SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

FORM 10-K

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

      For the Fiscal Year Ended February 28, 1998.

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

      For the Transition Period     From __________ to __________

Commission File Number: 1-8381

                              WELDOTRON CORPORATION

             (Exact Name of Company as Specified in its Charter)
                                                          22-160728
                  New  Jersey  (IRS  Employer  Identification  (State  or  other
jurisdiction of incorporation No.)
               or organization)
                                                            08807
    111 Chimney Rock Road, Bridgewater, NJ                (Zip Code)
   (Address of principal executive offices)
                                                        (732) 748-4600
  Company's         telephone number, including area code:

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

                                 Title of Class:
                          Common Stock, $.05 Par Value
                      Name of Exchange on Which Registered:
                                     OTC-BB

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

Indicate by check mark whether the Company (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  Company  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No ___

Indicate by check mark if  disclosure of  delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained herein,  and will not be contained,  to
the  best  of  Company's   knowledge,   in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III to this  Form 10-K or any
amendment to this Form 10-K.        [X]

Approximate aggregate market value of voting stock held by non-affiliates of the
Company as of July 31, 1998

Common Stock . . . . . . . . . . . . . . . . $157,000

As of July 31, 1998,  there were  outstanding  2,300,173 shares of the Company's
Common Stock, $.05 Par Value.


<PAGE>


                              WELDOTRON CORPORATION

                            Index to Annual Report on
                                    FORM 10-K
                      Twelve Months Ended February 28, 1998
              (Dollar Amounts in Thousands, Except Per Share Data)

PART I                                                                PAGE

Item 1.        Business...................................................3

Item 2.        Properties.................................................6

Item 3.        Legal Proceedings..........................................8

Item 4.        Submission of Matters to a Vote of Security Holders.......11

PART II

Item 5.        Market for Company's Common Stock and Related Stockholder
               Matters...................................................11

Item 6.        Selected Financial Data...................................12

Item 7.        Management's Discussion and Analysis of Financial
               Condition and Results of Operations.......................13

Item 8.        Financial Statements and Supplementary Data...............18

Item 9.        Changes In and Disagreements with Accountants.............39

PART III

Item 10.       Directors and Executive Officers of the Company...........40

Item 11.       Executive Compensation....................................40

Item 12.       Security Ownership of Certain Beneficial Owners
               and Management............................................42

Item 13.       Certain Relationships and Related Transactions............44

PART IV

Item 14.       Exhibits, Financial Statement Schedules, and Reports on
               Form 8-K..................................................45


<PAGE>


PART I

Item 1. BUSINESS

Weldotron Corporation (which,  together with its subsidiaries,  is herein called
the "Company"),  a New Jersey  corporation  organized in 1958, is engaged in two
principal  areas of activity --packaging  and industrial  automation and safety
controls.  The two principal  business units are the Packaging Systems Group and
the Safety and Automation  Systems Group located in Bridgewater,  New Jersey. In
addition,  the  Company  has a 60% owned  subsidiary  in Brazil  engaged  in the
packaging  systems business.  The Packaging Systems Group designs,  manufactures
and markets a comprehensive line of packaging  machinery and systems for a broad
range of industrial and consumer applications. The Safety and Automation Systems
Group  manufactures  and markets  electronic  systems for  personnel  safety and
controls for monitoring high speed automatic production machinery.

The  following  table sets forth the  aggregate  net sales  derived from the two
product groups in dollars and as a percentage of consolidated  net sales for the
fiscal years ended February, 1998, 1997 and 1996.

(Dollars in Thousands)
                                                                    
                 Fiscal Year           Fiscal Year            Fiscal Year
                    Ended                 Ended                  Ended
              February 28, 1998     February 28, 1997      February 29, 1996
              -----------------     -----------------      -----------------


Packaging     $6,886        87%     $12,130    91%         $15,997    87%
Systems

Safety &       1,009        13%       1,156    9%            2,318    13%
Automation
Systems

Total          7,895       100%     $13,286    100%        $18,315    100%

For  additional  details  relating  to industry  segments,  see the Notes to the
Consolidated Financial Statements included in this Report.

Packaging Systems Group

The Packaging  Systems Group designs,  manufactures  and markets a comprehensive
line of  packaging  machinery  and systems for a broad range of  industrial  and
consumer  applications.  These systems employ either shrink or stretch packaging
techniques.

Industrial  Packaging Systems:  The Company's  industrial packaging machines and
systems employ a technique  called "shrink"  packaging which utilizes  specially
formulated  thermoplastic films that are oriented in the original  manufacturing
process to shrink with the application of heat. In actual operation, the product
is enveloped in shrink film, the film is sealed, and the completely over wrapped
product is passed  through a hot air shrink  tunnel  where the heated air causes
the film to shrink tightly around the product.

The Company's  Industrial Packaging Systems Group manufactures a diverse line of
shrink packaging  systems designed to provide  substantial user benefits such as
lower packaging costs, increased  productivity,  and improved product appearance
and integrity.  Several  standard  models are offered from manual  L-sealers and
shrink tunnels up through fully automated  form/fill/seal  wrapping systems that
include feeders, collators and speed modulated conveyors.



                                       3
<PAGE>

Industrial   Packaging's  line  includes   manually  operated  shrink  packaging
machines. These machines incorporate features not generally found in competitive
low-end   units   such   as   electronic   timing,    microprocessor   controls,
self-compensating  temperature controls, and low operating costs and maintenance
requirements.

Industrial  Packaging's  medium  speed  equipment  program  includes a series of
automatic  L-sealers.  This series  features a "vertical  rising" seal head that
maximizes machine operating speed and produces stronger seals than pivoting type
seal bars found on many  competitive  machines.  Other  features  include single
level  operation for smooth product  transfer,  adjustable film forming plow for
quick  product  changeover,   and  heavy-duty  unibody  steel  construction  for
longevity.

The Company's  high-speed automatic equipment is of the type known as horizontal
form,  fill and seal.  It  functions  by forming  film into a tube,  feeding the
products to be wrapped at spaced  intervals  into the tube, and then sealing and
cutting  the tube  between  successive  products.  The result is a  film-wrapped
package  which is then passed  through a high-speed  shrink tunnel for the final
stage of shrinking.  The principal  applications for these systems have been the
packaging of computer  software and memory  disks,  magnetic  tapes,  cassettes,
books, hardware, toys, gift items and the like wherein large quantities of items
must be packaged and shipped in relatively short time intervals.

The  Company  also  offers an  economically  priced,  in-line  form-fill  shrink
packaging system that targets a medium speed niche market for larger  industrial
products.  The Company has expanded  this product  range to include an edge seal
version to target the tape,  cassette,  compact disk and entertainment  products
industries.

The Company's  high-speed  automatic shrink packaging  systems also provide what
the Company believes to be a practical, cost-effective method for tamper-evident
packaging for food and non-food products.

Safety and Automation Systems Group

The Safety and Automation  Systems Group designs,  sources and markets a line of
solid state  industrial  electronic  control  systems for  personnel  safety and
quality control monitoring of automatic production machinery. Certain models are
assembled in Bridgewater, New Jersey while others are manufactured and assembled
elsewhere  in  accordance  with the  Company's  specifications.  The  electronic
controls  protect  operators  from  injury,  prevent  tool  damage,  and  detect
production   malfunctions.   Areas  of  concentration  within  this  market  are
electronics,  automotive and appliances. Secondary markets consist of packaging,
plastics, special machines, and robotics area guarding. Safe-T-Lite is the trade
name of the Company's product line of infrared presence sensing devices designed
to comply with current standards for machine guarding.

PMD - Programmable  Monitoring  Device - is the Company's  latest entry into the
die  protection  market.  The  unit  incorporates   advances  in  microprocessor
technology  and is  designed  to prevent  costly  damage due to  improper  parts
ejection,  die overload,  misfeed,  and other  malfunctions  of automatic  press
operations.  The PMD has 6 Channel capability,  each with the ability to program
one of five functions.

Pro-Set is a resolver based  multi-functional  press automation  controller.  It
combines the features of 16-channel  programmable  limitswitch  with an advanced
12-station programmable die protection system and a brake monitor which complies
with OSHA 1910.217 (b 14). It features 200-job set-up memory capability.

