<PAGE>
 
                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB

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

         For the fiscal year ended:              Commission file number:
               June 30, 1998                             0-14427

                               LA-MAN CORPORATION
                         DBA DISPLAY TECHNOLOGIES, INC.
                 (Name of Small Business Issuer in Its Charter)

              NEVADA                                   38-2286268
     (State or other Jurisdiction                   (I.R.S. Employer
   of Incorporation or Organization)             Identification Number)

            5029 EDGEWATER DRIVE, ORLANDO, FL 32810   (407) 521-7477
   (Address, including zip code, of principal executive offices and telephone
                    number, including area code of Issuer)

  Securities registered under Section 12(b) of the Act:  NONE

  Securities Registered under  Section 12(g) of the Exchange Act: COMMON
STOCK, $.001 PAR VALUE

   Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the last 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 past 90 days. [x] Yes  [ ] 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.    [ ]

  Issuer's revenues for its most recent fiscal year:  $32,478,018

  On September 23, 1998 the bid and ask prices of the common stock were $3.50
and $3.63, respectively, according to NASDAQ Small Cap Market quotations
furnished by the National Quotation Bureau, Inc.  The aggregate market value of
the voting stock of the Issuer held by non-affiliates based on the average of
the bid and ask prices on September 23, 1998 was $12,530,448.

  As of September 23, 1998, 4,931,750 shares of common stock were outstanding.

  Transitional Small Business Disclosure Format (check one):  [ ] Yes   [x] No

DOCUMENTS INCORPORATED BY REFERENCE

          The information required by Items 9 through 12 of Part III of this
Report is incorporated by reference from the Issuer's definitive proxy statement
filed in accordance with Rule 14a-01, Schedule 14A, in connection with the
Issuer's October 29, 1998 meeting of shareholders which involves the election of
directors.
<PAGE>
 
                                     PART I
                                        

ITEM 1. BUSINESS.
-----------------

  La-Man Corporation dba Display Technologies, Inc., a Nevada corporation, was
originally incorporated in Michigan on November 2, 1979 and remained
substantially inactive until the autumn of 1980.  On February 4, 1983, La-Man
Corporation, a Nevada corporation ("the Company"), was formed and, pursuant to a
Certificate of Merger filed on May 16,1983, the Michigan corporation was merged
into the Nevada corporation.  The Company's executive office is located at 5029
Edgewater Drive, Orlando, Florida  32810.  Its telephone number is (407) 521-
7477.  The Company operates in two business segments: Image Enhancement Displays
and Filtration.

  The Company began doing business under the fictitious name "Display
Technologies, Inc." in September 1998.  At the annual meeting of the Company's
shareholders to be held on October 29, 1998, shareholders will be requested to
consider and vote on Restated Articles of Incorporation of the Company changing
the Company's corporate name to Display Technologies, Inc. and creating a new
class of capital stock comprised of 50,000,000 shares of preferred stock.  The
new corporate name, if approved, will better identify the Company's principal
business of designing and manufacturing electronic displays, message centers and
other commercial signs.  The Company's management believes that the new class of
preferred stock, if approved, will enhance the Company's flexibility in
connection with future acquisitions, financings, and other general corporate
purposes. More information concerning the name change and the new class of
preferred stock is contained in the Company's September 15, 1998 proxy statement
sent to shareholders in connection with the October 29 annual meeting.

  The Company's direct wholly-owned subsidiaries include Ad Art Electronic Sign
Corporation, a Florida corporation ("Ad Art"), Nevada SEMCO, Inc., a Nevada
corporation ("SEMCO"), Don Bell Industries, Inc., a Florida corporation ("Don
Bell"), Don Bell Industries of Nevada, Inc., a Nevada corporation ("Don Bell
Nevada"), Vision Trust Marketing, Inc., a Florida corporation ("Vision") and
Certified Maintenance Service, Inc., a Florida Corporation ("Certified").  The
Company's indirect wholly-owned subsidiaries include J.M. Stewart Industries,
Inc., a Florida corporation ("Stewart Industries"), and J.M. Stewart
Corporation, a Florida corporation ("Stewart Corporation"), each of which is
directly owned by SEMCO, and E.S.C. of Nevada, Inc., a Nevada corporation ("ESC
Nevada), owned directly by Ad Art.

  Unless the context otherwise requires, the term "Company" hereinafter refers
to La-Man Corporation, Ad Art, ESC Nevada, Certified, SEMCO and its subsidiaries
Stewart Corporation and Stewart Industries, Don Bell, Don Bell Nevada, and
Vision.  The Company's Consolidated Financial Statements include the accounts of
all subsidiaries.  See the footnotes to the Company's Consolidated Financial
Statements for information relating to the Company's industry segments.

ACQUISITION OF AD ART ELECTRONIC SIGN CORPORATION

  On February 18, 1998, the Company acquired all of the outstanding capital
stock of Electronic Sign Corporation dba Ad Art, a California corporation,
through the merger of the California corporation into a wholly-owned Florida
subsidiary of the Company, whose name was subsequently 

                                       2
<PAGE>
 
changed to Ad Art Electronic Sign Corporation. In consideration of the merger,
shareholders of the California corporation received a combination of $3,000,000
cash and 810,000 privately issued shares of the Company's common stock, with an
additional 540,000 shares contingently issuable upon the attainment by Ad Art of
certain annual net operating income levels for the fiscal year ending June 30,
1999. Ad Art designs and manufactures high quality electronic message centers
and video display boards with sophisticated animation and instant replay
capabilities. It is a major manufacturer of traditional and electronic signage
across a broad range of industries and countries.

ACQUISITION OF CERTIFIED MAINTENANCE SERVICES, INC.

  On July 1, 1997, the Company acquired all of the outstanding shares of
Certified in exchange for the assumption of Certified's net liabilities.
Certified services indoor and outdoor signage and lighting.  Through a network
of subcontractors, as well as its own service fleet and staff, Certified
specializes in providing service nationwide to multi-store retail outlets such
as department stores, grocery stores, gas stations, office complexes and
clothing outlets.  Following the acquisition, the operations of Certified were
merged with the installation and service operations of Don Bell to form a single
operating division.

ACQUISITION OF DON BELL INDUSTRIES, INC.

  On September 7, 1995, the Company acquired all of the outstanding shares of
Don Bell, a Port Orange, Florida manufacturer of commercial signs, in exchange
for 275,000 privately issued shares of common stock, a $750,000 convertible note
and cash of $360,000.  The note, which is convertible into the Company's common
stock at $4.53 per share, was paid down to $500,000 in September 1998.  The
remaining balance is payable in equal annual installments of $250,000 in each of
the next two years of the note.  Interest is payable semi-annually and the
Company has a call feature at 105% of principal in year one reducing annually to
100% in year five.  As an adjustment to the purchase price, additional notes
payable totaling $626,477 were issued on January 31, 1997 to the previous owners
of Don Bell.  These notes were paid in full and retired with the proceeds of a
refinancing of the Company's indebtedness on August 28, 1997.

ACQUISITION OF J.M. STEWART CORPORATION AND J. M. STEWART INDUSTRIES, INC.

  On January 6, 1994, the Company acquired Stewart Corporation and Stewart
Industries through a merger of their parent company into SEMCO, in exchange for
316,923 privately issued shares of restricted common stock valued at $824,000
and $214,312 cash.  The Company simultaneously competed a registered public
offering of units of the Company's common stock and common stock purchase
warrants for net proceeds of $1,353,431, of which $1,000,020 was used to retire
debt of the acquired  companies with the remainder applied to working capital.

ACQUISITION OF VISION TRUST MARKETING, INC.

  In November 1994, the Company purchased the outstanding shares of common stock
of Vision, an authorized agent of MCI Telecommunications, Inc. ("MCI").  Under
the terms of the acquisition agreement, La-Man canceled certain contractual
advances due from Vision in the amount of $180,195 and assumed the net
liabilities of Vision.  It also entered into a consulting agreement with the
prior owner of Vision and issued 70,000 newly  issued shares of common stock
under its 1994 

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Amended and Restated Employee and Consultant Stock Compensation Plan as
consideration for consulting fees under the agreement.

  The Company operated Vision in Orlando, Florida offering long distance
telephone services as an agent of MCI. The original contract between Vision and
MCI for commercial long-distance customers was executed in 1994 and was restated
and extended for a new five-year term in May 1996. This contract revision had
been proposed by MCI in September 1995 and discussed with Vision over a period
of eight months. In reliance on the new contract, Vision invested heavily in
staff, facilities and equipment in anticipation of significant commission
revenue as a result of the enhancements in the revised contract. In November
1996, the contracts between Vision and MCI were abruptly terminated by MCI.  A
lawsuit was filed by Vision on April 16, 1997 seeking the recovery of damages
from MCI. Because the cancellation of the contract by MCI resulted in Vision no
longer being contracted to market MCI long-distance services, its sole line of
business, the Company discontinued the operations of Vision in December 1996.

PRINCIPAL PRODUCTS

  Image Enhancement Displays.  The Company's display segment accounted for 94%
and 90% of consolidated sales for 1998 and 1997, respectively, and includes the
design, manufacture and sale of image enhancement displays by Ad Art and Don
Bell, the sale of stock institutional signage by Stewart Corporation, the
production of graphic arts and screen printed products by Stewart Industries and
the service, maintenance and installation of lighting and signage by both Don
Bell and Certified. None of Ad Art, Don Bell, Stewart Corporation or Certified
is dependent upon a single customer or a few major customers, the loss of any
one or more of which would have a material adverse effect on their respective
operations.  However, from time to time Ad Art and Don Bell enter into contracts
of significant value that may represent more than 10% of their sales in any one
particular year.  Since these large contracts vary in amount from year to year
and are not with the same customer or group of customers each year, the Company
does not have a significant economic dependence upon a single customer or a  few
major customers.

       Ad Art  Ad Art designs and manufactures high quality electronic message
       ------                                                                 
centers and video display boards with sophisticated animation and instant replay
capabilities.  It is a major manufacturer of traditional and electronic signage
across a broad range of industries and countries. Aesthetically pleasing,
durable and economical, Ad Art displays products are being utilized in the
world's casinos, stadiums, restaurants, banks, auto malls and retail
establishments.

  Ad Art is a recognized leader in state-of-the-art lamp-based video display
boards.  Its electronic video displays are found in many of the world's largest
venues, including Hiram Bithorn Stadium in San Juan, Puerto Rico, Atanasio
Giradot Stadium in Medellin, Columbia, and Chelsea Football Stadium in London.
Since its debut at Super Bowl XXX in Tempe, Arizona, Ad Art's StadiaVision
product has received critical acclaim for its crisp, bright display and video-
replay capabilities.  Ad Art's new LED (light emitting diode) video display
boards have been installed in shopping centers and a board is being installed in
the Hofheinz Pavilion at the University of Houston.

  Ad Art is a leader in the design, manufacture and installation of spectacular
signs as typically viewed in Las Vegas, Nevada.  Currently the gaming market is
expanding rapidly in Atlantic City, 

                                       4
<PAGE>
 
along the Mississippi and on Native American land nationally. Among the
successes designed and manufactured by Ad Art are the freestanding signs for
Stardust, Frontier, Mirage, Treasure Island, MGM (currently the tallest in Las
Vegas), and Monte Carlo. Ad Art manufactured a spectacular 195-foot tall sign
for the Rio Hotel & Casino. This project contained a 50 x 100 foot electronic
InfoVision(TM) display and is capable of displaying live video.

  Ad Art's new state-of-the art LED technology provides a video picture
comparable to and, in daytime applications, exceeding the quality of
conventional CRT displays.  This enables Ad Art to compete for major
installations, including sports stadium applications that have historically
relied on the older and more expensive CRT (large scale television) technology.
The LED's have a life several times longer than the CRT's with significantly
less power consumption than incandescent lamp systems.

  Historically, Ad Art's core business has been selling to and servicing its
well-established regional and national accounts in five broad customer
categories: banks, fast food, merchants, oil companies and entertainment.  Ad
Art signs for market leaders like Wells Fargo Bank, McDonalds, Federal Express,
Blockbuster Video, Pizza Hut, Chief Auto Parts, Office Depot, Texaco, Planet
Hollywood, The Disney Store and many others can be seen virtually on any street
corner throughout U.S. and Canada.   Ad Art has been chosen by Federal Express
to implement its new "FedEx" logo in 1,600 sign locations worldwide.  The
reasons each of these $1mm+ accounts relies on Ad Art are its superior creative
services combined with super-bright displays, quality of manufacture and
competitive pricing.

       Don Bell  Don Bell  is a producer of electronic message centers, custom
       --------                                                               
designed identification systems and custom graphic systems for commercial
clients.  Don Bell specializes in developing and installing interior and
exterior themed signage programs for shopping malls, parks, speedways,
restaurants, vacation destinations and other facilities with a themed image.

  Don Bell's product line is very diverse and includes single and multiple face
fluorescent backlit identification signs, changeable copy reader boards,
electronic time and temperature displays, large pylon electronic and non-
electronic identification signs, monochrome electronic message centers and
multi-color wedge-based electronic displays.  In addition, Don Bell often
produces smaller peripheral signs to complement larger signs and create a
signage theme for its customers.

  Both Don Bell and Certified provide installation, service and maintenance on
interior and exterior lighting and signage.  Prior to the acquisition of
Certified on July 1, 1997, the majority of the service work performed by Don
Bell was performed under five year maintenance agreements on signs sold by Don
Bell.  The acquisition of Certified expanded this business to include service on
other manufacturer's signs as well as service of interior and exterior lighting.

