SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
   
                                  FORM 10-KSB/A
                                 AMENDMENT No. 1
    

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]


For the Fiscal Year Ended June 30, 1997

OR

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

            For the transition period from ___________ to ___________

                           Commission File No. 0-8027

                         EASTCO INDUSTRIAL SAFETY CORP.
                 (Name of small business issuer in its charter)

    NEW YORK                      5098                      11-1874010
(State or other            (Primary Standard             (I.R.S. Employer
jurisdiction of          Industrial Classification       Identification
incorporation or              Code Number)                  Number)
organization)

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

       Registrant's telephone number, including area code (516) 427-1802

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

                                                           Name of Each Exchange
Title of Class                                             on Which Registered
--------------                                             -------------------
a) $.12 par value common stock ("Common Stock")            Boston Stock Exchange
b) Class B Redeemable common stock purchase                Boston Stock Exchange
   warrant ("Class B Warrant")

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

a)   $.12 par value common stock ("Common Stock")
b)   Class A Redeemable Common Stock Purchase Warrant ("Class A Warrant")
c)   Class B Redeemable Common Stock Purchase Warrant ("Class B Warrant")

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

                    YES  [X]              NO [_]

<PAGE>

Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B not contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB:  [X]

State registrant's revenues for its most recent fiscal year.  $27,987,969

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of September 15, 1997 was approximately $3,825,054. Non-affiliates
include all shareholders  other than officers,  directors and 5% shareholders of
the Company.  Market value is based upon the price of the Common Stock as of the
close of business on September  15, 1997 which was $2.4375 per share as reported
by NASDAQ.

As of September 15, 1997,  the number of shares  outstanding of the Common Stock
was  1,683,079  shares.  The number of shares has been  adjusted for prior stock
splits and estimated rounding for fractional shares.


<PAGE>


                                     PART I


Item 1.  DESCRIPTION OF BUSINESS


(b)  Business of Issuer.

Manufacturing Operations


(7) Puerto Rico Safety Equipment is engaged in manufacturing in Puerto Rico and
was granted an exemption for seventeen (17) years under the Puerto Rico
Industrial Tax Exemption Act of 1963 (the "Industrial Tax Act") with respect to
Puerto Rico income taxes on the production of such items as safety clothing,
protective sleeves, coats, pants, hoods and jackets for the period commencing
January 1, 1970. On July 1, 1989 Puerto Rico Safety Equipment was granted an
extension of its exemption and has a 90% exemption from Puerto Rico income taxes
for the ten-year period ending on June 30, 1999. During this period, Puerto Rico
Safety Equipment has a 75% exemption from Puerto Rico municipal taxes on its
real and personal property utilized in its operations.

     Disposable has been granted a fifteen-year exemption under the Industrial
Tax Act with respect to Puerto Rico income taxes on its operations covering the
production of limited use clothing and with respect to the property used in its
operations for the period commencing June 4, 1977, subject to the terms of the
grant. This exemption has been extended until June 30, 2006 on the basis of a
90% exemption on Puerto Rico income taxes and a 60% exemption on municipal taxes
on its real and personal property.

     As Puerto  Rico tax  exemptions  are  reduced or expire the  Company may be
required to pay taxes on income earned in Puerto Rico.  The Company is unable to
predict the amount of such impact after such exemptions are reduced or expire.

   
     Puerto Rico Safety Equipment and Disposable have elected to apply Section
936 of the Internal Revenue Code, effective July 1, 1979. The provisions of
Section 936 are effective until revoked by the Company. If the conditions of
Section 936(a)(2) are satisfied, the Section 936 credit equals the portion of
the United States income tax that is attributable to taxable income from sources
outside the United States derived from the active conduct of a trade or business
within a United States possession, or the sale or exchange of substantially all
of the qualified possession source investment income. Dividends payable by each
subsidiary to the Company from operations are entitled to a 100% dividends
received deduction but are subject to a 10% withholding tax in Puerto Rico. The
Omnibus Budget Reconciliation Act of 1993 (the "Omnibus Act") imposes new
limitations on computing the Possession Tax Credit under Section 936 for tax
years beginning after 1993. The Company made an election in 1995 which reduced
the credit to 60% of the 1994 level and which further phases out the credit by
5% in each subsequent year to a maximum credit of 40% in 1998. Since the credit
is a function of future earnings, if any, the effect of such limitations cannot
be determined at the present time. In addition, the Omnibus Act makes the 100%
dividends received deduction subject to the Alternative Minimum Tax Calculation.
The Small Business Job Protection Act of 1996 further limits the Possession tax
credit for years beginning after 2001 with the credit being eliminated for tax
years beginning after 2005. No dividends have been declared on the aggregate
undistributed earnings of Puerto Rico Safety Equipment and Disposable (which
through June 30, 1997, aggregates approximately $1,868,000) and none are
intended to be declared because it is management's intention to reinvest the
earnings, if any, from such subsidiaries indefinitely. The Company believes that
based upon current operations, the Omnibus Act will not have a material effect
on the Company for the foreseeable future.
    

<PAGE>

                                     PART II


Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

   
     a)   Not Applicable

     b)   Results of Operations
          ---------------------

     The Company's net loss for fiscal 1997 was $1,392,000, as compared to net
income of $10,000 in fiscal 1996.

     Consolidated net sales during fiscal 1997 increased by 3.7% to
approximately $27,988,000 from $26,983,000 during fiscal 1996. In fiscal 1997,
Manufacturing Operations revenues increased 11.3% to $19,907,000 from
$17,889,000 in fiscal 1996 while Distribution Operations revenues decreased
11.1% to $8,081,000 in fiscal 1997 from $9,094,000 in fiscal 1996. The Company
believes that the overall increase in sales was due to continued increased
demand for the Company's products in the manufacturing segment. The decrease in
distribution sales was due to a change in focus in the Company's customers from
end users engaged in hazardous material abatement ("environmental customers") to
other industrial end users ("industrial customers"). This caused a $1,631,000
decrease in sales to environmental customers, only partially offset by a
$618,000 increase in sales to industrial customers.

     The Company's overall gross profit percentage decreased in fiscal 1997 to
14.8% as compared to 20.3% in fiscal 1996. The gross profit percentage for the
Distribution Operations decreased from 18.5% in fiscal 1996 to 16.8% in fiscal
1997 due to a change in the customer base from environmental customers to
industrial customers where the customer base is more stable and credit worthy.
The gross profit percentage for the Manufacturing Operations was 14.0% for
fiscal 1997 as compared to 21.2% for fiscal 1996. This reduction was caused in
part by (1) our contractor in Mexico not meeting our expected production levels,
which forced higher production domestically at higher costs, (2) higher
manufacturing costs due to payroll and other overhead increases, (3) increased
sales in lower gross profit products, and (4) continued intense competition in
the marketplace.

     During the first three months ended September 30, 1996 the Company
sustained a decrease in sales due to hurricanes in Puerto Rico that affected
both production and shipments and therefore sales for that quarter. This loss in
production for the quarter caused lower production efficiencies in Puerto Rico
because of the weather related down-time.


<PAGE>

     Selling, general, and administrative expenses for fiscal 1997 were
$4,870,000 or 17.4% of sales compared to $4,546,000 or 16.8% for the prior
fiscal year. This increase was principally due to increased marketing expenses,
including a new telemarketing program and catalogs, an increase in bad debt
expense and operating expenses of the new glove manufacturing subsidiary in
Minnesota acquired during April 1997.