Manufacturing

The Company  currently  conducts  North American  manufacturing  operations in a
leased, one-story plant consisting of 36,000 square feet located in Bridgewater,
New Jersey.



                                       4
<PAGE>

Manufacturing  of packaging  systems is conducted  on a batch  production  basis
using progressive assembly methods. The Company fabricates the parts used in its
finished  products from raw materials  and  components  and produces most of its
sub-assemblies, except for certain parts and sub-assemblies supplied by selected
domestic and foreign suppliers.  These parts,  components and sub-assemblies are
carried in inventory in  anticipation  of projected sales and are then assembled
into  finished  products   according  to  production   schedules.   In  general,
manufacturing of standard machines is commenced in anticipation of orders rather
than to meet existing  backlog.  The  manufacturing  processes for the Company's
products  take  several  months,  depending  upon  their  size,  complexity  and
quantity.  However,  it has generally been the Company's  experience that except
for customized  equipment (which is made to order), most orders received are for
items that are in the process of being manufactured or are in inventory.

The raw materials used by the Company include steel, copper, brass, aluminum and
various plastics.  Some components,  including motors,  transformers,  fittings,
electrical and electronic components,  drives, and general-purpose hardware, are
purchased  by the Company.  Many of the  purchased  components  are built to the
Company's specifications. The Company believes that it is not dependent upon any
single supplier for any raw material or component.

The Company's  products are designed to operate  efficiently  over long periods,
and  rigorous   inspection   procedures   are   performed  to  insure  that  its
manufacturing processes result in products meeting these and other requirements.

The Company's products are serviced at its customers'  premises by distributors,
dealers or the Company's technicians.

The Company  generally  provides  its  customers  with express  limited  written
warranties covering its industrial  packaging equipment for a period of one year
and four years on safety and automation systems.

The Company also has a manufacturing plant in Nova Odessa, Brazil.

Marketing and Sales

The  Company  sells its  packaging  equipment  in North  America  to  industrial
companies through packaging machinery  distributors and dealers.  For the fiscal
year ended February 28, 1998, approximately 25% of the Company's sales were made
directly  to the  end  user  and  approximately  75%  were  made  through  other
distribution  channels.  Direct sales are more  prevalent  in stretch  packaging
systems than in shrink systems. The Company's largest customer is W.R. Grace and
Co., which buys packaging  equipment from the Company for resale. For the fiscal
years ended  February  28,  1998,  February  28,  1997,  and  February 29, 1996,
respectively,  sales to W.R. Grace and Co. accounted for  approximately  9%, 7%,
and 8%, respectively, of the consolidated net sales of the Company.

The Company  participates  in domestic and foreign  trade shows and maintains an
in-house marketing  services staff that handles product publicity,  advertising,
and promotion. Advertising is generally placed in trade journals.

The Company's backlog of unshipped  customer orders was  approximately  $860 and
$1,405 at February 28, 1998 and February 28, 1997, respectively.

Foreign sales,  which aggregated  approximately 7% of net consolidated sales for
the fiscal year ended February 28, 1998, are carried out directly and by certain
appointed distributors.

The Company's Brazilian subsidiary,  Weldotron do Brasil, Ltd. (WdB) ("Weldotron
do Brasil"),  is included in the consolidated  results of the Company. It is 60%


                                       5
<PAGE>

owned by the Company, with the remaining 40% being Brazilian owned. WdB has been
a subsidiary of the Company since 1973.  WdB is one of several  suppliers to the
Brazilian shrink packaging equipment market. Competition from imported equipment
is intense.

Weldotron do Brasil manufactures industrial packaging systems for sale in Brazil
and  certain  South  American  export  markets.  WdB owns a 21,000  square  foot
production  facility in Nova Odessa,  Brazil,  which it constructed and occupied
during fiscal 1990.

For the past several fiscal years,  the Company has experienced  fluctuations in
reported  financial  results due to  Brazilian  currency  translation  gains and
losses.  The Company is not capable of determining  future  translation gains or
losses and is uncertain of their effects on reported results in future periods.

Competition

The Company faces intense  competition in all of its product lines.  The Company
competes primarily on the basis of quality, service, technology and price.

The  Company's  principal  competitors  in  shrink  packaging  are  Great  Lakes
Corporation  and  Shanklin  Corporation.  Great Lakes  Corporation  and Shanklin
Corporation are larger in size to the Company.  Although  definitive  statistics
are not available,  the Company  believes that its share of the automatic shrink
packaging  equipment market in the United States has been  deteriorating  due to
the Company's financial difficulties.

The  Company  holds and has filed  applications  for United  States and  foreign
patents  relating  to  many  of its  products.  The  Company  also  has  certain
registered trademarks.  The Company has licensed some of its technology to other
manufacturers.

Employees

At February  28,  1998,  the Company had  approximately  48 domestic  employees,
including  24  engaged in  manufacturing,  2 in  engineering  and  design,  5 in
technical service and support,  4 in sales and marketing,  and 13 in general and
administrative functions. Comparatively, last year the Company had approximately
88  domestic  employees,  which  included  55  engaged  in  manufacturing,  4 in
engineering  and design,  4 in technical  service and  support,  13 in sales and
marketing and 12 in general and administrative functions. Because of the reduced
level of  business,  the Company made staff  reductions  in the first and second
quarters of fiscal 1998.  The Company's  manufacturing  employees  predominantly
work a single shift.  Approximately 20 of the Company's  manufacturing employees
are represented by Local 427 of the International Union of Electrical, Radio and
Machine Workers AFL-CIO.

A labor contract covering the Company's manufacturing employees was successfully
concluded  in March  1998 for the period  March 1998  through  March  1999.  The
Company generally considers its labor relations to be satisfactory.

The Company's Brazilian subsidiary employs about 58 people.

ITEM 2.     PROPERTIES

The continuing  operations of the Company and its subsidiaries occupy the plants
and offices described on the following pages:


                                       6
<PAGE>




WELDOTRON CORPORATION AND SUBSIDIARIES

PROPERTIES
            Aggregate Estimated                         Owned
            Floor     Percent                             or     Lease
 Location     Area    Utilized Principal Use Segment    Leased     Term    Notes
            (Sq. Ft.)                                              Date
--------------------------------------------------------------------------------

Bridgewater, 36,000     100%   Manufacturing,PackagingLeased      2000
New Jersey                     Warehousing,  Systems,
                               General and   Communications
                               Corporate     and
                               Office        Controls

Sao Paulo,    3,000     100%   General       PackagingLeased      1998
Brazil                         Office        Systems

Nova         21,000     100%   Manufacturing,PackagingOwned       N/A     (1)
Odessa,                        Warehousing,  Systems
Brazil                         General
                               Office

Notes:

(1)   Property is subject to a mortgage  securing  indebtedness of approximately
      $150.





                                       7
<PAGE>


ITEM 3.     LEGAL PROCEEDINGS

The Company is involved in various legal actions  arising in the ordinary course
of business and several claims have been asserted  against the Company.  Some of
the actions involve tort claims for compensatory, punitive or other damages. The
Company  presently  believes that it has valid  defenses to the tort claims that
have been  asserted  and that any  compensatory  damage  claims  are  covered by
insurance.  However,  the Company has elected to retain a significant portion of
litigation exposure through the use of deductibles under its insurance policies.
See Note 7 to the Consolidated Financial Statements included herein. In addition
to claims  arising in the ordinary  course of business,  the following  material
legal actions have been asserted:

Martin Siegel vs. Weldotron Corporation

On November  23,  1994,  the  Company was served with a lawsuit  filed by Martin
Siegel in the Superior Court of New Jersey, naming the Company as the defendant.
The other  defendants  named were:  William L.  Remley and  Richard C.  Hoffman,
officers and directors of the Company;  Richard Kramer,  John D. Mazzuto,  Bryon
Fusini  and Fred H.  Rohn,  directors  of the  Company;  Lyford  Corp.,  a major
shareholder of the Company and Mentmore Holdings Corporation. Until earlier that
year, Mr. Siegel served as Chairman of the Board and Chief Executive  Officer of
the Company.  On or about November 2, 1994, the Company  terminated Mr. Siegel's
employment agreement for cause. Mr. Siegel alleged, among other things, that the
Company  breached  its  obligations  to him under his  employment  agreement  by
forcing his  resignation as Chairman of the Board and Chief  Executive  Officer,
ceasing  his  regular  salary and  failing to fund a grantor  trust  designed to
secure Mr. Siegel's  deferred  compensation  benefits.  The defendants were also
served with an Order to Show Cause,  seeking to secure an  immediate  funding of
the grantor trust and summary disposition of his claims.