  The service and installation department of Don Bell was merged with the
operations of Certified to form a single service division within the Company.
Through a network of subcontractors and its own fleet of service trucks in Port
Orange, Orlando and Tampa, Florida, as well as Atlanta, Georgia and Las Vegas,
Nevada, the Company specializes in providing service nationwide to multi-store
retail outlets such as department stores, grocery stores, gas stations, office
complexes and clothing outlets while continuing to sell service contracts on
signs manufactured by Don Bell.

                                       5
<PAGE>
 
       Stewart Corporation  Stewart Corporation markets custom designed and
       -------------------                                                 
standard sign products specifically designed for outdoor use by institutional
organizations such as churches, schools, civic organizations and
governmental/military installations. The Company continually seeks markets in
other institutional organizations. The sign products are backed by a 20-year
comprehensive  warranty, and warranty claims have historically been less than 1%
of sales. The sign cabinets are constructed of heavy gauge aluminum extrusions
which are welded at mitered corners. The exteriors are painted in various,
selected customer colors utilizing high quality automotive paints. The formed
faces of the signs are constructed of a polycarbonate product principally
manufactured by General Electric under the product name Lexan. Lexan provides a
sign face which is long lasting, weather and hazard resistant and extremely
shatterproof.  The actual design of the sign can be selected from various stock
models which have been designed by Stewart Corporation or a sign may be custom
designed by the customer with Stewart Corporation's assistance.

  The signs are internally illuminated by fluorescent lamps for night
visibility, and have facing which permits the user to customize the message or
announcement on the signs.  The signs utilize a steel base plate which can be
bolt mounted on a concrete, stone or steel pylon base, and signs are designed
for ease of installation by the customer.

  Sign and sign component manufacturing historically have been carried out under
Stewart Corporation's supervision by non-affiliated manufacturing and assembly
businesses. The majority of the sign manufacture is now handled by one
unaffiliated company, with a limited amount of manufacturing being fulfilled by
affiliated companies. Drawings and specifications are submitted to the
manufacturer, prices are negotiated and Stewart Corporation places individual
orders with the vendor based on the agreed upon prices. Products are shipped
directly to the customer from the third-party manufacturer and, consequently,
Stewart Corporation does not maintain an inventory of stock signs at its
facilities. The manufacturing process utilizes molds, the engineering and
design of which are proprietary to Stewart Corporation.

  Stewart Industries produces graphic arts and screen printed products. Stewart
Industries  also uses computers to design and produce die cut vinyl letters,
symbols, and logos for signs. Stewart Corporation purchases changeable screen
printed copy letters and lettered signs for its church and school signs from
Stewart Industries. These intercompany sales are eliminated in the consolidated
financial statements.

  Filtration and Related Products.  The filtration segment, which accounted for
6% and 10% of consolidated sales for 1997 and 1996, respectively, includes the
manufacture and sale of a line of products which, when installed in compressed
air lines, substantially reduce or totally eliminate water and condensate
problems and most foreign contaminants, such as moisture, oil, dust, rust, and
the like, in the air line. The Company also manufactures and markets
replacement filters and filter materials for each of its filtration devices.
The Company assembles and ships all of its products from its owned facility in
Port Orange, Florida. However, in order to minimize production costs, the
actual components are manufactured by others using tooling owned by the Company.

  In the event that the shareholders approve the change of the Company's
corporate name to Display Technologies, Inc. at the 1998 annual meeting, the
Company intends to spin off its filtration division to a new, wholly-owned
subsidiary that will continue to do business under the name La-Man Corporation.

                                       6
<PAGE>
 
PATENT AND TRADEMARK PROTECTION

  The Company is the owner of 10 U.S. patents: U.S. Reg. No. 4,464,186 relating
to the Pneumatic Liquid Evaporator/Extractor (expires in the year 2001); No.
4,483,417 relating to the Pneuguard(R) Lubricator (expires in 2001); No.
4,487,618 relating to the Extractor/Dryer(R) (expires in 2001); No. 4,810,272
relating to the Air Inlet Valve Arrangement for Pneumatic Equipment (expires in
2006); No. Re32,989 (Reissue of No. 4,600,416) relating to the Air Line Vapor
Trap (expires in 2003); No. 4,874,408 relating to a Liquid Drain Assembly
(expires in 2006); No. 4,925,466 relating to a Filter Cartridge Assembly
(expires in 2007); No. 5,030,262 relating to the Air Vapor Trap and Drain
(expires in 2008); No. 5,114,443 relating to the Air Line Vapor Trap (expires in
2009) and No. 5,261,946 relating to the  Air Line Vapor Trap With Air Warming
System  (expires in 2010).

  The Company also is the owner of nine foreign patents and patents
applications:  Canadian Nos. 1,206,889 relating to the Pneumatic Dryer (expires
2003), 1,197,477 relating to the Extractor/Dryer(R) (expires 2002),1,207,674
relating to the Pneuguard(R) Lubricator (expires 2003), and 1,267,057 relating
to the Air Line Vapor trap (expires 2007), Canadian Patent Application No.
2,064,401 for the Air Line Vapor With Air Warming  System; Japanese Patent Nos.
1,410,903 relating to the Airline Lubricator (expires 2002), and 1,899,252
relating to the Air Line Vapor Trap (expires 2001), Taiwanese Patent No. UM
55136 relating to the Air Inlet Valve Arrangement for Pneumatic Equipment
(expires 2000), and Swedish Patent No. 101,861 relating  to the Airline
Lubricator (next renewal date July 13, 1997).

  The Company is the owner of U.S. Reg. No. 1,287,666 for the trademark LA-
MAN(R), Reg. No. 1,328,054 for PNEUGUARD(R), Reg. No. 1,596,100 for
EXTRACTOR/DRYER(R), and Reg. No. 1,790,935  for ENCAPULATOR(R), all on the
Principal Register of the U.S. Patent and Trademark Office,  Reg. No. 1,359,880
for the mark EXTRACTOR(R) on the Supplemental Register and Reg No. 1,844,119
for "We make Compressed Air Work".  Federal trademark protection is perpetual,
but the Company must renew its trademarks every 10 years.

  Ad Art presently has applications pending with the U.S. Patent and Trademark
Office for the following trademarks: INFOVISION(TM), STADIAVISION(TM),
ARENAVISION(TM) and AD ART(TM) Design. All of the applications have been
published, and are in various stages of the approval process. However, in view
of the backlog in the U.S. Patent and Trademark Office, the Company will not
know for a period of months whether any of the applications will face
opposition.

  The Company believes its filtration and lubrication products are proprietary
assets of the Company's filtration segment.  The Company intends to maintain all
patents and trademarks material to its business for their complete respective
terms.  Patents generally are granted for 17-year terms and are nonrenewable;
trademarks are renewable for 10-year terms.  The products and services of SEMCO,
Stewart Corporation, Stewart Industries and Don Bell are non-proprietary and, as
a result, trademarks and patents are not deemed material to the Company's
signage segment.

                                       7
<PAGE>
 
MARKETING AND DISTRIBUTION

  Ad Art and Don Bell market all U.S. products through staffs of commissioned
salespersons and commissioned independent sales contractors.  Ad Art markets its
products outside the United States through commissioned sales persons and
independent sales representatives. The companies also participate in
conventions, advertising programs and trade associations. Their long-time
reputations as quality manufacturers are valued sources of sales leads.

  Stewart Corporation markets its signs by direct marketing efforts which
include direct mail, telephone calls on prospective church, school and
institutional customers, and direct calls made upon the procurement personnel of
various national churches and church denominations, school board officials and
school procurement personnel. Stewart Corporation also participates in church,
school and governmental/military conventions, denominational meetings and other
events attended by representatives of potential church, school and
governmental/military customers.  It advertises its products and services
through church denominational publications and bulletins, and publications of
schools, school boards and school administrative personnel.

   Stewart Corporation also markets products through joint venture and similar
arrangements with the denominational headquarters of various organized churches.
Under the joint venture marketing strategy, Stewart Corporation products are
presented in denominational publications which are disseminated to member
churches. Stewart Corporation is presented as an appointed supplier of the
signs and related products and member churches are encouraged to purchase such
products from Stewart Corporation. Stewart Corporation remits a commission to
the denominational headquarters based upon product sales. Stewart Corporation
also plans to utilize joint venture arrangements in sign marketing to schools to
secure sign product endorsements from school boards and other administrative and
governing bodies.

  Don Bell and Certified market service agreements through direct sales calls as
well as the sale of five-year service agreements on signs manufactured by Don
Bell. Through a network of subcontractors, as well as their own fleet of
service trucks in Port Orange, Orlando, Tampa and Miami, Florida, as well as
Atlanta, Georgia, Don Bell and Certified specialize in providing service
nationwide to multi-store retail outlets such as department stores, grocery
stores, gas stations, office complexes and clothing outlets. As a result, a
significant portion of marketing is dedicated to direct sales calls on the
corporate or regional headquarters of national retailers. In addition to
national and regional sales, the companies market service to local retailers
such as automobile dealers and shopping malls. They also cross market signage
and lighting services to provide a full range of services to customers.

  The Company's filtration and lubrication business uses various techniques in
marketing its products, such as trade media advertising, direct mail, attendance
at trade shows and direct customer contact.

BACKLOG

  Customers of Ad Art and Don Bell place orders on an as-needed basis. Deposits
of up to 50% with the orders are negotiated with customers.  Delivery and
installation are dependent on the size and customization required of the order
and are usually completed within two months, except for 

                                       8
<PAGE>
 
long-term contracts. Ad Art and Don Bell do not have backlog orders which they
are not able to fill in accordance with their usual practice. However, they did
have contracts in process exceeding $14,700,000 in contract value as of June 30,
1998.

  Stewart Corporation's customers place orders on an as-needed basis.  Stewart
Corporation authorizes the manufacture of the sign when it obtains a deposit,
customarily 50% of the order, from the customer. The completed sign is shipped
to the customer approximately 6-8 weeks after the deposit is received. As of
June 30, 1998, Stewart Corporation did not have any firm orders for products
which it had not been able to fill in accordance with its usual practice.

  Most of the Company's filtration customers place orders on an as-needed
basis, which generally are filled within one to five days after receipt and in
accordance with the delivery requirements of the Company's customers. For the
fiscal year ending June 30, 1998, the Company did not have any firm orders for
products which it had not been able to fill in accordance with its usual
practice. The Company's larger customers provide the Company with "blanket
orders," i.e., scheduled orders, at designated prices over the course of six-
month or twelve-month periods. These orders are subject to modification by the
customer from time to time.

EMPLOYEES

  The Company presently has 481 full-time employees.  The following table shows
the breakdown of employees:
 
Signage Segment:
 Commercial Signage                               328
 Institutional Signage                             47
 Installation and Service                          84
 Graphic Arts and Screen Printing                   5
Filtration Segment                                 11
Executive Offices                                   6
                                                  ---
                                                  481
                                                  ===

COMPETITION

  Ad Art competes in two distinct markets - traditional signage and electronic
media.  In broad terms, Ad Art has Japanese and domestic competitors in video
display markets.  Sony Jumbotron and Mitsubishi Diamond Vision created the
outdoor stadium and "Times Square/Ginza" markets. Ad Art now delivers comparable
picture quality at 1/3 the total cost of ownership.  Among the remaining lamp-
based domestic alternatives, Ad Art competes with three main companies:
Daktronics and Whiteway, which manufacture scoreboards with electronic
messaging, and Mikhon Visual Products, with similar capabilities but vertically
oriented to the Las Vegas market.

  Ad Art has few major competitors in the spectacular sign market, nationally or
internationally. Over the past 30 years, Ad Art signs have been more highly
recognized for design and fabrication than those of its competitors.

                                       9
<PAGE>
 
  In the regional and national market, Ad Art identifies 10 competitors
representing approximately $500 million in annual sales against whom it vies for
market share. Of these firms, two generate annual sales in excess of $100
million, four generate annual sales of between $40-$70 million, and four
generate annual sales of between $25-$40 million. Ad Art competes extremely
well in local markets based on a solid brand image for quality, creativity and
value in both electronic and traditional signage.

  Don Bell and Certified are in a highly competitive market, primarily for
medium-to-large sign products and electronic message systems, with both national
and local sign makers. The strength of their sales force, the quality of their
products and electronics, and their pricing and name recognition are the keys to
their successful sales records. The sign and lighting service industry is
dominated by small, single-location service companies.  Multiple location
dispatch centers in Port Orange, Orlando, Tampa and Miami, Florida as well as
Atlanta, Georgia, Stockton, California  and Los Angeles, California, in
combination with an extensive network of subcontractors, enable the Company to
provide nationwide service, which gives the Company a competitive advantage in
the signage and lighting service market.

  Stewart Corporation encounters substantial competition from a myriad of local
signage companies which operate throughout the United States and Canada.  The
principal factors in such competition are product pricing, service, quality,
design, production and delivery time, and product warranties. Stewart
Corporation products contain materials of high quality. A 20-year sign warranty
is also provided. Management believes that the comparative quality of the
Stewart Corporation sign products, together with related services provided and
the extensive product warranty, enable the company to effectively compete with
other sign companies. Additionally, Stewart Corporation's joint venture
marketing strategy provides access to potential church and school customers that
is generally not available to local competitors. Stewart Corporation also
competes with a number of smaller companies in the sale of lower volume economy
signs.

  The Company's filtration manufacturing segment is subject to substantial
competition from a number of companies. At present, screening devices such as
filters and cumbersome water traps are the principal methods of attempting to
remove moisture and other impurities from compressed air lines. The Company  is
not aware of any product presently marketed that offers the range of uses,
effectiveness and ease of installation provided by the Company's line of
products. The principal methods of competition include performance, service and
price. Management believes the Company's product prices are within the range of
the prices of its competitors.

GOVERNMENT REGULATION

  The Company has no knowledge of any U. S. governmental regulations which
adversely affect its business operations. In the manufacture of its products
for governmental agencies, the Company is required to meet certain governmental
specifications. The Company has had no difficulty satisfying these requirements.