     Interest expense was $681,000 for fiscal 1997 as compared to $836,000 in
the prior year. This decrease was due principally to a reduction in interest
rates from the Company's major lender from 2 1/2% to 1% over the prime rate and
average lower borrowings during fiscal 1997.

     Net cash used for operating activities was principally a result of the
Company's net loss, an increase in inventories and a reduction in accounts
payable. Cash flows used in investing activities was for the purchase of
property, plant, and equipment, and the acquisition of the glove manufacturing
business in Minnesota completed in April 1997. Cash flows provided by financing
activities was principally from the proceeds of the rights and public offering
completed during November 1996.

     The Company, in connection with the purchase of the glove manufacturing
business in Minnesota during the fourth quarter of fiscal 1997, borrowed
$440,000 from Congress, issued 100,000 shares of its common stock valued at
approximately $412,000, has agreed to make additional payments over the next
three to five years aggregating at least $240,000, and paid cash of
approximately $295,000(see Note 12 of the Notes to the Consolidated Financial
Statements).

     As a result of the magnitude of the net loss recorded by the Company in the
fourth quarter of its year ended June 30, 1997, management is analyzing its
previously issued interim financial statements during said year in order to
determine the extent, if any, that such fiscal data requires restatement.

     Outstanding options and warrants did not materially dilute earnings per
share in fiscal 1996, but could do so in the future if there is a significant
increase in the spread between their exercise price and the quoted market price
of the Company's Common Stock. Such options and warrants were omitted from the
loss per share calculations in fiscal 1997, as their inclusion would be
antidilutive.

Adoption of New Accounting Standards
------------------------------------

     The Company has adopted the disclosure only provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock Based
Compensation" for stock options and warrants granted to its employees,  officers
and directors  and,  therefore,  continues to apply the provisions of Accounting
Principles  Board Opinion No. 25 and related  interpretations  in its accounting
for such grants.  Accordingly,  no  compensation  cost is  recognized  for these
grants at issuance  unless they are for less than fair value or are considered a
variable award. If the Company had recognized  compensation  cost under the fair
value method of SFAS 123, the net loss would have been approximately  $1,453,000
and the related per share loss would have been $1.03 per share.


<PAGE>


     Under Financial Accounting Standards Statement No. 128, "Earnings Per
Share", public companies are required to calculate their primary earnings per
share based upon the weighted average number of common shares outstanding during
the period presented. Diluted earnings per share is to be calculated giving
effect to all potentially dilutive common shares that could be issued. This new
rule becomes effective for annual and interim periods ending after December 15,
1997 and it is not currently expected to have a material effect on the Company's
reported earnings per share.

Liquidity and Capital Resources
-------------------------------

     The Company has working capital as of June 30, 1997 of $2,474,000 as
compared to working capital of $1,553,000 as of June 30, 1996. The increase
resulted primarily from the net proceeds of the Company's shareholder rights and
public offering offset in part by the effect of the loss for the year ended June
30, 1997. A substantial portion of the Company's working capital consists of
inventory, which was $5,973,000 and $5,230,000 as of June 30, 1997, and 1996,
respectively. The Company is required to maintain substantial inventories of its
numerous products to meet the immediate requirements of its customers who need
products on short notice and who do not maintain an inventory of such products.

     In July 1996, the line of credit with Congress was amended and extended
until October 1, 1999 with an option by Congress to extend the loan for an
additional year. The line was increased to $9,000,000 with an interest rate at 1
1/4% above the prime rate which was reduced to prime plus 1% subsequent to the
consummation of the Company's shareholder rights and public offering. The limits
on borrowings were increased to 85% of eligible accounts receivable and 55% of
eligible inventory. The amounts outstanding at June 30, 1997, and June 30, 1996
were $5,418,000 and $5,558,000, respectively. The Company had $629,000 available
for borrowing at June 30, 1997 based on its formula with Congress. The loan is
subject to certain working capital and net worth requirements and is
collateralized by all of the assets of the Company not previously pledged under
other loan agreements. Although the Company, at June 30, 1997, was not in
compliance with the tangible net worth requirement of the loan agreement,
Congress waived this default for this fiscal year and reduced the requirement
for future periods (see Note 5 of the Notes to the Consolidated Financial
Statements). The loan agreement prohibits the payment of cash dividends by the
Company.

     The Company believes that its current working capital position, line of
credit and operations will be sufficient to satisfy its cash needs through June
30, 1998.

     Management is addressing the causes of the loss incurred in fiscal 1997.
The Company has negotiated better pricing for materials used in its products and
switched to a new contractor in Mexico, who is able to produce higher quantities
of the Company's major products at an expected cost reduction of approximately
10%. The Company's efficiency at the new glove manufacturing business in
Minnesota is also continuing to improve.

         The Company has no material commitments for capital expenditures.


<PAGE>


     As the present time, the Company, together with a variety of defendants, is
a party to various asbestos-related lawsuits involving a number of plaintiffs
alleging damages from exposure to asbestos products sold by the Company. The
Company may become a party to additional asbestos-related actions in the future.
The Company is also party to a non-asbestos product liability action. While as
indicated in Item 3, Legal Proceedings, legal and settlement costs to the
Company have not been material to date, the Company cannot, at this time,
determine the outcome of these uncertainties which may have an adverse effect
upon the liquidity of the Company in the future.

Risks
-----

     From time to time, information provided by the Company or statements made
by its employees, or information provided in its filings with the Securities and
Exchange Commission may contain forward looking information. The Company's
actual future results may differ materially from those projections or statements
made in such forward looking information as a result of various risks and
uncertainties, including but not limited to competition, management, losses,
availability of capital, asbestos litigation, substantial availability of
Tyvek(R), the absence of dividends, and tax incentives. There can be no
assurances that asbestos litigation will not have an adverse effect upon the
Company in the future. The market price of the Company's Common Stock may be
volatile at times in response to fluctuations in the Company's quarterly
operating results, changes in analyst earnings estimates, market conditions, as
well as general conditions and other factors general to the Company.

Item 7. FINANCIAL STATEMENTS

              See Consolidated Financial Statements annexed hereto.
    

<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS


                                     INDEX




INDEPENDENT AUDITORS' REPORT                                            F-2

CONSOLIDATED FINANCIAL STATEMENTS:

  Consolidated Balance Sheet                                            F-3

  Consolidated Statements of Operations                                 F-4

  Consolidated Statements of Changes in Shareholders' Equity            F-5

  Consolidated Statements of Cash Flows                                 F-6
 
  Notes to Consolidated Financial Statements                            F-8





                                      F-1


<PAGE>

                          Independent Auditors' Report


Board of Directors and Shareholders
Eastco Industrial Safety Corp.
Huntington Station, New York


     We have  audited  the  accompanying  consolidated  balance  sheet of EASTCO
INDUSTRIAL  SAFETY CORP.  AND  SUBSIDIARIES  as at June 30, 1997 and the related
consolidated statements of operations,  changes in shareholders' equity and cash
flows  for each of the two  years in the  period  ended  June  30,  1997.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

     In  our  opinion,  the  aforementioned  consolidated  financial  statements
present fairly, in all material respects, the consolidated financial position of
Eastco  Industrial  Safety Corp.  and  Subsidiaries  as at June 30, 1997 and the
results  of their  operations  and their cash flows for each of the two years in
the period ended June 30, 1997, in conformity with generally accepted accounting
principles.


