexible and (b) a moderate increase in the operating
overhead of the Company (EAC). The combination of the above factors has resulted
in the Company's working capital declining to $448,128 in 1999 from $755,321 in
1998. Current assets decreased to $935,125 in 1999 from $1,258,249 in 1998 and
current liabilities also decreased to $486,997 in 1999 from $502,928 in 1998.
Dues to the above factors, shareholders' equity decreased to $479,121 in 1999
from $818,132 in 1998.

IN-MOLD HEAT TRANSFER LABELS
Flexible produces and markets in-mold, pre-cure heat transfer labels to the
rubber and silicone industry primarily for identification and decoration of
hoses and belts. Other products include post cure heat transfer labels for
rubber patches, tires and other rubber and silicone products.

Flexible's products are sold nationwide primarily to rubber and silicone hose
and belt manufacturers, principally by its

                                      - 2 -

<PAGE>

in-house sales personnel. The remainder is sold by a limited number of
manufacturers' representatives.

Management believes that the total in-mold decal/label market for decorating
rubber hoses and belts is approximately $10 million with Flexible's share
estimated at approximately 15%. The Company estimates that approximately five
companies compete directly with Flexible, including the parent company of one of
its customers. Flexible is a service business which competes on the basis of its
ability to produce and deliver high quality printing on short notice.


ITEM 2. PROPERTIES

The following table shows the location of each plant or facility of the
Registrant and its subsidiaries and sets forth related information. The
properties listed below are believed adequate to serve the Company's needs for
the foreseeable future.

<TABLE>
<S>                                     <C>           <C>               <C>            <C>

                                        Approx.         Lease
                                         Area         Expiration        Annual
                                        (Sq.Ft)          Date           Rental         Principal Use
                                        -------          ----           ------         -------------
101 W. Forest Avenue
Englewood, New Jersey                   20,000          6/2000         $57,000         Manufacturing and general offices
                                                                                       for Goodren and Athena

1600 North Orangethorp Avenue
Anaheim, California                      7,500          3/2001         $41,600         Manufacturing and general office for
                                                                                       Flexible

2111 Claridge Lane
Northbrook, Illinois                       600         Month to         $7,800          Office space and headquarters
                                                       Month                            for the Company

</TABLE>

ITEM 3.   LEGAL PROCEEDINGS

There are no legal proceedings to which the Company or its subsidiaries are
subject.

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

Not Applicable

                                      - 3 -


<PAGE>

                                     PART II
                                     -------

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

The Company's stock is traded on the over-the-counter market. Bishop Rosen &
Company (212-602-0681) and Troster, Singer Corporation are the principal market
makers. As of April 30, 1999, the Company believes there were approximately
1,650 shareholders of record. No dividends have been declared or paid during the
past two fiscal years. The following table sets forth, by fiscal quarters, the
closing bid prices of the Registrant's Common Stock per share for 1999 and 1998:

              1997                                 1998
              ----                                 ----

          First Quarter      $                First Quarter       $     3/6
          Second Quarter                      Second Quarter            3/8
          Third Quarter                       Third Quarter            3/16
          Fourth Quarter                      Fourth Quarter           3/16

The volume of trading is sporadic and infrequent and the prices quoted may not
be representative.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS

CONTINUING OPERATIONS In fiscal 1999, the Company had a net loss from continuing
operations of $426,040 ($.15 per share) as compared to a net loss of $696,885
($.30 per share) in fiscal 1998. The loss for fiscal 1999 was primarily due to
lower sales and gross profit margins at Flexible. In addition, during fiscal
1999, the Company experienced a slight increase of approximately 2% in its
operating overhead. The decreased sales and gross profit, increased overhead and
the effect of the write-down resulted in a pre-tax loss of $426,040 for the
current year compared to a loss of $179,591 sustained in the previous year. In
1998, the Company reversed a deferred tax asset of $510,000 which it had
recognized in prior years, since it was determined that it was not likely that
such asset will be realized in the near future. This reversal resulted in a net
loss from continuing operations of $696,885 in 1998 compared to $426,040 in the
current year.

DISCONTINUED OPERATIONS
In June 1998, the Company completed the sale of substantially all of the assets
of Goodren Label Corporation (formerly Athena Packaging Inc.) for an aggregate
sales price of $277,000 including inventory valued at the lower of cost or
market. On March 1, 1999, the Company completed the sale of the operating assets
of Goodren Products Corporation ("Goodren") for a price of $400,000 plus the
assumption of all trade payable liabilities. See Note 2 of Notes to the
Consolidated Financial Statements for a further description of these
transactions.

                                      - 4 -

<PAGE>

For the fiscal 1999 year, these two discontinued subsidiaries reported a loss
from operations of $101,264 as compared to a loss in the prior year of $303,610.
The gain realized from the sale of the assets of Athena aggregated $87,274. The
results of the sale of Goodren's assets have not been recorded as of January 31,
1999 since this is a post-balance sheet event.

NET LOSS
Consolidated net loss for the year ended January 31, 1999 was $440,030 ($.15 per
share) compared to a loss of $1,000,495 ($.43 per share) for the previous year.


INFLATION
The Company expects inflation to be moderate and to be offset by cost reduction
programs and price increases.

