SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

     (Mark One)

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

For the fiscal year ended December 31, 1998

     [_]  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 number 33-80961-NY

                              LAMINAIRE CORPORATION
                  (Exact name of small business in its charter)

         Delaware                                        22-2312917             
(State or of incorporation)                 (I.R.S. Employer Identification No.)
                                             
   960 East Hazelwood Ave. Rahway, NJ                       07065  
(Address of principal executive offices)                 (Zip Code)
                                                            
Issuer's telephone number, including area code:  732-381-8200

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

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

Common Stock, par value $.001;
Redeemable Warrants

     Check whether the issuer (1) has filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing  requirements  for the past 90 days.  
Yes _X_ No ___

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation  S-B contained in this form and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [X]

     Issuer's  revenues  for its most recent  fiscal year were  $6,028,993.  The
aggregate  market  value of common  voting stock held by  non-affiliates  of the
Issuer was  approximately  $424,079 computed by reference to the last sale price
at which the stock was sold on December  31,  1998 as reported by Nasdaq.  As of
December 31, 1998,  3,855,267  shares of common stock and  1,725,000  redeemable
warrants were outstanding.


<PAGE>


PART I

ITEM 1. DESCRIPTION OF BUSINESS

     Laminaire Corporation ("Laminaire" or the "Company"), formerly Thermo-Mizer
Environmental Corp., was founded in 1978 and, until October 1997, was engaged in
various aspects of the energy conservation and environmental control businesses.
Laminaire  reincorporated  in Delaware in October 1994, at which time it changed
its name from Thermo Engineering,  Inc. to Thermo-Mizer  Environmental Corp. The
Company  completed an initial  public  offering  ("IPO") of its common stock and
redeemable warrants in March 1996.

     Following  the  completion  of its IPO, the Company  implemented a strategy
designed to (i) enter the markets that appeared to be created or expanded by the
adoption  of  amendments  to the  Clean  Air Act and (ii)  introduce  new,  more
advanced versions of its  microprocessor  based product line used to monitor and
control a wide variety of  environmental  conditions.  These efforts  ultimately
required a  substantially  greater  amount of time and resources  than initially
anticipated.  These  efforts  resulted  in ongoing  cash flow  deficiencies  and
operating  losses,  making  a  change  in  the  Company's  direction  and  focus
necessary. The Company adopted a strategy of seeking growth and profitability by
acquiring  companies in related markets.  In October 1997, the Company completed
the  first  step in that  strategy  by  acquiring  Laminaire  Corporation  ("Old
Laminaire"),  a New Jersey  Corporation.  Old Laminaire,  located in Rahway, New
Jersey,  was founded in 1964 and is a manufacturer  and distributor of cleanroom
products  and also  assembles  a variety  of  electronic  circuit  boards.  This
acquisition  marked a fundamental  change in the way that the Company's business
is conducted by making it a product-driven business rather than a systems-driven
business. The Company changed its name from Thermo-Mizer  Environmental Corp. to
Laminaire Corporation in June 1998.

     Following the  acquisition of Old Laminaire,  Laminaire  operated with four
business groups - Cleanroom Manufacturing ("CM"), Cleanroom Distribution ("CD"),
Electronic  Manufacturing  ("EM") and Control Systems ("TCS").  TCS consisted of
the entire  business and  operations of the Company prior to the  acquisition of
Old Laminaire.  The Company  decided to discontinue  TCS in June 1998 because of
ongoing operating losses and the estimated requirements for future investment in
research and development were not deemed a prudent use of the Company's  limited
resources.  The Company also replaced its president with a senior executive from
Old Laminaire.

     Prior to the  acquisition of Old Laminaire,  all of the Company's  revenues
and  operations  related to and were  generated by TCS. The Company has restated
its prior financial  statements and information to present the operating results
of TCS as a discontinued  operation.  Following the  discontinuance  of TCS, the
Company is  positioned to compete in niche markets on the basis of service and a
willingness  to customize.  As a rule,  it is not competing  based on technology
requiring ongoing Company-funded research. Management believes that controls are
in place to minimize  the risk of  incurring  significant  losses on  individual
contracts or projects,  although no assurances  can be given that no such losses
will occur.

eSafety

     In March 1999, the Company announced the formation of a new  Internet-based
subsidiary  that  will be named  eSafety.  eSafety  will a  business-to-business
E-Commerce  solution for distributors  and users of disposable  safety equipment
and garments for all applications.  eSafety will seek to include


                                                                               2
<PAGE>


products  from a wide array of  manufacturers  on its site and will  incorporate
state-of-the-art  technology and software.  Its principal  strategy  consists of
boosting  the  Company's  overall  sales  without  corresponding   increases  in
inventory  levels. It will attempt to enter into agreements with vendors to drop
ship  purchased  items directly to customers.  In addition,  eSafety will employ
aggressive  Internet-based  marketing campaigns. The target date to open the new
site is the summer of 1999. The Company,  which has engaged a leading  developer
of E-Commerce software and marketing tools to assist it in this effort,  intends
to  commit  a  significant  portion  of  its  resources  to  the  formation  and
development of eSafety.

Products

     Lamimaire's principal product groups are:

Cleanroom Manufacturing - CM's principal products are:

Horizontal Laminar Flow Work Stations:

CS Series Console Slimline  Workstation - The purpose of this unit is to provide
a Class 100 horizontal laminar flow environment within a work chamber. Class 100
is an industry  standard  under which there can be no more than 100 particles of
material  that are  greater  than .5  microns  within  one cubic  foot of air. A
laminar (also known as a  unidirectional)  flow  environment is one in which air
flows in a single pass in a single direction in parallel  streamlines through an
air device or clean zone. This unit is a freestanding self-contained device that
functions effectively in controlled and uncontrolled areas wherever clean air is
a requirement.  The unit can fit through standard  doorways,  facilitating  easy
installation.  Applications  include  but are not  limited to optical  assembly,
pharmaceutical   preparation,   critical  sample  preparation,   microelectronic
fabrication,  assembly and inspection, and food processing. This device draws in
ambient air through a first stage  prefilter  and then passes this air through a
99.99%  efficient High  Efficiency  Particulate Air ("HEPA") filter that filters
out particles down to 0.3 microns.

C Series Console Workstation - Similar in function,  purpose,  use and design to
the CS Series,  this unit offers full  clearance  below a work surface to enable
installation of sinks, tanks,  plumbing, or any special process equipment.  This
design requires simple disassembly of the tabletop to fit into standard doorways
and also comes in a completely separate isolated tabletop version that is suited
to microscope inspection processes in which vibration is a concern.

TS Series Table Mount  Workstation - This unit,  which is designed to be mounted
on an  existing  workbench  or optional  base  cabinet,  has the same  function,
purpose and applications as the CS Series unit.

Series Table Mount  Workstation - This unit,  which is designed to be mounted on
an existing workbench or optional base cabinet,  has the same function,  purpose
and applications as the CS Series unit.

NFE  Negative  Flow  Exhausting  Work Station - This unit is designed to contain
contaminated  air in a work  chamber by  removing  gross  particulate  generated
within the work chamber through a process in which air is drawn from the outside
environment  and  across the work  surface.  The air is then  passed  through an
initial prefilter, and finally through a HEPA filter at the top of the unit. The
air is then  released  back to the outside  area.  Applications  include  powder
filling and handling, critical sample preparation, and cosmetic weighing.


                                                                               3
<PAGE>


WM and CRT Series Wall Modules and Cleanroom  Tunnels - These units are designed
to create clean zones of Class 100 laminar airflow. Multiple units can be joined
together  to create  horizontal  flow  tunnels.  Class 100  airflow  is  totally
displaced  throughout  the entire  tunnel  from wall to wall,  ceiling to floor,
exiting the open end and carrying out entrained particles.  These units are used
in microelectronic  assembly,  repair,  inspection and fabrication processes and
pharmaceutical manufacturing areas.

Vertical Laminar Flow Work Stations:

DWS Series  Module on Frame and PPWS Wet  Process  Station - The purpose of this
unit is to provide a Class 100 vertical laminar flow environment within the work
chamber. A freestanding unit,  typically installed over a process station,  this
unit protects  product from outside  contamination  within a work  chamber.  The
process  stations can be of any type that require  clean  airflow.  The PPWS wet
process  stations,  manufactured from stress relieved  thermoplastics,  are most
commonly   installed  under  the  units  and  can  incorporate  custom  designed
operations  with  exhaust  capabilities.  Applications  include  microelectronic
assembly,  inspection,  and  manufacturing,   pharmaceutical  processes,  hybrid
manufacturing,  laser research and development,  optical assembly, and precision
engineering.  When used in conjunction with a wet process station,  applications
include etching and plating processes,  semiconductor  processing and biomedical
manufacturing. 

Series  Module on Frame and PPWS Wet Process  Station - The purpose of this unit
is to provide a Class 100  vertical  laminar  flow  environment  within the work
chamber. A freestanding unit,  typically installed over a process station,  this
unit protects  product from outside  contamination  within a work  chamber.  The
process  stations can be of any type that require  clean  airflow.  The PPWS wet
process  stations,  manufactured from stress relieved  thermoplastics,  are most
commonly   installed  under  the  units  and  can  incorporate  custom  designed
operations  with  exhaust  capabilities.  Applications  include  microelectronic
assembly,  inspection,  and  manufacturing,   pharmaceutical  processes,  hybrid
manufacturing,  laser research and development,  optical assembly, and precision
engineering.  When used in conjunction with a wet process station,  applications
include etching and plating processes,  semiconductor  processing and biomedical
manufacturing.

R Series  Recirculating  Work Station - The purpose of this unit is to provide a
Class 100  vertical  laminar  flow  environment  within a work chamber and offer
recirculating capability to control against  cross-contamination within the work
chamber.  The laminar  airflow is passed  through a HEPA filter,  down through a
perforated work surface  prefiltered,  and recirculated  back through the entire
unit.  The design allows for the addition of make-up air, and positive  pressure
within the work chamber. Applications are similar to the DWS Series unit without
the PPWS.

E Series  Exhausting  Work  Station - The  purpose  of this unit is to provide a
Class 100  vertical  laminar  flow  environment  within a work chamber and offer
exhausting  capabilities.  This  unit is used  when  toxic  odors  and fumes are
present.  The prefiltered  laminar airflow is passed through a HEPA filter, down
through a perforated  work  surface,  and  exhausted  out the top of the unit. A
remote exhaust system is required to maintain the correct air balance within the
unit. Applications are similar to those of the R Series unit.


                                                                               4
<PAGE>


PVE Series  Exhausting  Work Station - The function and purpose of this unit are
similar to the E Series unit except  that this unit is  completely  manufactured
from stress relieved thermoplastic which prevents corrosion, provides resistance
to  acids  and  solvents  and  has  non-conductive   properties.   It  typically
incorporates  custom  designed  operations  with  exhaust  capabilities  and can
accommodate  the  installation of sinks,  special  process tanks,  heater baths,
ultrasonic  tanks,  and etching  tanks.  A remote  exhaust system is required to
maintain  the  correct  air  balance  within  the  unit.   Applications  include
microelectronic  assembly and manufacturing,  pharmaceutical  processes,  hybrid
manufacturing,  laser research and development,  etching and plating  processes,
semiconductor processing and chemical cleaning operations.

F Series  Exhausting  Work  Station - The  function and purpose of this unit are
similar to the E Series unit except  that this unit is  completely  manufactured
from stress relieved thermoplastic which prevents corrosion, provides resistance
to  acids  and  solvents  and  has  non-conductive   properties.   It  typically
incorporates  custom  designed  operations  with  exhaust  capabilities  and can
accommodate  the  installation of sinks,  special  process tanks,  heater baths,
ultrasonic  tanks,  and etching  tanks.  A remote  exhaust system is required to
maintain  the  correct  air  balance  within  the  unit.   Applications  include
microelectronic  assembly and manufacturing,  pharmaceutical  processes,  hybrid
manufacturing,  laser research and development,  etching and plating  processes,
semiconductor  processing  and  chemical  cleaning  operations.  

PFH Series Fume Exhaust Hood - The function,  purpose,  and applications of this
unit are to remove  harmful odors and fumes from a work  chamber.  Properties of
this unit are similar to that of the PVE Series.  Air is drawn through the front
opening,  across the tabletop,  and exhausted through  adjustable baffles at the
rear of the hood and up to exhaust collars at the top of the unit.

Personnel Entry Air Showers:

ASA  Series  - This  unit is  designed  to  remove  surface  contamination  from
personnel  entering  a clean  zone or  cleanroom.  The  unit  incorporates  high
velocity air nozzles,  microprocessor  technology,  timed, controlled sequences,
and HEPA filtered air to provide the cleaning process.  Applications include all
areas  of  industry  where  cleanrooms  or  clean  zones  are  present,  such as
automobile  painting  processes,  semiconductor  assembling  and  pharmaceutical
manufacturing.

LO-Pro Series Modules, Softwall and Hardwall Cleanroom Environments:

Lo-Pro(R)  Module - The Lo-Pro  filter-blower  module is  designed  to act as an
independent  HEPA filtered source of Class 100 ultra clean  unidirectional  air.
The unit can be placed in existing T-grid ceilings, tool enclosures, hanged from
a ceiling,  in steel frame or support  structures  to provide  clean work zones.
Uses include,  but are not limited to,  retrofit of existing  spaces,  cleanroom
construction, laser optics, microelectronic manufacturing, semiconductor process
tool  equipment,   pharmaceutical   manufacturing,   home  infusion,   aerospace
manufacturing,  sterile filling and medical device manufacturing.  


                                                                               5
<PAGE>


Lo-Pro(R)  PDE Softwall  Portable  Downflow  Environment  - This unit,  which is
designed for areas where hard wall cleanroom construction would not be practical
or  cost-effective,  provides a HEPA  filtered  portable  vertical  laminar flow
environment.  These  units are  pre-engineered  for  ceiling  coverage of Lo-Pro
units,  lights and ceiling tiles to provide  product  isolation or spot coverage
over process equipment. The units incorporate steel painted support structure on
locking casters  enclosed by a vinyl curtain  perimeter and provide a continuous
downflow  purge of Class 100 airflow.  Depending on the amount of ceiling filter
module coverage, Class 100,000 to Class 10 room classifications can be achieved.
Applications are similar to those of the Lo-Pro Series.

