U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                   FORM 10-KSB


          (Mark One)

 X        ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
---       OF 1934 [Fee Required]

          For the fiscal year ended April 30, 1999

          TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
---       ACT OF 1934 [No Fee Required]

          For the transition period from _______ to _______

                         Commission file number 33-75276

                            OMNI Rail Products, Inc.
                            ------------------------
                 (Name of Small Business Issuer in its Charter)

           Delaware                                      68-0281098
           --------                                      ----------
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
 Incorporation or Organization)


                   975 SE Sandy Blvd. Portland, Oregon 97214
                   -----------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

                   (Issuer's Telephone Number (503) 230-8034

         Securities registered under Section 12(b) of the Exchange Act:

     Title of each class           Name of each exchange on which registered

-----------------------------             ----------------------------

-----------------------------             ----------------------------

Securities registered under Section 12(g) of the Exchange Act:

Common Stock $.01 Par Value
---------------------------
(Title of class)

Warrants to purchase Common Stock $.01 Par Value
------------------------------------------------
(Title of class)


     Check  whether  the issuer:  (1) 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 is not contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.

     State issuer's revenues for its most recent fiscal year. $12,438,192.

     State the aggregate market value of the voting and non-voting common equity
held by  non-affiliates  computed by  reference to the price at which the common
equity was sold, or the average bid and asked prices of such common  equity,  as
of July 30, 1999. $851,000.

     State the number of shares  outstanding  of each of the issuers  classes of
common equity, as of July 30, 1999. 1,703,098 common shares.

<PAGE>

                            OMNI RAIL PRODUCTS, INC.
                                   FORM 10-KSB
             ANNUAL REPORT FOR THE FISCAL YEAR ENDED April 30, 1999

PART I    Item 1.   Description of Business                                   1

          Item 2.   Description of Property                                   6

          Item 3.   Legal Proceedings                                         7

          Item 4.   Submission of Matters to a Vote of Security Holders       7

PART II   Item 5.   Market for Common Equity
                    and Related Stockholder Matters                           8

          Item 6.   Management's Discussion and Analysis of Financial
                    Condition and Results of Operations                       9

          Item 7.   Financial Statements
                    Independent Auditor's Report                             F-1
                    Consolidated Balance Sheets                              F-2
                    Consolidated Statements of Operations                    F-3
                    Consolidated Statements of Stockholders'
                      Equity (Deficit)                                       F-4
                    Consolidated Statements of Cash Flows                    F-5
                    Notes to Consolidated Financial Statements               F-6

          Item 8.   Changes In And Disagreements With Accountants On
                    Accounting And Financial Disclosure                      18

PART III  Item 9.   Directors, Executive Officers, Promoters and
                      Control Persons; Compliance with Section 16(a)
                      in the Exchange Act                                    18

          Item 10.  Executive Compensation                                   20

          Item 11.  Security Ownership of Certain Beneficial Owners
                    and Management                                           20

          Item 12.  Certain Relationships and Related Transactions           22

          Item 13.  Exhibits and Reports on Form 8-K                         23

Index of Exhibits                                                            23

Signatures                                                                   27


<PAGE>

                                     PART I
                                     ------

Item 1. Description of Business:
--------------------------------

     Introduction
     ------------

     This Form 10-KSB  contains  certain  forward-looking  statements.  For this
     purpose,  any  statements  contained  in  this  Form  10-KSB  that  are not
     statements  of  historical  fact may be  deemed  to be  forwarding  looking
     statements.  Without  limiting the foregoing,  words such as "may," "will,"
     "expect," "believe,"  "anticipate,"  "estimate" or "continue" or comparable
     terminology  are  intended to identify  forward-looking  statements.  These
     statements,  by their nature,  involve substantial risks and uncertainties,
     and actual results may differ materially depending on a variety of factors.

     OMNI Rail Products, Inc., formerly Creative Medical Development,  Inc. (the
     "Company"),  was  incorporated in the state of California on July 20, 1992,
     and  reincorporated  in the state of Delaware on June 1, 1993.  The Company
     designed, developed,  manufactured and marketed ambulatory infusion therapy
     products under the "EZ Flow" trade name.

     On September 13, 1995, the Company entered into an Asset Purchase Agreement
     with Gish Biomedical, Inc. ("Gish") for sale of the EZ Flow Pump technology
     and  product  line.  Under its terms,  substantially  all of the  Company's
     manufacturing  related assets (with a net book value of $680,957) were sold
     for $600,000 cash and $2,000,000 of Gish Stock (240,240  shares).  Pursuant
     to the  terms  of the  agreement,  operation  of the EZ Flow  business  was
     transferred  to Gish as of September 13, 1995 and the sale closed April 17,
     1996.

     On April 17, 1997,  the Company  entered  into an agreement  for merger and
     reorganization  with OMNI  International  Rail Products,  Inc.,  ("OMNI") a
     privately held company in the business of  manufacturing  and  distributing
     premium  highway/rail  grade crossing surface products in the United States
     and  internationally.  The agreement provided for the merger of OMNI with a
     wholly  owned  subsidiary  of the  Company  formed for the  purposes of the
     transaction.  Subject to certain  adjustments,  the  Company  was valued at
     $2,000,000 and OMNI was valued at $4,000,000.

     OMNI,  an Oregon  corporation,  was formed in 1994 to acquire  the  premium
     railroad grade crossing  business from Reidel  Environmental  Technologies,
     Inc.  That business was operated by OMNI until the merger with the Company,
     and its  operations  continue under the Company's  wholly owned  subsidiary
     corporation  OMNI  Products,  Inc.  At the  time of the  merger,  the  OMNI
     executive  officers  became the  executive  officers of the Company and the
     subsidiary  and all but one of the OMNI directors  became  directors of the
     Company and its subsidiary.

     The Company's  transaction  with OMNI closed April 30, 1997.  Subsequently,
     the  Company  changed its fiscal  year to April 30,  1997  consistent  with
     OMNI's  fiscal  year  to  facilitate  accounting  and  reporting  financial
     results. In February 1999, at the Company's annual meeting of shareholders,
     the  shareholders  approved an amendment to the  Company's  certificate  of
     incorporation   to  change  the  Company's   name  from  Creative   Medical
     Development,  Inc. to OMNI Rail Products, Inc., to better match the Company
     name with its continuing business.

                                       1
<PAGE>


     Company Restructuring
     ---------------------

     During  the  fiscal  year  ended  April  30,  1998,  the  Company  began  a
     restructuring  plan to reduce  the  over-capacity  in its  recycled  rubber
     manufacturing   operations   and  to  increase  its   concrete   production
     capabilities.  The refocus of  business  stemmed  from  changes in industry
     demand away from recycled rubber and more toward concrete and virgin rubber
     crossings.  The  Company  ceased  production  of  recycled  rubber  at  its
     Portland,  Oregon,  and Lancaster,  Pennsylvania  plants and liquidated its
     real estate  holdings and virtually all its recycled  rubber  manufacturing
     equipment at both  locations.  It  transferred  some  equipment,  primarily
     concrete forms, to the Company's remaining facilities. At the same time the
     Company extended agreements with a pre-cast concrete company to produce the
     Company's  proprietary  concrete  and rubber grade  crossings,  and with an
     extruder of virgin rubber  products to make various rail product  materials
     of virgin rubber.

     The Company, in conjunction with its restructuring, wrote down assets to be
     liquidated,  wrote-off  excess and obsolete  recycled rubber  inventory and
     accrued expected  shutdown and liquidation  costs. The asset write-down and
     inventory  write-off  did not have an  impact on the  Company's  liquidity.
     Other charges were recorded as liabilities  and were paid out during fiscal
     year 1999.

     At the end of fiscal 1998,  the Company was in material  default of certain
     financial  and  non-financial  loan  covenants  under its Security and Loan
     Agreement with its senior lender Finova Financial  Corporation  ("Finova").
     In July 1998 the Company  entered into a Forbearance  Agreement with Finova
     under which Finova would  forbear in taking any action  against the Company
     by reason of the existing  defaults.  In  addition,  under the terms of the
     Forbearance  Agreement,  the Company was permitted an  overadvance of up to
     $400,000  (through  June 30,  1999)  beyond the normal terms of the line of
     credit.  The Forbearance  Agreement also  eliminated the monthly  principal
     payment  requirements  on Finova's  term debt.  As part of the  Forbearance
     Agreement  the Company  was  required  to raise an  additional  $250,000 in
     equity capital or subordinated debt. $275,160 of Subordinated financing was
     received  in three  tranches  beginning  in  November  1998  and the  final
     received the end of January 1999.  The Company was also required to dispose
     of certain assets with proceeds used to pay down Finova's term loan and the
     real estate mortgage with Capital Consultants,  Inc. Finova's term debt was
     completely paid off as of the end of fiscal year 1999.

     As  part  of the  Forbearance  Agreement,  and  as  part  of the  Company's
     restructuring  plan, the Company entered into Modification  Agreements and,
     in  some  cases,  Subordination  and  Standstill  Agreements  with  certain
     unsecured   creditors.   These   agreements  place  each  creditor  into  a
     subordinate position with Finova and extend payoff of any obligation over a
     five-year period.

                                       2
<PAGE>


     Products
     --------

     The Company through its subsidiary OMNI Products, Inc. designs,  engineers,
     manufactures and markets premium grade crossing surface products  primarily
     for the U.S.  market.  The  Company's  products  cover a range  of  premium
     crossing materials that include crossings  manufactured from virgin rubber,
     reinforced  concrete and a combination of rubber and concrete.  The Company
     also produces a molded virgin rubber  rail-seal  product  (trade named Rail
     Guard) and purchases an outsourced virgin rubber rail seal product used for
     semi-premium rail crossings. The product is designed to go against the rail
     with the balance of the crossing filled with asphalt.

     All major North American Class 1 railroads,  such as CSX Transportation and
     Union Pacific and many regional  railroads and transit  systems approve the
     Company's products.

     Products are distributed by truck or rail. A significant limiting factor of
     the business is the freight costs from certain geographic points. Companies
     in  the  industry  with  nearby  shipping  points  have a  delivered  price
     advantage.  As such, in order to have a truly nationwide  sales channel,  a
     company in the industry must have multiple regional locations.

     Rail Crossing Market and Competitive Business Conditions
     --------------------------------------------------------

     Grade crossings are an important part of the transportation  infrastructure
     wherever rail and road traffic intersect. Premium grade crossings made from
     recycled  rubber,  virgin rubber or reinforced  concrete  provide a smooth,
     safe and quiet means for vehicles to quickly pass over railroad tracks. The
     choice of rubber or concrete  depends on the application and is primarily a
     matter of  customer  preference.  The  longer  life of  rubber or  concrete
     premium crossing surfaces  significantly  reduce maintenance costs compared
     to the traditional  surfaces of timber or asphalt.  Premium grade crossings
     are replacing the more common timber,  asphalt or poured-in-place  concrete
     surfaces,  as they provide better safety,  convenience and  durability,  as
     well as lower  maintenance  and life  cycle  costs.  Premium  surfaces  are
     commonly  used in  areas  with  high  road  traffic  densities  and  within
     industrial  facilities  to speed the  movement of lift trucks and to reduce
     cargo spillage and damage.

     Many  major U.S.  railroads  have moved  from  solid  rubber  crossings  to
     concrete crossings with rubber next to the rail. This trend has accelerated
     over  the  past  several  years  as a  result  of  industry  consolidation.
     Combination  concrete/rubber  crossing materials now represent the majority
     of the premium grade crossing  surface market.  Many railroads  continue to
     use asphalt as the major component of their  crossings.  A premium crossing
     is  usually  not  used  unless  paid  for  in  conjunction   with  a  local
     municipality or transit authority.

     Based on the Federal Railroad  Administration  publication the Highway-Rail
     Crossing Inventory Data, there are approximately 158,000 public and 100,000
     private  rail  crossings  in the U.S.  In addition  there are an  estimated
     50,000 other rail crossings on industrial properties, ports, intermodal and
     terminal  yards,  and on rail transit  systems.  At 308,000  estimated rail
     crossings  in the U.S.  and  assuming an average  1.5 tracks per  crossing,
     suggests that 462,000  total  crossing  surfaces  exist in the U.S. With an
     average estimated crossing length of 54 feet for each crossing surface, the
     total potential domestic market is approximately 25 million track feet.

                                       3
<PAGE>


     Industry  estimates of useful life of a non-premium  rail-crossing  surface
     are 10 years. This means that approximately 10%, or 2.5 million track feet,
     of all railroad  crossings are refurbished each year.  Management  believes
     that 20% or  approximately  500,000 track feet of annual  refurbishment  is
     done in premium or semi-premium surfaces. Assuming an average price of $120
     per track  foot,  the current  annual  domestic  market for  premium  grade
     crossing surface materials is approximately $60 million and is estimated to
     grow at 2% per year. The Company believes its revenues currently  represent
     approximately  20% of the  total  domestic  market  for all  premium  grade
     crossing surfaces.

     The vast majority of grade  crossings are  maintained or  retrofitted  with
     asphalt, timber planks,  concrete pavement or consolidated materials.  This
     market  segment is  estimated  at over $400 million in the U.S. and Canada.
     Because of their  benefits,  this market  segment is rapidly  converting to
     premium grade crossings.  The Company believes that, at the current rate of
     growth and  acceptance  by  customers,  within five years as much as 40% of
     this market segment will convert to premium or semi-premium crossings.

     Crossing  safety  is  increasingly  scrutinized  at the  federal  level and
     legislative  action is likely  to  mandate  certain  safety  standards  for
     crossings.  Such  legislation may increase the market for premium  crossing
     surfaces.

     The federal government and many state governments  recognize the importance
     of safe and well  maintained  rail  crossings.  Through the Federal Highway
     Administration  and the Intermodal Surface  Transportation  Efficiency Act,
     the federal  government  provides direct financial  support to rehabilitate
     public rail  crossings,  fund mass  transit  construction  and maintain the
     country's transportation infrastructure. The Company estimates that as much
     as 50% of domestic rail crossing system installations are funded in part by
     government programs at the federal, state or municipal level. The remainder
     of the  installations  are  made by  railroads  as part  of  their  ongoing
     maintenance programs and by industrial concerns as part of the construction
     or maintenance of their facilities.