On January 3, 1995,  the court  denied Mr.  Siegel's  request for a  preliminary
injunction  mandating  the  immediate  funding of the grantor  trust and for the
matter to proceed  summarily.  Periodic payments of Mr. Siegel's annual deferred
compensation  benefits were  deposited  into an escrow  account  pending a final
determination of this matter.

On April 13, 1995, the Company  reached a full and final  settlement with Martin
Siegel. Under the terms of the settlement,  which was approved by the Court: (1)
all claims and counterclaims  by, between and among Mr. Siegel,  the Company and
the other parties to the litigation were dismissed,  without prejudice,  (2) Mr.
Siegel and the Company  exchanged mutual releases,  (3) Mr. Siegel's  Employment
Agreement with the Company dated March 1, 1988, as amended, was terminated,  and
(4) Mr. Siegel was awarded a lifetime  annual deferred  compensation  benefit of
$100. The annual deferred compensation benefit is an unsecured obligation of the
Company.

The  Company  made  regular  monthly  payments to Mr.  Siegel  under the revised
deferred compensation benefit arrangement until April of 1997 when such payments
were  suspended.  Mr. Siegel served  written notice of default in payment of his
deferred  compensation  benefits  upon  the  Company  in May of  1997.  In June,
pursuant  to Mr.  Siegel's  right under the terms of the  deferred  compensation
agreement  entered into as part of the settlement of the prior  litigation,  Mr.
Siegel  made  application  to the New  Jersey  Superior  Court  for a  confessed
judgement  against  the  Company  in the  amount  of the  present  value  of the
remaining payments due him under the deferred compensation agreement.

On June 24, 1997,  the Superior  Court of Bergen  County,  New Jersey  awarded a
judgment in Mr.  Siegel's favor in the amount of $772. The Company  entered into
discussions with Mr. Siegel concerning a potential settlement of its obligations
to Mr.  Siegel.  Mr.  Siegel has now  brought an action  against the Company and
others seeking to enforce an alleged verbal  settlement of his claim against the
Company for a payment of $85. As of February 28,  1998,  the Company had accrued
$875 as the present value of this obligation.



                                       8
<PAGE>

Seymour Siegel vs. Weldotron Corporation

Seymour Siegel,  who is the brother of Martin Siegel,  was formerly an executive
officer and  director of the Company who retired  from the Company as an officer
in 1993  and as a  director  in  1994.  Under  the  terms  of  Seymour  Siegel's
Employment  Agreement  with the Company,  upon his  retirement he was to receive
annual deferred compensation benefits of $50. These annual deferred compensation
benefits are unsecured  obligations  of the Company.  Such benefits were paid in
monthly installments to Seymour Siegel until April 1997, at which time they were
suspended by the Company. Seymour Siegel has given the Company notice of default
and has  threatened to retain  counsel to pursue his rights unless said payments
are resumed.  To pursue his claims against the Company,  Seymour Siegel would be
required to initiate  litigation against the Company.  The Company has discussed
with  Seymour  Siegel and his counsel a potential  settlement  of these  claims.
Recently,  the Company broke off discussions  with Mr. Siegel's  counsel.  As of
February  28, 1998,  the Company had accrued  $383 as the present  value of this
obligation.

Riken Optech Corp. vs. Weldotron Corporation

Riken  Optech  Corp.  ("Riken")  is  a  Japanese  manufacturer  of  solid  state
industrial  electronic  control  systems which  formerly  provided  products for
resale by the  Safety  and  Automation  Systems  Group of the  Company  under an
exclusive  distributorship  agreement (the  "Distributorship  Agreement")  which
originated in late 1970's.

In 1995, as a result of unfavorable  exchange rates between the Japanese Yen and
the U. S. Dollar, Riken unilaterally  increased the prices at which its products
would  be sold to the  Company  to a  prohibitive  level.  The  Company  pursued
discussions  with  Riken  to  license  production  of  the  Riken  products  and
simultaneously  initiated  separate  efforts  to  design,  fabricate  and source
comparable  products  domestically.  Discussions  ensued between the Company and
Riken during which time the Company suspended further payments upon certain open
invoices  with Riken.  In  December  of 1995,  Riken  allegedly  terminated  the
Company's  exclusive  Distributorship  Agreement with the Company.  Negotiations
were terminated and the Company  exclusively pursued its domestic product design
and  fabrication  efforts.  Thereafter,  the  Company,  through  its  Safety and
Automation Group,  introduced and began marketing its domestically  sourced line
of industrial electronic control systems.

In early 1996, the Company commenced an action in New Jersey State Court against
Riken and a former  employee of its Safety and Automation  Group who had left to
join a competitor,  asserting various claims in relation to Riken's  termination
of the exclusive  Distributorship  Agreement,  predatory pricing practices,  and
tortious interference with existing contractual relationships.

In late 1996,  Riken  commenced  a separate  action  against  the Company in the
United  States  District  Court for the Southern  District of New York,  seeking
payment in respect of the  outstanding  unpaid  invoices and  asserting  various
claims  in  relation  to  the  Company's  new  domestically  sourced  industrial
electronic control system products.

In January of 1997, the Company,  Riken, and the former Company employee reached
a settlement  of the claims  raised in the New Jersey State and New York Federal
Court  actions.  Under  the  terms  of  the  settlement:   (1)  All  claims  and
counterclaims  were  released  and the two court  actions  were  dismissed  with
prejudice;  (2) the Company agreed to pay Riken the sum of approximately $185 in
installments  over a  14-month  period,  which the  Company  had  accrued  as of
February 28, 1998; and (3) the Company agreed to make certain  cosmetic  changes
to the appearance of its new domestically sourced products.

Weldotron made four payments totaling  approximately $59, under the terms of the
settlement with Riken, then suspended all further payments.  Riken then notified
the Company that it would seek to pursue the enforcement of the settlement terms
against  the Company and  obtained a  judgement  in the amount of the  remaining


                                       9
<PAGE>

settlement  payments.  In July  1998,  the  Company  reached  a full  and  final
settlement with Riken for $70, which has been paid.

Mackman Realty Corp. vs. Weldotron Corporation

The Company formerly occupied a 256,000 square foot manufacturing,  warehousing,
and corporate  facility in Piscataway,  New Jersey under a long-term lease whose
original  term  was set to  expire  in May of 2005.  Because  the  Company  only
utilized  approximately  35% of said facility and because the rent payable under
said lease was substantially  below current  prevailing market rents for similar
facilities in the  proximate  geographic  marketplace,  the Company had, for the
last two years,  sought to sublease said  facility and to move to smaller,  more
efficient  quarters.  Because the facility was dated and because  updating would
have required  significant  expenditure of funds to make the facility attractive
to potential users, the Company chose to defer certain maintenance items until a
suitable subtenant could be identified.

In  January  of 1997,  the  Landlord  of this  facility,  Mackman  Realty  Corp.
("Mackman")  sought to declare a default  under the Lease and to  terminate  the
Lease  by  reason  of the  Company's  alleged  failure  to meet its  repair  and
maintenance  obligations  under  said  Lease.  Mackman  commenced  an action for
summary  possession  in New Jersey  Court.  The  Company  then filed a motion to
transfer the case to another court, as there were substantial issues of fact and
interpretation  and the need for discovery and expert  testimony.  The Company's
motion was granted and the parties commenced discovery efforts. Despite repeated
attempts at settlement,  negotiations broke down and a trial was held before the
Court in July.  The Court  issued  its  order on July 11,  1997,  declaring  the
Company's  lease  terminated  and  granting  judgement  in favor of Mackman  for
possession of the facility on August 15, 1997.  The Company  continued to occupy
the facility  under an interim  arrangement  with Mackman,  through  October 15,
1997. Mackman continues to assert monetary claims against the Company for unpaid
rent,  attorneys' fees and the cost of certain  repairs to the former  facility.
Trial is scheduled for October of 1998.