                                         /s/ Cornick, Garber & Sandler, LLP
                                             ------------------------------
                                             CERTIFIED PUBLIC ACCOUNTANTS

Uniondale, New York
October 27, 1997


                                       F-2


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                                  JUNE 30, 1997


                                     ASSETS
                                     ------
Current assets:
  Cash                                                             $    112,258
  Accounts receivable, net of $219,000 allowance for doubtful
    accounts (Note 5)                                                 4,561,053
  Inventories (Notes 1, 2 and 5)                                      5,972,904
  Other                                                                 670,155
                                                                   ------------

              Total current assets                                   11,316,370

Property, plant and equipment, net (Notes 1, 3, 5 and 6)              2,213,971
Excess of cost over net assets acquired (Note 1)                        448,910
Other assets                                                             61,338
                                                                   ------------

              T O T A L                                            $ 14,040,589
                                                                   ============
                                   LIABILITIES
                                   -----------
Current liabilities:
  Loans payable (Note 5)                                           $  5,417,675
  Current maturities of long-term debt (Note 6)                         278,821
  Accounts payable                                                    2,770,626
  Accrued expenses                                                      374,764
                                                                   ------------

              Total current liabilities                               8,841,886

Long-term debt, less current maturities (Note 6)                        811,410
                                                                   ------------

              Total liabilities                                       9,653,296
                                                                   ------------

Commitments and contingencies (Notes 8 and 11)

                              SHAREHOLDERS' EQUITY
                              --------------------
                               (Notes 1, 6 and 7)

Preferred stock, $.01 par value; authorized 1,000,000
  shares; no shares outstanding                                             --
Common stock, $.12 par value; authorized 20,000,000
  shares; 1,683,079 shares outstanding                                  201,970
Additional paid-in capital                                            9,807,708
(Deficit) (statement attached)                                       (5,622,385)
                                                                   ------------

              Total shareholders' equity                              4,387,293
                                                                   ------------

              T O T A L                                            $ 14,040,589
                                                                   ============


      The notes to consolidated financial statements are made a part hereof


                                       F-3


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                    Year Ended June 30,
                                                ---------------------------
                                                    1997           1996
                                                ------------    -----------
Net sales                                       $ 27,987,969    $26,982,699
                                                ------------    -----------

Costs and expenses:
  Cost of sales (Note 1)                          23,838,094     21,495,693
  Selling, general and
    administrative (Note 1)                        4,870,030      4,546,222
  Interest                                           680,749        836,359
  Other (income) expenses (net)                       (9,074)        16,388
  Settlement with former underwriter (Note 7)                        78,000
                                                ------------    -----------

      Total costs and expenses                    29,379,799     26,972,662
                                                ------------    -----------

NET INCOME (LOSS)                               $ (1,391,830)   $    10,037
                                                ============    ===========

Income (loss) per share (Note 1):
  Primary                                           $(.98)          $.02
                                                    =====           ====

  Assuming full dilution                            $(.98)          $.02
                                                    =====           ====

Average number of shares used in computing
per share amounts:
  Primary                                          1,413,775        595,758
                                                ============    ===========

  Assuming full dilution                           1,413,775        595,758
                                                ============    ===========


     The notes to consolidated financial statements are made a part hereof.


                                       F-4


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                               (NOTES 1, 6 and 7)


<TABLE>
<CAPTION>
                                                                   Additional
                                            Common Stock*            Paid-In
                                          Shares      Amount         Capital          (Deficit)         Total
                                        ---------    --------       ----------       -----------     -----------
<S>                                     <C>          <C>            <C>              <C>             <C>        
BALANCE - JULY 1, 1995                    347,738     $41,729       $6,224,509       $(4,240,592)    $ 2,025,646
Shares issued on settlement
  with former underwriter                  10,000       1,200           70,825                            72,025
Exercise of Class A warrants                3,750         450           48,300                            48,750
Shares issued on conversion
  of subordinated debenture                26,374       3,165          121,963                           125,128
Purchase and retirement of
  common stock                            (21,374)     (2,565)        (177,435)                         (180,000)
Shares issued in private
  placement                               399,000      47,880          454,314                           502,194
Net income for the year ended
  June 30, 1996                                                                           10,037          10,037
                                        ---------    --------       ----------       -----------     -----------

BALANCE - JUNE 30, 1996                   765,488      91,859        6,742,476        (4,230,555)      2,603,780
Shares issued in private
  placement                               114,000      13,680          140,320                           154,000
Shares issued in shareholder
  rights and public offering              703,591      84,431        2,524,405                         2,608,836
Sale of warrants to
  underwriter                                                                7                                 7
Shares issued for acquisition
  of glove manufacturing business         100,000      12,000          400,500                           412,500
Net loss for the year ended
  June 30, 1997                                                                       (1,391,830)     (1,391,830)
                                        ---------    --------       ----------       -----------     -----------

BALANCE - JUNE 30, 1997                 1,683,079    $201,970       $9,807,708       $(5,622,385)    $ 4,387,293
                                        =========    ========       ==========       ===========     ===========
</TABLE>


* Gives effect to the 1-for-10 reverse stock split in August 1996.



     The notes to consolidated financial statements are made a part hereof.


                                       F-5


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                         Year Ended June 30,
                                                      -------------------------
INCREASE (DECREASE) IN CASH AND                          1997           1996
  CASH EQUIVALENTS                                    -----------   -----------

Cash flows from operating activities:
  Net income (loss)                                   $(1,391,830)   $   10,037
                                                      -----------   -----------

  Adjustments to reconcile results of
  operations to net cash effect of
  operating activities:
    Depreciation and amortization                         144,606       134,290
    Provision for losses on                           
      accounts receivable                                 104,736       105,732
    Shares issued for services and settlement         
      with former underwriter                                            72,025
    Net changes in assets and liabilities (excluding  
    assets related to glove manufacturing             
    business acquisition):                            
      Accounts receivable                                   3,281      (876,629)
      Inventories                                        (603,667)     (866,339)
      Other current assets                               (228,392)       40,105
      Other assets                                        145,572       (75,122)
      Accounts payable                                   (463,505)      343,084
      Accrued expenses                                     83,423       (40,566)
                                                      -----------   -----------
                                                      
        Total adjustments                                (813,946)   (1,163,420)
                                                      -----------   -----------
                                                      
        Net cash used for operating activities         (2,205,776)   (1,153,383)
                                                      -----------   -----------
                                                    
Cash flows from investing activities:
  Acquisition of property and equipment                  (281,362)      (93,274)
  Acquisition of glove manufacturing business            (734,526)
                                                      -----------   -----------

           Net cash used for investing activities      (1,015,888)      (93,274)
                                                      -----------   -----------



(Continued)
                                       F-6


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                       -2-


<TABLE>
<CAPTION>
                                                                  Year Ended June 30,
                                                              ---------------------------
                                                                  1997            1996
                                                              ------------    -----------
<S>                                                           <C>             <C>         
Cash flows from financing activities:
   Repayments of long-term debt                               $   (79,551)    $   (48,762)
   Borrowings under line of credit agreements                  32,054,480      28,621,372
   Repayments under line of credit agreements                 (32,489,880)    (27,697,205)
   Borrowing under Bridge loan                                                    500,000
   Repayment of Bridge loan                                                      (500,000)
   Net proceeds from private placement of common stock            154,000         502,194
   Net proceeds from convertible subordinated debenture                           225,128
   Net proceeds from shareholder rights and public offering     2,608,843
   Borrowings to finance acquisition of
     glove manufacturing business                                 440,000
   Repayment of convertible subordinated debenture                               (100,000)
   Proceeds from exercise of Class A warrants                                      48,750
   Purchase of treasury stock                                                    (180,000)
                                                              -----------     -----------