                                       10
<PAGE>
 
ENVIRONMENTAL PROTECTION COMPLIANCE

  The Company has no knowledge of any federal, state or local environmental
compliance regulations which materially affect its current business activities.
The Company has  not expended any capital to comply  with environmental
protection statutes and does not anticipate that such expenditures will be
necessary in the future with respect to its products.

RESEARCH AND DEVELOPMENT COSTS

  The Company spent approximately $80,000 in fiscal 1998, primarily through Ad
Art.  Research and development expenses in fiscal 1997, prior to the Ad Art
acquisition, were negligible.

   Ad Art and Don Bell are expected to incur continuing research and development
costs for enhancement of LED video display boards, message centers and for
reduction of manufacturing costs.  Stewart Corporation and Stewart Industries'
operations do not require the expenditure of any sums for research and
development.  The Company's expenditures for its last two fiscal years on
research and development of new filtration and lubrication products were not
significant.


ITEM 2.  PROPERTIES.
--------------------

  The Company maintains its corporate offices in a 5,250 square foot leased
facility in an office and retail complex in Orlando, Florida under a five year
lease expiring in 2000.

  Ad Art owns a 100,000 square foot manufacturing facility in Stockton,
California which is situated on a 10-acre site and is suitable for plant
expansion and multiple shifts. The property is encumbered by deeds of trust
securing Ad Art indebtedness of approximately $1,158,000.

  Ad Art also leases branch offices in San Francisco, California, Carson,
California and Las Vegas, Nevada. The San Francisco lease is for 4,953 square
feet of office space for a term that expires January 31, 2002. The Carson,
California lease is for approximately 15,120 square feet of office space for a
term ending February 28, 2001. The Las Vegas lease is for 2,900 square feet of
office space for a term ending August 1, 2001.

  Don Bell operates in its owned manufacturing facilities; a 38,000 square foot
structure in Port Orange, Florida.  This building, situated on eight acres of
land owned by Don Bell, is a one and one half-story, steel frame structure with
a metal roof and slab floor.  Don Bell also leases an adjacent one-acre site for
rent of $2,750 per month for a term ending April 30, 2000, with an option to
purchase the parcel for $400,000.  In addition to the abovementioned facilities,
Don Bell and Certified operate service branches out of the corporate
headquarters in Orlando, Florida.  Service trucks are stationed at customers'
facilities in Atlanta, Georgia and Las Vegas, Nevada.

     Stewart Corporation leases approximately 9,175  feet of office space in
Sarasota, Florida for a five-year term that ends on December 31, 2000.  Stewart
Industries leases, for its graphics and screen print operations, space in
Sarasota, Florida for a one-year term that ends on January 31, 1999. SEMCO does
not have separate offices and conducts its  business from the offices of Stewart
Corporation.

                                       11
<PAGE>
 
  The Filtration segment operates in its owned manufacturing facilities; an
8,750 square foot structure in Port Orange, Florida.  This building, situated on
approximately one acre of land adjacent to the Don Bell property, is a one-
story, steel frame structure with a metal roof, slab floor, heat and partial
central air conditioning.

  The Company recently acquired an additional facility in which to manufacture
signs for Stewart Corporation or for commercial sign production.  The facility
is approximately 14,000 square feet and is adjacent to both the Don Bell and
Filtration facilities.

  All properties currently owned by the Company (except those of Ad Art), are
pledged as collateral against the Company's letter of credit, notes and line of
credit with SouthTrust Bank.


ITEM 3.  LEGAL PROCEEDINGS.
---------------------------

     In November 1996, the agency contracts between Vision and MCI were abruptly
terminated by MCI. The contract for commercial long-distance customers was
originally executed in 1994 and was restated and extended for a new five-year
term in May 1996. This contract revision had been proposed by MCI in September
1995 and discussed with Vision over a period of eight months. In reliance on
the new contract, Vision invested heavily in staff, facilities and equipment in
anticipation of significant commission revenue as a result of the enhancements
in the revised contract. A lawsuit was filed by Vision on April 16, 1997
seeking the recovery of damages from MCI. As of the date of this report, the
court hearing the lawsuit had made no material rulings.


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

  None.


                                    PART II


ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
---------------------------------------------------------------------------
MATTERS.
--------

  The Company's common stock is quoted on the NASDAQ Small Cap Market under the
trading symbol "LAMN" but is not traded on any exchange. If the Company's
proposed name change is approved at its 1998 annual meeting of shareholders, the
Company intends to change its trading symbol to "DTEK." The following table
indicates the range of high and low bid prices for the common stock for each
full quarterly period within the two most recent fiscal periods ended June 30,
1998 and June 30, 1997 as such quotes were supplied by the NASDAQ Small Cap
Market to the National Quotation Bureau, Inc. and reported to the Company by the
National Quotation Bureau, Inc. The market quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.

                                       12
<PAGE>
 
  Fiscal Year                            Common Stock Bid Prices
                                         -----------------------
    Ending         Quarter Ending            High       Low
--------------   ------------------         -----      -----

June 30, 1997    September 30, 1996         $2.13      $0.88
                 December 31, 1996           2.00       1.00
                 March 31, 1997              2.00       1.09
                 June 30, 1997               2.69       1.25
 
June 30, 1998    September 30, 1997         $3.13      $2.19
                 December 31, 1997           3.63       2.50
                 March 31, 1998              4.69       3.06
                 June 30, 1998               3.53       2.81

   As of September 23, 1998 there were approximately 707 holders of record of
the common stock.

  The Company has never paid and does not anticipate paying any cash dividends
on its common stock in the foreseeable future, but instead intends to retain
working capital and earnings for use in the Company's business operations and in
the expansion of its business.


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

RESULTS OF OPERATIONS

  The Company's consolidated financial statements include the accounts of the
Company and its subsidiaries SEMCO, Stewart Corporation, Stewart Industries,
Vision, Don Bell, Don Bell Nevada, Certified (since July 1, 1997) and Ad Art
(since February 18, 1998).

  Except for the historical information contained herein, certain matters
addressed in this Annual Report on Form 10-KSB may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act of 1934, as amended.
Such forward looking statements are subject to a variety of risks and
uncertainties that could cause actual results to be different materially from
those anticipated by the Company's management.  The Private Securities
Litigation Reform Act of 1995 (the "1995 Act") provides certain "safe harbor"
provisions for forward-looking statements.  All forward-looking statements made
in this Annual Report on Form 10-KSB are made pursuant to the 1995 Act.

YEAR ENDED JUNE 30, 1998 COMPARED WITH YEAR ENDED JUNE 30, 1997

  Fiscal 1998 sales of $32,478,000 represented an increase of $16,532,000, or
104%, over 1997 sales of $15,946,000. The increased sales resulted from
increases in both the sign and image enhancement display segment (the "display
segment") and the filtration segment.

  Display segment sales, which accounted for 94.5% of consolidated sales in 1998
and 89.7% of consolidated sales in 1997, increased $16,387,000, or 115%, from
1997 to 1998.  The sales growth in this segment can be broken down into internal
sales growth of $1,524,000 and growth from acquisitions of $14,863,000.

                                       13
<PAGE>
 
  Excluding the effects of acquisitions, display segment sales increased from
$14,299,000 in 1997 to $15,823,000 in 1998 - an increase of 11%. The most
significant portion of this increase came from commercial signage, image
enhancement displays, and related products and services which accounted for
sales of $7,753,000 (net of increases from acquisitions) in 1998 compared to
sales of $6,774,000 in 1997. This represents an internal growth rate of 14%.
The internal growth rate for less complex signs and image enhancement displays,
which consists primarily of institutional signage, was 7% with sales increasing
from $7,525,000 in 1997 to $8,070,000 in 1998.

  The acquisition growth in the display segment resulted from the July 1, 1997
acquisition of Certified and the February 18, 1998 acquisition of Ad Art.
Certified contributed sales during 1998 of $1,068,000 and Ad Art contributed
sales of $13,795,000.

  The internal sales growth in the display segment, as well as a  portion of the
growth from acquisitions, was the result of several factors such as continued
refinement of marketing and promotion, new market development, sales staff
increases and synergies created from the acquisitions.

  The marketing and promotion function was refined in July 1997 to more directly
target commercial customers through selective trade show attendance, direct mail
and other methods similar to the methods historically used to develop
institutional customer sales leads.  Marketing has also been expanded for
institutional displays to target customers in the government and military,
funeral home and civic (such as municipalities and social clubs and
organizations) industries.

  Synergies between the existing operations of the Company and the operations of
acquired companies have contributed significantly to the internal sales growth
and have also enable the acquired companies to grow at a faster pace subsequent
to the acquisitions.

  The acquisition of Ad Art created various opportunities for the Company's
existing display segment, and vice-versa, primarily through a wider variety of
products available for sale, exposure to a wider customer base and an increased
ability to penetrate the nationwide market. Ad Art is a leader in the industry
in the production of wedge-based and LED color message centers and video
displays. Historically, the Company has purchased these products from third
party suppliers when needed. In the other direction, the Company's existing
commercial display operation is a leader in the industry in the production of
monochrome, large lamp, incandescent message center displays. This is a product
that Ad Art had historically purchased from third party suppliers. This
availability of a wider variety of high quality products has resulted in
significant cross-marketing with Ad Art sales personnel working side by side
with Don Bell sales personnel. Historically, neither company would have been
able to make these sales calls because they either did not have the necessary
products available, or did not have the necessary sales contacts to make the
calls. These joint marketing efforts will also be expanded to existing national
account customers such as Office Depot, Nike, Lil' Champs, Hard Rock Cafe and
many others that currently are being served either by Ad Art on the west coast
or Don Bell on the east coast. These existing relationships create
opportunities for increased sales for both Ad Art and Don Bell. A west coast
presence has also created new opportunities for increased sales of institutional
displays where sales have historically been concentrated in the southeast. A
new sales position has recently been developed in California and should increase
sales in the western region of the United States.

                                       14
<PAGE>
 
  Filtration segment sales, which accounted for 6% of sales in fiscal 1998 and
10% of sales in 1997, increased by 9% from $1,646,000 in 1997 to $1,792,000 in
1998. Sales from this segment had been essentially flat for the previous three
years. The 9% increase in 1998 is attributable to significant changes in the
segment's marketing methods in April 1997. At that time, additional field
representatives were added, trade show attendance was expanded, advertising was
increased, communication with distributors was enhanced and a proactive program
to add distributors was enacted.

  The Company's overall gross margins dropped from 49.1% during 1997 to 39.4%
during 1998. The drop is a direct result of the change in the sales mix
resulting from the Ad Art acquisition. The types of display products produced
by Ad Art are typically sold at margins of 30% to 35%, which is consistent with
Don Bell's margins. These margins are significantly lower than the historical
55% to 60% gross margins on the Company's institutional display and filtration
operations, which have higher gross margins but higher selling expenses.

  Margins were also reduced, to a lesser extent, from the Certified acquisition.
Certified historically under-priced its services and had excessive overhead.
Since the acquisition, the Company has gradually increased prices, reduced
operating costs and converted customer services to more cost efficient methods.

  The filtration segment's gross margins increased from 57.5% in 1997 to 59.6%
in 1998. This increase represents a return to historical profit margins for
this segment upon training a new work force hired after the segment's operations
were moved from Indiana to Florida.

  Selling expense increased by 93% from $2,581,000 in 1997 to $4,973,000 in
1998. Again, this increase was a result of acquisitions as selling expenses,
expressed as a percentage of sales, dropped from 16.2% of sales in 1997 to 15.3%
of sales in 1998.

  Selling expenses for the display segment increased by 97% from $2,355,000 in
1997 to $4,643,000 in 1998. However, as a percentage of sales, the display
segments's selling expenses dropped from 16.5% of sales in 1997 to 15.1% of
sales in 1998 due to the acquisition of Ad Art, where selling expenses average
approximately 13.4% of sales. Disregarding the effect of acquisitions, the
segment's selling expenses increased from 16.5% of sales in 1997 to 17.5% of
sales in 1998 as a result of the increased marketing activities to commercial
and institutional customers. Historically, selling expenses for the Company's
institutional sign operations have been approximately 20% of sales while selling
expenses for the Company's  commercial sign operations have been approximately
12% of sales. For the four-month period that Ad Art's operations are included
in the Company's financial statements, its selling expenses totaled $1,843,000,
or 13.4% of its sales for the period. This level of selling expenses is
consistent with the levels historically experienced by the Company's commercial
display operations.

  General and administrative expenses increased by 26% from $4,210,000 in 1997
to $5,306,000 in 1998. The display segment, which includes the effects of
acquisitions, had a 26% increase in general and administrative expenses from
$3,073,000 in 1997 to $3,876,000 in 1998 and corporate general and
administrative expenses increased 38% from $856,000 in 1997 to $1,183,000 in
1998. The full increase in the display segment's general and administrative
expenses came from acquisitions where Ad Art added general and administrative
expenses of $594,000 (for the four months included in the Company's operations)
and Certified added general and administrative expenses of $226,000.

                                       15
<PAGE>
 
  Corporate general and administrative expenses primarily consist of executive
compensation and benefits, occupancy costs of the corporate office, and other
compliance costs incurred as a result of being a public company such as legal
fees, director fees, SEC and NASDAQ filing costs and investor relation and
publicity costs. From 1997 to 1998, corporate general and administrative costs
increased $327,000, or 38%. Approximately $140,000 of this increase resulted
from increased salary and bonus compensation to executives whose compensation
and bonuses are calculated under a formula based upon the financial performance
of the Company. The other significant expense increase, of approximately
$80,000, resulted from a expansion in investor relations and stock publicity
during 1998. Prior to 1998, investor relations and publicity activities were
very limited. The remaining increase in corporate general and administrative
expenses came from various sources associated with the growth of the Company
such as increased travel costs associated with the new west coast subsidiary and
increased costs for directors and officers insurance needed to attract a high
caliber of non-employee directors.