FINANCIAL RESOURCES AND LIQUIDITY The Company's financial condition declined in
1999 from 1998. The Company had working capital of $448,128 as of January 31,
1999 compared to $755,321 as of January 31, 1998. The Company and its
subsidiaries are current on all of their accounts payable and accrued expenses.

In March 1996, the Company entered into an agreement to make quarterly payments
of $7,548 against a union pension withdrawal liability/shortfall (see Note 11c
of Notes to the Consolidated Financial Statements). Subsequently, on September
30, 1996, the Company and Goodren entered into a Settlement Agreement with the
Trustees of the union pension plan whereby Goodren's pension fund liability was
reduced from $560,000 to $360,000 payable in 80 equal quarterly payments of
$8,752 including annual interest at a rate of 8%. In December 1997, the Company
entered into a Hardship Settlement Agreement with the Trustees whereby it was
able to reduce its quarterly payments/obligations to $3,000 because of the
Company's poor financial condition. If the Company's financial condition should
improve so that there would be no hardship in making future payments (i.e.
payment of the withdrawal liability does not impede its ability to operate),
then the Plan may terminate the Hardship Settlement and require the Company to
make all payments due after the date of such improvement in accordance with the
original Settlement Agreement. Should this occur, then the Company's quarterly
payment would revert back to $8,752. The Company continues to make quarterly
payments of $3,000 (including interest) and believes that such payments can be
funded from cash generated by the continuing operations of Flexible. Based upon
the Company's current operating results, management believes that there is a
good likelihood that they can negotiate a permanent $3,000 per quarter payment
plan. The gains realized from these reduced payments will be recognized on a
quarterly basis under the standardws of SFAS 15, "Accounting for Debtors and
Creditors for Troubled Debt Restructuring". However, should the payments revert
back to $8,752 per quarter, the Company would accordingly cease reflecting the
gains currently being recorded quarterly in accordance with SFAS 15.

The Company believes that its cash on hand will be sufficient to fund planned
operations for at least the next 12-month period. The Company (primarily
Flexible) is anticipating capital expenditures of approximately $50,000, during
the next year. Management believes that these expenditures can be funded from
existing resources.

ITEM 7.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Index to Consolidated Financial Statements

                                                                   Page Number
                                                                   -----------
          Independent Auditors' Report                                F - 1

          Consolidated Balance Sheets                                 F - 2

          Consolidated Statements of Operations                       F - 3

                                      - 5 -

<PAGE>


          Consolidated Statement of Changes in Shareholders' Equity   F - 4
          Consolidated Statements of Cash Flows                       F - 5
          Notes to the Consolidated Financial Statements              F - 6

ITEM  8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
          ON ACCOUNTING AND FINANCIAL DISCLOSURE:

          None

                                    PART III
                                    --------

ITEM  9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS ACT

     The following table sets forth the names of the nominees for the election
to the Board of Directors, their business experience during the past five years,
their positions, if any, with EAC, their previous terms as directors and the
number of Shares of Common Stock of EAC owned beneficially by each of them as of
January 31, 1999. Each nominee's Common Stock ownership represents less than 1%
of the aggregate amount of Common Stock outstanding, except for Peter B.
Fritzsche and P. Bartley Fritzsche whose beneficial ownership represents
approximately 33% and 1% respectively of the outstanding Common Stock of the
Company.

<TABLE>
                                                                                              Common Stock
                                                                                Director   Owned Beneficially
Name                      Principal Occupation for Last 5 Years                 Since         As of 1/31/99
----                      -------------------------------------                 -----         --------------
<S>                       <C>                                                   <C>           <C>
Peter B. Fritzsche(1)     Chairman of the Board of Directors, President         1991 and        943,208(2)
     Age 64               and CEO and Assistant Secretary, EAC - July           from
                          1992 to present; Chairman of the Board of             1978-
                          Director and Assistant Secretary, EAC -               1990
                          December 1991 to July 1992; Yale University
                          Development Office, New Haven, CT - January
                          1992 to July 1994; consultant - 1990 to 1992;
                          Director of EAC - 1989 to 1990; Chairman of
                          the Board of Directors, President and CEO,
                          EAC - 1979 to 1989.

E. Donald McKenzie, Jr.   President, Supercoups, Inc. Avon, MA (printer         1994              1,000
     Age 47               of coupons) 1997 to present; Vice President -
                          Sales and Marketing, Health Tour, Inc. (agency for
                          temporary help / occupational therapists) -
                          January, 1996-1997; President Graphic Systems West
                          (manufacturers' representative for printing
                          equipment), Irvine, CA - 1991 to 1995.

John B. Millet, Jr.       President and Owner of Mohawk Metal                   1994             38,254
     Age 57               Products Co., Utica, NY (suppliers to the retail
                          petroleum industry) - since 1977.

P. Bartley Fritzsche(1)   Regional Account Manager, Neuberger &                 1994             38,000
     Age 30               Berman Management Inc., Chicago, IL.
                          Financial Services Company; John Marshall
                          Law School - 1993-1997 (LLB); Account
                          Representative, John Nuveen & Co., Chicago,
                          IL - 1991 to 1993.
</TABLE>
     (1)  Peter B. Fritzsche and P. Bartley Fritzsche are father and son.

     (2)  Includes 942,408 Shares held directly or through an IRA and 800 Shares
          held of record by Mr. Fritzsche's spouse, whose beneficial ownership
          may be attributable to Mr. Fritzsche, but which he disclaims.