      Net cash provided by financing activities                 2,687,892       1,371,477
                                                              -----------     -----------

NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                                               (533,772)        124,820

Cash and cash equivalents - July 1                                646,030         521,210
                                                              -----------     -----------

CASH AND CASH EQUIVALENTS - JUNE 30                           $   112,258     $   646,030
                                                              ===========     ===========

Supplemental disclosure of cash paid for:
   Interest                                                   $   680,749     $   836,359
                                                              ===========     ===========

   Taxes                                                      $    12,758     $     5,440
                                                              ===========     ===========

Supplemental disclosure of noncash
financing activities:
   Noncash consideration for acquisition of 
   glove manufacturing business:
     Common stock issued                                      $   412,500
                                                              ===========

     Minimum guaranteed payments                              $   240,000
                                                              ===========

   Conversion of convertible subordinated
     debenture into common stock                                              $   150,000
                                                                              ===========

   Retirement of treasury stock                                               $   128,000
                                                                              ===========
</TABLE>



     The notes to consolidated financial statements are made a part hereof.


                                       F-7


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1997 AND 1996



NOTE 1 -  Summary of Significant Accounting Policies:

          Operations:

          The  Company  operates  in two  industry  segments.  The  first is the
          manufacture  and sale of industrial  protective  clothing  products to
          distributors  throughout  the United  States and in Puerto  Rico.  The
          second is the distribution and sale of industrial  protective clothing
          and  other  protective   products  directly  to  "end  users"  located
          primarily in the Northeastern United States.

          The  Company's   manufacturing   division  uses  Tyvek(R)  to  produce
          disposable   clothing.   Tyvek(R)  is  sold  solely  by  E.I.   Dupont
          Industries, Inc. Products made of Tyvek(R) accounted for approximately
          44% and 41% of  consolidated  sales for the years  ended June 30, 1997
          and 1996, respectively.

          Principles of Consolidation:

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

          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.


(Continued)


                                       F-8


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1997 AND 1996



NOTE 1 -  Summary of Significant Accounting Policies (Continued):

          Cash Equivalents:

          Cash  equivalents  include   certificates  of  deposit  with  original
          maturities of 90 days or less.

          Inventories:

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

          Depreciation and Amortization:

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

          Excess of Cost Over Net Assets Acquired:

          The excess of cost over the net assets of a business acquired in April
          1997 is being  amortized on a  straight-line  basis over its estimated
          useful life of 20 years (Note 12).  Management intends to periodically
          evaluate this asset for impairment  using estimated  future cash flows
          from the acquired business and other estimates of cost recoverability.

          Fair Value of Financial Instruments:

          Cash and cash  equivalents,  receivables,  loans payable and long-term
          debt are  reflected  in the  balance  sheet at amounts  considered  by
          management to reasonably approximate their fair value because of their
          relative short-term maturities, recent incurrance or because they bear
          variable interest rates.

          Stock Options and Warrants:

          The Company has adopted the disclosure only provisions of Statement of
          Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock
          Based  Compensation"  for stock  options and  warrants  granted to its
          employees,  officers and directors and, therefore,  continues to apply
          the  provisions  of  Accounting  Principles  Board  Opinion No. 25 and
          related   interpretations   in  its   accounting   for  such   grants.
          Accordingly,  no  compensation  cost is  recognized  for these  grants
          unless they are for less than fair value at issuance or are considered
          a variable award.


(Continued)


                                       F-9


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1997 AND 1996



NOTE 1 -  Summary of Significant Accounting Policies (Continued):

          Per Share Amounts:

          Primary  earnings per share amounts have been  computed  utilizing the
          weighted average number of common and, if material,  common equivalent
          shares outstanding during the period. Fully diluted earnings per share
          is based  upon the  weighted  average  number  of  common  and  common
          equivalent  shares  outstanding.  Per share amounts give effect to the
          1-for-10  reverse stock split approved by the  shareholders  in August
          1996.  All other per share  amounts and  information  set forth in the
          attached  financial  statements  and the notes  thereto have also been
          adjusted to give effect to the reverse stock split.  Common equivalent
          shares have not been  included  in the loss per share  amounts for the
          year ended June 30, 1997 as the result would be anti-dilutive.


NOTE 2 -  Inventories:

          Inventories consist of the following at June 30, 1997:

            Raw materials                      $2,049,328
            Work-in-process                     1,145,395
            Finished goods                      2,778,181
                                               ----------
                     Total                     $5,972,904
                                               ==========


NOTE 3 -  Property, Plant and Equipment:

          Property,  plant and  equipment is comprised of the  following at June
          30, 1997:

                                                                      Estimated
                                                                     Useful Life
                                                                       (Years)
                                                                       -------
            Cost:
              Land                                    $  382,000
              Building and leasehold improvements         833,741       5 - 40
              Machinery and equipment                   2,106,191       3 - 10
              Furniture and fixtures                      246,163       7 - 10
                                                      -----------

                     Total                              3,568,095

            Less accumulated depreciation
              and amortization                          1,354,124
                                                      -----------

                     Balance                          $ 2,213,971
                                                      ===========



(Continued)                              F-10


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1997 AND 1996



NOTE 4 -  Income Taxes:

          The  Company  accounts  for  income  taxes  under  the  provisions  of
          Statement of Financial  Accounting Standards No. 109 (SFAS 109). While
          SFAS 109  requires  the  recognition  of a deferred  tax asset for the
          benefit of net  operating  loss  carryforwards,  it also  requires the
          recognition  of a valuation  allowance when it is more likely than not
          that such benefit will not be realized.  As a result of the  Company's
          history of losses, it has recorded a valuation  allowance equal to the
          net deferred tax asset account as of June 30, 1997.

          Deferred  income taxes relate to the following  temporary  differences
          and carryforwards as of June 30, 1997:

            Deferred tax assets:
              Net operating loss carryforwards                $ 2,121,000
              Allowance for doubtful accounts
                 and credits                                       88,000
              Tax basis adjustments to inventory                   51,000
                                                              -----------

                   Total                                        2,260,000

            Less deferred tax liability:
              Accelerated depreciation of
                 property and equipment                            37,000
                                                              -----------

                   Balance                                      2,223,000

            Less valuation allowance                           (2,223,000)
                                                              -----------
            Net deferred income taxes after
              valuation allowance                             $       --
                                                              ===========


(Continued)


                                      F-11


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1997 AND 1996


NOTE 4 -  Income Taxes (Continued):

          Two  wholly-owned  Puerto Rico based  subsidiaries  have been  granted
          exemptions  from paying  Puerto Rico income taxes under  provisions of
          the Puerto Rico  Industrial  Tax Exemption Act of 1963,  provided such
          subsidiaries  continue  to meet  the  terms  and  conditions  of their
          grants.  One  subsidiary's  exemption  expires  June  30,  1999.  This
          subsidiary  has received a 90% exemption from Puerto Rico income taxes
          and a 75% exemption from Puerto Rico municipal and property taxes. The
          second subsidiary has received a 90% exemption from Puerto Rico income
          and  property  taxes and a 60%  exemption  from Puerto Rico  municipal
          income taxes to June 2006. These  subsidiaries have elected,  pursuant
          to Section  936 of the  Internal  Revenue  Code,  to  receive  credits
          equivalent to the amount of Federal income taxes which would otherwise
          be due on their income. The Omnibus Budget  Reconciliation Act of 1993
          imposes  limitations  on  computing  the  Possession  Tax Credit under
          Section 936 for tax years beginning  after 1993. In addition,  the Act
          makes the 100% dividends received deduction subject to the Alternative
          Minimum Tax calculation. The Small Business Job Protection Act of 1996
          further  limits the Possession  Tax Credit for years  beginning  after
          2001 with the credit being  eliminated after the years beginning after
          2005.