On October 15, 1997, the Company relocated to a smaller, more efficient facility
in the  immediate  area of the  previous  facility.  As a result of the  Court's
decision,  the Company wrote off the value of unamortized leasehold improvements
for the prior facility during the second fiscal quarter of 1994,  which amounted
to $662.

Reju vs. Weldotron

Varghese Reju, the Company's  former Chief Financial  Officer,  was dismissed as
part of an overall  downsizing and reduction of overhead in October of 1995. The
Company  offered  and Mr.  Reju  received  a  severance  based upon his years of
service  with the  Company.  Mr. Reju then  brought an action  asserting  he was
entitled to benefits under a written  Severance  Agreement  entered into between
Mr.  Reju and the  Company  in 1993.  Under the terms of the  written  Severance
Agreement,  Mr.  Reju would be  entitled  to receive  two times his base  salary
(approximately  $165) in the event he was terminated as a result of a "change of
control" as defined in the Agreement. In its defense of this action, the Company
asserts that the "change of control," as  contemplated  in Mr. Reju's  Severance
Agreement,  never occurred,  and even if it did, there was no connection between
any such "change of control" and Mr. Reju's  termination  some  eighteen  months
later.  Management  believes  that the  lawsuit is without  merit and intends to
vigorously defend the action;  however,  the outcome cannot be determined.  This
matter is scheduled to go to trial in September 1998.

Mentmore Holdings Corporation vs. Weldotron Corporation

Mentmore Holdings Corporation ("Mentmore" or "Mentmore Holdings"),  an affiliate
of Lyford and Exford Corporations,  provides management advisory services to the
Company  pursuant to an agreement  dated as of June 14, 1994.  See discussion in
Section 13-"Certain  Relationships and Related  Transactions." The Company is in


                                       10
<PAGE>

default of certain  payments  due  Mentmore  under the terms of said  agreement.
Mentmore  initiated an action  against the Company in the Superior  Court of New
Jersey, Law Division,  Somerset County,  New Jersey. In February 1998,  Mentmore
obtained a judgment  against the  Company in the amount of $914,  which has been
accrued at year-end.  Mentmore has not pursued  execution upon said judgment and
continues to provide services to the Company under the agreement.

Richard C. Hoffman, P. C. vs. Weldotron Corporation.

Richard C. Hoffman, P.C., a professional corporation,  provides legal services
to the  Company.  Richard  C.  Hoffman,  a  Director  of the  Company  and its
Secretary,  is the president and sole shareholder of Richard C. Hoffman,  P.C.
The Company is delinquent  in payment for fees and cost for services  provided
by Richard C.  Hoffman,  P.C.  Richard C.  Hoffman,  P.C.  initiated an action
against the  Company in the  Superior  Court of New Jersey,  Court of Somerset
County,  New Jersey.  On March 11, 1998 Richard C.  Hoffman,  P.C.  obtained a
judgment  against the Company in the amount of $424, which has been accrued at
year end.  Richard  C.  Hoffman,  P.C.  has not  pursued  execution  upon said
judgment and continues to provide services to the Company.

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

            None.

PART II

ITEM 5.     MARKET FOR THE COMPANY'S COMMON STOCK AND RELATEDSTOCKHOLDER
            MATTERS

The Company's  Common Stock was traded on the American  Stock  Exchange  (Symbol
WLD) until  November 8, 1996,  at which time the Company,  at its  request,  was
delisted from such exchange. It is now traded on the "pink sheets." High and low
prices  for each  quarter  during  Fiscal  Year  1998 and  Fiscal  Year 1997 and
information relating to dividends are:

                     For the year ended              For the year ended 
                        February  28,                    February 28, 
                            1998                             1997
                            ----                             ----

                      High            Low            High             Low
                      ----            ---            ----             ---

1st Quarter          $.1875          $.1875        $1.5000         $1.0000

2nd Quarter           .0937           .0937         1.0000           .6875

3rd Quarter           .0937           .0937          .3125           .3125

4th Quarter           .0937           .0937          .6250           .0625

No  dividends  have been paid to date and the Company  does not  anticipate  the
payment  of  future   dividends.   The  Company's  loan  agreements  also  place
restrictions on the amounts of dividends that can be paid.

There were  approximately  536  stockholders of record at February 28, 1998. The
Company  believes that a significant  number of beneficial  owners of stock hold
their shares in "street" names.

ITEM 6.     SELECTED FINANCIAL DATA

Selected  financial  data for the Company for each of the last five fiscal years
are set forth on the following page:

                                       11
<PAGE>



                     WELDOTRON CORPORATION AND SUBSIDIARIES
                      SELECTED CONSOLIDATED FINANCIAL DATA
                    (amounts in thousands except share data)

                             For Fiscal Years Ended,

                        February   February    February   February    February
                        28, 1997   29, 1996    28, 1995   28, 1994    28, 1998
                        --------   --------    --------   --------    --------

Net Sales                $ 7,895    $13,286     $18,315    $19,670    $21,462

Gross Profit               1,437      3,460       5,901      7,234      6,265

Loss From Operations      (4,528)    (2,233)     (2,754)    (3,202)    (2,361)

Other Income (Expenses)   (1,259)      (274)         99       (110)       101

Loss from Continuing
   Operations             (5,639)    (2,347)     (3,134)    (3,418)    (2,223)

Gain (Loss) From
   Discontinued              
   Operations                 --         --          --        (16)        12

Net Loss                  (5,639)    (2,347)     (3,134)    (3,434)    (2,211)

Net (Loss) Earnings
   Per Share, Basic &
   Diluted:

   Continuing Operations   (2.45)     (1.02)      (1.36)     (1.49)     (1.05)
   
   Discontinued Operations   --          --         --         .00        .01
   
Net Loss Per Share         (2.45)     (1.02)      (1.36)     (1.49)     (1.04)

Total Assets               4,426      9,031      12,217     15,286     17,047
Working Capital (Deficit) (6,050)      (586)      3,989      5,933      7,621
Long-Term Debt               150      1,000       1,750      1,250        777
Stockholders' Equity
(Deficiency)              (5,543)        95       2,442      5,576      9,010

See Item 6 for Management's  Discussion and Analysis of Financial  Condition and
Liquidity and Results of Operations.

No cash dividends have been distributed during the periods presented.


                                       12
<PAGE>

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

The following  discussion and analysis  should be read in  conjunction  with the
accompanying Consolidated Financial Statements, including the Notes thereto, and
the information presented under Item 6, "Selected  Consolidated Financial Data".
All  information is based on the Company's  fiscal  year-end of February 28. All
dollar amounts are in thousands except as noted.

FINANCIAL CONDITION AND LIQUIDITY

The Company is highly  leveraged and, as a result,  funds  available for working
capital,  capital expenditures and general corporate purposes, are very limited.
The primary and  secondary  sources of financing  for the Company  during fiscal
1998 were notes from certain  related  parties and a secured  revolving  line of
credit with Business Alliance Capital  Corporation (the "New Credit  Facility"),
respectively.

In June 1991, the Company entered into a credit facility (the "Credit Facility")
with Congress Financial Corporation,  ("Congress") which was amended on June 10,
1996.  It  provided  a  revolving  line of credit  and term loan of  $2,500,  an
interest rate of 3.75% over the Core States  floating base rate, a maturity date
of June 25, 1997, and financial  covenants as follows:  minimum domestic working
capital of $1,700 and minimum domestic tangible net worth of $1,050.

The Credit Facility was collateralized by substantially all of the assets of the
Company and its domestic subsidiaries. Borrowings under the Credit Facility were
limited to certain  percentages  of eligible  inventory and accounts  receivable
including stipulations as to the ratio of advances collateralized by receivables
compared to advances collateralized by inventory.

