SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                    FORM 10K

                 ANNUAL REPORT PURSUANT TO SECTION 113 OF 15 (D)
                        OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended April 30, 1998, Commission File #0-8006

                             COX TECHNOLOGIES, INC.
--------------------------------------------------------------------------------
                           f.k.a. ENERGY RESERVE, INC.
             (Exact name of registrant as specified in its charter)

         Arizona                                                 86-0220617
(State or other jurisdiction of                               (IRS Employer
incorporation or organization)                               Identification # )

69 McAdenville Road, Belmont, North Carolina 28012
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(Address of Principal Executive Offices)

Registrant's telephone number, including area code: (704)  825-8146

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

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

                         Common stock, without par value
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                                ( Title of Class)

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

State the aggregate market value of the voting stock held by non-affiliates  for
the  registrant's  (the aggregate market value shall be computed by reference to
the price at which the stock was sold,  or the average  bid and asked  prices at
which the stock was sold, or the average bid and asked prices of such stock,  as
of a specified date within 60 days prior to the date of filing.)
                           $3,505,566 at July 1, 1998
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Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest  practicable  date  (applicable only to corporate
registrants.)
                          19,905,438 as of July 1, 1998
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Documents   incorporated   by  reference:   List  the  following   documents  if
incorporated  by reference and the part of the Form 10-K into which the document
is  incorporated:  (1) any annual report to security  holders;  (2) any proxy or
information  statement;  and (3) any prospectus filed pursuant to Rule 4249B) or
(C) under the Securities Act of 1933.  (The listed  documents  should be clearly
described for identification purposes.)
<PAGE>
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

        (a) GENERAL DEVELOPMENT OF BUSINESS

        Cox  Technologies,  Inc. f.k.a.  Energy Reserve,  Inc. (the Company) has
been  primarily  engaged in the business of producing and  distributing  transit
temperature  recording  instruments,  both domestically in the United States and
internationally.  The  Company  also  engages  in  the  business  of  acquiring,
developing and selling oil properties and of producing and selling crude oil for
its own account in the United  States.  As such the Company has not and does not
engage in petroleum refining or retail marketing.

        The Company was  incorporated as Mericle Oil Company in July 1968, under
the laws of the State of Arizona.  The name was changed to Energy Reserve,  Inc.
in  August,  1975  and  changed  for  the  second  time  in  April  1998  to Cox
Technologies,  Inc. Its executive offices,  formerly located in Phoenix, Arizona
are now located at 69 McAdenville  Road,  Belmont,  North Carolina 28012 and its
telephone  number  is  (704)  825-8146.   Except  where  the  context  otherwise
indicates,  all references to the "Company" are to Cox Technology,  Inc. and its
wholly owned subsidiaries,  Twin-Chart, Inc. its wholly owned subsidiary Transit
Services,  Inc.,  ERES Cogenics,  Inc.,  Energy Reserve  Financial  Corporation,
Energy Reserve Holdings, Inc. and Digi-V, Inc., a 56% owned subsidiary.

        (b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

        The Company has two industry  segments:  (1) production and distribution
of temperature  recording devices; and (2) crude oil production and development.
The  following  table  summarizes  the assets,  revenues and  operating  results
attributable to the Company's  operations by industry  segments for the date and
periods indicated.
                                       1998          1997             1996
                                       ----          ----             ----
Revenues
(1) Temperature recorders-Y/E 4/30   $8,135,197    $7,444,170     $6,864,519
(2) Oil production-Y/E 4/30              $3,559        $9,647            -0-

Operating profit or loss:
(1) Temperature recorders-Y/E 4/30   $1,094,285      $840,992       $531,885
(2) Oil production-Y-E 4/30          $1,972,283       $29,649     $(363,864)

Identifiable assets
(1) Temperature recorders-4/30       $2,958,066    $3,142,207     $2,798,723
(2) Oil production-Y/E 4/30          $6,808,470    $3,811,149     $3,756,947

     (c) NARRATIVE DESCRIPTION OF BUSINESS

     TEMPERATURE RECORDER OPERATIONS

        The Company's  temperature  recorder  activities  include production and
distribution of transit temperature  recording  instruments.  These instruments,
known as temperature recorders, are self contained, battery powered and designed
to create a graphical "time vs. temperature" record.

        The  recorders  are  marketed  under the trade  name Cox  Recorders  and
produce a record which is documentary proof of temperature conditions useful for
compliance  with  governmental   regulations,   the  monitoring  performance  of
refrigerated  carriers,  and for claims in the transport of valuable perishables
such as  produce,  meat,  pharmaceuticals,  chemicals,  live  plants  and animal
material.

        The Company produces two separate graphic recorders.  The COX1 and COBRA
are  single-channel  recorders  which record the air temperature in the truck or
container.  The COBRA is a new low-cost  recorder with a transparent case, which
allows viewing of the temperature  record without opening the case itself.  Both
are used primarily in transit monitoring of temperature variations.

                                       1
<PAGE>
          In  addition  to these  graphic  temperature  recorders,  the  Company
distributes an electronic  temperature  recorder,  or "data  logger",  named the
TRACER.  The TRACER  delivers  its data via a cable link to a PC computer  using
specialized software.  TRACER is used in quality control and safety applications
in the foods  industries and also in shipping.  The shipping  configuration is a
new design with an integral mailer pack that has patents pending.

        The  source  and  availability  of raw  materials  are not  critical  or
significant factors in the temperature recorder operations of the Company.

        The temperature recorder operations of the Company are non-seasonal.

        The  Company  does and is  required  to  carry  significant  amounts  of
inventory  for its  temperature  recorder  operations  and  neither  Company nor
industry practices provide extended payment terms to customers.

        The  temperature  recorder  operations  of the Company are not dependent
upon a single or a few customers,  nor would the loss of any one customer have a
materially  adverse  effect  upon  earnings  or the  financial  position  of the
Company.

        Backlog  of orders is not a major  factor  in the  temperature  recorder
operations of the Company.

        The Company is a major competitor in the temperature  recording industry
as regards its production and distribution activities.

        The Company does not maintain company owned distribution  entities.  All
distributors  are on contract and major  distributors are located in Copenhagen,
Singapore and Melbourne. All other distribution and sales operations are through
individual sales persons  operating on a sales commission basis or a salary plus
incentive basis.

        The product  lines  include a portable  penetration  probe  thermometer,
which is retailed but not manufactured by the Company. The Company also performs
contract manufacturing.

        The COX1 product accounts for 90% of the Company's business. The balance
is due to probes  and retail  sales of other  temperature  monitoring  products,
which  are not  manufactured.  The  COBRA  and  TRACER  products  are new and no
substantial volume has yet been achieved.

        OIL PRODUCTION OPERATIONS

        The Company's oil activities  include the drilling of development  wells
and the  development  and operation of such  properties  for  production of oil.
Since 1980, the Company has principally financed these activities by borrowings,
sales of non-operating assets, issuance of its common stock and from operations.
During the three  years  covered by this  report the Company has only had modest
crude oil  production  or sales  from March  1997,  when  production  sales were
reactivated.

        In 1986, as a means to maximize  production through steam enhancement of
its  significant  heavy  crude  reserves,  the  Company  undertook  a project to
construct a Cogeneration (COGEN) and Thermal Enhanced Oil Recovery (TEOR) at its
oil leases in the Chico-Martinez field, Kern County, California. The COGEN/TEROR
facility as contracted with Pacific Gas & Electric  Company (PG&E), a California
public utility,  was a 45 MW project  consisting of two phases;  Phase One being
20.5 MW and Phase Two being  24.5 MW.  Problems  arose  with  PG&E,  principally
dealing  with  the  power  transmission  routing  and  inter-connection,   which
prevented the Company from meeting the contract deadline.

        As a result of these problems, a complaint was filed with the California
Public  Utilities  Commission  against  PG&E.  The future  plans of the  Company
pertaining to it's oil  production  and the  COGEN/TEOR  operation are discussed
under the respective properties captions elsewhere in this report under Item 2.,
Description of Properties - Mitchel and Bacon Hills leases.  The Company's plans
to  augment  its  oil  operations  in  California   include,  by  late  1998,  a
well-enhancement  oil  recovery  project  at  the  Chico-Martinez  Field.  It is
anticipated that the project will be a "Qualified Enhanced Oil Recovery Project"
as defined  by the  Omnibus  Budget  Reconciliation  Act of 1990 with  resultant
entitlements  of  substantial  federal income tax benefits.  The  organizational
structure  of the  enhanced  oil  project  will be such  as to  enable  investor
financing of the project and/or outsourcing of the field operations.

        Actual  drilling  operations are not undertaken by the Company,  but are
conducted by third-party drilling contractors.  The Company, however, may act as
operator  of such  projects,  thereby  supervising  exploration,  drilling,  and
production  activities.  Since 1980, virtually all of the Company's  development
activities  have been on its Kern County Leases,  which the Company  acquired by
cash and/or  issuance of shares of its common  stock to be held for  investment(
investment shares).

        The  source  and  availability  of raw  materials  are not  critical  or
significant factors in the oil production operations of the Company.

                                       2
<PAGE>
        The oil operations of the Company are non-seasonal.

        The Company does not and is not required to carry significant amounts of
inventory  for its oil  operations  and neither  Company nor industry  practices
provide extended payment terms to customers.

        The oil  operations of the Company are not dependent  upon a single or a
few customers,  nor would the loss of any one customer have a materially adverse
effect upon the earnings or financial position of the Company.

        Backlog  of orders is not a factor  in the crude oil  operations  of the
Company.

        The oil and gas industry is extremely competitive and involves risk. The
Company is a minor factor in the  petroleum  and natural gas industry as regards
to its  development  and  production  activities.  The ability of the Company to
market oil and gas  produced  from its  properties  or from  those  which may be
subsequently  acquired  depends on  numerous  factors  beyond the control of the
Company,  including the extent of production and imports of oil and gas into the
United  States,  the  proximity  and  capacity  of oil  and gas  pipelines,  the
availability of other  transportation  facilities,  the marketing of competitive
fuels,  the effect of governmental  regulations on the production of oil and gas
and  other  matters  affecting  the  availability  of a  ready  market,  such as
fluctuation, supply and demand.

        Governmental agencies of the United States maintain a close watch on the
ecological  impact of development  activities and the  possibility of ecological
disturbances.  Such measures may  substantially  increase the cost of developing
and  producing  oil and gas  and  may  prevent  or  delay  the  commencement  or
continuance of a given  operation.  In the opinion of management of the Company,
its operations comply with applicable legislation and regulations. The existence
of such  regulation has had no material  effect on the Company's  operations and
the cost of such  compliance  has not been material to date. The cost and effect
on operations  of  compliance  with future  environmental  laws and  regulations
cannot  be  predicted  and such  measures  may  have an  effect  on the  capital
investment or the net revenues resulting from the Company's activities.

