<PAGE>
<PAGE> 1                                              
===============================================================================
                                                                              
                  SECURITIES AND EXCHANGE COMMISSION   
                       WASHINGTON, D.C.  20549
                          _________________

                               FORM 10-K
 
            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                  THE SECURITIES EXCHANGE ACT OF 1934
                          _________________
                     
  FOR THE FISCAL YEAR ENDED MARCH 31, 1997       COMMISSION FILE NUMBER 1-7894

                          ERLY INDUSTRIES INC.
        (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                CALIFORNIA                       95-2312900
         (STATE OF INCORPORATION)     (I.R.S. EMPLOYER IDENTIFICATION NO.)

  10990 WILSHIRE BOULEVARD, #1800, LOS ANGELES, CALIFORNIA         90024-3955
      (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                     (ZIP CODE)


      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (213) 879-1480
                            _________________

 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                            NONE

 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

           COMMON STOCK, PAR VALUE $.01 PER SHARE
                      (TITLE OF CLASS)

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

    As of June 15, 1997, there were 4,764,415 common shares outstanding and 
    the aggregate market value of the common shares of ERLY Industries Inc. 
    (based upon the closing price for these shares on the NASDAQ National 
    Market) held by non-affiliates was approximately $34.7 million.

                    DOCUMENTS INCORPORATED BY REFERENCE
 
    Portions of the 1997 Proxy Statement to Shareholders are incorporated by 
    reference in Part III.

    Indicate by check mark if disclosure of delinquent filers pursuant to 
    Item 405 of Regulation S-K is not contained herein, and will not be 
    contained, to the best of registrant's knowledge, in definitive proxy or
    information statements incorporated by reference in Part III of this Form
    10-K or any amendment to this Form 10-K. [  ]
<PAGE>
                                                                           
<PAGE> 2
                        ERLY INDUSTRIES INC.     
                        FORM 10-K ANNUAL REPORT
                   FOR THE YEAR ENDED MARCH 31, 1997
                         TABLE OF CONTENTS

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

Part I
------  
  Item 1:      Business                      See pages 3-16

  Item 2:      Properties                    See pages 17-18

  Item 3:      Legal Proceedings             See page 19 and "Commitments and
                                             Contingencies" on page 61
                                             
  Item 4:      Submission of Matters         See page 20
               to a Vote of Security
               Holders

Part II
-------  
  Item 5:      Market for the Company's      See page 21 and "Quarterly Results
               Common Stock and Related      of Operations" on pages 63 and 64
               Stockholder Matters

  Item 6:      Selected Financial Data       See pages 28-29

  Item 7:      Management's Discussion       See pages 30-35
               and Analysis of Financial
               Condition and Results of
               Operations

  Item 8:      Consolidated Financial        See pages 36-65
               Statements                              
  
  Item 9:      Changes in and                See page 21
               Disagreements with 
               Accountants on Accounting 
               and Financial Disclosure

Part III
--------  
  Item 10:     Directors and Executive       See pages 22-23
               Officers of the Company

  Item 11:     Executive Compensation        See Proxy Statement

  Item 12:     Security Ownership of         See Proxy Statement
               Certain Beneficial Owners
               and Management

  Item 13:     Certain Relationships         See Proxy Statement
               and Related Transactions


Part IV
-------  
  Item 14:     Exhibits, Financial           See pages 25-73
               Statement Schedules and      
               Reports on Form 8-K  
</TABLE>
<PAGE>
    

<PAGE> 3

                                     PART I


Item 1.  Business

ERLY Industries Inc. (the "Company" or "ERLY") was incorporated in California
in March 1964.  The Company entered the rice business in 1970 with the 
acquisition of Comet Rice Mills, Inc.  ERLY expanded its rice operations in 
1979 with the acquisition of United Rice Growers and Millers and again in 
1988 with the purchase of 48% of American Rice, Inc. ("ARI").  In May 1993, 
ERLY acquired an additional 33% voting interest in ARI and consolidated the 
rice operations into a single operating company (the "Acquisition").

ARI is a processor and marketer of food products, principally rice and 
olives.  The company is currently involved in all phases of rice processing, 
rice packaging and rice marketing.  ARI markets white rice, instant rice, 
parboiled rice, brown rice and rice mixes under proprietary, trademarked 
names and is a leading marketer of U.S. rice in many of the world's major 
importing countries.

In July 1996, ARI added olives to its product lines by acquiring the domestic 
and foreign olive business of Campbell Soup Company (the "Olive Acquisition").  
Assets acquired included olive inventories and processing facilities in 
Visalia, California and Seville, Spain.  This acquisition positions ARI among 
the largest of four U.S. olive processors with the largest U.S. market share 
of branded sales of both ripe and green olives.

The Company entered the forest fire retardant business in 1968 with the 
acquisition of Arizona Agrochemical Corporation.  That company was primarily 
engaged in a fertilizer and pesticides business which was later sold.  The 
forest fire retardant business and an agricultural consulting and advisory 
service business were retained and transferred to a newly incorporated 
company, Chemonics Industries, Inc. ("Chemonics").  The consulting business 
was expanded considerably in 1975 with the opening of an office in Washington,
D.C.  With continually expanding consulting revenues and operations, that 
business was separately incorporated in November 1994 as Chemonics 
International, Inc. ("International" or "Consulting"), a wholly-owned 
subsidiary of Chemonics Industries, Inc.  In May 1996, the operations of the
U. S. forest fire retardant business were incorporated as a wholly-owned
subsidiary of Chemonics Industries, Inc.

The Company's principal executive offices are located at 10990 Wilshire 
Boulevard, Suite 1800, Los Angeles, California 90024, (213) 879-1480.  ARI's 
executive offices are located at 411 North Sam Houston Parkway East, Suite 
600, Houston, Texas 77060, (281) 272-8800.  Chemonics Industries' and 
Chemonic International's executive offices are located at 1133 20th Street, 
N.W., Suite 600, Washington, D.C. 20036.  Chemonics Fire-Trol's executive 
offices are located at 734 E. Southern Pacific Drive, Phoenix, Arizona 85034.



<PAGE>
<PAGE> 4

AMERICAN RICE, INC.

Background       

The Company's rice business dates back to 1901 when the predecessor company to
Comet Rice, Inc. ("Comet") was formed in Beaumont, Texas.  In 1952, the 
predecessor company to Comet merged with Wonder Rice Mills, Inc. of Stuttgart,
Arkansas and Adolphus Rice Mills, Inc. of Houston, Texas.  Comet was purchased
by ERLY in 1970.  In 1979, Comet acquired United Rice Growers and Millers 
which owned a rice processing facility in Maxwell, California which remains 
ARI's primary milling facility in the California rice producing region.

In 1986, Comet and American Rice, Inc., a Texas agricultural cooperative 
marketing association formed in 1969 and comprised primarily of rice growers 
(the "ARI Cooperative"), formed a joint venture known as Comet American 
Marketing ("CAM") for the purpose of conducting joint domestic marketing 
operations.  In connection with the formation of CAM, both companies 
contributed virtually all of their domestic brands to CAM and Comet 
transferred certain processing and packaging equipment, packaging supplies 
and production responsibilities to the ARI Cooperative.  ARI was incorporated 
in 1987 by the ARI Cooperative and in 1988, the ARI Cooperative contributed 
all of its assets to ARI in exchange for 52% of ARI's voting capital stock, 
which the ARI Cooperative distributed to its members.  Comet obtained the 
remaining 48% of ARI's voting capital stock in exchange for contributing cash 
and Comet's 50% interest in CAM.  On May 26, 1993, ERLY consolidated its 
ownership interests in ARI and Comet through the Acquisition, pursuant to 
which ERLY transferred all of the operating assets and liabilities of Comet 
to ARI in exchange for shares of voting preferred stock that gave ERLY an 
additional 33% of the voting power of ARI.  As a result of the Acquisition, 
ERLY holds 81% of the voting power of ARI, comprised of a 32% direct common 
stock equity interest and an additional 49% voting preferred stock interest.

In July 1996, the Company added olives to its product lines by acquiring the 
domestic and foreign olive business of Campbell Soup Company. Assets acquired 
include olive inventories and processing facilities in Visalia, California 
and Seville, Spain.


Company Overview

ARI is the largest U.S.-based and one of the world's leading processors and 
marketers of branded rice products, with leading brand positions in many U.S. 
markets as well as Saudi Arabia, Haiti, Puerto Rico and certain other rice 
consuming markets. ARI annually markets approximately 20% of the total U.S. 
rice crop and is the only marketer of rice in the world with significant 
sources of rough rice and milling facilities in the two major rice producing 
regions of the United States as well as certain strategic locations overseas.  
This allows ARI to moderate the impact of regional trade imbalances caused by 
climate and geopolitical factors on operating performance.  ARI is able to 
maximize its margins by purchasing rice grown domestically and abroad to take 
advantage of regional cost and supply availability.  ARI is among the largest 
of four U.S. olive processors with the largest U.S. market share of branded 
sales of both black and green olives.  Significant synergies have been 
attained through successful integration of the olive product lines with ARI's 
existing marketing, logistical, and support functions allowing effective 
marketing and efficient, lower cost operations for both rice and olives.
<PAGE>
<PAGE> 5                             
                             

                             RICE PRODUCTS


Rice Industry Overview

Rice is the primary staple food consumed in most countries and is the cereal 
grain with the highest level of human consumption in the world, comprising 
approximately 40% of world cereal grain consumption.  Primarily as a result 
of population increases, world rice consumption has increased approximately 
125% during the last 30 years to approximately 350 million metric tons. U.S. 
consumption of rice has approximately doubled since 1984 and currently 
exceeds three million metric tons per year.  The increase in U.S. rice 
consumption is primarily due to the substantial population growth of certain 
ethnic groups and increased awareness by the general population of the impact 
of diet on health.  Measured on a per capita basis, average consumption of 
rice is estimated at 150 pounds per person on a worldwide basis, with Asia 
having the highest per capita annual consumption at approximately 225 pounds 
and the United States having one of the lowest at 28 pounds.

International Trade.  While over 95% of the rice grown worldwide is consumed 
in the country in which it is grown, international trade in rice has expanded 
steadily over the last decade from approximately 11 million metric tons to 
approximately 18 million metric tons.  The demand for rice over time has 
increased proportionately with population increases, coupled with expansion 
in per capita consumption, and has exceeded agricultural productive capacity 
in some countries.  In addition, due to the economic collapse of the former 
Soviet bloc nations, certain foreign government agricultural support programs
have been reduced.  This has reduced supply and increased international trade 
demand.

The world's major rice producing countries include China, India, Indonesia, 
Bangladesh, Thailand, Vietnam and the United States, with China and India 
accounting for over 50% of world rice production.  Thailand is the largest 
exporter of rice in the world, exporting approximately 30% of total world 
rice exports, followed by the United States, India and Vietnam, whose exports 
account for 16%, 14% and 11%, respectively, of the world rice trade.  Rice 
produced in the United States is generally high quality and sells at premium 
prices relative to Asian rice.  Based on statistics compiled by the U.S.D.A., 
exports of rice produced in the United States have sustained consistent 
growth over the last 20 years, growing from an average of 1.8 million metric 
tons per year in the years from 1972 to 1974 to an average of approximately 
three million metric tons per year in 1995 to 1996.  

Historically, the largest rice importing nations have included Brazil, Iran 
and Saudi Arabia with each nation importing in excess of 750,000 metric tons 
annually.  In recent years, imports from Bangladesh, China and Indonesia have 
increased to this level.


<PAGE>
<PAGE> 6


In 1995, international trade was favorably impacted by the effects of the 
General Agreement on Tariff and Trade ("GATT").  Signatory countries, 
including the United States, the European Union, Japan and South Korea began 
implementation of their GATT commitments on January 1, 1995, which required, 
with some exceptions, the elimination of all import bans, and the reduction 
of all import tariffs.  In the case of Japan, which was not required to 
eliminate rice import bans, highly beneficial quotas were established through 
bilateral negotiations.  Japan imported approximately 450,000 metric tons of 
rice in the 1996 crop year, and its imports are scheduled to increase each 
year to 758,000 metric tons by 2000.   In general, reductions on tariffs will 
make imports more attractive to foreign buyers and consumers and more 
competitive with domestic products.  Under GATT, developed countries are 
committed to reduce tariffs by an average of 36% over six years, while 
developing nations will reduce tariffs 24% over 10 years.  Management 
believes increases in U.S. medium grain rice production in recent years is 
primarily attributable to GATT and that over the longer term the agreement 
will stimulate additional production increases and world rice trade.

Domestic Trade.  U.S. consumption of rice has approximately doubled since 
1984 and currently exceeds three million metric tons per year.  U.S. per 
capita consumption of rice has increased primarily due to increases in the 
population of high rice-consuming Hispanic and Asian ethnic groups, which 
have grown from 6% of the U.S. propulation in 1970 to 26% in 1990 and are 
projected by the U.S. Census Bureau to increase to 38% of the U.S. population
by 2020.  For example, the Hispanic communities in the Southwest, and the 
Asian communities in California, each of which have grown significantly since
1985, consume over three times the average per capita amount of rice 
consumed in the United States.  To a lesser extent, the growth in average 
per capita consumption of rice has also been caused by increased awareness 
of the impact of diet on health.

Rice Production.  Approximately two-thirds of total U.S. rice production is 
the long grain variety, which is produced almost entirely within Arkansas, 
Louisiana, Mississippi, Texas and Missouri and is marketed worldwide.  
Medium grain rice, which is grown in several rice producing states but is 
the dominant variety grown in California, accounts for effectively all of 
the remaining one-third of all rice grown in the United States.  California 
medium grain, generically known as Calrose, is preferred within certain 
segments of the global market, including Japan, Korea, Turkey, Jordan and 
Lebanon.  The difference between these rice varieties is reflected in the 
size and shape of the kernel as well as amylose or starch content. 

<PAGE>
<PAGE> 7

Rice Brands and Markets

ARI is one of the largest competitors in the global market for rice.  ARI 
competes in all major rice importing regions in the world. 

ARI plans to continue to expand into new markets and increase its share in 
certain of its existing markets.  The following table summarizes the regional 
concentrations of ARI's rice sales during the past three years (in thousands):

<TABLE>
<CAPTION>
                                                Years ended March 31,         
                                          --------------------------------
                                             1997        1996      1995   
                                          ---------   ---------  --------- 
<S>                                       <C>         <C>        <C>
United States                             $ 146,880   $ 131,776  $ 123,530

Export sales: 
  Middle East                               165,666     117,359     91,449
  Caribbean, Mexico and South America        64,991      64,654     84,806
  Asia                                       31,583      49,453     49,963
  Europe                                     13,993      18,111     13,632
  Africa                                     14,352       2,275      3,864
  Other                                       6,731       6,459      5,806
                                          ---------   ---------  ---------
Total export sales                          297,316     258,311    249,520 
                                          ---------   ---------  --------- 
  Total sales                             $ 444,196    $390,087   $373,050 
                                          =========   =========  =========
</TABLE>
                 

United States.  ARI's domestic rice sales consist of branded rice products 
sold to retail outlets, primarily grocery stores, branded bulk sales to 
ethnic wholesale and retail outlets and sales to other industrial users and 
major food processors.  ARI has targeted its domestic marketing programs to 
achieve regional brand prominence with such efforts primarily being focused 
on the top 15 rice consumption markets.  These markets, located principally 
in New York, California, Texas and Florida account for over 50% of the rice 
consumed in the United States.  ARI is the second largest seller by tonnage 
of retail branded long grain white rice products in the United States with 
a market share of approximately 15%.

ARI's long grain rice brands have attained the number one or number two 
market share in many of the regions in which they compete including Comet 
in North Carolina, Blue Ribbon in South Carolina, Adolphus in Texas, Comet 
in California, Texas and the Southeast and AA in California.

Certain ethnic groups represent some of the fastest growing segments of the 
rice business in the United States.  Management believes that ARI's AA is 
the leading brand of long grain rice among Asian-Americans and dominates 
sales in the western region of the United States and certain other regions 
having large Asian-American populations.  Other ARI brands have strong 
consumer acceptance with Hispanic-Americans in the Southwest. 
<PAGE>
<PAGE> 8


In addition to its own branded retail products, ARI supplies long grain white 
and parboiled rice, instant rice, rice mixes, brown rice and other rice 
products to a full range of private label resellers including five of the 
top fifteen supermarket chains in the United States and Canada as well as 
other food retailers. 

Middle East.  Saudi Arabia has been the largest market for U.S. grown rice, 
annually importing an average of approximately 750,000 metric tons from all 
sources, and is currently the largest branded parboiled rice market in the 
world.  ARI's Abu Bint brand is considered to be one of the best recognized 
food products in Saudi Arabia leading all U.S. grown rice imports with 
approximately 60% of the market for this rice.  Overall, Abu Bint is the 
number one brand with a market share of approximately 13% of the total Saudi 
Arabian market.  Rice products exported to Saudi Arabia by ARI are marketed 
to various wholesalers and retailers through a number of major distributors.

Historically, the rice ARI sold in Saudi Arabia was shipped from the United 
States in packaged form.  In 1994, ARI began shipping rice in bulk form to 
the Middle East region and packing it under strict quality supervision in 
order to reduce vessel loading and freight costs while providing enhanced 
market competitiveness, improved customer service and product freshness. 
Until January 1997, products were packed at a facility in Jeddah, Saudi 
Arabia (see Item 3 - Legal Proceedings).  Since January 1997 other Middle 
East facilities with similar advantages have been utilized.

ARI also sells significant quantities of both branded and unbranded rice to a 
number of other Middle East countries including  Turkey, Iran, Jordan and 
Syria. 

Caribbean, Mexico and South America.  The Caribbean is one of the highest per 
capita rice consumption markets in the world.  ARI sells branded products 
such as Comet, Blue Ribbon, D'Aqui and Cinta Azul in this region, with 
substantial ARI-controlled or owned assets in Haiti, Jamaica and the 
Netherlands Antilles.

ARI is the largest processor and marketer of rice to Haiti.  In Jamaica, ARI's
subsidiary, Comet Rice of Jamaica Limited, is the second largest processor 
and one of the largest branded retail and food service marketers in the 
country.  Within Aruba, Bonaire and Curacao, ARI has a long-term exclusive 
supply, processing and marketing agreement with the Antillean Rice Mill, a 
local marketing company. 

<PAGE>
<PAGE> 9


Asia.  As a participant in GATT, Japan imported approximately 450,000 metric 
tons of rice in the 1996 crop year, and its imports are scheduled to increase 
each year to 758,000 metric tons by the year 2000.  In the first two years of 
the GATT agreement, the United States exported approximately half of Japan's 
GATT commitment, and ARI milled in excess of 40% of the U.S. exports.  
Management believes the Company will continue to have material involvement in 
this business.