The Company was in default of its minimum working capital and tangible net worth
covenants  of the Credit  Facility as of August 31, 1996 and  November 30, 1996.
Subsequently,  Congress  Financial  Corporation  notified  the  Company  of  its
intention  to  terminate  the Credit  Facility due to the default as well as the
reduced size of the  outstanding  loan (below $1,000) and provided the Company a
period of time in which to seek  alternative  sources of financing.  On December
10, 1996, the Company  successfully entered into a new credit facility (the "New
Credit  Facility")  with  Business  Alliance  Capital  Corporation,  ("BACC") to
provide a revolving line of credit for working  capital  purposes.  The interest
rate is 3.0% over the Core States  floating base rate.  The New Credit  Facility
further  requires that the Company pay fees on the average  outstanding  loan of
0.33% per month, for administration and upon early termination of the New Credit
Facility. The maximum line of credit is $1,500 and the maturity date is December
10,  1998.  Management  does not believe  that the Company will be able to repay
borrowings  under  the  New  Credit  Facility  at  maturity  without  additional
financing. The Company has not received a commitment for additional financing.

The New Credit Facility is  collateralized by substantially all of the assets of
the  Company  and its  domestic  subsidiaries.  Borrowings  under the New Credit
Facility are limited to certain  percentages of eligible  inventory and accounts
receivable  as  well  as a  stipulation  as to  the  maximum  advance  level  on
inventory.

At February 28,  1998,  the Company had used  approximately  $1,076 of borrowing
availability  under Business Alliance Capital New Credit Facility (See note 6 to
the  consolidated  financial  statements).  Based on the advance  percentages of
eligible   receivables   and  inventory,   the  Company  had  unused   borrowing
availability of approximately $17 at February 28, 1998. The Company is currently
in technical  default under the New Credit Facility,  but BACC has not chosen to
declare a default and continues to work with the Company.

On  August  31,  1994,  the  Company  borrowed  $500  from  Lyford   Corporation
("Lyford"),   an  affiliated  company  that  owned  19.56%  of  the  issued  and
outstanding  common  stock of the  Company  as of July  31,  1998.  The  Company
executed and delivered to Lyford a promissory  note, a security  agreement and a


                                       13
<PAGE>

Common  Stock  Purchase  Warrant  granting to Lyford the right to purchase up to
200,000 shares of the Company's common stock at an initial exercise price of two
dollars per share,  the closing price for the Company's common stock on the date
the warrant was granted. The warrant expires on August 4, 2004.

On March 1, 1995, the Company concluded the rolling of this note into a new note
in the amount of $1,000.  The new obligation is evidenced by a certain  Amended,
Extended and Restated  Promissory  Note dated as of March 1, 1995 (the "Restated
Note"). In consideration for the new loan, the Company executed and delivered to
Lyford the Restated Note and an additional  Common Stock Purchase  Warrant.  The
Restated  Note was  originally  due and payable on or before  March 31, 1996 and
bore interest at 12% per annum. The Note was  subsequently  extended three times
-- first until April 1, 1997,  then until April 1, 1998 and finally  until April
1, 1999 and the interest  rate was  increased to 16%. The new warrant  grants to
Lyford the right to  purchase up to  1,000,000  shares of the  Company's  common
stock at an initial  exercise price of One Dollar ($1.00) per share.  The market
price of the Company's  common stock was $.875 on the date of the warrant grant.
The new warrant expires by its terms on April 12, 2005. The Company's management
considers  the note to be at fair  value and has not  assigned  any value to the
warrants. The loan transaction closed pursuant to documents dated as of March 1,
1995 and, in the case of the new warrant,  April 13, 1995.  These loan documents
were  contingent  on the Company's  obtaining the consent of its senior  lender,
which consent was obtained on May 5, 1995. The Lyford loan is  collateralized by
a junior lien on substantially all of the assets of the Company.

As a result of the continuing  deterioration in the financial performance of the
Company and the  negative  impact of the events  described  under "Item 3, Legal
Proceedings",  Lyford has advanced additional sums to the Company to protect its
collateral position and to fund ongoing operations. As of February 28, 1998, the
principal  balance and unpaid accrued  interest due and owing to Lyford amounted
to $1,452 and $381, respectively.

In January 1996,  the Company  entered into a $500 revolving loan agreement with
Exford Corp. an affiliate of Lyford.  The Company has outstanding  borrowings of
$350 under this  agreement,  which  borrowings  bear  interest at 14%,  and were
originally due on January 31, 1997. The note was  subsequently  extended  twice,
first until January 1, 1998 and then until  January 1, 1999. In connection  with
this  revolving  loan,  the Company has assigned to Exford its right,  title and
interest as tenant  under the lease for its prior  facility,  together  with any
rents due and payable to the Company. On September 1, 1997, Lyford purchased the
Exford  loan,  and  advanced  additional  sums to the  Company  to fund  ongoing
operations.  As of February 28, 1998 the  principal  balance and unpaid  accrued
interest due and owing to Lyford under the revolving loan agreement  amounted to
$552 and $93, respectively.

In February 1997,  the Company  entered into a one-year  promissory  note in the
amount of $96 with  Mentmore  Holdings,  an affiliate of Lyford.  The note bears
interest at two  percentage  points  above the prime rate,  with a default  rate
equal to the interest rate otherwise  payable plus five percent for late payment
of interest or principal.  The note originally  expired on February 11, 1998 and
has been extended for 1 year until February 11, 1999.

The Company's net working  capital and current ratio decreased from fiscal 1997.
Net working capital  decreased from a negative $586 to a negative $6,050 and the
current  ratio  decreased  from .92 to .36. The major changes in the net working
capital from year to year were the following: Accounts receivable decreased from
$1,299  in  fiscal  1997  to  $746  in  fiscal  1998  due  to a 40%  decline  in
consolidated sales from last year.  Inventories  decreased from $5,088 to $2,329
in fiscal  1998 due to efforts  to keep  inventory  levels in line with  reduced
sales,  particularly  in the domestic  side of the business and the write off of
obsolete inventory.

Prepaid  expenses and other current assets decreased from $399 in fiscal 1997 to
$334 in fiscal 1998 due primarily to reductions in prepaid  insurance  resulting
from premium savings and prepaid payroll taxes.

Cash overdraft decreased from $211 in fiscal 1997 to $11 in fiscal 1998.

                                       14
<PAGE>

Short-term  borrowings  decreased from $1,396 in fiscal 1997 to $1,132 in fiscal
1998 due primarily to the pay down from the sale of equipment and  reductions in
inventory.

Short-term  borrowing--Related  Party  increased  from  $446 to  $2,101,  due to
additional financing from Lyford to cover operating losses and liquidity needs.

Accounts payable and other current  liabilities  increased from $5,338 to $6,224
due  principally  to slower  payments  to vendors and an increase in payables to
related parties.

The Company invested $69 in property plant and equipment in fiscal 1998 compared
to $137 in fiscal 1997.  These capital  expenditures  were primarily for tooling
and engineering support services.  Capital expenditures excluding capital leases
were $0 for 1998  compared to $92 in fiscal 1997.  The Company  expects  capital
expenditures to be nominal in fiscal 1999.

The Company's  sixty per cent owned Brazilian  subsidiary,  Weldotron do Brasil,
was financially self-sufficient in fiscal 1998 and is expected to be so again in
fiscal 1999. Weldotron do Brasil operates in a highly inflationary economy. As a
hedge against inflation, in prior years, Weldotron do Brasil had invested excess
cash in three residential  apartments as investment property.  One apartment was
sold in fiscal 1995, with the proceeds distributed as dividends in a 60% and 40%
relationship between the Company and the minority interest. At the end of fiscal
1996,  title to one of the  remaining  two  apartments  was  transferred  to the
Company.  The Company has entered into a contract for the sale of the apartment,
with a closing expected prior to calendar year-end.

The major component  affecting  operating cash flow adversely in fiscal 1997 and
1998 was operating losses.  However,  these adverse changes were somewhat offset
by decreases in inventory levels due to non-cash  inventory  valuation  reserves
last year and tighter controls and improved asset management this year. The main
source of new capital has been related party borrowings.