     Where  customers  formerly  relied on  government  funding  to pay for most
     premium  crossing  surfaces,  there is a growing  recognition  that premium
     crossing surfaces significantly reduce installation and ongoing maintenance
     costs over the life of the crossing.  They have discovered significant long
     term cost savings by installing  premium crossing  surfaces using their own
     operating  funds.  Major railroads such as CSX  Transportation,  Burlington
     Northern/Santa  Fe and Union Pacific are expected to increase their premium
     crossing  installations  in the  future.  At the same time,  the market for
     premium crossing surface material can be volatile.  The major railroads are
     not  consistent  about  their  maintenance  policy,  which can cause  large
     fluctuations in a railroad's  demand for premium surface  materials,  or in
     the type of premium surface material required.

     The Company's  competitive advantage is its ability to provide a full range
     of premium grade crossing  materials.  Most  manufacturers  in the industry
     produce  either rubber or concrete  crossing  materials,  but not both. The
     Company's  variety of products allows it to meet a wide range of customers'
     needs and allows the Company to shift its sales  efforts and  manufacturing
     efforts from concrete to rubber, or vice-versa, as the market demands.

                                       4
<PAGE>


     Sales and Marketing
     -------------------

     U.S.  sales and marketing is  implemented  through a system of four regions
     designed to provide comprehensive coverage of key railroad customers. Sales
     manager employees manage two regions and independent sales  representatives
     manage  two.  In  addition,   the  Company  has  an   independent   account
     representative working in Omaha solely to service Union Pacific, one of the
     largest  users of grade  crossing  materials.  All report to the  Company's
     President.

     The  Company's  sales  employees  are  compensated  on a base  salary  plus
     commission.  Independent sales  representatives  are compensated  solely on
     commission.  Commissions  are not paid until funds are  collected  from the
     customer.

     Another component of the Company's sales and marketing effort is its unique
     customer  oriented program using part-time field technical  representatives
     who serve as an extension of the regional  sales force for technical  needs
     such as installations  and problem solving.  These  individuals have strong
     backgrounds in track construction and maintenance and are primarily retired
     railroad employees. Their prior relationships, loyalty to OMNI and customer
     service has significantly enhanced the Company's sales efforts.

     Although  the  Company  has over 300  customers,  approximately  74% of its
     fiscal 1999 sales were concentrated in its five largest customers. Sales to
     the Company's  five largest  customers as a group for the fiscal year ended
     April  30,  1998 was 77%.  The top  three  railroad  companies,  Burlington
     Northern-Santa  Fe, CSX  Transportation  and Union  Pacific,  collectively,
     represented  approximately  67% and  72%,  respectively,  of the  Company's
     fiscal 1999 and 1998 sales.

     Material Suppliers
     ------------------

     Basic raw  materials  required for  manufacturing  the  Company's  products
     include  off-spec  virgin rubber  obtained from rubber  brokers,  concrete,
     steel rebar and steel angle.

     Concrete and steel  materials are  available  from many sources in multiple
     locations.  However,  availability  of these  materials as well as off-spec
     virgin  rubber is subject to  seasonal  demand and market  variations.  The
     Company  believes  that  there  is an  adequate  supply  of all  basic  raw
     materials to meet its needs.

     The Company  anticipates  increasing  manufacturing  capacity  for both its
     concrete and virgin rubber products.  A number of outside sources available
     to the  Company,  as well as the  Company's  ability to expand  internally,
     allow the Company to increase  production  capacity  and to meet  increased
     demand for the Company's products.

     Patents and Licenses
     --------------------

     The  Company  has been  issued or has  patents  pending  on  several of its
     products,  such as its  Improved-Concrete  and its Embeded  Concrete-Rubber
     ("ECR")  products  incorporating  rubber  next to the rail with  reinforced
     concrete  panels.  There can be no assurance  that any patents issued would
     afford protection against  competition from similar inventions or products,
     or would not be infringed upon or designed around by others.  However,  the
     Company intends to enforce all patents it has been issued.

                                       5
<PAGE>


     Pursuant to a royalty agreement with Red Hawk Rubber Co. ("Red Hawk") which
     was transferred to OMNI in the acquisition from Reidel described above, the
     Company is obligated  to pay a royalty  equal to 5% of net sales of certain
     products acquired from Red Hawk. The agreement expired on June 30, 1999.


     Research and Development
     ------------------------

     The Company is engaged in a continuing  program of research and development
     to improve existing  products and develop more cost effective and efficient
     rail crossing  products.  During fiscal 1999,  the Company  redesigned  and
     improved its existing embedded rubber and concrete product.  The new design
     will allow the Company to sell to  additional  markets and to new customers
     as it meets  design  specifications  for most all railroad  crossings.  The
     Company's  expenditures  on research and  development  for the fiscal years
     ended April 30,  1999,  1998 and 1997 were  $113,445,  $127,624 and $61,646
     respectively.

     Employees
     ---------

     As of April 30,  1999,  the Company had 70 full time  employees  and 1 part
     time  employee.  Approximately  59 full  time  employees  were  engaged  in
     manufacturing  and  the  remainder  in  marketing,   sales,   research  and
     development, administrative and executive positions.


Item 2. Description of Property
-------------------------------

     The Company owns or leases the following properties:


                             Approximate        Own or
       Location             Square Footage      Lease       Purpose
       --------             --------------      -----       -------

     Portland, OR      (1)      3,000           Lease       Executive Offices
     McHenry, IL       (2)     21,271           Own         Manufacturing
     Ennis, TX         (2)     15,300           Own         Manufacturing
     Buena Park, CA    (3)        635           Lease       Former Sales Office
     Nevada City, CA   (4)     30,000           Own         Held for sale

     (1)  Leased on month-to-month basis.

     (2)  Properties are subject to a blanket  mortgage loan of $162,825 payable
          in monthly installments of $13,631,  including interest at 10% payable
          in full  December 1, 1999.  Properties  are also pledged as collateral
          for a revolving line of credit and capital expenditure loans.

     (3)  Leased  through  May,  2000.  The Company has entered  into a one-year
          sublease on the property  with a rate  greater than the current  lease
          cost.

                                       6
<PAGE>


     (4)  Property  is  subject  to a  mortgage  loan of  $1,201,279  payable in
          monthly  installments of $12,750 including interest at 11.375% payable
          in full in  December,  1999.  One hundred  percent of the  property is
          leased to others. Ron Gangemi, a shareholder of the Company,  owns One
          percent of the property.  Property is also pledged as collateral for a
          revolving line of credit and term and capital expenditure loans.

     All  properties  are well  maintained  and in good  condition.  The Company
     maintains  adequate  insurance  coverage on the property.  These properties
     meet the Company's needs for the foreseeable future.


Item 3. Legal Proceedings
-------------------------

     On January 9, 1999,  Edward George  Goebel and Kathy Goebel  ("Plaintiffs")
     filed suit against the Company,  and others, in the Third Judicial District
     Court, Salt Lake County, Utah.  Plaintiffs allege that Edward George Goebel
     suffered  injuries  when he fell off his  bicycle  while  traveling  over a
     railroad   crossing   containing   material  produced  in  part  by  Reidel
     Environmental  Technologies,  Inc.,  the  predecessor  in  interest to OMNI
     International  Rail Products,  Inc. The  Plaintiffs  have not yet specified
     their damages in the suit.  The case is not currently  scheduled for trial.
     The Company denies the Plaintiffs'  allegations and is vigorously defending
     the case.

     The Company's  insurance carrier is defending the claim under a reservation
     of its rights to dispute its legal  obligation  to defend the claim  and/or
     pay any adverse judgment.  The Company could be materially  affected if the
     plaintiffs receive an award against the Company which exceeds its insurance
     coverage  or  if  the  insurance  carrier  successfully  asserts  that  the
     Company's insurance policy does not cover such claim and refuses to pay the
     award.

     The  Company  is not  aware of any other  material  pending  or  threatened
     litigation to which the Company or any director,  officer,  or affiliate of
     the Company is or would be a party.


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

     The Annual meeting of the Company's  shareholders  was held on February 23,
     1999. The following  three  directors were elected at the meeting (all were
     directors prior to the meeting):

                William E. Cook
                Edward S. Smith
                John E. Hart

     Directors  hold office for a period of one year from their  election at the
     annual meeting of stockholders  and until their successors are duly elected
     and qualified.

     Shareholders  were also asked to approve a change of the Company's  name to
     OMNI Rail Products, Inc. Shares voting for were 3,221,670,  against were 0,
     and 3,250 abstained.  Shareholders also voted to approve a reverse split of
     the  Company's  outstanding  securities  on a ratio of one  share for every
     three shares  outstanding.  Shares voting for were 3,188,754,  against were
     132,916, and 3,250 abstained.

                                       7
<PAGE>

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters
----------------------------------------------------------------

     The Company's Common stock commenced  trading on the NASDAQ Smallcap Market
     on May 13, 1994. From May 1995 to March 23, 1999, the Company traded on the
     OTC Bulletin Board under the symbol  "CMDI." In  conjunction  with its name
     change,  the Company changed its ticker symbol to "ORXR" on March 23, 1999.
     As of April  30,  1999,  the  Company  had  approximately  300  record  and
     beneficial  stockholders  holding  1,703,098 shares of the Company's common
     stock.

     The published bid and ask  quotations for the previous two fiscal years are
     included in the chart below.  These  quotations  represent  prices  between
     dealers and do not include  retail  markup,  markdown  or  commissions.  In
     addition,  these quotations may not represent actual  transactions.  Prices
     are adjusted to reflect the  Company's  one for three  reverse  stock split
     completed in March 1999.


       -------------------------------------------------------------------
                      Quarterly Common Stock Bid Price Ranges
       -------------------------------------------------------------------
                                  1998                        1999
       -------------------------------------------------------------------
          Quarter            High       Low              High       Low
       -------------------------------------------------------------------
            1st              1.50       .93               .63       .45
       -------------------------------------------------------------------
            2nd              1.50       .87               .56       .37
       -------------------------------------------------------------------
            3rd              1.14       .57               .45       .21
       -------------------------------------------------------------------
            4th               .75       .51               .55       .27
       -------------------------------------------------------------------


     No  dividends  have been  declared or paid on the Common Stock and none are
     anticipated.  The Company is restricted  from paying  dividends by covenant
     with its senior lender.

     Prior to fiscal  year ended  April 30,  1999,  the  Company  had issued and
     outstanding  622,066 shares of Series B Convertible  Preferred  Stock,  par
     value  $.01 per  share  with  voting  rights  of one  common  share to each
     preferred  share,  until  converted  or  canceled.  Each  share of Series B
     convertible  preferred  stock was  convertible  to a like  number of common
     shares if the Company  reported  gross annual  revenues of  $20,000,000  or
     annual  pre-tax  earnings of  $1,500,000  during either of the fiscal years
     ended  April 30, 1998 or 1999.  The  Company did not meet these  conversion
     standards by the end of either such fiscal year end. Therefore,  the Series
     B preferred  stock will be canceled by the Company upon the issuance of its
     fiscal year ended April 30, 1999 consolidated financial statements.

                                       8
<PAGE>


Item 6. Management's  Discussion and Analysis of Financial Condition and Plan of
        Operation
--------------------------------------------------------------------------------

     The following  Selected  Financial Data for the years ended April 30, 1999,
     1998 and 1997  have  been  derived  from the  financial  statements  of the
     Company  audited  by KPMG  Peat  Marwick  LLP,  the  Company's  independent
     auditors.  The  report  of  KPMG  Peat  Marwick  LLP on the  aforementioned
     consolidated  financial  statements contains an explanatory  paragraph that
     states  that the  Company  suffers  liquidity  constraints,  has a  working
     capital deficit,  and a shareholder  deficit,  that raise substantial doubt
     about its  ability to continue as a going  concern.  Management's  plans in
     regard to these  matters are also  described in note 13 to those  financial
     statements.  The financial  statements do not include any adjustments  that
     might result from the outcome of this uncertainty.  This Selected Financial
     Data should be read in  conjunction  with, and is qualified in its entirety
     by  reference  to, the  financial  statements  and  related  notes  thereto
     included elsewhere in this Report.

     Except for the historical  information  contained  herein,  the matters set
     forth in this Report include forward-looking  statements within the meaning
     of the "safe harbor" provisions of the Private Securities Litigation Reform
     Act of 1995.  These  forward-looking  statements  are  subject to risks and
     uncertainties  that may cause actual  results to differ  materially.  These
     risks  and  uncertainties  are  detailed  throughout  this  Report  and are
     discussed  from time to time in the Company's  periodic  reports filed with
     the  Securities and Exchange  Commission.  The  forward-looking  statements
     included in this Report speak only as of the date hereof.

     As  mentioned  in item 1 (The  Business)  the  Company,  on April 30, 1997,
     completed  an  agreement  and plan of merger with OMNI  International  Rail
     Products, Inc. (OMNI). For financial reporting purposes, the transaction is
     considered  a  reverse  acquisition  and has been  accounted  for under the
     purchase method of accounting.  Thus, the operating  results  presented and
     discussed herein reflect only the activity of OMNI.

     The following table sets forth the Company's operating results in thousands
     of dollars and as a percentage of revenue for the years ended April 30:

<TABLE>
<CAPTION>

                                             1999                    1998                  1997
                                    ---------------------   --------------------   --------------------

<S>                                 <C>            <C>       <C>          <C>       <C>          <C>
Revenue                             $ 12,438       100.0%    16,449       100.0%    12,903       100.0%
Cost of goods sold                     9,100        73.2     13,447        81.7     10,558        81.8

Gross Profit                           3,338        26.8      3,002        18.3      2,345        18.2

General & Administrative Expenses      1,117         9.0      1,587         9.6      1,138         8.8
Selling Expenses                         985         7.9      1,666        10.1      1,323        10.3
Research and Development                 114          .9        128          .8         62          .5
Restructuring Charge                    (130)       (1.0)     1,684        10.2       --           --

Earnings (Loss) from operations        1,252        10.0     (2,063)      (12.5)      (178)       (1.4)

Interest Expense                        (538)       (4.3)      (773)       (5.3)      (827)       (5.3)
Other Income (Expense)                   437         3.5        (44)       (3.8)      (346)       (3.8)

Net earnings (loss)                    1,151         9.2     (2,882)      (17.5)    (1,295)      (10.0)

Basic earnings (loss) per share         0.66                 (1 .56)                 (1.24)

</TABLE>

                                       9
<PAGE>


     REVENUE
     1999 vs. 1998

     The Company  derives  its  revenues  from the sale of premium  highway/rail
     grade   crossing   material   to   railroads,   general   contractors   and
     municipalities.  Management  operates  its  crossing  business  as a single
     segment with product lines in concrete,  virgin rubber and a combination of
     rubber and concrete.  Net revenues for fiscal 1999 declined by  $4,010,684,
     or 24.4% from last fiscal year. A major part of the decline came from lower
     sales to fiscal  1998's  largest  customer.  Purchases by this one customer
     declined from  $6,214,697 in fiscal 1998 to $3,186,333 in fiscal 1999, or a
     49%  drop.  Sales  to the  Company's  top  three  customers,  the  Class  I
     railroads,  BNSF, CSX and UP, declined by $3,382,762 or 29%.  Declines also
     occurred as a result of  discontinuance  of the Company's  recycled  rubber
     products  (approximately  $2.2 million) and discontinuance of international
     sales (approximately $.5 million).  The aforementioned decline in sales was
     in part offset by an increase in sales to other customers.