ITEM 2. DESCRIPTION OF PROPERTIES

        The Company owns  working  interests  in certain  developed  oil and gas
properties in the United  States.  Developed  acreage  consists of properties on
which oil and gas wells have been drilled  which are capable of producing  crude
oil or natural gas.

        The Company's principal oil and gas properties are the Mitchel and Bacon
Hills leases previously  referred to in this report.  Following is a description
of each of these principal oil and gas properties:

        MITCHEL LEASES

        These  subleases,  located in the  Chico-Martinez  field,  Kern  County,
California,  were acquired in 1969 and consist of 380 acres in which the Company
has interests to a depth of 2,000 feet on 320 acres and to a depth of 2,500 feet
on 60  acres.  The  Company  owns a 78.33  percent  working  interest  in  these
subleases,  with 52  completed  oil wells which were  unitized in 1976 and which
produce  from the 500 to 1,600 foot  levels.  Production  interest  of others in
these wells was 1.1 percent at April 30, 1998,  1997 and 1996.  The oil produced
is heavy crude of  approximately  12.7 API gravity.  The Company has no drilling
requirements  under the subleases,  which are held by  production.  There was no
crude oil production on these leases during the three years ended April 30, 1998
until March 1997.

        BACON HILLS LEASE

        In March 1990,  the  sublessor  declared this  sublease  terminated  and
requested return of the underlined portion of the sublease. The Company does not
acknowledge  the  declaration  of  termination  and has not  complied  with  the
sublessor's request. To date, no litigation,  action or further request has been
undertaken  by the  sublessor  in a  connection  with this  matter.  The Company
retains and holds a  five-acre  well tract and the oil and gas rights to each of
fourteen wells drilled on this sublease.

         This  sublease,  located  in the  Chico-Martinez  field,  Kern  County,
California,  was acquired in December,  1980 and consists of  approximately  260
acres,  1 which  the  Company  has  interests  to the depth of 5,000  feet.  The
landowners'  and  overriding  royalty  interest  holders are identical  with the
Mitchel  leases  which total 21.67  percent and the Company  owns the  remaining
78.33 percent working  interest in this lease. The acquisition of this sublease,
in conjunction with the Mitchell subleases,  provided the Company with an entire
leasehold interest in a full section of land.

          Under  the  terms of this  sub-lease,  the  Company  committed  to the
drilling of an initial six wells on or before March 31,  1982,  and at least six
additional wells each 12-month period  thereafter,  until at least 52 wells have
been drilled  without  regard to whether they are  producing or  abandoned.  The
Company has drilled a total of 14 wells under its commitment. No wells have been
drilled on this lease since 1984.
                                       3
<PAGE>
       COGENERATION SYSTEM AND THERMALLY ENHANCED OIL RECOVERY OPERATION

        During  the past ten  years,  the  Company's  oil  activities  have been
directed  toward the  implementation  of the  COGEN/TEOR  Project on the Mitchel
leases  which would be capable of serving the  combined  Mitchel and Bacon Hills
leases with a steam flood  enhanced oil recovery  operation  and provide for the
sale of power to a California  public utility  company.  ERES Cogenics,  Inc., a
wholly   owned   subsidiary,   was   formed   in   August   1987   to   be   the
builder/owner/operator of the COGEN/TEOR facilities.  The Company signed a power
purchase agreement with Pacific Gas and Electric Company for the delivery to the
utility of 20.5  megawatts of electricity by a date no earlier than June 1, 1989
and no later than December 24, 1991. The agreement further provided for delivery
and  purchase of up to 45  megawatts  of power in later  years.  Contracts  were
signed for negotiated with responsible and experienced  suppliers,  supervision,
natural gas  delivery,  maintenance  and  operation  and the TEOR  installation,
including the laying of steam lines for the steam flood operations.

        As stated  earlier  in 1(c)  under Oil  Production  Operations,  certain
problems  arose with the public  utility,  which  rendered the Company unable to
satisfy  the power  purchase  contract  requirements  by the  December  24, 1991
deadline. The public utility denied a request for deferral of the deadline date.
The Company filed a complaint  with the  California  Public  Utility  Commission
(CPUC) requesting  continuation of the power purchase agreement.  The matter was
heard by the  CPUC in  October  1993 and a  settlement  in this  litigation  was
reached  in  June  1997,  which  was  approved  by the  CPUC  in the  amount  of
$3,500,000. The Company received the settlement amount in February 1998.

        The tables below set forth the gross and net  developed  acreage and the
gross,  net, and revenue net  productive  wells of all oil and gas properties of
the Company at April 30, 1998.

        (a) "Gross Acreage" represents all acres in respect to which the Company
has a working  interest,  "Net Acreage"  represents the aggregate of the working
interest of the Company in the gross acreage.

                                                  Acreage (a)
                                            ----------------------
                                              Gross
   Location        Held By      Expires     Developed        Net
   --------        -------      -------     ---------        ---
  California
  Mitchel        Production    Indefinite     380.00        297.65
 *Bacon Hills    Production        *           70.00         54.83
                                             -------        ------
                                              450.00        352.48

* Reference  is made to the  descriptions  of the Mitchel and Bacon Hills leases
previously  discussed  in this Item 2  concerning  the  status of the leases and
certain  drilling   commitments  required  of  the  Compnay  pertaining  to  the
California leases.

         (b)  "Gross  Wells"  represents  the total  number  of wells  which the
Company has a working interest; "Net Wells" represents the number of gross wells
multiplied  by the  percentages  of the working  interests  therein owned by the
Company.  "Revenue Net Wells" represents the number of gross wells multiplied by
the percentages of the  participating  production  interests therein retained by
the Company.
                          Oil Wells
                                              Revenue
Location           Gross          Net           Net
--------           -----          ---           ---
California          62.0         48.6            48.6

        During the past five fiscal  years,  the Company has not drilled any oil
or gas wells.

        The Company is not obligated under any existing  contracts or agreements
to provide a fixed and determinable quantity of oil and gas in the future.

        The  latest  independent  petroleum  studies  and  reports  for the Kern
County,   California   leases  were  by  Douglass   Petroleum   Management  Co.,
Bakersfield,  California as follows:  (1)  Comprehensive  Reservoir  Engineering
Study dated  February  1986 which  estimated  the  recoverable  oil  reserves at
21,103,341  barrels,  and (2) a Steam Flood  Development  Plan,  dated June 1987
which sets forth a plan including  drilling and production costs for recovery of
the oil reserves.  The Company has not filed any reports  concerning oil and gas
reserve  estimates  with any  regulatory  authorities  or agency  other than the
Securities and Exchange Commission.

        The net  production  of oil and gas for each of the last  five  years is
shown below. Net production  represents the gross production after deduction for
royalties of other parties.
                                       4
<PAGE>
                                OIL/BBDS

                           1998           235
                           1997           500
                           1996           -0-
                           1995           -0-
                           1994           -0-

        None of the net  production  during each of these years is applicable to
long-term supply or similar  agreements with foreign  governments or authorities
in which the Company acts as producer.

ITEM 3. LEGAL PROCEEDINGS

        Disclosure of legal  proceedings  is contained in Note M,  "Commitments,
litigation and contingencies," of the Notes to Consolidated Financial Statements
incorporated herein by reference.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

        On November 15, 1997 pursuant to Notice and accompanying Proxy Statement
for the Annual Meeting of  Shareholders,  the annual meeting of  shareholders of
the Company was held in Phoenix,  Arizona at which meeting the following matters
were submitted to a vote of the securities holders:

          1.   To elect five  Directors to the Board of Directors for a one-year
               term in accordance with the articles of Incorporation.

          2.   To consider  and act upon a proposal to ratify the  selection  of
               Bedinger  &  Company   as  the   Company's   independent   public
               accountants for the fiscal year ending April 30, 1998.

                                     PART II

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

        (a) MARKET INFORMATION FOR COMMON STOCK

        The Company's common stock is traded in the nationwide  over-the-counter
market and is listed in the  electronic  bulletin board provided by the National
Quotation Bureau, Inc.

        The  range of high and low bid  quotations  for  each  quarterly  period
during the past four years ended April 30,  based upon  information  provided to
the Company by the National  Association of Securities  Dealers or market makers
in the Company's stock, was as follows:

                     1998             1997             1996          1995
                  -----------     -----------    -----------   ------------
                  High    Low     High    Low    High    Low    High    Low
                  ----    ---     ----    ---    ----    ---    ----    ---
 First Quarter     1/4    1/4      1/4    1/4     5/8     3/8   3/16    7/64
 Second Quarter   5/16   5/16    1 1/4    1/8     5/8    5/16   3/16    1/86
 Third Quarter     3/4    3/8    13/16    3/8     5/8    5/16   7/16    3/16
 Fourth Quarter    3/4    3/8      3/4    3/8     1/2    5/16    5/8     3/8

                                       5
<PAGE>
        (b) APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS

        As of April 30, 1998 the approximate number of holders of record of each
class of equity securities of the Company was as follows:

        Common Stock, no par value  3,000 (1)

        (1) Included in the number of  stockholders of record are shares held as
"nominee" or "street name.

        (c) DIVIDENDS

        The Company has not declared any  dividends  during the past three years
ended April 30, 1996 through 1998.

ITEM 6. SELECTED FINANCIAL DATA

        Following is a summary of selected  financial  data for each of the last
three fiscal years ended April 30:

                                        1998          1997          1996
                                        ----          ----          ----
           Operating Revenues        $8,138,757    $7,453,817    $6,864,519
           Profit (loss) from
           continuing operations      3,117,068     1,004,333       207,638

           Profit (loss) from
           continuing operations
           per common stock                0.15          0.05          0.01

           Total Assets               9,766,536     6,953,356     6,555,670

           Long-term
           Obligation                   280,706       358,686       465,895

           Cash Dividends Declared
           Per Common Share                 -0-           -0-           -0-

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

           LIQUIDITY AND CAPITAL RESOURCES

           Based upon its temperature  recorder operations and the developed and
undeveloped  reserves  of the  Mitchel  and  Bacon  Hills  leases,  the  Company
anticipates  cash  from  operations,   equity  investment,  and  borrowing  from
long-term lending sources adequate to meet cash requirements.  At present,  cash
flow from  operations is adequate to meet cash  requirements  and commitments of
the Company.  However,  the Company intends to enter into equity,  debt of other
financing  arrangements  to meet its further  financial needs for expansion into
food safety control products related to its temperature recorder operations and:

          (a)  To resume and continue  drilling and work over  activities at its
               Chico Martinez oil field.