The effect of exchange  rate changes on cash and cash  equivalents  for the year
ended  February  28,  1998  and the  prior  year was a gain of $74 and a loss of
$(148),  respectively.  This is  attributable  to Weldotron  do Brasil's  highly
inflationary  economy and the  "Remeasurement  method" used for foreign currency
translation to be measured into U.S. dollars as required by SFAS No. 52.

Due to the decline in market  share and  recurring  losses over the past several
years, the Company downsized its organization  considerably  during fiscal 1996,
1997 and 1998. The Company continues to aggressively  outsource product formerly
manufactured in-house, thereby further reducing investments in inventory as well
as lowering overall costs of manufacturing. Certain cost reduction programs have
been  implemented and others are in process in the areas of business  insurance,
employee  benefits,  utilities and professional fees. The Company is involved in
various legal actions, (see Item 7, Legal Proceedings).  The Company is not in a
position to settle such pending claims in full at this time.

The Company incurred net losses in recent years, and as of February 28, 1998 had
an accumulated deficit of $5,543. Whereas the Company's financial statements for
the year ended February 28, 1998 have been prepared on a going concern basis, no
assurance  can be  given  that  the  Company  will be  successful  in  achieving
profitability  or positive cash flow.  The Company's  independent  auditors have
issued a going concern opinion as of February 28, 1998. In an effort,  to return
to profitability the Company has continued to reduce staff,  lower overall costs
of manufacturing and reduce selling,  general and administrative expenses during
Fiscal 1999. The Company is  investigating  new products to increase sales.  The
Company  is  dependent  on  related   party   financing   until  it  returns  to
profitability.  No assurances can be given as to the Company's ability to obtain
financing or to the future results of operation.



                                       15
<PAGE>

RESULTS OF OPERATIONS
Fiscal Year 1998 Compared To 1997

Net Sales from continuing  operations in fiscal 1998 were $7,895,  a decrease of
40% from $13,286 in fiscal 1997.  Domestic packaging sales declined from $12,130
to $6,886, or 43%. Sales in the Safety and Automation Group declined from $1,156
to $1,009 or 13%. The Brazilian  subsidiary  experienced a decline in sales from
$3,267 in fiscal 1997 to $2,849 in fiscal 1998, or 9%. The  packaging  market is
fragmented  and highly  competitive  and the Company has lacked the resources to
aggressively  compete in its markets.  In addition,  the Company  began  another
major  restructuring  in fiscal 1998.  This included  relocation in October 1997
from a 256,000 sq. ft. facility to a 36,000 sq. ft. facility in Bridgewater, New
Jersey.  The  cost of the  relocation  including  the  write  down  of  obsolete
inventory was  approximately  $1,475. In addition a loss of $773 was incurred as
the  abandonment  of  leasehold  improvements.   The  relocation  disrupted  the
Company's  operations  and its  standing  in the  market  place,  which  further
negatively impacted sales.

Gross Margin  decreased from 26.0 % of net sales in fiscal 1997 to 18% in fiscal
1998 and from $3,460 to $1,437.  As the Company's sales declined,  the Company's
fixed costs  increased  as a percent of sales.  The  Company's  relocation  to a
smaller facility has significantly  reduced its rent,  insurance,  utilities and
other overhead cost by  approximately  $100 per month. The overhead did however,
negatively  impact costs of fiscal 1998 resulting in lower  margins.  Relocation
costs  outweighed the immediate cost savings from the relocation,  which was not
completed until the latter part of fiscal 1998.

The Company's selling,  general and administrative  expenses decreased in fiscal
1998 by 19% to $3,889  compared to $4,801  during  fiscal 1997.  The decrease in
domestic  expenses  was in salaries  and wages,  travel and  entertainment,  and
reduced fringe benefit expenses.  The decrease at Weldotron do Brasil was evenly
distributed between marketing and general administrative expenses.

The Loss from  Continuing  Operations  increased  to $5,639 in fiscal  1998 from
$2,347 in fiscal 1997. The increase  resulted from  restructuring  and inventory
charges of $1,475 this year in connection  with the relocation to a new facility
and the overall decline in sales.

Deferred  compensation  expense in fiscal 1998 decreased slightly to $109 from
$113 in fiscal 1997.

Other income and expenses in fiscal 1998 included a foreign currency translation
gain of $74 compared to a loss of $148 last year with  respect to the  Company's
Brazilian subsidiary.  These translation gains represent  inflationary gains for
these  years  on  the  net  assets  of  the  Brazilian  subsidiary,   which  has
historically operated in a highly inflationary economy. Accordingly, the results
from  the  Brazilian   operations   may  be   significantly   affected  by  such
fluctuations.  Interest expense and royalty income were virtually unchanged from
1997 to 1998. The Company expects to receive future royalties on patents through
2002,  which  are not  expected  to be  material.  Commission  income  generated
entirely by the Brazilian subsidiary decreased from $414 in fiscal 1997 to $0 in
fiscal 1998 due to lower earnings.

The Net Loss  increased to $5,639 from $2,347 last year.  The increase  resulted
from the factors outlined above as well as restructuring  and inventory  charges
in fiscal 1998 in connection with the relocation to a new facility.

RESULTS OF OPERATIONS
Fiscal Year 1997 Compared To 1996

Net Sales from continuing  operations in fiscal 1997 were $13,286, a decrease of
27.5% from  $18,315 in fiscal  1996.  Domestic  packaging  sales  declined  from
$11,050 to $8,863 or 19.8%.  Sales in the Safety and  Automation  Group declined
from $2,318 to $1,156 or 50.1%. The Brazilian  subsidiary  experienced a decline
in sales  from  $4,947 in  fiscal  1996 to  $3,267  in  fiscal  1997,  or 34.0%.
Domestically,  the Company  experienced an  improvement in industrial  packaging
equipment  sales of 3.7%  versus the prior year due to the  shipment  of several


                                       16
<PAGE>

custom  roofing  shingle  bundling  machines.  During  fiscal 1997,  the Company
refocused its marketing efforts toward such higher cash contributing  industrial
packaging  products,  which had a negative  impact on food  packaging  equipment
sales,  and  packaging  sales  overall.  To  compensate  for the  marginal  cash
generated  from the food  packaging  side of the business,  the Company  reduced
excess  marketing  expenses  associated  with that segment in fiscal  1997.  The
Safety and  Automation  Group  continued  to feel the  effects of being  without
inventory due to exorbitant  price  increases and unfavorable  foreign  exchange
rates with its former major offshore supplier during fiscal 1996.

Gross Margin decreased from 32.2% of net sales in fiscal 1996 to 26.0% in fiscal
1997 and from  $5,901 to $3,460 in  dollars.  Despite  improvements  achieved in
material costs, as a percentage of sales, labor costs were higher,  most notably
at the Company's  Brazilian  subsidiary.  In terms of dollar  contribution,  the
Brazilian  subsidiary's  gross margin  decreased  $1,046 due to higher labor and
related  overhead  content on reduced sales,  while the Packaging System Group's
and the Safety and  Automation  Group's  gross  margins  declined $728 and $667,
respectively.

The  Company's  selling,  general and  administrative  expenses  decreased  in
fiscal 1997 by $1,857 to $4,801  compared to 1996.  Domestic  operations had a
decrease of $1,530,  while the Brazilian  location had a decrease of $327. The
decrease in domestic  expenses was in a) salaries and wages of $715, b) travel
and  entertainment  of $196, c) reduced fringe benefit expenses of $180 due to
salary reduction,  d) dealer  commissions  primarily  associated with the food
packaging  segment  of $170,  and e) reduced  general  business  insurance  of
$105.  The  decrease at  Weldotron  do Brasil was evenly  distributed  between
marketing and general administrative expenses.

The Loss from  Operations  decreased  to $2,347  in fiscal  1997 from  $3,134 in
fiscal 1996. The decrease  resulted from the absence of major  restructuring and
inventory  charges in fiscal  1998,  as well as  reduced  selling,  general  and
administrative  expenses.  In fiscal 1997, the Company recorded a reserve of $91
to write down inventory to net realizable value. This compares to a total charge
of $1,085 in fiscal 1996.