     The Company  improved  its  delivery  time  during the current  fiscal year
     lowering lead times to one month when  previously lead times often exceeded
     6 months.  Much of this  pervious  back order  consisted  of the  Company's
     standard  concrete  and rubber  product.  Improved  delivery has helped the
     Company to diversify its sales to a wider  customer  base,  although it has
     meant a reduction in sales  volume.  The top three United  States  railroad
     systems  (BNSF,  CSX and UP)  purchase a majority of the  premium  crossing
     materials  produced and represent  the majority of the Company's  revenues.
     These railroads are not consistent in their purchase  policies from year to
     year and can significantly influence the Company as well as the market as a
     whole.  Management  believes  the  concrete  portion  of the  premium  rail
     crossing  market  will  experience  the  greatest  growth in coming  years.
     However,  such growth may not be linear and can change  radically from year
     to year due to the  unpredictable  buying  habits of the  largest  railroad
     systems.

     Sales by product type also changed  dramatically  during fiscal 1999. Sales
     of  the  Company's  recycled  rubber  products  dropped  $2,165,253  as all
     recycled  rubber product  manufacturing  was  discontinued  in fiscal 1998.
     Concrete sales dropped by $1,987,376 mainly due to a drop in demand for the
     Company's  proprietary standard concrete and rubber product (called "SCR").
     Increased sales of the Company's Improved Concrete product occurred despite
     an increase in price in fiscal 1999.  Sales of all virgin  rubber  products
     increased by only  $129,553,  or 2%.  However,  sales of the Company's most
     expensive virgin rubber product,  Heavy Duty,  increased by over $1 million
     or 68% while  sales of the  Company's  Rail-Guard,  rail-seal  semi-premium
     product  dropped.  Part  of  the  trend  in  virgin  rubber  sales  is as a
     replacement  for the Company's  recycled  rubber  products,  despite virgin
     rubber products being twice the cost of recycled rubber.

                                       10
<PAGE>


     1998 vs. 1997

     Net revenues for fiscal 1998 were $16,448,876 as compared to $12,902,491 in
     1997 or a 27% increase. Much of the increase came from greater sales of the
     Company's  SCR  product.  This  patented  product is  comprised of a molded
     concrete form with rubber rail flangeway filler embedded into the concrete.
     SCR sales  increased  from  $690,941  in 1997 to  $6,397,770  in 1998 or an
     increase of 826%. At the same time,  sales of the Company's  other concrete
     products  dropped below prior year's sales.  Total  concrete  revenues were
     $8,090,346  for 1998  compared to  $5,121,332  in 1997, an increase of 58%.
     Rubber sales  declined  slightly to $7,628,987  in 1998 from  $7,781,159 in
     1997,  a drop of less than 2%.  Sales of rubber  products  shifted from the
     Company's standard, heavy duty and steel reinforced products (full crossing
     material) to its  Rail-Guard  flange way filler  materials that are used in
     conjunction with asphalt.  Rail-Guard sales increased to $3,857,219 in 1998
     from $558,189, an increase of 591%.


     COST OF SALES & GROSS MARGIN
     1999 vs. 1998

     Cost of sales  declined  from  $13,446,678  in fiscal 1998 to $9,100,437 in
     fiscal  1999  or a 32%  decline.  However,  costs  as a  percent  of  sales
     decreased substantially from 82% in fiscal 1998 to 73% in fiscal 1999. This
     improved  the  Company's  overall  gross  profit  margin for fiscal 1999 by
     $335,557,  or 11%, while the gross profit margin  percentage  improved from
     18% in fiscal 1998 to 27% in fiscal 1999.  Much of this  difference was due
     to an $800,000  write-off of obsolete  inventory  taken directly to cost of
     sales in fiscal 1998. Without this writedown,  the fiscal 1998 gross profit
     margin  percentage  would have been 23%. Much of the improved  gross margin
     and lower  cost of sales  resulted  from  discontinuance  of the  Company's
     unprofitable  operations in Lancaster,  Pennsylvania and Portland,  Oregon.
     However,  the  Company's  gross  margin  was  adversely  affected  by these
     operations  during  fiscal  1999 while  these  plants  were shut down.  The
     Company also  negotiated a new  outsource  manufacturing  contract with its
     existing  supplier  for  concrete  product  that  provided the Company with
     better  return on SCR product  sales.  Additionally,  the  Company  reduced
     overhead  costs at its  remaining  plant  locations by  eliminating  excess
     management, reducing inventories and improving operating efficiencies. Both
     McHenry  and  Ennis   operations  had  fiscal  1999  gross  margin  returns
     comparable to fiscal 1998.


     1998 vs. 1997

     Cost of goods sold for the year ended  April 30, 1998 were  $13,446,678  as
     compared to $10,557,688 in 1997.  Cost of sales as a percent of revenue was
     the same for both years.  Included in costs for both years were significant
     write-offs of inventory.  For 1998, the write-off was $1,085,600 or 6.6% as
     a percent of revenue  and for 1997 it was  $571,200  or 4%.  Excess  rubber
     inventory (primarily recycled rubber) resulted from obsolescence and out of
     specification  material  produced,  and due to reduced  demand for recycled
     rubber railroad crossing material. Warranty costs are also included in cost
     of sales.

     Warranty costs and related customer claims were a smaller component of cost
     of sales in fiscal  1999,  but were a major  component  of cost of sales in
     fiscal  years 1998 and 1997.  As shown in the table  below,  both  warranty
     costs and inventory writedowns declined in the current fiscal year.

                                       11
<PAGE>
<TABLE>
<CAPTION>


                    WARRANTY EXPENSE AND INVENTORY WRITE OFF

Fiscal year ended            April 30, 1999            April 30, 1998            April 30, 1997
-----------------        ----------------------   ------------------------   ----------------------
                                     Percent of                 Percent of               Percent of
                          Dollars      sales        Dollars       sales       Dollars      sales
                          -------      -----        -------       -----       -------      -----
<S>                      <C>            <C>       <C>             <C>        <C>            <C>
Warranty Expense         $ 165,130      1.3%      $  418,040      2.5%       $483,528       3.7%
Inventory Written Off    $  14,555      0.2%      $1,085,600      4.9%       $571,200       4.4%

</TABLE>


     The Company records a percent of each sale towards the warranty expense (as
     represented  in the above  table) and places  that  amount  into an accrued
     reserve.  The amount  accrued  reflects  management's  estimate of possible
     future  warranty and  customer  claims  exposure.  The accrual was lower in
     fiscal 1999 due to fewer actual warranty claims. When warranty services are
     incurred,  the Company  credits  cost of sales for the product  used in the
     warranty service and correspondingly  reduces the warranty reserve.  Actual
     warranty  services  incurred in fiscal 1999 were $83,000.  Actual  warranty
     services  incurred in 1998 were $334,000 that included several  significant
     international warranty obligations that exceeded $100,000 in total. Much of
     prior  year  warranty  issues  were  with  the  Company's  recycled  rubber
     products,  and with  international  sales.  The  Company  has seen a marked
     decline in warranty  claims  with the  discontinuance  of  recycled  rubber
     products and  elimination  of  international  sales.  The current  warranty
     accrual  balance  includes an estimated  reserve of $175,000 for a customer
     claim involving disputed freight costs for goods shipped in fiscal 1997 and
     1998.  The Company has produced  concrete  related  crossing  materials for
     three years.  The Company  provides a standard six year  warranty and feels
     the  present  reserve  should be  adequate  to cover  future  warranty  and
     customer  claims that may arise for the  Company's  existing  recycled  and
     virgin rubber and concrete crossing materials.

     The Company's  policy is to write off inventory that is more than two years
     old. The  majority of the  extraordinary  inventory  write off in the years
     ended April 30,  1998 and 1997  occurred at the end of each fiscal year and
     included a $150,000 reserve in 1997 that related to overstocked  inventory.
     Almost  all  of  the  overstocked  or  obsolete  inventory  related  to the
     Company's  recycled  rubber  products.  The Company  liquidated  all of its
     written off inventory in fiscal 1999.


     GENERAL AND ADMINISTRATIVE EXPENSES
     1999 vs. 1998

     General and  administrative  expenses declined by $469,936 or 30% in fiscal
     1999 over the prior  fiscal  year.  Declines  occurred in  virtually  every
     expense category.  Overall this reflects current management's  reduction of
     all operating costs as part of cost reduction  measures  implemented by the
     Company during the  restructuring.  Reductions in personnel,  including the
     Company's prior top management,  created a reduction in the Company's labor
     costs by  $323,430.  Similarly,  this  reduction  in  personnel  created  a
     reduction  of  $70,336  in  Travel  &  Entertainment,  and  other  variable
     personnel costs from telephone to payroll services.  Other significant cost
     reductions occurred in professional fees paid to accountants, attorneys and
     consultants ($61,187 lower) as fewer professional services were used by the
     Company and  fees/licenses & financing expense ($54,651 lower) due to fewer
     fees charged by the Company's  senior lender.  The reduction in general and
     administrative  expenses was partially offset by an accrued cost of $55,000
     for settlement of a lawsuit with a former consultant with the Company.

                                       12
<PAGE>


     1998 vs. 1997

     General and Administrative  Expenses were $1,586,956 and $1,137,978 for the
     fiscal years ended April 30, 1998 and 1997, respectively.  The increase for
     fiscal 1998 is primarily due to a $219,146 increase in consulting  charges,
     $56,651 increase in fees and licenses,  $67,494 increase in accounting fees
     and a $38,076 increase in insurance premium costs.  Consulting charges were
     up due to the Company's  employment of various  financial  consultants that
     were hired to assist the  Company in  obtaining  equity or debt  financing.
     Fees and licenses increased due to additional financing fees charged by the
     Company's senior lender, Finova Financial Corporation.  These non-recurring
     fees resulted from the Company exceeding its borrowing line and deferral of
     certain  principal  payments.  Accounting fees were up due to the Company's
     change from a private  company to one that is publicly  traded.  Similarly,
     insurance  costs  increased due to added  directors and officers  liability
     insurance.


     SELLING EXPENSES:

     Selling  expenses  for the years ended April 30,  1999,  1998 and 1997 were
     $985,350,  $1,665,506 and $1,323,070,  respectively,  and represented 7.9%,
     10.1% and 10.3% of sales, respectively. Commissions are a primary component
     of selling costs and were $598,007 (61% of selling costs), $783,284 (47% of
     selling  costs) and $669,619 (50% of selling  costs) for fiscal years ended
     1999, 1998 and 1997,  respectively.  Commission expense is directly tied to
     total  sales.  The average  commission  rate to sales  remained  relatively
     constant from year to year.


     1999 vs. 1998

     Selling  expenses  declined  in fiscal 1999 by  $680,156.  $185,277 of this
     decline came from lower commissions. Fiscal 1999 selling payroll costs were
     down  $256,781 or 50%  compared to fiscal  1998,  due to lower sales (lower
     employee sales  commissions)  and elimination of personnel at the Company's
     Southwest sales office. All other direct marketing, promotion,  advertising
     and sales related costs were down approximately  $96,000,  again mainly due
     to the drop in sales and consolidation of the Company's sales offices.  Bad
     debt  expense is  recognized  through  selling  expenses  and  declined  by
     $141,938  from fiscal 1998 to fiscal  1999.  The higher bad debt expense in
     fiscal  1998  resulted  from  write-off  of  several  significant  European
     accounts. Fiscal 1999 bad debt write-offs were approximately $22,000.

     1998 vs. 1997

     Selling  expenses  increased  by $342,436 for fiscal 1998 over fiscal 1997.
     One  component of this  increase  came from greater  commission  expense of
     $113,665 as noted above. Additionally, selling payroll costs in fiscal 1998
     were  higher by $192,315  over fiscal l997 also due to greater  commissions
     paid to employees  associated with greater sales.  Other selling costs were
     marginally  higher in fiscal 1999,  again  mainly due to the greater  sales
     activity.

                                       13
<PAGE>



     RESTRUCTURING CHARGES

     The Company recorded  restructuring  charges in fiscal 1998 associated with
     the shut down of two  factories  and  associated  with the  write  down and
     liquidation of manufacturing equipment. These charges are the result of the
     Company's  refocus of its operation into producing more concrete and virgin
     rubber grade crossing  material and  elimination of excess  capacity in the
     company's recycled rubber manufacturing operations. The total restructuring
     charges of $1,684,833  included  $1,239,567 in write down of  manufacturing
     equipment to fair value, $226,950 in costs associated with plant shut downs
     and equipment liquidation, $158,316 in severance costs and $60,000 in other
     restructuring charges.

     Recoveries   in  fiscal  1999   recognized   against  prior  fiscal  year's
     restructuring  charge  includes  $25,000  for  a  negotiated  reduction  of
     severance and $105,000  realized on elimination of accrued costs associated
     with the Company's  Portland  production  facility  terminated  lease.  The
     remaining  $35,000 of Portland's lease accrual was converted into a note as
     settlement  with the landlord.  All  liabilities  accrued in fiscal 1998 as
     part of the restructuring  were paid or converted to a note in fiscal 1999.
     During fiscal 1999,  the Company sold  virtually all assets written down in
     fiscal 1998,  at amounts at or below the assets'  written down values.  The
     Company  did not write down its  Lancaster,  PA facility in fiscal 1998 and
     sold the facility at a gain of approximately $159,000.