                                     - 6 -
<PAGE>

ITEM 10.  EXECUTIVE COMPENSATION

     Set forth below is the compensation paid to the executive officers of the
Company and its Goodren Products Corporation subsidiary (which was sold on July
1, 1999) and for all such persons as a group:


Name and                                                     All Other
Principal Position         Year        Salary      Bonus   Compensation
------------------         ----        ------      -----   ------------

Peter B. Fritzsche        FY 1999     $132,000     $ -0-     $ -0-
Chairman and CEO          FY 1998     $132,000     $ -0-     $ -0-
                          FY 1997     $132,000     $ -0-     $ -0-

Steven Mann (1)           FY 1999     $165,697     $ -0-     $ -0-
President and Goodren     FY 1998     $179,372     $ -0-     $ -0-
Products Corp.            FY 1997     $177,398     $ -0-     $ -0-

Total                     FY 1999     $297,657     $ -0-     $ -0-
                          FY 1998     $311,372     $ -0-     $ -0-
                          FY 1997     $309,398     $ -0-     $ -0-

     (1)  Mr. Mann had an employment contract, renewable annually, which called
          for base compensation of $155,000 (subject to annual inflation
          adjustments) and a bonus equal to 5% of Goodren's total operating
          income, provided that operating income was in excess of $650,000 in
          the pertinent fiscal year. Mr. Mann was not paid a discretionary bonus
          in fiscal 1997, fiscal 1998 or fiscal 1999.

     Board members who are not employees (three presently) are paid fees equal
to $4,000 per year, plus $1,250 for each board or committee meeting attended.
Each non-employee director earned $9,000 during the fiscal year, having
attended a total of five board or committee meetings. As of September 30, 1999
Board members agreed to waive board compensation while the Company's financial
hardship situation continues.

                                     - 7 -
<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                         PRINCIPAL HOLDERS OF SECURITIES

     To the best knowledge of EAC, as of January 31, 1999 the only beneficial
owner of 5% or more of EAC's Common Stock was:


                                                        Amount
                  Principal Name and Address         Beneficially     Percent of
Class             of Beneficial Owner                   Owned            Class
-----             -------------------                   -----            -----

Common Stock      Peter B. Fritzsche                   943,208            33%
                  EAC Industries, Inc.
                  2111 Claridge Lane
                  Northbrook, Illinois  60062-8615

As of that date, all directors and officers as a group owned 1,020,462
Shares (35%).  See Item 9 above for additional information.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     See Item 9 above for relevant information.


                                    PART IV
                                    -------

ITEM 13.  EXHIBITS, FINANCIAL STATEMENTS AND REPORTS
          ON FORM 8-K

          (a)  1.  FINANCIAL STATEMENTS
                   Consolidated Financial Statements of the Registrant
                   (Included in Part II, Item 7)

               2.  EXHIBITS
                   (22) Subsidiaries of the Registrant
                        Goodren Products Corporation
                        Flexible Printed Products, Inc.
                        Athena Packaging, Inc.

                   (27) Financial Data Schedule


          (b) REPORTS ON FORM 8-K
              None

                                      -8 -


<PAGE>

                                   SIGNATURES


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

                                      EAC INDUSTRIES, INC.
                                      (Registrant)


                                      By: /s/PETER B. FRITZSCHE

                                          __________________________
                                          Peter B. Fritzsche
                                          President, Chief Executive
                                          Officer and Principal Financial
                                          and Accounting Officer


Date: May 13, 1999


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.


/s/PETER B. FRITZSCHE                                               May 13, 1999
_________________________
Peter B. Fritzsche, Director



/s/ P. BARTLEY FRITZSCHE                                            May 13, 1999
_________________________
P. Bartley Fritzsche, Director


/s/ JOHN B. MILLET, JR.                                             May 13, 1999
_________________________
John B. Millet, Jr., Director


/s/ E. DONALD MCKENZIE, JR.                                         May 13, 1999
_________________________
E. Donald McKenzie, Jr., Director

                                      - 9 -

<PAGE>

                                   SIGNATURES


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

                                      EAC INDUSTRIES, INC.
                                      (Registrant)


                                      By: __________________________
                                          Peter B. Fritzsche
                                          President, Chief Executive
                                          Officer and Principal Financial
                                          and Accounting Officer


Date: May 13, 1999


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.


_________________________                                           May 13, 1999
Peter B. Fritzsche, Director

_________________________                                           May 13, 1999
P. Bartley Fritzsche, Director

_________________________                                           May 13, 1999
John B. Millet, Jr., Director

_________________________                                           May 13, 1999
E. Donald McKenzie, Jr., Director

                                      -10-

<PAGE>

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------



To the Board of Directors
EAC Industries, Inc.
Northbrook, Illinois


We have audited the accompanying consolidated balance sheets of EAC Industries,
Inc. and subsidiaries as of January 31, 1999 and 1998 and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for the two year period ended January 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of EAC Industries, Inc.
and subsidiaries as of January 31, 1999 and 1998 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.