Deferred  compensation  expense in fiscal 1997 decreased slightly to $113 from
$124 in fiscal 1996.

Other income and expenses in fiscal 1997 included a foreign currency translation
loss of $148  compared  to a gain of $345 in  fiscal  1996 with  respect  to the
Company's Brazilian subsidiary.  These translation gains represent  inflationary
gains for these years on the net assets of the Brazilian  subsidiary.  Weldotron
do Brasil operates in a highly inflationary  economy.  Accordingly,  the results
from  the  Brazilian   operations   may  be   significantly   affected  by  such
fluctuations.  The general price index for 1997 was 9% compared to 15% for 1996.
The  official  selling  rates of  exchange  to the U.S.  dollar  were $1  equals
R$1.0394  in 1997  compared  to $1 equals  R$0.9726  in 1996.  The  current  and
historical  levels of inflation in Brazil and the changing exchange rates cannot
be expected to affect  future  periods to the same  extent,  or even in the same
direction  as were the  current  and  prior  years  affected.  Interest  expense
increased by $8 due to increased borrowings at our Brazilian subsidiary. Royalty
income was $60  compared to $42 in fiscal 1996.  The Company  expects to receive
future royalties on patents through 2002.  Commission income generated  entirely
by the Company's Brazilian subsidiary decreased from $489 in fiscal 1996 to $414
in fiscal 1997.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

SFAS No. 129  "Disclosure of Information  About Capital  Structure"  requires an
entity to provide certain disclosures within its financial  statements about the
pertinent rights and privileges of the various securities outstanding for fiscal
years beginning after December 16, 1997. The Company  believes SFAS No. 129 will
have  little,  if  any,  effect  on the  information  already  disclosed  in the
Company's financial statements.

SFAS No. 130,  "Reporting  Comprehensive  Income,"  requires an entity to report
comprehensive  income  and its  components  for  fiscal  years  beginning  after


                                       17
<PAGE>

December 15, 1997. The Company  believes SFAS No. 130 will have little,  if any,
effect  on  the  information   already  disclosed  in  the  Company's  financial
statements.

SFAS  No.  131,   "Disclosure  About  Segments  of  an  Enterprise  and  Related
Information" requires an entity to report financial and descriptive  information
about its  reportable  operating  segments  for  fiscal  years  beginning  after
December 15, 1997. The Company  believes SFAS No. 131 will have little,  if any,
effect  on  the  information   already  disclosed  in  the  Company's  financial
statements.

Statement  of Position  98-1,  "Accounting  for the Costs of  Computer  Software
Developed  or  Obtained  for  Internal  Use,"  requires an entity to expense all
software  development costs incurred in the preliminary project stage,  training
costs and data  conversion for fiscal years  beginning  after December 15, 1998.
The Company  believes that this statement will not have a material effect on the
Company's accounting for computer software acquisitions.

Statement of Position 98-5  "Accounting  for Start-up  Costs,"  requires that an
entity expense all start-up and related costs, as incurred, for all fiscal years
beginning after December 15, 1997. The Company believes that this statement will
not have a material effect on its accounting for start-up costs.

YEAR 2000

Many  existing  computer  programs use only two digits to identify a year in the
date field.  These programs do not consider the impact of the upcoming change in
the century. Currently, the Company is evaluating its Year 2000 computer issues.
Based on preliminary  evaluations,  the Company estimates the costs that will be
incurred to update its computer systems will be immaterial. The company believes
that solutions will be implemented timely.

FORWARD-LOOKING STATEMENTS

This  report  contains  forward-looking  statements  within  the  meaning of the
Private Securities  Litigation Reform Act of 1995.  Investors are cautioned that
any  forward-looking  statements,  including  statements  regarding  the intent,
belief,  or  current  expectations  of the  Company or its  management,  are not
guarantees of future performance and involve risks and  uncertainties,  and that
actual results may differ materially from those in forward-looking statements as
a result of various factors including,  but not limited to: (i) general economic
conditions in the markets in which the Company  operates,  (ii)  cancellation of
specific programs due to general budgetary  constraints or poor customer demand,
(iii)  development of competing  technology and scientific  know-how  similar or
superior  to that of the  Company,  (iv)  success  in hiring and  retaining  key
management  and technical  personnel,  (v) the Company's  significant  liquidity
concerns,  (vi) legal  proceedings  pending and judgments  rendered  against the
Company, and (vii) the decline in the Company's overall business.

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  consolidated  financial  statements,  notes  thereto and  auditors'  report
thereon, are included herein.

Selected quarterly financial data and other supplementary  financial information
are not required.

WELDOTRON  CORPORATION
Consolidated Financial Statements and Supplemental Schedule
as of and for the Years Ended February 28, 1998, 1997 and 1996 and
Report of Independent Certified Public Accountants

Note - The  Auditor's  Report on the  Financial  Statements  for the year  ended
February 29, 1996 is not included herein.


                                       18
<PAGE>


              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders of Weldotron Corporation
Bridgewater, New Jersey

We have  audited  the  accompanying  consolidated  balance  sheets of  Weldotron
Corporation  and  subsidiaries  as of February 28, 1998 and 1997 and the related
consolidated  statements of operations,  stockholders' equity (deficit) and cash
flows  for  the  years  then  ended.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material   respects,   the  financial  position  of  Weldotron
Corporation  and  subsidiaries as of February 28, 1998 and 1997, and the results
of their  operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial statements,  the Company has suffered recurring losses from operations
and at February 28, 1998 has significant deficiencies in working capital and net
assets.   Furthermore,   the  Company  is  delinquent   paying  several  of  its
liabilities.  These matters raise  substantial doubt about the Company's ability
to continue as a going  concern.  Management's  plans in regard to these matters
are also  described  in Note 2. The  financial  statements  do not  include  any
adjustments that might result from the outcome of this uncertainty.

                                                                BDO Seidman, LLP

New York, New York
July 31, 1998






                                       19
<PAGE>




Weldotron Corporation and Subsidiaries
Consolidated Balance Sheets
February 28, 1998 and February 29, 1997
(Amounts in thousands, except share data)

                                                             1998        1997
                                                             ----        ----
Assets
CURRENT ASSETS
      Cash and cash equivalents                          $      9    $     19
      Accounts receivable (less allowance
        for doubtful accounts:
        1998 $151; 1997, $184                                 746       1,299
      Inventories                                           2,329       5,088
      Prepaid expenses and other current assets               334         399
                                                         ---------  ---------
            Total current assets                            3,418       6,805
                                                          --------  ---------

PROPERTY, PLANT AND EQUIPMENT:
      Land and buildings                                      660         660
      Fixtures and equipment                                  701       8,781
      Leasehold improvements                                   --       1,758
      Automotive equipment                                     28         164
                                                               --         ---
            Total property, plant & equipment               1,389      11,363

      Less accumulated depreciation and amortization          664       9,676
                                                       -----------  ---------

            Property, plant & equipment, net                  725       1,687
                                                       -----------  ---------

DEFERRED COSTS AND OTHER ASSETS                               283         539
                                                       ----------- ----------
TOTAL ASSETS                                             $  4,426    $  9,031
                                                         =========   ========


Liabilities and Stockholders' Equity CURRENT LIABILITIES:
      Cash overdraft                                   $       11   $     211
      Short-term borrowings                                 1,132       1,396
      Short-term borrowings - related party                 2,101         446
      Accounts payable                                      2,249       1,721
      Payables to related parties                           1,471         807
      Accrued payroll, vacation and payroll taxes             460         539
      Accrued severance and other compensation              1,258       1,165
      Other current liabilities                               786       1,106
                                                           -------  ---------

            Total current liabilities                       9,468       7,391
                                                         ---------   --------
LONG-TERM DEBT - Related Party                                150       1,000
                                                        ----------  ---------

            TOTAL LONG-TERM DEBT                              150       1,000
                                                        ---------   ---------

MINORITY INTEREST IN SUBSIDIARY                               328         478
                                                       ----------- ----------

OTHER LONG-TERM LIABILITIES                                    23          67
                                                      -----------------------

                                       20
<PAGE>
                                                            1998        1997
                                                            ----        ----
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIENCY):

      Preferred stock, par value $.05 per Share;
        authorized 1,000,000 shares in
        1997 and 1996; issued none

      Common stock, par value $.05 per share;
        authorized 10,000,000 shares; issued 
        2,352,720 shares                                      118         118
      Additional paid-in capital                            9,798       9,798
      Deficit                                             (15,336)     (9,698)

      Common stock in treasury, at cost - 52,547 shares
        In 1997 and 1996                                     (123)       (123)
           ----     ----                                     ----        ---- 
                                                      
            Total stockholders' equity (Deficiency)        (5,543)         95
                                                           ------          --
                                                        
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $   4,426    $  9,031
                                                        ==========   ========

See Notes to Consolidated Financial Statements.