          (b)  To repay outstanding current liabilities;

          (c)  To provide for general working capital needs;

        COMPARISON OF OPERATIONS FOR 1998 AND 1997

        Operations for the years ended April 30, 1998 resulted in a net earnings
of  $3,066,568  or 0.15 per share.  Included in these net earnings is a one-time
income  amount of $2,043,305  net of the provision for income taxes.  The income
from  operations  was $1,023,263 for the current year and $985,119 for the prior
year.

        The following schedule sets forth the two company segments for the years
ended April 30, 1998 and 1997:
                                       6
<PAGE>
                                     Y/E 1998                    Y/E 1997
                             Temperature      Oil        Temperature     Oil
                              Recorders    Production    Recorders    Production
                              ---------    ----------    ---------    ----------
Revenues:
Sales                         $8,135,197  $     3,559   $ 7,444,170   $   9,647

Cost of sales                  3,676,082       28,775     3,472,256       3,649

General & Admin                1,925,715      153,492     1,745,691      88,915
Sales Expense                  1,223,991          -0-     1,052,164         -0-
Interest                          34,938       37,250        40,851      24,249
Depreciation                      34,468          782        36,946       3,977

Income(loss) operations        1,240,003     (216,740)    1,096,262    (111,143)
Other income (expense)          (127,203    2,221,008      (121,578)    140,792
Income taxes                      18,515       31,985       133,692         -0-

Net earnings (loss)            1,094,285    1,972,283       840,992      29,649

        TEMPERATURE RECORDERS

        Sales  increased  approximately  $700,000 or 9% for the current  year as
compared to the prior year ended April 30. There was an  improvement  in cost of
sales as a  percentage  of sales from 46.6% in the 1996-97  year to 45.1% in the
1997-98 year.

        Sales  expense  increased  $171,827  for the current year over the prior
year.  Such expenses  expressed as a percent of sales,  increased  from 14% last
year to 15% for the current  year.  This increase was due primarily to marketing
activities in the  introduction  of the Company's new products  concerning  food
safety monitoring.

        General and  administrative  expense as a percentage  of sales  remained
constant at 23% for the two years of comparative operations. The decrease of 15%
in interest  expense was due to  reduction  in long term debt.  The  category of
other expense increased by $5,625 or 5% due primarily to a reduction in interest
income from the prior year.

        Overall,  the  improvement  in Income  from  Operations  of  $143,741 is
noteworthy  by the fact  that it  represents  21% of the  sales  increase.  This
compares favorably with the Company's  historically normal percentage of 15% for
this category of income.

        OIL PRODUCTION

        Crude  oil sales  were down in the 1997- 98 year by $6,088 or 63%.  This
was the result of decreased  production  due to depressed  oil prices and a well
work-over program.

        Cost of sales  increased  $25,126 due to the  above-mentioned  work-over
program, which accounted for all of the increase.

        General  and  administrative  expenses  increased  $64,577  or 73%,  due
primarily  to   technological   research  and  development   costs  of  $32,000,
shareholder  meeting  costs of $19,000 and increases  aggregating  approximately
$13,500 for rent, travel, insurance and office relocation costs.

        The  increase in interest  expense of $13,000  was due  primarily  to an
adjustment of the note payable  balance  pertaining to the stipulated  judgement
referred to in Note H of Notes to Consolidated Financial Statements incorporated
herein by reference.

        Other  income  increased  $2,080,216  over  the  prior  year  income  of
$140,792.  As disclosed  elsewhere  in this report  under  Enhanced Oil Recovery
Operations  and  by  Note  E  of  Notes  to  Consolidated  Financial  Statements
incorporated herein by reference,  the Company received $3.5 million in February
1998 in settlement of certain  litigation  with a public  utility  company.  The
Company  realized a net settlement  amount of $2,274,764  after payment of legal
fees,  consultant  fees and  litigation  costs of the six-year  litigation.  The
Company  absorbed a charge to  operations of $53,756 from a write off of certain
investment  securities  valuation  and  other  expenses  which  resulted  in the
$2,221,008 other income amount.

        COMPARISON OF OPERATIONS FOR 1997 AND 1996

        Operations for the year ended April 30, 1997 resulted in a net profit of
$870,641.  This is a $702,620 or 418%  improvement  over the $168,020 net profit
for the prior year ended April 30, 1996.

                                       7
<PAGE>
        The following  schedule  reflects the two company segments for the years
ended April 30, 1997 and 1996.

                                     Y/E 1997                  Y/E 1996
                           Temperature       Oil     Temperature      Oil
                            Recorders    Production   Recorders    Production
                            ---------    ----------   ---------    ----------
Sales                      $ 7,444,170   $   9,647   $ 6,864,519        -0-

Cost of sales                3,472,256       3,649     3,525,156      6,715

General & Admin              1,745,691      88,915     1,649,384     62,076
Sales Expense                1,052,164         -0-     1,004,953        -0-
Interest                        40,851      24,249        42,028     45,709
Depreciation                    36,946       3,977        39,116      3,977

Income(loss)                 1,096,262    (111,143)      603,882   (118,477)
operations
Other income (expense)        (121,578)    140,792       (32,380)  (245,387)
Income taxes                   133,692         -0-        39,617        -0-

Net earnings (loss)            840,992      29,649       531,885   (363,864)

        TEMPERATURE RECORDERS

        Net  earnings  were  $840,992  for the year ended in 1997 as compared to
$531,885 for 1996, an improvement of $309,107 or 58%.

        Sales were up  approximately  8.5% for the  current  year over the prior
year.  There was a slight decrease in cost of sales.  These two factors resulted
in an  improvement  in gross  margin on sales of  $632,551  for 1997.  The gross
profit on sales in 1997 was $3,971,914 as compared to $3,339,363 for 1996.

        As a percentage of sales, all categories of operating expenses, remained
relatively constant between the two years.

        Income from operations was up $492,380 for 1997 over 1996.  Increases in
other  expense and income  taxes of  $183,273  reduced  the  improvement  in net
earnings to $309,107.

        OIL PRODUCTION

        The oil  production  segment  reflects  net  earnings for the year ended
April 30, 1997 of $29,649 as  compared  to a net loss of $363,864  for the prior
year.  This  improvement of $393,513 is  attributable  primarily to other income
gain as disclosed below.

        The only oil  production  sales  for  either  of the past two  years was
approximately  500 barrels sold in March 1997.  As  disclosed  elsewhere in this
report,  the oil field  operations  have been  inactive for several years due to
litigation involving the Company's  cogeneration project.  Production operations
have been reactivated in the last quarter of the 1996-1997 fiscal year.

        General  and  administration  expenses  increased  $26,839  or  43%  due
primarily  to legal  costs of $8,000 and  increases  in  salaries,  rentals  and
insurance expenses of approximately $19,000.

        Interest expense declined due to debt reduction. Other income in 1997 of
$140,792  was the  result  of the  settlement  of  liabilities  at less than the
recorded  liability,  which  resulted in a gain of $386,179 for this category of
operations.  In the prior year the $245,387 expense was attributable principally
to a loss on investment securities.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        See Part IV

ITEM 9. DISAGREEMENT OF ACCOUNTING AND FINANCIAL DISCLOSURE

        None
                                       8
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

        (a) IDENTIFICATION OF DIRECTORS

        The following table lists certain  information  concerning the directors
of the Company:

Name, Positions and                  Director       Term        Certain Other
Offices With Registrant     Age        Since       Expires       Corporations
-----------------------     ---        -----       -------       ------------
Alfred P. Sprenger,
Chairman of the Board       70         1968          (1)             (2)

James L. Cox,
President, Chief
Executive Officer,
Chief Operating Officer     53         1995          (1)             (3)

David K. Caskey
Secretary and Treasurer     36         1997          (1)             (4)

George M. Pigott            70         1997          (1)

Michael  E. Fonzo           58         1997          (1)

(1)  Serves until next meeting of the Company's stockholders.
(2)  Serves  as the sole  trustee  of the  Liquidating  Trusts  for  Progressive
     Investment Corporation (PIC) and PIC Research & Development Corp.
(3)  Serves  as  President  and  Chief   Executive   Officer  of  the  Company's
     subsidiary, Twin-Charts, Inc.
(4)  Serves as Secretary-Treasurer of Company's  subsidiaries,  Twin Chart, Inc.
     and Transit Services, Inc.

        (b) IDENTIFICATION OF EXECUTIVE OFFICERS
                                                                    Executive
Name, Positions and                    Director       Term        Certain Other
Offices With Registrant       Age       Since        Expires      Corporations
-----------------------       ---       -----        -------      ------------
James L. Cox,
President, Chief
Executive Officer,
Chief Operating Officer        53       1995          (1)            (2)

David Caskey
Secretary-Treasurer            36       1997          (1)            (3)

(1) Serves until replaced by the Board of Directors.
(2)  Serves as President and Chief  Executive  Officer of Company's  subsidiary,
     Twin-Chart, Inc. and Transit Services, Inc.
(3)  Serves as Secretary-Treasurer of Company's subsidiaries,  Twin-Chart, Inc.,
     and Transit Services, Inc.

        (c) BUSINESS EXPERIENCE

        Mr. James L. Cox has been an officer and  director of the Company  since
August 1, 1995. He has served in the capacity of President  and Chief  Operating
Officer from that date to the present. From November 1997 to the present, he has
served as Chief Executive Officer. He has served in identical  capacities in the
two subsidiary corporations, Twin-Chart, Inc., and Transit Services, Inc., since
1986  and  from  1977  to  1986,  he  served  as  Sales  Manager  and  Executive
Vice-President  of  Transit  Services,  Inc.  He  holds  a Ph.D.  from  Stanford
University  and has held  various  teaching  and  research  positions  with Duke
University,  Stanford  Research  Institute and University of  California,  Santa
Barbara.

        Mr.  Alfred P.  Sprenger  has been a director of the  Company  since its
incorporation.  He served  in the  capacity  as  President  and Chief  Operating
Officer from 1969 to August 1, 1995. He served as Chief Executive Officer of the
Company  from August 1, 1995 to November  1997,  on which date he resigned as an
executive  officer and  employee.  He served in identical  capacities in the two
affiliated  corporations,  Progressive  Investment  Corporation  (PIC)  and  PIC
Research and  Development  (PIC R&D) until  December  1983 and now serves as the
sole trustee of the Liquidating Trusts for PIC and PIC and R&D.