          Dividends, if paid by the Puerto Rico based subsidiaries,  are subject
          to a withholding tax of 10%;  however,  no taxes have been provided on
          their aggregate undistributed earnings (of approximately $1,868,000 at
          June 30, 1997) because it is  management's  intention to reinvest such
          earnings indefinitely.

          A  reconciliation  between the expected  tax expense at the  statutory
          federal income tax rate and the Company's actual income tax expense is
          as follows:

                                                               Year Ended
                                                                June 30,
                                                        ------------------------
                                                           1997          1996
                                                        ----------    ----------
              Income tax expense (benefit)
                at the statutory rate                   $ (529,000)   $   3,000
              Effect of net operating loss of
                Puerto Rican subsidiaries for
                which there is no current tax
                benefit                                    172,000
              Effect of domestic net operating
                loss for which there is no
                current tax benefit                        357,000
              Benefit of utilization of net
                operating loss carryforwards                             (3,000)
                                                        ----------    ----------
                Actual income tax expense               $      --     $     --
                                                        ==========    ==========


(Continued)


                                      F-12


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1997 AND 1996


NOTE 4 -  Income Taxes (Continued):

          At June 30, 1997, the Company has net operating loss  carryforwards of
          approximately   $5,582,000  for  federal  income  tax  purposes.  Such
          carryforwards  expire in 2005 through 2012. As a result of the private
          placement  offering in June 1996, the amount of the loss carryforwards
          which can be utilized to offset future  taxable income will be limited
          to approximately $345,000 a year, plus any loss carryforwards incurred
          after June 30, 1996.  However, to the extent such annual limitation is
          not utilized in any year, it may be further  carried forward until the
          carryforward would have otherwise expired.


NOTE 5 -  Loans Payable:

          Loans payable at June 30, 1997 are  comprised of borrowings  under the
          Company's line of credit agreement with Congress Financial Corporation
          ("Congress").

          The Company  amended and  extended its line of credit  agreement  with
          Congress during 1997. The line which expires in October 1999  provides
          for borrowings up to $9,000,000  with interest  payable  monthly at 1%
          above  the  prime  rate,  plus  an  unused  line  fee of  1/4% a year.
          Borrowings are limited to 85% of eligible accounts  receivable and 55%
          of  eligible   inventory  up  to  maximum   inventory   borrowings  of
          $2,875,000.  The loans are subject to certain  working capital and net
          worth requirements and are collateralized by all assets of the Company
          not previously pledged under other loan agreements. The loan agreement
          prohibits the payment of dividends by the Company.  In September 1993,
          Congress sold to three individuals,  who are officers and directors of
          the Company, a $250,000 junior  participation in the loans made to the
          Company. The Company had an informal agreement with Congress,  whereby
          Congress  agreed to provide  the  Company an  additional  $500,000  in
          borrowing  availability of which $250,000 was repaid at $11,250 a week
          beginning November 1, 1993. Congress repurchased $35,000 of the junior
          participations  in May 1996 and the remaining  balance during November
          1996.

          The  Company  was  not in  compliance  with  the  tangible  net  worth
          requirement  at June 30,  1997.  However,  Congress  has  waived  such
          covenant  and amended it downward  to  $3,600,000  for the year ending
          June 30,  1998,  $4,100,000  commencing  July 1, 1998 and for the year
          ending June 30, 1999 and $4,600,000 thereafter.


(Continued)


                                      F-13


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1997 AND 1996


NOTE 6 -  Long-Term Debt:

          Long-term debt is comprised of the following:

            Mortgage  payable - interest at 12% per
              annum, collateralized by land, building
              and personal property (a)                             $  433,736

            Mortgage payable - interest at 1 1/4% above
              the prime rate, collateralized by all assets
              of the Puerto Rico subsidiaries (b)                      215,311

            Term loan - interest at 1 1/4% above the
              prime rate, collateralized by all assets of the
              Company not previously pledged (c)                       209,517

            Guaranteed payments for purchase of glove
              manufacturing business (see Note 12) (d)                 231,667
                                                                    ----------

                       Total                                         1,090,231

            Less current maturities                                    278,821
                                                                    ----------
            Noncurrent portion                                      $  811,410
                                                                    ==========


          Maturities of the noncurrent portion of long-term debt are as follows:

            Year ending June 30:
               1999                                                $277,600
               2000                                                 151,400
               2001                                                  53,000
               2002                                                  54,000
               2003                                                 275,410
                                                                   --------
                       Total noncurrent portion                    $811,410
                                                                   ========


(Continued)                             F-14


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1997 AND 1996


NOTE 6 -  Long-Term Debt (Continued):

          (a)  The mortgage,  with an original  interest rate of 14.0% per annum
               and which was due in July  1997,  was  amended  and  extended  on
               September  26, 1996.  The amendment  reduced the annual  interest
               rate to 12.0%  commencing July 1, 1997, with monthly  payments of
               $6,223  until  July  1,  2002  when  the  remaining   balance  of
               approximately   $275,000  is  payable.  In  connection  with  the
               original  mortgage in 1992, the Company issued five year warrants
               to acquire 10,833 shares at $30.00 a share.  In January 1995, the
               Company  reduced the  exercise  price to $13.00 and  extended the
               expiration  date  until  April  1999.  Approximately  38% of this
               mortgage  is held by a group  of  investors  which  includes  the
               spouses of certain  officers and directors and a past director of
               the Company.  Interest on the mortgage  aggregated  approximately
               $65,000  and  $72,000 for the years ended June 30, 1997 and 1996,
               respectively.

          (b)  The mortgage is repayable in 29 monthly principal installments of
               $7,690 plus interest to October 1, 1999.  The funds received were
               used for the acquisition of the glove manufacturing business (see
               Note 12).

          (c)  The term loan is repayable in 29 monthly  principal  installments
               of $7,483,  plus interest to October 1, 1999.  The funds received
               were also  used for the  acquisition  of the glove  manufacturing
               business (see Note 12).

          (d)  This  amount  is   comprised  of   guaranteed   payments  to  two
               individuals  in  connection  with the  acquisition  of the  glove
               manufacturing  business.  One  individual  is  entitled to 10% of
               income  before  taxes (as  defined)  of the  glove  manufacturing
               business for the five year period  commencing July 1, 1997, up to
               a maximum  of  $180,000,  but in no event less than  $18,000  per
               year,  for which the Company  has  accrued  the  $90,000  minimum
               payment.   The  second  individual   entered  into  a  consulting
               agreement  with the Company  for a three year  period  commencing
               April  17,  1997,  which  calls  for a fee of  $50,000  per year,
               payable in monthly  installments.  The  Company  has  accrued the
               $150,000 required payment.

               The $240,000 aggregate minimum payments, which are due regardless
               of  continued  employment,   have  been  recorded  as  additional
               purchase  price.  No imputed  interest has been recorded on these
               payments as the effect would be immaterial.



(Continued)                              F-15


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1997 AND 1996




NOTE 7 -  Shareholders' Equity:

          Preferred Stock:

          On August 12,  1996,  the  shareholders  of the  Company  approved  an
          amendment to the Company's  certificate of  incorporation to authorize
          1,000,000  shares of preferred  stock.  No preferred  shares have been
          issued.