     INTEREST EXPENSE & OTHER INCOME/EXPENSE
     1999 vs. 1998

     Fiscal 1999  interest  expense fell  $235,032 or 30% from fiscal 1998.  The
     reduction resulted from lower borrowed funds.  Borrowed funds during fiscal
     1999  averaged  over $2 million  lower than  during the prior  fiscal  year
     (comparing quarter end borrowing  balances).  At the same time, the Company
     realized  higher  rents  on its  California  facility  contributing  to the
     increased other income.  The Company also recognized  amortization costs as
     an other expense in fiscal 1998 and 1997 that became fully amortized at the
     end of fiscal 1998. Other income in fiscal 1999 also includes gains on sale
     of assets  including an  approximate  $153,000 gain realized on the sale of
     the Company's Pennsylvania manufacturing facility that occurred in December
     1998.

     1998 vs. 1997

     Interest  Expense was  $772,984  and $827,095 for the years ended April 30,
     1998  and  1997,  respectively.  The  decline  is due to  lower  levels  of
     principal  on all  the  Company's  term  debt as  well  as a  reduction  in
     borrowings on the Company's  line of credit.  This includes over $1 million
     in principal reduction in fiscal 1998.


     LIQUIDITY AND CAPITAL RESOURCES

     The Company's  combined cash balance at April 30, 1999 and 1998 amounted to
     $36,280 and  $393,887,  respectively.  The Company's  operating  activities
     during fiscal 1999  generated cash of $634,028 on net income of $1,151,273.
     Reductions in working capital offset cash generated from operations. During
     fiscal 1998 the Company generated  $817,183 of cash from operations despite
     loss for the year of $2,882,185. Much of fiscal 1998's loss occurred due to
     write down or  write-off  of  non-producing  assets.  Cash  generated  from
     operations in 1997 was $331,424.  The Company also received $100,000 of net
     proceeds from the sale of stock in fiscal 1997.

                                       14
<PAGE>


     Net  working  capital  deficit  at April  30,  1999 and  1998  amounted  to
     ($2,530,187) and  ($5,062,315),  respectively.  Reductions in the Company's
     current  debt  borrowings  as well as  decreases  in  payables  and accrued
     liabilities  helped lower the working capital deficit.  Short term debt was
     paid down through cash generated  from the Company's  operations as well as
     from proceeds  from sales of assets.  At the same time funds were also used
     to acquire  $253,592  of fixed  assets in fiscal  1999.  The  Company  also
     converted approximately $538,000 of short-term obligations,  and $67,500 of
     common stock puts into 7% long-term  subordinated notes. Terms of the notes
     require  interest  only  payments  beginning  in October 1999 with 12 equal
     quarterly  principal payments beginning in October 2000 plus interest.  The
     notes are subject to a subordination and standstill agreement with Finova.

     The Company was in material default of certain  financial and non-financial
     loan covenants under its Security and Loan Agreement with its senior lender
     Finova Financial Corporation  ("Finova").  In July 1998 the Company entered
     into a  Forbearance  Agreement  with Finova  under which  Finova  agreed to
     forbear in taking any action  against the Company by reason of the existing
     defaults. In addition,  under the terms of the Forbearance  Agreement,  the
     Company was permitted an overadvance  facility of up to $400,000 beyond the
     normal terms of the line of credit  trough June 30, 1999.  The  Forbearance
     Agreement also  eliminated the monthly  principal  payment  requirements on
     Finova's  term debt. As part of the  Forbearance  Agreement the Company was
     subject to  additional  covenants  that it met  during  fiscal  1999.  This
     included  requiring the Company to raise an  additional  $250,000 in equity
     capital or subordinated  debt and disposal of certain assets (proceeds must
     go to pay down various loans with Finova).  The Company raised  $275,160 in
     the form of  subordinated  convertible  secured  notes.  These  notes  bear
     interest at 8% payable  monthly,  and are  convertible  into the  Company's
     common stock at  approximately  $0.19 per share.  The notes become callable
     and have a put  feature  that  becomes  effective  two  years  after  their
     issuance. The notes are subject to a subordination and standstill agreement
     with Finova

     The  Company's  capital  expenditures  were $253,592 and $231,802 in fiscal
     1999 and 1998,  respectively.  Expenditures in 1998 were incurred primarily
     for  necessary   improvements  in  the  Company's  production   facilities.
     Expenditures  in fiscal  1999 were  mostly  for  changes  to the  Company's
     existing  concrete  forms to allow  production of a new,  improved and more
     widely accepted embedded rubber in concrete premium railroad grade crossing
     product.  In addition,  Company  liquidated its security holdings in fiscal
     1998 that  generated  an  additional  proceeds to the Company of  $752,573.
     Sales of assets generated  $842,557 and $571,038 of proceeds in fiscal 1999
     and 1998,  respectively.  These  proceeds  were used to retire  much of the
     Company's term debt and mortgage in fiscal 1999. The Company's Nevada City,
     California  property is subject to a mortgage that has an extended due date
     of December  1999.  This  facility is for sale and the Company  anticipates
     selling it once an acceptable offer is received.

     The Company's primary source of funds is from its operations and borrowings
     on its line of credit.  The Company is  restricted  as to the amount it can
     borrow  from  Finova  based  on  a  percent  of  eligible  receivables  and
     inventory.  Additionally,  the Company will need replacement debt or equity
     financing  after the end of the Finova  agreement on August 31,  1999.  The
     Company is presently  negotiating  financing that will replace its existing
     borrowing facility and anticipates adding additional long term financing to
     assist in expected  future capital  expenditures  that will allow increased
     capacity.

     There can be no assurance  the Company will be able to complete the sale of
     its California facility prior to its mortgage maturity date.  Additionally,
     the Company's  current  financing  facility will require  restructuring  or
     additional  financing must be found prior to the date when Finova's debt is
     due.

                                       15
<PAGE>


     YEAR 2000 COMPLIANCE ISSUES

     The year 2000 issue  results when older  computer  programs use two digits,
     rather than four digits to define a year,  thus programs do not recognize a
     year that begins with "20" rather than the familiar "19." If not corrected,
     many computer applications could fail or create erroneous results.

     Risks of the Company's year 2000 issues:
     ----------------------------------------
     The Company's  products are relatively  non-technical and are produced in a
     non-automated environment.  The Company's main use of electronic automation
     is in its  administrative  processes.  As such,  the Company feels that its
     direct  internal  exposure  to year 2000  issues  are  limited  to  certain
     computer  software  applications and hardware systems and to a few items of
     office and facility  equipment.  The Company also uses an  electronic  data
     transfer  mechanism (EDI) for  transferring  transactional  information and
     funds. Electronic transactions must be year 2000 compliant to ensure proper
     processing  of  information.  Exposure to year 2000 issues from third party
     vendors  or  customers  may  occur.  In  addition,  the  Company  would  be
     negatively  impacted in the event its Senior financing source was unable to
     forward funds when needed to meet the Company's financial commitments.

     The Company's present state of readiness:
     -----------------------------------------
     The Company uses a fiscal year end that  straddles  the calendar year 2000.
     Because of this,  the  Company  has had to upgrade  its  computer  systems,
     including  installing  updated computer software and hardware,  in order to
     begin fiscal 2000 accounting and reporting.  The Company has also performed
     various tests of certain systems that contain  micro-processing  chips that
     may have a built in year 2000 problem.  This includes  phone  systems,  fax
     machines and other  automated  office  devices.  The Company feels that its
     internal systems should not present a significant issue on January 1, 2000.
     The Company will update its EDI software and systems in the calendar fourth
     quarter of 1999, and is  investigating  customer year 2000  compliance with
     these  systems.  Many of the Company's  raw material  suppliers do not rely
     heavily on  automated  systems  for  manufacturing  product.  Although  the
     Company  has made only  limited  inquiry of its  vendors on their year 2000
     preparedness, the Company feels any exposure will be minimal.

     Costs to Address the Year 2000 issues:
     --------------------------------------
     Through April 30, 1999, the Company had incurred  approximately  $30,000 in
     costs to upgrade its systems.  The Company expects to incur another similar
     amount to achieve full preparedness for year 2000.

     The Company's Contingency plans:
     --------------------------------
     The Company's worst case scenario for year 2000 is the effects it will have
     on the Company's customers.  The Federal Reserve Board of the United States
     has  expressed  that its  primary  concern  for small  business is not from
     actual  year  2000  issues,  but  rather  from the  effects  from the small
     businesses'  larger customers building up supplies as a contingency for the
     year 2000.  The result  could be an over supply by the large  customer  and
     discontinued  orders to the small  supplier as those  supplies are used up.
     The Company has no  contingency  plan in the event orders  should  diminish
     after the end of the calendar year.  However,  the Company  feels,  even in
     this  situation,  that its exposure is limited.  The Company's  business is
     seasonal with the winter  months the slowest time of the year already.  The
     Company  generally  anticipates  this slow period and takes steps to ensure
     adequate  funds  are  available  until  business  picks  up in the  Spring.
     Additionally,  the  Company's  product  is  usually  not  one  that  larger
     customers stock pile as an essential inventory item. Most crossing material
     is purchased on an as needed basis and as such orders  should be unaffected
     by this issue.  Other issues or problems could occur that management cannot
     foresee or control and therefore Management cannot adequately determine the
     outcome of such occurrences.  Management  believes the Company,  as a small
     non-technical  business, will probably better deal with year 2000 issues as
     they arise than larger automated companies.

                                       16
<PAGE>


ITEM 7. FINANCIAL STATEMENTS



                     OMNI RAIL PRODUCTS, INC. AND SUBSIDIARY

                     (Formerly Creative Medical Development, Inc.)

                     Consolidated Financial Statements

                     April 30, 1999 and 1998

                     (With Independent Auditors' Report Thereon)


                                       17
<PAGE>


                          INDEPENDENT AUDITORS' REPORT



The Board of Directors
OMNI Rail Products, Inc.:


We have  audited  the  accompanying  consolidated  balance  sheets  of OMNI Rail
Products, Inc. and Subsidiary (formerly Creative Medical Development,  Inc., the
"Company")  as of  April  30,  1999  and  1998,  and  the  related  consolidated
statements of operations,  stockholders'  equity  (deficit),  and cash flows for
each of the  years  in the  three  year  period  ended  April  30,  1999.  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 present
fairly, in all material respects,  the financial position of OMNI Rail Products,
Inc. and Subsidiary  (formerly Creative Medical  Development,  Inc.) as of April
30, 1999 and 1998, and the results of their  operations and their cash flows for
each of the years in the three year period  ended  April 30, 1999 in  conformity
with generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will  continue as a going  concern.  As discussed in note 13 to
the   consolidated   financial   statements,   the  Company  suffers   liquidity
constraints,  has significant debt maturities  within one year and has a working
capital  deficit.  In addition,  the Company has a  shareholder  deficit.  These
factors  raise  substantial  doubt  about its  ability  to  continue  as a going
concern.  Management's  plans in regard to these  matters are also  disclosed in
note 13. The  consolidated  financial  statements do not include any adjustments
that might result from the outcome of this uncertainty.



KPMG Peat Marwick LLP




Portland, Oregon
June 25, 1999

                                      F-1
<PAGE>
<TABLE>
<CAPTION>


                            OMNI RAIL PRODUCTS, INC.
                                 AND SUBSIDIARY

                           Consolidated Balance Sheets

                             April 30, 1999 and 1998

                       Assets                               1999             1998
                                                            ----             ----
Current assets:
<S>                                                      <C>                <C>
    Cash                                                 $    36,280        393,877


    Accounts receivable, less allowance for doubtful
      accounts of $56,916 in 1999 and $68,776 in 1998      1,478,337      1,853,280
    Inventories, net                                       1,330,663      1,423,800
    Prepaid expenses and deposits                             51,241         52,158
                                                         -----------    -----------

              Total current assets                         2,896,521      3,723,115

Real estate and other assets held for sale                 1,400,000      1,618,275
Property, plant and equipment, net                         1,904,156      2,272,214
                                                         -----------    -----------

                                                         $ 6,200,677      7,613,604
                                                         ===========    ===========

            Liabilities and Stockholders' Deficit

Current liabilities:
    Accounts payable                                       1,480,166      1,884,679
    Accrued liabilities                                      879,995      1,459,092
    Notes payable                                          1,693,135      3,305,283
    Current portion of long-term debt                      1,373,412      2,136,376
                                                         -----------    -----------

              Total current liabilities                    5,426,708      8,785,430
                                                         -----------    -----------

Long-term debt, less current portion                       1,403,115        522,342

Commitments and contingencies

Stockholders' deficit:
    Convertible preferred stock, $.01 par value,
      25,000,000 shares authorized:
        Series B, 1,000,000 shares authorized, 195,619
         and 207,355 shares issued and outstanding in
         1999 and 1998, respectively                           1,956          6,221
    Common stock, 50,000,000 shares authorized, $.01
      par value, 1,703,098 and 1,841,586 shares issued
      and outstanding in 1999 and 1998, respectively          17,031         55,246
    Additional paid-in capital                             2,369,880      2,413,651
    Accumulated deficit                                   (3,018,013)    (4,169,286)
                                                         -----------    -----------

              Total stockholders' deficit                   (629,146)    (1,694,168)
                                                         -----------    -----------

                                                         $ 6,200,677      7,613,604
                                                         ===========    ===========


See accompanying notes to consolidated financial statements.

                                      F-2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                     OMNI RAIL PRODUCTS, INC.
                                          AND SUBSIDIARY

                               Consolidated Statements of Operations

                             Years ended April 30, 1999, 1998 and 1997


                                                         1999            1998            1997
                                                         ----            ----            ----
<S>                                                 <C>               <C>             <C>
Net sales                                           $ 12,438,192      16,448,876      12,902,491
Cost of sales                                          9,100,437      13,446,678      10,557,688
                                                    ------------    ------------    ------------

              Gross profit                             3,337,755       3,002,198       2,344,803
                                                    ------------    ------------    ------------

General and administrative expenses                    1,117,020       1,586,956       1,137,978
Selling expenses                                         985,350       1,665,506       1,323,070
Research, development and engineering                    113,795         127,624          61,646
Restructuring charges                                   (130,435)      1,684,833            --
                                                    ------------    ------------    ------------

                                                       2,085,730       5,064,919       2,522,694
                                                    ------------    ------------    ------------

              Earnings (loss) from operations          1,252,025      (2,062,721)       (177,891)
                                                    ------------    ------------    ------------

Other income (expense):
    Interest expense                                    (537,952)       (772,984)       (827,095)
    Legal settlement                                        --              --          (334,500)
    Amortization of organization costs                      --          (237,955)       (119,249)
    Miscellaneous income                                 273,151         163,686         133,219
    Gain (loss) on sale of assets                        164,049          29,683         (25,156)
                                                    ------------    ------------    ------------

              Total other expense                       (100,752)       (817,570)     (1,172,781)
                                                    ------------    ------------    ------------

              Earnings (Loss) before income taxes      1,151,273      (2,880,291)     (1,350,672)

Provision (benefit) for income taxes                        --             1,894         (55,607)
                                                    ------------    ------------    ------------

              Net earnings (loss)                   $  1,151,273      (2,882,185)     (1,295,065)
                                                    ============    ============    ============


Basic earnings (loss) per share                     $       0.66           (1.56)          (1.24)
                                                    ============    ============    ============

Diluted earnings (loss) per share                   $       0.52           (1.56)          (1.24)
                                                    ============    ============    ============

Basic weighted common shares outstanding               1,735,473       1,844,242       1,042,098
                                                    ============    ============    ============

Diluted weighted common shares outstanding             2,232,940       1,844,242       1,042,098
                                                    ============    ============    ============



       See accompanying notes to consolidated financial statements.