                                       9
<PAGE>
        In September  1996, Mr. David K. Caskey was elected  Secretary/Treasurer
of the Company to replace Roger Sherer,  who died in August 1996. Mr. Caskey has
served as  Secretary/Treasurer in the two subsidiary  corporations,  Twin-Chart,
Inc., and Transit  Services,  Inc., since 1990. He holds a B.A. degree from Long
Beach State University and has been with the subsidiary corporations since 1987.

        Mr. Michael E. Fonzo has been  Vice-President  of AMS  Industrial,  Inc.
since 1986, a firm engaged in engineering solutions for coal-fired power plants,
coal-mines  and in  conducting  seminars to  engineering  companies.  He holds a
Master of  Science  from  Catholic  University,  Chile  and has held a  teaching
position  with the  University  of the  North,  Chile.  He has been a Sales  and
Marketing  manager and  consultant  to several  companies  in the  petrochemical
field. From 1991 to 1993 he represented Cox Recorders in selected countries.

        Dr. George M. Pigott is Professor of Food Engineering and is Director of
the Institute for Food Science and Technology,  School of Fisheries,  College of
Ocean and Fishery  Sciences at the University of  Washington.  He has held these
positions since approximately 1985. He is the author of many papers presented at
symposiums  around the world and is a lecturer  at several  universities  in the
United  States.  For  years,  Dr.  Pigott  has been  involved  in  research  and
development activities for the processing, preservation and packaging of aquatic
products presented to the customer.

        (d)   INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

        Disclosure  of legal  proceedings  is contained in Note M  "Commitments,
Litigation and Contingencies," of the Notes to Consolidated Financial Statements
incorporated herein by reference.

ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS

        (a) Remuneration,  on an accrual basis,  paid to the executive  officers
and  directors  of the  Company  during the year ended  April 30,  1998,  was as
follows:
                            CASH AND CASH EQUIVALENTS
                              FORMS OF REMUNERATION
<TABLE>
<CAPTION>
                                                               Securities
                                                              or Property
                                                               Insurance     Aggregate
                                             Salaries, Fees   Benefits or        of
Name of Individual                          Director's Fees  Reimbursement   Contingent
   or number of           Capacities in       Commissions,      Personal      Forms of
 persons in Group         Which Served        and Bonuses       Benefits    Remuneration
 ----------------         ------------        -----------       --------    ------------
<S>                   <C>                      <C>              <C>         <C>
   James L. Cox        Director, President      $125,407          None          None
                            CEO & COO

Alfred P. Sprenger         Chairman of            -0-             None          None
                            the Board

 David K. Caskey       Director & Sec/Treas.    $ 71,431          None          None

      Three              All Officers &         $196,838          None          None
                            Directors
</TABLE>
        (b) The Company does not have future plans to pay remuneration, directly
or  indirectly,  to any of the above  officers  or  directors  other that direct
salaries and bonuses as authorized by the Board of Directors.
        (c) The directors of the Company do not receive compensation for serving
in their  capacity  other than  reimbursement  of expenses  incurred  related to
company business.
        (d) Transactions with management are disclosed in Note L of the Notes to
Consolidated Financial Statements incorporated herein by reference.

                                       10
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following  table show as of April 30, 1998 the  effective  number of
shares of common stock of the Company  owned by every person owning of record or
known  by  the  Company  as  owning  beneficially  more  than 5  percent  of the
outstanding common stock.

        (a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

        The  number of shares  and  percentage  ownership  represents  effective
ownership  in  the  Company,   including   ownership   through  the   affiliated
corporations  liquidating trusts,  Progressive  Investment Corporation (PIC) and
PIC research and Development (PIC R&D).

Title of     Name and Address          Amount and Nature of       Percent of
 Class       Beneficial Owner          Beneficial Ownership         Class
 -----       ----------------          --------------------         -----
 Common         James L. Cox             4,587,000 shares           23.3%
 stock,     69 McAdenville Rd.                Record
 no par         Belmont, NC

 Common     Alfred P. Sprenger               895,800                 4.5%
 stock,       2432 W. Peoria                  Record
 no par         Suite 1167
                Phoenix, AZ

 Common    PIC Liquidating Trust             178,614                 1.0%
 Stock,       2432 W. Peoria          Record and Beneficial
 no par         Suite 1167
                Phoenix, AZ

 Common     PIC R&D Liq. Trust                67,962                 0.3%
 stock,       2432 W. Peoria                  Record
 no par         Suite 1167
                Phoenix, AZ

 Common      Robert W. Dupree                704,000                 3.5%
 stock,       2432 W. Peoria                  Record
 no par         Suite 1167
                Phoenix, AZ

 Common   Other Related Parties*            4,522,304               22.7%
 stock,                               Record and Beneficial
 no par

* Comprised of  individuals  being certain  Company  employees and relatives,
  friends and business associates of Mr. Sprenger.

        For further  information  concerning  ownership  interests,  see Note L,
"Related-party  Matters,  Ownership  Interests,"  of the  Notes to  Consolidated
Financial Statements, incorporated herein by reference.

        (b SECURITY OWNERSHIP OF MANAGEMENT

        The  following  table  shows as of April  30,  1998,  all  shares of the
Company stock and that of the affiliated corporations  liquidating trusts, PICLT
and PIC R&DLT,  beneficially  owned by the officers and directors of the Company
as a group:
                                          Amount and Nature of
Title of Class        Name of Security    Beneficial Ownership  Percent of Class
--------------        ----------------    --------------------  ----------------
Common stock,       Energy Reserve, Inc.        5,595,811             28.1%
   No par

Common stock      PIC Liquidating Trust           -0-
   No par

Common stock    PIC R&D Liquidating Trust         -0-
   No par
                                       11
<PAGE>
                                     PART IV

ITEM 13.  FINANCIAL  STATEMENTS,  FINANCIAL  STATEMENT  SCHEDULES,  EXHIBITS AND
          REPORTS ON FORM 8-K

        (a) DOCUMENTS FILED AS PART OF THIS REPORT

        LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

        Consolidated Financial Statements:
          Balance sheets--April 30, 1998 and April 30, 1997
          Statement of operations  and  accumulated  deficit for the years ended
          April 30, 1998, 1997 and 1996
          Statement of  shareholders'  investment  for the years ended April 30,
          1998, 1997 and 1996
          Statement of cash flows for the years ended April 30,  1998,  1997 and
          1996

        (b) REPORTS ON FORM 8-K

        The Company has filed the  following  Forms 8-K for the year  covered by
this report ended April 30, 1998:

        None

                                       12
<PAGE>







                     COX TECHNOLOGIES, INC. AND SUBSIDIARIES
                (FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)

              REPORT ON AUDIT OF CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED APRIL 30, 1998 AND APRIL 30, 1997



<PAGE>
                                    CONTENTS
                                                                PAGE
                                                                ----

Independent Auditors' Report..................................    1

FINANCIAL STATEMENTS

    Consolidated Balance Sheets...............................    2

    Consolidated Statements of Income and Accumulated Deficit.    3

    Consolidated Statements of Changes in Stockholders' Equity    4

    Consolidated Statements of Cash Flows.....................  5-6

    Supplemental Schedule of Non-Cash Investing and
      Financing Activities....................................    7

    Notes to Consolidated Financial Statements ............... 8-29

<PAGE>

                          INDEPENDENT AUDITORS' REPORT


                                                                   June 19, 1998

Board of Directors
Cox Technologies, inc.
Phoenix, Arizona

We  have  audited  the   accompanying   consolidated   balance   sheets  of  Cox
Technologies,  Inc.  (formerly  Energy Reserve,  Inc.), as of April 30, 1998 and
1997, and the related consolidated  statements of income and accumulated deficit
and of cash  flows for the years  ended  April 30,  1998,  1997 and 1996.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of Cox Technologies,
Inc.,  at April 30, 1998 and 1997,  and the results of its  operations  and cash
flows for the years ended April 30,  1998,  1997 and 1996,  in  conformity  with
generally accepted accounting principles.


                                        Certified Public Accountants


                                      F-1
<PAGE>
COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEETS
APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

                                                             April 30
                                                    ---------------------------
ASSETS                                                   1998           1997
                                                    ------------   ------------
CURRENT ASSETS:
 Cash and cash equivalents                          $  2,575,945   $  1,118,019
 Accounts receivable, less allowance for
  doubtful accounts of $29,527 and $30,000
  at April 30, 1998 and 1997, respectively             1,627,074      1,131,873
 Inventory (Note B)                                    1,043,531        757,492
 Investment in securities (Note C)                        39,500         64,500
 Notes receivable - current (Note D)                      33,503         39,579
 Prepaid expenses                                        352,143         10,508
 Deferred income taxes (Note F)                           30,000              0
                                                    ------------   ------------
      TOTAL CURRENT ASSETS                             5,701,696      3,121,971

 Property and equipment (Net) (Note E)                 3,704,243      3,748,808
 Investment in securities (Note N)                       300,000              0
 Deposits                                                  5,290          3,890
 Goodwill (Notes A, I and J)                              48,479         78,687
 Notes receivable-non-current portion (Note D)             6,828              0
                                                    ------------   ------------
      TOTAL ASSETS                                  $  9,766,536   $  6,953,356
                                                    ============   ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable and accrued expenses (Note G)    $    356,811   $    489,740
  Income taxes payable (Note F)                           52,270            400
  Current portion of long-term debt (Note H)             510,369        585,859
                                                    ------------   ------------
       TOTAL CURRENT LIABILITIES                         919,450      1,075,999

  Long-term debt (Note H)                                280,706        358,686
  Minority interest (Notes A and J)                          669          2,674
                                                    ------------   ------------
                                                       1,200,825      1,437,359
                                                    ------------   ------------
COMMITMENTS AND CONTINGENCIES (Note M)

STOCKHOLDERS' EQUITY
 Common stock, no par value; authorized-
   100,000,000 shares;  issued and outstanding;
   19,905,438 shares at April 30, 1998 and
   19,905,188 shares at April 30, 1997                20,041,562     20,041,562
 Common stock subscribed                                  58,100              0
 Contributed capital                                     220,872        220,872
 Treasury stock                                          (45,920)             0
 Accumulated deficit                                 (10,598,719)   (13,665,287)
 Unrealized loss on available-for-sale
   securities (Note C)                                  (180,500)      (205,500)
 Less - Notes receivable for common
  stock:
   Issued (Notes K and L)                               (875,650)      (875,650)
   Subscribed (Notes K and L)                            (54,034)             0
                                                    ------------   ------------
      TOTAL STOCKHOLDERS' EQUITY                       8,565,711      5,515,997
                                                    ------------   ------------