          Common Stock:

          On August  12,  1996,  the  shareholders  of the  Company  approved  a
          1-for-10  reverse  stock  split  of  all  outstanding  shares  of  the
          Company's  common stock.  The financial  statements  and notes thereto
          give effect to this split for all periods presented.

          In April 1991, the Company sold, pursuant to a rights offering, 48,007
          shares of common stock. In this connection, the underwriter was sold a
          warrant to purchase  4,078 shares of common stock at $53.30 per share,
          which was  exercisable  until  February 28, 1996. The Company also had
          borrowed  $200,000 with interest at 17% per annum during February 1991
          from five  unrelated  parties.  These  loans  were  repaid  out of the
          proceeds of the rights  offering,  including  interest.  In connection
          with these loans,  the Company issued  warrants to purchase 833 shares
          of common stock,  exercisable  at $30.00 per share until May 13, 1996.
          In January 1995,  the Company  reduced the exercise price of the above
          warrants to $13.00 and  extended  their  expiration  dates until April
          1999.

          In April  1996,  the  holder of a  $250,000  convertible  subordinated
          debenture,   issued  in  February  1996,  converted  $150,000  of  the
          debenture  into  26,374  shares of the  Company's  common  stock.  The
          Company  repurchased  21,374 of these  shares for $180,000 and retired
          the  stock.  The  remaining  $100,000  balance  of the  debenture  was
          repurchased  for $120,000.  The $20,000  excess has been included with
          interest expense for the year ended June 30, 1996.



(Continued)

                                      F-16


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1997 AND 1996


NOTE 7 -  Shareholders' Equity (Continued):

          Common Stock (Continued):

          On April 19, 1994, the Company sold in a public offering 200,000 units
          at $20.00 per unit, each unit consisting of one share of the Company's
          common stock and one Class A warrant. Each warrant entitled the holder
          to purchase one share of common stock at an exercise price of $24.00 a
          share from April 12, 1995 through April 12, 1999. In January 1995, the
          Company  reduced the exercise price to $13.00 a share.  These warrants
          are  redeemable  by the Company  commencing  April 12, 1995 at $1.00 a
          warrant,  provided  that the high bid  price of its  stock is at least
          $19.50  for  the  required  number  of days  prior  to the  Notice  of
          Redemption.  The Company also granted to the  underwriter an option to
          purchase,  at the same price,  30,000 units to cover  over-allotments.
          This option was exercised in May 1994.  In addition,  the Company sold
          to the underwriter for $10 an option,  exercisable from April 12, 1995
          to April 12, 1999,  to purchase  23,000  additional  units at $29.00 a
          unit  and  entered  into a two  year  consulting  agreement  with  the
          underwriter  at a total  cost of  $72,000.  Subsequent  to the  public
          offering,  two  officers of the  underwriter  became  directors of the
          Company until their resignations on July 10, 1995.

          On July 10, 1995,  the Company issued 10,000 shares of common stock to
          the  underwriter of its 1994 public stock offering in exchange for the
          cancellation  of all of its rights under the  Underwriting  Agreement.
          The  $78,000  cost  thereof,  equal to the market  value of the shares
          issued and legal  expenses  incurred,  is separately  reflected on the
          consolidated statement of operations for the year ended June 30, 1996.

          In  October  1996,  the  Company  sold,   pursuant  to  a  combination
          shareholder  rights and public  offering,  703,591  units at $5.00 per
          share,  with each unit consisting of one share of common stock and one
          Class B warrant.  Each  warrant  entitles  the holder to purchase  one
          share of common  stock at an exercise  price of $6.25 per share during
          the period from twelve months to three years after the closing date of
          the offering.  The warrants may be repurchased by the Company, upon 30
          days prior written notice,  eighteen months after the offering at $.01
          per  warrant  if the high bid  price of the  common  stock  for the 15
          consecutive  trading days ending on the third day prior to the date of
          notice is in excess of 150% of the exercise price of the warrant.  The
          Company  also sold to the offering  agent/underwriter,  for a total of
          $7, warrants to purchase 70,359 units. The warrants are exercisable at
          $6.00  per  unit  for four  years  commencing  in  November  1997.  In
          addition,  the Company  entered into a one year  consulting  agreement
          with the offering agent/underwriter for approximately $70,000.


(Continued)


                                      F-17


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1997 AND 1996


NOTE 7 -  Shareholders' Equity (Continued):

          Private Placements:

          On June 28, 1996, the Company issued, in a private  placement,  10 1/2
          units at $57,000 a unit, with each unit consisting of 38,000 shares of
          the  Company's  common  stock.  The net  proceeds to the Company  were
          approximately  $501,000  after fees to the  placement  agent and other
          expenses.  The  proceeds  were used to repay a  $500,000  bridge  loan
          obtained in May 1996. On July 9, 1996, an additional 3 units were sold
          for net proceeds of approximately  $165,000.  The Company issued three
          year  warrants to purchase  2,500  shares of common  stock at $10.00 a
          share in connection with the foregoing transactions.

          Other Warrants:

          On May 13, 1996,  warrants to purchase  9,003 shares each were granted
          to the Company's  then  president and two of the  vice-presidents  for
          their gurantees of overadvances by Congress (see Note 5). The warrants
          are exerciseable until February 23, 2001 at $5.35 per share.

          On July 26, 1995,  the Company issued to a consulting  firm,  which is
          the  employer  of a then new  director  of the  Company,  a five  year
          warrant to purchase 12,500 shares of the Company for $12.50 a share.

          In January 1994, a corporate officer/director of the Company purchased
          a warrant  from a prior  lender.  The warrant is for 92,477  shares at
          $5.62 per share. The expiration date of this warrant was extended from
          March 31, 1997 until April 11, 1999.

          Incentive Stock Option Plans:

          Under the Company's 1983 Incentive Stock Option Plan, options could be
          granted  to June  23,  1993  for a  maximum  of  5,625  shares  of the
          Company's  common  stock.  At June 30,  1997,  options to purchase 865
          shares at $26.64 to $30.00 a share are outstanding; no further options
          may be granted under this plan.

          The  Company's  1992  Incentive  Stock  Option Plan  provides  for the
          granting of options for 20,000 shares of the Company's common stock to
          December 20, 2002. At June 30, 1997, options to purchase 300 shares at
          $27.50  are  outstanding.  The  Company  has  agreed  not to issue any
          additional options under this plan.

          The  Company's  1994  Incentive  Stock  Option Plan  provides  for the
          granting of options for 10,000 shares of the Company's common stock to
          January  2004. At June 30, 1997,  options to purchase  8,500 shares at
          $10.63 are outstanding.


(Continued)


                                      F-18


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1997 AND 1996


NOTE 7 -  Shareholders' Equity (Continued):

          Incentive Stock Option Plans (Continued):

          On August 12, 1996, the shareholders approved the adoption of the 1996
          Incentive  Stock  Option  Plan,  which  provides  for the  granting of
          options for 300,000 shares, to key employees,  of the Company's common
          stock until May 2006. On June 24, 1997,  the Company issued options to
          purchase  231,400  shares at $2.25 a share;  59,400  of these  options
          vested on issue date,  32,000 will vest over the next four years based
          upon employment and the remaining  balance vest based upon the Company
          achieving certain sales and income requirements.