  Non-operating activities netted to a $307,000 expense in 1998 compared to
$158,000 in income in 1997, a net increase in expenses of $465,000.  The main
components of this increase are interest expense and the gain on sales of
assets.

  Interest expense increased by 109%, or $253,000, from $233,000 in 1997 to
$486,000 in 1998. The increase in interest expense is directly attributable to
the acquisitions, as a total of approximately $100,000 in interest was incurred
during the year on debt incurred to finance the acquisitions and approximately
$180,000 in additional interest was paid on debts assumed in the acquisitions.

  Gains on sales of assets dropped from $271,000 in 1997 to only $5,000 in 1998.
During 1997, the Company sold three billboards for a gain of approximately
$260,000 ($0.08 per basic share and $0.06 per diluted share). This sale removed
the Company from the billboard industry and represents a non-recurring gain.

  Income tax expense for 1998 was $615,000 compared to a tax credit of $229,000
in 1997, a net increase in expense of $844,000 ($0.21 per basic share and $0.15
per diluted share). The tax credit in the prior year was the result of the
recognition of tax benefits derived from net operating losses incurred in prior
years. A portion of these benefits was also realized during 1998, which reduced
the effective tax rate for the Company to 28% rather than the statutory 38% to
40% federal and state rates. All benefits of these historical net operating
losses have now been realized and future tax expense should approximate the
statutory rates.

  Net income from continuing operations increased by 12% from $1,418,000 in 1997
to $1,588,000 in 1998. On a per share basis, basic earnings per share from
continuing operations decreased from $0.41 in 1997 to $0.40 in 1998 on a 15%
increase in weighted average shares outstanding from 3,439,000 in 1997 to
3,965,000 in 1998. Diluted earnings per share from continuing operations
decreased from $0.35 in 1997 to $0.32 in 1998 on a 28% increase in weighted
average shares outstanding from 4,202,000 in 1997 to 5,389,000 in 1998.

                                       16
<PAGE>
 
  The loss from discontinued operations in 1997 includes the loss from
operations and winddown costs of Heritage Packaging Corporation, the Company's
package wholesaling subsidiary that was discontinued in August, 1996 and Vision,
the Company's telemarketing subsidiary that was discontinued in December, 1996.

  Net income increased by 107% from $765,000 in 1997 to $1,588,000 in 1998.  On
a per share basis, basic earnings per share increased by 82% from $0.22 per
share in 1997 to $0.40 per share in 1998 despite the 15% increase in weighted
average shares outstanding, and diluted earnings per share increased by 60% from
$0.20 in 1997 to $0.32 in 1998 despite the 28% increase in weighted average
shares outstanding.

LIQUIDITY, CASHFLOW AND CAPITAL RESOURCES

  A total of $1,026,000 in cash was used in operations during the year.  Net
income contributed cash of $2,214,000 net of non-cash charges for depreciation
and amortization, fixed asset disposals, contributions to the Company's 401(k)
plan and deferred income taxes.  This cash provided was offset by increases in
receivables of $2,036,000 and inventories of $551,000 as well as decreases in
accounts payable of $1,080,000 and changes in other assets and liabilities.  An
additional $755,000 in cash was provided from increased customer deposits.

  The cash used to increase receivables and inventories is directly related to
higher sales and year-end sales backlogs that require higher levels of
receivables and inventory be carried on the Company's books.  This also
contributed to the higher level of customer deposits as increased sales result
in increased deposits received from customers.  The $1,080,000 used to pay down
account payables is somewhat misleading, as significant past due payables were
acquired in both the Ad Art and Certified acquisitions.  The Company provided
working capital for each of these companies upon acquisition, which allowed
payables to be made current.  However, since these payments occurred subsequent
to the acquisition, they are classified as operating activities rather than
investing activities associated with the acquisition.

  A total of $3,868,000 in cash was used for investing activities during the
year, primarily as a result of the acquisitions which used $3,005,000 in cash,
net of cash acquired.  An additional $883,000 in cash was used to acquire
various property, plant and equipment during the year.

  A total of $5,200,000 in cash was provided by financing activities during the
year, which included $4,500,000 to finance the Ad Art acquisition consisting of
$3,500,000 in debt and $1,000,000 in common stock.  An additional $327,000 in
cash was received from the proceeds of long-term debt when the Company
refinanced its long-term debt in August, 1997.

  At June 30, 1998, the Company had working capital of $6,557,000 and
availability under open lines of credit of $3,341,000.  Management believes that
this, combined with other available debt and equity financing sources, is
sufficient to fund the operations of the Company as well as potential future
acquisitions.

                                       17
<PAGE>
 
INFLATION

  Although inflation has slowed in recent years, it continues to be a factor in
the Company's operations.  In recent years, the Company has taken steps to
counteract the effects of inflation by price increases and by careful cost
controls.  There are no other significant factors which are expected to cause a
material increase in the Company's general and administrative expenses.

YEAR 2000

  Many existing computer programs use only two digits to identify a year in the
date field, with the result that data referring to the year 2000 and subsequent
years may be misinterpreted by these programs.  If present in computer
applications of the Company or its suppliers and not corrected, this problem
could cause computer applications to fail or to create erroneous results and
could cause a disruption in operations and have an adverse effect on the
Company's business and results of operations.

  All of the Company's computer systems are provided by third-party vendors.
The Company has evaluated its principal computer systems and received assurances
from the system vendors that all systems currently in place are year 2000
compliant.

  The Company has not communicated with all of its suppliers to determine the
extent to which the Company is vulnerable to failure by them to remediate their
own year 2000 issues.  However, because of the availability of alternative
suppliers for the majority of the Company's raw materials, the Company does not
believe that any potential noncompliance by material vendors will have a
significant adverse effect on the Company.

  Expenditures to remediate the year 2000 issue have not been material and the
Company does not anticipate any material expenditures related to this issue in
the future.

RECENT ACCOUNTING PRONOUNCEMENTS

   See the footnotes to the Company's Consolidated Fiancial Statements for 
information relating to recent accounting pronouncements.

ITEM 7.  FINANCIAL STATEMENTS.
------------------------------

  Financial statements are included at the end of this report starting at page
F-1.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS, ETC.
------------------------------------------------------------

  None.

                                    PART III

THE INFORMATION REQUIRED BY ITEMS 9 THROUGH 12 OF THIS PART III IS INCORPORATED
BY REFERENCE FROM THE COMPANY'S DEFINITIVE PROXY STATEMENT TO BE FILED IN
CONNECTION WITH THE OCTOBER 29, 1998 MEETING OF SHAREHOLDERS OF THE COMPANY,
WHICH WILL INVOLVE THE ELECTION OF DIRECTORS.
 
 
ITEM  13.  EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES,  AND  REPORTS  ON
--------------------------------------------------------------------------
FORM  8-K.
----------

(a)  The following documents are filed as part of this Report:

                                       18
<PAGE>
 
<TABLE> 
<S>                                                                                 <C>
LA-MAN CORPORATION AND SUBSIDIARIES
Report of Independent Certified Public Accountants - BDO Seidman, LLP.............. F-2
Consolidated Balance Sheet as of June 30, 1998..................................... F-3
Consolidated Statements of Income for the years ended June 30, 1998 and 1997....... F-4
Consolidated Statements of Stockholders' Equity for the years ended
  June 30, 1998 and 1997........................................................... F-5
Consolidated Statement of Cash Flows for the years ended June 30, 1998 and 1997.... F-6
Notes to Consolidated Financial Statements......................................... F-7
 
</TABLE>
Exhibit
Number  Title of Exhibit
------  ----------------
  2.1   Stock Purchase and Sale Agreement dated as of September 7, 1995 among
        Registrant, Don Bell Industries, Inc., Worrell Enterprises, Inc. and
        Gary D. Bell/24/
  2.2   Agreement for Purchase of Assets dated as of August 27, 1996 between
        Heritage Packaging Services, Inc. and Midwest Packaging Products,
        Inc./27/
  2.3   Stock Purchase and Sale Agreement among the Registrant, Certified
        Maintenance Service, Inc. and Mark Manfredi dated as of July, 1,
        1997/32/
  2.4   Agreement and Plan of Merger and Reorganization dated as of February 17,
        1998 among the Registrant, Displays Acquisitions, Inc., a wholly owned
        Florida subsidiary of the Registrant, Electronic Sign Corporation d/b/a
        Ad Art, a California corporation, and Terry J. Long, Daniel G. O'Leary,
        individually and in his capacity as Trustee of the Daniel O'Leary Trust
        Dated April 18, 1993, Betty E. Papais, individually and in her capacity
        as Trustee of the Papais Trust Dated January 29, 1991, and Lou A.
        Papais/33/
  3.1   Articles of Incorporation of Registrant/1/
  3.2   Certificate of Merger/1/
  3.3   Bylaws of Registrant as amended/27/
  3.4   Amendment to Articles of Incorporation/9/
  3.9   Articles of Incorporation of Nevada SEMCO, Inc., a Nevada 
        corporation/20/
  3.10  By-Laws of Nevada SEMCO, Inc./20/
  3.13  Articles of Incorporation of Vision Trust Marketing, Inc., a Florida
        corporation/27/
  3.14  Bylaws of Vision Trust Marketing, Inc./27/
  3.15  Articles of Incorporation of Don Bell Industries, Inc., a Florida
        corporation/27/
  3.16  Bylaws of Don Bell Industries, Inc./27/
  3.17  Articles of Incorporation of Don Bell Industries of Nevada, Inc./27/
  3.18  Bylaws of Don Bell Industries of Nevada, Inc./27/
  3.19  Articles of Incorporation of Certified Maintenance Service, Inc./32/
  3.20  Bylaws of Incorporation of Certified Maintenance Service, Inc./32/
  3.21  Articles of Incorporation of Displays Acquisitions Corp. (n/k/a Ad Art
        Electronic Sign Corporation)/35/
  3.22  Articles of Merger of Electronic Sign Corporation into Displays
        Acquisition Corp. (with the surviving corporation, Displays Acquisitions
        Corp. changing its name to Ad Art Displays, Inc.)/35/
  3.23  Articles of Amendment to Articles of Incorporation of Ad Art Displays,
        Inc. (changing the corporate name to Ad Art Electronic Sign
        Corporation)/35/
  3.24  Bylaws of Ad Art Electronic Sign Corporation f/k/a Ad Art Displays,
        Inc./35/
  3.25  Articles of Incorporation of ESC of Nevada, Inc./35/

                                       19
<PAGE>
 
  3.26    Bylaws of ESC of Nevada, Inc./35/
  4.1     Specimen of Common Stock Certificate/17/
  4.2     Specimen of Warrant Certificate (as revised)/17/
  4.3     Form of Representative's Unit Purchase Option (as revised)/20/
  4.7     Form of Warrant Agreement among Registrant, Mathews, Holmquist &
          Associates, Inc., and Continental Stock Transfer & Trust Company
          (revised)/20/
  4.8     Specimen Certificate of Common Stock to be included in Units/17/
  4.13    Amendment No. 1 to Warrant Agreement, dated as of December 8, 1995,
          between La-Man Corporation and Continental Stock Transfer & Trust
          Company, as Warrant Agent/29/
  4.14    8% Convertible Note of Registrant, dated September 7, 1995, in
          principal amount of $750,000 to Worrell Enterprises, Inc./26/
  4.15    Amendment No. 2 to Warrant Agreement, dated as of January 10,1997,
          between La-Man Corporation and Continental Stock & Transfer Company,
          as Warrant Agent/32/
  4.16    Amendment No. 3 to Warrant Agreement, dated as of March 20, 1998,
          between La-Man Corporation and Continental Stock Transfer & Trust
          Company, as Warrant Agent/35/
  4.17    Convertible Loan Agreement Dated March 2, 1998 by and between La-Man
          Corporation and Renaissance Capital Growth & Income Fund III, Inc.,
          Renaissance US Growth & Income Trust PLC and Renaissance Capital
          Group, Inc./34/
  4.18    8.75% Convertible Debenture Due March 2, 2005 issued to Renaissance
          Capital Growth & Income Fund III, Inc./34/
  4.19    8.75% Convertible Debenture Due March 2, 2005 issued to Renaissance US
          Growth & Income Trust PLC /34/
  4.20    Stock Purchase Warrant issued to Renaissance Capital Growth & Income
          Fund III, Inc./34/
  4.21    Stock Purchase Warrant issued to Renaissance US Growth & Income Trust
          PLC /34/
  4.22    J. William Brandner Lock-Up Agreement /34/
  4.23    J. Melvin Stewart Lock-Up Agreement /34/
  9       Voting Trust Agreement dated as of May 19, 1998 among J. Melvin
          Stewart, as Trustee, and Rebecca Stewart Brooks, Bonnie Stewart Knox,
          J. Melvin Stewart as Trustee for the Emily Stewart Michelsen
          Irrevocable Trust dated May 6, 1998, Susan Stewart Michelsen,
          Elizabeth Stewart Ricci, Deborah Stewart, John M. Stewart and Mary
          Stewart 
  10.46   1988 Incentive Stock Option Plan/17/
  10.47   1992 Stock Option and Appreciation Rights Plan/17/
  10.58   Employment Agreement dated July 26, 1993 between Registrant and Philip
          Howe Hoard/20/
  10.60   Employment Agreement dated August 19, 1993, between J.M. Stewart
          Corporation and J. Melvin Stewart/20/
  10.61   Employment Agreement dated as of April 28, 1994 between Registrant and
          J. William Brandner/21/
  10.94   Amendment No. 1, dated as of August 31, 1995 to Employment Agreement
          between Registrant and J. William Brandner/27/
  10.95   Amendment No. 1, dated as of August 31, 1995 to Employment Agreement
          between Registrant and Philip Howe Hoard/27/
  10.96   Amendment No. 1, dated as of August 31, 1995 to Employment Agreement
          between Registrant and J. Melvin Stewart/27/
  10.102  Employment Agreement dated as of September 7, 1995 among Registrant,
          Don Bell Industries, Inc. and Gary D. Bell/26/
  10.104  La-Man Corporation 1994 Amended and Restated Employee and Consultant
          Stock Compensation Plan, as amended by Amendment No. 1 thereto dated
          as of August 31, 1995/26/