In 1994, ARI formed ARI-Vinafood, a Vietnamese limited liability company on a 
joint venture basis with a company owned by the government of the Socialist 
Republic of Vietnam (the "Vietnam Partner") for the purpose of producing rice 
and related products at rice processing facilities in Vietnam.  ARI owns 55% 
of ARI-Vinafood.  ARI's participation in ARI-Vinafood is subject to a buy-out 
by the Vietnam Partner after the fifth year of operation.  ARI's participation
in ARI-Vinafood has allowed ARI to participate in the world market for Asian
origin rice. 


Rice Sourcing and Pricing

ARI's market and source diversity enhances its ability to moderate the impact 
of regional trade imbalances caused by climate and geopolitical factors.  ARI 
is the only marketer of rice in the world with sources and milling capacity 
in each of the major rice producing regions of the United States as well as 
overseas.  As a result, ARI utilizes a variety of rice products grown in the 
United States and is able to take advantage of regional cost and supply 
availability.  Each of ARI's milling facilities are strategically located to 
minimize shipping costs and maximize the convenience to the customer enabling 
ARI to capitalize on marketing opportunities as they develop around the world.

ARI buys rough rice from a variety of farm sources.  A large portion of these 
rough rice purchases are made under pre-harvest agreements.  Pre-harvest 
agreements generally provide for delivery of rough rice from specified 
acreage at a price per hundredweight determined by the terms of the 
agreements.  Generally, the price per hundredweight is determined based on 
local market conditions occurring between the time of harvest and on or after 
delivery to the buyers.  ARI also obtains domestic rough rice through 
competitive bidding in all rice producing states.  In addition to purchasing 
domestic rough rice, ARI obtains milled rice from other U.S. and foreign rice 
suppliers as needed.

The Chicago Board of Trade maintains a futures and options market in rough 
rice.  ARI buys and sells futures and options contracts as a mechanism to 
manage a portion of its rough rice requirements.

ARI procures rice from a variety of locations, including five of the six 
significant U.S. rice growing states; Texas, Louisiana, Mississippi, Arkansas 
and California.


<PAGE>
<PAGE> 10

Southern Facilities.  ARI's principal Southern rice processing facility is 
located in Freeport, Texas.  The Freeport facility, is a 20-acre integrated
processing complex with an annual milling capacity of over 600,000 metric 
tons located directly on a deep water port in the Gulf of Mexico.  The 
facility is the only rice facility in the United States capable of handling 
large ocean-going vessels directly.  The facility has a parboiled processing 
plant and separate milling facilities for both white and parboiled rice.  The 
Freeport facility adds water polishing and electro-optical sorting to ensure 
that ARI's exacting quality standards are consistently met.  The facility 
also has a rice flour mill that markets and meets the stringent quality 
standards of baby food processors and Japanese food ingredient purchasers.  
ARI also processes instant rice for retail and industrial markets.

California Facilities.  ARI operates two rice processing facilities in 
Maxwell and Biggs, California and has one of the state's largest single rice 
drying operations.  The Maxwell facility is the largest capacity single rice 
mill operating in California.  The Biggs facility, which was first leased by 
Comet in 1991 and recently extended, is an older milling facility which 
provides additional milling capacity to supplement ARI's domestic milling 
requirements.  The combined capacity of the Maxwell facility and the Biggs 
facility exceeds the multi-mill capacities of ARI's largest California 
competitors.

Other Facilities.  ARI also operates packaging facilities in Port-au-Prince, 
Haiti and Kingston, Jamaica that receive bulk rice from ARI's Southern 
facilities and process and package the bulk rice into local retail branded 
rice products.  ARI's Haitian facility is located on a self-contained deep 
water port 25 kilometers outside the capital city and principal market, 
Port-au-Prince. ARI operates an ocean-going vessel to service the Caribbean 
area facilities.  These facilities provide ARI with competitive advantages 
in loading, transportation and labor costs as well as in customer service 
and product freshness.


<PAGE>
<PAGE> 11                               
                               
                               OLIVE PRODUCTS 

Olive Industry Overview

While rice is a primary staple food in the world, olives are typically used 
as a food ingredient, supplement or garnish.  Therefore, while rice has 
estimated average per capita consumption of 150 pounds per year, olives are 
much lower with estimated average world per capita consumption of .4 pounds 
per year. Per capita consumption of olives in the U.S. is estimated to be 
1.5 pounds per year.

International Trade.  The principal production regions for table olives are 
the Mediterranean and the valleys of California. Consumption is concentrated 
in the Mediterranean region and the U.S. In the five years ending with crop 
year 1996-1997, estimated world production and consumption of table olives 
has averaged approximately one million tons, while world trade between 
countries averaged approximately 230,000 tons. Due to favorable weather 
conditions, the 1996-1997 world crop is expected to exceed the average of 
the last four years by over 200,000 tons, with a consumption increase and 
replenishment of unusually low beginning inventories absorbing the production 
increase. Among the leaders in world trade in recent years, Morocco is the 
largest exporter (with approximately 85,000 tons), while the United States 
is the largest importer (with approximately 76,000 tons).

Domestic Trade.  California processors dominate the production and marketing 
of black olives sold domestically, accounting for about 80-85% of the market. 
The remaining 15-20% are imported from Spain, Morocco and Mexico. The 
California ripe olive processing industry is consolidating.  The industry 
entered the 1990's with six processors, down from 27 during the early 1960's. 
Today only four domestic processors remain.  The industry's increased 
mechanization, higher fixed environmental costs, and higher capital 
requirements in both production and marketing have raised breakeven volumes 
leaving smaller olive companies uncompetitive. In addition, growth in food 
service demand for sliced olives and price pressure from Spain and Morocco 
have shrunk industry margins.  Among domestic processors, ARI is the second 
largest in production capacity handling approximately 30% of California's 
annual production.

The green olive business, in contrast to the domestic black olive business, 
is fragmented with dozens of Spanish processors and marketers and U.S. 
importers. Natural industry consolidation has been delayed by Spanish laws 
making plant closures and mergers prohibitively expensive.  These laws, 
however, are currently under review with the objective of increasing the 
global competitiveness of Spanish businesses. Changes which will favor 
industry consolidation are expected which will improve the economics of 
efficient operations such as that of ARI.

ARI is one of a few international olive processors and marketers. The company 
operates modern, low cost production facilities in Visalia, California for 
ripe olives and in Seville, Spain for green olives. The Company has also 
allied itself with other processors of various olive styles in key producing 
regions to assure its customers a complete product line and reliable supply.


<PAGE>
<PAGE> 12

Olive Production.  Olives have been produced and consumed in the Mediterranean
region since history has been recorded. It is believed olive cultivation was 
spread throughout the Mediterranean by the Greeks and Romans and was brought 
to the Western Hemisphere by Spanish explorers. Olives are said to have been 
among the crops grown in the Jesuit mission settlements in California. 
Although there are numerous varieties of olives cultivated in the world, the 
principal varieties are the Manzanillo and Sevillano.

Olives are harvested in the fall of the year and are either processed 
immediately or stored in a brine solution for processing later in the year. 
Regardless of variety, olives can be processed into two principal types, 
green olives (also known as Spanish olives) and black olives (also known as 
ripe olives), the determining factor being differences in the production 
process. 

Green olives are produced by fermentation under controlled temperatures in a 
brine solution for a period ranging from two to seven months. Black olives 
are produced by a caustic aeration process lasting about seven days. After 
bulk processing, olives are made into a variety of familiar products 
including pitted, unpitted, stuffed, sliced, or chopped olives or olive oil.

The olive tree is an erratic, alternate bearing fruit because the stress to 
the olive tree caused by a large crop tends to depress new growth and 
production in the following year. The 1996-1997 crop was the second largest 
olive crop in history both in the U.S. and the world. Early indications 
suggest the 1997-1998 crop will be only 50% as large, and thus carryover 
inventory in the U.S. will be important to service olive customers.   ARI's 
relatively large inventory position is expected to be ideal to meet 
anticipated demand in the next year.


Olives Brands and Markets

ARI annual sales of olive products in fiscal 1998 are expected to exceed $100 
million.  In the nine months from the Olive Acquisition to March 31, 1997 
sales of $71.3 million included $64.2 million in the U.S. and $7.1 million in 
other world markets, primarily Europe. 

United States.  ARI enjoys the largest market share of branded sales of both 
black and green olives in U.S. markets. In dollar sales of black olives, the 
company has 35.8% of the market compared to 23.4% for the nearest competitor. 
The dominance of ARI's share of branded green olive sales is more pronounced, 
with 25.2% compared to the nearest competitor with a 13.8% share. ARI's 
principal U.S. olive brand is Early California, although the Company also 
markets U.S. olives under the Franciscan and Senor brands. Through a fee 
arrangement with Campbell Soup Company, ARI uses Campbell's Vlasic brand in 
the Eastern United States.  Sales under the Vlasic brand are being phased 
out in favor of the Early California brand. The Company is also a major 
private label supplier.

<PAGE>
<PAGE> 13

Other World Markets.  ARI markets green olives produced in its Spanish 
facilities primarily to European and Caribbean countries in proprietary 
brands such as Tapas and Loreto. Several of ARI's rice markets, particularly 
the middle eastern countries, are also major olive consuming countries.  
Others are key olive producing countries. ARI is uniquely positioned to 
leverage its skills and relationships in international procurement, logistics 
and marketing over this new line of products.

 



Competition

Competition is based upon brand name recognition, quality, product 
availability, product innovation and price.  On a global basis, ARI competes 
with approximately 15 entities that together trade or market over 50% of 
world trade in rice.  These competitors are from the United States and other 
exporting countries such as Thailand, Pakistan and Vietnam.  ARI's U.S. 
competitors in the domestic and export milled rice markets include Riviana 
Foods Inc., Riceland Foods, Inc., Producers Rice Mills, Inc., Continental 
Grain Company, Cargill Inc. and Farmers Rice Cooperative.  There are other 
competitors in certain specialized marketing areas, such as Mars, Inc. 
(Uncle Ben's), Philip Morris Companies, Inc. (Minute) and the Quaker Oats
Company (Rice-a-Roni). 

Within the United States, competition exists both for procuring and 
processing rough rice, and for marketing milled rice products.  Competitors 
in the rice milling business include both private commercial mills, such as 
ARI, and mills operated by agricultural cooperatives.  ARI's principal 
competitors in milling are Riceland Foods, Inc., Farmers Rice Cooperative 
and Cargill Inc. with estimated shares of operating domestic milling capacity 
of 19%, 8% and 7%, respectively.  ARI's share of estimated operating domestic 
milling capacity is 20%.

Domestic competitors of ARI in the marketing of retail branded milled rice on 
a national basis principally consist of Riviana Foods Inc. and Riceland Foods,
Inc., and, in the food service markets, Farmers Rice Cooperative.  According 
to syndicated market data, no company currently controls more than 25% of the 
domestic branded markets. There are a number of small regional competitors in 
the branded segment of the rice industry and approximately 15 to 20 rice 
millers who compete in the commodity rice markets.

The California ripe olive processing industry is consolidating. The industry 
entered the 1990's with six processors, down from 27 during the early 1960's. 
Today only four domestic processors remain. ARI's competitors include Bell 
Carter Foods, Inc., Oberti Olive Company and Musco Olive Company. Bell 
Carter and Musco are privately held businesses. Oberti Olive is a subsidiary 
of Tri-Valley Growers, an agricultural cooperative. The industry's increased
mechanization, higher environmental costs, and higher capital requirements in 
both production and marketing have raised breakeven volumes leaving smaller 
olive companies uncompetitive.  In addition, growth in food service demand 
for sliced olives and price pressure from Morocco and Spain have shrunk 
industry margins. Among domestic processors, ARI is the second largest in 
production capacity handling approximately 30% of California's annual 
production.
<PAGE>
<PAGE> 14


Brand Names and Trademarks

ARI's trademarks, copyrights and brand names are protected by numerous 
registrations in the U.S. and foreign jurisdictions.  ARI believes that these 
trademarks, copyrights and brand names have significant value and are 
adequately protected.  



Regulation

Although ARI is not involved in rice farming, certain government regulations 
affecting U.S. rice farmers have a significant impact on ARI's cost and 
availability of ARI's principal raw material, rough rice.  Substantially all 
U.S. rice is grown under the influence of U.S. government programs. 

In April 1996, the Federal Agriculture Improvement and Reform Act ("1996 Farm 
Bill") was enacted to replace its 1990 predecessor, the Food, Agriculture, 
Conservation and Trade Act of 1990 ("1990 Farm Bill").  The 1996 Farm Bill 
provides marketing loans and agricultural market transition payments to 
qualifying farmers for seven years beginning with the 1996 crop.  The 
agricultural market transition payments range on a declining scale from 
$2.75 per cwt. for the 1996 crop to $2.03 per cwt. in 2002 and replace 
similar payments of the 1990 Farm Bill.  Unlike the predecessor bill 
payments, the agricultural market transition payments are fixed without 
reference to price levels.  Other key provisions of the new law include the 
elimination of acreage reduction incentives and increased flexibility of 
farmers to change among different commodities as market conditions warrant.

Management believes the 1996 Farm bill was primarily responsible for a 
reduction of approximately eight percent of rice tonnage harvested in the 
U.S. in 1996 and a general increase in price levels of rice.  While price 
levels have remained somewhat higher, preliminary acreage surveys indicate 
production will increase in 1997.

ARI is subject to various federal, state and local environmental laws and 
regulations governing, among other things, air and water quality, the 
generation, use and disposal of materials related to plant operations and 
the processing, storage and shipment of it's products. The Company believes 
it is in substantial compliance with all existing laws and regulations and 
has obtained or applied for the necessary permits to conduct its business. 
To date, and in management's belief for the foreseeable future, compliance 
with applicable environmental laws has not had and will not have a material 
adverse effect on ARI's financial or competitive positions.


<PAGE>
 
<PAGE> 15


CHEMONICS INTERNATIONAL, INC. - CONSULTING

Chemonics International, Inc. offers management and technical assistance 
services to developing countries worldwide under contracts with the U.S. 
Agency for International Development (AID), the World Bank, development 
banks, municipalities and other government agencies as well as private firms.  
Services are provided in a range of areas including agriculture, agribusiness,
natural resources and the environment, and rural development.  A major focus 
is aiding the development of private enterprise, especially in countries 
where government controlled enterprise once dominated, and privatization of 
state farms and land in these countries.  

Chemonics International has over 30 long-term contracts which are regional or 
worldwide in scope and maintains offices in more than 30 countries.  The 
countries or regions with the largest amount of business include Egypt, Oman, 
Central and South America, Philippines, Guinea, Indonesia, Nepal, 
South Africa, Botswana, Swaziland and the newly independent states of the 
former Soviet Union.

At March 31, 1997, Chemonics International has a funded contract backlog of 
approximately $166 million covering 1997 through 2000.  Of this amount, $65 
million relates to services expected to be provided in fiscal year 1997.  
Contracts are subject to cancellation in the event of severe political 
turmoil in the country or region, subject to appropriate compensation for 
winding down the contract involved.  Revenues for 1997 were $77,427,000, down 
slightly (.4%) from record revenues of the prior year.  Revenues were 
$77,754,000 in 1996, up 22% from 1995 revenues of $63,546,000.  Chemonics 
International is one of the largest for-profit AID contractors, in terms of 
volume of service to AID, in an industry dominated by non-profit entities 
including universities.  The Company is one of the leaders in trying to 
enhance the role of profit-making firms in providing consulting services 
to AID.



CHEMONICS FIRE-TROL, INC. 

Chemonics Fire-Trol Inc. is headquartered in Phoenix, Arizona.  Chemonics 
Fire-Trol also maintains facilities in Northern California, Washington State 
and Western Canada from which forest fire retardant chemicals are manufactured
and sold. 

Chemonics Fire-Trol's primary products are forest fire retardants.  These 
products are patented, United States Forest Service tested and qualified 
materials designed to combat forest, brush and grass fires through 
dissemination from air tankers and helicopters.  These products are sold 
under contract to the U.S. and Canadian Forest Services through competitive 
bidding, on contracts ranging in length from one to ten years.  The chemical 
components are generally available throughout the year and are combined in a 
manufacturing process at Orland, California; Pasco, Washington; Kamloops, 
British Columbia; and Edmonton, Alberta.  Fire-Trol is available throughout 
all major forest fire areas in North America.  It is distributed in Canada 
through Chemonics' Canadian affiliate, Chemonics Industries (Canada) Ltd.  
Fire-Trol is also developing overseas with established operations in France, 
Portugal, Spain, South Africa and South America.
<PAGE>
 
<PAGE> 16


Chemonics holds significant patents for Fire-Trol (which expire in various 
years through the year 2012), but it faces substantial competition in its 
fire retardant business from Monsanto Chemical Company, a corporation with 
far greater resources than the Company.  Annual sales fluctuate according to 
the number and severity of forest fires in the geographical areas serviced
by Chemonics Fire-Trol.  Sales for 1997 were $20,936,000 as compared to 
$14,034,000 for 1996 and $23,003,000 in 1995.  This volume variation, based 
upon weather and fire conditions, is an important aspect of Chemonics' 
overall sales and profitability.



                              EMPLOYEES

The Company employs approximately 1,788 people full-time, 1,500 of which are 
in the rice and olive businesses.  Approximately 600 employees in the 
Company's foreign operations in Vietnam and Spain are covered by collective 
bargaining agreements.  There have been no significant labor disputes in the 
past several years and the Company considers its employee relations to be 
excellent.

All eligible employees of the Company are covered by a profit sharing 
retirement plan and a group insurance plan providing life insurance, medical, 
dental and hospitalization benefits.  The Company makes a mandatory 1% 
matching contribution to the profit sharing retirement plan on a monthly 
basis and an annual contribution solely at the discretion of the Board of 
Directors of the Company.