                                       F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                OMNI RAIL PRODUCTS, INC.
                                                      AND SUBSIDIARY

                                   Consolidated Statements of Stockholders' (Deficit) Equity

                                            Years ended April 30, 1999, 1998 and 1997



                                  Preferred stock
                                     Series B                     Common stock            Additional                      Total
                             --------------------------    --------------------------      paid-in      Accumulated   stockholders'
                                Shares         Amount         Shares         Amount        capital        deficit   equity (deficit)
                                ------         ------         ------         ------        -------        -------   ----------------

<S>                          <C>            <C>            <C>            <C>            <C>            <C>            <C>
Balance, April 30, 1996             --      $      --        1,033,721    $    31,010    $ 1,328,990    $    72,964    $ 1,432,964

Issuance of common stock            --             --           37,248          1,117        116,383           --          117,500
Dividends                           --             --             --             --             --          (65,000)       (65,000)
Payment of stock dividend           --             --           77,809          2,334        186,478           --          188,812
Preferred and common shares
  issued in merger               207,355          6,221        702,715         21,082        812,755           --          840,058
Net loss                            --             --             --             --             --       (1,295,065)    (1,295,065)
                             -----------    -----------    -----------    -----------    -----------    -----------    -----------

Balance, April 30, 1997          207,355          6,221      1,851,493         55,543      2,444,606     (1,287,101)     1,219,269

Repurchase of stock puts            --             --           (9,907)          (297)       (30,955)          --          (31,252)
Net loss                            --             --             --             --             --       (2,882,185)    (2,882,185)
                             -----------    -----------    -----------    -----------    -----------    -----------    -----------

Balance, April 30, 1998          207,355          6,221      1,841,586         55,246      2,413,651     (4,169,286)    (1,694,168)

Repurchase of stock put                                         (5,944)           (59)       (18,693)                      (18,752)
Conversion of stock puts
  to debt                                                      (21,397)          (214)       (67,285)                      (67,499)
Cancellation of escrowed
  shares                         (11,736)          (117)      (111,147)        (1,111)         1,228                          --
Effect of one for three
  reverse split                                  (4,148)                      (36,831)        40,979                          --

Net income                                                                                                1,151,273      1,151,273
                             -----------    -----------    -----------    -----------    -----------    -----------    -----------

Balance, April 30, 1999          195,619    $     1,956      1,703,098    $    17,031    $ 2,369,880    $(3,018,013)   $  (629,146)
                             ===========    ===========    ===========    ===========    ===========    ===========    ===========


See accompanying notes to consolidated financial statements.

                                      F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                     OMNI RAIL PRODUCTS, INC.
                                          AND SUBSIDIARY

                               Consolidated Statements of Cash Flows

                             Years ended April 30, 1999, 1998 and 1997


                                                              1999            1998          1997
                                                              ----            ----          ----
Cash flows from operating activities:
<S>                                                       <C>             <C>            <C>
   Net (loss) earnings                                    $ 1,151,273     (2,882,185)    (1,295,065)
   Adjustments to reconcile net (loss) earnings to net
      cash provided by operating activities:
         Depreciation and amortization                        161,417        587,552        491,642
         Legal settlement                                        --             --          334,500
         (Gain) loss on sale of assets                       (164,049)       (29,683)        25,156
         Asset impairment - write down of assets                 --        1,239,567           --
         Deferred income taxes                                   --             --          (55,607)
         Change in assets and liabilities:
           Accounts receivable                                374,943        (35,171)      (199,814)
           Inventories                                         93,137      1,070,943        296,361
           Prepaid expenses and deposits                          917        (31,478)         1,876
           Accounts payable                                  (404,513)       520,600        425,992
           Accrued liabilities                               (579,097)       377,038        306,383
                                                          -----------    -----------    -----------

              Net cash provided by operating activities       634,028        817,183        331,424
                                                          -----------    -----------    -----------

Cash flows from investing activities:
   Proceeds from sale of property, plant and equipment        842,557        571,038         17,166
   Purchase of property, plant and equipment                 (253,592)      (231,802)      (375,316)
   Proceeds from sale of securities                              --          752,573           --
                                                          -----------    -----------    -----------

              Net cash provided by (used in) investing
                 activities                                   588,965      1,091,809       (358,150)
                                                          -----------    -----------    -----------

Cash flows from financing activities:
   Net payment on notes payable                            (1,612,148)    (1,071,440)      (116,326)
   Payments on long-term debt                                (762,964)      (552,058)       (14,281)
   Proceeds from Subordinated Convertible debt                275,160           --             --
   Borrowings on Subordinated and other debt                  538,114           --             --
   Sale (repurchase) of stock                                 (18,752)       (31,252)       100,000
   Acquisition costs                                             --             --         (185,065)
                                                          -----------    -----------    -----------

              Net cash used in financing activities        (1,580,590)    (1,654,750)      (215,672)
                                                          -----------    -----------    -----------

              (Decrease) increase in cash                    (357,597)       254,242       (242,398)

Cash at beginning of year                                     393,877        139,635        382,033
                                                          -----------    -----------    -----------

Cash at end of year                                       $    36,280        393,877        139,635
                                                          ===========    ===========    ===========

Supplemental disclosure of cash flow information:
   Cash paid for:
      Interest                                            $   530,355        768,630        807,847
      Income taxes                                               --            1,894           --

Supplemental schedule of non-cash investing and
  financing activities:
   Stock dividend                                                --             --           65,000
   Issuance of common stock on conversion of debt                --             --           17,500
   Issuance of debt in exchange for common stock               67,499           --             --
   Effect of acquisition:
       Fair value of assets acquired                             --             --        2,255,123
       Liabilities assumed                                       --             --        1,230,000


See accompanying notes to consolidated financial statements.

                                      F-5
</TABLE>
<PAGE>


                            OMNI RAIL PRODUCTS, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                          April 30, 1999, 1998 and 1997



(1)  Summary of Significant Accounting Policies

     Principles  of  Consolidation,  Description  of the  Company  and  Basis of
     Presentation
     ---------------------------------------------------------------------------

     The  consolidated  financial  statements  include the accounts of OMNI Rail
     Products,  Inc. (the Company,  a Delaware  corporation),  formerly Creative
     Medical Development, Inc. ("CMD", name changed during fiscal 1999), and its
     wholly-owned  subsidiary,  OMNI  Products,  Inc. All material  intercompany
     transactions   and  balances  have  been  eliminated  in  the  consolidated
     financial statements.  Effective April 30, 1997, CMD and OMNI International
     Rail Products, Inc. (OMNI),  completed an agreement and plan of merger. The
     transaction  between CMD and OMNI was considered a reverse  acquisition for
     financial  reporting  purposes  and was  accounted  for under the  purchase
     method of accounting.

     The Company designs,  engineers,  manufactures and distributes a variety of
     rubber,  rubber/concrete  and  concrete  premium  grade  railroad  crossing
     surface  products  primarily for the United States market.  OMNI's products
     are  approved  by all  major  North  American  Class 1  railroads,  such as
     Burlington  Northern-Santa Fe and Union Pacific and many regional railroads
     and transit  systems.  From its operating  facilities  in Illinois,  Texas,
     Oregon and through its  relationship  with key suppliers,  OMNI markets its
     products  to all 50 states and  Canada.  67% of the  Company's  fiscal 1999
     sales  were  concentrated  in the  three  largest  United  States  railroad
     companies (down from 72% in fiscal 1998) (Note 12).

     Inventories
     -----------

     The Company values  inventories at the lower of average  production cost or
     market (net realizable value). The Company determines cost on the first-in,
     first-out (FIFO) basis.

     Accounts Receivable
     -------------------

     The Company  extends sales credit to virtually  all of its customers  under
     specific  terms  and  conditions.  The  Company  performs  periodic  credit
     evaluations  of its  customers to determine  the extent of each  customer's
     allowable  credit  limit  and to  determine  the need for an  allowance  on
     potential credit losses.

     Property, Plant and Equipment
     -----------------------------

     Property,  plant and equipment are stated at cost. Depreciation is provided
     over the  estimated  useful  lives of the  assets  using the  straight-line
     method.  The estimated  useful lives for furniture,  vehicles and equipment
     are between three and ten years; buildings are forty years.

     Expenditures   for  additions  and  major   improvements  are  capitalized.
     Expenditures for repairs and maintenance are charged to income as incurred.

     Warranty
     --------

     The Company  provides a six-year  warranty for its products and establishes
     an accrual at the time of sale, based on historical warranty experience, to
     provide for estimated warranty costs.

                                      F-6
<PAGE>


     Income Taxes
     ------------

     The Company accounts for income taxes under the asset and liability method.
     Under the asset and  liability  method,  deferred  income taxes reflect the
     future tax consequences of differences  between the tax bases of assets and
     liabilities  and  their  financial  reporting  amounts  at  each  year-end.
     Deferred tax assets and  liabilities  are measured  using enacted tax rates
     expected to apply to taxable  income in the years in which those  temporary
     differences are expected to be recovered or settled. The effect on deferred
     tax assets and liabilities of a change in tax rates is recognized in income
     in the period that includes the enactment date.

     Research and Development Costs
     ------------------------------

     The Company charges all research and development  costs associated with the
     development of products to expense when incurred.

     Advertising Expenses
     --------------------

     Advertising  expenses are charged to expense as incurred and were  $17,346,
     $44,424 and $102,310 for 1999, 1998 and 1997, respectively.

     Revenue Recognition
     -------------------

     Revenues are recognized when products are shipped.

     Stock Option Plan
     -----------------

     As  permitted  by  Financial   Accounting  Standards  No.  123  (FAS  123),
     Accounting for Stock-Based Compensation,  the Company measures compensation
     expense for its stock-based employee compensation plans using the intrinsic
     method prescribed by APB 25 Accounting for Stock Issued to Employees.

     Fair Value of Financial Instruments
     -----------------------------------

     At April 30, 1999 and 1998, the carrying value of cash, trade  receivables,
     accounts  payable  and  notes  payable  approximate  fair  value due to the
     short-term  nature of these  instruments.  At April 30, 1999 and 1998,  the
     fair value of the Company's  long-term debt approximates  carrying value as
     such instruments'  stated interest rates do not differ  significantly  from
     current market rates available to the Company.

     Basic and Diluted Net Earnings (Loss) Per Common Share
     ------------------------------------------------------

     In  1997,  the  Financial   Accounting  Standards  Board  issued  Financial
     Accounting  Standards No.128 (FAS 128), "Earnings Per Share" which replaced
     the calculation of primary and fully diluted  earnings per share with basic
     and diluted earnings per share.  Unlike primary  earnings per share,  basic
     earnings per share excludes any dilutive effects of options,  warrants, and
     convertible  securities.  Diluted  earnings  per  share is  similar  to the
     previously  reported fully diluted  earnings per share.  The calculation of
     diluted earnings (loss) per share for fiscal years ended April 30, 1998 and
     1997, excludes any potentially dilutive shares as such shares would have an
     antidilutive affect (Note 11). The Company adopted FAS 128 in fiscal 1998.

     Reverse Stock Split
     -------------------

     The Company effected a one-for-three  stock split to stockholders of record
     as of the close of  business  on  February  25,  1999.  Share and per share
     amounts for all periods presented have been adjusted to reflect the reverse
     stock split.

                                      F-7
<PAGE>


     Use of Estimates
     ----------------

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

     Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
     -----------------------------------------------------------------------

     The Company reviews long-lived assets and certain identifiable  intangibles
     for impairment  whenever events or changes in  circumstances  indicate that
     the carrying amount of an asset may not be recoverable.  Recoverability  of
     assets to be held and used is  measured  by a  comparison  of the  carrying
     amount of an asset to future net cash flows expected to be generated by the
     asset. If such assets are considered to be impaired, then the impairment to
     be recognized is measured by the amount by which the carrying amount of the
     assets exceeds its fair value. Assets to be disposed of are reported at the
     lower of the carrying amount or fair value less costs to sell.

     Recent Accounting Pronouncements
     --------------------------------

     The  Company  adopted  Financial  Accounting  Standards  No.130  (FAS 130),
     "Reporting  Comprehensive Income" and Financial Accounting Standards No.131
     (FAS  131),  "Disclosures  About  Segments  of an  Enterprise  and  Related
     Information"  in fiscal  1999.  FAS 130 requires  companies  to report,  in
     addition to net income, other components of comprehensive income, including
     unrealized  gains  or  losses  on  available-for-sale  securities,  foreign
     currency translation adjustments and minimum pension liability adjustments.
     The Company had no components of other  comprehensive  income during fiscal
     1999. FAS 131 requires an enterprise to report segment information based on
     how  management  internally  evaluates  the  operating  performance  of its
     business  units  (segments).  The Company's  operations are confined to one
     business  segment,  the  production and sale of premium  railroad  crossing
     materials.

     In 1998, Financial  Accounting Standards No.133 (FAS 133),  "Accounting for
     Derivative Instruments and Hedging Activities" was issued and is effective,
     as amended by FAS 137, for fiscal years commencing after June 15, 2000. The
     Company  will comply with the  requirements  of FAS 133 in fiscal year 2000
     and  does not  expect  the  adoption  of FAS 133  will be  material  to the
     Company's consolidated results of operations.


     Reclassifications
     -----------------

     Certain  reclassifications  have  been  made to the 1997  and 1998  balance
     sheets,  statements  of operation  and  statements of cash flows to conform
     with 1999 presentation.