                                       20
<PAGE>
 
  10.106  $2,570,000 Irrevocable Letter of Credit No. SB 1326 issued by
          SouthTrust Bank, National Association, on August 28, 1997 for the
          account of La-Man Corporation./32/
  10.107  Form of La-Man Corporation $2,500,000 Variable/Fixed Rate Credit
          Enhanced Notes./32/
  10.108  Trust Indenture dated August 1, 1997 between La-Man Corporation and
          SouthTrust Bank, National Association /32/
  10.109  Remarketing Agent Agreement dated as of August 1, 1997 among La-Man
          Corporation, SouthTrust Bank, National Association, as Trustee and
          SouthTrust Securities, Inc., as Remarketing Agent /32/
  10.110  Revolving-Line-of-Credit Promissory Note dated August 1, 1997 from La-
          Man Corporation to SouthTrust Bank, National Association /32/
  10.111  Credit and Security Agreement dated as of August 1, 1997 between La-
          Man Corporation and SouthTrust Bank, National Association /32/
  10.112  Real Estate Mortgage and Security Agreement dated as of August 1,
          1997, by La-Man Corporation, Don Bell Industries, Inc., Don Bell
          Industries of Nevada, Inc., Nevada SEMCO, Inc., JM Stuart Corporation,
          JM Stuart Industries, Inc., Certified Maintenance Services, Inc. and
          Vision Trust Marketing, Inc., to and for the benefit of SouthTrust
          Bank, National Association /32/
  10.113  Guaranty Agreement dated as of August 1, 1997, by Don Bell Industries,
          Inc., Don Bell Industries of Nevada, Inc., Nevada SEMCO, JM Stuart
          Corporation, JM Stuart Industries, Inc., Certified Maintenance
          Service, Inc. and Vision Trust Marketing, Inc. to and for the benefit
          of SouthTrust Bank, National Association /32/
  10.114  Exclusive Manufacturing and Sales Agreement dated as of September 16,
          1997 between Don Bell Industries, Inc. and Electronic Sign Corporation
          d/b/a Ad Art /32/
  10.115  February 17, 1998 promissory note from Electronic Sign Corporation
          payable to the order of Terry J. Long/33/
  10.116  February 17, 1998 promissory note from Electronic Sign Corporation
          payable to the order of Daniel Gregory O'Leary, as Co-Trustee under
          the Daniel and Beverly O'Leary Revocable Family Trust Dated January
          17, 1997/33/
  10.117  February 17, 1998 promissory note from Electronic Sign Corporation
          payable to the order of Betty E. Papais, as Trustee of the Papais
          Trust Dated January 29, 1991/33/
  10.118  Employment Agreement dated February 18, 1998 between and among La-Man
          Corporation, Ad Art Displays, Inc. and Terry J. Long/33/
  10.119  Employee Stock Option Agreement dated February 18, 1998 by and between
          La-Man Corporation and Terry J. Long/33/
  10.120  Consulting Agreement dated February 18, 1998 between and among Ad Art
          Displays, Inc. and Lou A. Papais/33/
  10.121  Pledge Agreement dated March 2, 1998 between La-Man Corporation and
          Renaissance Capital Growth & Income Fund III, Inc. and Renaissance US
          Growth & Income Trust PLC /34/
  10.122  Security Agreement dated March 2, 1998 between La-Man Corporation and
          Renaissance Capital Growth & Income Fund III, Inc. and Renaissance US
          Growth & Income Trust PLC /34/
  10.123  Form of Subsidiary Continuing Guaranty /34/
  10.124  Form of Subsidiary Security Agreement /34/
  10.125  Amendment No. 2 to La-Man Corporation 1992 Stock Option and
          Appreciation Rights Plan, as amended /34/

                                       21
<PAGE>
 
  10.126  Amendment No. 3 to La-Man Corporation 1992 Stock Option and
          Appreciation Rights Plan, as amended /34/
  10.127  Amendment No. 2 to La-Man Corporation Amended and Restated 1994
          Employee and Consultant Stock Compensation Plan, as amended /34/
  10.128  Employment Agreement dated as of February 17, 1998 among Registrant,
          Don Bell Industries, Inc. and Gary D. Bell/35/
  10.129  Employment Agreement dated as of September 1, 1998 between Registrant
          and Marshall S. Harris
  21      Subsidiaries/35/
____________

/1/  Incorporated by reference from Registrant's Pre-Effective Amendment
     No. 1 to the  Registrant's Registration Statement on Form S-18
     (Registration No. 2-89341).

/2/  Incorporated by reference from Registrant's Pre-Effective Amendment
     No. 2 to the  Registrant's Registration Statement on Form S-18
     (Registration No. 2-8934 1).

/3/  Filed as an exhibit to Registrant's Form 10-Q for the period ended
     June 30, 1986 (File No. 0-14427), and incorporated by reference.

/4/  Incorporated by reference from Registrant's Post-Effective Amendment
     No. 1 to Registrant's Registration Statement on Form S-18 (Registration No.
     2-89341).

/5/  Filed as an exhibit to Registrant's Form 10-Q for the period ended
     December 31, 1985 (File No. 0-14427), and incorporated by reference.

/6/  Filed as an exhibit to Registrant's Current Report on Form 8-K filed
     on December 23, 1987 (File No. 0-14427), and incorporated by reference.

/7/  Filed as an exhibit to Registrant's Form 10-K for the period ended
     September 30, 1986 (File No. 0-14427), and incorporated by reference.

/8/  Filed as an exhibit to Registrant's Form 10-K for the period ended
     September 30, 1987 (File No. 0-14427), and incorporated by reference.

/9/  Filed as an exhibit to Registrant's Form 10-K for the period ended
     September 30, 1988 (File No. 0-14427), and incorporated by reference.

/10/ Filed as an exhibit to Registrant's Current Report on Form 8-K filed
     on October 3, 1989 (File No. 0-14427), and incorporated by reference.

/11/ Filed as an exhibit to Registrant's Form 10-K for the period ending
     September 30, 1989 (File No. 0-14427), and incorporated by reference.

/12/ Filed as an exhibit to Registrant's Form 8-K dated March 29, 1990
     (File No. 0-14427), and incorporated by reference.

/13/ Filed as an exhibit to Registrant's Form 8-K dated January 5, 1991
     (File No. 0-14427), and incorporated by reference.

                                       22
<PAGE>
 
/14/ Filed as an exhibit to Registrant's Form 10-K for the period ending
     September 30, 1991 (File No. 0-14427), and incorporated by reference.

/15/ Filed as an exhibit to Registrant's Form 8-K filed on September 3,
     1992 (File No. 0-14427), and incorporated by reference.

/16/ Filed as an exhibit to Registrant's Form 10-K for the transition
     period ending June 30, 1992 (File No. 0-14427), and incorporated by
     reference.

/17/ Previously filed as an exhibit to the Registration Statement
     (Registration No. 33-54230) and incorporated by reference.

/18/ Previously filed as an exhibit to Post Effective Amendment No. 1 to
     the Registration Statement (Registration No. 33-54230) and incorporated by
     reference.

/19/ Filed as an Exhibit to Registrant's Form 8-K dated August 19, 1993
     (File No. 0-14427) and incorporated by reference.

/20/ Previously filed as an exhibit to Post Effective Amendment No. 2 to
     the Registration Statement (Registration No. 33-54230) and incorporated by
     reference.

/21/ Filed as an exhibit to Registrant's Form 8-K dated June 23, 1994 filed
     on June 28,1994 (File No. 0-14427), and incorporated by reference.

/22/ Filed as an exhibit to Registrant's Form 8-K dated January 27, 1994
     and filed on February 3, 1994 (File No. 0-14427), and incorporated by
     reference.

/23/ Filed as an exhibit to  Registrant's Form 10-K for the period ending
     June 30, 1994 (File No. 0-14427), and incorporated by reference.

/24/ Filed as an exhibit to Registrant's Form 8-K dated November 14, 1994
     and filed on January 27, 1995 (File No. 0-14427), and incorporated by
     reference.

/25/ Filed as an exhibit to Registrant's Form 8-K dated February 13, 1995
     and filed on February 27, 1995 (File No. 0-14427), and incorporated by
     reference.

/26/ Filed as an exhibit to Registrant's Form 8-K dated September 7, 1995
     and filed effective September 22, 1995 (File No. 0-14427), and incorporated
     by reference.

/27/ Filed as an exhibit to Registrant's Form 10-KSB for the period ending
     June 30, 1995 (File No. 0-14427), and incorporated by reference.

/28/ Filed as an exhibit to Registrant's Registration Statement on Form S-3
     (Registration No. 33-98964), and incorporated by reference.

/29/ Filed as an exhibit to Registrant's Post-Effective Amendment No. 7 to
     Registration Statement on Form S-3 (Registration No. 33-54230), and
     incorporated by reference.

/30/ Filed as an exhibit to Registrant's Form 8-K dated December 27, 1995
     (File No. 0-14427), and incorporated by reference.

                                       23
<PAGE>
 
/31/ Filed as an exhibit to Registrant's Form 8-K dated August 28, 1996
     (File No. 0-14427), and incorporated by reference.

/32/ Filed as an exhibit to Registrant's Form 10-KSB for the period ending June
     30, 1997 (File No. 0-14427), and incorporated by reference.

/33/ Filed as an exhibit to Registrant's Form 8-K dated February 18, 1998
     and filed March 2, 1998 (File No. 0-14427), and incorporated by reference.

/34/ Filed as an exhibit to Registrant's Form 8-K dated March 2, 1998 and
     filed March 12, 1998 (File No. 0-144227), and incorporated by reference.

/35/ Filed as an exhibit to Registrant's Registration Statement on Form S-3
     (Registration No. 333-51835), and incorporated by reference.

(b)  No reports on Form 8-K were filed by the Registrant during the three-month
     period ended June 30, 1998, the last quarter of the period covered by this
     Annual Report on Form 10-KSB.

(c)  Exhibits:

     9      Voting Trust Agreement dated as of May 19, 1998 among J. Melvin
            Stewart, as Trustee, and Rebecca Stewart Brooks, Bonnie Stewart
            Knox, J. Melvin Stewart as Trustee for the Emily Stewart Michelsen
            Irrevocable Trust dated May 6, 1998, Susan Stewart Michelsen,
            Elizabeth Stewart Ricci, Deborah Stewart, John M. Stewart and Mary
            Stewart

     10.129 Employment Agreement dated as of September 1, 1998 between
            Registrant and Marshall S. Harris

                                       24
<PAGE>
 
                                  SIGNATURES
                                  ----------


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


                                     By:  /s/ J. William Brandner
                                        --------------------------------------
                                        J. William Brandner, President
                                        (Chief Executive Officer) and Director
                                        September 24, 1998
 
  Pursuant to the requirements of the Securities Exchange Act of 1934, this
report had been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S>                                             <C>  
By: /s/ J. Melvin Stewart                      By: /s/ Terry J. Long
   ----------------------------------              --------------------------
   J. Melvin Stewart, Chairman of                  Terry J. Long, Director
   the Board and Director                          September 24, 1998
   September 24, 1998
 
By: /s/ Gary D. Bell                           By: /s/ Lou A. Papais
   ----------------------------------              --------------------------
   Gary D. Bell, Director                          Lou A. Papais, Director
   September 24, 1998                              September 24, 1998
 
 
By: /s/ Edwin M. Freakley                      By: /s/ William A. Retz 
   ----------------------------------              --------------------------
   Edwin M. Freakley, Director                     William A. Retz, Director
   September 24, 1998                              September 24, 1998
 
By: /s/ Thomas N. Grant                        By: /s/ Robert M. Smither, Jr.
   ----------------------------------              --------------------------
   Thomas N. Grant, Director                       Robert M. Smither, Jr., 
   September 24, 1998                              Director
                                                   September 24, 1998
 
By: /s/ Phillip Howe Hoard                     By: /s/ Todd D. Thrasher
   ----------------------------------              --------------------------
   Philip Howe Hoard, Vice President,              Todd D. Thrasher
   Secretary and Director                          Vice President, Treasurer 
   September 24, 1998                              (Chief Financial Officer) 
                                                   and Assistant Secretary
By: /s/ Lester Jacobs                              September 24, 1998
   ----------------------------------
   Lester Jacobs, Director
   September 24, 1998
</TABLE> 

                                       25
<PAGE>
 
LA-MAN CORPORATION AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S>                                                                                <C>  
LA-MAN CORPORATION AND SUBSIDIARIES
Report of Independent Certified Public Accountants...............................  F-2
Consolidated Balance Sheet as of June 30, 1998...................................  F-3
Consolidated Statements of Income for the years ended June 30, 1998 and 1997.....  F-4
Consolidated Statements of Stockholders' Equity for the years ended
  June 30, 1998 and 1997.........................................................  F-5
Consolidated Statement of Cash Flows for the years ended June 30, 1998 and 1997..  F-6
Notes to Consolidated Financial Statements.......................................  F-7
</TABLE>

                                      F-1
<PAGE>
 
La-Man Corporation

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



To the Board of Directors and Stockholders
Display Technologies, Inc.