<PAGE>
<PAGE> 17

Item 2.   Properties

The following table summarizes the principal properties owned and/or occupied 
by the Company and its subsidiaries:

<TABLE>
<CAPTION>                                       
                                      APPROXIMATE           OWNED OR LEASED-
                                    SQUARE FOOTAGE OF      EXPIRATION DATE OF
       LOCATION                        BUILDINGS                 LEASE       
<S>                                 <C>                     <C>
Continuing Operations
---------------------
Administrative offices:
    Los Angeles, California           11,086 sq. ft.          Leased 2001
    Houston, Texas                    49,900 sq. ft.          Leased 2003
    Phoenix, Arizona                  10,300 sq. ft.          Leased 1997
    Washington, D.C.                  68,475 sq. ft.          Leased 2006
    Washington, D.C.                  27,270 sq. ft.          Leased 1998 
    
Warehousing, processing and 
shipping of rice, rice 
products and olives:
    Freeport, Texas                  272,400 sq. ft.          Leased 2022
    Stuttgart, Arkansas              142,900 sq. ft.             Owned   
    Maxwell, California (1)          261,000 sq. ft.           Owned and
                                                              Leased 2034     
    Biggs, California                 95,000 sq. ft.          Leased 2001     
    Laffiteau, Haiti                  30,024 sq. ft.          Leased 2001
    Spanish Town, Jamaica             29,000 sq. ft.          Leased 1998
    Can Tho, Vietnam (2)             250,000 sq. ft.          Leased 2014
    Visalia, California              333,000 sq. ft.             Owned
    Seville, Spain                   166,000 sq. ft.             Owned

Processing, warehousing and
shipping of fire retardants:
    Phoenix, Arizona                  20,600 sq. ft.          Leased 1997
    Orland, California                20,000 sq. ft.             Owned
    Kamloops, British Columbia,
      Canada                          10,000 sq. ft.          Leased 2016
    Edmonton, Alberta, Canada          4,800 sq. ft.          Leased 1998

Discontinued Operations
-----------------------
Grape crushing, fermenting,
processing and warehousing 
of wine:
    Tulare, California (3)            49,000 sq. ft.             Owned
    Delano, California (4)           121,000 sq. ft.             Owned

</TABLE>


(1)  Most of the storage facilities and approximately half of the land 
     is leased.
(2)  Subject to an option to purchase by the joint venture partner commencing 
     1999.
(3)  Leased to a third party, with an option to buy.
(4)  Leased to a third party.
<PAGE>
 
<PAGE> 18


All properties owned or leased by the Company are maintained in good repair, 
and management believes them to be adequate for their respective purposes.  
All machinery and equipment are considered to be in sound and efficient 
operating condition.  Facilities reflected as discontinued operations above 
are included in other assets in the consolidated balance sheets. 

Substantially all property, plant and equipment detailed above (in addition 
to all receivables and inventories of ARI and Chemonics Industries, Inc.) 
are pledged as collateral on notes payable and certain other long-term debt 
obligations.

<PAGE>
 
<PAGE> 19

Item 3.   Legal Proceedings

In April 1995, a lawsuit was filed in the district court of Harris County, 
Texas by Kingwood Lakes South, L.P. and Tenzer Company, Inc. as plaintiffs 
against G.D. Murphy and D.A. Murphy, Chairman and President of the Company 
and ARI, respectively.  ERLY and ARI were named as codefendants in the 
lawsuit by an amendment to the original petition in September 1995.  This is 
a dispute between the general partner of a proposed real estate development 
and G.D. Murphy and D.A. Murphy.  Damages sought are in the range of $10 
million, plus attorneys' fees and punitive damages.  The Company and ARI 
were named as defendants in the lawsuit because of their actions to obtain 
restraining orders to prevent threatened foreclosures on ERLY common stock 
pledged as collateral by G.D. Murphy and to stop interference by the 
plaintiff in the lawsuit, with ARI's mortgage note financing, as well as 
certain other alleged activities, including knowing participation in breaches 
of fiduciary duties, civil conspiracy with the Murphys and conversion.  The 
plaintiff recently added a reverse alter ego claim.  The Company and ARI 
believe they have valid defenses in this case and that damages, if any, will
not have a material effect on the Company's financial position or results of 
operations; however, as with any litigation, the ultimate outcome is unknown.  
In order to minimize legal expenses, ERLY, ARI, and the Murphys are using 
common legal counsel in this matter and have agreed to share legal expenses 
ratably.

ARI has also been named as a codefendant with Messrs. John M. Howland and 
George E. Prchal in a lawsuit filed in February 1997 in U.S. district court 
in Houston, Texas by Rice Milling & Trading Investments, LTD., an Isle of 
Man Company ("RMTI").  In 1994, ARI entered into an agreement with RMTI for 
processing the Company's rice through RMTI's facility in Jeddah, Saudi 
Arabia.  Messrs. Howland and Prchal were officers of RMTI through January 
1997 and have also been directors of ARI since October 1993 and prior to 
October 1993 were officers of ARI.  In January 1997, RMTI ceased shipping 
ARI's rice through its Jeddah facility and terminated the employment of 
Messrs. Howland and Prchal.  The lawsuit alleges among other things ARI 
failed to perform under the terms of the agreement and Messrs. Howland and 
Prchal breached their fiduciary duties to RMTI.  On April 21, 1997, the 
Company obtained a restraining order from the U.S. District Court for the
Southern District of Texas ordering RMTI to desist and refrain from purchasing
rice of U.S. or Vietnam origin from any supplier other than ARI and from
introducing and/or marketing rice of U.S. and Vietnam origin in Saudi Arabia
targeted against ARI's U.S. origin and Vietnam origin rice.  The Company 
believes that this litigation will not have a material effect on the 
Company's financial position or results of operations; however, as with 
any litigation, the ultimate outcome is unknown.

The Company is involved in other legal proceedings that arise in the ordinary 
course of its business, all of which are routine in nature.  Management 
believes that the resolution of such legal proceedings will not have a 
material adverse affect on the consolidated financial position or 
consolidated results of operations of the Company.
<PAGE>
  
<PAGE> 20


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

No matters were submitted to a vote of security holders, through a 
solicitation of proxies or otherwise, since the last Annual Meeting of 
Shareholders held on September 17, 1996.



<PAGE>
  
<PAGE> 21

                                 PART II


Item 5.  Market for the Company's Common Stock and Related Stockholder Matters

(a)  Market Information

The Company's common stock is listed in the National Market Issue Section of 
the Over-the-Counter Market as ERLY Industries Inc. - NASDAQ Symbol "ERLY." 


                             PRICE RANGE OF ERLY COMMON STOCK


                                  
                                  High                Low
                                  -----              -----
Fiscal Year 1997*                     
  1st Quarter                  $ 10-1/8            $ 6-1/2
  2nd Quarter                     9-5/8              6-5/8
  3rd Quarter                     9-1/4              5-7/8  
  4th Quarter                     9-1/4              6-7/8


Fiscal Year 1996*
  1st Quarter                  $  9               $  8          
  2nd Quarter                     8-3/4              7-1/8
  3rd Quarter                     8-1/8              6
  4th Quarter                     9-1/4              5-3/8



*  Restated for a 10% stock dividend in September 1996.



(b)  Holders

There were approximately 1,009 shareholders of record as of March 31, 1997.

(c)  Dividends

The Company has never paid cash dividends on ERLY Common Stock and has no 
present intention to declare or pay cash dividends on the Common Stock in 
the foreseeable future.  The Company intends to retain any earnings which 
it may realize in the foreseeable future to finance its operations.


Item 9.   Changes in and Disagreements with Accountants on Accounting and 
          Financial Disclosure

There have been no disagreements on accounting or financial disclosures to 
report.
<PAGE>
                               
<PAGE> 22                                
                                
                                PART III


Item 10.   Directors and Executive Officers of the Company

The following is a list of the directors of ERLY Industries Inc. with 
information provided as of June 15, 1997:

                                           DATE ELECTED 
                                           AS DIRECTOR 
NAME OF DIRECTOR          AGE               OF COMPANY 

Gerald D. Murphy           69               April 1964

Mr. Murphy is Chairman of the Board and Chief Executive Officer (since 1964) 
of the Company, and is Chairman of the Board (since 1993) and Director (since 
1988) of American Rice, Inc. (which is 81% owned by ERLY effective May 1993).  
He also serves as a Director of Pinkerton's, Inc., a security and investigation
services firm.


Douglas A. Murphy          41               January 1988

Mr. Murphy is President (since 1990) and Chief Operating Officer (since 1992) 
of ERLY Industries Inc., President, Chief Executive Officer (since 1993) and 
Director (since 1990) of American Rice, Inc. and President of ERLY Juice Inc. 
(since 1988), a subsidiary of the Company.  He was President of Comet American
Marketing, a division of American Rice, Inc. from 1986 to 1990.  He is also a 
director advisor of Compass Bank Houston.


William H. Burgess         80               September 1975

Mr. Burgess is a private business consultant, Chairman of CMS Digital, Inc., a 
privately held company, and a Director of American Rice, Inc. (since 1988).  
From 1978 to 1986 Mr. Burgess was Chairman of International Controls Corp., 
an internationally diversified manufacturing company.  


Bill J. McFarland          60               August 1986

Mr. McFarland has served as Vice President of the Company since 1975 and as 
Director since 1986.  He has served as President of the Comet American 
Marketing division of American Rice, Inc. since 1993 and Senior Vice President
of American Rice, Inc. since 1993.  He was President of ERLY Food Group from 
1990 to 1993, President of The Beverage Source from 1979 to 1990 and President
of Early California Foods from 1975 until its sale in 1985 (all subsidiaries 
of the Company).

Alan M. Wiener             59               March 1995

Mr. Wiener has served as a Director of the Company since 1995.  He was 
President of Impulse Designs, Inc. from 1974 to 1995.  He is also a 
Director of FloTool International, Inc.  He previously served as a Director 
of Cal Fame Citrus Products, Inc. and Leisure Technology, Inc.

<PAGE>
<PAGE> 23

The following is a list of the executive officers of ERLY Industries Inc., 
their ages and their positions as of June 15, 1997:

Gerald D. Murphy     69         Chairman of the Board and Chief Executive 
                                Officer of ERLY Industries since formation of 
                                the Company in 1964 and President of the 
                                Company from 1964 to 1990; and Chairman of the 
                                Board of American Rice, Inc. (since 1993).

Douglas A. Murphy    41         President since 1990 and Chief Operating 
                                Officer since 1992 of ERLY Industries;  
                                President and Chief Executive Officer since 
                                1993 and Director since 1990 of American Rice, 
                                Inc.; President of ERLY Juice Inc. since 1988; 
                                and President of Comet American Marketing from 
                                1986 to 1990.

Bill J. McFarland    60         Vice President of the Company since 1975;  
                                President of the Comet American Marketing 
                                division of American Rice, Inc. since 1993; 
                                Senior Vice President of American Rice, Inc. 
                                since 1993; President of ERLY Food Group from 
                                1990; President of The Beverage Source from 
                                1979 to 1990; and President of Early 
                                California Foods from 1975 until its sale in 
                                1985.

Richard N. McCombs   51         Vice President and Chief Financial Officer of 
                                the Company since 1990; Executive Vice 
                                President of Finance and Administration, 
                                Secretary, Treasurer and Director of American 
                                Rice, Inc. since 1993; Managing Director of the
                                ARI-Vinafood joint venture since 1994; 
                                President of ISC Wines of California from 1984 
                                to 1986; and Executive Vice President of The 
                                Beverage Source from 1986 to 1990 and President
                                since 1990.

Kurt A. Grey         56         Vice President of the Company since 1982; 
                                President, Cicero Industries from 1981 to 1982;
                                and Vice President, Union Bank, from 1976 to 
                                1981.

Lolan M. Pullen      63         Vice President of the Company since 1986; Vice 
                                President - Finance of the Early California
                                Foods division of American Rice, Inc. since 
                                1996; Vice President of Comet Rice, Inc. from 
                                1986 to 1993; and Vice President - Finance of 
                                Early California Foods from 1976 until its sale 
                                in 1985.

Thomas A. Whitlock   47         Vice President and Corporate Controller of the
                                Company since 1991, Vice President and 
                                Controller of The Beverage Source (a subsidiary 
                                of the Company) from 1987 to 1990 and Corporate
                                Controller of the Company from 1981 to 1987.


Douglas A. Murphy, President of ERLY Industries Inc. and American Rice, Inc. is
the son of Gerald D. Murphy, Chairman of the Board of the Company.  There are 
no other family relationships among the directors or executive officers of the 
Company.
<PAGE>
<PAGE> 24


Item 11.   Executive Compensation

Pursuant to General Instruction G(3), information concerning executive 
compensation is incorporated by reference to the Company's 1997 Proxy 
Statement to Shareholders.  


Item 12.   Security Ownership of Certain Beneficial Owners and Management

Pursuant to General Instruction G(3), information concerning security 
ownership of certain beneficial owners and management is incorporated 
by reference to the Company's 1997 Proxy Statement to Shareholders.  


Item 13.   Certain Relationships and Related Transactions

Pursuant to General Instruction G(3), information concerning certain 
relationships and related transactions is incorporated by reference to 
the Company's 1997 Proxy Statement to Shareholders.   



<PAGE>
                               
<PAGE> 25






                                 PART IV


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

                                                              Page
                                                             Number
(a) 1.   Financial Statements

           Selected Financial Data                           28-29

           Management's Discussion and Analysis of 
           Financial Condition and Results of Operations     30-35

           Consolidated Statements of Operations             36-37

           Consolidated Balance Sheets                       38

           Consolidated Statements of Cash Flows             39-40

           Consolidated Statements of Stockholders' Equity   41

           Notes to Consolidated Financial Statements        42-64
           
           Independent Auditors' Report                      65
                                  

    2.   Financial Statement Schedules
                                  
          Schedule I - Condensed Financial
            Information of ERLY Industries Inc.
            (Parent Only)                                    66-68
                                       
          Schedule II - Valuation and Qualifying
            Accounts                                         69
                                  
               
         All other schedules are omitted because they are inapplicable, not 
         required under the instructions or the information is included in the
         financial statements and schedules of the registrant.  
                                  
                                  

                                  
<PAGE>
<PAGE> 26

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K 
           (continued)
                                  
    3.     Exhibits
                                    
         Exhibit                                                    Exhibit
         Number       Description                                  Reference
                                  
        (3)(i)  Articles of Incorporation (as amended 
                September 6, 1995) (incorporated by
                reference to Exhibit 3 to the Company's
                1996 Form 10-K).                        
    
        (4)     The Indenture dated as of December 1, 1993 for
                $8,880,000 12 1/2% Subordinated Sinking Fund
                Debentures due 2002 (incorporated by reference
                to Exhibit 4 to the Company's 1994 Form 10-K).
                                  
        (4)     Trust Indenture dated August 24, 1995 by and 
                among American Rice, Inc. and U. S. Trust Company
                of Texas for $100,000,000 13% Mortgage Notes 
                due 2002 (incorporated by reference to Exhibit 
                4.1 of ARI's Form S-1, file No. 33-60539).

        (11)    Calculation of Primary Income (Loss) Per Share.    Exhibit 11.1
                                  
        (11)    Calculation of Fully Diluted Income (Loss) Per 
                Share.                                             Exhibit 11.2
                                  
        (21)    Subsidiaries of ERLY Industries Inc.               Exhibit 21
                                  
        (27)    Financial Data Schedule (electronic filing)        Exhibit 27
                                  
        (28)    Asset Purchase Agreement dated March 23, 1993, 
                between and among American Rice, Inc., Comet 
                Rice, Inc. and ERLY Industries Inc. 
                (incorporated by reference to Exhibit 1 to the
                Company's Form 8-K, filed June 16, 1993, File 
                No. 1-7894).
                                  
        (28)    Amendment to Asset Purchase Agreement dated 
                May 25, 1993, between and among American Rice, 
                Inc., Comet Rice, Inc. and ERLY Industries Inc. 
                (incorporated by reference to Exhibit 2 to the 
                Company's Form 8-K, filed June 16, 1993, File 
                No. 1-7894).
  
        (28)    Asset Purchase and Sale Agreement between American 
                Rice, Inc. and Campbell Soup Company, dated as of 
                June 11, 1996 (incorporated by reference to Exhibit 
                2.1 of Form 8-K, filed July 22, 1996).

        (28)    Share Sale Agreement between American Rice, Inc. 
                and Campbell Soup Company, dated as of June 11, 1996 
                (incorporated by reference to Exhibit 2.2 of Form 8-K, 
                filed July 22, 1996).
                                  
        (28)    American Rice, Inc. 1997 Annual Report and Form 
                10-K (incorporated by reference to ARI's 1997 
                Form 10-K, filed June 30, 1997, file No. 0-17039).
                                      
  
<PAGE>
<PAGE> 27
                                      
                                      

(b) 1.     Reports on Form 8-K

           A Form 8-K was filed in July 1996 to report the acquisition on 
           July 6, 1996 of the ripe and green olive businesses of Campbell 
           Soup Company.  This was amended by the filing of Form 8-K/A-2 on
           February 27, 1997 to amend pro forma financial information 
           previously submitted.
                      
<PAGE>
<PAGE> 28
                                      
ERLY INDUSTRIES INC. AND SUBSIDIARIES
Item 6.  Selected Financial Data                                     

<TABLE>
<CAPTION>
Years ended March 31:             1993          1994          1995          1996          1997     
(In thousands except             -------       -------       -------       -------       -------
  per share data)
<S>                         <C>           <C>             <C>          <C>          <C>         
Net sales
  Rice and olives(1)          $  169,617    $  284,464     $ 373,050    $  394,838    $  515,937 
  Consulting                      37,185        41,944        63,546        77,754        77,427 
  Fire-Trol                       12,629         8,416        23,003        14,034        20,936 
------------------------------------------------------------------------------------------------
    Total net sales           $  219,431    $  334,824     $ 459,599    $  486,626    $  614,300 

Operating profit (loss) (2)
   Rice and olives           ($      316)   $   16,002     $  18,501    $   14,338    $   25,837 
   Consulting                      1,539         1,508         4,920         4,157         2,907 
   Fire-Trol                       1,507          (173)        5,348         1,329         3,483 
------------------------------------------------------------------------------------------------    
    Total operating profit    $    2,730    $   17,337     $  28,769    $   19,824    $   32,227 

Income (loss) from
  continuing operations      
  before minority interest   ($   10,989)   $   14,765     $   8,653   ($    8,439)   $    6,637

Net income (loss)            ($    8,673)   $   17,669     $   9,275   ($    1,149)   $    7,352

Income (loss) from 
  continuing operations
  per share*
    Primary                  ($     2.52)   $     2.90     $    1.68   ($      .24)   $     1.51
    Fully diluted            ($     2.52)   $     2.71     $    1.58   ($      .24)   $     1.46

Net income (loss)
  per share*
    Primary                  ($     1.99)   $     3.82     $    1.68   ($      .24)   $     1.51
    Fully diluted            ($     1.99)   $     3.58     $    1.58   ($      .24)   $     1.46

Average common and 
  common equivalent 
  shares outstanding* 
    Primary                    4,347,000     4,624,000     5,522,000     4,708,000     4,868,000 
    Fully diluted              4,357,000     4,962,000     5,943,000     4,708,000     5,123,000 

Cash dividends per 
  common share                $     -       $     -        $    -       $     -       $     -    
                           
Stock dividend issued               -             -             -            15%           10%

At year-end:
  Total assets                $  135,100    $  199,150     $ 207,058    $  235,135    $  320,718 
  Long-term debt**            $   40,565    $   67,971     $  68,321    $  100,276    $  101,086 
  Subordinated debt**         $    9,941    $    8,880     $   7,670    $    6,665    $    5,665 
  Stockholders' equity 
    (deficiency)             ($    9,194)   $    8,394     $  16,799    $   17,534    $   24,780 
  Shares outstanding           3,486,956     3,674,765     3,718,272     4,284,985     4,740,415 
  
</TABLE>
<PAGE>
<PAGE> 29


Selected Financial Data (continued)
                                            
                                          

On May 26, 1993, ERLY consummated the Acquisition in which it acquired an 
additional 33% voting interest in ARI in exchange for the net assets of 
Comet, other than the ARI capital stock already owned by Comet.  Comet was 
a wholly owned subsidiary of ERLY.  The Acquisition was accounted for as a 
reverse step acquisition of ARI by ERLY through its subsidiary, Comet.