                                        LAZAR LEVINE & FELIX LLP


New York, New York
April 19, 1999

                                     F - 1

<PAGE>

                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                         AS OF JANUARY 31, 1999 AND 1998

                               - ASSETS (Note 6) -

<TABLE>
<S>                                                                                             <C>                <C>

                                                                                                      1999                1998
                                                                                                      ----                ----

CURRENT ASSETS:
   Cash (Note 3d)                                                                               $   467,910         $   308,539
   Accounts receivable - net of allowance for doubtful accounts of $20,000
     for 1999 and 1998 (Note 3d)                                                                    180,161             227,674
   Inventories (Notes 3e and 4)                                                                      60,041              85,055
   Prepaid taxes and expenses                                                                        20,878              30,432
   Net assets of discontinued operations (Note 2)                                                   206,135             606,549
                                                                                                -----------         -----------

TOTAL CURRENT ASSETS                                                                                935,125           1,258,249
                                                                                                -----------         -----------
PROPERTY, PLANT AND EQUIPMENT, NET (Notes 3f and 5)                                                 224,885             265,101
                                                                                                -----------         -----------
OTHER ASSETS:
   Costs in excess of net assets acquired (Note 3g)                                                 162,621             177,009
   Other assets                                                                                       4,404               -
                                                                                                -----------         -----------
                                                                                                    167,025             177,009
                                                                                                -----------         -----------
                                                                                                $ 1,327,035         $ 1,700,359
                                                                                                ===========         ===========

                                            - LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
   Accounts payable                                                                             $   143,899         $   185,451
   Accrued expenses (Note 6)                                                                        319,353             305,817
   Long-term debt - current portion (Note 7)                                                         23,745               9,460
   Income taxes payable (Notes 3h and 9)                                                              -                   2,200
                                                                                                -----------         -----------
TOTAL CURRENT LIABILITIES                                                                           486,997             502,928
                                                                                                -----------         -----------
LONG-TERM DEBT - NET OF CURRENT PORTION (NOTE 7):                                                   360,917             379,299
                                                                                                -----------         -----------
COMMITMENTS AND CONTINGENCIES  (NOTES 10 AND 11)

SHAREHOLDERS' EQUITY (NOTE 8):
   Common stock, $.10 par value; 20,000,000 shares authorized; 2,892,819
     and 2,319,285 shares issued in 1999 and 1998, respectively                                     289,282             231,929
   Capital in excess of par value                                                                10,546,048          10,504,380
   Accumulated deficit                                                                          (10,307,607)         (9,867,577)
                                                                                                -----------         -----------
                                                                                                    527,723             868,732
   Less:   Common stock in treasury, 7,298 and 7,598 shares at cost
           in 1998 and 1998, respectively                                                           (48,602)            (50,600)
                                                                                                -----------         -----------
                                                                                                    479,121             818,132
                                                                                                -----------         -----------
                                                                                                $ 1,327,035         $ 1,700,359
                                                                                                ===========         ===========
</TABLE>

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

                                      F - 2

<PAGE>

                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS



<TABLE>
<S>                                                                                                 <C>             <C>
                                                                                                        Year Ended January 31,
                                                                                                        1999            1998
                                                                                                        ----            ----


NET SALES                                                                                           $1,436,489      $ 1,669,739
                                                                                                    ----------      -----------
COSTS AND EXPENSES:
    Cost of products sold                                                                            1,058,519        1,077,519
    Selling, general and administrative expenses                                                       803,707          787,769
                                                                                                    ----------      -----------
TOTAL COSTS AND EXPENSES                                                                             1,862,226        1,865,288
                                                                                                    ----------      -----------
(LOSS) FROM OPERATIONS                                                                                (425,737)        (195,549)
                                                                                                    ----------      -----------
OTHER INCOME (EXPENSE):
    Interest expense                                                                                   (10,417)          (8,094)
    Interest and other income                                                                           10,114           24,052
                                                                                                    ----------      -----------
                                                                                                          (303)          15,958
                                                                                                    ----------      -----------

(LOSS) BEFORE PROVISION FOR INCOME TAXES                                                              (426,040)        (179,591)

    Provision for income taxes  (Notes 3h and 9)                                                          -             517,294
                                                                                                    ----------      -----------

(LOSS) FROM CONTINUING OPERATIONS                                                                     (426,040)        (696,885)
                                                                                                    ----------      -----------

DISCONTINUED OPERATIONS (Note 2):
    Loss from operations of discontinued subsidiary - net of taxes                                    (101,264)        (303,610)
    Gain on disposal of operating assets of discontinued subsidiary - net of taxes                      87,274            -
                                                                                                    ----------      -----------
                                                                                                       (13,990)        (303,610)
                                                                                                    ----------      -----------
NET LOSS                                                                                            $ (440,030)     $(1,000,495)
                                                                                                    ==========      ===========

BASIC LOSS PER SHARE  (Note 3i)
    Continuing operations                                                                               $(0.15)          ($0.30)
    Discontinued operations                                                                                -              (0.13)
                                                                                                    ----------      -----------
                                                                                                        $(0.15)          $(0.43)
                                                                                                    ==========      ===========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                                                           2,837,427        2,311,687
                                                                                                    ==========      ===========

</TABLE>

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

                                      F - 3

<PAGE>

                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<S>                                <C>            <C>           <C>              <C>               <C>           <C>

                                                                 Capital in                          Common            Total
                                   Number of        Common         Excess          Accumulated      Stock in        Shareholders'
                                     Shares         Stock          of Par            Deficit        Treasury           Equity
                                     ------         -----          ------            -------        --------           ------