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $  9,766,536   $  6,953,356
                                                    ============   ============
                                      F-2
<PAGE>
COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF INCOME
YEARS  ENDED APRIL 30, 1998, 1997 AND 1996

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

                                                  Year Ended April 30
                                        ---------------------------------------
                                            1998          1997          1996
                                            ----          ----          ----
REVENUE:
  Sales                                 $ 8,138,756   $ 7,453,817   $ 6,864,519
                                        -----------   -----------   -----------

     TOTAL REVENUE                        8,138,756     7,453,817     6,864,519
                                        -----------   -----------   -----------
COSTS AND EXPENSES
  Cost of sales                           3,704,857     3,475,905     3,531,871
  General and administrative expenses     2,079,207     1,834,606     1,711,460
  Sales expense                           1,223,991     1,052,164     1,004,953
  Depreciation and amortization              35,250        40,923        43,093
                                        -----------   -----------   -----------
     TOTAL EXPENSES                       7,043,305     6,403,598     6,291,377
                                        -----------   -----------   -----------

     INCOME FROM OPERATIONS               1,095,451     1,050,219       573,142
                                        -----------   -----------   -----------
OTHER INCOME (EXPENSE):
  Other income (expense) (Note E)         2,093,805        19,214      (266,575)
  Minority interest in income of
   consolidated subsidiary (Note I)                                     (11,192)
  Interest expense                          (72,188)      (65,100)      (87,737)
                                        -----------   -----------   -----------

     TOTAL OTHER INCOME (EXPENSE)         2,021,617       (45,886)     (365,504)
                                        -----------   -----------   -----------

Earnings before income taxes              3,117,068     1,004,333       207,638

Provisions for income taxes (Note F)         50,500       133,692        39,617
                                        -----------   -----------   -----------

NET EARNINGS                            $ 3,066,568   $   870,641   $   168,021
                                        ===========   ===========   ===========
EARNINGS PER SHARE (Note A):
  Net Income                            $       .15   $       .04   $       .01
                                        ===========   ===========   ===========

                                      F-3
<PAGE>
COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS  ENDED APRIL 30, 1998, 1997 AND 1996
--------------------------------------------------------------------------------

                                             Year Ended April 30
                                   -----------------------------------------
                                       1998           1997          1996
                                       ----           ----          ----
ACCUMULATED DEFICIT, beginning 
  of year                         ($13,665,287)  ($14,535,928)  ($14,703,949)

NET EARNINGS                         3,066,568        870,641        168,021
                                  ------------   ------------   ------------

ACCUMULATED DEFICIT, end of year  ($10,598,719)  ($13,665,287)  ($14,535,928)
                                  ============   ============   ============

                                             Common Stock
                                        ------------------------
                                         Number of                 Contributed
                                          Shares        Amount       Capital
                                          ------        ------       -------
BALANCES:
 April 30, 1995                         19,526,374   $ 20,009,855     $220,872
 Shares issued:
   Settlement of liabilities                36,607          4,500
   Shares reacquired and cancelled          (7,793)        (7,793)

BALANCES:
                                       -----------   ------------     --------
 April 30, 1996                         19,555,188     20,006,562      220,872
 Shares issued:
   Acquisition of subsidiary               350,000         35,000

BALANCES:
                                       -----------   ------------     --------
  April 30, 1997                        19,905,188     20,041,562      220,872
  Shares issued                                250

BALANCES:
                                       -----------   ------------     --------
  April 30, 1998                        19,905,438   $ 20,041,562     $220,872
                                       ===========   ============     ========

                                      F-4
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 30, 1998, 1997 AND 1996
--------------------------------------------------------------------------------

                                                     Year Ended April 30
                                               --------------------------------
                                                  1998        1997       1996
                                                  ----        ----       ----
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net earnings                                  $3,066,568   $870,641  $ 168,021
 Adjustments to reconcile net earnings
   to net cash used by
   operating activities:
     Depreciation and depletion                    31,273     36,946     39,116
     Minority interest                             (2,005)     2,674     11,192
     Allowance for doubtful accounts                 (473)     5,000     25,000
     Amortization of goodwill                       3,977      3,977      3,977
     Deferred taxes                               (30,000)   167,411     39,600
     (Acquisition) disposition of Goodwill         26,231    (26,979)

CHANGES IN CURRENT ASSETS AND CURRENT
LIABILITIES:  (Net of effect from purchase
of Twin-Chart, Inc.: for the years ended 
April 30, 1997 and 1996 only)

(Increase) decrease in current assets:
  Accounts receivable                            (494,728)   240,192)    49,237
  Inventory                                      (286,039)   (12,768)    22,756
  Prepaid expenses                               (341,635)    (1,697)    (2,436)

(Increase) decrease in non-current assets:
  Deposits                                         (1,400)         0      2,931

Increase (decrease) in current liabilities:
  Accounts payable and accrued expenses          (132,929)   206,545)   (50,907)
  Income taxes payable                             51,870          0          0
                                               ----------   --------  ---------
NET CASH  PROVIDED (USED) BY OPERATING
 ACTIVITIES                                     1,890,710    598,468    308,487
                                               ----------   --------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of treasury stock                      (45,920)
  Issuance of securities                                      35,000
  Disposition of securities                                              25,650
  Investment in securities                       (300,000)
  Purchase of property and equipment              (37,090)   (56,816)  (308,426)
  Disposition of equipment                         50,382                38,629
  Loss realized on sale of securities              50,000               287,850
  Purchase of minority interest in subsidiary                          (167,750)
  Common stock subscribed                          58,100
                                               ----------   --------  ---------

NET CASH (USED) BY INVESTING ACTIVITIES          (224,528)   (21,816)  (124,047)
                                               ----------   --------  ---------
                                      F-5
<PAGE>
COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
YEARS ENDED APRIL 30, 1998, 1997 AND 1996
--------------------------------------------------------------------------------

                                                     Year Ended April 30
                                              ---------------------------------
                                                   1998        1997       1996
                                                   ----        ----       ----
CASH FLOWS FROM FINANCING ACTIVITIES:
  Amounts loaned on notes receivable              (9,006)                (6,702)
  Amounts repaid on note receivable                8,254      25,595     40,612
  Amounts borrowed under notes payable            78,069                640,179
  Amounts repaid on notes payable               (231,539)    (98,584)  (291,795)
  Repayment (additions) to subscriptions 
   receivable                                    (54,034)                   250
  Reacquisition of common stock (net)                                    (3,293)
                                              ----------  ----------  ---------

NET CASH PROVIDED (USED) BY
 FINANCING ACTIVITIES                           (208,256)    (72,989)   379,251
                                              ----------  ----------  ---------

NET INCREASE (DECREASE) IN CASH                1,457,926     503,663    563,691

CASH AND CASH EQUIVALENTS, beginning of year   1,118,019     614,356     50,665
                                              ----------  ----------  ---------

CASH AND CASH EQUIVALENTS, end of year        $2,575,945  $1,118,019  $ 614,356
                                              ==========  ==========  =========


SUPPLEMENTAL DISCLOSURE:
  Interest paid                               $   36,345  $   40,851  $  58,091

  Income taxes paid                           $   26,326              $  46,016

                                      F-6
<PAGE>
COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
YEARS ENDED APRIL 30, 1998, 1997 AND 1996
--------------------------------------------------------------------------------
OTHER NON-CASH INVESTING AND FINANCING ACTIVITIES

                                            Year Ended April 30
                                     -------------------------------
                                       1998        1997         1996
                                       ----        ----         ----
Payment of accounts payable and
 accrued expenses in exchange
 for common stock                       $0       $      0       $250

Write-down for unrealized loss on
 available for sale securities          $0       $205,500       $  0



                                      F-7
<PAGE>
COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE A -  ORGANIZATION,  OPERATIONS  AND  SUMMARY OF  SIGNIFICANT
ACCOUNTING POLICIES

ORGANIZATION

The Company was  organized in July 1968 for the purpose of acquiring oil and gas
leases and for the exploration and development of oil and gas properties.

On October  30,  1994,  the  Company  acquired  Twin-Chart,  Inc. a
Nevada Corporation,  and its subsidiary  (collectively  Twin). Twin
was   privately   owned  and   operated   and  is  a  producer  and
distributor of transit temperature recording instruments.

Twin was acquired by the issuance of 4,587,000 restricted shares of common stock
and 5,000,000  warrants to purchase  restricted common stock of the Company with
an agreed aggregate value of approximately $1,050,000.

Twin conducts its operations  primarily  through a 100 percent owned  subsidiary
Transit Services, Inc., under the trade name and style of Cox Recorders.

In March, 1997 a transaction was consummated wherein the Company acquired 75% of
the issued and outstanding  shares of National On-Site Check Cashing,  Inc. This
transaction was  subsequently  reversed with no significant  effect on income in
1998.

Effective   August  1,  1995,  by  agreement,   the  Company   organization  was
restructured with Mr. James Cox becoming an officer and director of the Company.
In 1997 Mr. Cox became  President,  Chief Executive  Officer and Chief Operating
Officer,  Mr.  Sprenger,  formerly  President of the Company and Chief Operating
Officer became the Chairman of the Board of Directors and the Board was expanded
to a total of five members. One of the new members is an officer and employee.

SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

A. PRINCIPLES OF CONSOLIDATION

The consolidated  financial  statements  include the accounts of the Company and
its wholly owned  subsidiaries,  Energy Reserve Financial Corp.,  Energy Reserve

                                      F-8
<PAGE>
COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE A -  ORGANIZATION,  OPERATIONS  AND  SUMMARY OF  SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)

A. PRINCIPLES OF CONSOLIDATION (CONTINUED)

Holdings,  Inc., ERES Cogenics,  Inc. and Twin-Chart,  Inc. It also includes the
56%  ownership  of  Digi-V,  Inc.,  which  is  in  the  development  stage.  All
significant intercompany accounts and transactions have been eliminated.

B. ACCOUNTING ESTIMATES

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

C. CAPITALIZATION OF OIL AND GAS PROPERTIES

The following  types of costs  relating to the Company's oil and gas  properties
are capitalized under the successful efforts method of accounting:

   (i) Costs of purchase to acquire properties.

   (ii)Costs to obtain access to proved  reserves and to provide  facilities for
       extracting,  treating, gathering and storing oil and gas whether or not a
       specific well is successful.