Because Comet was the acquirer for accounting purposes, the selected financial
data presented herein for periods prior to the Acquisition includes the 
accounts of Comet, not ARI.  In addition, the fiscal year 1994 operating 
results for the period April 1, 1993 through the date of the Acquisition, 
May 26, 1993, include those of Comet, not ARI.  Operating results thereafter
reflect the consolidated operations of Comet and ARI.

Because ERLY holds both common and convertible preferred stock in ARI, ERLY's 
share of ARI's net income since the Acquisition consists of ERLY's 
proportionate share (32%) of ARI's earnings applicable to common stock plus 
dividends earned on ARI Series B Preferred Stock.  ERLY's share of ARI's net 
earnings (loss) applicable to common stock after preferred dividend 
requirements was ($690,000), ($3,784,000), ($645,000) and $2.6 million in 
1997, 1996, 1995 and 1994, respectively.  ERLY also earned Series B Preferred 
dividends of $5.2 million in 1997, 1996 and 1995 and $4.3 million from the 
date of the Acquisition to the end of fiscal year 1994 (see Note 11 of Notes 
to the Consolidated Financial Statements).

This information should be read in conjunction with the Consolidated 
Financial Statements and related notes and "Management's Discussion and 
Analysis of Financial Condition and Results of Operations." 


Notes to Selected Financial Data:

(1) ARI sales increased in 1994 due to the combination of Comet and ARI.  ARI 
    sales increased in 1997 with the acquisition of the Early California Foods
    division.

(2) Operating profit represents gross profit less selling, general and 
    administrative expenses, excluding corporate overhead.

*   Retroactively adjusted to give effect to a 10% stock dividend in 
    September 1996. 

**  Including current portion.



<PAGE>
<PAGE> 30


ERLY INDUSTRIES INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results 
of Operations 
                                                               
                                           
FISCAL YEAR ENDED MARCH 31, 1997 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1996

Consolidated Results

For the year ended March 31, 1997, ERLY Industries recorded net income of $7.4
million or $1.46 per fully diluted share of common stock on sales of $614 
million.  This compares with a net loss in 1996 of $1.1 million or $.24 per 
share of fully diluted common stock on sales of $487 million.  Results for 
fiscal year 1996 include a $7.2 million provision for loss on disposal of 
property held for sale (see Note 6).  Excluding this non-recurring charge 
(and the related effect on taxes and minority interest), ERLY would have 
recorded net income of $2.9 million for fiscal 1996. 

Consolidated sales increased by $128 million in 1997 over 1996 due to 
increases by ARI ($122 million) and Fire-Trol  ($7 million).  ARI results 
reflect the acquisition of the olive business in fiscal 1997 which had sales 
of $71 million for the year plus a $55 million increase in sales of rice.


American Rice

Overview

ARI purchases and processes rough rice into branded and commodity rice for 
sale in both international and domestic markets. Demand for branded rice 
products is relatively constant and margins are typically higher than those 
for commodity rice products.  Demand for commodity rice products is 
relatively constant globally, but demand for U.S. grown commodity rice is
dependent upon supply and cost relative to other sources of supply. Supply 
and costs for both branded and commodity products depend on many factors 
including governmental actions, crop yields and weather, and such factors 
can persist through one or more fiscal years. 

In general, management believes that it is insulated from many of the effects 
of rough rice price fluctuations for the following reasons: (i) the Company's 
net sales are proportionately weighted toward the relatively higher margin 
branded products, (ii) approximately one-half of the Company's rough rice 
purchases, excluding rough rice milled under contract for others, are made 
as spot market purchases and matched against commodity orders at prices 
providing a favorable margin to costs, (iii) the Company's high rice 
inventory turnover rate of approximately five times per year reduces the 
Company's exposure to seasonal price fluctuations, and (iv) the Company's 
diversity of rice sources and rice customers increases the ability of the 
Company to take advantage of supply and demand imbalances.


<PAGE>
 
<PAGE> 31

On July 5, 1996, ARI acquired the domestic and foreign olive business of 
Campbell Soup Company for approximately $36 million. Assets acquired include 
domestic inventories and fixed assets, all of the outstanding common stock 
of a Spanish olive company and fifty-one percent of the stock of a marketer 
of olive processing machinery. The purchase was funded primarily from ARI's 
credit facilities. The Acquisition is accounted for as a purchase, and the 
results of operations of the acquired business are included in the Company's 
consolidated financial statements after July 5, 1996. 

Historically, sales of olives have pronounced seasonal elements, with higher 
sales occurring in conjunction with holiday consumption.  Accordingly, 
because the quarterly period ending December 31 contains both the 
Thanksgiving and Christmas holidays, the two holidays of highest consumption, 
it will have significantly higher sales than the other three quarters of the
fiscal year.  Margins normally follow the seasonal pattern of sales.

Net Sales.  ARI's net sales increased $121.7 million, or 30.9%, from $393.8 
million in fiscal 1996 to $515.5 million in fiscal 1997.  The sales increase 
of $121.7 million was composed of $67.6 million in olive sales derived from 
the Olive Acquisition in July 1996, $39.0 million in increases in sales of 
exported rice, and $15.1 million in increases in sales of rice in the U.S.

Export rice sales increased due primarily to higher volume, while average 
export rice prices remained at approximately the same levels as the prior 
year.  Export rice sales volume increased approximately 3.1 million 
equivalent rough rice hundredweight as a result of higher sales in the Middle 
East and Africa partially offset by lower sales to Asia and the Western 
Hemisphere.  Domestic rice sales were higher as a result of higher average 
prices partially offset by lower volume.

Gross Profit.  Gross profit was 11.9% of sales for fiscal 1997 compared to
9.7 % for fiscal 1996.  Gross profit increased $23.2 million, or 61.0%, from 
$38.1 million in fiscal 1996 to $61.3 million in fiscal 1997, due primarily 
to the Olive Acquisition.

Selling, General and Administrative Expenses.  Selling, general and 
administrative expense increased $11.1 million to $35.9 million in fiscal 
1997 due primarily to higher advertising and promotional expenses associated 
with the Olive Acquisition.


Chemonics International - Consulting    

Revenues for International decreased slightly by $327,000, or .4% to $77.4 
million in 1997 from $77.7 million in 1996.  Although sales were essentially
flat, significant shifts occurred in the regions constituting these sales as
revenue from contracts in the former Soviet Union declined, while new 
contracts began in Latin America with the World Bank and the International
Development Bank.  Gross profit as a percentage of revenues for 1997 was 28.6%
compared to 27.4% for the prior fiscal year.  This increase reflects a reduced
level of subcontracted work and a greater utilization of Chemonic's staff as
as percentage of cost input.  Operating income was $2.9 million, or 3.8% of 
revenues in fiscal 1997 compared to $4.2 million or 5.3% of revenues in 
fiscal 1996.  Selling, general and administrative expenses were up by 
approximately $2 million for the year due largely to intensified efforts to
obtain new business and maintain Chemonic's current market share.
<PAGE>
<PAGE> 32

Chemonics Fire-Trol

Fire-Trol reported net sales of $20.9 million in fiscal 1997 compared to net 
sales of $14.0 million in fiscal 1996, an increase of 49%.  Fiscal 1997 
represented a near record sales year for Fire-Trol due to the significant 
forest fire activity experienced in the Western United States in the summer 
of 1996.  Fiscal year 1996 reflected a more normal fire season.  Gross profit 
for fiscal year 1997 as a percentage of sales increased to 28.4% from 26.9% 
in fiscal 1996 due to the increase in sales.  Operating income for fiscal 
year 1997 was $3.5 million, compared to $1.3 million in 1996, an increase 
of $2.2 million due to the increase in sales. 


Corporate

Consolidated interest expense was $23.4 million in 1997 compared to $19.8 
million in 1996, an increase of $3.6 million.  ARI had a $3.8 million 
increase in interest expense, primarily due to higher average balances 
outstanding due to the addition of the olive business.  Interest expense 
in both periods includes amortization of capitalized debt issuance costs 
and accretion of the $6 million original issue discount on the $100 million 
notes issued by ARI in August 1995.



FISCAL YEAR ENDED MARCH 31, 1996 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1995


Consolidated Results

For the year ended March 31, 1996, ERLY Industries recorded a net loss of 
$1.1 million or $.24 per fully diluted share of common stock on sales of 
$487 million.  This compares with net income in 1995 of $9.3 million or 
$1.58 per fully diluted share on sales of $460 million.

Results for fiscal year 1996 include a $7.2 million provision for loss on 
disposal of property held for sale (see Note 6).  Excluding this non-recurring
charge (and the related effect on taxes and minority interest), ERLY would 
have recorded net income of $2.9 million for fiscal 1996.  The decline in 
operating results from last year is primarily due to decreases recorded by 
the Company's subsidiaries, ARI and Fire-Trol.
  

American Rice

Net Sales.  ARI's net sales increased $20.7 million, or 5.5%, from $373.1 
million in fiscal 1995 to $393.8 million in fiscal 1996.  Export sales 
increased by $8.8 million while domestic sales increased by $11.9 million.  
Export sales increased due to  higher average prices partially offset
by lower volume.  Average export prices increased approximately 23.0%, 
accounting for $48.4 million in sales increases.  Total export sales volume 
declined approximately 4.1 million equivalent rough rice hundredweight or 
16%, accounting for a $39.6 million sales decline.  Export volume was lower 
primarily due to lower sales to the Caribbean partially offset by higher 
sales to the Middle East.  Sales to Asia were approximately the same as the 
prior year.  Domestic sales were higher primarily due to higher volume.
<PAGE>
 
<PAGE> 33

Gross Profit.  Gross profit decreased $2.7 million, or 6.8%, from $40.8 
million in fiscal 1995 to $38.1 million in fiscal 1996, primarily due to 
lower sales to Japan partially offset by increases in gross profit on U.S. 
sales.  As a percentage of net sales, gross profit decreased from 10.9% in 
fiscal 1995 to 9.7% in fiscal 1996.

Selling, General and Administrative Expenses.  Selling, general and 
administrative expenses increased $1.5 million, or 6.6%, from $23.2 million 
in fiscal 1995 to $24.8 million in fiscal 1996.  As a percentage of net 
sales, selling, general and administrative expenses were approximately the 
same as the prior year.

Provision for Loss on Disposal of Properties.  In fiscal year 1996 ARI 
entered into an agreement to sell its principal Houston property held for 
sale, for net proceeds of approximately $11.2 million after expenses 
associated with the sale.  In anticipation of this transaction the carrying 
value of the property was reduced to its approximate net realizable value 
(after accrual of certain costs) by a non-recurring charge of $7.2 million 
in fiscal year 1996. 


Chemonics International - Consulting

Revenues for International increased by $14.2 million, or 22.4%, to $77.7 
million for fiscal 1996 from $63.5 million in the prior fiscal year.  This 
increase was primarily due to increased revenues from projects in the former 
Soviet Union in addition to revenues from new clients, principally national 
and regional development banks.  Gross profit for fiscal 1996, as a percentage
of revenues, was 27.4% compared to 29.3% for the prior fiscal year.   
Operating income was $4.2 million, or 5.3% of revenues in fiscal 1996 
compared to $4.9 million or 7.7% of revenues in fiscal 1995. 


Chemonics Industries - Fire-Trol

Fire-Trol reported net sales of $14.0 million in fiscal 1996 compared to net 
sales of $23.0 million in fiscal 1995, a decrease of $9.0 million, or 39%.  
Fiscal 1995 represented a record sales year for Fire-Trol due to the 
significant amount of forest fire activity experienced in the United States 
and Canada in the summer of 1994.  Fiscal year 1996 reflected a more normal
sales year.  Gross profit for fiscal year 1996 as a percentage of sales 
decreased to 26.9% from 31.6% in fiscal 1995 due to the decrease in sales.  
Operating income for fiscal 1996 was $1.3 million, compared to $5.3 million 
in 1995, a decrease of $4.0 million due to the reduction in sales.


Corporate

Consolidated interest expense was $19.8 million in 1996 compared to $15.9 
million in 1995, an increase of $3.9 million.  ARI had a $5.1 million 
increase in interest expense due to higher average balances outstanding and 
higher average interest rates.  Interest expense in both periods includes 
amortization of capitalized debt issuance costs.  Interest expense for 1996 
also includes accretion of the $6 million original issue discount on the 
$100 million notes issued in August 1995.
<PAGE>
         
<PAGE> 34

                 FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES


ARI requires liquidity and capital primarily for the purchase of rough rice 
and olives and to invest in property, plant and equipment necessary to 
support operations.  Historically, ARI has financed both working capital and 
capital expenditures through internally generated funds and by funds provided 
by credit lines.  Chemonics' international consulting operation requires 
capital to finance the costs of it's consulting projects, a significant 
portion which are labor related, prior to collection under applicable 
contract terms.

The Company's normal working capital and operational requirements are 
currently provided by a combination of internally generated funds and 
external borrowings under three revolving lines of credit.  ARI operations 
are funded by an $85 million line of credit and $7.3 million in short-term 
notes from foreign banks to finance Vietnam inventory.  Chemonics is funded 
by a $19 million line for its international consulting activities and U.S. 
Fire-Trol operations and a $1.0 million line for Fire-Trol operations in 
Canada.  Advances under the lines of credit are made as needed assuming 
required collateral, consisting primarily of accounts receivable and 
inventory, is available.  At March 31, 1997, borrowing availability under 
ARI's line of credit was $8.5 million and borrowing availability under 
Chemonics' lines was $3.0 million.

For fiscal year 1996, ARI had a $47.5 million revolving credit loan with 
interest at the prime rate of interest plus .5%.  In June 1996, this loan 
was refinanced with a new lender and the borrowing limit was increased to 
$85.0 million.  The new loan bears interest at ARI's option at either the 
prime rate or the London Interbank Offered Rate plus an applicable margin 
based upon ARI's adjusted funded debt ratio.

Cash used in operations totaled $29.4 million for 1997 compared to cash flow 
used in operations of $2.5 million in 1996.  The change was primarily 
attributable to increased inventory levels and increased receivables, 
partially offset by net income in 1997 and higher accounts payable and 
accrued liability levels.  Inventories were up $52 million over last year 
with ARI accounting for $51 million of the increase.  ARI's inventories 
increased due to a variety of factors which included the increased inventory 
associated with the Olive Acquisition and higher rice inventories in the 
Caribbean region and for the Saudi Arabia business.  Historically, the rice 
ARI sold in Saudi Arabia was shipped from the United States in packaged form.  
In 1994, ARI began shipping rice in bulk form to the Middle East region and 
packing it under strict quality supervision in order to reduce vessel loading 
and freight costs while providing enhanced market competitiveness, improved 
customer service and product freshness.  Until January 1997, products were 
packed at a facility in Jeddah, Saudi Arabia (see Item 3 - Legal 
Proceedings).  Since January 1997 other Middle East facilities with similar 
advantages have been utilized.
<PAGE>
<PAGE> 35

Cash provided by financing activities totaled $57 million in 1997 compared to 
cash provided of $8.8 million in 1996.  Cash provided by financing activities 
in 1997 primarily reflected the $60.3 million increase notes payable, due to 
the addition of the olive business.  In September 1996, ARI closed the sale 
of its principal Houston property held for sale and received gross proceeds 
of approximately $13.1 million of which approximately $1 million was used to 
retire mortgage notes discussed below. 

Cash outlays for capital expenditures in 1997 totaled $6.2 million of which 
$5.1 million was invested in the Company's rice and olive operations for 
infrastructure, development and modernization of new and existing facilities.

The significant growth in International's revenue in recent years necessitated
increases in its revolving credit line for its working capital requirements.  
In November 1994, International obtained an $11 million line of credit which 
was increased to $16 million in fiscal 1996.  This was increased to $19 
million in fiscal 1997 and now provides financing for Chemonics' international
consulting operations and its U.S. Fire-Trol operations.  Chemonics Industries
also has a $1.0 million line of credit to support its Canadian Fire-Trol 
operations.

In a public offering completed in August 1995, ARI issued $100 million 
principal amount of 13.0% mortgage notes due 2002 (the "Notes").  Portions 
of the net proceeds of $94 million were used to repay the balance of ARI's 
existing term loans, to make a $10.5 million 15% loan to ERLY due 2001, and 
to reduce borrowings outstanding under ARI's revolving credit loan.  The 
Notes provide for interest payments semi-annually, accruing fixed interest 
at an annual rate of 13.0%, an effective yield rate of 14.4%

ARI intends to satisfy its obligations under the Notes as well as future 
capital expenditures and working capital requirements primarily with cash 
flow from operations and from funds available under existing and new 
revolving lines of credit.  Management believes that cash flow from 
operations and the line of credit will provide sufficient liquidity to enable 
ARI to meet its currently foreseeable working capital and capital expenditure 
requirements.

The parent company's operating cash requirements for corporate overhead are 
expected to be met from management fees received from subsidiaries, payments 
under tax sharing agreements with subsidiaries and through positive cash 
flows from investments.  Lines of credit have been arranged through 
subsidiary companies, with the result that cash distributions are either 
not permitted to the parent company or limited to certain amounts under 
management agreements.  The current ARI lending agreements include 
restrictions on dividend payments, tax payments and management fees.  

Under the terms of the ARI Series B Preferred Stock issued to ERLY in 
exchange for the assets and liabilities of Comet, ERLY is entitled to an 
aggregate dividend of approximately $5.2 million per year.  The current 
loan agreements with the ARI lenders prohibit the payment of any dividends 
and do not provide any basis on which the lenders would approve a dividend
payment.  As of March 31, 1997, ARI Series B Preferred dividends accumulated,
but not declared, total $19.9 million, and the Preferred C dividends 
accumulated but not declared total $2.9 million.