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

          Transactions under the above plans are summarized as follows:

<TABLE>
<CAPTION>
                                                                       Weighted Average
                                                      Shares       Exercise Price Per Share
                                                      -------      ------------------------
<S>                                                   <C>                 <C>
            Outstanding - June 30, 1995 and 1996        9,665             $12.60

            Granted during year ended June 30,
              1997                                    231,400              $2.25
                                                      -------

            Outstanding - June 30, 1997               241,065              $2.66
                                                      =======
</TABLE>


(Continued)


                                      F-19


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1997 AND 1996


NOTE 7 -  Shareholders' Equity (Continued):

          Other Stock Options:

          1996 Stock Options:

          On August 12, 1996, the shareholders approved the adoption of the 1996
          Nonqualified  Stock  Option Plan which  provides  for the  granting of
          options for 300,000  shares of the Company's  stock until August 2006.
          On June 24,  1997,  the Company  issued  ten-year  options to purchase
          143,000  shares at $2.25 a share.  These  options  vest based upon the
          Company meeting certain sales and income requirements.

          1995 Stock Options:

          On January 20, 1995,  the Board of Directors  granted to the Company's
          then president and two vice-presidents  ten-year  nonqualified options
          to purchase  82,236  shares  each at $5.17 per share.  The options are
          exercisable  after five years but may become  exercisable  sooner upon
          the Company achieving pretax earnings  targets.  Based on the earnings
          for the year ended  June 30,  1995,  options  for  123,355  shares are
          currently exercisable.

          Other nonqualified  options  outstanding at June 30, 1997, under prior
          years' grants, aggregate 3,108 shares at $16.88 to $30.00 a share.

          The  following  table  summarizes   information  about  stock  options
          outstanding at June 30, 1997.


<TABLE>
<CAPTION>
                                      Options Outstanding             Options Exercisable
                                --------------------------------    -----------------------
                                           Weighted    Weighted                   Weighted
                                            Average    Average                    Average
                                           Remaining   Exercise                   Exercise
               Range of                   Contractual   Price                      Price
             Exercise Prices     Shares       Life     Per Share      Shares      Per Share
             ---------------    --------   ----------  ---------    ---------     ---------
<S>          <C>                 <C>        <C>         <C>          <C>         <C>    
             $  .01 - $ 5.00     374,400    10 years    $  2.25        88,000    $  2.25
             $ 5.01 - $10.00     246,708    7.5 years      5.17       123,354       5.17
             $10.01 - $20.00      11,500    5.3 years     12.26        11,500      12.26
             $20.01 - $30.00       1,273    2.1 years     27.28         1,273      27.28
                                --------                              -------           

                Totals           633,881                              224,127
                                ========                              =======
</TABLE>


(Continued)


                                      F-20


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1997 AND 1996


NOTE 7 -  Shareholders' Equity (Continued):

          Stock Options (Continued):

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

                                                    Year Ended June 30,
                                                 ------------------------
                                                     1997        1996
                                                 -----------  -----------
            Net income (loss):
              As reported                       $(1,391,830)     $10,037
              Pro forma                          (1,452,962)      10,037

            Income (loss) per share:
              As reported                          $ (.98)        $.02
              Pro forma                            $(1.03)        $.02

          The fair values of the  Company's  stock  options  used to compute the
          above pro forma  disclosures  are their  estimated  present  values at
          grant  date  using the  Black-Scholes  option  pricing  model with the
          following  assumptions for 1997;  expected volatility of 80.4%, a risk
          free  interest  rate of 6.7% and an  expected  holding  period  of ten
          years.

          The following  summarizes  all shares  reserved at June 30, 1997 under
          options and warrants outstanding:

                                                                    Price Per
                                                      Number      Share or Unit
                                                      ------      -------------
            Stock options:
              Incentive stock option plans           241,065     $ 2.25 - $30.00
              Nonqualified options                   392,816     $ 2.25 - $30.00
            Warrants:
              Class A                                226,250     $13.00
              Class B                                703,591     $ 6.25
              Other                                  220,589     $ 1.00 - $13.00

(Continued)


                                      F-21


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1997 AND 1996


NOTE 8 -  Commitments and Contingencies:

          Rent:

          The  Company  is   obligated   through   August  2003  under   several
          noncancellable long-term operating leases covering office, factory and
          warehouse facilities. Minimum annual rentals under these leases are:

              Year ending June 30:
                 1998                                       $127,000
                 1999                                        137,000
                 2000                                        157,000
                 2001                                        142,000
                 2002                                        151,000
              Thereafter                                     180,000
                                                             -------
                        Total                               $894,000
                                                            ========

          Rent  expense,  including  month-to-month  rentals,  was  $289,000 and
          $226,000 in the fiscal years ended June 30, 1997 and 1996.

          Employment Agreements:

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

                                                    Expiration        Current
                       Officer                         Date        Annual Salary
             ----------------------------           ----------     -------------

             President (a)                         July 1, 2000       $125,000
             Senior Vice-President (b)             July 1, 2000       $133,000
             Senior Vice-President and
               Treasurer (c)                       July 1, 2000       $ 85,500
             Vice-President of Finance             January 31, 2000   $ 92,500
             Vice-President of Manufacturing       January 31, 2000   $ 96,500


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


(Continued)                           F-22


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1997 AND 1996


NOTE 8 -  Commitments and Contingencies (Continued):

          Employment Agreements (Continued):

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

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

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

          In  addition,  should an  unrelated  party obtain more than 20% of the
          Company's then outstanding stock, other than by transactions initiated
          by the Company, the following will occur for three of the officers:

               (a)  Each will be paid a bonus equal to their minimum base salary
                    for the next three years.

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

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

          All  bonuses  for the  years  ended  June 30,  1997 and 1996 have been
          waived and the bonuses  based on income before taxes and interest have
          been waived through June 30, 2000.


NOTE 9 -  Profit Sharing Plan:

          The Company's  qualified  profit  sharing plan for eligible  full-time
          employees,  which includes a 401(k) salary reduction feature, requires
          a matching  contribution  from the Company of up to $500 per  employee
          for the 401(k) feature and provides for  discretionary  profit sharing
          contributions  by the Company,  as approved by its Board of Directors.
          Contribution  expense was approximately $6,900 for the year ended June
          30, 1997. There were no required matching  contributions or authorized
          contributions for the year ended June 30, 1996.


(Continued)


                                      F-23


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1997 AND 1996


NOTE 10 - Industry Segment Information:

          Information for the Company's  distribution and manufacturing segments
          for the years ended June 30, 1997 and 1996 is summarized as follows:


                 1997                 Distribution   Manufacturing     Total
          ------------------------    ------------   -------------  -----------
          Net sales                    $ 8,081,082    $19,906,887   $27,987,969
                                       ===========    ===========   ===========
          
          Operating profit (loss)      $  (155,685)   $   874,739   $   719,054
                                       ===========    ===========

          General corporate expenses                                 (1,430,135)
          Interest expense                                             (680,749)
                                                                    ----------- 
          Net loss                                                  $(1,391,830)
                                                                    ===========

          Identifiable assets          $ 4,408,928    $ 9,631,661   $14,040,589
                                       ===========    ===========   ===========
          Capital expenditures         $    81,570    $   993,792   $ 1,075,362
                                       ===========    ===========   ===========
          Depreciation and amortiza-
            tion expense               $    62,893    $    81,713   $   144,606
                                       ===========    ===========   ===========

          
                 1996                 Distribution   Manufacturing     Total
          ------------------------    ------------   -------------  -----------
          Net sales                    $ 9,094,046    $17,888,653   $26,982,699
                                       ===========    ===========   ===========
          
          Operating profit             $   133,760    $ 2,124,131   $ 2,257,891
                                       ===========    ===========

          General corporate expenses                                 (1,411,495)
          Interest expense                                             (836,359)
                                                                    -----------
          Net income                                                $    10,037
                                                                    ===========

          Identifiable assets          $ 5,182,514    $ 7,289,591   $12,472,105
                                       ===========    ===========   ===========
          Capital expenditures         $    43,704    $    49,570   $    93,274
                                       ===========    ===========   ===========
          Depreciation and amortiza-
            tion expense               $    58,941    $    75,349   $   134,290
                                       ===========    ===========   ===========
          
          
(Continued)


                                      F-24


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1997 AND 1996


NOTE 11 - Litigation:

          At June 30,  1997,  the Company is a defendant  in  approximately  300
          lawsuits,  together with a multitude of other  defendants,  in actions
          alleging  exposure by  approximately  1,900 first party  plaintiffs to
          asbestos and  products  containing  asbestos  sold by the Company over
          unspecified periods of time.