Balance at January 31, 1997        2,319,285      $231,929      $10,504,380      $ (8,867,082)     $(50,600)     $   1,818,627

Net loss for the year                 -              -               -             (1,000,495)         -            (1,000,495)
                                   ---------      --------      -----------      ------------      --------      -------------
Balance at January 31, 1998        2,319,285       231,929       10,504,380        (9,867,577)      (50,600)           818,132

Sale of common stock                 573,534        57,353           41,668             -             1,998            101,019

Net loss for the year                 -               -                -             (440,030)         -              (440,030)
                                   ---------      --------      -----------      ------------      --------      -------------
BALANCE AT,
  JANUARY 31, 1999                 2,892,819      $289,282      $10,546,048      $(10,307,607)     $(48,602)     $     479,121
                                   =========      ========      ===========      ============      ========      =============
</TABLE>






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

                                      F - 4

<PAGE>

                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<S>                                                                                                  <C>
                                                                                                        Year Ended January 31,
                                                                                                        1999              1998
                                                                                                        ----              ----

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net (loss)                                                                                         $(440,030)     $(1,000,495)
  Adjustments to reconcile net (loss) to cash provided (utilized) by operating activities:
    Depreciation and amortization                                                                       65,614          100,571
    Allowance for doubtful accounts                                                                       -               4,470
    Loss (gain) on sale of fixed assets                                                                  9,812          (19,745)
    Deferred income taxes                                                                                 -             510,000
  Changes in assets and liabilities:
    Decrease (increase) in accounts and notes receivable                                                47,513          (65,589)
    Decrease (increase) in inventories                                                                  25,014          (23,129)
    Decrease in prepaid expenses                                                                         5,150            1,219
    Increase in accounts payable, accrued expenses and accrued income taxes                            386,419          122,999
    Net cash from discontinued operations                                                               27,834           97,703
                                                                                                     ---------      -----------
       NET CASH PROVIDED (UTILIZED) BY OPERATING ACTIVITIES                                            127,326         (271,996)
                                                                                                     ---------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sale of fixed assets                                                                      -             113,249
  Capital expenditures                                                                                 (20,823)          (2,773)
                                                                                                     ---------      -----------
       NET CASH (UTILIZED) PROVIDED BY INVESTING ACTIVITIES                                            (20,823)         110,476
                                                                                                     ---------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from sale of common stock                                                               101,019             -
  Payments of long-term debt                                                                           (48,151)        (149,353)
                                                                                                     ---------      -----------
       NET CASH PROVIDED (USED BY) FINANCING ACTIVITIES                                                 52,868         (149,353)
                                                                                                     ---------      -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                       159,371         (310,873)

  Cash and cash equivalents, at beginning of year                                                      308,539          619,412
                                                                                                     ---------      -----------

CASH AND CASH EQUIVALENTS, AT END OF YEAR                                                            $ 467,910      $   308,539
                                                                                                     =========      ===========

SUPPLEMENTAL CASH FLOW INFORMATION:
  Interest paid                                                                                        $29,189          $40,364
  Income taxes paid                                                                                       -              15,170

</TABLE>

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

                                      F - 5

<PAGE>

                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 1999 AND 1998


NOTE 1 -  DESCRIPTION OF THE COMPANY:

          EAC Industries, Inc., the Company, was organized in 1958 as a New York
          corporation. The Company is a holding company with, as of January 31,
          1998, three wholly owned operating subsidiaries, Goodren Products
          Corporation ("Goodren"), Flexible Printed Products, Inc. ("Flexible")
          and Athena Packaging, Inc. ("Athena"). See Note 2 for a description of
          Discontinued Operations. Flexible, currently the Company's only
          operating subsidiary, produces and prints on plastic, pre-cure in-mold
          heat transfer labels for the identification and decoration of rubber
          and silicone hoses, belts and tire patches.


NOTE 2 -  DISCONTINUED OPERATIONS:

          In June 1998, the Company completed the sale of substantially all of
          the assets of Goodren Label Corporation (formerly Athena Packaging
          Inc.) for an aggregate sales price of $277,000 including inventory
          valued at the lower of cost or market. Simultaneously with the sale,
          the Company entered into a consulting agreement with the buyer which
          terminated 180 days after the closing. The value of this agreement,
          $75,000, was included with the payment made at closing. The buyer paid
          the sales price as follows: (i) $167,000 at closing, (ii) value of
          inventory 90 days after the closing plus interest accrued at an annual
          rate of 7% and (iii) $62,500 which was to be paid 180 days after
          closing plus accrued interest at 7% per annum. As of January 31, 1999,
          all payments due had been received.

          On March 1, 1999, subsequent to the balance sheet date, the Company
          completed the sale of the operating assets of Goodren Products
          Corporation ("Goodren") for a price of $400,000 plus the assumption of
          all trade payable liabilities. The payment terms are as follows: (i)
          $200,000 at closing, (ii) $30,000 to be paid 180 days after closing
          plus interest accrued at an annual rate of 7% (iii) $50,000 to be paid
          360 days after closing plus interest accrued at an annual rate of 7%,
          (iv) $60,000 to be paid 540 days after closing plus interest accrued
          at an annual rate of 7% (v) $60,000 to be paid 720 days after closing
          plus interest accrued at an annual rate of 7%.