D.  DEPRECIATION,  DEPLETION AND AMORTIZATION OF CAPITALIZED COST OF OIL AND GAS
    PROPERTIES

Depreciation,  depletion and amortization of the capitalized cost of oil and gas
properties are provided (on each property) on the unit-of-production method, at

                                      F-9
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE A -  ORGANIZATION,  OPERATIONS  AND  SUMMARY OF  SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)

SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)

D.  DEPRECIATION,  DEPLETION AND AMORTIZATION OF CAPITALIZED COST OF OIL AND GAS
    PROPERTIES (CONTINUED)

rates  which  are  based on the  ratio of oil and gas  produced  for the year to
independent  estimates of the total proved developed recoverable reserves and to
total proved recoverable reserves from the property.  These rates are applied to
the  unamortized  costs for each  property.  Adjustments  to the rates  applied,
required as the result of  revisions  of  independent  engineers'  estimates  of
proved reserves, affect the year of such change and future years.

Depreciation   of  all  other   property  and   equipment  is  provided  on  the
straight-line  method over the respective  estimated  lives ranging from five to
twenty years.

E. OPERATING COSTS

Costs of oil production  (lifting costs),  geological and geophysical  costs and
the costs of  carrying  and  retaining  undeveloped  properties  are  charged to
operations as incurred.

F. RESEARCH AND DEVELOPMENT COSTS

Costs of  research  and  development  activities  are charged to  operations  as
incurred.

G. CASH AND CASH EQUIVALENTS

Cash and cash equivalents represent highly liquid investments,  generally with a
remaining maturity of three months or less.

                                      F-10
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE A -  ORGANIZATION,  OPERATIONS  AND  SUMMARY OF  SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)

SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)

H. INVENTORY

Inventory  at April  30,  1998  and 1997  consists  primarily  of raw  material,
work-in-progress  and finished  goods related to transit  temperature  recording
instruments;  manufactured  by Transit  Services.  Inventories are stated at the
lower of cost (first-in, first-out method) or market.

I. INCOME TAXES

The Company  accounts for income taxes under  Statement of Financial  Accounting
Standards  No. 109,  "Accounting  for Income  Taxes".  Income taxes are provided
based on earnings reported for financial statements purposes. Deferred taxes are
provided on the temporary differences between income for financial statement and
tax purposes.

The Company deducts certain  exploration and development costs in its income tax
returns,  which are capitalized and amortized for financial  reporting purposes.
Accordingly,  the tax basis of  certain of the  Company's  oil and gas assets is
less than its basis for financial reporting  purposes.  Deferred taxes for these
differences  have not been provided in the accompanying  consolidated  financial
statements due to the existence of net operating loss carryforwards.

J. CONCENTRATION OF CREDIT RISK

Financial  instruments,  which potentially subject the Company to concentrations
of credit risk,  consist  principally  of temporary cash  investments  and trade
receivables.  The Company  places its temporary  cash  investments  in two money
market  accounts  (totaling  $817,368  and  $898,997  at April 30, 1998 and 1997
respectively) with a high quality financial  institution.  At April 30, 1998 and
1997,  substantially  all cash and cash  equivalents  were on  deposit  with one
financial  institution.  Concentrations  of credit  risk with  respect  to trade

                                      F-11
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE A -  ORGANIZATION,  OPERATIONS  AND  SUMMARY OF  SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)

SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)

J. CONCENTRATION OF CREDIT RISK (CONTINUED)

receivables  are limited due to the large  number of  customers  comprising  the
Company's  customer base and their dispersion  across many different  geographic
areas.  Accounts  receivable from ten customers amounted to approximately 37% of
the total accounts receivable at April 30, 1998. Generally, the Company does not
require  collateral  or other  security  to support  customer  receivables.  The
Company  established  an allowance for doubtful  accounts  during the year ended
April 30, 1996 of $25,000. At April 30, 1998 and 1997 the allowance for doubtful
accounts was $29,529 and $30,000 respectively.

K. FAIR VALUE OF FINANCIAL INSTRUMENTS

Based on borrowing rates currently  available to the Company for bank loans with
similar terms and  maturities,  the fair value of the Company's  long-term  debt
approximates  the carrying value.  Furthermore,  the carrying value of all other
financial  instruments   potentially  subject  to  valuation  risk  (principally
consisting of cash and cash equivalents,  accounts receivable,  bank borrowings,
and accounts payable) also approximates fair value.

L. ISSUANCE OF COMMON STOCK

The  issuance of common  stock for other than cash is recorded by the Company at
management's  estimate  of the fair value of the  assets  acquired  or  services
rendered.  The shares of common stock used (investment  shares) can be sold only
in  accordance  with issued rules  promulgated  by the  Securities  and Exchange
Commission (SEC).

                                      F-12
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE A -  ORGANIZATION,  OPERATIONS  AND  SUMMARY OF  SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)

SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)

M. GOODWILL

Goodwill  created in the acquisition of the  consolidated  subsidiaries is being
amortized over 15 years. Accumulated amortization amounted to $11,931 and $7,954
at April 30, 1998 and 1997, respectively.

N. BASIC EARNINGS PER SHARE

Earnings per share have been calculated in conformity with Financial  Accounting
Standards Board Statement No. 128 "EARNINGS PER SHARE". The Company has a simple
capital  structure with no significant  potential common shares.  Basic earnings
per  common  share is based on the  weighted  average  number of  common  shares
outstanding  during  each year (1998 -  19,905,438;  1997 -  19,584,355;  1996 -
19,540,781).  Common stock  equivalents  were  immaterial for earnings per share
purposes.

O. LONG-LIVED ASSETS

The  Company  has  implemented  the   requirements  of  Statement  of  Financial
Accounting  Standards  No. 121,  "Accounting  for the  Impairment  of Long-lived
assets  and for  Long-Lived  asset  for the  Disposal  of".  In  evaluating  the
recoverability  of the Company's  Long-lived  assets,  management  evaluated the
current  fair  market  value and  expected  future  cash flows of its assets and
concluded that no impairment of value has occurred as of April 30, 1998.

                                      F-13
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE  B - INVENTORY

Inventory at April 30, 1998 and 1997 consists of the following:

                      1998           1997
                      -----          ----
Raw Materials      $  364,540      $279,338
Work-in-process       352,096       142,413
Finished goods        326,895       335,741
                   ----------      --------
                   $1,043,531      $757,492
                   ==========      ========

NOTE  C - INVESTMENT IN SECURITIES

In March 1992, as part of a February 1992 agreement to acquire securities of Pan
American Energy,  Inc., (PAEC) a public corporation,  the Company traded certain
California  real estate lots in exchange for  4,000,000  Series "A" common stock
warrants and the right to purchase  2,000,000  additional  such  warrants at ten
cents ($.10) per warrant. The Company did not recognize gain on the exchange and
has recorded the cost of the warrants at the $30,000 recorded cost of the lots.

INVESTMENTS IN SECURITIES

      O.T.S. HOLDINGS, INC.

In February  1992, the Company  entered into an agreement with O.T.S.  Holdings,
Inc. (OTS) a public  company to sell certain mining  equipment and 50,000 shares
of  Company  stock in  exchange  for  $10,000  cash and  190,000  shares  of 10%
Cumulative Convertible Income Preferred stock of OTS. The transaction was valued
at $200,000  comprised  of $50,000 for the Company  stock at $1.00 per share and
$150,000 for the mining equipment.

In conversations with a market-maker for these securities, it was concluded that
recent  litigation  has reduced the value of this stock to $.05 bid; $.09 asked.
Accordingly,  a valuation allowance was established reducing the carrying amount
to $.05 per share. Because the core business of the company was still considered

                                      F-14
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE  C - INVESTMENT IN SECURITIES (CONTINUED)

INVESTMENTS IN SECURITIES (CONTINUED)

      O.T.S. HOLDINGS, INC. (CONTINUED)

sound,  the loss is considered  unrealized  and  reflected in the  stockholders'
equity section of the financial statements.

      PERFECTION FOODS INTERNATIONAL

In December  1992,  the Company  agreed in principal to use 50,000 shares of its
common stock to acquire 1,500,000 common stock shares and 5,000,000  warrants of
Perfection Foods,  International (PFI) a company formed in 1992 to engage in the
fish  processing  business.  In March 1993,  subsequent to the fiscal year ended
December 31, 1992,  the  transaction  was completed  and the Company  issued the
agreed  shares and received the PFI shares.  Mr.  Sprenger,  the chairman of the
Board of  Directors  of the  Company,  is an officer and director of PFI. At the
date of the transaction,  March 1993, the Company's  holding  represented 33% of
the outstanding shares of PFI, and the Company recorded the transaction of $1.00
per share issued on 50,000 shares. Because the short-term growth of PFI has been
slower than anticipated, the Company reduced the carrying amount of PFI's shares
by 50% in 1997. The loss on these  available for sale securities was realized in
1998.

Shares held at April 30, 1998 and 1997 were comprised as follows:

                                                          1998
                                             ------------------------------
                                              Current   Unrealized
                                               Cost       Value       Loss
                                               ----       -----       ----
Pan American Energy Corporation Warrants     $ 30,000    $30,000    $
O.T.S. Holdings, Inc. Stock                   190,000      9,500     180,500
                                             --------    -------    --------
                                             $220,000    $39,500    $180,500
                                             ========    =======    ========

                                      F-15
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE  C - INVESTMENT IN SECURITIES (CONTINUED)

INVESTMENTS IN SECURITIES (CONTINUED)

      PERFECTION FOODS INTERNATIONAL (CONTINUED)

                                                           1997
                                            ---------------------------------
                                                         Current   Unrealized
                                               Cost       Value       Loss
                                               ----       -----       ----
Pan American Energy Corporation Warrants      $30,000    $30,000    $
Perfection Food International Stock            50,000     25,000      25,000
O.T.S. Holdings, Inc. Stock                   190,000      9,500     180,500
                                             --------    -------    --------
                                             $270,000    $64,500    $205,500
                                             ========    =======    ========

NOTE D - NOTES RECEIVABLE

Notes receivable at April 30, 1998 and 1997 consists of:


                                                   1998                1997
                                                   ----                ----
Unsecured note receivable, due October 6, 1998 
plus accrued interest at 13%.                     $14,929             $23,183

Other                                              25,402              16,396
                                                  -------             -------
                                                   40,331              39,579
Less: current portion                              33,503              39,579
                                                  -------             -------
                                                  $ 6,828             $     0
                                                  =======             =======

                                      F-16
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE E - PROPERTY AND EQUIPMENT

At April 30, 1998 and 1997,  property  and  equipment  are  summarized  by major
classification as follows:

Oil and Gas Properties and Equipment         1998          1997
------------------------------------         ----          ----

Intangible drilling costs                 $  883,023   $  883,023
Lease and well equipment                   1,828,881    1,828,881
Leasehold improvements                       715,891      715,891
Undeveloped leases                            72,167       72,167
Repurchased participating interests        2,608,640    2,608,640

Other                                         71,036      121,418
                                          ----------   ----------
                                           6,179,638    6,230,020
Less: accumulated depreciation and
depletion                                  2,767,860    2,767,078
                                          ----------   ----------
                                           3,411,778    3,462,942
                                          ----------   ----------
Manufacturing Property and Equipment
------------------------------------

Tooling                                      146,225      112,727
Machinery and equipment                       34,640       34,640
Office furniture and equipment                 8,106        6,129
Leasehold improvements                       234,533      232,918
                                          ----------   ----------
                                             423,504      386,414
Less: accumulated depreciation and
depletion                                    131,039      100,548
                                          ----------   ----------
                                             292,465      285,866
                                          ----------   ----------
                                          $3,704,243   $3,748,808
                                          ==========   ==========

                                      F-17
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE E - PROPERTY AND EQUIPMENT (CONTINUED)

OIL AND GAS PROPERTIES

   MITCHEL LEASES

The Mitchel leases located in Kern County,  California  consist of 380 acres, on
which 52 oil wells have been drilled and completed.