(2)  Restructuring charges and Asset Impairments

     In fiscal year 1998, the Company recorded  restructuring charges associated
     with the shut down of two factories and charges  associated  with the write
     down and  liquidation  of  manufacturing  equipment.  These charges are the
     result of the Company's  refocus of its operation into producing  primarily
     concrete  and virgin  rubber  grade  crossings  and  elimination  of excess
     capacity in the Company's recycled rubber manufacturing  operations.  Total
     fiscal 1998  charges of  $1,684,833  included  $1,239,567  in write down of
     manufacturing  equipment to fair value,  $226,950 in costs  associated with
     plant shut downs and equipment liquidation, $158,316 in severance costs and
     $60,000  in  other   restructuring   charges.   Total  accrued  and  unpaid
     restructuring  costs  at the  end  of  1998  were  $249,295  not  including
     severance  costs  that were  accounted  for in  accrued  compensation.  All
     associated  charges were paid during  fiscal 1998 and 1999.  During  fiscal

                                      F-8
<PAGE>


     1999,  the Company sold or disposed  virtually  all assets  written down in
     fiscal 1998,  at amounts at or below the assets'  written down values.  The
     Company  did not write down its  Lancaster,  PA facility in fiscal 1998 and
     sold the  facility at a gain of  approximately  $159,000  in the  Company's
     third quarter of fiscal 1999. In addition,  the Company wrote off excess or
     out of specification inventory as part of the restructuring.  During fiscal
     1999 the Company  recovered  certain costs  associated with the fiscal 1998
     restructuring  charge.  These recovered costs included accrued  anticipated
     lease charges of $105,435 and accrued severance charges of $25,000.


(3)  Inventories

     Inventories consist of the following at April 30, 1999 and 1998:

                                                   1999         1998
                                                ----------   ----------

        Raw materials                           $  175,692      383,527
        Finished goods                           1,179,971    1,054,828
                                                ----------   ----------

                                                 1,355,663    1,438,355

        Less allowance for excess or obsolete
           inventory                                25,000       14,555
                                                ----------   ----------

                 Inventories, net               $1,330,663    1,423,800
                                                ==========   ==========


     In conjunction with the fiscal 1998  restructuring,  the Company  wrote-off
     $812,840 of excess and out of  specification  recycled rubber inventory and
     included  such charge in Cost of sales.  Total fiscal  1999,  1998 and 1997
     inventory write-offs were $14,555, $1,085,000 and $571,200, respectively.



(4)  Property, Plant and Equipment

     Property,  plant and  equipment  consist of the following at April 30, 1999
     and 1998:

                                                1999         1998
                                             ----------   ----------

           Land                              $   93,024      217,593
           Buildings                            812,684    1,163,115
           Office furniture, manufacturing
              equipment and vehicles          1,587,694    1,382,915

                                             ----------   ----------

                                              2,493,402    2,763,623

           Less accumulated depreciation        589,246      491,409
                                             ----------   ----------

                                             $1,904,156    2,272,214
                                             ==========   ==========


     Certain  property,  plant and equipment  serves as collateral for short and
     long-term debt obligations.  As discussed in note 2, certain  manufacturing
     equipment   was  written  down  during  1998  as  part  of  the   Company's
     restructuring

                                       F-9
<PAGE>



(5)  Accrued Liabilities

     Accrued liabilities consist of the following at April 30, 1999 and 1998:

                                                   1999        1998
                                                ----------   ----------

         Warranties and other customer claims   $  353,635      268,902
         Accrued compensation                      206,416      486,520
         Accrued restructuring charges                --        249,195
         Accrued merger costs                         --         60,000
         Accrued interest                           80,162       72,565
         Other                                     239,782      321,910
                                                ----------   ----------

                                                $  879,995    1,459,092
                                                ==========   ==========


(6)  Notes Payable

     The  Company  has a  revolving  line  of  credit  totaling  $1,396,195  and
     $2,107,966  as of April 30, 1999 and 1998,  respectively,  under a Loan and
     Security  Agreement  ("Loan  Agreement")  with Finova  Capital  Corporation
     (Finova).  The line of credit allows the Company to borrow up to $3,500,000
     against 85% of eligible accounts  receivable and 50% of eligible inventory.
     Interest  on the line is at prime  rate plus 2.25% (10% and 10.75% at April
     30, 1999 and 1998, respectively),  with a minimum interest charge of $9,000
     per month.  The Company also has a capital loan payable to Finova  totaling
     $296,940 and $507,502 at April 30, 1999 and 1998, respectively,  payable in
     monthly  installments  of $12,500  plus  interest  of 11.5%.  At the end of
     fiscal  1998,  the  Company  also had a term  note  payable  to  Finova  of
     $689,815,  that was fully  paid at April 30,  1999.  The loans  payable  to
     Finova are secured by equipment and inventory.  The original  maturity date
     was  extended  from April 26, 1999 to August 31, 1999 as noted  below.  The
     Company is restricted from paying dividends by covenant with Finova.

     From time to time the Company has entered  into various  amendments  to the
     Loan Agreement with Finova. These amendments have modified the various loan
     agreements  providing for certain  changes to the underlying  provisions of
     the various notes.  One such amendment  extended the loans'  maturity dates
     until  August 31,  1999.  At the end of fiscal  1998,  the  Company  was in
     violation of certain financial and non-financial loan covenants,  including
     negative  covenants for cash  requirements for Senior Debt Coverage and Net
     Worth of Borrower.

     On  July  15,  1998,  the  Company  entered  into a  Forbearance  Agreement
     ("Agreement")  that  significantly   realigned  the  borrowing  arrangement
     between the Company and Finova. This Agreement, that continued through June
     1, 1999,  allowed the Company to borrow up to an  additional  $400,000 over
     the calculated  eligible borrowing balance ("Permitted  Overadvance"),  and
     deferred  installment  payments on the Company's  term debt.  The Permitted
     Overadvance  was  subject to an  interest  rate of 6.25% over prime and the
     term note  balance was  subject to the default  rate of interest at 2% over
     the stated note  interest  rate.  The  Agreement  also waived all prior and
     existing  defaults and put in place new  financial  covenants  based on the
     Company achieving forecast  operating  results.  These covenants included a
     requirement  to raise  $250,000  in  subordinated  financing  to aid in the
     financing of the Company.  A total of $275,160 was raised, in part, from an
     outside  investor and from two current  directors of the Company.  Also, as
     part of the Agreement, and as part of the Company's restructuring plan, the
     Company   entered  into   Modification   Agreements  and,  in  some  cases,
     Subordination  and Standstill  agreements with eight  unsecured  creditors.
     These  agreements  place the note holder into a  subordinate  position with
     Finova and extends payoff of any obligation over a five-year period.

                                      F-10
<PAGE>



(7)  Long-term Debt

     Long-term debt is comprised of the following at April 30, 1999 and 1998:

                                                        1999           1998
                                                    -----------     -----------





     Note  payable  to  Capital   Consultants   in
        monthly installments of $13,631, including
        interest  at  10%,   payable  in  full  in
        December 1999, secured by real estate.      $   162,825         866,458

     Mortgage payable to financial  institution in
        monthly installments of $12,750, including
        interest  at  11.375%,  payable in full in
        December 1999, secured by real estate.        1,201,279       1,216,668

     Secured   convertible   subordinated   notes,
        interest   payable   monthly  at  8%.  Due
        October  2003 and January  2004,  with put
        option  for   payout  in  twelve   monthly
        payments  after second  anniversary  date.
        Convertible  into common  stock at $0.1932
        per share.  Subject to  Subordination  and
        Standstill Agreement with Finova.               275,160            --

     Subordinated   notes   payable   to   various
        individuals  and  entity,   interest  paid
        quarterly beginning October 15, 1999 at 7%
        interest  and  principal   paid  quarterly
        beginning  October  15,  2000,  with final
        payment  due July  15,  2003.  Subject  to
        Subordination  and  Standstill   Agreement
        with Finova.                                  1,077,114         575,592

     Other  note  and  capitalized   lease   with
        interest of 10%                                  60,149             --
                                                    -----------     -----------

                                                      2,776,527       2,658,718

     Less current portion                             1,373,412       2,136,376
                                                    -----------     -----------

               Long-term debt                       $ 1,403,115         522,342
                                                    ===========     ===========


     The aggregate  principal  repayments and reductions required in each of the
     years  ending  April 30,  2000  through  April 30,  2004 for the  Company's
     long-term debt is as follows:

                     2000                     $1,373,412
                     2001                        405,805
                     2002                        540,198
                     2003                        366,227
                     2004                         90,885
                                              ----------

                                              $2,776,527
                                              ==========

                                      F-11
<PAGE>


(8)  Income Taxes

     The income tax (benefit) expense consists of the following:

                                             1999      1998       1997
                                             ----      ----       ----
       Current:
         Federal                            $  --        --         --
         State                                 --       1,894       --
                                            -------   -------    -------

                                               --       1,894       --
                                            -------   -------    -------
       Deferred:
         Federal                               --        --      (46,039)
         State                                 --        --       (9,568)
                                            -------   -------    -------

                                               --        --      (55,607)
                                            -------   -------    -------
       Total income tax (benefit) expense   $  --       1,894    (55,607)
                                            =======   =======    =======


     The  tax  effects  of  temporary   differences   and  net  operating   loss
     carryforwards  which give rise to  significant  portions  of  deferred  tax
     assets  and  deferred  tax  liabilities  at April 30,  1999 and 1998 are as
     follows:

                                                          1999         1998
                                                       ----------   ----------
 Deferred tax assets:
     Restructuring costs                               $   42,567      143,895
     Warranty reserve                                     135,654       91,028
     Legal settlement payable                             123,390      123,390
     Inventory write down                                   9,590      369,307
     Bad debt reserve                                      21,833       26,380
     Self-insurance reserve                                 9,313       22,490
     Other                                                 14,825       27,879
     Capital loss carryforward                            273,043      273,043
     Net operating loss carryforwards:
         Federal                                          852,724      767,970
         State                                            177,203       98,391
                                                       ----------   ----------
                                                        1,660,142    1,943,773
     Less valuation allowance                           1,246,759    1,657,570
                                                       ----------   ----------
             Net deferred tax asset                       413,383      286,203
                                                       ----------   ----------

 Deferred tax liability:
     Property, plant and equipment, due to
        differences in depreciation                       221,603       94,423
     Real estate held for sale                            191,780      191,780
                                                       ----------   ----------

             Net deferred tax liability                   413,383      286,203
                                                       ----------   ----------

             Net deferred tax assets and liabilities   $     --           --
                                                       ==========   ==========


                                      F-12
<PAGE>

     The provision  (benefit) for income taxes differs from the amount of income
     tax determined by applying the applicable Federal statutory income tax rate
     to  earnings  (loss)  before  income  taxes  as a result  of the  following
     differences:

                                                1999      1998     1997
                                                ----      ----     ----

         Statutory federal income tax rate      34.0%   (34.0)%  (34.0)%
         State income taxes, net of federal
            income tax benefit                   4.4     (4.3)    (4.4)
         Change in valuation allowance         (35.7)    40.5     36.2
         Other                                  (2.7)    (2.1)    (2.1)
                                               ------   ------   ------

         Effective tax rates                     0.0%      .1%    (4.3)%
                                               ======   ======   ======


     The  Company  has a  valuation  allowance  of  $1,246,759,  $1,657,570  and
     $490,416, as of April 30, 1999, 1998 and 1997, respectively.  The change in
     the valuation allowance was ($410,811),  $1,167,154 and $490,416,  in 1999,
     1998 and 1997, respectively.

     At April 30, 1999 and 1998,  the Company had  approximately  $2,684,000 and
     $2,284,000,  respectively,  of net operating loss  carryforwards  to offset
     future  income for federal and state income tax purposes  which will expire
     2009 through 2019.

     A provision of the Tax Reform Act of 1986,  as amended,  requires  that net
     operating loss and credit carryforward utilization be limited when there is
     a more than 50%  cumulative  change in ownership of the Company in a 3 year
     period.  Such change in ownership may have occurred with the merger of OMNI
     into CMDI.  The  merger  affects  the CMDI  portion  of the  Company's  net
     operating loss carryforward or approximately $3,376,000,  and as such, this
     amount  is not  included  as a  deferred  tax  asset  or in  the  valuation
     allowance  above. The date of the change and the amount of loss and credits
     subject to the limitation  has not yet been  determined.  Accordingly,  the
     utilization of the net operating loss and credit carryforwards to remaining
     future years may be limited.  Any future change in the equity  structure of
     the Company may further limit the  utilization  of the net  operating  loss
     carryforwards.


(9)  Commitments and Contingencies

     Operating Lease Commitments
     ---------------------------

     The  Company   leases  office  space,   vehicles,   office   equipment  and
     manufacturing  equipment,  from a director of the  Company,  under  various
     operating lease  agreements that are either  month-to-month  or that expire
     during the next year.  The Company's  minimum  monthly lease payments under
     the various  cancelable  and  non-cancelable  lease  agreements are $6,074.
     Total future  minimum  lease  commitments  under  non-cancelable  leases is
     $8,743. In addition, the Company, as lessor, leases all of its space at its
     Grass Valley building, shown under real estate and assets held for sale. At
     present,  such rental  revenues exceed the costs to finance and operate the
     facility.  Future  minimum  lease  payments to be received on the Company's
     California  facility  are  $142,276  for fiscal 2000 and $42,046 for fiscal
     2001. Lease expense was  approximately  $91,500,  $159,000 and $108,000 for
     the years ended April 30, 1999, 1998 and 1997, respectively.

                                      F-13
<PAGE>


     Royalty Agreements
     ------------------

     The  Company  assumed a royalty  agreement  with Red Hawk  Rubber Co.  (Red
     Hawk),  from Riedel  OMNI  Rubber  Products,  Inc.  The Red Hawk  agreement
     provides  that the  Company  pay a 5% royalty on all net sales of  products
     that were being  manufactured  at the time the  agreement  was signed until
     June 1999.  Any new products  developed  and  manufactured  by OMNI are not
     subject to the Red Hawk royalty agreement. Total royalty expense for fiscal
     years ended  April 30,  1999,  1998 and 1997 were  $167,103,  $113,725  and
     $137,994, respectively.

     Litigation
     ----------

     The Company is involved in various claims and legal actions  arising in the
     ordinary  course of business.  In the opinion of  management,  the ultimate
     disposition of these matters will not have a material adverse effect on the
     Company's  consolidated  financial  position,   results  of  operations  or
     liquidity.