Lo-Pro(R) FDE Softwall  Fixed Downflow  Environment - The function,  purpose and
uses are similar to the PDE Series  unit,  however  this unit is  provided  with
fixed leveling mounts. Generally, these units are larger in design than those of
the PDE Series.

Lo-Pro(R)  MDR  Hardwall  Cleanroom  - The  purpose of this unit is to provide a
vertical  HEPA  filtered  airflow  environment  in  a  pre-fabricated   hardwall
semi-permanent  design.  These units are  pre-engineered for ceiling coverage of
Lo-Pro  units,  lights and ceiling  tiles.  The MDR features  vinyl covered wall
panels,   pre-hung  doors,  low  side  wall  return,   aluminum  T-grid  ceiling
suspension,  windows and HVAC  (option) to create Class 100,000 to Class 10 room
classifications. Applications are the same as the PDE and FDE Series units.

     CM sells its products  through its own salesmen,  augmented by  independent
sales  representatives.  It  plans  to  increase  its use of  independent  sales
representatives  in 1999 and will offer  attractive  commission plans to achieve
this goal. It competes on the basis of its reputation for timely  deliveries and
its ability to customize  products to meet specific  customer  requirements.  It
believes  that its principal  competitors  consist of a variety  privately  held
companies, none of which have a significant segment of the overall marketplace.

Cleanroom  Distribution - CD sells a large variety of disposable  items, such as
hats, coats, boots and gloves, that are used in cleanroom  facilities.  All such
products are manufactured by others.

     CD sells its products through catalogs and by a direct marketing force that
uses telephone  sales as its primary tool.  CD's typical  customer is a facility
that requires a small quantity of each item ordered.

     Laminaire has a site on the World Wide Web to communicate  principally with
customers  of CD and  CM and  provide  a  convenient  means  of  describing  its
products,   communicate   specifications  and  take  orders  from  its  approved
customers.  This site will be folded into its new eSafety  subsidiary during the
second quarter of 1999.

Electronic  Manufacturing - EM specializes in small  production runs of high end
critical components such as precision circuit boards, wire harnesses and control
panels. All products are assembled to customer-provided specifications.

     EM sells  through a limited  direct sales effort,  appearances  at Job Shop
Technology  Shows  and  word  of  mouth.  Its  customers  tend  to  be  military
contractors and high precision manufacturers.

Employees

     At  December  31,  1998,  Laminaire  had 38  employees,  none of  whom  are
unionized or subject to a collective bargaining agreement.


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<PAGE>


     Laminaire   owns  a  47,000   square  foot   facility   having  office  and
manufacturing space in Rahway, New Jersey.

Manufacturing and Backlog

     Management  believes that its sources of equipment,  parts and supplies are
sufficient as all required parts and components are readily available and can be
acquired from alternative sources.

     Laminaire  generally does not commence  assembling a system unless it has a
contract or a purchase order from the customer.  Laminire has limited inventory.
At March 31, 1999, its backlog was approximately $856,388, a substantial portion
of which is expected to be completed during 1999, although delays outside of the
Company's control may push certain of the work covered by the purchase orders in
backlog into subsequent periods.

Item 3. LEGAL PROCEEDINGS

     Laminaire is not a party to any litigation that, in its opinion, could have
a material  adverse  effect on it or its  business.  Laminaire is a defendant in
several cases involving collection of payables and employment matters.

     In 1998,  the Company  terminated  its former  president for cause.  He has
indicated that he may bring a cause of action against the Company as a result of
such  termination,  although  no such  action has been  initiated  to date.  The
Company  believes,  based on its own  investigation and discussion with counsel,
that any claims that the former  president may bring are  substantially  without
merit.

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

                                      NONE

PART II

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

     Laminaire's  Common Stock and Redeemable  Warrants are quoted on the NASDAQ
Over-the-Counter  ("OTC")  Electronic  Bulletin  Board  Market under the symbols
"THMZ" and  "THMZW",  respectively.  The table below sets forth the high and low
sale prices for  Laminaire's  Common  Stock after  adjusting  for a four for one
reverse stock split effected on June 29, 1998:

     Quarter Ended                        Common Stock
                                            High            Low

     March 31, 1997                        $8.36           $2.75
     June 30, 1997                          5.00            1.75
     September 30, 1997                     5.76            2.38
     December 31, 1997                      4.12            1.75
     March 31, 1998                         1.63             .75
     June 30, 1998                          2.25             .50
     September 30, 1998                      .88             .27
     December 31, 1998                       .42             .09


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<PAGE>

                                                     
There are  approximately  1,380  stockholders of record of the Company's  Common
Stock.

Item 6.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF RESULTS OF  OPERATIONS  AND
         FINANCIAL CONDITION

Safe Harbor  Statement  Under the Private  Securities  Litigation  Reform Act of
1995.

     Information set forth herein contains  "forward-looking  statements"  which
can be identified by the use of forward-looking  terminology such as "believes,"
"expects,"  "may," "should" or  "anticipates"  or the negative  thereof or other
variations thereon or comparable terminology,  or by discussions of strategy. No
assurance can be given that the future  results  covered by the  forward-looking
statements will be achieved.  Laminaire  cautions readers that important factors
may  affect  their  actual  results  and  could  cause  such  results  to differ
materially  from  forward-looking  statements made by or on behalf of Laminaire.
Such factors include,  but are not limited to, changing market  conditions,  the
impact of competitive  products,  pricing,  acceptance of the Combined Company's
products in  development  and other risks  detailed  herein and in other filings
that Laminaire makes or has made with the SEC.

General

     Prior to the  acquisition  of Old Laminaire in October 1997,  the Company's
operations  consisted  principally  of systems  contracts  with customers in the
pharmaceutical and chiller control industries.  Fluctuations in sales,  revenues
and operating  results  occurred  because of the timing of such contracts  since
certain larger contracts  required greater amounts of vendors' materials and use
of subcontractors than did other contracts.  Generally, gross margins were lower
on those contracts which required the purchase of significant  amounts of vendor
materials and services  compared with contracts  which were more  engineering or
labor intensive.  In addition,  the Company's  engineering  staff was capable of
serving  a  significant  volume of  business.  Thus,  engineering  costs did not
fluctuate at the same rate as revenues.  This meant that if revenues  increased,
gross profits  increased at a faster rate than revenue.  The reverse was true if
revenues were to decrease below the breakeven point.

     The Company  was unable to  generate  sufficient  and timely  contracts  to
permit it to operate profitably and,  accordingly,  attempted to reduce business
volatility by becoming a product-oriented company serving various aspects of the
environmental  controls  industry.  However,  its  efforts,  which were  limited
available  resources,  failed to make a meaningful  penetration  in the selected
market  niches.  It then decided that the best way to implement its strategy was
to acquire a  product-based  company.  Old  Laminaire  was acquired as the first
major step of this new strategy.

     Following the acquisition of Old Laminaire,  the Company took various steps
to improve the operating  results of its  traditional  core business that became
known as the Controls System Division ("TCS"), including:

     o    Combining all operations into a single facility in Rahway, New Jersey.

     o    Trying to identify and correct defects in newly-introduced products.

     o    Limiting bidding  activities for TCS contracts to potential  contracts
          in which  TCS  anticipated  having  a  commercial  advantage  over its
          competition   and  which  did  not   include   products   experiencing
          significant technical problems.



                                                                               8
<PAGE>


     o    Investigating  whether there was a cost  effective way to  incorporate
          TCS  technology  into Old  Laminaire  products to give such products a
          competitive advantage.

     Despite the foregoing efforts, TCS continued to impact cash flow negatively
and incur operating losses.  The Company  determined that the costs necessary to
improve TCS' operating results, including ongoing development and support costs,
were and would  continue to be material in relation to the  Company's  resources
and the ultimate  benefit to be derived  therefrom  remained  highly  uncertain.
Furthermore,  there was no certainty that profitability could be achieved in the
foreseeable  future. The Company,  therefore,  concluded that it was in its best
interests to focus all of its efforts and resources in the clean room industry.

     During the quarter ended June 30, 1998, the Company  replaced its President
with a former senior executive from Old Laminaire. At the same time, the Finance
Committee  of the  Board  of  Directors  assumed  a more  active  strategic  and
oversight role in the Company.  Management then subcontracted out as much of the
TCS open commitments as possible and eliminated its staff by September 30, 1998.

     Old  Laminaire  had operated  profitably  prior to its  acquisition  by the
Company. However,  subsequent to such acquisition its reported operating results
are and will  continue to be burdened by (i) the  amortization  of goodwill  and
other purchase adjustments required by generally accepted accounting principles;
(ii) the costs  associated with being a public  company;  and (iii) interest and
debt service costs.  Accordingly,  the Company  believes that it needs a greater
volume of revenue  over which to spread these and other fixed costs or a plan to
reduce the interest and fixed facilities'  costs.  Management is considering the
sale or  refinancing  of the  Company's  building  in  Rahway,  NJ as a means of
accomplishing  certain of these objectives.  No assurances can be given that The
Company will be successful in this undertaking.

     In general,  the Company  believes that it is now  positioned to compete in
niche markets on the basis of service and a willingness to customize. As a rule,
it is not competing based on technology.  Management  believes that controls are
in place to minimize  the risk of  incurring  significant  losses on  individual
contracts or projects,  although no assurances  can be given that no such losses
will occur.  The Company  believes that operating  losses are likely to continue
throughout  the first half of 1999,  although the cash impact of such  operating
losses is  likely to be less than  those  incurred  over the  immediately  prior
quarters.

Results of Operations

     Prior to the  acquisition of Old Laminaire,  all of the Company's  revenues
and operations related to TCS. Therefore, the acquisition of Old Laminaire (in a
transaction  accounted  for as a purchase in conformity  with the  provisions of
Opinion No 16 of the Accounting  Principles Board) and the discontinuance of TCS
means that the periods  discussed  below for the Company are not  comparable  in
most respects.

     Readers should be aware that results  reported for interim  periods are not
necessarily  indicative  of results to be reported for a full year.  Furtermore,
the Company  changed its fiscal year from a year ending on June 30 to a calendar
year ending on December 31.


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<PAGE>


Comparison of Fiscal Periods Ended December 31, 1998 and 1997

     Prior to the  acquisition of Old  Laminaire,  the Company had one business,
the controls  system  business.  Immediataely  following the  acquisition of Old
Laminaire,  the Company  operated with four divisions - Cleanroom  Manufacturing
("CM"),  Cleanroom Distribution ("CD"), and Electronic Manufacturing ("EM") (all
of which were acquired from Old Laminaire),  and TCS . In June 1998, the Company
discontinued TCS because of ongoing  operating losses and Management's  decision
that  the  risk   associated  with  TCS'  research  and  development  and  other
requirements  did not  constitute  an  effective  use of the  Company's  limited
resources.  Prior to the  acquisition of Old  Laminaire,  TCS made up all of the
Company's operations.

     The table below sets forth the sales and operating  profits  contributed to
continuing  operations  by each  division for the year ended  December 31, 1998.
Each of these  operating  divisions  share  the same  facility  and use a common
administrative  pool.  These  joint  costs  have been  allocated  using  various
formulas  developed  by the  former  management  of  Laminaire.  The  Company is
currently  reviewing  the  allocation  bases being used and may revise or modify
such bases.

                                  CM           CD           EM          Total   
     Revenues                $ 2,264,772  $ 2,360,329  $ 1,403,892  $ 6,028,993
     Cost of revenues          2,081,280    1,762,551    1,011,123    4,854,954
     Gross profit                183,492      597,778      350,029    1,174,039
                             
     Direct selling              100,104      173,825       42,740      316,669
     Contribution                 83,388      423,953      350,029       857370
                             
     Joint overhead costs                                               884,923
                             
     Operating loss                                                  $  (27,553)
                             
                             
     General and  administrative  expenses for the year ended  December 31, 1998
include  $79,711   relating  to  the   amortization  of  goodwill  and  purchase
adjustments.  Such  expenses  also include  expenses of  approximately  $177,000
associated  with the Company being a public  entity.  A  significant  portion of
those costs is noncash in nature.

     The Company also incurred  interest  expense of  approximately  $316,000 in
1998,  principally  in  connection  with a loan due to Garay,  LLC from whom Old
Laminaire  was  acquired.  The Company is actively  seeking ways to reduce these
debt service costs through the refinancing or sale of its building in Rahway, NJ
(see "Liquidity').

     No net benefit was  recognized  for the benefit of Federal  income tax loss
carryforwards because of the uncertainty of utilization of such carryforwards.

     The rate of new orders received from customers  slowed down during the last
quarter of 1998. EM and CM, in  particular,  experienced a sharp decrease in new
orders from their larger customers.  The Company believes that this situation is
temporary,  but no  assurances  can be given  that the rate of new  orders  will
increase  and equal or exceed  the levels of prior  periods.  In part to address
this  situation,  the Company is  undertaking  a significant  new  initiative by
establishing  a  new  subsidiary,  eSafety,  a  business-to-business  E-Commerce
solution for distributors and users of disposable  safety equipment and 


                                                                              10
<PAGE>


garments for all applications. eSafety will seek to include products from a wide
array  of  manufacturers  on its  site  and  will  incorporate  state-of-the-art
technology  and software.  The target date to open the new site is the summer of
1999. The Company,  which has engaged a leading developer of E-Commerce software
and marketing tools to assist it in this effort, intends to commit a significant
portion of its resources to the formation and development of eSafety.

Discontinued Operation

     As  previously  indicated,  the Company  discontinued  TCS in June 1998.  A
summary of TCS'  operations  for the year  ended  December  31,  1998 and the 12
months ended December 31, 1997 follows:

                                                   1998                  1997
                                                   ----                  ----

Revenues                                       $ 1,476,833           $ 2,515,060
Cost of revenues                                 1,451,261             2,114,333
Gross profit                                        25,572               400,727
Operating expenses                                 804,888             2,650,696
Loss before taxes                              $  (779,316)          $(2,273,67)

     Operating  expenses of TCS for the year ended  December  31,  1998  exclude
corporate,  facilities  and  similar  type  expenses  that have been  charged to
continuing operations.