<PAGE>

<PAGE> 36

ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS 
                            
<TABLE>         
<CAPTION>

Years ended March 31                     1997            1996             1995     
                                    ------------     ------------     ------------
<S>                                <C>              <C>              <C>
Net sales                           $614,300,000     $486,626,000     $459,599,000 
Cost of sales                        524,535,000      422,434,000      392,902,000 
----------------------------------------------------------------------------------
  Gross profit                        89,765,000       64,192,000       66,697,000 

Selling, general and 
  administrative expenses             60,017,000       46,003,000       40,418,000 
Interest expense                      23,429,000       19,849,000       15,868,000 
Interest income                         (617,000)        (486,000)        (451,000)
Other (income) expense                  (381,000)        (499,000)        (196,000) 
Provision for loss on 
  disposal of property                                  7,200,000        1,000,000     
----------------------------------------------------------------------------------     
                                      82,448,000       72,067,000       56,639,000 
----------------------------------------------------------------------------------

Income (loss) before 
  taxes on income
  and minority interest                7,317,000      ( 7,875,000)      10,058,000 

Taxes on income                          680,000          564,000        1,405,000 
----------------------------------------------------------------------------------
Income (loss) before 
  minority interest                    6,637,000       (8,439,000)       8,653,000 
Minority interest*                       715,000        7,290,000          622,000
----------------------------------------------------------------------------------

Net income (loss)                   $  7,352,000      ($1,149,000)     $ 9,275,000 
==================================================================================
</TABLE>                                                          (Continued)

<PAGE>

<PAGE> 37

ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (continued) 
                                         
<TABLE>                                         
<CAPTION>

Years ended March 31                      1997             1996             1995     
                                       ---------        ---------        ---------
<S>                                    <C>              <C>            <C>
Net income (loss) per common
  and common stock equivalents:
    Primary**                            $  1.51          ($  .24)        $   1.68 
==================================================================================


    Fully diluted**                      $  1.46          ($  .24)        $   1.58
==================================================================================


Weighted average common and
  common stock equivalents:
    Primary                            4,868,000        4,708,000        5,522,000 
    Fully diluted                      5,123,000        4,708,000        5,943,000 

</TABLE>
                                                

   *  Represents minority interest in net earnings or loss of American Rice, 
      Inc. applicable to common stock, after preferred  stock dividend 
      requirements (see Note 11).

  **  Retroactively adjusted to give effect to 10% stock dividend in September
      1996.
 
 
    


See Notes to Consolidated Financial Statements.

<PAGE>
<PAGE> 38

ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
                                
<TABLE>             
<CAPTION>

March 31                                        1997                   1996     
                                          ---------------        ---------------
<S>                                      <C>                    <C>
ASSETS
Current assets:
   Cash and cash equivalents              $     5,584,000         $    3,819,000 
   Notes and accounts receivable,
     less allowance for doubtful
     accounts of $1,326,000 (1997)
     and $1,715,000 (1996)                     85,789,000             56,665,000 
   Inventories                                129,695,000             78,004,000 
   Prepaid expenses and other
     current assets                             3,354,000              2,020,000
   Properties held for sale, net                                      13,535,000
--------------------------------------------------------------------------------       
       Total current assets                   224,422,000            154,043,000 

Long-term notes receivable, net                 1,503,000              1,574,000 
Property, plant and equipment, net             71,571,000             56,360,000 
Other assets                                   23,222,000             23,158,000 
-------------------------------------------------------------------------------- 
                                          $   320,718,000         $  235,135,000 
================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Notes payable, collateralized          $    87,740,000        $    27,413,000 
   Accounts payable                            64,069,000             48,670,000 
   Accrued payroll and other
     current liabilities                       23,307,000             16,497,000 
   Income taxes payable                         1,936,000              2,165,000 
   Current portion of long-term and
     subordinated debt                          1,502,000              1,163,000 
--------------------------------------------------------------------------------       
       Total current liabilities              178,554,000             95,908,000 

Long-term debt                                100,584,000            100,113,000 
Subordinated debt                               4,665,000              5,665,000 
Deferred income taxes payable                   1,501,000              1,592,000
Minority interest                              10,634,000             11,811,000 
Commitments and contingencies

Redeemable common stock warrants                                       2,512,000 
Stockholders' equity:
   Common stock, par value $.01 a share: 
     Authorized: 15,000,000 shares 
     Issued and outstanding: 
       4,740,415 shares (1997) and 
       4,284,985 shares (1996)                     47,000                 43,000 
   Additional paid-in capital                  27,533,000             23,879,000 
   Retained earnings (deficit)                 (1,249,000)            (5,046,000) 
   Cumulative foreign currency
     adjustments                               (1,551,000)            (1,342,000)
--------------------------------------------------------------------------------       
       Total stockholders' equity              24,780,000             17,534,000 
--------------------------------------------------------------------------------   
                                          $   320,718,000        $   235,135,000 
================================================================================
</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE>
<PAGE> 39

ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
                    
<TABLE>                
<CAPTION>

Years ended March 31                        1997             1996             1995     
                                         ----------       ----------     ------------
<S>                                     <C>              <C>            <C>
OPERATING ACTIVITIES:
  Net income (loss)                      $7,352,000      ($1,149,000)     $ 9,275,000 
  Adjustments to reconcile net
    income (loss) to net cash provided
    by (used in) operating activities:
  Depreciation and amortization           8,775,000        7,247,000        7,627,000 
  Minority interest                        (715,000)      (7,290,000)        (622,000) 
  Provision for loss on disposal
    of property                                            7,200,000        1,000,000 
  Provision for loss on receivables         653,000          320,000          437,000
  Gain on redemption of warrant
    repurchase obligation                  (387,000)                               
  Change in assets and liabilities,
    net of effects of acquisition
    and sale of businesses:
    (Increase) decrease in receivables  (26,857,000)     ( 3,553,000)     (18,851,000) 
    (Increase) decrease in inventories  (30,336,000)     (21,982,000)       7,274,000
    Increase (decrease) in accounts 
      payable, other current 
      liabilities and taxes payable      15,917,000       17,987,000        7,343,000
    Other, net                           (3,758,000)     ( 1,241,000)        (245,000)
-------------------------------------------------------------------------------------

NET CASH PROVIDED BY (USED IN)
  OPERATING ACTIVITIES                  (29,356,000)     ( 2,461,000)      13,238,000

INVESTING ACTIVITIES:
  Acquisition of Olive business
   (net of cash acquired)               (33,952,000)
  Disposition of assets held for sale    13,118,000
  Additions to property, plant
    and equipment                        (6,227,000)      (6,306,000)      (4,601,000)
  Disposition of property, plant
    and equipment                         1,153,000           50,000           16,000 
-------------------------------------------------------------------------------------

NET CASH (USED IN)
  INVESTING ACTIVITIES                  (25,908,000)      (6,256,000)      (4,585,000) 

</TABLE>
                                                               
                                                                  (Continued)
                                                    
<PAGE>
<PAGE> 40                                                    

ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                        
<TABLE>                
<CAPTION>

Years ended March 31                       1997             1996            1995     
                                     --------------      -----------    -------------
<S>                                 <C>                 <C>            <C>
FINANCING ACTIVITIES:
  Increase (decrease) in 
    notes payable                    $   60,327,000    ($ 14,470,000)   $   1,188,000
  Principal payments on
    long-term debt                         (275,000)     (63,118,000)      (8,237,000)
  Principal reduction on
    subordinated debt                    (1,000,000)      (1,000,000)      (1,201,000)
  Redemption of redeemable
   common stock warrants                 (2,125,000)
  Proceeds from notes and 
    long-term debt                                        94,000,000                  
  Mortgage notes issuance cost               (5,000)      (6,631,000)
  Proceeds from sale of stock               107,000           37,000          250,000 
-------------------------------------------------------------------------------------

NET CASH PROVIDED BY (USED IN)
  FINANCING ACTIVITIES                   57,029,000        8,818,000      ( 8,000,000)
-------------------------------------------------------------------------------------
INCREASE IN CASH
  DURING THE YEAR                         1,765,000          101,000          653,000
CASH, BEGINNING OF YEAR                   3,819,000        3,718,000        3,065,000 
-------------------------------------------------------------------------------------
CASH, END OF YEAR                    $    5,584,000      $ 3,819,000    $   3,718,000 
=====================================================================================
Supplemental cash flow information -
  Net cash paid during the year for:
    Interest expense                 $   22,360,000      $15,964,000    $  11,583,000 
    Income taxes                     $    1,008,000      $   953,000    $     686,000 
</TABLE>

Non-cash activities:

    In fiscal year 1997, the Company acquired the domestic and foreign olive 
    business of Campbell Soup Company for $35,976,000.  In conjunction with 
    the acquisition, liabilities were assumed as follows:

    Fair value of assets acquired       $ 43,961,000
    Cash paid                             35,976,000
                                        ------------
    Liabilities assumed                 $  7,985,000
                                        ============


  In fiscal year 1996, the Company acquired $1,054,000 of property, plant 
  and equipment through capital leases.


See Notes to Consolidated Financial Statements.
<PAGE>


<PAGE> 41

ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    
<TABLE>
<CAPTION>

                                                                                  Cumulative         
                                                  Additional      Retained         Foreign           Total 
                          Common Stock             Paid-in        Earnings         Currency      Stockholders'
                     Shares         Dollars        Capital        (Deficit)       Adjustments       Equity      
                    ---------    -----------------------------------------------------------------------------
<S>                <C>          <C>             <C>             <C>               <C>             <C>         
Balance
April 1, 1994       3,374,765       $ 34,000     $16,157,000     ($6,450,000)     ($1,347,000)      $8,394,000 

Net income                                                         9,275,000                         9,275,000 
Foreign currency
  adjustments                                                                         (45,000)         (45,000)
Common stock
  issued               43,507                        250,000                                           250,000 
Accretion of
  redeemable
  common stock                                                                                                     
  warrants                                                        (1,075,000)                       (1,075,000)
                    ---------     ----------------------------------------------------------------------------
Balance
March 31, 1995      3,418,272         34,000      16,407,000       1,750,000       (1,392,000)      16,799,000 

Net income (loss)                                                 (1,149,000)                       (1,149,000)
Foreign currency
  adjustments                                                                          50,000           50,000 
15% stock 
  dividend            512,314          5,000       5,639,000      (5,644,000)                             --     
Cash payments
  in lieu of 
  fractional shares                                                   (3,000)                           (3,000)
Reclassification
  from redeemable
  common stock        345,000          4,000       1,796,000                                         1,800,000 
Common stock 
  issued                9,399                         37,000                                            37,000 
                    ---------    -----------------------------------------------------------------------------
Balance
March 31, 1996      4,284,985         43,000      23,879,000      (5,046,000)      (1,342,000)     $17,534,000 
                    
Net income                                                         7,352,000                         7,352,000
Foreign currency
  adjustments                                                                        (209,000)        (209,000) 
10% stock 
  dividend            430,417          4,000       3,547,000      (3,551,000)                             --     
Cash payments
  in lieu of 
  fractional shares                                                   (4,000)                           (4,000)
Common stock 
  issued               25,013                        107,000                                           107,000 
                    ---------    -----------------------------------------------------------------------------
Balance
March 31, 1997      4,740,415    $    47,000     $27,533,000     ($1,249,000)     ($1,551,000)     $24,780,000 
                    =========    =============================================================================

</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE>
<PAGE> 42


ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        

Note 1 - Summary of Significant Accounting Policies

Principles of consolidation--The accompanying consolidated financial 
statements include the accounts of ERLY Industries Inc. and its subsidiaries 
(the "Company" or "ERLY").  All significant intercompany accounts, 
intercompany profits and intercompany transactions are eliminated.  As 
discussed in Note 2, substantially all of the assets and liabilities of 
ERLY's wholly owned subsidiary, Comet Rice, Inc. ("Comet"), were acquired by 
American Rice, Inc. ("ARI") on May 26, 1993, in a transaction accounted for 
as a reverse acquisition by its subsidiary, Comet.  Prior to the transaction, 
ERLY owned 48% of the voting rights of ARI, and its investment in ARI was 
accounted for using the equity method.  ERLY's equity in ARI's net results of 
operations was reflected as investment income or loss in ERLY's consolidated 
statements of operations.  As a result of the transaction, ERLY's ownership
increased to 81% of the voting rights of ARI; therefore, beginning in June 
1993, ARI's balance sheet and results of operations are consolidated with 
ERLY's with appropriate adjustments to reflect minority interest of 19%.

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

Revenue recognition - The Company's ARI and Fire-Trol subsidiaries generally 
record revenues upon shipment of product to the customer.  The Company's 
consulting business records revenues in the following manner--On cost-
reimbursable contracts, revenues are recorded as contract costs are incurred, 
plus a proportionate amount of the fee expected to be realized on the 
contract.  On time-and-materials contracts, revenues are recorded at 
contractual rates for labor hours incurred, plus other expenses.  On fixed-
price contracts, revenues are recorded using the percentage-of-completion 
method, generally based on costs incurred in relation to total estimated 
costs.  Provisions for estimated losses on contracts are recorded when 
identifiable.

Cash and cash equivalents--Cash and cash equivalents include cash on hand 
and highly liquid debt instruments purchased with a maturity of three months 
or less.

Inventories--Inventories are accounted for by the first-in, first-out (FIFO) 
method or market, if lower.  Inventory cost includes direct materials, 
direct labor and manufacturing overhead.  Market value is determined by 
deducting the costs of disposition from estimated selling prices.

The Company, from time to time, buys and sells futures and options contracts 
on rice as an operational tool to manage its inventory position.  Gains and 
losses on contracts that meet defined criteria are recognized upon completion
of the transaction, while gains and losses from all other contracts are 
recognized in the period in which the market value of the contracts change.

<PAGE>
 
<PAGE> 43

Note 1 - Summary of Significant Accounting Policies (continued)  

Property, plant and equipment--Property, plant and equipment are stated at 
cost and are depreciated, using the straight-line method of depreciation 
over the estimated useful lives of the related assets as follows:  buildings 
and improvements--10 to 45 years; machinery and equipment--3 to 25 years; 
and, leasehold improvements--the lesser of useful life or lease term.

Other assets--Included in other assets are trademarks and tradenames, which 
are being amortized on a straight-line basis over 40 years and deferred 
costs related to long-term debt and subordinated debentures, which are 
being amortized over the respective terms of the related debt.  The Company 
utilizes estimated future undiscounted cash flows to evaluate any possible 
impairment of trademarks and tradenames.

Federal and state income taxes--Deferred income tax assets and liabilities 
are computed annually for differences between the financial statement basis 
and tax basis of assets and liabilities that will result in taxable or 
deductible amounts in the future.  Such deferred income tax asset and 
liability computations are based on enacted tax laws and rates applicable 
to periods in which the differences are expected to affect taxable income.  
Valuation allowances are established when necessary to reduce deferred tax 
assets to the amount expected to be realized.  The Company does not provide 
U.S. federal income taxes on undistributed earnings of foreign subsidiaries
as such earnings are intended to be permanently reinvested in those 
operations.

Foreign currency translation--All assets and liabilities of operations 
outside the United States are translated from the functional currency to 
the reporting currency at the foreign exchange rates in effect at year end.  
Revenues and expenses for the year are translated at average exchange rates 
during the year.  Such translation gains and losses are not included in 
determining net income but are accumulated and reported as a separate 
component of stockholders' equity.  Net realized and unrealized gains or 
losses resulting from foreign currency transactions, including translations 
of local currencies to the functional currency, are credited or charged to 
income.  The U.S. dollar is currently the functional currency for all 
operations except Canada, Vietnam and Spain, where the Canadian dollar, the
Vietnamese dong and the Spanish peseta are the functional currencies, 
respectively.

Fair value of financial instruments--The Company's financial instruments 
consist primarily of cash, trade accounts and notes receivable, accounts 
and notes payable, and debt instruments.  The book values of cash, trade 
receivables and accounts payable are representative of their respective 
fair values due to the short-term maturity of these instruments.  The book 
value of short-term debt instruments is considered to approximate the fair 
value as the interest rates of such instruments are based on the prime rate. 
The fair value of ARI's $99 million principal amount of 13% mortgage notes 
was approximately $98 million as of March 31, 1997, based on a dealer quote.

Stock-based compensation--In October 1995, the Financial Accounting Standards 
Board issued Statement No. 123, "Accounting for Stock-Based Compensation," 
which is effective in fiscal 1997 for ERLY.  As permitted by the new 
standard, the Company will continue applying accounting prescribed by APB 
Opinion No. 25, "Accounting for Stock Issued to Employees," and has included
additional footnote disclosures, as necessary.
<PAGE>
<PAGE> 44

Note 1 - Summary of Significant Accounting Policies (continued)  

Impairment of long-lived assets--On April 1, 1996, the Company adopted 
Financial Accounting Standards Board Statement No. 121, "Accounting for the 
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
This standard provides guidance on the carrying value of long-lived assets.  
The adoption of this statement did not have a material effect on the 
consolidated financial statements.  The Company evaluates long-lived assets 
for impairment whenever events or changes in circumstances indicate that 
the carrying value of an asset may not be recoverable.  If the estimated 
future cash flows (undiscounted and without interest charges) from the use 
of an asset are less than the carrying value, a write down would be recorded 
to reduce the related asset to its estimated fair value.

Earnings per share--Primary earnings per share are based on the weighted 
average number of:  (1) common shares, and (2) dilutive common share 
equivalents (consisting of stock options and warrants) outstanding during 
each year.  Fully diluted earnings per share assumes conversion of a 
convertible note payable, unless conversion would be antidilutive. 

Recent Accounting Pronouncement--In February 1997, the Financial Accounting 
Standards Board issued Statement No. 128, "Earnings Per Share" ("SFAS 128"), 
which is effective for periods ending after December 15, 1997 and specifies 
the computation, presentation and disclosure requirements of earnings per 
share ("EPS").  SFAS 128 requires a dual presentation of basic and diluted 
EPS.  Basic EPS, which excludes the impact of common stock equivalents, 
replaces primary EPS.  Diluted EPS, which utilizes the average market price 
per share as opposed to the greater of the average market price per share or 
ending market price per share when applying the treasury stock method in 
determining common stock equivalents, replaces fully diluted EPS.  Pro 
forma basic and diluted EPS for all historical periods presented, assuming 
SFAS No. 128 was effective at the beginning of such historical period, would 
not be materially different from the primary and fully diluted EPS presented.

Reclassifications--Certain reclassifications have been made to prior year 
consolidated financial statements to conform to current year presentation.



Note 2 - Acquisition of Comet Rice, Inc. by American Rice, Inc.