(10) Stockholders' Equity

     Convertible Preferred Stock Series B
     ------------------------------------

     The  Company  has  authorized  1,000,000  shares  of  Series B  convertible
     preferred stock, of which 195,619 are issued and outstanding.  The terms of
     these shares are as follows:

          Voting
          ------
          Each share of Series B convertible preferred stock, until converted or
          canceled,  has the right to one vote equivalent to one share of common
          stock into which such preferred series could be then converted.

          Conversion
          ----------
          Each share of Series B convertible  preferred stock was convertible to
          a like number of common shares had the Company  reported  gross annual
          revenues of  $20,000,000  or annual  pre-tax  earnings  of  $1,500,000
          during either of the fiscal years ended April 30, 1998 or 1999.  These
          conversion  standards  were  not  met,  and  therefore  the  Series  B
          preferred  stock shall be canceled by the Company upon the issuance of
          its  fiscal  year  ended  April  30,   1999   consolidated   financial
          statements.

     Put Agreement
     -------------

     In February,  1997, two OMNI directors purchased shares in OMNI for a total
     of $67,499 at $3.25 per share. Simultaneously, put agreements were executed
     requiring  the Company to purchase  those shares at a price  equivalent  to
     $4.00 per share 120 days following the investment.  The put agreements with
     these two parties were not repaid  according to the put agreements and were
     subsequently converted to subordinated notes as of July 1998.

     Cancellation of Merger Shares in Escrow
     ---------------------------------------

     As part of the merger  between  CMD and OMNI ten  percent of the CMD common
     shares and  series B  preferred  shares  exchanged  for OMNI  shares in the
     transaction,   were  placed  in  escrow  ("Escrow  Shares")  pending  final
     valuation and settlement.  The final ownership ratio was adjusted  pursuant
     to the Merger  Agreement to reflect  differences that resulted from changes
     in  assets  of both  companies  between  the  date of  acquisition  and the
     settlement date of April 30, 1998. The  determination of final asset values
     was not  resolved  until August 1, 1998,  at which time 111,147  common and
     11,736  series B preferred  Escrowed  Shares  were  canceled to reflect the
     final ownership ratio.

                                      F-14
<PAGE>


     Stock Options
     -------------

     The  Company's  1994  Amended  and  Restated  Stock  Option Plan (the plan)
     provides for  granting to employees  and  consultants  of either  incentive
     stock options or non-qualified stock options.  Incentive stock options must
     be granted at an exercise price not less than 100% of the fair market value
     per share at the grant date.  Non-qualified stock options generally must be
     granted at an exercise price of not less than 100% of the fair market value
     per share at the grant date,  although,  in certain cases may be granted at
     85% of fair market  value.  The term of options  granted  under the plan is
     generally ten years,  but in certain cases may be five years.  The right to
     exercise options granted is generally fully vested on the grant date.

     The fair value of each option grant is estimated on the date of grant using
     the Black-Sholes  option-pricing model with the following  assumptions used
     for grants in 1999:  dividend  yield of 0.0%;  expected  volatility of 86%;
     risk-free interest rate of 6.35%; and expected life of 10 years.

     The Company  applies APB Opinion No. 25 in accounting  for its Plan and, no
     compensation  cost  has  been  recognized  for  its  stock  options  in the
     financial  statements.  The pro forma  effects  on net  earnings  (loss) of
     applying  SFAS  No.  123 for  fiscal  year  ended  1999 was an  expense  of
     approximately  $2,000.  There is no  effect  on pro  forma  net  loss  from
     applying SFAS No. 123 to fiscal years ended 1998 and 1997



     The following table presents historic stock option activity under the plan:

                                                                       Weighted
                                                                       Average
                                                        Number         Exercise
                                                       of shares        Price
                                                       ---------        -----
     Options outstanding at April 30, 1997              698,199        $   2.66

     Granted                                             13,636            3.00
     Exercised                                             --              --
     Forfeited                                             --              --
     Expired                                               --              --

     Options outstanding at April 30, 1998              711,835            2.67

     Granted                                            206,668            0.42
     Exercised                                             --              --
     Forfeited                                         (588,763)          (2.33)
     Expired                                               --              --
                                                       --------        --------

     Options outstanding at April 30, 1999              329,740        $   1.86
                                                       ========        ========


     There were no unvested  stock  options or other equity  instruments  issued
     during fiscal 1998 or 1997. The Company reserved 1,000,000 shares of common
     stock for issuance  under the plan.  At April 30, 1999,  there were 670,260
     shares  available for grant under the plan. At April 30, 1999, the range of
     exercise  prices  and  weighted  average  remaining   contractual  life  of
     outstanding  options  under  the  plan  were  $0.27  - $5.00  and 7  years,
     respectively.  The number of exercisable options and weighted average price
     of such options at April 30, 1999 were 206,407 and $2.63, respectively.

                                      F-15
<PAGE>



     Warrants Outstanding
     --------------------

     CMD issued  warrants in  conjunction  with its initial  public  offering in
     1993,  prior to its merger with OMNI.  These warrants were due to expire on
     May 13, 1999. On May 4, 1999 the Company's board of directors  extended the
     exercise date of such warrants until November 15, 1999. The following table
     presents  warrants  outstanding at April 30, 1999, all of which were issued
     by CMD in consideration for service rendered,  debt and debt restructuring,
     or stock purchases and placements:

      Number of
       Common
       Shares                      Exercise                  Expiration
      Issuable                       price                      date
      --------                       -----                      ----

       17,500                     $   18.15                 May 13, 1999
      201,250                         19.50                 Nov. 15, 1999
       16,667                         30.00                 April 14, 2000



(11) Earnings Per Share

     The following  table  reconciles  basic  earnings per common share (EPS) to
     diluted EPS:

     For the year ended April 30, 1999

                                                      Weighted
                                                       Average    Per share
                                          Income       Shares       amount
                                          ------       ------       ------

       Income available to common
       Shareholders                     $1,151,273    1,735,473    $   0.66
       Effect of dilutive securities:
           Stock options                                 24,166       (0.01)
           Convertible notes                 7,315      473,301       (0.13)
                                        ----------   ----------    --------

       Diluted EPS                      $1,158,588    2,232,940    $   0.52
                                        ==========   ==========    ========

     The calculation of diluted earnings (loss) per share for fiscal years ended
     April 30, 1998 and 1997,  excludes any potentially  dilutive shares as such
     shares would have an antidilutive  affect.  Total common stock  equivalents
     not used in calculating  diluted EPS were 1,504,539  shares in fiscal 1999,
     and  represented  stock options and warrants with exercise  prices  greater
     than market price and  averaging of  convertible  debt.  Total common stock
     equivalents  not used in  calculating  diluted EPS for both fiscal 1998 and
     1997 was  approximately  332,150  shares and  represented  stock option and
     warrants with exercise prices greater than market price.


(12) Major Customers and Credit Concentration

     The  Company  does  business  with  and  extends  credit  to a  variety  of
     commercial  customers,  including all of the major  railroads in the United
     States,  major cities and  municipalities  throughout the United States and
     Canada.

                                      F-16
<PAGE>


     The Company sells products to customers  primarily in the United States. On
     April  30,  1999  and  1998,  88%  and  71%,  respectively,  of  the  trade
     receivables were concentrated  within the domestic railroad  industry,  and
     12% and 29%,  respectively,  of trade  receivables  were with companies and
     distributors  located in foreign  countries.  Although the Company does not
     currently foresee a credit risk associated with its receivables,  repayment
     is somewhat  dependent  upon the financial  stability of the companies with
     which the Company does business.


(13) Going Concern

     As  reflected  in  the  accompanying  financial  statements,  current  debt
     maturities and other  short-term  commitments  exceed the Company's  liquid
     assets available to repay such  commitments.  In addition,  as discussed in
     Note 1, the Company has a significant  concentration  of Product sales with
     its top three  customers.  To finance debt  maturities,  management has and
     will continue to seek both debt and equity investors to provide  additional
     capital.  Management believes the Company will be profitable in fiscal 2000
     and is expecting to  refinance  its debt as discussed in Note 14.  However,
     there can be no assurance that the Company will be profitable,  will retain
     its largest customers,  or that it will be able to complete the refinancing
     of its debt.


(14) Subsequent Event

     Litigation Settlement
     ---------------------

     Subsequent  to the end of the  fiscal  year,  the  Company  entered  into a
     settlement  agreement with  Transcontinental  Capital Partners ("TCP") that
     ends the  litigation  between the Company and TCP.  The Company had accrued
     the full amount of the settlement as of the fiscal year end.

     Refinancing of the Company's Senior Debt
     ----------------------------------------

     Subsequent to year end the Company  negotiated an amendment with its senior
     lender Finova that provides an extension of a reduced credit facility ($1.8
     million) under similar terms and conditions that existed at year end, until
     August 31,  2000,  at  interest  of prime plus  1-1/2%.  The new  financing
     package also provides $600,000 of new term debt at prime plus 2.25% payable
     in 60 monthly  installments of principal and interest.  The Company had not
     yet  signed  the  new   financing   package  prior  issuing  its  financial
     statements.



                                      F-17
<PAGE>


Item  8.  Changes  In And  Disagreements  With  Accountants  On  Accounting  And
          Financial Disclosure
--------------------------------------------------------------------------------

     None.


                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        with Section 16 (a) in the Exchange Act.
--------------------------------------------------------------------------------

     The executive officers and directors of the Company are as follows:



             NAME                    AGE                   POSITION

     William E. Cook                 50          Chairman of the Board, Director

     Edward S. Smith                 80          Director

     John E. Hart                    60          Director and Secretary

     Robert E. Tuzik                 47          President and Chief Operating
                                                 Officer

     M. Charles Van Rossen           43          Chief Financial Officer, Vice
                                                 President Finance and Treasurer


     Each  director  is elected  for a period of one year and  serves  until the
     stockholders duly elect his or her successor. The Board of Directors has no
     committees.  Officers  of the  Company  are  elected  by,  and serve at the
     discretion of the Board of Directors. None of the above individuals has any
     family relationship with any other.

     The principal  occupations  of each  director and executive  officer of the
     Company, for at least the past five years, are as follows:

     William  E. Cook  served as  restructuring  consultant  and  interim  Chief
     Executive Officer of the Company from March 31, 1998 through November 1998,
     when he accept a seat on the board of directors and the chairmanship of the
     board. Mr. Cook,  through his company Riptide Holdings,  Inc., was hired by
     the Company to assist with the restructuring and turnaround of the Company.
     Mr. Cook has been  President of Riptide for four years.  For the four years
     Prior to that Mr. Cook was President, CEO, a director and board chairman of
     DDL  Electronics,  Inc.,  a New York Stock  Exchange  company  with printed

                                       18
<PAGE>


     circuit board and electronic contract assembly  manufacturer  operations in
     the United  States and Europe.  Prior to that,  Mr. Cook was a partner with
     TBM  Associates,  a venture  capital  firm based in Boston,  Massachusetts.
     Prior to that, Mr. Cook was President and CEO of Signal Technology, Inc., a
     company he co-founded in 1981. Mr. Cook acts as a consultant  and/or serves
     on the boards of several private companies. Mr. Cook has both undergraduate
     and graduate  degrees in Engineering  from North Carolina State  University
     and a Masters degree in Business Administration from MIT.

     Edward S. Smith has been a director  of the  Company  since  closing of the
     merger  with OMNI on April 30,  1997.  He had been a director  of OMNI from
     1994 to the  closing of the merger.  Mr.  Smith is  President/Owner  of Ted
     Smith & Company.  He is the former  chairman  and CEO of Omark  Industries,
     Inc.,  an  international  manufacturer  of  cutting  chain for chain  saws,
     hydraulic log loaders and sporting ammunition. His business activity during
     the last five years has been  concentrated  on private  investing and board
     memberships.  Currently he serves on the Board of Directors of Georgia Gulf
     Corporation and Expert Systems Publishing Company.

     John E. Hart has been a director of the Company since closing of the merger
     with OMNI on April  30,  1997.  Prior to the  merger,  he had been  general
     counsel to CMD since October 1993 and its  Secretary  and  Treasurer  since
     June,  1994.  From 1985 to 1994 he was engaged in the  private  practice of
     law. He resumed his law practice in May, 1997. Mr. Hart holds a J.D. degree
     from  the  University  of  Southern  California  and a BA  degree  from the
     University of Redlands.

     Robert E. Tuzik has been President Chief  Operating  Officer of the Company
     since October 1998.  Prior to that Mr. Tuzik was Vice President - Sales and
     Marketing of the Company since closing of the merger with OMNI on April 30,
     1997. He had been Vice President - Sales and Marketing of OMNI from 1996 to
     the closing of the merger.  From 1995 to 1996 he owned and  operated  Talus
     Associates, specializing in railway marketing and media relations. Prior to
     that he spent  six  years as editor of  Railway  Track  and  Structures,  a
     railroad-engineering  journal.  Mr.  Tuzik  holds a BA in English and MS in
     Journalism  from the  University  of Illinois  at Chicago and  Northwestern
     University.

     M. Charles Van Rossen served as the Company's  interim CFO from May 1, 1998
     until his appoint as Chief Financial  Officer,  Vice President  Finance and
     Treasurer on August 11, 1998. From 1995 to 1998 he was a private  financial
     and  management  consultant.  Prior  to that he spent  four  years as Chief
     Financial Officer and Controller of DDL Electronics, Inc., a New York Stock
     Exchange  company  with  printed  circuit  board  and  electronic  contract
     assembly manufacturer  operations in the United States and Europe. Prior to
     that he spent seven years with the Pacificorp group of companies working in
     various management positions for that company's many subsidiaries. Prior to
     that Mr. Van Rossen was an audit  manager with KPMG Peat  Marwick.  He is a
     Certified  Public  Accountant  and  holds a BS  degree  in  Accounting  and
     Quantitative Methods from the University of Oregon.