     The Loss on Disposal of the  Discontinued  Operations of $611,570  consists
principally  of  write-downs of  inventories,  receivables on certain  long-term
contracts,  other  assets  and fixed  assets,  as well as the costs to  complete
contracts-in-progress. Many of the receivables written off related to retainages
on contracts in which customers  experienced problems associated with the use of
new  products.  The Company  minimized  its  close-down  costs by  outsourcing a
significant portion of the uncompleted work.

Comparison of the Six-Month Periods Ended December 31, 1997 and 1996

     Substantially  all of the  operating  results below relate to the Company's
operations prior to the acquisition of Old Laminaire.  The business  represented
by these operations was discontinued in June 1998.

<TABLE>
<CAPTION>
                                     1997         %          1996         %        Change
<S>                           <C>            <C>      <C>            <C>      <C>        
Contract and other            $ 2,887,447    100.0%   $   961,000    100.0%   $ 1,926,447
revenues

Cost of revenues                2,414,766     83.6%     1,043,297    108.6%     1,371,469

Gross profit                      472,681     16.4%       -82,297     -8.6%       554,978

Expenses:

Personnel and related costs       473,320     16.4%       295,234     30.7%       178,086

Selling & Administration          712,968     24.7%       447,520     46.6%       265,448
expenses

Product development costs         121,578      4.2%       125,246     13.0%        -3,668

Total Expenses                  1,307,866     45.3%       868,000     90.3%       439,866

Operating income                 -835,185    -28.9%      -950,297    -98.9%       115,112

Other-Net                        -878,718    -30.4%      -407,534    -42.4%      -471,184

Income before income taxes     -1,713,903    -59.4%    -1,357,831   -141.3%      -356,072

Income Taxes-Net                   -4,499     -0.2%             0      0.0%        -4,499

Net loss                      ($1,718,402)   -59.5%   ($1,357,831)  -141.3%   ($  360,571)
</TABLE>


                                                                              11
<PAGE>


     The  information  presented  is not  comparable  because  the 1997  amounts
include the results of Old Laminaire's  operations from the date of acquisition.
Old Laminaire,  therefore,  contributed sales of $1,762,578 and gross profits of
$405,569 to the consolidated  results for this period.  Substantially all of the
contribution  towards  corporate and joint overheads came from the Old Laminaire
operations. The Company's traditional systems business continued to be adversely
impacted by (i) the sales level being  insufficient  to cover all  overheads and
(ii) loss contracts relating to the installation of  newly-introduced  products.
These loss contracts resulted in TCS realizing little or no gross margin for the
eighteen  months ended  December 31, 1997. At the same time, the Company did not
combine operations into a single facility until January 1998.

     The  results of  operations  for 1997 were also  adversely  affected by the
impact  of (i)  amortizing  the debt  discount  associated  with  the  favorable
conversion  feature of the debt issued to finance the  acquisition  of Laminaire
and the accrual of the remaining lease  liability  associated with the Company's
rented facility in Ridgefield, New Jersey. These two matters resulted in noncash
charges of  approximately  $778,000.  In addition,  the Company  incurred public
relations and other expenses of $239,580, which were also noncash in nature. The
results of  operations in 1996 also reflect the impact of  nonrecurring  matters
which are described in Notes to the Consolidated  Financial  Statements included
elswhere herein.

Comparison of Fiscal 1997 to 1996

     All of the operating results below relate to the Company's operations prior
to  the  acquisition  of  Old  Laminaire.  The  business  represented  by  these
operations was discontinued in June 1998.


<TABLE>
<CAPTION>
Caption                                     1997         %           1996        %          Change          %
<S>                                  <C>            <C>          <C>          <C>       <C>            <C>
Contract and other                    $2,351,191               $2,125,959                 $225,232      10.6%
revenues                                           

Cost of revenues                       2,099,873     89.3%      1,437,682     67.6%        662,191      46.1%
                                                   
Gross profit                             251,318     10.7%        688,277     32.4%       -436,959     -63.5%
                                                   
Expenses:                                       

Personnel and related costs              524,401     22.3%        246,489     11.6%        277,912     -63.5%
                                                   
Selling and administrative               897,839     38.2%        417,686     19.6%        480,153     -63.5%
                                                   
Product development costs                221,429      9.4%        169,667      8.0%         51,762      30.5%
                                                   
Occupancy costs                           32,955      1.4%         38,333      1.8%         -5,378     -14.0%
                                                   
Total                                  1,676,624     71.3%        872,175     41.0%        804,449       2.9%
                                                    
Operating income                      -1,425,306    -60.6%       -183,898     -8.7%     -1,241,408
                                                    
Nonoperating expenses - net             -478,653    -20.4%         15,117      0.7%       -493,770
                                                    
Loss before income taxes              -1,903,959    -81.0%       -168,781     -7.9%     -1,735,178
                                                       
Income taxes - net                       -19,207     -0.8%        -55,643     -2.6%        -74,850
                                                     
Net loss                             ($1,923,166)   -81.8%      ($113,138)    -5.3%    ($1,810,028)
</TABLE>
                                                         
     The Company  completed an initial  public  offering of its common stock and
warrants  in March  1996.  Thereafter,  it  commenced  implementing  a  strategy
designed  to  make  it a  product  and  service,  rather  than a  systems-driven
business.  Management  believed  that it would begin to realize the  benefits of
these investments during fiscal 1997. However,  this strategy was not successful


                                                                              12
<PAGE>


because the product  development  costs were greater than  anticipated,  and the
Company did not achieve a sufficient level of market penetration to permit it to
operate profitably.

     In January  1997,  the Company made  certain  reductions  in its  workforce
designed to permit it to approach  breakeven at lower levels of sales  activity.
Nevertheless,  the Company did not receive a  sufficient  quantity of new orders
and contracts to permit its traditional core business to operate at a profitable
level.

     Operating  expenses are not comparable  between periods because fiscal 1997
includes the costs  associated with the additional  infrastructure  put in place
following the initial public offering.

     Product   development  costs  increased  because  the  Company  hired  four
engineers who devoted a  significant  portion of their time to  introducing  and
correcting the problems of new products.

     In  addition,  operating  results  were  significantly  impacted by several
transactions  which took place  during the fiscal  year ended June 30,  1997 and
related to the engagement of a public relations and acquisition consultant,  the
issuance of nonqualified  stock options and the cancellation of the Underwriting
Agreement with  Nationwide  Securities,  Inc.  Management  believes that each of
these  expenditures and transactions had the potential to contribute  positively
to future shareholder  value,  although no assurance thereof can be given. There
were no similar  investments or  transactions  during the fiscal year ended June
30, 1996. A detailed  listing and  description of these  charges,  which include
noncash  items  aggregating  approximately  $247,000,  is set forth the Notes to
Consolidated Financial Statements included elsewhere herein. Management does not
anticipate incurring similar charges in the future

     The Company established reserves for the entire benefit associated with the
unused income tax loss carryforwards  because the Company must realize income in
the future to utilize such carryforwards.

Liquidity and Capital Resources

     On October 16, 1997, the Company acquired all of the outstanding  shares of
Common Stock of Old Laminaire from Garay LLC for a purchase price of $3,200,000,
subject to adjustment based on Old Laminaire's  operating performance during the
period  immediately  prior to the  acquisition.  Garay  LLC is an  affiliate  of
Charles Garay, who became a director of the Company following the acquisition of
Old Laminaire.  The purchase price consisted of a cash payment of $1,000,000,  a
convertible  promissory  note in the principal  amount of $2,200,000 (the "First
Note") and a  promissory  note with a  principal  amount to be  determined  (the
"Second Note").

First, Second and Third Notes - The First Note bears interest at the rate of 10%
per annum and is payable in 60 equal monthly installments principal and interest
of $33,830  commencing  November  16, 1997 with a final  payment of principal of
$1,000,000 due on October 16, 2002. The First Note is convertible into shares of
Common Stock at a conversion  price per share equal to $1. The First Note became
convertible for a period of two years  commencing  April 16, 1998 in amounts not
exceeding  $500,000  for  each  four  month  period.  The  Second  Note was in a
principal amount equal to the difference  between (a) the  Stockholders'  Equity
(as defined) of Old Laminaire as of September 30, 1997 minus  $200,000 minus (b)
the  Stockholders'  Equity  of  Old  Laminaire  as  of  September  30,  1996  or
approximately $28,000.


                                                                              13
<PAGE>


     In conjunction with the acquisition of Old Laminaire,  the Company issued a
promissory note to Charles Garay in the principal  amount of $90,479 (the "Third
Note")  to  replace  an  existing  liability  due to Mr.  Garay by the  acquired
company. The Third Note, and all accrued interest at the rate of 15% per annum.

     The Second and Third Notes were paid in October 1998.

     The  Company's  obligations  under  the  First  Note are  secured  by first
priority security interests in the real property and all tangible and intangible
personal  property,   including  inventory  and  accounts  receivable,   of  Old
Laminaire.  The  security  agreement  underlying  the First  Note also  contains
various financial ratios.

     In conjunction with the acquisition of all of the outstanding  common stock
of Old Laminaire, the Company paid all of Old Laminaire's obligations, amounting
to approximately  $1,100,000, to Corestates National Bank ("Corestates") under a
mortgage  secured by Old Laminaire's  interest in its real property and building
located in Rahway, New Jersey.

     The  Company's  operations  have been  generating  sufficient  cash flow to
service the First Note, although no assurances can be given that this trend will
continue for the term of the First Note.

     Other Financings - The funds in excess of those provided by the issuance of
the notes to Garay LLC  utilized by the Company to purchase  the common stock of
Old  Laminaire  and satisfy  Old  Laminaire's  obligations  to  Corestates  were
obtained  from the  issuance of (i) Common  Stock of the  Company for  aggregate
consideration of $200,000 and (ii)  convertible  promissory notes and debentures
for $2,300,000.

     Subsequent  to June 30,  1997 but  prior to the  closing  of the  Laminaire
acquisition,  the Company issued convertible debentures (the "First Debentures")
to ten investors,  in the aggregate  principal amount of $1,450,000  pursuant to
Regulation S under the  Securities  Act of 1933,  as amended,  (the  "Securities
Act").  Concurrent  with the closing of the  acquisition of Laminaire on October
16, 1997,  the Company also issued 96,630 shares of its Common Stock to a single
investor for aggregate  consideration of $200,000 pursuant to Regulation S under
the Securities Act and issued convertible debentures (the "Debentures") to three
investors in the principal amount of $300,000 pursuant to Regulation S under the
Securities Act. The Company will pay interest to the holders of the Debenture at
the rate of 5% per  annum.  Interest  on the  Debentures  is  payable in cash or
Common Stock of the Company, at the Company's discretion. The Debentures,  which
are  unsecured,  became  convertible  into shares of the Company's  Common Stock
beginning 41 days after the date of issuance,  at a price per share equal to the
lesser  of 70% of the  average  closing  bid  price  for the five  trading  days
preceding:  (i) the date of conversion or (ii) the date of closing,  October 16,
1997.

     Concurrent  with the closing of the  acquisition of Laminaire,  the Company
issued a convertible promissory note (the "Convertible Note") to Norwood Venture
Corp.  in the  principal  amount of $500,000  pursuant to Regulation D under the
Securities  Act.  The Company is  obligated  pay  interest to the holders of the
Convertible Note at the rate of 12% per annum. The Company's  obligations  under
the  Convertible  Note were  secured  by a first  security  interest  in the TCS
accounts  receivable and a lien that is second in priority to that of Garay LLC,
the seller of the common stock of  Laminaire,  with respect to the inventory and
equipment of the Company and the accounts receivable, inventory and equipment of
Laminaire.  Laminaire  also executed a guaranty in favor of Norwood with respect
to the Company's obligations under the Convertible Note. The Convertible Note is


                                                                              14
<PAGE>


convertible into shares of the Company's Common Stock at any time at a price per
share equal to the lesser of 70% of the  average  closing bid price for the five
trading days preceding (i) the date of closing or conversion.  In June 1998, the
Company   discontinued  the  operations  of  TCS,  thereby  affecting  Norwood's
collateral  position.  In November  1998,  the Company  agreed to substitute the
common stock of Old Laminaire and a second  mortgage on the Rahway  building for
the TCS receivables as collateral under the Norwood  agreement.  The Company has
the right to substitute  accounts  receivable in lieu of the common stock of Old
Laminaire if certain  conditions are met.  Furthermore,  Norwood will relinquish
its second  mortgage  on the Rahway  building  if the  Company  refinances  such
building and uses the proceeds therefrom to satisfy the First Note.

     Through  December 31, 1998,  an aggregate of  $1,410,000  of the  principal
amount of the Debentures has been converted into Common Stock.

     The Company also borrowed $200,000 from an individual  investor.  The terms
and conditions of such  borrowing have not yet been finalized and,  accordingly,
such note is classified as a current liability in the accompanying  Consolidated
Balance Sheet at December 31, 1998.

     To the  extent  that a portion of  principal  of the  Convertible  Note and
Debentures is not converted, the Company will seek a funding source to refinance
such indebtedness. No assurance can be given that the Company will be successful
in such efforts.

Lack of Credit Facilities - Laminaire does not have any working capital or other
credit  facilities.  Laminaire is dependent on revenue from  operations  and, to
date, has satisfied its  obligations  when due.  However,  it may require credit
facilities  or other source of liquidity to meet the needs of its  business.  No
assurance can be given that it will obtain such  financing or, if available,  on
terms acceptable to Laminaire.

     Laminaire  is  exploring  options to reduce its debt  service  obligations.
These options include, but are not limited to, a possible refinancing or sale of
its  building  in  Rahway,  NJ  with  the  proceeds  used to  repay  outstanding
indebtedness.  No assurances can be given that any option being  considered will
be successfully completed.