We have audited the accompanying consolidated balance sheet of La-Man
Corporation and subsidiaries as of June 30, 1998, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the two
years in the period ended June 30, 1998. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 La-Man Corporation
and subsidiaries as of June 30, 1998, and the results of their operations and
their cash flows for each of the two years in the period ended June 30, 1998 in
conformity with generally accepted accounting principles.



                                       BDO Seidman, LLP
Orlando, Florida
August 10, 1998

                                      F-2
<PAGE>
 
La-Man Corporation

CONSOLIDATED BALANCE SHEET


<TABLE>
<CAPTION>
June 30                                                                                       1998
----------------------------------------------------------------------------------------------------- 
 
ASSETS
<S>                                                                                        <C>
CURRENT ASSETS
Cash                                                                                       $  537,564
Accounts receivable:
  Trade, less allowance for doubtful accounts of $374,088                                   6,897,120
  Other                                                                                       433,004
Inventories                                                                                 4,338,453
Costs and estimated earnings in excess of billings on uncompleted contracts in progress     1,611,070
Prepaid expenses                                                                              905,017
Deferred tax assets                                                                           574,000
----------------------------------------------------------------------------------------------------- 
                                                                                           15,296,228
----------------------------------------------------------------------------------------------------- 

PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation                                6,071,271
----------------------------------------------------------------------------------------------------- 
 
OTHER ASSETS
Intangibles, less accumulated amortization                                                  9,009,986
Deferred tax assets                                                                           122,000
Other                                                                                         295,123 
----------------------------------------------------------------------------------------------------- 
                                                                                            9,427,109
----------------------------------------------------------------------------------------------------- 

                                                                                          $30,794,608
===================================================================================================== 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable                                                                          $ 2,821,524              
Customer deposits                                                                           1,331,396              
Accrued expenses                                                                            3,523,342              
Billings in excess of costs and estimated earnings on uncompleted contracts in progress       210,052              
Current maturities of long-term debt                                                          650,375              
Current portion of obligations under capital leases                                           202,747              
----------------------------------------------------------------------------------------------------- 
                                                                                            8,739,436              
----------------------------------------------------------------------------------------------------- 
                                                                                                                   
NON-CURRENT LIABILITIES                                                                                            
Lines of credit                                                                             2,959,195              
Long-term debt, less current maturities                                                     7,257,583              
Obligations under capital leases, less current portion                                        234,930              
Other                                                                                          76,102              
----------------------------------------------------------------------------------------------------- 
                                                                                           10,527,810               
----------------------------------------------------------------------------------------------------- 
 
STOCKHOLDERS' EQUITY
Common stock; $.001 par value; authorized 50,000,000 shares; issued and 
    outstanding 4,891,524 shares                                                                4,892
Additional paid-in capital                                                                 11,501,193
Retained earnings                                                                              21,277
----------------------------------------------------------------------------------------------------- 
                                                                                           11,527,362
----------------------------------------------------------------------------------------------------- 

                                                                                          $30,794,608
=====================================================================================================

          See accompanying notes to consolidated financial statements
</TABLE> 

                                      F-3
<PAGE>
 
La-Man Corporation

CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended June 30                                                 1998          1997
<S>                                                            <C>           <C>
---------------------------------------------------------------------------------------- 
SALES                                                          $32,478,018   $15,945,627
COST OF SALES                                                   19,688,873     8,123,075
---------------------------------------------------------------------------------------- 
Gross profit                                                    12,789,145     7,822,552
 
OPERATING EXPENSES
Selling expenses                                                 4,973,451     2,581,389
General and administrative expenses                              5,305,649     4,209,536
---------------------------------------------------------------------------------------- 
                                                                10,279,100     6,790,925
---------------------------------------------------------------------------------------- 
 
INCOME FROM OPERATIONS                                           2,510,045     1,031,627
 
OTHER INCOME (EXPENSE)
Interest income                                                     94,812       100,770
Interest expense                                                  (486,460)     (233,140)
Gain on disposal of property and equipment                           4,649       270,892
Miscellaneous income                                                79,895        19,253
---------------------------------------------------------------------------------------- 
                                                                  (307,104)      157,775
---------------------------------------------------------------------------------------- 
 
Income from continuing operations before income tax benefit      2,202,941     1,189,402
Income tax (expense) benefit                                      (615,000)      229,000
---------------------------------------------------------------------------------------- 
Income from continuing operations                                1,587,941     1,418,402
---------------------------------------------------------------------------------------- 
 
DISCONTINUED OPERATIONS
Loss from operations of discontinued operations                        -         281,371
Loss on disposal of discontinued operations                            -         371,572
---------------------------------------------------------------------------------------- 
                                                                       -         652,943
---------------------------------------------------------------------------------------- 
                                                                            
Net income                                                      $1,587,941   $   765,459
======================================================================================== 
                                                                            
EARNINGS PER COMMON SHARE                                                   
BASIC                                                                       
Continuing operations                                                $0.40   $      0.41
Discontinued operations                                                -           (0.19)
---------------------------------------------------------------------------------------- 
                                                                     $0.40        $ 0.22
======================================================================================== 
                                                                            
DILUTED                                                                     
Continuing operations                                                $0.32        $ 0.35
Discontinued operations                                                -           (0.15)
---------------------------------------------------------------------------------------- 
                                                                     $0.32        $ 0.20
======================================================================================== 
                                                                            
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING                               
Basic                                                            3,964,960     3,438,580
Diluted                                                          5,389,452     4,202,331
========================================================================================

          See accompanying notes to consolidated financial statements
</TABLE> 

                                      F-4
<PAGE>
 
La-Man Corporation

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
 
                                                     Common Stock
                                              ---------------------------      Additional      Retained Earnings       Total
                                                 Number            Par           Paid-In          (Accumulated      Stockholders'
                                                Of Shares         Value          Capital             Deficit)           Equity  
---------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>               <C>           <C>              <C>                 <C> 
BALANCE, JUNE 30, 1996                          3,058,665         $3,059        $6,158,510         $(1,601,831)      $4,559,738 
Issuance of five percent stock dividend           152,768            153           152,615            (152,768)               - 
Issuance of note payable as adjustment to                                                                                       
 Don Bell Industries purchase price                     -              -          (626,476)                  -         (626,476)
Exercise of stock options and warrants, net        52,521             52            18,698                   -           18,750 
Issuance of stock options and warrants                  -              -            35,000                   -           35,000 
Stock contributed to 401(k) plan                   46,915             47            71,485                   -           71,532 
Net income                                              -              -                 -             765,459          765,459 
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                
BALANCE, JUNE 30, 1997                          3,310,869          3,311         5,809,832            (989,140)       4,824,003 
Issuance of five percent stock dividend           167,885            168           577,356            (577,524)               - 
Issuance of stock for acquisition of Ad Art       810,000            810         3,336,390                   -        3,337,200 
Sales of common stock, net                        231,482            232           969,768                   -          970,000 
Exercise of stock options and warrants, net       322,396            322           548,398                   -          548,720 
Issuance of stock options and warrants                  -              -           124,250                   -          124,250 
Stock contributed to 401(k) plan                   35,845             36           101,812                   -          101,848 
Stock issued for employee bonuses                  13,047             13            33,387                   -           33,400 
Net income                                              -              -                 -           1,587,941        1,587,941  
---------------------------------------------------------------------------------------------------------------------------------

BALANCE, JUNE 30, 1998                          4,891,524         $4,892       $11,501,193             $21,277      $11,527,362
=================================================================================================================================
          See accompanying notes to consolidated financial statements
</TABLE> 

                                      F-5
<PAGE>
 
La-Man Corporation

CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended June 30                                                                1998         1997
--------------------------------------------------------------------------------------------------------
<S>                                                                           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                    $ 1,587,941   $ 765,459
Adjustments to reconcile net income to net cash provided by (used for)
continuing operating activities:
 Loss from discontinued operations                                                      -     652,943
 Depreciation and amortization                                                    666,941     479,227
 Gain on disposal of property, plant and equipment                                 (4,650)   (270,892)
 Contribution of common stock to 401(k) plan                                      101,848      71,532
 Realization of deferred income                                                         -     (52,810)
 Change in deferred income taxes                                                 (137,656)   (250,000)
 Changes in assets and liabilities, net of effects of acquisitions:
   Accounts receivable                                                         (1,992,003)   (467,322)
   Other receivables                                                              (43,655)    155,060
   Inventories                                                                   (550,953)   (305,868)
   Prepaid expenses                                                              (240,100)   (101,003)
   Accounts payable                                                            (1,079,715)   (420,299)
   Customer deposits                                                              754,520      88,791
   Accrued expenses                                                               (88,771)    318,036
--------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) CONTINUING OPERATING ACTIVITIES                (1,026,253)    662,854
NET CASH USED FOR DISCONTINUED OPERATING ACTIVITIES                                     -    (509,768)
--------------------------------------------------------------------------------------------------------
 
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment                                        (882,813)   (257,266)
Business acquisitions, net of cash acquired                                    (3,004,568)          -
Proceeds from sale of property, plant and equipment                                19,470     382,635
Changes in other assets                                                                 -      12,801
--------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES                           (3,867,911)    138,170
--------------------------------------------------------------------------------------------------------
 
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in line of credit borrowings                                           (62,048)          -
Proceeds from issuance of notes payable                                         3,827,077           -
Principal payments on notes payable                                              (114,458)   (159,167)
Proceeds from sales of stock (including option and warrant exercises), net      1,518,720      18,750
Payments on capital lease obligations                                            (108,265)    (32,253)
Payment of fees for long-term debt                                               (142,630)          -
Other financing activities                                                        282,019           -
--------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES                            5,200,415    (172,670)
--------------------------------------------------------------------------------------------------------
 
NET INCREASE IN CASH                                                              306,251     118,586
CASH, beginning of year                                                           231,313     112,727
--------------------------------------------------------------------------------------------------------
CASH, end of year                                                             $   537,564   $ 231,313
========================================================================================================
</TABLE>
          See accompanying notes to consolidated financial statements

                                      F-6
<PAGE>
 
La-Man Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS AND COMPANY NAME
The Company designs, manufactures, installs and services hi-tech electronic
computer driven video displays, message centers, scoreboards, and business
identity signs.

The Board of Directors has adopted a resolution to change the name of the
Company to Display Technologies, Inc.  This name change will not become
effective until ratified by the shareholders at the next shareholders meeting.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of La-Man Corporation
and its wholly-owned subsidiaries (the "Company").  All significant intercompany
accounts and transactions have been eliminated in consolidation.

INVENTORIES
Inventories are valued at the lower of first-in, first-out (FIFO) cost or
market.

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is computed over
the estimated useful lives of the assets by the straight-line method.

INTANGIBLE ASSETS
Intangible assets are amortized using the straight-line method over their
estimated useful lives.

IMPAIRMENTS
Assets are evaluated for impairment when events change or changes in
circumstances indicate that the carrying amounts of the assets may not be
recoverable.  When any such impairment exists, the related assets will be
written down to fair value.

REVENUE RECOGNITION
The Company recognizes revenue on long-term construction contracts under the
percentage-of-completion method, measured by the percentage of contract costs
incurred to estimated total costs for each contract. Contract costs include all
direct material and labor costs and those indirect costs related to contract
performance. Provisions for estimated losses on uncompleted contracts are made
in the period in which  such losses are determined. Changes in job performance,
job conditions, and estimated profitability may result in revisions to costs and
income and are recognized in the  period in which the revisions are determined.
Profit is included in revenues when its realization is reasonably assured.

LEASING ACTIVITIES
The Company leases certain of its signs to customers under long-term
noncancellable leases which are accounted for as sales-type leases. The present
value of the minimum rentals to be received under such leases is recorded
currently as net sales revenue. The cost of the leased property is charged
against income at the time the sale is recorded.

INCOME TAXES
Income tax expense or benefit includes both current and deferred state and
federal income taxes.  Deferred income taxes are provided for temporary
differences in the recognition of income and expense for financial reporting and
income tax purposes. Deferred income tax assets and liabilities are computed for
differences between the financial statement and tax bases of assets, liabilities
and tax carry forwards that will result in taxable or deductible amounts in
future periods based upon enacted tax laws and rates applicable to the periods
in which the differences are expected to affect taxable income.  Deferred tax
liabilities are recognized when incurred; deferred tax assets, when necessary,
are reduced by a valuation allowance and recognized when it is more likely than
not that the asset will be realized.

STOCK BASED COMPENSATION
The Company adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123) during 1997.  However, as
permitted by SFAS 123, the Company has elected to continue to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25) and related interpretations in accounting for stock based compensation to
employees.

Stock options granted to non-employees are valued using a Black-Scholes option
pricing model with appropriate assumptions for risk free investment rates,
expected lives, dividend yields and volatility factors.  The value of options
granted to non-employees is charged to appropriate asset or expense accounts
when the options are granted.

FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates discussed herein are based upon certain market assumptions
and pertinent information available to management as of June 30, 1998.  The
respective carrying value of certain on-balance-sheet financial instruments
approximated their fair values. These financial instruments include cash, trade
receivables, accounts payable and accrued expenses. The fair value of the
Company's long-term debt is estimated based upon the quoted market prices for
the same or similar issues or on the current rates offered to the Company for
debt of the same remaining maturities.

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

RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial statements
to conform with the current year presentation.