American Rice, Inc. is a public company involved in all phases of rice 
processing, packaging and marketing.  Pursuant to a reorganization, which 
was consummated in April 1988, ARI acquired all of the assets of an 
agricultural cooperative in exchange for approximately 52% of ARI's 
outstanding voting stock.  The remaining 48% of ARI's voting stock was 
acquired by ERLY's wholly owned subsidiary, Comet Rice, Inc., at a cost 
of $20 million cash.  The cost was allocated first to 48% of ARI's equity 
($11,610,000) and the remainder to ARI's Houston, Texas property.

The investment in ARI was accounted for under the equity method and was 
adjusted by Comet's equity interest in the results of ARI's operations.
<PAGE>
<PAGE> 45

Note 2 - Acquisition of Comet Rice, Inc. by American Rice, Inc. (continued)

On May 26, 1993, ARI consummated a transaction (the "Acquisition") to acquire 
substantially all of the assets of Comet (except the ARI capital stock owned 
by Comet) and assume all of Comet's liabilities.  In connection with the 
Acquisition, ERLY succeeded to the ARI stock held by Comet upon the 
liquidation of Comet.

Pursuant to the Acquisition, in exchange for the assets acquired from Comet, 
ARI issued to Comet 2.8 million shares (as adjusted for a one-for-five 
reverse stock split for all issues of common and preferred stock effective 
September 1994) of a newly created Series B $1 par value preferred stock.  
Each share of Series B Preferred Stock provides for annual cumulative, 
non-participating dividends of $1.85, is convertible into two shares of ARI 
common stock, is entitled to two votes, and has a liquidation preference of 
$5.00 per share.  The Series B Preferred Stock carries an aggregate dividend 
of approximately $5.2 million per year.  The current ARI loan agreements 
prohibit the payment of any dividends and do not provide any basis on which 
the lenders would approve a dividend payment.  As a result of the 
Acquisition, ERLY holds 81% of the combined voting power of ARI stock 
outstanding after the Acquisition.  


Note 3 - Olive Business Acquisition

On July 5, 1996, the Company's subsidiary, ARI, acquired the domestic and 
foreign olive business of Campbell Soup Company ("CSC Olives") for 
approximately $36 million (the "Olive Acquisition").  Assets acquired include 
domestic inventories and fixed assets, all of the outstanding common stock 
of a Spanish company which comprises the foreign olive business, and 51% of 
the stock of Sadrym California, a marketer of olive processing machinery.  
The purchase was funded primarily from ARI's credit facilities.  The Olive
Acquisition was accounted for as a purchase and the results of operations 
of the acquired business have been included in the Company's consolidated 
financial statements after July 5, 1996.  The olive business is operated 
as the Early California Foods division of ARI.

Operating results reflected in the accompanying financial statements do 
not include CSC Olives' operating activities before July 5, 1996.  The 
following summarized pro forma information assumes the Olive Acquisition 
occurred on the first day of the current fiscal year (in thousands, 
except per share data):

                               Year ended
                             March 31, 1997
                             --------------

Pro forma net sales            $  632,030
                               ==========

Pro forma net income           $    5,553
                               ==========

Pro forma earnings per share:
  Primary                      $     1.14
  Fully diluted                $     1.08
<PAGE>
<PAGE> 46


Note 4 - Inventories

A summary of inventories at March 31, 1997 and 1996 follows:

                                            1997              1996     
                                         -----------       -----------

Raw materials                           $ 49,745,000       $47,883,000 
Finished goods                            79,950,000        30,121,000 
----------------------------------------------------------------------   
                                        $129,695,000       $78,004,000 
======================================================================



Note 5 - Property, Plant and Equipment

A summary of property, plant and equipment at March 31, 1997 and 1996 follows:

                                           1997              1996     
                                     --------------     --------------

Land                                 $    3,103,000     $      596,000 
Buildings and improvements               36,295,000         30,931,000 
Machinery and equipment                  67,753,000         54,813,000 
----------------------------------------------------------------------  
                                        107,151,000         86,340,000     
Less accumulated depreciation        
  and amortization                      (35,580,000)       (29,980,000)
----------------------------------------------------------------------   
                                     $   71,571,000     $   56,360,000 
======================================================================


Depreciation expense was $7,133,000 (1997), $5,484,000 (1996) and 
$5,099,000 (1995).



Note 6 - Properties Held for Sale 

The consolidated balance sheet at March 31, 1996 included properties held for 
sale of $13.5 million which primarily represented 39 acres of land in 
Houston, Texas, held for sale by ARI.  In fiscal year 1996, ARI entered 
into an agreement to sell this property and reduced the carrying value of 
the property to its approximate net realizable value (after the accrual of 
certain costs) by a non-recurring charge of $7.2 million in the quarter 
ended December 31, 1995.  In September 1996, ARI completed the sale of the 
property and received gross proceeds of approximately $13.1 million.


<PAGE>
<PAGE> 47

Note 7 - Other Assets

Other assets at March 31, 1997 and 1996 consist of the following:

                                           1997               1996     
                                     --------------     --------------
Trademarks and tradenames            $   14,761,000      $  14,360,000 
Deferred debt issue costs                13,733,000         12,022,000 
Winery assets held for sale               2,510,000          3,148,000 
Other                                       903,000            778,000 
----------------------------------------------------------------------  
                                         31,907,000         30,308,000 
Less accumulated amortization:                      
  Trademarks and tradenames              (2,514,000)        (2,149,000)
  Deferred debt issue costs              (6,171,000)        (5,001,000)
----------------------------------------------------------------------   
                                     $   23,222,000     $   23,158,000 
======================================================================



Winery assets held for sale primarily represents two wineries of the 
Company's discontinued wine operations which management intends to dispose 
of in an orderly manner.  Both plants are leased to third parties, one of 
which is under a lease that includes an option to buy.  In fiscal 1995, 
a $1.0 million reserve for impairment was provided on these assets.  

<PAGE>
<PAGE> 48


Note 8 - Notes Payable

The Company and its subsidiaries have utilized short-term lines of credit 
with commercial banks in addition to other short-term loans.  Interest 
expense on notes payable to banks and on other short-term borrowings 
amounted to $7,877,000 (1997), $5,386,000 (1996) and $4,980,000 (1995).

A comparison of information relating to the Company's lines of credit for 
the years ended March 31, 1997, 1996 and 1995 follows:


<TABLE>
<CAPTION>

                                              1997           1996            1995   
                                          -----------     -----------     -----------
<S>                                       <C>             <C>             <C>
Average during the year:
  Short-term borrowings                    $64,709,000     $35,391,000     $31,739,000
  Weighted average interest                  
    rate*                                        9.11%          10.68%           9.50%
  Average bank prime rate                        8.25%           8.71%           7.84%    
At March 31: 
  Lines of credit and short-term loans,
    subject to collateral availability    $115,500,000     $74,364,000     $62,438,000
  Short-term borrowings                   $ 87,740,000     $27,413,000     $41,883,000
  Average interest rate                          8.50%           8.50%          10.89%
  Bank prime rate                                8.50%           8.25%           9.00%

Unused short-term 
    borrowing capacity                     $11,540,000     $23,278,000     $14,989,000

Maximum month-end 
  short-term borrowings 
  during the year                          $87,740,000     $46,418,000     $43,964,000

</TABLE>


*Based on outstanding borrowings

Substantially all receivables, inventories, property, plant and equipment 
and the capital stock of American Rice, Inc. and Chemonics Industries, Inc. 
are pledged as collateral on notes payable and certain other long-term debt 
obligations. 

For fiscal year 1996, ARI had a $47.5 million revolving credit loan with 
interest at the prime rate of interest plus .5%.  In June 1996, this loan 
was refinanced with a new lender and increased to $85.0 million.  The new 
loan bears interest at ARI's option at either the prime rate or the London 
Interbank Offered Rate plus an applicable margin based upon ARI's adjusted 
funded debt ratio.

<PAGE>
<PAGE> 49


Note 9 - Income Taxes

The provision for income taxes is composed of the following:

<TABLE>
<CAPTION>
                                           Years ended March 31,               
                                 ------------------------------------------   
                                     1997           1996            1995    
                                 -----------     -----------     ----------
<S>                             <C>             <C>             <C>
Currently payable                            
  Federal                        $   171,000     $      --     $    183,000    
  State                              388,000                        802,000 
  Foreign                            143,000         564,000        420,000 
---------------------------------------------------------------------------
                                     702,000         564,000      1,405,000
Deferred                             (22,000)
--------------------------------------------------------------------------- 
Total provision                  $   680,000     $   564,000     $1,405,000 
===========================================================================
</TABLE>

The pre-tax income (loss) (before minority interest) related to domestic 
and foreign operations is as follows:


                                            Years ended March 31,           
                                  -----------------------------------------    
                                     1997          1996            1995   
                                  ----------   ------------   -------------

Domestic                          $8,495,000    ($8,948,000)     $8,937,000
Foreign                           (1,178,000)     1,073,000       1,121,000
---------------------------------------------------------------------------
Total                             $7,317,000    ($7,875,000)    $10,058,000
===========================================================================


The reconciliation of the Company's effective tax rate to 
the statutory federal tax rate is as follows:

                                            Years ended March 31,         
                                       --------------------------------
                                       1997          1996          1995   
                                       ----          ----          ----

Federal rate                            34%           (35%)         35%
State taxes                              3                           8   
Foreign taxes                            7              2            4    
Change in valuation allowance          (38)            40          (34)  
Other                                    3                           1
-----------------------------------------------------------------------
Effective tax rate                       9%             7%          14% 
=======================================================================
<PAGE>

<PAGE> 50

Note 8 - Income Taxes (continued)

The tax effect of the temporary differences and carryforwards which give rise 
to deferred tax assets and liabilities at March 31, 1997 and 1996 are as 
follows:
                                             
                                      
                                              1997                1996      
                                          ------------       -------------
Deferred tax assets:
  Allowance for doubtful accounts
    and other reserves                    $  1,909,000       $   2,270,000 
  Net operating loss carryforwards          11,811,000          16,001,000 
  Tax credit carryforwards                     199,000
  Other                                        910,000           1,217,000   
Deferred tax liabilities:
  Difference in basis of property          (12,574,000)        (13,837,000)   
  --------------------------------------------------------------------------  
  Subtotal                                   2,255,000           5,651,000    

Valuation allowance                         (3,756,000)         (7,243,000)
--------------------------------------------------------------------------
Net deferred tax asset (liability)         ($1,501,000)        ($1,592,000)
==========================================================================


Subsequent to the Acquisition, ARI's current taxable income or loss is 
included in ERLY's consolidated federal income tax return.  Under the terms 
of the tax sharing agreement between ARI and ERLY, ARI will pay to or receive 
from ERLY the amount of income taxes currently payable or refundable computed 
as if ARI filed its annual tax return on a separate company basis.  The tax 
sharing agreement provides that ERLY will receive the benefit of any 
pre-Acquisition tax net operating loss carryforwards generated by Comet.  

The Company and certain subsidiaries file consolidated federal income and 
combined state franchise tax returns.  The Company has provided a valuation 
allowance for the benefits of operating loss carryforwards in excess of net 
deferred tax liabilities.  At March 31, 1997, the Company has net operating 
loss carryforwards for federal tax reporting purposes of approximately $34 
million, which expire at various dates, primarily in years 2002 through 2011.

The Company's California franchise tax returns for fiscal years 1982 through 
1989 are currently under examination by the California Franchise Tax Board 
(FTB) which has issued notices of proposed assessments for certain of those 
years.  The Company has formally protested various positions taken by the 
FTB and believes that a majority of the Company's positions will be upheld.  
Management believes that adequate provisions for income taxes have been 
made and that the ultimate outcome of this matter will not have a material 
adverse effect on the Company.

<PAGE>

<PAGE> 51

Note 10 - Long-term and Subordinated Debt

A schedule of outstanding long-term and subordinated debt at March 31, 1997 
and 1996 follows:

                                                 1997              1996     
                                              -----------       -----------

Long-term debt:
  ARI mortgage notes due 2002,
    interest at 13%, net of 
    unamortized discount of $5,032,000        $93,968,000       $94,322,000 
  Term loans due 2008, interest
    at 6%                                       3,000,000         3,000,000 
  Convertible note payable to 
    officer, due 1998, interest 
    at bank prime rate plus 2%                  1,000,000         1,000,000 
    (See Note 13)
  Various obligations with maturities
    to 2000, interest rates ranging from
    5% to 12%                                   3,118,000         1,954,000 
  Less current portion of
    long-term debt                               (502,000)         (163,000)
--------------------------------------------------------------------------- 
                                             $100,584,000      $100,113,000 
===========================================================================

Subordinated debt:
  12-1/2% subordinated sinking 
    fund debentures                            $5,665,000        $6,665,000 
  Less current portion of 
    subordinated debt                          (1,000,000)       (1,000,000)
---------------------------------------------------------------------------  
                                               $4,665,000        $5,665,000 
===========================================================================



Certain of the Company's and subsidiaries' long-term debt agreements require 
maintenance of minimum amounts or ratios related to working capital, 
long-term debt and net worth, in addition to the observance of other 
covenants.  These restrictions also preclude the payment of cash dividends.  

<PAGE>
 
<PAGE> 52

Note 10 - Long-term and Subordinated Debt (continued)

In a public offering completed in August 1995, ARI issued $100 million 
principal amount of 13.0% mortgage notes due 2002 (the "Notes").  Portions 
of the net proceeds of $94 million were used to repay the balance of ARI's 
existing term loans, to make a $10.5 million 15% loan to ERLY due 2001, and 
to reduce borrowings outstanding under ARI's revolving credit loan.  ERLY 
utilized a portion of the proceeds to repay the remaining $9.5 million ERLY 
Juice Inc. debt, including accrued interest, which ERLY had guaranteed 
(see Note 12).

The Notes provide for interest payments semiannually, mature on July 31, 2002 
and are non-callable by ARI prior to July 31, 1999, after which date the 
Notes are callable at the option of ARI, in whole or in part, at any time 
upon not less than 30 nor more than 60 days notice, at 107.0% of the 
principal amount, declining ratably to par on or after July 31, 2001.  
Except under certain changes of control, upon remarketing of industrial 
revenue bonds, or asset sales, as defined in the related indenture, ARI 
is not required to make mandatory redemption payments on the Notes.  The 
Notes accrue fixed interest at an annual rate of 13.0%, an effective yield 
of 14.4%. 

In addition to fixed interest, the Notes bear contingent interest of 4.0% of 
consolidated cash flow (as defined) up to a limit of $40 million of 
consolidated cash flow during the fiscal year in which such interest accrues.  
Contingent interest accrues in each semiannual period (as defined) in which 
consolidated cash flow in such period and the immediately preceding 
semiannual period is equal to or greater than $20 million.  Contingent 
interest is payable semiannually, but ARI may elect to defer all or a 
portion of any such payment to the extent that (a) the payment of such 
portion of contingent interest will cause ARI's adjusted fixed charge 
coverage ratio  (as defined) for the two consecutive applicable semiannual 
periods to be less than 2.0:1 and (b) the principal of the Notes 
corresponding to such contingent interest has not then matured and become 
due and payable.

Contingent interest accrued in fiscal 1997 was zero and $143,000 for the 
semiannual periods ended June 30, 1996 and December 31, 1996, respectively.  
Contingent interest accrued in fiscal 1996 was $447,000 and zero for the 
semiannual periods ended June 30, 1995 and December 31, 1995, respectively.  
As the applicable fixed charge coverage ratio was less than 2.0:1, ARI 
elected to defer payments of the contingent interest. 

The Notes are secured by (a) a first or second priority security interest 
in substantially all of ARI's property, plant and equipment (including 
related leasehold interests), (b) a pledge agreement creating first priority 
security interests in the capital stock of ARI held by ERLY (other than 
200,000 shares of ARI's Series B Preferred Stock pledged to the holders of 
ARI's Series C Preferred Stock), (c) notes receivable from ERLY (as 
defined), and (d) a security agreement creating a first priority security 
interest in all registered U.S. trademarks and a security interest in all 
other registered trademarks owned or licensed by ARI.
<PAGE>

<PAGE> 53

Note 10 - Long-term and Subordinated Debt (continued)

The Notes rank senior in right of payment to all subordinated indebtedness 
and pari passu in right of payment with all existing and future senior 
indebtedness of ARI, including borrowings under the revolving credit loan.  
The indenture includes covenants that in certain instances restrict, among 
other things, (a) the payment of dividends, (b) the redemption of equity 
interests of ARI, (c) the payment on or redemption of indebtedness 
subordinate to the Notes, (d) certain investments (as defined), (e) the 
incurrence of certain indebtedness and issuance of preferred stock, 
(f) certain transactions with affiliates, and (g) certain mergers, 
consolidations or sales of assets.  In addition, the indenture contains 
certain limitations on capital expenditures, operating lease obligations 
and rice contract polices and procedures.

The Company's 12-1/2% Subordinated Sinking Fund Debentures due in 2002 
require sinking fund payments of $1 million annually through 2001 and 
$665,000 in 2002.  These debentures were issued in exchange for debentures 
which matured on December 1, 1993.

Principal maturities on ERLY's long-term and subordinated debt (excluding 
annual amortization of debt discount) are as follows:  1998--$1,502,000; 
1999--$3,506,000; 2000--$1,410,000; 2001--$1,360,000; 2002--$1,665,000; 
thereafter--$102,340,000.

Interest expense on long-term and subordinated debt amounted to $15,552,000 
(1997), $14,463,000 (1996) and $10,888,000 (1995).


Note 11 - Minority Interest

ERLY owns 81% of ARI's voting interests through ownership of ARI's common 
stock and convertible preferred stock.  ERLY's 81% interest in ARI consists 
of the following securities of ARI:  

  * 777,777 shares of ARI common stock which represent 32% of ARI's total 
    outstanding common stock and 9% of ARI's common shares on a fully 
    converted basis.

  * 777,777 shares of ARI Series A Preferred Stock, which is convertible 
    one for one, has voting rights, liquidation preferences of $25.70 per 
    share, but has no stated dividend.  These shares represent 9% of ARI's 
    common shares on a fully converted basis.

  * 2,800,000 shares of ARI Series B Preferred Stock, which is convertible 
    into 5,600,000 common shares, has voting rights, liquidation preferences 
    of $5.00 per share and an annual cumulative dividend of approximately 
    $5.2 million.  These shares represent 63% of ARI's common shares on a 
    fully converted basis.

ARI also issued a Series C Preferred Stock to third parties which does not 
have voting or conversion rights but does have an annual cumulative dividend 
of $750,000.  The Series A, Series B and Series C Preferred Stocks are 
unique securities with preferential rights which are superior to common 
stock rights.
<PAGE>

<PAGE> 54

Note 11 - Minority Interest (continued)

The Minority Interest of ARI in ERLY's consolidated financial statements 
represents the 68% of the common stock of ARI which ERLY does not own and 
the Series C Preferred Stock, for a total of 19% of the voting interest in 
ARI on a fully converted basis.