Securities  Listing - The  National  Association  of  Securities  Dealers,  Inc.
advised   Laminaire  that  it  was  not  in  compliance   with  the  maintenance
requirements  for  continued  listing  and,  accordingly,  delisted  Laminaire's
securities from the NASDAQ SmallCap Market in July 1998.  Trading in Laminaire's
securities now takes place in the  over-the-counter  market in what are commonly
referred to as the  "Electronic  Bulletin  Board" or the "OTC." As a result,  an
investor may find it more difficult to dispose of or obtain accurate  quotations
as to the market value of the securities.  Furthermore, Laminaire may experience
greater difficulty in obtaining financing if and when needed.

Seasonality

     The demand for Laminaire's products is not seasonal.

New Accounting Pronouncements

     No new pronouncement  issued by the Financial  Accounting  Standards Board,


                                                                              15
<PAGE>


the American  Institute of Certified  Public  Accountants  or the Securities and
Exchange  Commission  is  expected  to have a  material  impact  on  Laminaire's
financial position or reported results of operations.

Year 2000 Issues

     Management has initiated a company-wide  program and has developed a formal
plan of  implementation  to prepare the Company for the Year 2000. This includes
taking  actions  designed to ensure that the  Company's  information  technology
("IT") systems, products and infrastructure are Year 2000 compliant and that its
customers,  suppliers  and service  providers  have taken  similar  action.  The
Company is in the  process of  evaluating  its  internal  issues - all of its IT
systems,  products,  equipment  and  other  facilities  systems.  At this  time,
Management  believes  that the Company does not have any internal  problem other
than to upgrade  some of its software to  available  new releases  that are Year
2000 compliant.  With respect to its external issues - customers,  suppliers and
service  providers,  the Company is surveying  them  primarily  through  written
correspondence.  Despite the efforts to survey customers,  suppliers and service
providers,  Management cannot be certain as to the actual Year 2000 readiness of
these third parties. To the extent any of its suppliers or service providers are
not Year 2000 ready,  the Company  believes that it will be able to obtain other
suppliers  or  service  providers  without  a  significant  interruption  to its
business.  To date, the Company has not formulated a Year 2000 contingency plan.
Based upon responses to its inquiries, the Company will determine the need for a
contingency  plan  by  the  end of the  second  quarter  of  1999.  The  Company
anticipates completing its Year 2000 project in mid 1999

     Management  currently  believes  that the costs  related  to the  Company's
compliance with the Year 2000 issue should not have a material adverse effect on
its consolidated financial position, results of operations or cash flows.

Item 7. FINANCIAL STATEMENTS

     The  financial  statements  are filed as part of this Annual Report on Form
10-KSB.

Item 8. CHANGES AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE

     None.  The  Company  has not had any  disagreements  with  its  independent
auditors  regarding  the  presentation  of  its  financial   statements  or  the
application of any Generally Accepted Accounting Principles.


PART III.

Item 9. DIRECTORS,  EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS COMPLIANCE
        WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

     The executive officers and directors of Laminaire are as follows:

Name                           Age           Position with Company

Stephen B. Schneer              69           Chairman of the Board
Antonio Garay                   50           President
Gerard M. Gallagher             62           Chief Financial Officer
Edward A. Heil                  47           Director


                                                                              16
<PAGE>


K. Ivan F. Gothner              40           Director
Asim S. Kohli                   32           Director
Charles J. Garay                58           Director
Steven W. Schuster              44           Secretary
Jon J. Darcy (1)                51           Director

     (1) The Board of Directors has voted to recommend to the shareholders  that
Mr.  Darcy be  removed  from the  Board.  Such  removal  will be  subject to the
affirmative vote of a majority of the shareholders.

     All  Directors  hold office until the  completion  of their term of office,
which is not longer  than  three  years,  or until  their  successors  have been
elected.  The Company has a staggered  Board of Directors.  The terms of Messrs.
Heil and Gothner  expire in 1999.  The term of Mr.  Darcy  expires in 2000.  Mr.
Garay's term expires in 2001.  All officers are appointed  annually by the Board
of  Directors  and,  subject to  existing  employment  agreements,  serve at the
discretion of the Board.

     The Board of  Directors  has an Audit  Committee,  Finance,  Operating  and
Compensation Committee. The Audit Committee reviews the results and scope of the
audit and other services provided by the Company's independent auditors, reviews
and evaluates the Company's  internal audit and control.  The Finance Committee,
established  in February 1998,  oversees the Company's  treasury  function.  The
Operating Committee reviews and establishes  Laminaire's  strategies,  goals and
direction.

Background of Executive Officers and Directors

     Stephen B.  Schneer,  who was  elected to the Board of  Directors  in April
1999, has been in the private  practice of securities  and general  business law
for more than 30 years. He is a graduate of Washington and Jefferson  University
and holds a Juris Doctorate from Columbia University.

     Edward A. Heil is a certified  public  accountant and a managing  director,
since January 1992, in Independent  Network Group, Inc., a financial  consulting
firm. From 1984 through  December 1991 he was a partner in the accounting  firm,
Deloitte  &  Touche,  LLP.  From  1973  to  1984  he  was  employed  in  various
professional  capacities by Deloitte & Touche,  LLP. Mr. Heil holds  Bachelor of
Arts and Master of Business Administration degrees from New York University.

     K. Ivan F.  Gothner is a  Managing  Director  and a founder  of  Adirondack
Capital,  LLC, a private merchant banking firm that focuses on serving small and
midsize  growth  companies.  Mr. Gothner was  associated  with Kleinwort  Benson
Limited in 1986 and,  from 1987 through 1990,  Mr.  Gothner acted as the General
Manager of the KB Mezzanine Fund, LP., a specialized smallcap fund. In 1990, Mr.
Gothner  joined  Barclays  Bank  as a  Senior  Vice  President  responsible  for
establishing an investment  banking unit to serve small and mid sized companies.
Upon the sale of  Barclays'  "middle  market"  business at the end of 1992,  Mr.
Gothner  began to work  independently  in this area.  In addition  to  financial
advisory  assignments,  Mr.  Gothner's work had included an assignment  where he
acted as a "start up"  Managing  Director of First United  Equities  Corporation
from 1995 to 1997. Mr. Gothner holds BA and MA degrees from Columbia  University
and also serves as a director of the Ashton  Technology  Group, a public company
based in  Philadelphia  and Gomez  Advisors,  Inc., an internet  consulting  and
research company based in Boston.

     Asim S. Kohli,  who was elected to the Board of Directors in April 1999, is
an investment banker. He was engaged in executive capacities involving corporate
finance at United States  Financial Group,  Incorporated  until February


                                                                              17
<PAGE>


1999 at which time he established EJ Associates,  LLC, a private  consulting and
merchant  banking  firm.  Mr. Kohli is a graduate of the  University of Northern
Illinois.

     Charles J. Garay,  the founder of Laminaire became a member of the Board of
Directors in October 1997 upon the completion of the Laminaire acquisition. From
1968 to  October  1997 he was  President  and  Chief  Executive  Officer  of Old
Laminaire. Mr. Garay attended Rutgers University.

     Antonio Garay became President of the Company in April 1998. Prior thereto,
he held various  executive  positions  with Old Laminaire  since 1981. Mr. Garay
holds a Bachelor of Business Administration degree from Hofstra University and a
Master of Business Administration degree from Bernard Baruch College.

     Gerard M.  Gallagher  became  Chief  Financial  Officer  of the  Company in
February  1998.  For the  preceding  five  years,  he served  as an  independent
consultant to a variety of businesses. He is a graduate of Iona College.

     Steven W. Schuster has been secretary of the Company since July 1996. He is
a member of McLaughlin & Stern,  LLP,  counsel to the Company,  since 1995.  Mr.
Schuster has practiced  corporate and securities  law for the past 18 years.  He
received a Bachelor of Arts degree from Harvard University and a Juris Doctorate
from  New York  University.  Mr.  Schuster  is a  director  of  ACTV,  Inc.,  an
interactive television company.

     Jon J. Darcy  co-founded the Company in 1978 and has been an executive with
it since  inception and  President  from 1987 until April 1998.  His  employment
contract was terminated  August 1998. He holds a Bachelor of Science degree from
the State University of New York Maritime College.

     Outside  directors  receive  $4,000  per  year  plus  $350 per  meeting  as
compensation for serving on the Board of Directors. All Directors are reimbursed
by the Company for expenses  incurred in attending  Directors'  meetings.  Firms
associated with outside directors  received an aggregate of $250,143  (exclusive
of expenses),  principally for professional fees associated with the acquisition
program negotiation of the financing therefor,  and in the case of Mr. Schuster,
legal services.  During the year ended December 31, 1998. A firm associated with
Edward A.  Sundberg  received  $22,500;  a firm  associated  with Edward A. Heil
received  $120,000;  a firm associated with Steven W. Schuster received $30,143,
and a firm associated  with K. Ivan F. Gothner  received  $50,000.  Mr. Schuster
also received  100,000 shares of common stock,  and Mr.  Schuster's  firm is due
approximately  $101,000 in unpaid legal fees at December 31, 1998.  Fees paid to
directors or firms associated with directors relate to work that would generally
be done by other consultants or additional employees.

     Messrs.  Kohli and Heil, with  assistance from Mr. Gothner,  are overseeing
the Company's plans for and activities relating to the establishment of eSafety.


Item 10. EXECUTIVE COMPENSATION

     Antonio  Garay was  appointed  President  in April  1998 and has a contract
calling  for an  annual  salary  of  $120,000  as  well as a car  allowance  and
reimbursement of expenses. The contract expires in October 2000.



                                                                              18
<PAGE>


     Jon J.  Darcy,  former  President  and Chief  Executive  Officer,  received
compensation  of  approximately  $131,000  in  each  of  fiscal  1996  and  1995
(consisting  of salary of $123,000  and benefits  having an  estimated  value of
$8,000).  Mr. Darcy  received  options to purchase  95,000 shares at an exercise
price of $.83 per share, the market price of the shares on the date of issuance.

     The Board of Directors has established a compensation  committee  comprised
of  outside  directors  to  review  compensation  matters  as  well  as any  new
employment contracts.  The Company has a health and disability plan and a 401(k)
plan for its employees. In September 1998, the Company terminated its employment
agreement with Mr. Darcy for cause.

Stock Option Plans

     The Company has two stock option plans which expire ten years from the date
adopted and enable the Company to grant  incentive  stock options,  nonqualified
options  and  stock  appreciation  rights  ("SARs")  for up to an  aggregate  of
1,000,000 shares of the Company's Common Stock.  Incentive stock options granted
under the Plan must conform to applicable  Federal  income tax  regulations  and
have an exercise price not less than the fair market value of shares at the date
of grant (110% of fair market value for ten percent or more stockholders). Other
options and SARs may be granted on terms  determined by a committee of the Board
of Directors.  As of December 31, 1998,  there were 114,000 options  outstanding
under the Plans,  all of which are  exercisable  at prices  ranging from $.20 to
$.57.

     The  information  required by this Item 10 is  incorporated by reference to
the information captioned  "Remuneration and Other Transactions with Management"
included in the Company's  definitive  proxy  statement in  connection  with the
meeting of shareholders to be held on a date to be determined.

Item 11. SECURITY OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table sets forth certain  information  known to the Company
regarding  beneficial  ownership of the  Company's  Common Stock at December 31,
1998 by (i) each person known by the Company to own,  directly or  beneficially,
more  than 5% of the  Company's  Common  Stock at such  date,  (ii)  each of the
Company's  directors,  and (iii) all officers and  directors of the Company as a
group. Except as otherwise  indicated,  the Company believes that the beneficial
owners of the Common Stock listed below, based on information  furnished by such
owners,  have sole  investment  and voting  power with  respect to such  shares,
subject to community property laws, where applicable.

     NAME AND ADDRESS OF                       NUMBER OF           PERCENT OF
     BENEFICIAL OWNER(6)                 SHARES OWNED(5)      SHARES OWNED(4)
                                                              
     Jon J. Darcy(1)                              134,938            3.5
                                                              
     Stephen B. Schneer                                       
                                                              
     Edward A. Heil(2)                                 --            --
                                                              
     K. Ivan F. Gothner                                --            --
                                                              
     Asim S. Kohli                                            
                                                              
     Charles J. Garay                                  --            --


                                                                              19
<PAGE>

     NAME AND ADDRESS OF                       NUMBER OF           PERCENT OF
     BENEFICIAL OWNER(6)                 SHARES OWNED(5)      SHARES OWNED(4)
                                                              
     Steven W. Schuster(3)                         90,000            2.5
                                                              
     David Morgenstern                            152,372            3.9
                                                              
     Norwood Venture Group(4)                   5,000,000          56.46
                                                              
     Austost Anstalt Schaan(4)                    378,080           14.9
                                                              
     UFH Endowment(4)                             749,281           17.7
                                                              
     Arcadia Mutual Fund Co., Inc(4)            1,719,566           43.2
                                                              
     Directors and Officers As a Group            224,938            6.0
                                                              
     (1)  Excludes  110,385 shares held in trust for Mr.  Darcy's  children over
          which Mr. Darcy disclaims beneficial ownership.

     (2)  Excludes  20,000  shares  owned  by a  company  in which  Mr.  Heil is
          managing director. Mr. Heil disclaims beneficial ownership thereof.

     (3)  Excludes 10,250 shares held by the law firm in which Mr. Schuster is a
          partner.

     (4)  Excludes the assumed conversion of warrants and options.

     (5)  Includes all options held by the respective individuals.

     (6)  The address  for each  officer or  director  listed  above is 960 East
          Hazelwood Avenue, Rahway, New Jersey 07065.

     (7)  Represents  shares  of  common  stock  issued  upon  conversion  of  a
          Convertible Note.

     (8)  Issuable  upon  conversion of  Convertible  Debentures at a conversion
          price equal to 70% of the lesser of the average  closing bid price per
          share of the Common  Stock for the five  trading days prior to the (i)
          closing date of the Convertible  Debentures or (ii) conversion date of
          such Debentures.  For the purpose of this  calculation,  the bid price
          was assumed to be $.10.


Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     On October 16, 1997, the Company acquired all of the outstanding  shares of
Common Stock of Old Laminaire from Garay LLC for a purchase price of $3,200,000,
subject to adjustment based on Old Laminaire's  operating performance during the
period  immediately  prior to the  acquisition.  Garay  LLC is an  affiliate  of
Charles Garay, who became a director of the Company following the acquisition of
Old Laminaire.  The purchase price consisted of a cash payment of $1,000,000,  a
convertible  promissory  note in the principal  amount of $2,200,000 (the "First
Note") and a  promissory  note with a  principal  amount to be  determined  (the
"Second Note").

First, Second and Third Notes - The First Note bears interest at the rate of 10%
per annum and is payable in 60 equal monthly installments principal and interest
of $33,830  commencing  November  16, 1997 with a final  payment of principal of
$1,000,000 due on October 16, 2002. The First Note is convertible into shares of
Common Stock at a conversion  price per share equal to $1. The First Note became
convertible for a period of two years  commencing  April 16, 1998 in amounts not
exceeding  $500,000  for  each  four  month  period.  The  Second  Note was in a
principal amount equal to the difference  between (a) the  Stockholders'  Equity
(as defined) of Old Laminaire as of September 30, 1997 minus  $200,000 minus (b)
the  Stockholders'  Equity  of  Old  Laminaire  as  of  September  30,  1996  or
approximately $28,000.



                                                                              20
<PAGE>


     In conjunction with the acquisition of Old Laminaire,  the Company issued a
promissory note to Charles Garay in the principal  amount of $90,479 (the "Third
Note")  to  replace  an  existing  liability  due to Mr.  Garay by the  acquired
company. The Third Note, and all accrued interest at the rate of 15% per annum.

     The Second and Third Notes were paid in October 1998.

     The  Company's  obligations  under  the  First  Note are  secured  by first
priority security interests in the real property and all tangible and intangible
personal  property,   including  inventory  and  accounts  receivable,   of  Old
Laminaire.  The  security  agreement  underlying  the First  Note also  contains
various financial ratios.

     In conjunction with the acquisition of all of the outstanding  common stock
of Old Laminaire, the Company paid all of Old Laminaire's obligations, amounting
to approximately  $1,100,000, to Corestates National Bank ("Corestates") under a
mortgage  secured by Old Laminaire's  interest in its real property and building
located in Rahway, New Jersey.

     The  Company's  operations  have been  generating  sufficient  cash flow to
service the First Note, although no assurances can be given that this trend will
continue for the term of the First Note.

     Other Financings - The funds in excess of those provided by the issuance of
the notes to Garay LLC  utilized by the Company to purchase  the common stock of
Old  Laminaire  and satisfy  Old  Laminaire's  obligations  to  Corestates  were
obtained  from the  issuance of (i) Common  Stock of the  Company for  aggregate
consideration of $200,000 and (ii)  convertible  promissory notes and debentures
for $2,300,000.

     Subsequent  to June 30,  1997 but  prior to the  closing  of the  Laminaire
acquisition,  the Company issued convertible debentures (the "First Debentures")
to ten investors,  in the aggregate  principal amount of $1,450,000  pursuant to
Regulation S under the  Securities  Act of 1933,  as amended,  (the  "Securities
Act").  Concurrent  with the closing of the  acquisition of Laminaire on October
16, 1997,  the Company also issued 96,630 shares of its Common Stock to a single
investor for aggregate  consideration of $200,000 pursuant to Regulation S under
the Securities Act and issued convertible debentures (the "Debentures") to three
investors in the principal amount of $300,000 pursuant to Regulation S under the
Securities Act. The Company will pay interest to the holders of the Debenture at
the rate of 5% per  annum.  Interest  on the  Debentures  is  payable in cash or
Common Stock of the Company, at the Company's discretion. The Debentures,  which
are  unsecured,  became  convertible  into shares of the Company's  Common Stock
beginning 41 days after the date of issuance,  at a price per share equal to the
lesser  of 70% of the  average  closing  bid  price  for the five  trading  days
preceding:  (i) the date of conversion or (ii) the date of closing,  October 16,
1997.

     Concurrent  with the closing of the  acquisition of Laminaire,  the Company
issued a convertible promissory note (the "Convertible Note") to Norwood Venture
Corp.  in the  principal  amount of $500,000  pursuant to Regulation D under the
Securities  Act.  The Company is  obligated  pay  interest to the holders of the
Convertible Note at the rate of 10% per annum. The Company's  obligations  under
the  Convertible  Note were  secured  by a first  security  interest  in the TCS
accounts  receivable and a lien that is second in priority to that of Garay LLC,
the seller of the common stock of  Laminaire,  with respect to the inventory and


                                                                              21
<PAGE>


equipment of the Company and the accounts receivable, inventory and equipment of
Laminaire.  Laminaire  also executed a guaranty in favor of Norwood with respect
to the Company's obligations under the Convertible Note. The Convertible Note is
convertible into shares of the Company's Common Stock at any time at a price per
share equal to the lesser of 70% of the  average  closing bid price for the five
trading days preceding (i) the date of closing or conversion.  In June 1998, the
Company   discontinued  the  operations  of  TCS,  thereby  affecting  Norwood's
collateral  position.  In November  1998,  the Company  agreed to substitute the
common stock of Old Laminaire and a second  mortgage on the Rahway  building for
the TCS receivables as collateral under the Norwood  agreement.  The Company has
the right to substitute  accounts  receivable in lieu of the common stock of Old
Laminaire if certain  conditions are met.  Furthermore,  Norwood will relinquish
its second  mortgage  on the Rahway  building  if the  Company  refinances  such
building and uses the proceeds therefrom to satisfy the First Note.

     The Company also borrowed $200,000 from an individual  investor.  The terms
and conditions of such  borrowing have not yet been finalized and,  accordingly,
such note is classified as a current liability in the accompanying  Consolidated
Balance Sheet at December 31, 1998.

     Outside  directors  receive  $4,000  per  year  plus  $350 per  meeting  as
compensation for serving on the Board of Directors. All Directors are reimbursed
by the Company for expenses  incurred in attending  Directors'  meetings.  Firms
associated with outside directors  received an aggregate of $250,143  (exclusive
of expenses),  principally for professional fees associated with the acquisition
program negotiation of the financing therefor,  and in the case of Mr. Schuster,
legal services.  During the year ended December 31, 1998. A firm associated with
Edward A.  Sundberg  received  $22,500;  a firm  associated  with Edward A. Heil
received  $120,000;  a firm associated with Steven W. Schuster received $30,143,
and a firm associated  with K. Ivan F. Gothner  received  $50,000.  Mr. Schuster
also received  100,000 shares of common stock,  and Mr.  Schuster's  firm is due
approximately  $101,000 in unpaid legal fees at December 31, 1998.  Fees paid to
directors or firms associated with directors relate to work that would generally
be done by other consultants or additional employees.

PART IV Exhibits and Reports on Form 8-K

a.   Exhibits

INDEX TO EXHIBITS

1.1       Release   Agreement  among  Nationwide   Securities,   Inc.  (and  its
          affiliates) and Thermo-Mizer Environmental Corp.(1)

2.        Plan of Merger for Thermo  Engineering,  Certificate  of Ownership and
          Merger, Certificate of Merger.(1)

3.1       Certificates of Incorporation.(1)

3.2       By-Laws.(1)

4.1       Specimen Certificate of Common Stock.(1)

4.2       Form of Underwriter's Warrant Purchase Option.(1)

4.3       Form of Option issued to Solay, Inc. and Crystal Line, Inc.(2)



                                                                              22
<PAGE>


4.4       Form  of  Options  issued  to  Officers,  Directors,  Consultants  and
          Employees.(3)

4.5       Form of Class B Warrant.(3)

10.2      Agreement with D.R. Maruster & Co. dated December 10, 1996.(4)

10.2      Premium Reduction Option Cafeteria Plan.(1)

10.3      Lease Agreement.(1)

10.4      401(k) Retirement Plan and Profit Sharing Plan.(1)

10.5      Thermo-Mizer Environmental Corp. 1996 Stock Incentive Plan.(2)

10.6      Employment Agreement - Thomas B. Lewis(1)

10.7      Employment Agreement - Jeffrey A. Buser(1)

10.8      Employment Agreement - Eric W. Stark(1)

10.9      Agreement between the Registrant and Enersave, Inc. dated July 1996(3)

10.10     Agreement  between  the  Registrant  and  American  Process  Controls,
          Inc.(3)

10.11     Consulting Agreement with Solay, Inc.(2)

10.12     Amendment to Consulting  Agreement between  Registrant and Solay, Inc.
          dated as of February 21, 1997.(5)

10.13     Agreement with Continental  Capital & Equity  Corporation  dated April
          29, 1997.(6)

10.14     Form of Convertible Debenture regarding July 7, 1997 issuance.(7)

10.15     Form of Regulation S Securities Subscription Agreement.(7)

10.16     Form of Escrow Agreement.(7)

10.17     Form of Registration Rights Agreement.(7)

10.18     Form of Employment  Agreement  between the Registrant and Jon J. Darcy
          dated July 1, 1997.(7)

10.19     Purchase Agreement between the Company and Laminaire Corporation dated
          October 13, 1997.(9)

10.20     Promissory  Note in Principal  Amount of $2,200,000  dated October 16,
          1997 executed by the Company in favor of Garay LLC.(10)

10.21     Promissory  Note dated  October  16,  1997  executed by the Company in
          favor of Garay LLC.(10)

10.22     Promissory Note in Principal  Amount of $90,479 dated October 16, 1997
          executed by Company in favor of Charles Garay.(10)



                                                                              23
<PAGE>


10.23     Guaranty executed by Laminaire Corporation on October 16, 1997.(10)

10.24     Mortgage and Security Agreement executed by Laminaire Corporation.(10)

10.25     Employment Agreement of Charles J. Garay dated October 16, 1997.(10)

10.26     Employment Agreement of Antonio Garay dated October 16, 1997.(10)

10.27     Employment Agreement of Gerald E. Reilly dated October 16, 1997.(10)

10.28     Employment Agreement of Etta Monteleone dated October 16, 1997.(10)

10.29     Form of 5%  Convertible  Debenture  issued by the Company  pursuant to
          Regulation S.(10)

10.30     Convertible  Note Purchase  Agreement  between the Company and Norwood
          Venture  Corp.  dated  October  16,  1997,  with  form of  Convertible
          Promissory  Note  executed by the Company in favor of Norwood  Venture
          Corp. dated October 16, 1997.(10)

10.31     Security Agreement executed by the Company in favor of Norwood Venture
          Corp. dated October 16, 1997.(10)

10.32     Security  Agreement  executed  by  Laminaire  Corporation  in favor of
          Norwood Venture Corp. dated October 16, 1997.(10)

10.33     Guaranty executed by Laminaire Corporation in favor of Norwood Venture
          Corp. dated October 16, 1997.(10)

10.34     Consulting  Agreement with  Continental  Capital & Equity Corp.  dated
          July 12, 1997.(7)

10.35     Consulting Agreement with Roy Meadows dated March 29, 1998.(11)

10.36     Memorandum of Understanding with Adirondack Capital, LLC dated October
          28, 1997. (12)

10.37     Memorandum of  Understanding  with Consult  America Inc. dated October
          28, 1997. (12)

10.38     Memorandum  of  Understanding  with The Ridge Group dated  October 28,
          1997. (12)

10.39     Non-Qualified Options. (8)

14.       Assignment of Patent.(1)

27.       Financial  Data  Schedule,  which is submitted  electronically  to the
          Securities and Exchange Commission for information only and not filed.

(1)Included in, and incorporated by reference to, the Registrant's  Registration
Statement on Form SB-2.

(2)Included in, and incorporated by reference to, the Registrant's  Registration
Statement on Form S-8, filed on September 26, 1996.

(3)Included in, and incorporated by reference to, the Registrant's  Registration


                                                                              24
<PAGE>


Statement on Form S-8, filed on June 30, 1996.

(4)Included in, and incorporated by reference to, the Registrant's  Registration
Statement on Form S-8, filed on January 21, 1997.

(5)Included in, and incorporated by reference to, the Registrant's  Registration
Statement on Form S-8, filed on March 11, 1997.

(6)Included in, and incorporated by reference to, the Registrant's  Registration
Statement on Form S-8, filed on May 13, 1997.

(7)Included in, and incorporated by reference to, the Registrant's  Registration
Statement on Form 8-K, filed on July 22, 1997.

(8)Included in, and incorporated by reference to, the Registrant's  Registration
Statement on Form S-8 filed on April 14, 1997.

(9)Included  in, and  incorporated  by reference  to, the Annual  Report on Form
10-KSB filed on October 13, 1997.

(10)Included in, and incorporated by reference to, the Registrant's Registration
Statement on Form 8-K filed on October 27, 1997.

(11)Included in, and incorporated by reference to, the Registrant's Registration
Statement on Form S-8 filed on March 31, 1998.

(12)  Included  in,  and   incorporated   by  reference  to,  the   Registrant's
Registration Statement on Form S-8 filed on April 15, 1998.

     b.   Report on Form 8-K






                                                                              25
<PAGE>



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

                                             /s/ Antonio Garay 
                                        ---------------------------------------
                                        ANTONIO GARAY
                                        Title: President
                                        Date: 4/15/99


                                             /s/ Gerard M. Gallagher
                                        ---------------------------------------
                                        GERARD M. GALLAGHER
                                        Title: Chief Financial Officer
                                        Date: 4/15/99

     Directors

                                             /s/ Stephen B. Schneer
                                        ---------------------------------------
                                        Stephen B. Schneer
                                        Title:  Director and Chairman
                                        Date: 4/15/99


                                             /s/ Edward A. Heil
                                        ---------------------------------------
                                        EDWARD A. HEIL
                                        Title: Director
                                        Date: 4/15/99


                                             /S/ K. Ivan F. Gothner
                                        ---------------------------------------
                                        K. IVAN F. GOTHNER
                                        Title: Director
                                        Date: 4/15/99


                                             /S/ Asim S. Kohli
                                        ---------------------------------------
                                        Asim S. Kohli
                                        Title: Director
                                        Date: 4/15/99


                                        ---------------------------------------
                                        CHARLES J. GARAY
                                        Title: Director
                                        Date: __________


                                        ----------------------------------------
                                        JON J. DARCY
                                        Title: Director
                                        Date: __________



                                                                              26
<PAGE>


TABLE OF CONTENTS

                                                                            Page

     INDEPENDENT AUDITORS' REPORT

     CONSOLIDATED FINANCIAL STATEMENTS:

     Consolidated Balance Sheet at December 31, 1998

     Consolidated  Statements  of  Operations  for the Year Ended
     December  31, 1998,  the Six Months Ended  December 31, 1997
     and the Fiscal Year Ended June 30, 1997

     Consolidated  Statements  of Cash  Flows for the Year  Ended
     December  31, 1998,  the Six Months Ended  December 31, 1997
     and the Fiscal Year Ended June 30, 1997

     Consolidated Statements of Stockholders' Equity for the Year
     Ended  December 31, 1998,  the Six Months Ended December 31,
     1997 and the Fiscal Year Ended June 30, 1997


     Notes to Consolidated Financial Statements



                                                                              27
<PAGE>


To the Board of Directors
 Laminaire Corporation
 Rahway, New Jersey


     We have audited the  accompanying  consolidated  balance sheet of Laminaire
Corporation  (formerly  Thermo-Mizer  Environmental  Corp.) and subsidiary as of
December  31,  1998  and the  related  consolidated  statements  of  operations,
stockholders'  equity and cash flows for each of the three fiscal periods in the
period ended December 31, 1998.