                                      F-7
<PAGE>
 
La-Man Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2.  ACQUISITIONS
On February 18, 1998, the Company acquired all of the outstanding common stock
of Electronic Sign Corporation (dba Ad Art) ("Ad Art") in exchange for 810,000
shares of the Company's $.001 par value common stock valued at $3,337,200 and
$3,000,000 in cash.  Additional costs of the acquisition, including legal and
other fees, totaled $277,800.  An additional 540,000 shares of the Company's
$.001 par value common stock (the "contingent shares") are issuable on a pro-
rata basis if Ad Art's after tax earnings for fiscal 1999 are between $1.4
million and $2.4 million.  The contingent shares are issuable at a rate of
approximately 49,000 shares for each $100,000 of after tax income in excess of
$1.4 million up to the maximum of 540,000 shares to be issued for after tax
income of $2.4 million or higher. The acquisition was recorded using the
purchase method of accounting.  Accordingly, the purchase price was allocated to
the net assets acquired based upon their estimated fair market values. The
excess of the purchase price over the estimated fair value of the net assets
acquired amounted to approximately $6,000,000, which has been accounted for as
goodwill and is being amortized over its estimated life of 40 years.  The
operating results of Ad Art are included in the Company's consolidated results
of operations from the date of acquisition.

The following unaudited pro-forma summary presents the consolidated results of
continuing operations as if the acquisition of Ad Art had occurred at the
beginning of the period presented and does not purport to be indicative of what
would have occurred had the acquisition been made as of that date or of results
which may occur in the future.
 
Year ended June 30       1998         1997
----------------------------------------------
Net sales             $52,546,000  $43,625,000
Net income            $ 1,170,000  $   633,000
Earnings per share
 Basic                $       .23  $       .12
 Diluted              $       .20  $       .12
============================================== 

On July 1, 1997, the Company acquired all of the outstanding common stock of
Certified Maintenance Services, Inc. ("Certified") for the assumption of
Certified's net liabilities of approximately $600,000.  The acquisition was
recorded using the purchase method of accounting.  Accordingly, the purchase
price was allocated to the net assets acquired based upon their estimated fair
market values.  The excess of the purchase price over the estimated fair value
of net assets acquired amounted to approximately $600,000, which has been
accounted for as goodwill and is being amortized over its estimated life of 40
years. The operating results of Certified are included in the Company's
consolidated results of operations from the date of acquisition.


NOTE 3.  INVENTORIES
Inventories at June 30, 1998 consist of the following:
 
-----------------------------
Raw materials      $2,925,768
Work in process     1,256,188
Finished goods        156,497
----------------------------- 
                   $4,338,453
=============================

NOTE 4.  PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at June 30, 1998 consist of the following:
                                  Estimated
                                 Useful Lives
----------------------------------------------------------- 
Land                                             $1,547,256
Buildings and improvements        15-30 years     2,543,161
Machinery and equipment            5-10 years     2,029,194
Office equipment and furniture     5-10 years     1,256,721
Transportation equipment            3-5 years       582,465
Signs held for lease                 11 years       255,527
----------------------------------------------------------- 
                                                  8,214,324
Less accumulated depreciation                     2,143,053
----------------------------------------------------------- 
                                                 $6,071,271
=========================================================== 

Depreciation expense from continuing operations for the years ended June 30,
1998 and 1997 was $507,088 and $399,369, respectively.
 
 
NOTE 5.    INTANGIBLE ASSETS
Intangible assets are summarized as follows:

                     Estimated Lives
--------------------------------------------------- 
Patents                 5 years          $  223,143
Debt fees          7 - 15 years             383,234
Goodwill               40 years           8,910,234
--------------------------------------------------- 
                                          9,516,611
Less accumulated amortization               506,625
--------------------------------------------------- 
                                         $9,009,986
=================================================== 

Amortization expense from continuing operations for the years ended June 30,
1998 and 1997 was $159,853 and $79,858, respectively.

                                      F-8
<PAGE>
 
La-Man Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6.  NET INVESTMENT IN SALES-TYPE LEASES
The Company is the lessor of a variety of signs and advertising display units
under agreements expiring through 2005. The Company accounts for these leases as
sales-type leases.  At June 30, 1998, the net investment in sales-type leases
consists of the following:

----------------------------------------------------------------
Total minimum lease payments to be received             $410,465
Less unearned income                                      69,665
----------------------------------------------------------------
Net investment in sales-type leases                      340,800
Less current portion (included in other receivables)     118,897
----------------------------------------------------------------
Long-term net investment (included in other assets)     $221,903
================================================================ 

The following is a schedule of minimum lease payments to be received as of 
June 30, 1998:

-------------------------------
1999                   $153,017
2000                    137,130
2001                     66,572
2002                     27,482
2003                     19,632
Thereafter                6,632
-------------------------------
                       $410,465
=============================== 

NOTE 7.  COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED
         CONTRACTS IN PROGRESS
Costs and estimated earnings on uncompleted contracts consists of the following
at June 30, 1998:
 
------------------------------------------------------ 
Costs incurred on uncompleted contracts    $ 2,394,655
Estimated earnings                             870,546
------------------------------------------------------ 
                                             3,265,201
Billings to date                            (1,864,183)
------------------------------------------------------ 
                                           $ 1,401,018
====================================================== 

Included in the accompanying balance sheet under the following captions:

---------------------------------------------------------------
Costs and estimated earnings in excess of
 billing on uncompleted contracts in progress        $1,611,070
Billings in excess of costs and estimated earnings
 on uncompleted contracts in progress                  (210,052)
---------------------------------------------------------------
                                                     $1,401,018
===============================================================


NOTE 8.  ACCRUED EXPENSES
Accrued expenses at June 30, 1998 consist of he following:
 
---------------------------------------- 
Payroll and benefits          $1,795,058
Taxes                            847,511
Warranty                         504,558
Other                            376,215
----------------------------------------                           
                              $3,523,342
========================================                         

NOTE 9.  LINES OF CREDIT
The Company has a $1.3 million revolving line of credit with a national bank.
The line of credit bears interest at one percent over the bank's prime rate (for
a rate of 9.5% at June 30, 1998) and matures October, 1999 with annual renewal
provisions.  The line of credit is secured by eligible receivables and
inventory, subsidiary guarantees, and is cross-collateralized with the letter of
credit from the same lender and the $2.5 million notes payable secured by the
letter of credit.  As of June 30, 1998, $62,000 was borrowed against this line
of credit.  This line of credit contains certain financial and operating
covenants.  The Company was in compliance with all covenants at June 30, 1998.

Through its Ad Art subsidiary, the Company has a $5,000,000 line of credit with
a corporate lending institution.  The line of credit matures March, 2000 and
bears interest at 2.5% over the lenders prime rate and is adjustable to 1.5%
over the lenders prime rate provided Ad Art maintains certain tangible net worth
levels.  At June 30, 1998, Ad Art had attained the required levels of tangible
net worth to obtain the lower interest rate, but had not yet maintained this
level for the required period.  Therefore, the interest rate on this line of
credit was 11.0% at June 30, 1998.  The line of credit is secured by eligible
receivables and inventory, substantially all other assets of Ad Art, and a
guarantee by the Company.  As of June 30, 1998, $2,897,195 was borrowed against
this line of credit.

                                      F-9
<PAGE>
 
La-Man Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10.        LONG-TERM DEBT
Long term debt at June 30, 1998 is summarized as follows:

-----------------------------------------------------------------
Notes payable secured by a letter of credit with
 a national bank, variable interest rate plus 1%
 letter of credit fee (effective rate at
 June 30, 1998 was 6.74%), secured by
 substantially all assets of the Company,
 subsidiary guarantees, and cross-collateralized
 with and covered by the same covenants as
 the line of credit with the same national bank,
 interest due monthly with annual principal
 payments due in varying amounts each August
 through 2012.                                        $ 2,500,000
 
8.75% convertible subordinated debentures,
 convertible into the Company's $.001 par value
 common stock at $4.75 per share, secured by
 substantially all assets of the Company and
 subsidiary guarantees, but subordinated to
 bank debt, interest due monthly, monthly
 principal payments begin March 2, 2001 at the
 rate of 1% of the outstanding principal balance,
 final balloon payment due March 2, 2005                3,500,000
 
8% unsecured convertible note payable,
 convertible into the Company's $.001 par value
 common stock at $4.53 per share, interest due
 semi-annually with annual principal payments
 of $250,000 for three years beginning
 September 1998                                           750,000
 
7.875% note payable, secured by deed of trust
 on specific land and buildings, monthly
 payments of $8,663 including interest, matures           901,299
 May 2013
 
8% note payable, secured by deed of trust on
 specific real property, monthly payments of
 $3,000 including interest, matures March 1999            256,659
-----------------------------------------------------------------
                                                        7,907,958
Less current portion                                      650,375
-----------------------------------------------------------------
Total                                                  $7,257,583
================================================================= 

Aggregate maturities of long-term debt over future years are as follows: 1999 -
$650,375; 2000 - $401,412; 2001 - $554,336; 2002 - $592,495; 2003 - $600,909 and
thereafter - $5,108,431.


NOTE 11.  COMMITMENTS
LEASES
The Company conducts its operations partially from leased facilities. These
leases are classified as operating leases and expire on various dates through
2005.

The Company also leases equipment under capital leases which expire on various
dates through 2003. The total capitalized cost for this equipment is $486,000
with accumulated depreciation of $154,000 as of June 30, 1998.

As of June 30, 1998, future net minimum lease payments under capital leases and
future minimum rental payments required under operating leases that have initial
or remaining noncancelable lease terms in excess of one year are as follows:
 
                                    Capital   Operating
Year ending June 30                 Leases      Leases
-------------------------------------------------------- 
1999                              $  250,456  $1,046,258
2000                                 114,500     934,368
2001                                 100,481     702,158
2002                                  61,992     228,976
2003                                  10,220     160,072
Thereafter                                 -     418,927
-------------------------------------------------------- 
                                     537,649  $3,490,759
                                              ========== 
Less amount representing interest     99,972
-------------------------------------------- 
Present value of minimum
 lease payments                   $  437,677
============================================ 

Rental expense for the years ended June 30, 1998 and 1997 was approximately
$736,000 and $298,000, respectively.

EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements expiring at various dates
through the year 2000.  As of June 30, 1998, the Company's total noncancellable
obligation under all employment contracts is approximately $1,115,204.

NOTE 12.  INCOME TAXES
The components of deferred tax assets and liabilities consist of the following
as of June 30, 1998:
 
------------------------------------------------------------- 
DEFERRED TAX ASSETS
Accruals and reserves                              $  497,000
Accounts receivable                                    66,000
Net operating loss and other tax carry forwards       794,000
Deferred income                                         1,000
Customer deposits                                       9,000
Intangible assets                                       5,000
------------------------------------------------------------- 
Gross deferred tax assets                           1,372,000
Valuation allowance                                         -
------------------------------------------------------------- 
Total deferred tax assets                           1,372,000
 
DEFERRED TAX LIABILITIES
Sales-type lease receivables                         (115,000)
Inventory                                            (106,000)
Plant and equipment                                  (455,000)
------------------------------------------------------------- 
Net deferred tax assets                            $  696,000
============================================================= 

The change in the valuation allowance for deferred tax assets was a decrease of
$367,000 during 1998.

                                      F-10
<PAGE>
 
La-Man Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Significant components of the income tax expense (benefit) are as follows:
 
                                       1998        1997
---------------------------------------------------------
CURRENT
Federal                             $ 632,000   $   6,000
State                                 120,000      15,000
---------------------------------------------------------
                                      752,000      21,000
---------------------------------------------------------
DEFERRED
Federal                              (117,000)   (276,000)
State                                 (20,000)     26,000
---------------------------------------------------------
                                     (137,000)   (250,000)
---------------------------------------------------------
                                     $615,000   $(229,000)
========================================================= 

At June 30, 1998, the Company had unused federal tax net operating losses (NOLs)
to carry forward against future years' taxable income of approximately
$2,335,000 expiring in various amounts from 2006 to 2013.  As a result of the
consummation of the Company's public offering and certain acquisitions, the use
of these NOLs will be limited each year under the provisions of Section 382 of
the Internal Revenue Code of 1986, as amended and the provisions of Treasury
Regulation 1.1502-21 regarding Separate Return Limitation years as follows:
 
                            Maximum NOL
Year ending June 30           Available
---------------------------------------  
1999                           $680,000
2000                            316,000
2001                            316,000
2002                            316,000
2003                            316,000
Thereafter                      391,000 
---------------------------------------   
                             $2,335,000
======================================= 

The following summary reconciles differences from taxes on income from
continuing operations at the federal statutory rate with the effective rate:
 
                                                 1998    1997
------------------------------------------------------------- 
Federal taxes on income at statutory rates        34%     34%
Goodwill                                           2%     16%
State taxes                                        2%      -
Reduction of deferred tax asset
 valuation allowance                             (14%)   (69%)
Other                                              4%      -
------------------------------------------------------------- 
Taxes on income (benefit) at effective rates      28%    (19%)
============================================================= 

NOTE 13.  CAPITAL STOCK
On June 29, 1994, the Board of Directors adopted the amended and restated 1994
Employee and Consultant Stock Compensation Plan ("the 1994 plan"). The 1994 plan
provides for the issuance of up to 2,425,500 shares of the Company's common
stock to employees and consultants of the Company.  Options granted under the
plan are not permitted to have a term in excess of five years.

On November 4, 1992, the Board of Directors adopted the 1992 Stock Option and
Appreciation Rights Plan ("the 1992 plan"). The 1992 plan provides for the
issuance of up to 633,938 shares of the Company's common stock to employees,
officers, directors and consultants of the Company.  Options granted to
employees or directors under this plan must have an exercise price equal to or
greater than 85% of the fair value of the stock on the date of grant and cannot
have a term in excess of 10 years.

On April 25, 1988, the Company adopted the 1988 Incentive Stock Option Plan
("the 1988 plan").  The 1988 plan provides for the issuance of  up to 183,750
shares of the Company's common stock to employees of the Company. Options
granted under this plan must have an exercise price equal to or greater than the
fair value of the stock on the date of grant and are not exercisable until 18
months from the date of grant.