NOTE 3 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

          The Company's accounting policies are in accordance with generally
          accepted accounting principles. Outlined below are those policies
          considered particularly significant.

     (a)  USE OF ESTIMATES:

          In preparing financial statements in accordance with generally
          accepted accounting principles, management makes certain estimates and
          assumptions, where applicable, that affect the reported amounts of
          assets and liabilities and disclosures of contingent assets and
          liabilities at the date of the financial statements, as well as the
          reported amounts of revenues and expenses during the reporting period.
          While actual results could differ from those estimates, management
          does not expect such variances, if any, to have a material effect on
          the financial statements.

                                      F - 6

<PAGE>

                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 1999 AND 1998


NOTE 3 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED):

     (b)  BASIS OF CONSOLIDATION:

          The consolidated financial statements include the accounts of the
          Company and its operating subsidiaries. All material intercompany
          balances and transactions have been eliminated in consolidation.

     (c)  STATEMENTS OF CASH FLOWS:

          For purposes of the statements of cash flows, the Company considers
          all investments purchased with a remaining maturity of three months or
          less to be a cash equivalent.

     (d)  CONCENTRATION OF CREDIT RISK/FAIR VALUE:

          Financial instruments that potentially subject the Company to
          concentrations of credit risk consist principally of cash investments
          and accounts receivable.

          The Company and its subsidiaries maintain, at times, deposits, in
          federally insured financial institutions, in excess of federally
          insured limits. Management attempts to monitor the soundness of these
          financial institutions and feels the Company's risk is negligible.

          Concentrations of credit risk with respect to accounts receivable are
          limited.

          The carrying value of cash and cash equivalents, accounts receivable
          and accounts payable reasonably approximate fair value because of the
          short maturity of those instruments.

     (e)  INVENTORIES:

          Inventories are stated at the lower of cost or market, determined on a
          first-in, first-out basis.

     (f)  PROPERTY, PLANT AND EQUIPMENT:

          Fixed assets are reflected at cost. The Company principally uses the
          straight-line method to compute depreciation of fixed assets.
          Depreciation lives generally range from three to ten years for
          furniture and fixtures, machinery and equipment and transportation
          equipment. Buildings are being amortized over 20 years and leasehold
          improvements are amortized over the useful life of the asset or the
          term of the lease, whichever is shorter. Major renewals and
          betterments of fixed assets are capitalized while maintenance and
          repairs are expensed as incurred. Upon retirement of fixed assets, the
          related cost and accumulated depreciation are written off and any gain
          or loss is reflected in income.

                                      F - 7

<PAGE>

                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 1999 AND 1998


NOTE 3 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED):


     (g)  GOODWILL:

          Costs in excess of net assets acquired are considered goodwill and are
          being amortized over 15 years on a straight line basis. Amortization
          costs included in continuing operations were $14,388 for each of the
          years ended January 31, 1999 and 1998. Accumulated amortization as of
          January 31, 1999 and 1998 aggregated $52,379 and $37,991,
          respectively.

          The Company periodically reviews the valuation and amortization of
          goodwill to determine possible impairment by comparing the carrying
          value to the undiscounted future cash flows of the related assets in
          accordance with Statement of Financial Accounting Standard No. 121 -
          Accounting for the Impairment of Long-lived Assets and for Long-lived
          Assets to be Disposed of.


     (h)  INCOME TAXES:

          The Company accounts for income taxes using the provisions of
          Statement of Financial Accounting Standards No. 109, "Accounting for
          Income Taxes" ("SFAS No. 109") which require that the Company utilize
          an asset and liability approach for financial accounting and reporting
          for income taxes. The primary objectives of accounting for income
          taxes under SFAS No. 109 are to (a) recognize the amount of tax
          payable for the current year and (b) recognize the amount of deferred
          tax liability or asset based on management's assessment of the tax
          consequences of events that have been reflected in the Company's
          financial statements or tax returns. See also Note 9.

     (i)  INCOME PER SHARE:

          The Company reports earnings per share as required by SFAS 128
          "Earnings Per Share" ("SFAS 128"). SFAS 128 requires the presentation
          of "basic" and "diluted" earnings per share on the face of the income
          statement. Basic loss per common share is computed by dividing net
          loss by the weighted average number of common shares outstanding
          during each period.

     (j)  RECLASSIFICATIONS:

          Certain reclassifications have been made to the 1998 financial
          statements in order to conform to the 1999 presentation. These
          reclassifications relate to the disposition of assets as disclosed in
          Note 2.

                                      F - 8

<PAGE>

                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 1999 AND 1998

NOTE 3 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED):

     (k)  NEW ACCOUNTING PRONOUNCEMENTS:

          SFAS 130 "Reporting Comprehensive Income" is effective for years
          beginning after December 15, 1997 and early adoption is permitted.
          This statement prescribes standards for reporting comprehensive income
          and its components. The Company currently has no items of other
          comprehensive income.

          SFAS 131 "Disclosures About Segments of an Enterprise and Related
          Information" is effective for years beginning after December 15, 1997
          and early adoption is encouraged. The Company does not presently
          believe that it operates in more than one identifiable segment.