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

     In our opinion,  the consolidated  financial  statements  referred to above
represent fairly, in all material respects,  the financial position of Laminaire
Corporation  (formerly  Thermo-Mizer  Environmental  Corp.) and subsidiary as of
December 31, 1998 and the results of their  operations  and their cash flows for
each of the three  fiscal  periods  in the period  ended  December  31,  1998 in
conformity with generally accepted accounting principles.



Eichler Bergsman & Co., LLP
New York, NY
April 15, 1999



                                                                              28
<PAGE>


                See Notes to Consolidated Financial Statements.



                                                                              29
<PAGE>

                              LAMINAIRE CORPORATION
           (Formerly THERMO-MIZER ENVIRONMENTAL CORP.) AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 1998

                                     ASSETS


  Current Assets:

         Cash                                                         $   79,785
         Accounts receivable-net of allowance of $68,039                 656,886
         Inventories                                                     534,982
         Prepaid expenses and other                                      125,052
                                                                      ----------
                  Total Current Assets                                 1,396,705
                                                                      ----------

Property, Plant and Equipment - net                                    2,190,898

Other Assets - principally goodwill                                    1,930,092
                                                                      ----------
Total Assets                                                          $5,517,695
                                                                      ==========

                 See Notes to Consolidated Financial Statements.


<PAGE>


                              LAMINAIRE CORPORATION
           (Formerly THERMO-MIZER ENVIRONMENTAL CORP.) AND SUBSIDIARY


                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 1998

                      LIABILITIES AND STOCKHOLDERS' EQUITY


Current Liabilities:

         Notes payable and current portion of long-term debt        $   460,373
         Accounts payable                                               796,292
         Accrued expenses and other                                     336,118
         Net liabilities of discontinued operation                      303,347
                                                                     ---------- 
                  Total Current Liabilities                           1,896,135
                                                                     ---------- 

Long-term Debt                                                        2,250,519
                                                                     ---------- 
Commitments and Contingencies

Stockholders' Equity:
         Common Stock, $.001 par value; 25,000,000 shares    
         Authorized; 3,855,267 shares issued and outstanding)             3,855
         Additional paid-in capital                                   6,681,117
         Deficit                                                     (5,153,931)
                                                                     ---------- 
     Total                                                            1,531,041
      Less - Note receivable                                           (160,000)
                                                                     ---------- 

Stockholders' Equity - net                                            1,371,041
                                                                     ---------- 

Total Liabilities and Stockholders' Equity                            5,517,695
                                                                     ========== 


                 See Notes to Consolidated Financial Statements.


                                                                              30
<PAGE>

                              LAMINAIRE CORPORATION
           (Formerly THERMO-MIZER ENVIRONMENTAL CORP.) AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 1998,
                    THE SIX MONTHS ENDED DECEMBER 31, 1997,
                    AND THE FISCAL YEAR ENDED JUNE 30, 1997

<TABLE>
<CAPTION>
                                                      Year Ended        Six Months       Year ended
                                                       12/31/98       Ended 12/31/97       6/30/97
<S>                                                  <C>               <C>               <C>         
CONTINUING OPERATIONS:
Sales                                                $ 6,028,993       $ 1,762,578
Cost of sales                                          4,854,954         1,357,009
                                                     -----------       -----------

Gross profit                                           1,174,039           405,569

Selling and administrative expenses                    1,201,592           383,933
                                                     -----------       -----------

Operating loss                                           (27,553)           21,636
Other - net (principally interest and, in 1997,
charges of $750,000 relating to the issuance of
convertible debentures)                                  397,415          (850,699)
                                                     -----------       -----------
Loss from continuing operations                         (424,968)         (829,063)
                                                     -----------       -----------

DISCONTINUED OPERATIONS:
Loss from operations                                    (779,316)         (889,339)      $(1,923,166)
Loss from disposal and closedown                        (611,570)
                                                     -----------
Loss from discontinued operation                      (1,390,886)         (889,339)       (1,923,166)
                                                     -----------       -----------       -----------


NET LOSS                                             $(1,815,854)      $(1,718,402)      $(1,923,166)
                                                     ===========       ===========       ===========

BASIC LOSS PER SHARE:
Continuing Operations                                $      (.14)      $     (1.00)
Discontinued Operations                                     (.47)            (1.07)      $     (3.44)
                                                     -----------       -----------       -----------
Net Loss                                             $      (.61)      $     (2.07)      $     (3.44)
                                                     ===========       ===========       ===========
Weighted average number of common
Shares outstanding                                     2,983,253           827,510           557,843
                                                     ===========       ===========       ===========
</TABLE>


                 See Notes to Consolidated Financial Statements.


                                                                              31
<PAGE>


                              Laminaire Corporation
           (Formerly Thermo-Mizer Environmental Corp.) and Subsidiary
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 1998,
                       SIX MONTHS ENDED DECEMBER 31, 1997
                    AND THE FISCAL YEAR ENDED JUNE 30, 1997

<TABLE>
<CAPTION>
                                                            Year Ended   Six Months Ended         Year Ended
                                                            ----------   ----------------         ----------
                                                     December 31, 1998  December 31, 1997       June 30,1997
                                                     -----------------  -----------------       ------------
<S>                                                        <C>                <C>                <C>
OPERATING ACTIVITIES:

Net Loss                                                   $(1,815,854)       $(1,718,402)       $(1,923,166)
Adjustments to reconcile net income to net cash
provided by operating activities:
Discontinued operations                                      1,390,886            889,339          1,923,166
Depreciation and amortization                                  304,431             12,007
Loss on disposal of assets
Provision for doubtful accounts                                 45,449
Nonoperating writeoffs and charges                                                750,000
(Increase) decrease in assets:
Accounts receivable                                            526,794           (289,084)
Inventories                                                    255,198           (411,896)
Prepaid expenses and other                                     134,848             61,711
Increase (decrease) in liabilities:
Accounts payable                                                32,641            381,663
Accrued expenses and other                                      95,765           (314,248)
                                                           -----------        -----------
Net cash used in continuing operating activities               970,158           (638,910)
Net cash used by discontinued operations                      (880,252)          (284,373)        (1,756,767)
                                                           -----------        -----------        -----------
Net cash used by all operating activities                       89,906           (923,283)        (1,756,767)
                                                           -----------        -----------        -----------
INVESTING ACTIVITIES:
Purchase of property and equipment                             (38,000)        (2,285,462)          (104,112)
                                                           -----------        -----------        -----------
FINANCING ACTIVITIES:
Issuance of commons stock and warrants                         103,161          1,388,706            428,764
Payments on debt                                              (337,461)        (1,510,995)
Proceeds from debt                                                              4,479,357
Acquisition and financing costs                                (37,000)        (1,420,525)          (282,272)
Investment in other time deposit                                                  375,000
Other investments                                                                                   (198,619)
Purchase of treasury stock                                                        (37,625)           (34,080)
                                                                              -----------        -----------
Net cash provided by (used in) financing activities           (271,300)         3,273,918            (86,207)
                                                           -----------        -----------        -----------
Net increase (decrease) in cash and cash equivalents
                                                              (219,394)            65,173         (1,947,086)
Cash-beginning                                                 299,179            234,006          2,181,779
                                                           -----------        -----------        -----------
Cash-ending                                                $    79,785        $   299,179        $   234,092
                                                           ===========        ===========        ===========
</TABLE>


                 See Notes to Consolidated Financial Statements.


                                                                              32
<PAGE>

                              Laminaire Corporation
           (Formerly Thermo-Mizer Environmental Corp.) and Subsidiary
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                      FOR THE YEAR ENDED DECEMBER 31, 1998,
                    THE SIX MONTHS ENDED DECEMBER 31, 1997,
                    AND THE FISCAL YEAR ENDED JUNE 30, 1997

<TABLE>
<CAPTION>
                                                        Common Stock            Additional         Retained
                                                                                   Paid-In         Earnings
                                                   Shares          Amount          Capital         (Deficit)          Total
<S>                                             <C>            <C>              <C>              <C>                <C>      
Balance, July 1, 1996                             474,125      $       474      $ 3,244,573      $   303,491      $ 3,548,538
Sale of Common Stock                              205,250              205          588,559                           588,764
Net loss                                               --               --                        (1,923,166)      (1,923,166)
                                              -----------      -----------      -----------      -----------      -----------
Balance, June 30, 1997                            679,375              679        3,833,132       (1,619,675        2,214,136
Issuance of Common Stock                           81,889               82          237,418                           237,500
Conversion of Debt Securities                     226,757              227          400,979                           401,206
Amount attributable to conversion feature                                           750,000                           750,000

Net loss                                               --               --               --       (1,718,402)      (1,718,402)
                                              -----------      -----------      -----------      -----------      -----------
Balance, December 31, 1997                        988,021              988        5,221,529       (3,338,077)       1,884,440
Issuance of Common Stock                        2,867,246            2,867        1,531,293                         1,534,160
Retirement of treasury stock                                                        (71,705)                          (71,705)
Net loss                                                                                          (1,815,854)      (1,815,854)
                                              -----------      -----------      -----------      -----------      -----------
Balance December 31, 1998                       3,855,267      $     3,855      $ 6,681,117      $(5,153,931)       1,531,041
                                              ===========      ===========      ===========      ===========      ===========

Less-Note receivable                                                                                                 (160,000)
                                                                                                                  -----------
Total                                                                                                             $ 1,371,041
                                                                                                                  ===========
</TABLE>


Note - All amounts give  retroactive  effect to a 1 for four reverse stock split
effected June 29, 1998.


                 See Notes to Consolidated Financial Statements


                                                                              33
<PAGE>

                              LAMINAIRE CORPORATION
           (Formerly THERMO-MIZER ENVIRONMENTAL CORP.) AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--ACQUISITION OF LAMINAIRE CORPORATION AND NATURE OF BUSINESS

     Laminaire  Corporation  (formerly  Thermo-Mizer  Environmental  Corp.) (the
"Company" or "Laminaire"),  a Delaware  corporation based in Rahway, New Jersey,
designs,  assembles and sells a family of products and systems used in cleanroom
facilities and to monitor a wide variety of environmental conditions.

     On October 16, 1997 the Company  acquired all of the outstanding  shares of
Common  Stock  of  Laminaire   Corporation  ("Old  Laminaire"),   a  New  Jersey
corporation, from Garay LLC for a purchase price of $3,228,000, after adjustment
based on Laminaire's  operating  performance during the period immediately prior
to the acquisition.  Laminaire,  based in Rahway,  New Jersey,  manufactures and
distributes cleanroom products and also produces a variety of electronic circuit
boards.  The  purchase  price  consisted  of a cash  payment  of  $1,000,000,  a
convertible  promissory  note in the principal  amount of $2,200,000 (the "First
Note") and a promissory note with a principal amount $28,000(the  "Second Note")
(see Note 6).


NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     A summary of the Company's  principal  accounting  and financial  reporting
policies is as follows:

Basis of Presentation

     The Company  discontinued  its Control Systems ("TCS") Division and product
line  in June  1998  because  of  ongoing  operating  losses  and the  estimated
requirement for future  investment in research and development was not deemed an
effective use of the Company's  limited  resources.  Prior to the acquisition of
Old Laminaire,  all of the Company's revenues and operations related to and were
generated by TCS. The Company has restated  its prior  financial  statements  to
present the operating  results of TCS as a discontinued  operation (see Note 9).
All  results  of  operations   prior  to  October  17,  1997  are  reflected  as
Discontinued  Operations because TCS represented all of the Company's  operating
activities in that period. The remaining operating assets and liabilities of TCS
at  December  31,  1998  are  included  in  the  caption  "Net   Liabilities  of
Discontinued Operation" and are stated at their estimated net realizable value.

     The Company  declared a four-for-one  reverse stock split on June 29, 1998.
All share and per  share  amounts  in the  accompanying  consolidated  financial
statements  and notes  thereto give  retroactive  effect to such  reverse  stock
split.

     The  Company  changed its name from  Thermo-Mizer  Environmental  Corp.  to
Laminaire Corporation in June 1998.


                                                                              34
<PAGE>

Principles of Consolidation

     The consolidated  financial  statements include the accounts of the Company
and its wholly-owned subsidiary, Old Laminaire (a New Jersey Corporation), which
was acquired on October 17, 1997 in a transaction accounted for as a purchase in
accordance with the  requirements  set forth in Opinion No. 16 of the Accounting
Principles  Board.  Accordingly,  the  results  of  Laminaire's  operations  are
included in the Company's  consolidated financial statements commencing with the
date of acquisition. All significant intercompany accounts and transactions have
been eliminated in consolidation.