The earnings or losses of ARI are allocated between ERLY and the minority 
interest in accordance with the underlying terms of the various securities, 
rather than allocation based on voting ownership of the subsidiary.  No 
conversion is assumed in the case of convertible preferred stocks for 
purposes of this calculation, even though conversion may occur at any 
time at the option of ERLY.

ARI's cumulative annual dividends of $5.2 million related to the Series B 
Preferred Stock and $750,000 related to the Series C Preferred Stock are 
deducted from ARI earnings or loss to yield earnings or loss to be allocated 
to common stock.  The Series B Preferred Stock dividend is allocated entirely
to ERLY, while the Series C Preferred Stock dividend is allocated entirely to 
Minority Interest.  The current ARI loan agreements prohibit the payment of 
any dividends.  These dividends are allocated even if not declared as the 
dividends are cumulative.  The remaining earnings or losses to be allocated 
to common stock after deduction of the preferred stock dividends is 
allocated in accordance with the relative common stock ownership of ERLY 
(32%) and the Minority Interest (68%).  ERLY's share of ARI's net earnings 
(loss) applicable to common stock after preferred stock dividend requirements 
was ($690,000), ($3,784,000) and ($645,000) in 1997, 1996 and 1995, 
respectively.  ERLY also earned Series B Preferred dividends of $5.2 million 
in 1997, 1996 and 1995. 

Minority Interest does not represent actual amounts distributable to minority 
shareholders.  Amounts, if any, ultimately distributable to minority 
shareholders will depend on the ownership interests which exist at such time 
as distributions are made, including the potential conversions of convertible 
securities and potential issuance or retirement of other securities.  The 
timing of distributions and conversions, if any, is at the discretion of 
ERLY, since ERLY owns 81% of the voting interest in ARI.



Note 12 - Redeemable Common Stock and Common Stock Warrants  

In connection with the discontinuation of the Company's juice business in 
December 1993, the Company issued warrants to acquire up to 10% of ERLY's 
common stock at $.01 per share.  In conjunction with the repayment of the 
ERLY Juice debt in August 1995 described in Note 10, the Company had the 
right to call the warrants prior to September 30, 1996 for $2,512,000 and, 
accordingly, the warrants were classified as redeemable common stock 
warrants at March 31, 1996.

In August 1996, the Company exercised its call option and redeemed all of 
the outstanding common stock warrants in exchange for a payment of 
$2,125,000, resulting in a gain of $387,000 which is included in other 
income.

<PAGE>
 
<PAGE> 55

Note 12 - Redeemable Common Stock and Common Stock Warrants (continued)  

In fiscal 1992, ERLY issued 379,500 shares (as adjusted) of ERLY common 
stock in exchange for $5.4 million of debt.  In conjunction with this 
transaction, ERLY entered into an agreement to repurchase all of such stock 
at a price of $4.75 per share, as adjusted ($1,800,000 total obligation), 
at the option of the stockholder, through December 31, 1997.  These shares 
were classified as redeemable common stock in the consolidated balance 
sheets.  In October 1995, the stockholder sold the shares which were 
subject to the repurchase agreement to a third party, thereby canceling 
the repurchase agreement between ERLY and the stockholder.  Accordingly, 
these shares and the related $1.8 million obligation were transferred 
to common stock and paid-in capital.


Note 13 - Stockholders' Equity

Included in long-term debt is a $1 million note payable to D.A. Murphy, 
President of the Company.  The note is convertible into ERLY common 
stock at a conversion price of $2.97 per share (as adjusted).

In September 1996, the Company declared a 10% stock dividend to shareholders 
of record at the close of business on September 23, 1996.  All per share 
amounts have been retroactively adjusted to reflect this stock dividend.

Six thousand shares of $100 par value preferred stock are presently 
authorized but unissued.

In 1982, the Company adopted an Incentive Stock Option Plan (the "Plan"), 
under which 250,000 shares of ERLY common stock were reserved for the 
granting of options to key employees.  The Plan had a term of 10 years 
and expired in 1992.  The expiration of the Plan has no effect on 
outstanding options.  The purchase price for shares could not be less than 
the market value of the shares at the date of grant.  The options were 
exercisable 25% a year over a four-year period beginning one year after 
the date of issuance.  The options generally expired ten years from the 
date of grant.  At March 31, 1997, options for 124,595 shares issued 
under the Plan in 1988 remain outstanding.  All of these options were 
exercisable at a price of $3.56 per share and expire in 1998.

In fiscal 1996, the Company granted stock options to a key employee for 
88,550 shares at a price of $4.55 per share (as adjusted for stock 
dividends).  At March 31, 1997, all of the options were exercisable.  
These options expire in the year 2001.


<PAGE>
<PAGE> 56

Note 13 - Stockholders' Equity (continued)


The following table summarizes stock option activity for the three years 
ended March 31, 1997, as adjusted for a 10% stock dividend declared 
in September 1996:
                                                                 Weighted
                                                                 Average
                                                Number of     Exercise Price
                                                 Options        Per Option  
                                                ---------     -------------
 Outstanding at March 31, 1994                   155,827              $3.52 
  Granted                                           -    
  Exercised                                      (10,186)             $2.95 
  Canceled or expired                               -                       
---------------------------------------------------------------------------
Outstanding at March 31, 1995                    145,641              $3.56 
  Granted                                         88,550              $4.55 
  Exercised                                      (10,230)             $3.56 
  Canceled or expired                               -                       
---------------------------------------------------------------------------
Outstanding at March 31, 1996                    223,961              $3.95 
  Granted                                           -                       
  Exercised                                      (10,816)             $3.56 
  Canceled or expired                               -                  -    
---------------------------------------------------------------------------
Outstanding at March 31, 1997                    213,145              $3.97
===========================================================================

Exercisable at March 31, 1997                    213,145 
========================================================


In addition to the stock options described above, the Company has issued 
warrants to purchase 12,650 shares at $2.67 per share (as adjusted) which 
expire in September 1998.

<PAGE>
<PAGE> 57

Note 13 - Stockholders' Equity (continued)

The Company has elected to follow Accounting  Principals Board Opinion 
No. 25, "Accounting for Stock Issued to Employees" (APB 25), and related 
Interpretations in accounting for its employee stock options because, as 
discussed below, the alternative fair value accounting provided for under 
Statement of Financial Accounting Standards No. 123 "Accounting for 
Stock-Based Compensation" (Statement 123) required use of option valuation 
models that were developed for use in valuing publicly traded stock options.  
Under APB 25, because of the exercise price of the Company's employee stock 
options equals the market price of the underlying stock on the date of 
grant, no compensation expense is recognized.  

Pro forma information regarding net income (loss) and income (loss) per share 
is required by Statement 123 and has been determined as if the Company had 
accounted for its employee stock options under the fair value method.  The 
weighted-average fair value of options granted during 1996 was $4.81.  The 
fair value of options granted was estimated at the date of grant using a 
Black-Scholes option pricing model with the following weighted-average 
assumptions for 1996; risk-free interest rates of 6%; zero percent 
dividend yields; volatility factors of the expected market price of the 
Company's common stock of 25%; and a weighted-average expected life of the 
options of 5.65 years.

The Black-Scholes option valuation model was developed for use in estimating 
the fair value of traded options which have no vesting restrictions and are 
fully transferable.  In addition, option valuation models require the input 
of highly subjective assumptions, including the expected stock price 
volatility.  Because the Company's employee stock options have 
characteristics significantly different from those of traded options, and 
because changes in the subjective input assumptions can materially affect 
the fair value estimate, in management's opinion, the existing models do 
not necessarily provide a reliable measure of the fair value of its employee
stock options. 

For purposes of pro forma disclosures, the estimated value of the options 
is amortized to expense over the options' vesting period. 

The Company's pro forma information is as follows (in thousands, except per 
share information):


                                                 1997           1996        
                                               --------       --------
  Pro forma net income (loss)                  $  7,154      ($  1,362)
                                               ========       ========
  Pro forma net income (loss) per share:            
    Primary                                    $   1.47      ($    .29)
    Fully diluted                              $   1.42      ($    .29)
<PAGE>

<PAGE> 58


Note 14 - Nature of the Business - Segment Information

The Company operates principally in three industries - food processing, 
packaging and marketing; international consulting; and the manufacture and 
sale of forest fire retardant chemicals.

The Company purchases and processes rough rice into branded and commodity 
rice for sale in both international and domestic markets.  Demand for branded 
rice products is relatively constant and margins are typically higher than 
those for commodity rice products.  Demand for commodity rice products is 
relatively constant globally, but demand for U.S. grown commodity rice is 
dependent upon supply and cost relative to other sources of supply.  Supply 
and costs for both branded and commodity products depend on many factors 
including governmental actions, crop yields and weather, and such factors 
can persist through one or more fiscal years.

Historically, sales of olives have pronounced seasonal elements, with higher 
sales occurring in conjunction with holiday consumption.  Accordingly, 
because the quarterly period ending December 31 contains both the 
Thanksgiving and Christmas holidays, the two holidays of highest consumption, 
it will have significantly higher sales than the other three quarters of the
fiscal year.  Margins normally follow the seasonal pattern of sales.

The Company's international consulting activities ("Consulting") include 
technical assistance and related services to a variety of countries 
worldwide, principally under contracts with the Agency for International 
Development.  

The forest fire retardant chemical business ("Fire-Trol") primarily consists 
of sales to the U.S. and Canadian forest services and the volume of its 
activities can vary significantly from year to year based upon fire and 
weather conditions.


<PAGE>
<PAGE> 59

Note 14 - Nature of the Business - Segment Information (continued)

The Company's sales, operating profit and other financial data by industry 
segment for the three years ended March 31, 1997 follow:

<TABLE>                                               
<CAPTION>
                                               
                                                                 Years ended March 31,   
                                           ---------------------------------------------------------------
                                                   1997                  1996                   1995    
                                           ------------------    ------------------      -----------------
                                               $         %            $         %            $         %
                                           --------    -----     ---------    -----      --------    -----
<S>                                       <C>         <C>       <C>          <C>       <C>          <C>
Net sales                                                       (in thousands)
  Export sales - Rice and olives
    Middle East                            $165,666               $117,359               $ 91,449           
    Caribbean, Mexico and South America      65,410                 64,654                 84,806           
    Asia                                     31,583                 49,453                 49,963 
    Europe                                   21,114                 18,111                 13,632           
    Africa                                   14,352                  3,338                  3,864           
    Other                                     6,731                  5,396                  5,806           
----------------------------------------------------------------------------------------------------------        
                                            304,856      50%       258,311      53%       249,520      54%
  Domestic sales  
    Rice and olives                         211,081      34        136,527      28        123,530      27   
    Consulting                               77,427      13         77,754      16         63,546      14   
    Fire-Trol                                20,936       3         14,034       3         23,003       5   
----------------------------------------------------------------------------------------------------------      
      Total                                $614,300     100%      $486,626     100%      $459,599     100%
==========================================================================================================

Income (loss) before taxes on 
 income and minority interest
    Rice and olives                        $ 25,837               $ 14,338               $ 18,501           
    Consulting                                2,907                  4,157                  4,920           
    Fire-Trol                                 3,483                  1,329                  5,348          
-------------------------------------------------------------------------------------------------      
      Operating profit                       32,227                 19,824                 28,769           

    General corporate expense                (2,479)                (1,635)                (2,490)          
    Interest expense                        (23,429)               (19,849)               (15,868)          
    Interest income                             617                    486                    451           
    Other income                                381                    499                    196          
    Write-down of plant facilities*                                 (7,200)                (1,000)                  
-------------------------------------------------------------------------------------------------      
                                           $  7,317              ($  7,875)               $10,058           
=================================================================================================
</TABLE>


* Fiscal year 1996 includes a $7.2 million write-down of ARI's Houston 
  properties and fiscal year 1995 includes a $1 million write-down on the 
  Company's remaining wine assets.
<PAGE>
<PAGE> 60

Note 13 - Nature of the Business - Segment Information (continued)

                                            Years ended March 31,     
                                     ------------------------------------  
                                       1997          1996         1995   
                                     --------      --------      --------      
                                                (in thousands)

Identifiable assets
  Rice and olives                    $307,471      $222,080      $187,994 
  Consulting                           24,517        25,310        21,748 
  Fire-Trol                            11,564        10,244         8,455 
  Corporate                             1,548         2,138         3,381 
  Discontinued operations               2,725         3,162         2,649
  Intercompany eliminations           (27,107)      (27,799)      (17,169)
-------------------------------------------------------------------------    
    Total                            $320,718      $235,135      $207,058 
=========================================================================


Depreciation and amortization
  Rice and olives                    $  7,554      $  6,339      $  6,981 
  Consulting                              705           414           236 
  Fire-Trol                               468           471           391 
  Corporate                                48            23            19 
-------------------------------------------------------------------------    
    Total                            $  8,775      $  7,247      $  7,627 
=========================================================================


Capital expenditures
  Rice and olives                    $  5,117      $  3,690      $  3,562 
  Consulting                              370         1,947           493 
  Fire-Trol                               740           669           546 
-------------------------------------------------------------------------    
    Total                            $  6,227      $  6,306      $  4,601 
=========================================================================



Note 15 - Profit-Sharing Plan

The Company has a defined contribution profit-sharing plan covering 
substantially all of its employees.  The Company makes a mandatory 1% 
matching contribution to the plan on a monthly basis and an annual 
contribution solely at the discretion of the Board of Directors.  Total 
profit-sharing plan expense was $930,000 (1997), $618,000 (1996) and 
$1,407,000 (1995).

<PAGE>
  
<PAGE> 61


Note 16 - Commitments and Contingencies

In April 1995, a lawsuit was filed in the district court of Harris County, 
Texas by Kingwood Lakes South, L.P. and Tenzer Company, Inc. as plaintiffs 
against G.D. Murphy and D.A. Murphy, Chairman and President of the Company 
and ARI, respectively.  ERLY and ARI were named as codefendants in the 
lawsuit by an amendment to the original petition in September 1995.  This 
is a dispute between the general partner of a proposed real estate 
development and G.D. Murphy and D.A. Murphy.   Damages sought are in the 
range of $10 million, plus attorneys' fees and punitive damages.  The 
Company and ARI were named as defendants in the lawsuit because of their 
actions to obtain restraining orders to prevent threatened foreclosures on 
ERLY common stock pledged as collateral by G.D. Murphy and to stop 
interference by the plaintiff in the lawsuit, with ARI's mortgage note 
financing, as well as certain other alleged activities, including knowing 
participation in breaches of fiduciary duties, civil conspiracy with the 
Murphys and conversion.  The plaintiffs recently added a reverse alter ego 
claim.  The Company and ARI believe they have valid defenses in this case 
and that damages, if any, will not have a material effect on the Company's 
financial condition; however, as with any litigation, the ultimate outcome 
is unknown.  

ARI has also been named as a codefendant with Messrs. John M. Howland and 
George E. Prchal in a lawsuit filed in February 1997 in U.S. district court 
in Houston, Texas by Rice Milling & Trading Investments, LTD., an Isle of 
Man Company ("RMTI").  In 1994, ARI entered into an agreement with RMTI 
for processing the Company's rice through RMTI's facility in Jeddah, Saudi 
Arabia.  Messrs. Howland and Prchal were officers of RMTI through January 
1997 and have also been directors of ARI since October 1993 and prior to 
October 1993 were officers of ARI.  In January 1997, RMTI ceased shipping 
ARI's rice through its Jeddah facility and terminated the employment of 
Messrs. Howland and Prchal.  The lawsuit alleges among other things ARI 
failed to perform under the terms of the agreement and Messrs. Howland 
and Prchal breached their fiduciary duties to RMTI.  On April 21, 1997, the 
Company obtained a restraining order from the U.S. District Court for the
Southern District of Texas ordering RMTI to desist and refrain from purchasing
rice of U.S. or Vietnam origin from any supplier other than ARI and from
introducing and/or marketing rice of U.S. and Vietnam origin in Saudi Arabia
targeted against ARI's U.S. origin and Vietnam origin rice.  The Company 
believes that this litigation will not have a material effect on the Company's
financial condition; however, as with any litigation, the ultimate outcome 
is unknown.  

The Company is involved in other legal proceedings that arise in the ordinary
course of its business, all of which are routine in nature.  It is the 
opinion of management that the resolution of such legal proceedings will not 
have a material adverse effect on the consolidated financial position or 
consolidated results of operations of the Company.

<PAGE>
   
<PAGE> 62

Note 16 - Commitments and Contingencies (continued)

The Company's subsidiary, Chemonics Industries, Inc., has operated in the 
chemical and pesticide business and has potential liability for the 
correction of environmental contamination relating to certain of its 
property.  Chemonics has contracted with an independent laboratory to 
perform sample testing and provide consultation to assess various cleanup 
options available.  The estimated costs of such remedies are not presently 
determinable because the extent and scope of the cleanup required is unknown 
and the method by which such cleanup can be accomplished is under 
investigation.  Management does not believe, however, that the costs 
associated with this matter will have a material adverse effect on the 
financial condition of the Company.



The Company and its subsidiaries are obligated under operating leases for 
offices, plant facilities and equipment.  Aggregate minimum rental 
commitments under operating leases with noncancellable terms of more than 
one year are as follows:



Year ending March 31,                       
----------------------------------------------------------------------------
1998                                                             $ 5,545,000
1999                                                               5,196,000
2000                                                               4,822,000
2001                                                               4,478,000
2002                                                               4,009,000
Thereafter                                                        33,196,000
---------------------------------------------------------------------------- 
                                                                 $57,246,000
============================================================================


Total rental expense amounted to $7,272,000 (1997), $5,543,000 (1996) and  
$5,589,000 (1995).  Certain leases provide for options to renew and for 
payment of taxes, insurance and maintenance costs.

In October 1996, ARI entered into a new seven year lease agreement for 
office space in Houston, Texas with a limited partnership owned directly
and indirectly by the Chairman and President of the Company.  ARI's 
annual lease expense under the lease ranges from approximately $600,000 in
the first year to approximately $740,000 in the seventh year, which 
management believes is comparable to, or better than, rates for similar 
office space in the proximity.  In connection with the lease, ARI performs 
building management services in exchange for certain reductions in the lease 
cost.