     (l)  IMPACT OF THE YEAR 2000 ISSUE:

          The year 2000 issue is the result of computer programs being written
          using two digits rather than four to define the applicable year. Any
          of the Company's computer programs that have date-sensitive software
          may recognize a date using "00" as the year 1900 rather than the year
          2000. This could potentially result in a system failure or
          miscalculations causing disruptions of operations, including, among
          other things, a temporary inability to process transactions, send
          invoices, or engage in other similar normal business activities. The
          Company has ensured that its software is already year 2000 compliant,
          and as such, this issue is not expected to have a material effect on
          the operations of the Company.


NOTE 4 -  INVENTORIES:

          Inventories at January 31, 1999 and 1998 consisted of the following:

                                                  1999              1998
                                                  ----              ----

               Raw materials                    $57,691           $80,055
               Finished goods                     2,350             5,000
                                                -------           -------
                                                $60,041           $85,055
                                                =======           =======

                                     F - 9

<PAGE>

                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 1999 AND 1998

NOTE 5 -  PROPERTY, PLANT AND EQUIPMENT:

          Fixed assets and accumulated depreciation at January 31, 1999 and 1998
          consisted of the following:

<TABLE>
<S>                                                              <C>              <C>
                                                                    1999              1998
                                                                    ----              ----

               Building and improvements                         $  18,543        $   8,242
               Machinery and equipment                             216,496          206,727
               Label artwork                                       150,000          150,000
               Transportation equipment                             22,275           22,275
               Furniture and fixtures                               48,922           58,844
                                                                 ---------        ---------
                                                                   456,236          446,088
               Less: accumulated depreciation and amortization     231,351          180,987
                                                                 ---------        ---------
                                                                 $ 224,885        $ 265,101
                                                                 =========        =========

</TABLE>
          For the years ended January 31, 1999 and 1998, depreciation expense
          from continuing operations aggregated $51,226 and $67,706,
          respectively.


NOTE 6 -  ACCRUED EXPENSES:

          At January 31, 1999 and 1998 accrued expenses consisted of the
          following:

                                                  1999              1998
                                                  ----              ----

               Salaries and wages            $    9,239       $    7,603
               Employee benefits                162,048          162,048
               Other                            148,066          136,166
                                             ----------       ----------
                                             $  319,353       $  305,817
                                             ==========       ==========

                                     F - 10

<PAGE>

                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 1999 AND 1998


NOTE 7 -  LONG-TERM DEBT:

     (a)  OTHER LIABILITIES:

          At January 31, 1999 and 1998 long-term liabilities included the
          following:

<TABLE>
<S>                                                                                 <C>                  <C>
                                                                                         1999                 1998
                                                                                         ----                 ----

          9.9% equipment note payable in monthly installments of
          $1,454, inclusive of interest                                              $  35,283            $  44,434

          Union pension withdrawal liability/shortfall, presently
          payable in quarterly installments of $3,000 (including
          interest at 8% per annum (see Note 11c)                                      349,379              344,325
                                                                                     ---------            ---------
                                                                                       384,662              388,759
                Less: current portion                                                   23,745                9,460
                                                                                     ---------            ---------
                                                                                     $ 360,917            $ 379,299
                                                                                     =========            =========

</TABLE>

          Aggregate maturities of long-term liabilities for the next five years
          and in the aggregate are $23,745, $25,960, $16,673, $12,007,
          $12,935 and $293,342 thereafter.


NOTE 8 -  SHAREHOLDERS' EQUITY:

          In November 1997, the Company filed a statement with the Securities
          and Exchange Commission registering 283,551 shares of its common stock
          to be issued upon exercise of the rights to subscribe for such shares,
          "the Rights Offering." Shareholders holding 100 shares of common stock
          or more at the close of business on November 10, 1997 (the record
          date) received one non-transferable Right for each share of common
          stock held. Each Right entitled the holder to purchase one share of
          Company common stock at an exercise price of $.22 per share. This
          offering closed in February 1998 and the Company realized net proceeds
          of $101,019. Simultaneously with the closing, the Company effected (i)
          a 100 to 1 reverse split of its common stock through a
          reclassification of its common stock and (ii) an immediate subsequent
          reclassification with a forward stock split pursuant to which each
          holder of the reclassified common stock would receive 99 additional
          shares of reclassified common stock. The effect of this was to
          eliminate all holders of less than 100 shares (pre-reverse split) of
          common stock, such stockholders receiving cash of $.28125 per share in
          lieu of their fractional interests.

                                     F - 11


<PAGE>

                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 1999 AND 1998


NOTE 9 -  INCOME TAXES:

          The provision for income taxes consisted of the following for the
          years ended January 31, 1999 and 1998:

<TABLE>
          <S>                                                                      <C>                <C>                     <C>
                                                                                          1999                1998
                                                                                          ----                ----
          Current:
            Federal                                                                         -           $       -
            State and local                                                                 -                7,294
                                                                                   -----------          ----------
                                                                                            -                7,294
          Deferred
            Federal, state and local                                                        -              510,000
                                                                                   -----------          ----------
          PROVISION FOR INCOME TAXES                                               $        -           $  517,294

          The components of the net deferred income tax asset, pursuant to SFAS
          109, as of January 31, 1999 and 1998 are as follows:
                                                                                          1999                1998
                                                                                          ----                ----
          Deferred tax assets:
            Accounts receivable                                                    $     6,500          $    3,700
            Inventory                                                                    3,200               2,800
            Operating loss carryforward                                              3,115,000           3,000,000