                                       19
<PAGE>


Item 10. Executive Compensation
-------------------------------

     The  following  table sets  forth  remuneration  paid to certain  executive
     officers  for the  fiscal  years  ended  April  30,  1999,  1998 and  1997,
     respectively:

<TABLE>
<CAPTION>

                                     SUMMARY COMPENSATION TABLE

                                                                        Long-Term
                              Annual Compensation                       Compensation
                              -------------------------------------     -------------------

                                                            Other       Securities
                               Year                         Annual      Underlying
                               Ended                        Compen-      Options       LTIP     All other
Name and Principal Position   April 30    Salary   Bonus    sation         SARs      Payments     Comp.
---------------------------   --------    ------   -----    ------         ----      --------     -----
<S>                            <C>       <C>       <C>     <C>            <C>         <C>        <C>
William E. Cook                1999                        141,728(1)     33,334
Interim CEO                    1998             0    0      30,000             0        0              0

Michael L. DeBonny (2)         1999             0    0           0             0        0        125,000
Former CEO, President          1998       150,000    0           0             0        0              0
and Treasurer                  1997       151,814    0           0       618,144        0              0

</TABLE>


     (1)  Represents consulting fees paid during fiscal 1999. Mr. Cook's current
          contract provides for a monthly consulting fee of $7,500.

     (2)  Mr.  DeBonny  resigned  from the  Company  effective  April 30,  1998.
          Pursuant  to his  employment  contract  and the  settlement  agreement
          reached  between him and the Company,  Mr.  DeBonny was paid  $125,000
          severance during fiscal 1999.


          The  Company's  nonsalaried  directors  receive  $500 for  each  Board
          meeting  attended,   and  receive  $2,500  quarterly,   together  with
          reimbursement for out-of-pocket expenses in attending Board meetings.



Item 11. Security Ownership of Certain Beneficial Owners and Management
-----------------------------------------------------------------------

     The  following  table sets forth  certain  information  with respect to the
     beneficial  ownership of the Company's  Common Stock and Series B Preferred
     Stock as of the date hereof; by (i) each person who is known by the Company
     to own of  record or  beneficially  more  than 5% of the  Company's  Common
     Stock;  (ii) each of the Company's  directors  and officers;  and (iii) all
     directors and officers of the Company as a group. The  stockholders  listed
     in the table have sole voting and  investment  powers  with  respect to the
     shares indicated.


                                       20
<PAGE>

       Name and Address of                  Number of
     Beneficial Owner (1)(2)              Shares Owned       Percent of Class
     -----------------------              ------------       ----------------

     William E. Cook (3)                     865,951                23.7%
     1413 Loniker Drive
     Raleigh, NC  27615

     Michael L. DeBonny                      220,826                 6.0%
     16101 Parelius Circle
     Lake Oswego, OR 97034

     John E. Hart (4)                         61,016                 1.7%
     Box 2495
     Grass Valley, CA 95945

     Edward S. Smith (5)                     397,231                10.9%
     921 SW Washington St., Ste. 762
     Portland, OR 97205

     Richard A. Kreitzberg (6)             1,091,241                29.8%
     3332 El Dorado Loop South
     Salem, OR 97032

     Ronald J. Gangemi (7)                   226,765                 6.2%
     11950 Willow Valley Road
     Nevada City, CA 95959

     Robert E. Tuzik (8)                      60,220                 1.6%
     1732 Aspen Ct.
     Lake Oswego, OR  97034

     M. Charles Van Rossen (9)                50,000                 1.4%
     2747 SW English Ct.
     Portland, OR 97201

     All officers and directors            1,212,398                39.2%
     as a group (5 persons)

----------

                                       21
<PAGE>


     (1)  Assumes  (i) no  exercise  or  conversion  of  common  stock  purchase
          warrants and  underwriter's  warrants  issued in conjunction  with the
          Company's 1994 public offering, outstanding warrants, options or other
          commitments  of the Company that are  convertible  into or exercisable
          for shares of Common  Stock,  except that Common Stock  obtainable  by
          persons  named  in  the  above  table  upon  exercise  of  options  or
          conversion of debt is deemed  outstanding  and  beneficially  owned by
          such  persons  in  calculating  their  percentage  ownership;  or (ii)
          conversion of the Series B Preferred Stock.

     (2)  Includes shares of Series B Preferred Stock held by the person listed.

     (3)  Includes  options held by Mr. Cook to purchase 33,334 shares of Common
          Stock under the  Company's  Incentive  Stock  Option Plan and includes
          634,472  shares  available on conversion of  convertible  subordinated
          notes.

     (4)  Includes  options held by Mr. Hart to purchase 36,668 shares under the
          Company's Incentive Stock Option Plan.

     (5)  Includes options held by Mr. Smith to purchase 44,485 shares of Common
          Stock under the  Company's  Incentive  Stock  Option Plan and includes
          155,280  shares  available on conversion of  convertible  subordinated
          note.

     (6)  Includes  shares  owned  by Mr.  Kreitzberg's  spouse.  Also  includes
          634,472  shares  available on conversion of  convertible  subordinated
          note.

     (7)  Includes shares owned by Mr. Gangemi's spouse and children.

     (8)  Includes options held by Mr. Tuzik

     (9)  Includes options held by Mr. Van Rossen



Item 12. Certain Relationships and Related Transactions
-------------------------------------------------------

     On July 6, 1998,  Michael  L.  DeBonny  who had  served as an  officer  and
     director  of the  Company  entered  into a  Separation  and Mutual  Release
     Agreement which resolved certain disputes and controversies between him and
     the Company.  Mr. DeBonny's  employment was terminated and he resigned as a
     director  both  effective   April  30,  1998.  In  addition,   Mr.  DeBonny
     relinquished  options to purchase 618,144 shares of common stock and 63,150
     shares of Series B preferred stock and granted the directors of the Company
     an  irrevocable  proxy to vote all shares he is  entitled  to vote  through
     April 30, 2000. Mr. DeBonny will receive,  subject to possible adjustments,
     his salary and certain fringe benefits through February 28, 1999.


                                       22
<PAGE>



     In February,  1997, three OMNI directors (Messrs.  DeBonny,  Kreitzberg and
     Smith)  purchased shares in OMNI for a total of $99,617 at $3.50 per share.
     Simultaneously,  put  agreements  were  executed  requiring  the Company to
     purchase  those  shares at a price  equivalent  to $4.00 per share 120 days
     following the investment.  Mr. Kreitzberg  exercised his put and his shares
     were repurchased in June, 1997. The put agreements with Messrs. DeBonny and
     Smith were extended and the put price adjusted. In March, 1998, they agreed
     to defer  exercise  of the puts until April 2, 1999 and to adjust the price
     of the put to reflect an 11% per annum return on the investment.  Effective
     as of June 30, 1998, in conjunction with the FINOVA debt restructuring, Mr.
     Smith's  put was  deemed  exercised  and a note was  issued  to him for the
     amount due.  The note is  subordinated  to the FINOVA  obligations  and has
     deferred  payments on the same terms as other unsecured  creditors who were
     required by FINOVA to subordinate and defer payment.  Mr. DeBonny's put was
     cancelled  as of June  30,  1998,  in  conjunction  with  the  FINOVA  debt
     restructuring  and his separation  agreement.  The subordinated  promissory
     note from the  Company  to Mr.  DeBonny  which had been used to pay for the
     stock issued in the put  transaction  in February 1997 was  reinstated  and
     payment was  deferred on the same terms as other  unsecured  creditors  who
     were required by FINOVA to subordinate and defer payment.

     In March,  1997, OMNI entered into a short-term  equipment rental agreement
     with one of its directors.  The Company continues to rent such equipment on
     a month-to-month basis.

     As a condition of the merger  transaction  with OMNI,  the Company  entered
     into  agreements  with  Messrs.  Hart and Gangemi to exchange  all of their
     Series A  preferred  stock  (60,000 and 750,000  shares  respectively)  for
     20,000 and 250,000 shares, respectively, of Series B preferred stock.

     On October  15,  1998,  the  directors  authorized  the  issuance  of up to
     $250,000 worth of convertible  subordinated notes to comply with the FINOVA
     debt  restructuring  requirements.  William E. Cook, who was  restructuring
     consultant  to the  Company  and interim  CEO,  until  joining the board of
     directors and becoming Chairman of the Board on November 10, 1998, invested
     a total of $122,580 in those notes. Mr. Smith invested  $30,000.  The notes
     are secured, are convertible into common stock at $0.1932 per share and are
     due  October  2003 and January  2004,  with put option for payout in twelve
     monthly  payments after the notes' second  anniversary  date. The notes are
     subject to  Subordination  and  Standstill  Agreements  with the  Company's
     senior lender.

     Management is of the opinion that all transactions  described above between
     the Company and its officers,  directors or  stockholders  were on terms at
     least as fair to the Company as had the transactions been concluded with an
     unaffiliated  party.  All  material  transactions  effected  in the  future
     between the Company and its officers,  directors and principal stockholders
     will  be  subject  to  approval  by a  majority  of the  Company's  outside
     directors not having an interest in the transaction.



Item 13. Exhibits and Reports on Form 8-K
-----------------------------------------

     a.   The Exhibits listed on the accompanying Index of Exhibits are filed as
          part of this annual report.

     b.   No reports on Form 8-K were filed  during the quarter  ended April 30,
          1999.

          Index of Exhibits
          -----------------

          Exhibit #                 Description
          ---------                 -----------

          2.01      Certificate of Incorporation of the Registrant (1)

          2.02      Bylaws of the Registrant (1)

          2.04      Bylaws of the Registrant as amended December 10, 1994 (1)

          2.05      Certificate  of  Designation  of  Preferences  of  Series
                    B Preferred Shares (9)

                                       23
<PAGE>


         Exhibit #                 Description
         ---------                 -----------

         2.06      Amended and Restated Certificate of Incorporation (8)

         2.07      Certificate of Amendment of Certificate of Incorporation

         4.01      Form of Warrant Agreement (1)

         5.01      Opinion of John Hart, Esq., regarding legality of the Common
                   Stock and Warrants (includes Consent) (1)

         10.01     Incentive Stock Option Plan (1)

         10.03     Agreement with LBI general partnership (1)

         10.06     Merger Agreement and Plan of Reorganization (5)

         10.07     Letter from Perry-Smith & Co. (former  accountant dated July
                   24, 1997) pursuant to Item 304 (a) (3) of Regulation S-K (6)

         10.08     Employment Agreement (Mr. DeBonny) (8)

         10.09     Lease Agreement for Portland, Oregon Facility, dated May 21,
                   1997(7)

         10.10     Amended and Restated 1994 Stock Option Plan (8)

         10.11     FINOVA Forbearance Agreement (9)

         10.12     Separation  Agreement and Mutual Release between the Company
                   and Michael L. DeBonny,  he Company's former Chief Executive
                   Officer (10)

         10.13     Eight  Percent   Secured   Convertible   Subordinated   Note
                   Agreement  ("Subordinated  Note")  between  the  Company and
                   William E. Cook, the Company's Board Chairman (11)

         10.14     Registration  Rights  Agreement,  establishing Note Holder's
                   rights  and  Company  requirements  for  conversion  of  the
                   Subordinated Note (11)

         10.15     Subordinated  Security  Agreement granting William E. Cook a
                   security interest in all assets of the Company, subordinated
                   to certain Senior lenders (11)

                                       24
<PAGE>


         Exhibit #                 Description
         ---------                 -----------

         10.16     Eight  Percent   Secured   Convertible   Subordinated   Note
                   Agreements  ("Subordinated  Notes")  between the Company and
                   Richard A Kreitzberg (12)

         10.17     Eight  Percent   Secured   Convertible   Subordinated   Note
                   Agreements  ("Subordinated  Notes")  between the Company and
                   Edward  S.  Smith,  a  member  of  the  Company's  board  of
                   directors (12)

         10.18     Registration  Rights  Agreement,  establishing Note Holder's
                   rights and Company  requirements  for registration of shares
                   issued upon conversion of the Subordinated Note (12)

         10.19     Subordinated   Security   Agreement   granting   Richard  A.
                   Kreitzberg  and Edward S. Smith a security  interest  in all
                   assets  of  the  Company,  subordinated  to  certain  Senior
                   lenders (12)

         19.20     Addendum to  Subordinated  Security  Agreement,  between the
                   Company and William E. Cook (12)

         19.21     Addendum to Eight Percent Secured  Convertible  Subordinated
                   Note, between the Company and William E. Cook (12)

         27.05     Financial Data Schedule--April 30, 1999


         (1)  Previously  filed  as part  of the  Company's  SB-2  Registration
         Statement  filed on February 11, 1994, as amended and effective on May
         13, 1994.

         (2)  Previously  filed as Exhibits to the  Company's  Annual Report on
         Form 10-KSB for the fiscal year ended September 30, 1994.

         (3)  Previously  filed as an Exhibit to the Company's  Post  Effective
         Amendment No. 1 to Form SB-2 Registration Statement filed on March 10,
         1995 and effective on March 28, 1995.

         (4) Previously filed as an Exhibit to the Company's  Preliminary Proxy
         Statement filed October 24, 1995.

         (5) Previously filed as an Exhibit to the Company's Form 8-K filed May
         2, 1997.

         (6)  Previously  filed as an Exhibit to the  Company's  Form 8-K filed
         July 30, 1997.

         (7)  Previously  filed  as an  Exhibit  to  the  Company's  annual  or
         quarterly report for the period ending the indicated date.

                                       25
<PAGE>


         (8) Previously  filed as an Exhibit to the Company's Form 10-KSB filed
         for the fiscal year ended April 30, 1997.

         (9) Previously  filed as an Exhibit to the Company's Form 10-KSB filed
         for the fiscal year ended April 30, 1998.

         (10)  Previously  filed as an  Exhibit  to the  Company's  Form 8-K on
         August 25, 1998.

         (11)  Previously  filed as an Exhibit to the Company's  form 10-QSB on
         December 15, 1998.

         (12)  Previously  filed as an Exhibit to the Company's  form 10-QSB on
         January 14, 1999.


                                       26
<PAGE>



                                   SIGNATURES

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


                                          OMNI Rail Products, Inc.
                                          (Registrant)



                                          By /s/ Robert E. Tuzik
                                          ----------------------
                                          (Signature and Title)
                                          Robert E. Tuzik
                                          President and Chief Operating Officer

                                          Date: August 12, 1999
                                          ---------------------


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


By: /s/ M. Charles Van Rossen                   By: /s/ William E. Cook
-----------------------------                   -----------------------
(Signature and Title)                           (Signature and Title)
M. Charles Van Rossen                           William E. Cook,
Chief Financial Officer                         Chairman of the Board

Date August 12, 1999                            Date August 12, 1999
--------------------                            --------------------



By /s/ JOHN E. HART                             By: /s/ EDWARD S. SMITH
-------------------                             -----------------------
(Signature and Title)                           (Signature and Title)
John E. Hart, Director                          Edward S. Smith, Director

Date August 12, 1999                            Date August 12, 1999
--------------------                            --------------------


                                       27