During 1998,  1997 and 1996 the Company did not drill any wells on this lease as
to which all drilling requirements have been satisfied.

Landowner and overriding royalty interests in the property total 21.66 percent.

The Company has obtained a report from an independent  petroleum  engineer which
combines  the  estimated  proved  reserves  and  revenues as of June 1996 of the
Mitchel leases and the  contiguous  Bacon Hills leases.  These  combined  leases
comprise an entire section of the Chico-Martinez  field (see below, "Bacon Hills
lease").  Reference is also made to the supplemental information on Standardized
measure of Discounted Future Net Cash Flows elsewhere in this Form 10-K.

During 1998 and 1997, the Company  produced  approximately  500 gross barrels of
oil, on the  combined  Mitchel and Bacon Hills  leases.  No oil was  produced on
these leases in 1996.  During 1998,  1997 and 1996,  the Company had no steaming
operations.

   BACON HILLS LEASE

This sublease, located in the Chico-Martinez field, Kern County, California, was
acquired in December 1980, and consists of approximately 260 acres, in which the
Company has interests to the depth of 5,000 feet.  The landowners and overriding
royalty  interest  holders are identical  with the Mitchel  leases,  which total
21.67 percent, and the Company owns the remaining 78.33 percent working interest
in this  lease.  The  acquisition  of this  sublease,  in  conjunction  with the
Mitchell subleases,  provided the Company with an entire leasehold interest in a
full section of land. Under the terms of this sublease, the Company committed to
the drilling of an initial six 

                                      F-18
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE E - PROPERTY AND EQUIPMENT (CONTINUED)

OIL AND GAS PROPERTIES (CONTINUED)

   BACON HILLS LEASE (CONTINUED)

wells on or  before  March 31,  1982,  and at least six  additional  wells  each
12-month  period  thereafter,  until at least 52 wells have been drilled without
regard to whether  they are  producing or  abandoned.  The Company has drilled a
total of 14 wells - under its  Commitment.  No wells  have been  drilled on this
lease since 1984.

In March 1990,  the  sublessor  declared the sublease  terminated  and requested
return  of  the  undrilled  portion  of  the  sublease.  The  Company  does  not
acknowledge  the  declaration  of  termination,  and has not  complied  with the
sublessor's request. To date, no litigation,  action or further request has been
undertaken by the sublessor in connection with this matter. The Company believes
that this breach can be cured, but irrespective of the breach, the Company holds
a five acre well tract and the oil and gas rights to each of the  aforementioned
fourteen wells on this sublease.

   COGENERATION SYSTEM AND THERMALLY ENHANCED OIL RECOVERY OPERATION

The major activity of the Company  concerning the properties during the past ten
years was directed toward the implementation of a proposed COGEN/TEOR Project to
be located on the Mitchel  leases,  with the  capability of serving the combined
Mitchel  and  Bacon  Hills  leases  with a steam  flood  enhanced  oil  recovery
operation and provide for the sale of power to a California Public Utility. ERES
Cogenics,  Inc., a wholly owned subsidiary,  was formed in August 1987 to be the
builder/owner/operator of the COGEN/TEOR facilities.  The Company signed a power
purchase  agreement  with the Pacific Gas and  Electric  Company  (PG&E) for the
delivery by the Company of 20.5 megawatts of electricity no earlier than June 1,
1989 and no later  than  December  1991.  The  agreement  further  provided  for
delivery  and the  purchase  of up to 45  megawatts  of power  in  later  years.
Contracts were signed or negotiated with  responsible and experienced  suppliers
and contractors for the Cogen construction,  engineering,  supervision,  natural
gas delivery,  maintenance and operation and the TEOR installation including the
laying of steam lines for the steam flood operations.  The estimated cost of the
 

                                      F-19
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

COGEN/TEOR NOTE E - PROPERTY AND EQUIPMENT (CONTINUED)

COGENERATION  SYSTEM AND THERMALLY ENHANCED OIL RECOVERY OPERATION (CONTINUED)

20.5 megawatt facility was between $45,000,000  and  $50,000,000  by independent
engineers.

The power purchase  agreement with PG&E  terminated on December 24, 1991 after a
decision by the utility not to defer the  deadline  date.  In 1992,  the Company
filed a complaint with the California Public Utility  Commission (CPUC) alleging
bad faith conduct by PG&E and requesting a reinstatement of a new power purchase
contract.  In October 1993, the CPUC hearing on the complaint was concluded.  In
June,  1997,  the  Company  and  PG&E  reached  a  settlement  agreement  of the
complaint,  which was approved by the CPUC in the amount of $3,500,000 which was
received by the Company in February 1998.

OTHER MATTERS

Geological  and  geophysical  costs for the years  ended April 30, 1998 and 1997
were not significant.

To  continue to operate and  further  develop  its oil and gas  properties,  the
Company will require significant amount of additional capital in 1998 and future
years from the sale of debt and/or equity securities, or through other financial
arrangements.

NOTE F - INCOME TAXES

The provisions for income taxes consists of:
                                       April 30
                              ------------------------------
                               1998       1997       1996
                               ----       ----       ----
Current payable:
  Federal                     $10,500                $32,000
  State                        70,000    $   800       1,017
                              -------    -------     -------
                               80,500        800      33,017
                              -------    -------     -------
Deferred:
  Federal                      30,000     98,933      29,304


                                      F-20
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE F - INCOME TAXES (CONTINUED)

                                                April 30
                                      ------------------------------
                                        1998       1997        1996
                                        ----       ----        ----

  State                                           33,959      10,296
                                      -------   --------     -------
                                       30,000    132,892      39,600
                                      -------   --------     -------
                                       50,500    133,692      72,617
                                      -------   --------     -------
Less: utilization of net operating
loss carryforward                           0          0     (33,000)
                                      -------   --------     -------
                                      $50,500   $133,692     $39,617
                                      =======   ========     =======

The Company and its subsidiaries file  consolidated  Federal income tax returns.
There is an aggregate  Federal net  operating  loss  carryover of  approximately
$10,100,000  available to reduce  future  federal  taxable  income of the parent
company.  These net operating  loss  carryovers  will expire in various  amounts
between 2001 and 2010.

The Company also has available  unused  investment tax credits of $184,000 which
will expire in various amounts between 1999 and 2001.

The  reconciliation  of income tax computed at U.S.  Federal and State statutory
rates to the income tax  provision  for the years  ended April 30, 1998 and 1997
are as follows:
                                               1998
                                     -------------------------
                                        Currently Payable
                                     -------------------------
                                     Consolidated   Deferred
                                     ------------   --------

Pre-tax accounting income             $ 3,117,068    $
                                      ===========    =======
Tax at statutory rates:

                                      F-21
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE F - INCOME TAXES (CONTINUED)

  Federal                                 968,100    (30,000)
  State                                   185,000
  Utilization of net operating
   loss carryforward                   (1,072,600)
                                       ----------   --------
                                       $   80,500   $(30,000)
                                       ==========   ======== 

                                               1997
                                     -------------------------
                                        Currently Payable
                                     -------------------------
                                     Consolidated    Deferred
                                     ------------    --------

Pre-tax accounting income              $1,019,333    $
Abandonment of property                 (594,000)     594,000
                                       ---------     --------
Taxable income                         $ 425,333     $594,000
                                       =========     ========
Tax at statutory rates:
   Federal                             $ 148,800     $ 98,933
   State                                   7,900       33,959
Utilization of net operating
     loss carryforward                  (155,900)
                                       ---------     --------
                                       $     800     $132,892
                                       =========     ========

The deferred tax asset at April 30, 1998 is attributable to accrued State income
taxes.

NOTE G - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts  payable and accrued  liabilities at April 30, 1998 and 1997 consist of
the following:

                                      F-22
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE G - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (CONTINUED)

                                        1998         1997
                                        ----         ----

Trade accounts payable               $103,356     $211,961
Accrued vacation payable               73,121       67,443
Accrued salaries and wages payable    170,398      134,623
Other accounts  payable and accrued
liabilities                             9,936       75,713
                                     --------     --------
                                     $356,811     $489,740
                                     ========     ========

NOTE H - NOTES AND CONTRACTS PAYABLE

The following is a summary of notes and contracts  payable at April 30, 1998 and
1997:


                                                          1998       1997
                                                          ----       ----
Unsecured  notes payable to individuals  due
in monthly installments of $2,955, including  
interest at 8%, through December 2001 (see Note I).      $72,091   $103,875

Note payable  secured by treasury stock, due in 
monthly  installments of $2,000 plus accrued 
interest at 6.67% through March, 2000.                    42,422 

Stipulated   judgement   for   $201,875  for
settlement  of  litigation  involving a well
drilling   contractor   at   the   Company's
Mitchell  and Bacon  Hills  lease.  Interest
at accruing 10% per annum.                               394,271    358,429

Note  payable to  individual  at 10%, due on demand.                  7,057

                                      F-23
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE H - NOTES AND CONTRACTS PAYABLE (CONTINUED)


                                                          1998       1997
                                                          ----       ----

Unsecured notes payable to individuals, due  
on demand, including interest at 8%.                                125,000 

Unsecured note payable at 10%, due on demand.                         4,500


Note payable to bank, secured under general
security agreement, due in monthly installments 
of $7,560, including interest at 8.5%, through
January 2002.                                            282,291    345,684
                                                       ---------  ---------

TOTAL                                                    791,075    944,545

Less: current portion                                   (510,369)  (585,859)
                                                       ---------  ---------
                                                       $ 280,706  $ 358,686
                                                       =========  =========

Aggregate maturities of long-term borrowings over the next five fiscal years are
as follows:

Year Ended April 30                           Amount
-------------------                           ------
     1999                                    $510,369
     2000                                    $123,055
     2001                                    $101,236
     2002                                    $ 56,415
                                             --------
                                             $791,075
                                             ========

NOTE I - ACQUISITION OF TWIN-CHART, INC.