          To June 30, 1997 and since 1981, the Company  estimates  approximately
          920 actions on behalf of  approximately  8,100 first party  plaintiffs
          have been instituted against it concerning asbestos related claims and
          that claims of  approximately  6,200  plaintiffs have been terminated.
          The foregoing numbers assume the consummation of pending  settlements.
          The Company  estimates  that with the  exception of defense  costs,  a
          total of approximately $1,500,000 has been agreed to in settlements to
          date with  regard to the  terminated  actions of which all but $30,000
          has been paid by the Company's insurance  carriers.  To June 30, 1997,
          the Company has paid less than $40,000 for legal and defense  costs to
          counsel appointed by the insurance companies to defend it. The Company
          entered  into an  agreement  with  its  primary  insurance  companies,
          wherein  its  liability  is limited to 12% of the cost of the  defense
          liability and 17% of the settlement claim of certain  litigation.  The
          agreement,  which is subject to policy  limitations  on each insurance
          policy,  may be  terminated  at any time upon 90 days notice by any of
          the parties  provided that  termination may not be effective as to any
          asbestos  action that has already  been placed on the trial  calendar,
          unless it has a scheduled trial date more than 12 months from the date
          the notice is given.  In May 1991,  the Company  reached an  agreement
          with Mount Vernon Fire Insurance Company, one of its primary insurance
          carriers,  with respect to its pending and future asbestos litigation.
          Mount Vernon agreed to contribute 6.25% to the Company's defense costs
          and  6.25% to its  indemnity  costs  for so long a  period  of time as
          $100,000 in  aggregate  has not been paid for  indemnity  costs.  This
          agreement  applied  only  during  the  period  Mount  Vernon  provided
          insurance  coverage,  which is between April 1, 1968 to April 1, 1969.
          However, because past results of settlements and defense costs are not
          necessarily  indicative  of future  settlements  and defense costs and
          because,  as of  this  date,  management  is  still  unable  to  fully
          ascertain  the extent of  insurance  coverage  applicable  to asbestos
          claims against the Company or the extent to which  insurance  carriers
          will  provide  coverage,  neither  management  nor  counsel is able to
          predict  the  outcome of these  matters or the range of any  potential
          liability  that might  result.  In  addition,  based on past  history,
          management  believes  it is  likely  that  there  will  be  additional
          asbestos action instituted against the Company.


(Continued)


                                      F-25


<PAGE>


                         EASTCO INDUSTRIAL SAFETY CORP.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1997 AND 1996


NOTE 11 - Litigation (Continued):

          The Company is party to other product liability  litigation arising in
          the ordinary course of business.  After consultation with counsel, the
          Company considers that its ultimate liability, if any, after available
          insurance coverage, in the majority of these matters, would not have a
          material  adverse  effect  upon  the  Company's   financial  position.
          However,  there  can be no  assurances  that the  Company's  insurance
          coverage  will  adequately  cover these cases or whether the Company's
          insurance  will provide  coverage for punitive  damages should they be
          awarded.


NOTE 12 - Acquisition of Glove Manufacturing Business:

          In April 1997, the Company, through Eastco Glove Technologies, Inc. (a
          newly formed wholly-owned subsidiary) acquired all the common stock of
          Protective Knitting, Inc. ("PKI") and certain machinery, equipment and
          inventory  from a  company  related  to PKI.  The  purchase  price was
          approximately $1,387,000 which has been recorded as follows:

            Inventory                                       $  139,000
            Machinery and equipment                            794,000
            Excess of cost over net assets
              acquired                                         454,000
                                                            ----------
                                                            $1,387,000
                                                            ==========

          In connection with this purchase,  the Company borrowed  $440,000 from
          Congress,  (see Note 6),  issued  100,000  shares of its common  stock
          valued at  approximately  $412,000  and has agreed to make  additional
          payments  to PKI's  former  owners  over the next  three to five years
          which  aggregate at least  $240,000.  The  remaining  purchase  price,
          including  closing costs was paid in cash.  The  acquisition  has been
          accounted for as a purchase  transaction.  The operations of PKI prior
          to its  acquisition  were  immaterial  in  relation  to  those  of the
          Company.


NOTE 13 - Quarterly Results of Operations:

          The  Company's  previously  reported  unaudited  net loss for the nine
          months  ended  March  31,  1997  was  $70,422,  whereas  the  attached
          financial  statements  reflect a net loss of  $1,391,830  for the year
          ended June 30, 1997.

          As a result of the  magnitude of the net loss  recorded by the Company
          in the fourth  quarter of its year ended June 30, 1997,  management is
          currently analyzing its previously issued interim financial statements
          during such year in order to determine  the extent,  if any, that such
          financial data requires restatement.


                                      F-26

<PAGE>


   
     The following exhibit is annexed hereto:

27.01 Financial Data Schedule
    

<PAGE>


                                   SIGNATURES

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

                                   EASTCO INDUSTRIAL SAFETY CORP.

                                 By:/s/LAWRENCE DENSEN            Date: 10/29/97
                                    ---------------------------
                                       LAWRENCE DENSEN

                                       President and Chief Executive Officer


                                 By:/s/ARTHUR J. WASSERSPRING     Date: 10/29/97
                                    ---------------------------
                                       ARTHUR J. WASSERSPRING
                                       Vice President of Finance, and
                                       Chief Financial Officer

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

                                 By:/s/LAWRENCE DENSEN            Date: 10/29/97
                                    ---------------------------
                                       LAWRENCE DENSEN
                                       Director

                                 By:/s/ALAN DENSEN                Date: 10/29/97
                                    ---------------------------
                                       ALAN DENSEN
                                       Director

                                 By:/s/CHARLES HOLZBERG           Date: 10/29/97
                                    ---------------------------
                                        CHARLES HOLZBERG
                                        Director

                                 By:/s/MARTIN FLEISHER            Date: 10/29/97
                                    ---------------------------
                                        MARTIN FLEISHER
                                        Director

                                 By:/s/ANTHONY P. TOWELL          Date: 10/29/97
                                    ---------------------------
                                       ANTHONY P. TOWELL
                                       Director

                                 By:/s/BRUCE FRIEDMAN             Date: 10/29/97
                                    ---------------------------
                                       BRUCE FRIEDMAN
                                       Director

                                 By:/s/JAMES A. FAVIA             Date: 10/29/97
                                    ---------------------------
                                       JAMES A. FAVIA
                                       Director