On March 2, 1998, in connection with the issuance of the 8.75% convertible note
payable, the Company issued a stock purchase warrant to the lender separate from
each of the above agreements.  The stock purchase warrant entitles the holder to
purchase up to 200,000 shares of the Company's common stock at a price of $4.32
per share.  As of June 30, 1998, all 200,000 warrants were exercisable.

Also on March 2, 1998, in connection with consulting services received for the
acquisition of Ad Art, the Company issued a stock purchase warrant to a
consulting firm separate from each of the above agreements.  The stock purchase
warrant entitles the holder to purchase up to 75,000 shares of the Company's
common stock at a price of $4.32 per share.  As of June 30, 1998, all 75,000
warrants were exercisable.

On March 18, 1997, the Company entered into an agreement with an investor
relations firm and, separate from each of the above established plans, issued an
option to purchase up to 50,000 shares of the Company's common stock at an
exercise price of $1.47 per share.   On August 29, 1997, the Company extended
the agreement with this investor relations firm and issued an option to purchase
up to an additional 50,000 shares of the Company's common stock at an exercise
price of $2.62 per share.  As of June 30, 1998, 65,000 of the options issued to
this investor relations firm were exercisable.

                                      F-11
<PAGE>
 
La-Man Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On November 22, 1996 the Company entered into an agreement with an investment
banking firm and, separate from each of the above established plans, issued
warrants to purchase up to 210,000 shares of the Company's common stock at an
exercise price of $1.74 per share.  These warrants were exercised during 1998
for total proceeds to the Company of $365,400.

All stock options and warrants issued during 1997 and 1998 pursuant to the above
plans and agreements were issued with an exercise price that approximated the
fair market value of the stock on the date of grant.  A summary of the status of
the Company's stock options and warrants for the plans and agreements discussed
above as of June 30, 1998 and 1997 and changes during the years ended on those
dates (as restated for stock dividends) is presented below:
 
                                          Weighted
                                           Average
                                          Exercise
                                 Shares    Price
--------------------------------------------------
Outstanding - June 30, 1996    1,270,080   $0.66
Granted                          443,625    1.51
Exercised                        (55,125)   0.34
Forfeited                        (22,050)   0.50
--------------------------------------------------
Outstanding - June 30, 1997    1,636,530   $0.91
Granted                          576,000    3.91
Exercised                       (326,065)   1.48
Forfeited                        (13,010)   1.07
--------------------------------------------------
Outstanding - June 30, 1998    1,873,455   $1.73
================================================== 

The following table summarizes stock options and warrants issued under the plans
and agreements discussed above outstanding at June 30, 1998:
 
                                  Weighted       Weighted
        Range of                   Average        Average
        Exercise                  Exercise       Remaining
         Price       Outstanding    Price     Contractual Life
-------------------------------------------------------------- 
 $    0.46  - 0.80    1,091,401     $0.66         1.8 years
      0.96  - 1.47      202,548      1.32         3.3 years
      2.04  - 3.06      129,506      2.81         6.4 years
      4.03  - 4.32      450,000      4.21         4.7 years
-------------------------------------------------------------- 
 $    0.46  - 4.32    1,873,455     $1.73         3.0 years
============================================================== 

As of June 30, 1997 1,389,780 options and warrants were exercisable under the
plans and agreements discussed above at a weighted average exercise price of
$.76.  As of June 30, 1998 1,836,705 options and warrants were exercisable under
the plans and agreements discussed above at a weighted average exercise price of
$1.71 as follows:
 
                                  Weighted       Weighted
        Range of                   Average        Average
        Exercise                  Exercise       Remaining
         Price       Exercisable    Price    Contractual Life
------------------------------------------------------------- 
 $    0.46  - 0.80    1,091,401     $0.66         1.8 years
      0.96  - 1.47      202,548      1.32         3.3 years
      2.04  - 3.06       92,756      2.88         7.7 years
      4.03  - 4.32      450,000      4.21         4.7 years
------------------------------------------------------------- 
 $    0.46  - 4.32    1,836,705     $1.71         2.9 years
============================================================= 

The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees", and related interpretations in accounting for its
stock based compensation to employees.  Accordingly, no compensation expense has
been recognized for stock based compensation issued to employees. Had
compensation cost for the Company's stock based compensation issued to employees
been determined based upon the fair value at the grant date consistent with the
methodology prescribed under Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation", the Company's proforma net
income for 1998 and 1997 would have been $1,406,357 and $1,377,402 from
continuing operations and $1,406,357 and $724,459 after discontinued operations,
respectively. Proforma basic earnings per share from continuing operations would
have been $.35 for 1998 and $.40 for 1997 and diluted earnings per share would
have been $.28 and $.34 for 1998 and 1997, respectively. After discontinued
operations, proforma basic earnings per common share would have been $.35 for
1998 and $.21 for 1997 and diluted earnings per share would have been $.28 and
$.19 for 1998 and 1997, respectively.

The weighted average fair value of options granted during 1998 and 1997 was
estimated at $.86 and $0.17 per share, respectively, based upon the Black-
Scholes option-price model with the following weighted average assumptions: 5%
dividend yield, expected volatility of 40% for 1998 and  52% for 1997, risk-free
interest rate of 6% and expected life of 2.9 years for 1998 and 2.5 years for
1997.

On January 13, 1994 in conjunction with a public offering of the Company's
common stock, the Company issued 620,000 common stock purchase warrants with an
exercise price of $4.53 per share that expire, as amended, on December 31, 1998.
As of June 30, 1998 all of these warrants were exercisable.  In conjunction with
the same public offering, the Company issued an  option to purchase 31,000
"units", each unit consisting of two shares of common stock and two
nonredeemable common stock purchase warrants, for a price of $7.06 per unit.
Each common stock purchase warrant obtainable under this option entitles the
holder to purchase one share of common stock at a price of $4.25. Both the
option to purchase the units, and the purchase warrants included in the units,
expire on January 6, 1999.  As of June 30, 1998 all these units as well as the
warrants issuable under the units are exercisable.

                                      F-12
<PAGE>
 
La-Man Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14.  EMPLOYEE BENEFIT PLAN
The La-Man Corporation 401(k) profit sharing plan covers all employees with more
than six months of service and allows employees to defer up to 15% of their
income and contribute to the plan. The Company contributes to the plan at a
matching rate of 50% of the first six percent contributed by the employee.
Company contributions to the plan are in the form of the Company's common stock.
The Company issued to the 401(k) plan in fiscal years 1998 and 1997, 35,845 and
46,915 shares of the Company's common stock at an average price of $2.84 and
$1.52 per share, respectively.


NOTE 15.  EARNINGS PER SHARE
Earnings per share for all periods presented is calculated under the provisions
of Financial Accounting Standards No. 128, "Earnings per Share" which was
adopted by the Company in 1998.

Diluted earnings per share for 1998 and 1997 is calculated as follows:
 
                                      1998        1997
--------------------------------------------------------- 
Net Income                         $1,587,941  $  765,459
Convertible debt interest, net        119,177      60,000
--------------------------------------------------------- 
Net income for purposes of
 calculated diluted
 earnings per share                $1,707,118  $  825,459
========================================================= 
 
Weighted average shares             3,964,960   3,438,580
Convertible securities                411,177     165,441
Dilutive options and warrants       1,013,315     598,310
--------------------------------------------------------- 
Diluted weighted average shares     5,389,452   4,202,331
========================================================= 

Diluted earnings per share         $     0.32  $     0.20
========================================================= 


NOTE 16.  INDUSTRY SEGMENTS
The Company's operations are classified into two business segments:  image
enhancement displays ("displays") and filtration.

The display segment markets and produces custom designed and stock sign products
which are specifically designed for internal and external use by institutional,
governmental and commercial enterprises.  The display segment also provides
periphial services on the sign products such as installation, maintenance and
service.

Operations within the filtration segment include the manufacture and sale of a
line of products which, when installed in compressed air lines, substantially
reduce or totally eliminate water and condensate problems and most foreign
contaminants in the air line.

The following table shows sales and operating income from continuing operations
and other financial information by industry segment as of and for the years
ended June 30, 1998 and 1997:
 
                           1998          1997
------------------------------------------------ 
SALES
 Displays              $30,686,361   $14,299,463   
 Filtration              1,791,657     1,646,164
------------------------------------------------ 
                       $32,478,018   $15,945,627
================================================ 
 
OPERATING INCOME
 Displays              $ 3,201,907   $ 1,448,813   
 Filtration                490,792       439,125
 Corporate expenses     (1,182,654)     (856,311)
------------------------------------------------ 
                        $2,510,045   $ 1,031,627
================================================ 
 
DEPRECIATION AND AMORTIZATION
 Displays           $   590,443      $   373,249
 Filtration              43,187           68,493
 Corporate               33,311           37,485
------------------------------------------------ 
                    $   666,941      $   479,227
================================================ 
 
 
IDENTIFIABLE ASSETS
 Displays           $28,418,273      $ 7,757,381
 Filtration           1,053,464          995,683
 Corporate            1,322,871          722,733
------------------------------------------------ 
                    $30,794,608      $ 9,475,797
================================================ 
 
CAPITAL EXPENDITURES
 Displays           $   836,230      $   203,192
 Filtration              39,509           18,072
 Corporate                7,074           36,002
------------------------------------------------ 
                       $882,813      $   257,266
================================================ 

NOTE 17. ECONOMIC DEPENDENCE
For the years ended June 30, 1998 and 1997, the Company had one supplier which
accounted for a significant volume of consolidated purchases. For the year ended
June 30, 1998, purchases of signs from this supplier approximated $2,741,000, or
12% of consolidated purchases. For the year ended June 30, 1997, purchases of
signs from this supplier approximated $2,850,000, or 34% of consolidated
purchases.

                                      F-13
<PAGE>
 
La-Man Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 18.  SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid $511,753 and $221,813 for interest and $4,440 and $-0- for
income taxes for the years ended June 30, 1998 and 1997, respectively.

The following summarizes noncash investing and financing transactions:
 
                                          1997          1996
-------------------------------------------------------------
Equity issued for acquisition of Ad
 Art                                    $3,372,450   $     -

Debt refinancing                        $2,005,318   $     -

Issuance of five percent stock
 dividend                               $  577,524   $152,768

Fees on long-term debt paid from
 debt proceeds                          $  167,605   $     -

Common stock contributed to
 401(k) plan                            $  101,848   $ 71,532 
 
Issuance of stock warrants for fees
 on long-term debt                      $   73,000   $     -
 
Stock issued for employee bonuses       $   33,400   $     -

Issuance of stock options for
 prepaid investment services            $   16,000   $ 35,000
 
Common stock and notes payable
 issued in purchase of Don Bell
 Industries                             $       -    $626,476
 
Capital lease obligations incurred
 for fixed asset acquisition            $       -    $ 30,305
============================================================= 

NOTE 19. STOCK DIVIDEND
On October 30, 1997, the Company authorized a five percent stock dividend to be
issued December 1, 1997 to holders of record on November 14, 1997.  The dividend
resulted in the issuance of an additional 167,885 shares of the Company's $.001
par value common stock.  Earnings per share for the year ended June 30, 1997 has
been retroactively restated to reflect the effects of this stock dividend.

On July 12, 1996, the Company authorized a five percent stock dividend to be
issued August 7, 1996 to holders of record on July 26, 1996.  The dividend
resulted in the issuance of an additional 152,768 shares of the Company's $.001
par value common stock. Earnings per share reflects the effects of this stock
dividend.


NOTE 20. LEGAL PROCEEDINGS AND DISCONTINUED OPERATIONS
In November, 1996, the contracts between Vision Trust Marketing Services, Inc.
("VTM"), the Company's long-distance telephone marketing subsidiary, and MCI
Telecommunications, Inc. ("MCI") were abruptly terminated by MCI.  The contract
for commercial long-distance customers was originally executed in 1994 and was
restated and extended for a new five year term in May, 1996.  This contract
revision had been proposed by MCI in September, 1995 and discussed with VTM over
a period of eight months.  In reliance on the new contract, VTM invested heavily
in staff, facilities and equipment in anticipation of significant commission
revenue as a result of enhancements in the revised contract.  A lawsuit was
filed by VTM on April 16, 1997 seeking the recovery of damages from MCI.

Because the cancellation of the contract by MCI resulted in VTM no longer being
contracted to market MCI long-distance services, its sole line of business, the
Company discontinued the operations of VTM in December, 1996.  All identifiable
assets of VTM were either transferred to other subsidiaries of the Company or
disposed of with minimal proceeds at a loss of $282,281.  As of June 30, 1997
VTM had no remaining assets or liabilities.  From July 1, 1996 to December,
1996, VTM operated at a loss of $281,371.  Additional costs charged to expense
during 1997 associated with the wind down of VTM subsequent to December, 1996
amounted to $129,276 including a remaining reserve for additional costs of
$12,201 and $35,336 at June 30, 1998 and 1997, respectively.  Sales for VTM for
1997 were $105,348.


NOTE 21. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133). FAS 133 requires companies to recognize all
derivative contracts as either assets or liabilities in the balance sheet and to
measure them at fair value.  FAS 133 is effective for periods beginning after
June 15, 1999.  Historically, the Company has not entered into derivative
contracts.  Accordingly, FAS 133 is not expected to affect the Company's
financial statements.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (FAS
130) and No. 131, "Disclosure about Segments of an Enterprise and Related
Information" (FAS 131).  FAS 130 establishes standards for reporting and
displaying comprehensive income, its components and accumulated balances.  FAS
131 establishes standards for the way that public companies report information
about operating segments in annual financial statements and requires reporting
of selected information about operating segments in interim financial statements
issued to the public.  Both FAS 130 and FAS 131 are effective for periods
beginning after December 15, 1997.  Neither FAS 130 nor FAS 131 are expected to
have a material effect on the Company's financial statements.

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