<PAGE>
<PAGE> 63


Note 17 - Quarterly Results of Operations (Unaudited)


<TABLE>
<CAPTION>
                                                       Fiscal Year 1997
                                             (In thousands, except per share data)
                             -------------------------------------------------------------------------    
                                 1st            2nd             3rd             4th    
                               Quarter        Quarter         Quarter         Quarter          Total  
                             ----------     ----------      ----------      ----------      ---------- 
<S>                         <C>            <C>            <C>             <C>             <C>
Net sales                    $  124,591     $  155,966      $  171,930      $  161,813      $  614,300 
Gross profit                 $   13,314     $   24,350      $   28,167      $   23,934      $   89,765 

Income (loss) before
  minority interest         ($    3,836)    $    4,606      $    3,832      $    2,035      $    6,637
Minority interest                 2,586            157          (1,280)           (748)            715 
------------------------------------------------------------------------------------------------------
Net income (loss)           ($    1,250)    $    4,763      $    2,552      $    1,287      $    7,352
======================================================================================================

Earnings (loss) per share*:
  Primary                   ($      .27)    $      .94      $      .53      $      .26      $     1.51
  Fully diluted             (       .27)           .88             .49             .25            1.46
 
Weighted average shares
  outstanding*:
    Primary                       4,713          5,049           4,850           4,861           4,868 
    Fully diluted                 4,713          5,387           5,192           5,198           5,123 

Price range of common stock*:
  High                       $   10-1/8     $    9-5/8      $    9-1/4      $    9-1/4    
  Low                             6-1/2          6-5/8           5-7/8           6-7/8

</TABLE>

*   Restated for 10% stock dividend in September 1996.



<PAGE>
<PAGE> 64

Note 19 - Quarterly Results of Operations (Unaudited) (continued)

<TABLE>
<CAPTION>

                                                       
                                                       Fiscal Year 1996
                                             (In thousands, except per share data)
                             -------------------------------------------------------------------------    
                                 1st            2nd             3rd             4th    
                               Quarter        Quarter         Quarter**       Quarter          Total  
                             ----------     ----------      ----------      ----------      ---------- 
<S>                         <C>            <C>            <C>             <C>             <C>
Net sales                    $  112,889     $  111,641      $  123,384      $  138,712      $  486,626 
Gross profit                 $   16,714     $   15,655      $   15,618      $   16,205      $   64,192 

Income (loss) before
  minority interest          $    1,699     $       11     ($    9,263)    ($      886)    ($    8,439)
Minority interest                   565            889           4,826           1,010           7,290 
------------------------------------------------------------------------------------------------------
Net income (loss)            $    2,264     $      900     ($    4,437)     $      124     ($    1,149)
======================================================================================================

Earnings (loss) per share*:
  Primary                    $      .39     $      .16     ($      .94)     $      .02     ($      .24)
  Fully diluted                     .37            .15     (       .94)            .02     (       .24)
 
Weighted average shares
  outstanding*:
    Primary                       5,847          5,562           4,704           5,385           4,708 
    Fully diluted                 6,184          5,899           4,704           5,721           4,708 

Price range of common stock*:
  High                       $        9     $    8-3/4      $    8-1/8      $    9-1/4    
  Low                                 8          7-1/8           6               5-3/8

</TABLE>

*   Restated for 10% stock dividend in September 1996.

**  Results for the quarter include a $7.2 million non-recurring pre-tax 
    provision for loss on disposal of property held for sale.




<PAGE>
                       
<PAGE> 65                     
                     
                     Independent Auditors' Report



Board of Directors
ERLY Industries Inc.
Los Angeles, California

We have audited the accompanying consolidated balance sheets of ERLY 
Industries Inc. and subsidiaries (the "Company") at March 31, 1997 and 1996, 
and the related consolidated statements of operations, stockholders' equity, 
and cash flows for each of the three years in the period ended March 31, 
1997.  Our audits also included the financial statement schedules listed in 
the Index at Item 14(a)(2).  These consolidated financial statements and 
financial statement schedules are the responsibility of the Company's 
management.  Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedules based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all 
material respects, the financial position of the Company at March 31, 1997 
and 1996, and the results of its operations and cash flows for each of the 
three years in the period ended March 31, 1997 in conformity with generally 
accepted accounting principles.  Also, in our opinion, such financial 
statement schedules, when considered in relation to the basic consolidated 
financial statements taken as a whole, present fairly in all material 
respects the information set forth therein.







/s/  DELOITTE & TOUCHE LLP

Los Angeles, California
June 20, 1997



<PAGE>
               


<PAGE> 66

Item 14(a)2.  Financial Statement Schedules


                ERLY INDUSTRIES INC. (PARENT COMPANY ONLY)
             SCHEDULE I - CONDENSED STATEMENTS OF OPERATIONS
                              (in thousands)

<TABLE>
<CAPTION>
                                                  Years ended March 31,     
                                            --------------------------------  
                                             1997         1996        1995  
                                            ------       ------      -------
<S>                                       <C>          <C>         <C>
Corporate overhead expenses                ($2,479)     ($1,635)    ($ 2,490)
Income from subsidiaries                       600          600        1,522 
Intercompany interest                       (2,235)      (1,705)        (644)
Interest expense                            (1,220)      (1,294)      (1,487)
Interest income                                273          330          186 
Other income                                 1,308        1,331           27 
----------------------------------------------------------------------------
Income (loss) before taxes on income        (3,753)      (2,373)      (2,886)
  
Taxes on income (benefit)                   (3,999)       2,185       (4,422)
----------------------------------------------------------------------------
Income (loss) before undistributed 
  earnings of subsidiaries                     246       (4,558)       1,536 
Undistributed earnings
  of subsidiaries                            7,106        3,409        7,739
 ----------------------------------------------------------------------------

Net income (loss)                           $7,352      ($1,149)     $ 9,275 
============================================================================
</TABLE>



<PAGE>
                
<PAGE> 67                

                ERLY INDUSTRIES INC. (PARENT COMPANY ONLY)
                  SCHEDULE I - CONDENSED BALANCE SHEETS
                              (in thousands)

<TABLE>                                            March 31,           
<CAPTION>                                  -------------------------    
                                             1997             1996 
                                           --------         --------
<S>                                       <C>              <C>
Assets
Current assets:
  Cash                                     $    430         $    289 
  Accounts receivable, net                      292               96
  Other current assets                           42              781 
--------------------------------------------------------------------    
    Total current assets                        764            1,166 

Intercompany receivable from 
  Chemonics Industries, Inc.                     --            1,957 
Long-term notes receivable, net                 819              819 
Property, plant and equipment, net                7               10 
Investment in subsidiaries*                  55,922           51,935 
Deferred income taxes                         4,865            2,556 
Other assets                                    121              124 
--------------------------------------------------------------------
                                           $ 62,498         $ 58,567 
====================================================================

Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable and other 
    current liabilities                    $  3,384         $  2,934 
  Current portion of long-term
    and subordinated debt                     1,064            1,057 
--------------------------------------------------------------------    
    Total current liabilities                 4,448            3,991 

Intercompany payable to 
  American Rice, Inc.                        24,165           24,361 
Long-term debt                                4,440            4,504 
Subordinated debt                             4,665            5,665     

Redeemable common stock warrants                               2,512 
Stockholders' equity:
  Common stock                                   47               43 
  Additional paid-in capital                 27,533           23,879 
  Retained earnings (deficit)                (1,249)          (5,046) 
  Cumulative foreign currency 
    adjustments                              (1,551)          (1,342)
--------------------------------------------------------------------
    Total stockholders' equity               24,780           17,534 
--------------------------------------------------------------------
                                           $ 62,498         $ 58,567 
====================================================================
</TABLE>

*  Recorded at equity in net assets of subsidiaries.
<PAGE>
                
<PAGE> 68

                ERLY INDUSTRIES INC. (PARENT COMPANY ONLY)
             SCHEDULE I - CONDENSED STATEMENTS OF CASH FLOWS
                              (in thousands)
                                                
<TABLE>                                                
<CAPTION>
                                                
                                                     Years ended March 31,   
                                                -------------------------------
                                                 1997        1996        1995
                                                -------    --------    --------
<S>                                           <C>         <C>         <C>
OPERATING ACTIVITIES:
  Net income (loss)                             $ 7,352   ($  1,149)    $ 9,275
  Adjustments to reconcile net income (loss)             
    to net cash provided by (used in)
    operating activities:
  Undistributed earnings of subsidiaries         (7,106)     (3,409)     (7,739)
  Depreciation and amortization                      51          23          19 
  Provision for loss on receivables                                         200  
  Gain on redemption of warrant
     repurchase obligation                         (387)
  Change in assets and liabilities, net          (1,361)      3,166      (3,531)
--------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) 
  OPERATING ACTIVITIES                           (1,451)     (1,369)     (1,776)

INVESTING ACTIVITIES:
  Change in intercompany payables, net            1,696        (745)      2,764
  Other, net                                      2,971       1,072         256 
-------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
  INVESTING ACTIVITIES                            4,667         327       3,020 

FINANCING ACTIVITIES:
  Intercompany loan from ARI                                 10,500
  Additional long-term debt                                     200
  Principal payments on long-term debt              (57)     (8,665)        (84)   
  Principal payments on subordinated debt        (1,000)     (1,000)     (1,201)    
  Redemption of redeemable
   common stock warrants                         (2,125)
  Proceeds from sale of stock                       107          37         250 
-------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
  FINANCING ACTIVITIES                           (3,075)      1,072      (1,035)
-------------------------------------------------------------------------------
INCREASE IN CASH DURING THE YEAR                    141          30         209 
CASH, BEGINNING OF YEAR                             289         259          50 
-------------------------------------------------------------------------------
CASH, END OF YEAR                              $    430     $   289     $   259 
===============================================================================
</TABLE>

<PAGE>
<PAGE> 69                

                ERLY INDUSTRIES INC. AND SUBSIDIARIES
           SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>

                                        Additions              
                                --------------------------
                Balance at      Charges to       Charges       Deductions         Balance at
                beginning        costs and       to other         from              end of 
Description     of period        expenses        accounts      reserves(a)          period  
-----------     -----------     -----------     -----------    -----------       -----------
<S>             <C>             <C>            <C>            <C>              <C>
Year ended
March 31, 1997
--------------
Allowance for
  doubtful
  accounts      $ 1,715,000     $   653,000                    ($ 1,042,000)     $ 1,326,000 
============================================================================================
Reserve for
  notes
  receivable    $   200,000                                                      $   200,000 
============================================================================================

Year ended
March 31, 1996
--------------
Allowance for
  doubtful
  accounts      $ 1,831,000     $   320,000      $   22,000    ($   458,000)     $ 1,715,000 
============================================================================================
Reserve for
  notes 
  receivable    $   200,000                                                      $   200,000 
============================================================================================

Year ended
March 31, 1995
--------------
Allowance for
  doubtful
  accounts      $ 1,865,000     $   237,000      $   86,000    ($   357,000)     $ 1,831,000 
============================================================================================
Reserve for
  notes 
  receivable    $   --          $   200,000                                      $   200,000     
============================================================================================
Reserve for
  discontinued
  businesses    $   518,000                                    ($   518,000)     $     -- 
============================================================================================
</TABLE>

(a)    Uncollectible accounts written off to allowance for doubtful accounts; 
       and, charges to reserve for discontinued businesses.
<PAGE>
                              



<PAGE> 70

                                   SIGNATURES


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


                                ERLY INDUSTRIES INC.



                                By /s/  Gerald D. Murphy               
                                   --------------------------------------
                                  Gerald D. Murphy, Chairman of the Board
                                   (Chief Executive Officer)

                                By /s/  Thomas A. Whitlock            
                                   --------------------------------------
                                  Thomas A. Whitlock, Vice President and
                                   Corporate Controller
                                   (Chief Accounting Officer)

Date: June 30, 1997

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



/s/  Gerald D. Murphy           /s/  Douglas A. Murphy               
--------------------------      ---------------------------
Gerald D. Murphy, Director      Douglas A. Murphy, Director
June 30, 1997                   June 30, 1997



/s/  Bill J. McFarland          /s/  William H. Burgess                
---------------------------     ----------------------------
Bill J. McFarland, Director     William H. Burgess, Director
June 30, 1997                   June 30, 1997



/s/  Alan M. Wiener                   
------------------------
Alan M. Wiener, Director
June 30, 1997



<PAGE>
<PAGE> 71

                             EXHIBIT 11.1
                ERLY INDUSTRIES INC. AND SUBSIDIARIES
            CALCULATION OF PRIMARY INCOME (LOSS) PER SHARE
                (In thousands, except per share data)
<TABLE>
<CAPTION>

                                                           Years ended March 31,    
                                           ---------------------------------------------------------      
                                            1997        1996       1995         1994          1993  
                                           ------      ------     -------      -------       -------
<S>                                      <C>          <C>        <C>         <C>           <C>
Income (loss) from                  
  continuing operations                    $6,637     ($8,439)    $ 8,653      $14,765       ($10,989)
Minority interest on                                                           
  continuing operations                       715       7,290         622       (1,376)                                  
----------------------------------------------------------------------------------------------------  
  Continuing operations, net                7,352      (1,149)      9,275       13,389        (10,989)

Loss on discontinued operations                                                 (8,810)       ( 4,972)

Income from extraordinary items                                                 16,792          7,288 
Minority interest on extraordinary items                                        (3,702)                              
-----------------------------------------------------------------------------------------------------   
   Extraordinary items, net                                                     13,090          7,288 
-----------------------------------------------------------------------------------------------------    
Net income (loss)                          $7,352     ($1,149)    $ 9,275      $17,669       ($ 8,673)
=====================================================================================================

Average number of shares of
  common stock and common
  stock equivalents outstanding*:
   Average number of shares of
    common stock outstanding                4,731       4,708       4,663        4,472          4,357 
   Common stock equivalents: 
    Dilutive effect of stock
     options and warrants based 
     on application of treasury
     stock method                             137        (a)          859          152           (a)   
-----------------------------------------------------------------------------------------------------    
    Total                                   4,868       4,708       5,522        4,624          4,357 
=====================================================================================================

Primary income (loss) 
  per common share*:
  Income (loss) from
    continuing operations (b)             $  1.51   ($   . 24)     $ 1.68       $ 2.90        ($ 2.52)
  Loss on discontinued operations                                                (1.91)         (1.14)
  Income from extraordinary items (b)                                             2.83           1.67 
-----------------------------------------------------------------------------------------------------  
  Primary income (loss) 
    per common share                      $  1.51    ($   .24)     $ 1.68       $ 3.82        ($ 1.99)
=====================================================================================================
</TABLE>

*   Retroactively adjusted to give effect to 10% stock dividend in 
    September 1996. 

(a) Exercise of stock options and warrants is not assumed as the computation 
    would be anti-dilutive.
(b) Net of applicable minority interest. 

<PAGE>
                             
<PAGE> 72

                             EXHIBIT 11.2
                ERLY INDUSTRIES INC. AND SUBSIDIARIES
         CALCULATION OF FULLY DILUTED INCOME (LOSS) PER SHARE
                (In thousands, except per share data)
 
<TABLE>
<CAPTION>
                                                               Years ended March 31,    
                                           ----------------------------------------------------------  
                                            1997        1996         1995       1994           1993  
                                           ------     -------      -------     -------        -------
<S>                                      <C>         <C>          <C>        <C>            <C>
Income (loss) from                                                                           
  continuing operations                   $ 6,637   ($ 8,439)     $ 8,653     $14,765      ($10,989)
Minority interest                             715      7,290          622      (1,376)
Interest adjustment
 on convertible debt                          103        (a)           98          80           (a)
-----------------------------------------------------------------------------------------------------  
  Continuing operations, net                7,455    ( 1,149)       9,373      13,469       (10,989)

Loss on discontinued operations                                                (8,810)       (4,972)

Income from extraordinary items                                                16,792         7,288                
Minority interest on extraordinary items                                       (3,702)                              
----------------------------------------------------------------------------------------------------  
  Extraordinary items, net                                                     13,090         7,288 
----------------------------------------------------------------------------------------------------         
  Net income (loss), as adjusted           $7,455    ($1,149)     $ 9,373     $17,749      ($ 8,673)
====================================================================================================

Average number of shares of
  common stock and common
  stock equivalents outstanding*:                                                                                    
Average number of shares of
    common stock outstanding                4,731      4,708        4,663       4,472         4,357 
Common stock equivalents: 
    Dilutive effect of stock
     options and warrants based 
     on application of treasury
     stock method                              55        (a)          942         152           (a)   
Other potentially dilutive securities:
 Common stock issuable upon
 conversion of note payable                   337        (a)          338         338           (a)
----------------------------------------------------------------------------------------------------    
    Total                                   5,123      4,708        5,943       4,962         4,357 
====================================================================================================

Fully diluted income (loss) 
  per common share*:
  Income (loss) from
    continuing operations (b)             $  1.46    ($  .24)      $ 1.58      $ 2.71       ($ 2.52)
  Loss on discontinued operations                                               (1.77)        (1.14)
  Income from extraordinary items (b)                                            2.64          1.67 
-----------------------------------------------------------------------------------------------------  
  Fully diluted income (loss) 
    per common share                      $  1.46    ($  .24)      $ 1.58      $ 3.58       ($ 1.99)
=====================================================================================================
</TABLE>

*   Retroactively adjusted to give effect to 10% stock dividend in 
    September 1996.   

(a) Exercise of stock options, warrants and convertible note is not assumed as 
    the computation would be anti-dilutive.
(b) Net of applicable minority interest.

<PAGE>
                              
<PAGE> 73
                              EXHIBIT 21
                         ERLY INDUSTRIES INC.
                             SUBSIDIARIES

The following is a list of all parents and principal subsidiaries of the 
Company reflecting ownership and the state or country of incorporation:

<TABLE>
<CAPTION>
                                                                     % of Voting
                                                                      Securities
Parent                            Subsidiaries                           Owned    
------                            ------------                         --------
<S>                             <C>                                    <C>
ERLY Industries Inc.            American Rice, Inc.                       81%
(California)                    (Texas)

                                Chemonics Industries, Inc.               100%
                                (Arizona)

                                The Beverage Source Inc.                 100%
                                (California)

                                ERLY Juice Inc.                          100%
                                (California)

American Rice, Inc.             Comet Rice of Puerto Rico, Inc.          100%
(Texas)                         (Delaware)

                                Comet Ventures, Inc.                      90%
                                (California)                             

                                Comet Rice of Jamaica Limited            100%
                                (Jamaica)

                                Rice Corporation of Haiti, S.A.          100%
                                (Haiti)

                                ARI-Vinafood                              55%
                                (Vietnam)
                                                                         
                                BargeCarib, Inc.                         100%
                                (Texas)                                  

                                Compania Envasadora Loreto, S.A.         100%
                                (Spain)                   
    
                                Sadrym California, Inc.                   51%
                                (California)

Chemonics Industries, Inc.      Chemonics International, Inc.            100%
(Arizona)                       (California)                                  

                                Chemonics Fire-Trol, Inc.                100%
                                (Delaware)
                                
                                Chemonics Industries (Canada) Ltd.       100%
                                (Canada)

</TABLE>    

 
All subsidiaries are included in the consolidated financial statements.