     The  following   unaudited  pro  forma  operating  data  assumes  that  the
acquisition of old Laminaire had taken place as of the beginning of July 1, 1997
(for the six months  ended  December  31, 1997) and the year ended June 30, 1996
(fiscal  1997),  respectively.  The data combines the  operating  results of the
Company's fiscal year with corresponding data from old Laminaire's calendar year
and gives effect to (i) the  amortization  of purchase  adjustments and goodwill
and  (ii)   incremental   interest   expense   associated   with  the  financing
arrangements.  No effect has been given to assumed cost savings brought about by
the consolidation of the two entities.


                                                 12/31/97         Fiscal 1997
                                               (6 months)

  Net revenues                                 $4,500,550         $8,777,632
  Cost of sales                                 3,623,487          6,635,974
  Gross profit                                    877,063          2,141,658
  Operating expenses                            1,691,811          3,322,865
  Nonoperating expenses                           917,510            480,221
  Income (loss) before taxes                   -1,732,258         -1,858,292
  Income taxes-net                                  4,497             19,607
  Net income (loss)                            -1,736,755         -1,877,899

Revenue Recognition

     Revenue for product  sales is recognized in the period in which the product
is   shipped.    Contract   revenues   and   profits   are   recognized   on   a
percentage-of-completion  basis using the cost-to-cost  method under which sales
and  profits  are  recorded  based on the ratio of costs  incurred  through  the
measurement  date to estimated  total costs at completion.  At December 31, 1998
unbilled receivables were not significant.

     Revisions to contract estimates of revenue and profits are reflected in the
earnings of the period in which the  revisions are made.  Anticipated  losses on
contracts-in-progress are charged to earnings when identified.


Inventories

     Inventories  are stated at the lower of cost or market with cost determined
using the  first-in,  first-out  cost flow  assumption.  At December  31,  1998,
inventories consist of:

                Raw materials and components
                                                       $208,352
                Work-in-progress                        213,868
                Finished goods                          112,762
                                                       --------
                Total                                  $534,982
                                                       ========


                                                                              35
<PAGE>

Finished  goods   represent   products   purchased  from  outside   vendors  for
distribution to customers.

Property, Plant and Equipment

     Property.   plant  and  equipment  are  stated  at  cost  less  accumulated
depreciation.  Depreciation  is computed  using  straight-line  and  accelerated
methods based upon the estimated  useful lives of the related assets as follows:

               Building and improvements               30 years

               Furniture and fixtures                  5 years

               Vehicles                                5 years

               Machinery and equipment                 5-7 years

     Expenditures  for  repairs  and  maintenance  are  charged  to  expense  as
incurred. Upon retirement,  sale or other disposition of property and equipment,
the cost and accumulated  depreciation are eliminated from the accounts and gain
or loss is included in operations.

Goodwill

     Goodwill,  which  represents  the  excess  of the  purchase  price  for Old
Laminaire over the fair value of the net assets acquired,  is being amortized on
the straight-line basis over 40 years.

Long Lived Assets

     Long-lived assets to be held and used are reviewed for impairment  whenever
events or changes in circumstances indicate that the related carrying amount may
not be recoverable. If required, impairment losses on assets to be held and used
are recognized  based on the excess of the asset's  carrying value over its fair
value. Long-lived assets to be sold are reported at the lower of carrying amount
or fair value reduced by estimated disposal costs.

Statement of Cash Flows

     Interest  paid for the year ended  December 31, 1998,  the six months ended
December 31, 1997 and the fiscal year ended June 30, 1997 was $315,472,  $76,847
and $22,697, respectively.  Income taxes paid for the fiscal year ended June 30,
1997 was  $19,207.  For the  purposes of this  statement,  investments  and time
deposits  having an initial  term of 90 days or less are  considered  to be cash
equivalents.

Advertising

     The Company charges advertising costs to expense as incurred. Costs related
to mail order catalogs and promotional  materials are charged to operations when
mailed or  distributed.  Advertising  costs  related  to  continuing  operations
amounted to $49,602 and $50,841 for the two periods ended  December 31, 1998 and
1997, respectively.

Basic Loss Per Share

     Basic  loss per  common  and  common  equivalent  share are  calculated  by
dividing  net  income  by the  weighted  average  number of  common  and  common


                                                                              36
<PAGE>

equivalent shares outstanding during the period, after giving retroactive effect
to the one for four  reverse  stock  split  effected  in June 1998.  The assumed
exercise of outstanding  warrants and options would have been  antidilutive and,
therefore,  were excluded from the  calculation of loss per share in all periods
presented.

Warranty Costs

     The Company's policy is to warrant parts on new  installations for one year
from  start-up  of the  system.  The  cost of  parts  used in  installations  is
generally  not a  material  component  of  the  total  installation  costs.  The
Company's  policy is to accrue expenses  related warranty costs when the related
revenue is recognized.

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 at the
date of the  financial  statements  and the  reported  amounts of  revenues  and
expenses during the reporting periods. The principal assumptions inherent in the
accompanying  financial  statements relate to estimated  percentages of contract
completion and the  realizability  of certain assets.  Actual results may differ
from those  estimates.  All  liabilities are recorded and carried at approximate
fair values.

Revenue and Credit Concentration

     A significant  portion of the Company's  revenue is derived from  contracts
performed  for  customers  located in the New York and New  Jersey  Metropolitan
Area. Accordingly, a substantial portion of the Company's accounts receivable at
December  31, 1998 is due from  customers  located in the New York  Metropolitan
area.

ReclassificationsReclassifications

     Certain fiscal 1997 amounts and balances have been  reclassified to conform
to the current presentation.

NOTE 3--PROPERTY AND EQUIPMENT

     Property and equipment consist of the following at December 31, 1998:

                     Land and building                      $2,750,099

                     Furniture and fixtures                    751,205

                     Machinery and equipment                   483,645

                     Vehicles                                   31,508
                                                            ---------- 
                     Total                                   4,016,457

                     Less - accumulated depreciation        (1,825,559)
                                                            ---------- 

                     Property and equipment - net           $2,190,898
                                                            ========== 

                                                                              37
<PAGE>

NOTE 4--OTHER ASSETS

     Other assets consist of the following at December 31, 1998:


            Deferred debt costs                          $88,642
            Goodwill-net (notes 1 and 2)               1,804,450
            Other                                         37,000
                                                      ----------
            Total                                     $1,930,092
                                                      ==========

NOTE 5--INCOME TAXES

     The  Company  incurred  a net  operating  loss for  each of the year  ended
December  31, 1998,  the six months  ended  December 31, 1997 and for the fiscal
year ended June 30, 1997. The Company has  established an allowance for the full
potential  benefit  of  all  such  carryforwards  because  of  doubt  as to  the
realizability  of such benefit.  The entire  provision in all periods  presented
relates to state franchise taxes and fees.

     Deferred  income  taxes  will be  recorded  for the  net tax  effects  when
temporary   differences  arise  between  the  carrying  amounts  of  assets  and
liabilities  for  financial  reporting  purposes and amounts used for income tax
purposes. No deferred income taxes are recorded at December 31, 1998.

     The  Company  has  net  operating  loss   carryforwards   of  approximately
$4,900,000  expiring in the years through 2013 and  investment  and research and
development  credits  amounting to $37,000 that are  available to reduce  future
income taxes through 2012.

NOTE 6--NOTES PAYABLE AND LONG-TERM DEBT

     On October 16, 1997, the Company acquired all of the outstanding  shares of
Common Stock of Old Laminaire from Garay LLC for a purchase price of $3,200,000,
subject to adjustment based on Old Laminaire's  operating performance during the
period  immediately  prior to the  acquisition.  Garay  LLC is an  affiliate  of
Charles Garay, who became a director of the Company following the acquisition of
Old Laminaire.  The purchase price consisted of a cash payment of $1,000,000,  a
convertible  promissory  note in the principal  amount of $2,200,000 (the "First
Note") and a  promissory  note with a  principal  amount to be  determined  (the
"Second Note").

First, Second and Third Notes - The First Note bears interest at the rate of 10%
per annum and is payable in 60 equal monthly installments principal and interest
of $33,830  commencing  November  16, 1997 with a final  payment of principal of
$1,000,000 due on October 16, 2002. The First Note is convertible into shares of
Common Stock at a conversion  price per share equal to $1. The First Note became
convertible for a period of two years  commencing  April 16, 1998 in amounts not
exceeding  $500,000  for  each  four  month  period.  The  Second  Note was in a
principal amount equal to the difference  between (a) the  Stockholders'  Equity
(as defined) of Old Laminaire as of September 30, 1997 minus  $200,000 minus (b)
the  Stockholders'  Equity  of  Old  Laminaire  as  of  September  30,  1996  or
approximately $28,000.

     In conjunction with the acquisition of Old Laminaire,  the Company issued a
promissory note to Charles Garay in the principal  amount of $90,479 (the "Third
Note")  to  replace  an  existing  liability  due to Mr.  


                                                                              38
<PAGE>

Garay by the acquired  company.  The Third Note, and all accrued interest at the
rate of 15% per annum.

     The Second and Third Notes were paid in October 1998.

     The  Company's  obligations  under  the  First  Note are  secured  by first
priority security interests in the real property and all tangible and intangible
personal  property,   including  inventory  and  accounts  receivable,   of  Old
Laminaire.  The  security  agreement  underlying  the First  Note also  contains
various financial ratios.

     In conjunction with the acquisition of all of the outstanding  common stock
of Old Laminaire, the Company paid all of Old Laminaire's obligations, amounting
to approximately  $1,100,000, to Corestates National Bank ("Corestates") under a
mortgage  secured by Old Laminaire's  interest in its real property and building
located in Rahway, New Jersey.

     The Company's operations have generated sufficient cash flow to service the
First Note,  although no  assurances  can be given that this trend will continue
for the term of the First Note.

Other  Financings - The funds in excess of those provided by the issuance of the
notes to Garay LLC  utilized by the Company to purchase  the common stock of Old
Laminaire and satisfy Old  Laminaire's  obligations to Corestates  were obtained
from the issuance of (i) Common Stock of the Company for aggregate consideration
of $200,000 and (ii) convertible promissory notes and debentures for $2,300,000.

     Subsequent  to June 30,  1997 but  prior to the  closing  of the  Laminaire
acquisition,  the Company issued convertible debentures (the "First Debentures")
to ten investors,  in the aggregate  principal amount of $1,450,000  pursuant to
Regulation S under the  Securities  Act of 1933,  as amended,  (the  "Securities
Act").  Concurrent  with the closing of the  acquisition of Laminaire on October
16, 1997,  the Company also issued 96,630 shares of its Common Stock to a single
investor for aggregate  consideration of $200,000 pursuant to Regulation S under
the Securities Act and issued convertible debentures (the "Debentures") to three
investors in the principal amount of $300,000 pursuant to Regulation S under the
Securities Act. The Company will pay interest to the holders of the Debenture at
the rate of 5% per  annum.  Interest  on the  Debentures  is  payable in cash or
Common Stock of the Company, at the Company's discretion. The Debentures,  which
are  unsecured,  became  convertible  into shares of the Company's  Common Stock
beginning 41 days after the date of issuance,  at a price per share equal to the
lesser  of 70% of the  average  closing  bid  price  for the five  trading  days
preceding:  (i) the date of conversion or (ii) the date of closing,  October 16,
1997.

     Concurrent  with the closing of the  acquisition of Laminaire,  the Company
issued a convertible promissory note (the "Convertible Note") to Norwood Venture
Corp.  in the  principal  amount of $500,000  pursuant to Regulation D under the
Securities  Act.  The Company is  obligated  pay  interest to the holders of the
Convertible Note at the rate of 12% per annum. The Company's  obligations  under
the  Convertible  Note were  secured  by a first  security  interest  in the TCS
accounts  receivable and a lien that is second in priority to that of Garay LLC,
the seller of the common stock of  Laminaire,  with respect to the inventory and
equipment of the Company and the accounts receivable, inventory and equipment of
Laminaire.  Laminaire  also executed a guaranty in favor of Norwood with respect
to the Company's obligations under the Convertible Note. The Convertible Note is
convertible into shares of the 


                                                                              39
<PAGE>

Company's  Common  Stock at any time at a price per share equal to the lesser of
70% of the average closing bid price for the five trading days preceding (i) the
date of closing  or  conversion.  In June 1998,  the  Company  discontinued  the
operations of TCS, thereby affecting Norwood's collateral position.  In November
1998,  the Company  agreed to substitute the common stock of Old Laminaire and a
second  mortgage on the Rahway  building for the TCS  receivables  as collateral
under the Norwood  agreement.  The Company has the right to substitute  accounts
receivable  in lieu of the common stock of Old  Laminaire if certain  conditions
are met. Furthermore,  Norwood will relinquish its second mortgage on the Rahway
building if the Company refinances such building and uses the proceeds therefrom
to satisfy the First Note.

     Through  December 31, 1998,  an aggregate of  $1,410,000  of the  principal
amount of the Debentures has been converted into Common Stock.

     The obligations  above (net of amounts converted through December 31, 1998)
are scheduled to mature as follows:

              Year of Maturity                                 Amount

              1999 (current portion)                         $260,373
              2000                                            408,282
              2001                                            433,582
              2002                                          1,368,655
              Thereafter                                       40,000
                                                           ----------
              Total                                        $2,510,892
                                                           ==========

     The Company also borrowed $200,000 from an individual  investor.  The terms
and conditions of such  borrowing have not yet been finalized and,  accordingly,
such note is classified as a current liability in the accompanying  Consolidated
Balance Sheet at December 31, 1998.


NOTE 7--STOCKHOLDERS' EQUITY

     The Company is a Delaware  corporation.  Its  Certificate of  Incorporation
provides  that its  authorized  capital stock  consists of 25 million  shares of
Common  Stock,  par value $.001 per share.  The holders of the Common  Stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of  stockholders.  Holders of Common Stock are entitled to receive  ratably
such dividends as may be declared by the Board of Directors out of funds legally
available therefor. The Board of Directors,  without shareholder approval, could
issue  shares of Common  Stock upon such terms as it  determines  to whomever it
pleases,  including  persons who or entities that would help present  management
maintain control.

     The  Company  has  issued  shares  of  common  stock  to  pay  for  various
consulting,  professional and public relations  services.  At December 31, 1998,
$63,000  is  included  in  prepaid   expenses  in  connection   with  incomplete
engagements.