In April 1993,  the Company  exchanged  50,000  shares of its common stock for a
combination of 1,000,000  shares and 5,000,000  warrants of  Twin-Chart,  Inc.'s

                                      F-24
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE I - ACQUISITION OF TWIN-CHART, INC. (CONTINUED)

(TCI) common  stock,  which  represented  approximately  20% of the  outstanding
shares.  In  October  1994,  the  Company  acquired  the  remaining  issued  and
outstanding  shares of TCI which  amounted  to  4,098,000  shares for  4,587,000
shares of the Company's common stock and 5,000,000  warrants for the purchase of
the Company's stock at an initial price of $5.00 per share.  The price per share
increases  at a rate of $.50 per share  per year for five  years  following  the
initial  year,  then at a rate of $1.00 per share per year for the  second  five
years and finally at a rate of $2.00 per share per year for the final three year
period.  The  acquisition  has been accounted for as a purchase.  The results of
operations of TCI have been included in the accompanying  consolidated financial
statements since the date of acquisition,  which was October 31, 1994. The total
cost of the acquisition was  approximately  $1,050,000,  which  approximated the
fair value of the net assets of TCI acquired as of that date.

In January,  1996,  TCI  acquired all of the  minority  interest  (13.7%) in its
subsidiary Transit Services,  Inc. The purchase price was $110 per share on five
year  installment  notes,  due in  monthly  installments  of  $2,955,  including
interest at 8% (see Note H). The total cost was $167,750.

NOTE J - ACQUISITION OF NATIONAL ON-SITE CHECK CASHING, INC. OF NEVADA

In March,  1997,  the Company  issued 350,000 shares of common stock in exchange
for 75% of the issued and outstanding  stock of "National On-Site Check Cashing,
Inc.  of Nevada"  (NOCC).  NOCC  cashes  payroll  checks for a fee using  mobile
armored  trucks for  facilitating  the  transactions.  The Company  recorded the
transaction using the purchase method of accounting and valued the shares issued
at $.10 per share.  The transaction was rescinded in April,  1998.  There was no
significant gain or loss in the transaction.

                                      F-25
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE K - COMMON STOCK

SHARES ISSUED IN EXCHANGE FOR INTEREST-BEARING NOTES

The  Company  has  issued  shares  of its  common  stock in  exchange  for notes
receivable. The financial statements show the outstanding shares and the related
notes receivable as an offset against stockholders' equity.

NOTE L - RELATED-PARTY MATTERS

As discussed  below,  certain  transactions  have been  consummated with parties
related to the Company and its management.

OWNERSHIP INTERESTS

Mr.  Sprenger  is the  trustee  of  two  liquidating  trusts  for  two  formerly
affiliated  corporations in which he was an officer and director.  These trusts,
Progressive  Investment  Corporation  Liquidating Trust (PICLT) and PIC Research
and Development  Liquidating Trust (PICR&DLT) are shareholders of Company common
stock.

The ownership of the Company's  common stock by Mr.  Sprenger,  Mr. Cox,  PICLT,
PICR&DLT,  Company employees and other related parties  (relatives,  friends and
business associates of Mr. Sprenger) is summarized as follows at April 30, 1998:

                                          Percentage
                                          ----------
           Mr. Sprenger *                    4.5
           Mr. Cox                          23.3
           PICLT                             1.9
           PICR&DLT                          1.2
           Company employees                 2.5
           Other related parties *          24.3

* Includes stock issued under  subscription  rights (Refer to discussion in this
Note L).

Mr.  Sprenger,  Mr.  Sherer's Estate and other related parties own the following
beneficial percentages in the two liquidating trusts at April 30, 1998.

                                      F-26
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE  L - RELATED-PARTY MATTERS (CONTINUED)

OWNERSHIP INTEREST (CONTINUED)

                                   PICLT   PICR&DLT
                                   -----   --------
           Mr. Sprenger               0        0
           Mr. Sherer (Estate)      7.0      1.1
           PICLT                     --     44.1
           Other related parties   31.0      6.0

TRANSACTIONS INVOLVING MR. SPRENGER AND OTHER RELATED PARTIES

A.   In October 1984,  the Company and the then  President,  Alfred P. Sprenger,
     and his wife  Dorothy V.  Sprenger  (Sprengers),  entered into an agreement
     (the  agreement) for the issuance to the Sprengers of 2,000,000  investment
     shares of Company stock at a price of $1.00 per share.  The price quoted by
     NASDAQ  as of the date of  agreement  was  $.875 to $1.00  per  share.  The
     agreement  was  mutually  extended to December  31, 1991 for payment of the
     $2,000,000  which  evidenced  by a  promissory  note  secured by the issued
     shares.

     In December 1991, the Company  reviewed the status of the arrangement  with
     issuances for employee options and settlement of liabilities.  Accordingly,
     the stock price for this  agreement was adjusted to $0.625 per share.  This
     action  resulted in a decrease  of  $750,000 in the amount of the  original
     agreement.  The maturity date of the  promissory  note has been extended to
     December 31, 2000.

     In December 1992, Mr. Sprenger  assigned his interest in 1,950,000 of those
     investment shares to a non profit organization. From December 1991 to April
     30,  1998,  a total of  $728,321  has been  credited  to the  common  stock
     promissory  note by application of $598,000 in accrued salary  compensation
     from 1988 to date and a $130,321 debt due Mr.  Sprenger.  At April 30, 1998
     and  1997,  the  unpaid  balance  of  the  promissory   note  is  $521,929,
     respectively,  which is secured by 1) 870,800  shares of the issued  common
     stock and 2) further  collateralized  by mortgages on real estate. At April
     
                                      F-27
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE  L - RELATED-PARTY MATTERS (CONTINUED)

TRANSACTIONS  INVOLVING  MR.  SPRENGER AND OTHER  RELATED  PARTIES
(CONTINUED)

     30, 1998, a total of 1,079,200  shares of the  1,950,000  shares of Company
     stock  assigned  by Mr.  Sprenger  had been  transferred  to the non profit
     organization.

B.   In December 1985, the Company issued 1,300,000  investment shares of common
     stock to certain  parties in exchange for  promissory  notes secured by the
     issued  shares at a price of $0.625 per  share.  The  quoted  market  price
     according to the National Market  Quotation  Bureau was $0.62 to $0.875 per
     share at the date of issuance of the shares. The aggregate dollar amount of
     the promissory notes was $812,500. A total of $458,779 has been paid on the
     promissory notes to date by the various  parties.  The $353,721 balance due
     at April 30,  1998 is  reflected  in the  consolidated  Balance  Sheet as a
     deduction from shareholders' equity. This balance due is secured by 508,394
     of the issued shares. None of the promissory notes are due from officers of
     the company.

NOTE  M - COMMITMENTS AND CONTINGENCIES

GENERAL

The Company's  operations  are subject to various  governmental  and  regulatory
controls  (particularly  those of the Department of Energy and the Environmental
Protection  Agency),  the effect of which on the nature of the Company's  future
operations, if any, is not known.

COMMITMENTS

The  Company  leases  its  offices  and  manufacturing  plant  facilities  under
noncancellable  operating  leases  which  expire  in  2005.  The  total  minimum
commitments under these leases are as follows:

                                      F-28
<PAGE>

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
--------------------------------------------------------------------------------

NOTE  M - COMMITMENTS AND CONTINGENCIES (CONTINUED

COMMITMENTS (CONTINUED)

          Year ending April 30
          --------------------

               1999              $ 67,642
               2000              $ 67,642
               2001              $ 67,642
       Through 2005              $248,043

Rent  expense  for the years ended April 30,  1998,  1997 and 1996 is  $103,814,
$134,852, and $125,380, respectively.

LITIGATION

A complaint for  infringement  of patent was filed in October 1995 in the United
States District Court for the Eastern District of California.  The complaint was
settled in 1997 for a nominal amount.

NOTE N - SUBSEQUENT EVENT

In  November,  1997,  the Company  acquired a nominal  interest  in VITSAB,  AG,
(VITSAG) a corporation  formed under the laws of the Country of Switzerland  for
$300,000.  In June, 1998 the Company  acquired all of the outstanding  shares of
Visual Indicators Tag Systems,  AB, (VITSAB) a corporation formed under the laws
of  the  Country  of  Sweden  and  a  wholly-owned  subsidiary  of  VITSAG.  The
acquisition  was  accomplished  by  the  issuance  of  3,375,734  shares  of the
Company's  unregistered  common  stock,  950,000  shares of the common  stock of
VITSAB,  USA,  Inc., a previously  wholly-owned  subsidiary  of the Company with
4,750,000  issued  shares of common stock  outstanding,  and the  assumption  of
certain debt owed by VITSAB to an unrelated company.

                                      F-29
<PAGE>

                                   SIGNATURES


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

Dated:
                                           ENERGY RESERVE, INC.,
                                           an Arizona Corporation

7-29-98                  By /s/ James L. Cox
                           ---------------------------
                           James L. Cox, President and
                           Chief Executive Officer


7-29-98                  By /s/ R.W. Dupree
                           ---------------------------
                           R.W. Dupree, Controller and
                           Chief Financial Officer


7-29-98                  By /s/ David K. Caskey
                           ---------------------------
                           David K. Caskey
                           Secretary-Treasurer

        Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Company and in the capacities and on the dated indicated:

Dated:                              SIGNATURES
------                              ----------

7-29-98                    James L. Cox
                           ---------------------------
                           James L. Cox
                           President and Director


7-29-98                    /s/ Alfred P. Sprenger
                           ---------------------------
                           Alfred P. Sprenger
                           Chairman - Board of Directors

7-29-98                    /s/ David K. Caskey
                           ---------------------------
                           David K. Caskey
                           Secretary-Treasurer and Director


7-29-98                    /s/ George M. Pigott
                           ---------------------------
                           George M. Pigott
                           Director

7-29-98                    /s/ Michael E. Fonzo
                           ---------------------------
                           Michael E. Fonzo
                           Director