          Total deferred tax asset                                                   3,124,700           3,006,500

            Valuation allowance                                                      3,124,700           3,006,500
                                                                                   -----------          ----------
          NET DEFERRED INCOME TAX ASSET                                            $        -           $     -
                                                                                   ===========          ==========

</TABLE>

          The Company has available operating loss carryforwards for federal tax
          purposes of approximately $9,000,000. These losses expire in various
          years beginning in 2005 and may result in deferred tax assets. The
          Company had previously recorded a deferred tax asset based on the
          assumed recoverability of the net operating loss carryforward. Since
          the Company realized a significant net operating loss for the year
          ended January 31, 1998, this deferred tax asset was reversed during
          that year. The Company has provided a 100% valuation allowance against
          its deferred tax asset since it is not more likely than not that such
          asset will be realized in the near future. This allowance will be
          evaluated at the end of each year, considering both positive and
          negative evidence concerning the realizability of the asset, and will
          be increased or reduced accordingly.

          Reconciliation of the statutory Federal income tax rate to the
          Company's negative effective tax rate for the years ended January 31,
          1999 and 1998 is not meaningful and therefore not provided due to the
          reversal of the deferred tax asset.

                                     F - 12

<PAGE>

                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 1999 AND 1998

NOTE 10 - RETIREMENT PLANS:

          Goodren has a defined contribution profit sharing plan covering
          substantially all of its employees. Contributions are based on a
          percentage of each participant's compensation or a fixed annual
          contribution for union employees based on a collective bargaining
          agreement. The cost of the plan approximated $35,000 in 1998. No
          contributions were made in 1999.

          Due to the sale of Goodren's operating assets in March 1999, the
          Company is currently in the process of terminating this plan.


NOTE 11 - COMMITMENTS AND CONTINGENCIES:

     (a)  OPERATING LEASES:

          The Company and its subsidiaries lease certain administrative and
          manufacturing facilities and equipment under operating leases expiring
          at various times through 2002. Other locations are rented on a month
          to month basis. Rental and lease expense aggregated approximately
          $109,000 and $102,000 for the years ended January 31, 1999 and 1998,
          respectively.

          Future minimum rental commitments for existing operating leases and in
          the aggregate are as follows:

          Fiscal year ending January 31, 2000 -  $108,325
                                         2001 -    71,075
                                         2002 -     3,639
                                                 $183,039

     (b)  EMPLOYMENT CONTRACTS:

          The Company had an employment contract (the "Contract") with the
          President of Goodren which, after its expiration on January 31, 1994,
          was renewed automatically for successive one-year terms. The contract
          specified base compensation of $155,000 for the initial term with
          annual increases based on changes in the consumer price index. The
          contract also provided for additional compensation equal to 5% of the
          operating income of Goodren provided such operating income exceeds
          $650,000 for the fiscal year. In December 1994, Goodren entered into a
          further agreement with this executive whereby the proceeds of a newly
          purchased term life insurance policy in the amount of $250,000 will be
          paid to the spouse upon the death of this executive. As a result of
          the sale of the operating assets in March 1999, this contract has now
          been terminated.

          Flexible entered into an employment contract with its President for a
          three-year period ending December 15, 1997, subject to renewals for
          successive one-year terms. The base compensation under this contract
          was $75,000 with adjustments made annually based on changes in the
          consumer price index. The contract also provided for additional
          compensation based on annual sales revenue and/or gross profit
          performance of Flexible. The contract also covered non-compete
          provisions, availability of medical benefits and the use of an
          automobile. During the year ended January 31, 1999, this employee
          resigned thus terminating the contract.

                                     F - 13

<PAGE>

                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 1999 AND 1998


NOTE 11 - COMMITMENTS AND CONTINGENCIES:

     (c)  OTHER:

          Goodren has withdrawn from participating in the District 65 Union
          Pension Plan (the "Plan"). The withdrawal has resulted in the
          assessment of a withdrawal liability owed to the Plan by Goodren.
          During the year ended January 31, 1995, the Company accrued a reserve
          for an estimated liability of $560,000 which counsel to the Company
          believed would be payable over a period of approximately 22 years
          beginning approximately one year from the withdrawal date. In March of
          1996, the Company signed an agreement with the Plan whereby they will
          make quarterly payments of $7,548. At September 30, 1996, the Company
          and Goodren entered into a Settlement Agreement with the Trustees of
          the union pension plan whereby Goodren's pension fund liability was
          reduced to $360,000 payable in 80 equal quarterly payments of $8,752
          including annual interest at a rate of 8%. In December 1997, the
          Company entered into a Hardship Settlement Agreement with the Trustees
          whereby it was able to reduce its quarterly payments/obligations to
          $3,000 because of the Company's poor financial condition. If the
          Company's financial condition should improve so that there would be no
          hardship in making future payments (i.e. payment of the withdrawal
          liability does not impede its ability to operate), then the Plan may
          terminate the Hardship Settlement and require the Company to make all
          payments due after the date of such improvement in accordance with the
          original Settlement Agreement. Should this occur, then the Company's
          quarterly payment would revert back to $8,752. The Company applied for
          relief as a "hardship case" pursuant to the Settlement Agreement, and
          received approval to reduce its quarterly obligations to $3,000 until
          such time as the Company is out of hardship.

                                     F - 14