Stock Options

     In December 1996 and June 1998, the  shareholders  approved stock incentive
plans under which the Company may issue  incentive  stock options,  nonqualified
stock  options and stock  appreciation  rights under which the Company can issue
options for up to 1,000,000  shares.  As of December  31, 1998,  the Company has
granted  options  covering  114,000  shares  of Common  Stock,  all of which are
vested.


                                                                              40
<PAGE>

     In  June  1997,  the  Company  issued  stock  options  for  35,000,   after
retroactive  adjustment  for the 1 for 4 reverse  stock  split  declared in June
1998,  shares  of  Common  Stock  exercisable  at a price of $.40  per  share in
consideration for services performed by outside directors in connection with the
acquisition  of Laminaire.  The  difference  between the exercise  price and the
market price of these shares was accounted for as part of the acquisition  price
of Laminaire (see Note 1).

     The Company  accounts for all options using the  intrinsic  value method in
accordance with Accounting Principles Board Opinion No.25, "Accounting For Stock
Issued To  Employees"  and its related  interpretations.  Effective  with fiscal
1997,  the  Company is subject  to the  provisions  of  Statement  of  Financial
Accounting Standards No. 123,  "Accounting For Stock-Based  Compensation" ("SFAS
123").  SFAS 123  establishes  a fair value method of  determining  compensation
expense relating to stock-based  compensation plans, and requires the disclosure
of the pro forma  effects of recording  such expense using the fair value method
rather than the intrinsic method.  Under SFAS 123, the fair value of stock-based
awards to employees is calculated using option pricing models,  even though such
models were  developed  to  estimate  the fair value of freely  tradable,  fully
transferable  options without vesting  restrictions,  which significantly differ
from the Company's  stock option  awards.  These models also require  subjective
assumptions,  including  future  stock price  volatility  and  expected  time to
exercise,  which greatly affect the calculated  values.  The Company's pro forma
calculations  were made using the  Black-Scholes  option  pricing model with the
following assumptions:

                Risk-Free Interest Rate                  9%
                Dividend Rate                            0%
                Expected Term of Option In Years     Five years

     On a pro forma basis, net loss and loss per common share for the year ended
December  31, 1998,  six months ended  December 31, 1997 and for the fiscal year
ended June 30,  1997 would not have  changed  significantly  if the  Company had
accounted  for options  using the fair value  method  rather than the  intrinsic
value method.

         A summary of stock option activity follows:

<TABLE>
<CAPTION>
           Description                                                   Number          Price Range
<S>                                                                   <C>              <C>
           Year Ended June 30, 1997:
           Options granted                                            1,286,000        $.10 to $1.00
           Options exercised                                            400,000                $1.00
           Options cancelled                                             55,000                $1.00
           Options outstanding                                          831,000        $.83 to $1.00
           Six Months Ended December 31, 1997:
           Options granted                                              565,000         $.20 to $.57
           Options exercised
           Options cancelled                                             17,250                $1.00
           Options outstanding                                        1,378,750        $.20 to $1.00
           Year Ended December 31, 1998
           Options granted
           Options canceled                                             174,000                   $1
           Options outstanding                                        1,204,750         $.20 to $.57
</TABLE>

     All options outstanding are exercisable at December 31, 1998.


                                                                              41
<PAGE>

Solay Agreement

     On July 30, 1996, the Company entered into a one-year financial  consulting
agreement  with Solay,  Inc.  ("Solay")  under which Solay agreed to provide the
Company with  financial  public  relations and  acquisition-related  services in
consideration  for a payment of $165,000 and an option (the  "Option")  granting
Solay the right to purchase  550,000 units at an exercise  price of $1 per unit.
Each unit  consists of one share of common stock and two Class B warrants.  Each
Class B warrant  entitled  the holder  thereof to  purchase  one share of common
stock at an exercise price equal to the greater of (i) $3 per share or (ii) 120%
of the offering price of a share of common stock in a secondary  public offering
which  results in gross  proceeds of at least  $3,000,000.  The Class B warrants
were exercisable for a period of five years commencing on the earlier of (i) one
year from the date that the option was  granted or (ii) the  consummation  of an
acquisition,  as defined, by the Company.  The Company registered all securities
covered by the Option in a Registration Statement on Form S-8. In February 1997,
the  Company  and Solay  agreed to modify the terms of the  option  such that it
cancelled  470,000  previously  issued  Class B Warrants  and  Solay's  right to
purchase  30,000 Class B Warrants  and issued an aggregate of 100,000  shares of
Common Stock (one share of Common Stock for each five Class B Warrants).

     Solay was entitled to exercise  options for up to 300,000 shares,  of which
it exercised such option for 260,000 such shares, including 160,000 for which it
issued a note to the Company in the  principal  amount of $160,000.  The note is
interest-free and is nonrecourse to Solay,  except to the extent that the former
president  of the Company  repays a note due by such former  president to Solay.
The  Option  expires  five  years  from  the date of  grant.  Solay  granted  an
irrevocable proxy to vote all shares purchased and held by Solay pursuant to the
Option to the Company's  President.  Such proxy  terminates at the time that the
shares are sold, exclusive of a transfer pursuant to a pledge of the shares.

     As  part  of  the  agreement  with  Solay,   Nationwide  Securities,   Inc.
("Nationwide"),  the  underwriter  for the Company's  initial public offering in
March  1996,  agreed  to  terminate  the  underwriting   agreement   effectively
eliminating  all  restrictive  covenants  set forth  therein  and  severing  the
relationship between the Company and Nationwide.  Accordingly,  the Company also
wrote off the  unamortized  portion,  amounting to $100,000,  of the  Nationwide
consulting agreement during the fiscal year ended June 30, 1997.

     The Company issued  nonqualified  options for 180,000 units to officers and
directors.  The units covered by these nonqualified options are identical to the
units included in the Option issued to Solay,  except that they were exercisable
at  estimated  fair  market  value  at the date of grant  ($1.16).  The  Class B
Warrants  included in such units were  treated in the same manner as the Class B
Warrants included in the Solay agreement  described above. The conversion of the
Class B Warrants results in the exercise price per share becoming $.83.

     For financial reporting  purposes,  the Company ascribed a value of $.05 to
each Class B Warrant.  The aggregate difference between the fair market value of
a share of common stock on the date of grant ($1.0623) and the value ascribed to
each share of common stock included in the units  described above ($.90) for the
Solay Options  amounts to $89,375 and was accounted for as an expense during the
fiscal  year ended  June 30,  1997.  There are no  remaining  unamortized  costs
associated with the Solay Agreement.


                                                                              42
<PAGE>

NOTE 8--COMMITMENTS AND CONTINGENCIES

     The Company's  management does not believe that its products are subject to
material product liability claims and has no insurance to cover such risk.

     The  Company  has a qualified  401(k)  profit  sharing  plan  available  to
full-time  employees  who meet the  plan's  eligibility  requirements.  The plan
permits  participants  to make  contributions  by salary  reduction  pursuant to
section  401(k) of the Internal  Revenue Code.  In addition,  the Company has no
obligation  to  contribute to the plan,  however,  it can elect a  discretionary
contribution.  The  Company  made no  contributions  to the plan during the year
ended  December 31, 1998, six months ended December 31, 1997 and the fiscal year
ended June 30, 1997.

     The  Company  is a  defendant  in various  cases  involving  collection  of
payables  and  employment  terminations.  The Company  does not believe that the
outcome of these matters will have a material  adverse  impact on its results of
operations.


                                                                              43
<PAGE>

NOTE 9--BUSINESS SEGMENTS AND CONCENTRATION OF CREDIT RISK

Segments

     Prior to the  acquisition of Old  Laminaire,  the Company had one business,
the  controls  system  business.   In  the  period  immediately   following  the
acquisition of Laminaire,  the Company  operated with four divisions - Cleanroom
Manufacturing ("CM"),  Cleanroom Distribution ("CD"),  Electronic  Manufacturing
("EM"),  and TCS. The LM business  represents Low Margin cleanroom  distribution
sales  involving  transactions  in which the Company served as a distributor for
vendors that only sell through  distributors.  In these cases the products  were
drop shipped by the vendor to the end customer.  A  substantial  portion of this
segment of the business has been phased out. TCS' operations  were  discontinued
in June 1998  because  of ongoing  operating  losses  and the  estimated  future
investment  in research and  development  was not deemed an effective use of the
Company's resources.

     The Company's largest customer accounted for 10.2% of its net revenues from
continuing operations during the year ended December 31, 1998.

     The table below sets forth the sales and operating  profits  contributed to
continuing  operations by division for the year ended  December 31, 1998. All of
these   operating   divisions   share  the  same   facility  and  use  a  common
administrative  pool.  These  joint  costs  have been  allocated  using  various
formulas  developed by the former  management of Old  Laminaire.  The Company is
currently  reviewing  the  allocation  bases being used and may revise or modify
such bases.

<TABLE>
<CAPTION>
         1998
         ----
                                                 CM               CD               EM            Total
<S>                                        <C>              <C>              <C>             <C>        
 Revenues                                  $ 2,264,772      $ 2,360,329      $ 1,403,892     $ 6,028,993
 Cost of revenues                            2,081,280        1,762,551        1,011,123       4,854,954
 Gross profit                                  183,492          597,778          350,029       1,174,039

 Direct selling                                100,104          173,825           42,740         316,669
 Contribution                                   83,388          423,953          350,029         857,370

 Joint overhead costs                                                                            884,923

 Operating loss                                                                              $   (27,553)

<CAPTION>
         1997
         ----
                                                 CM               CD               EM
<S>                                        <C>              <C>              <C>
Revenues                                   $   520,523      $   740,369      $   501,686
Cost of revenues                               362,185          670,126          324,698
Gross profit                                   158,338           70,243          176,988

Direct selling and product development          44,611           45,004           49,583
Contribution                                   113,727           25,239          127,405

Joint overhead costs                            99,361           56,430          100,058
Other costs                                      9,285            3,483            7,813
Income (Loss) before taxes                       5,081          (34,674)          19,534
</TABLE>


                                                                              44
<PAGE>

     Many  costs are  allocated  based on  various  allocation  bases  including
relative sales and square footage used. It is not  practicable to ascribe assets
to specific divisions.

Discontinued Business

     Prior to the  acquisition of Old  Laminaire,  the Company had one business,
the controls system  business.  TCS'  operations were  discontinued in June 1998
because of ongoing  operating  losses and the  estimated  future  investment  in
research  and  development  was not  deemed an  effective  use of the  Company's
resources.  Highlights of TCS operating  results for the year ended December 31,
1998,  the six months ended December 31, 1997 and the fiscal year ended June 30,
1997 are set forth below:

                                      12/31/98        12/31/97          6/30/97
Revenues                            $1,476,833      $1,124,869      $ 2,351,191
Cost of revenues                     1,451,261       1,057,757        2,099,873
Gross profit                            25,572          67,112          251,318
Other costs                            804,888         923,933        1,676,624
Operating loss                        (779,316)       (856,831)      (1,425,306)
Other - net                                             32,508          497,860
Loss from discontinued business     $ (779,316)     $ (889,339)     $(1,923,166)

     The  amounts  above  relate  to  operating  results  prior  to the  date of
discontinuance.  All results  thereafter  are included as part of the  closedown
costs of TCS.  Operating  expenses  for the year ended  December 31, 1998 do not
include  corporate,  facilities and similar type expenses that have been charged
to continuing operations.

     The Loss on Disposal of the  Discontinued  Operations of $611,570  consists
principally  of  write-downs of  inventories,  receivables on certain  long-term
contracts,  other  assets  and fixed  assets,  as well as the costs to  complete
contracts-in-progress.

NOTE 10--NONRECURRING EXPENSES AND OTHER

     Nonrecurring expenses and other consist of the following for the year ended
December  31, 1998,  the six months ended  December 31, 1997 and the fiscal year
ended June 30, 1997.

<TABLE>
<CAPTION>
                                                              12/31/98      12/31/97  6/30/97(1)
<S>                                                          <C>          <C>         <C>      
     Solay agreement                                                                  $ 294,375
     Write-off - Nationwide consulting agreement                                         95,000
     Postemployment cost                                     $  25,000                   40,000
     Professional fees associated with nonrecurring
     transactions                                                                        67,510
     Amortization of discount associated with the
     favorable conversion feature
                                                                          $ 750,000
     Amortization of goodwill                                   46,378       11,115
     Interest - net                                            326,037       89,584     (43,436)
     Disposal of equipment (and write-off of lease
     obligation)                                                                         27,756
     Write-off of lease costs (Note 8) (1)                                   28,019
     Other                                                                               (2,552)
                                                                                      ---------

     Total                                                   $ 397,415    $ 878,718   $ 478,653
                                                             =========    =========   =========
</TABLE>


                                                                              45
<PAGE>

(1) Amounts are included in Discontinued Operations

     The Company agreed to purchase an annuity for an officer who retired during
the fiscal year ended June 30, 1997, the cost of which  ($40,000) was charged to
operations.

NOTE 11--RELATED PARTY TRANSACTIONS

     During the year ended  December 31, 1998, the six months ended December 31,
1997 and the fiscal year ended June 30,  1997,  the Company  paid  professional,
consulting and legal fees amounting to $250,143  (exclusive of 100,000 shares of
common stock awarded to the Company's  secretary),  $217,675 (of which  $126,180
relates to the  acquisition  of Laminaire or obtaining the financing  therefor);
and  $332,953(of  which  $153,924  relates to the  acquisition  of  Laminaire or
obtaining the financing  therefor) to directors or firms related to directors or
officers.  The law firm in which  the  Company's  Secretary  is a  partner  also
received  41,000  shares of common  stock in  satisfaction  of fees owed  during
fiscal 1997. At December 31, 1998, the outstanding balance of unpaid fees due to
such  firm  was  approximately  $101,000.  Substantially  all  work  done  on  a
consulting  basis is in lieu of the same work  being  done by new  employees  or
other directors.

     In  addition,  an  entity  associated  with a  director  received  interest
payments of $233,402 in 1998.


                                                                              46