                                       21
<PAGE>




Weldotron Corporation and Subsidiaries
Consolidated Statements of Operations
For the Years Ended February 28, 1998,
February 28, 1997 and February 29, 1996
(Dollar amounts in thousands, except per share amounts.)

                                                1998        1997       1996
                                                ----        ----       ----

NET SALES                                     $ 7,895     $13,286     $18,315
                                              -------     --------    -------

COST & EXPENSES
      Cost of sales                             6,458       9,826      12,414
      Selling, general and administrative       3,889       4,801       6,658
      Depreciation and amortization               192         388         488
      Deferred compensation expenses              109         113         124
      Restructuring and other inventory charges    --          91       1,085
      Related party charges                       300         300         300
      Relocation expense                        1,475           -           -
                                                -----       -----       -----
                                               12,423      15,519      21,069
                                               -------   ---------   --------
LOSS FROM OPERATIONS                           (4,528)     (2,233)     (2,754)
                                               -------   ---------   --------

OTHER INCOME (EXPENSES)
      Foreign currency translation gain (loss)     74        (148)        345
      Interest Expense                           (633)       (621)       (613)
      Royalty Income                               58          60          42
      Other (expense) income                       15          21        (164)
      Commission income                            --         414         489
      Loss on sale and abandonment
         of fixed assets                         (773)         --          --
                                               -------   ---------   --------
                                               (1,259)       (274)         99
                                               -------   ---------   --------

LOSS FROM OPERATIONS
   BEFORE MINORITY INTEREST IN
   SUBSIDIARY AND INCOME TAXES                 (5,787)     (2,507)     (2,655)
INCOME TAX (PROVISION)                             --         (37)       (270)
MINORITY INTEREST IN FOREIGN
   SUBSIDIARY'S (INCOME) LOSS                     148         197        (209)
                                               -------   ---------   --------
            NET LOSS                         $ (5,639)   $ (2,347)    $(3,134)
                                               -------   ---------   --------
NET LOSS PER COMMON SHARE
      Basic & Diluted                       $   (2.45)  $   (1.02)   $  (1.36)
                                            ==========  ==========   =========

See Notes to Consolidated Financial Statements.





                                       22
<PAGE>





Weldotron Corporation and Subsidiaries
Consolidated  Statement of Stockholders' Equity
For the Years Ended February 28, 1998,
February 28, 1997 and February 29, 1996
(Dollar amounts in thousands.)

                     Common   Additional    (Deficit)   Common Stock    Total
                     Stock      Paid-In     Retained    In Treasury,
                                Capital     Earnings       At Cost
BALANCE FEBRUARY
28, 1995             $118     $9,798      $(4,217)       $(123)       $5,576

Net Loss                -          -       (3,134)           -        (3,134)
                   ------     ------      -------        -----        -------

BALANCE FEBRUARY
29, 1996              118      9,798      (7,351)         (123)        2,442

Net Loss                -          -      (2,347)            -        (2,347)
                   ------     ------      -------        -----        -------

BALANCE FEBRUARY
28, 1997              118      9,798      (9,698)         (123)           95

Net Loss                -          -      (5,639)            -        (5,639)
                   ------     ------      -------        -----        -------
                   
BALANCE FEBRUARY
28, 1998             $118     $9,798      $(15,336)      $(123)       $(5,543)
                     ====     ======      =========      ======       ========


See notes to consolidated financial statements.




                                       23
<PAGE>




Weldotron Corporation and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended February 28, 1998,
February  28, 1997 and  February 29, 1996
Dollar amounts in thousands.)

                                              1998         1997        1996
                                              ----         ----        ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss                                    $(5,639)     $(2,347)     $(3,134)
                                            --------     --------     --------
Adjustments to reconcile net loss to net
   cash flows provided by (used in)
   operating activities

   Depreciation and amortization                192          388          488
   Foreign currency translation (gain) loss     (74)         148         (345)
   Bad debt provision (recoveries)               52          (75)         (46)
   Non-cash inventory reductions               (182)          91        1,085
   Deferred compensation expense                 93          113          122
   Minority interest in subsidiary net         
     income (loss)                             (148)        (197)         209
   (Gain) Loss on sale of property,
     plant and equipment                        773         (148)         (13)
   
   Changes in operating assets and liabilities
   (Increase) decrease in assets:

   Accounts receivable                          501          833          379
   Inventories                                2,759        1,651        1,100
   Prepaid expenses and other current            
   assets                                        65          120         (126)
   Other assets                                 256          (17)          19
   Increase (decrease) in current               
   liabilities                                  444       (1,305)         538
   Increase (decrease) in Related Party         
   liabilities                                  485          389          334
   Increase (decrease) in other                 
     long-term liabilities                      (44)        (150)        (158)
                                                ---         ----         ---- 
   Total adjustments                          4,466        1,841        3,586
                                              -----        ------       -----
   Net cash provided by (used in)              
     operating activities                      (467)        (506)         452  
                                               ====         ====          ===   
   




                                       24
<PAGE>





CASH FLOWS FROM INVESTING ACTIVITIES:             1998        1997        1996
                                                  ----        ----        ----

   Purchases of property, plant and              
     equipment                                   (69)        (137)       (231)
   Proceeds from the sales of property,
     plant and equipment                         247          148         132
                                                 ---          ---         ---
   Net cash provided by (used in)               
     investing activities                        178           11         (99)  
                                                 ---           --         ---   
CASH FLOWS FROM FINANCING ACTIVITIES:
   Net proceeds (repayments) under              
     short-term borrowings                      (264)        (179)     (1,347)
   Proceeds from debt - related party            664          296         650
   Principal payments under capital lease        
     obligations                                  --          (10)        (33)
   Cash overdraft                               (200)         211          --
   Dividends paid by subsidiary to                                     
      minority shareholder                        --           --         (23)
   Net cash (used in) provided by 
      financing activities                       200          318        (753)
                                                 ---          ---        ---- 

EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS                              79         (148)        306
                                                  --         ----         ---
                      
NET DECREASE IN CASH AND CASH EQUIVALENTS        (10)        (325)        (94)

CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR                                              19          344         438
                                                  --          ---         ---
                                         
CASH AND CASH EQUIVALENTS, END OF YEAR       $     9      $    19      $  344
                                             ========     ========     ======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
  Cash (paid) received during the year for:
    Interest paid                            $  (144)     $  (403)     $ (631)
    Taxes                                        (84)        (178)       (169)
    Interest received                             -0-          45          23

SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES

Capital lease obligations incurred when      
  the Company entered into leases for new
  equipment                                  $     -      $    45      $    -
Distribution of investment in real estate
   to minority interest                            -            -         252

See Notes to Consolidated Financial Statements.



                                       25
<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands.)

1.          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles  of  Consolidation  - The  consolidated  financial  statements of the
Company and its subsidiaries include the accounts of all subsidiaries. Financial
information  relating to the Company's 60% owned  subsidiary in Brazil  reflects
the 12 month  periods  ended  February  28,  1998,  1997 and 1996.  All material
intercompany transactions and balances have been eliminated.

The Company designs,  manufactures and markets a comprehensive line of packaging
machinery and systems for a broad range of industrial and consumer  applications
as well as innovative food packaging and weighing  systems for  supermarkets and
fresh food processors.  Its Safety & Automation  Systems Group  manufactures and
markets electronic systems for personnel safety and controls for monitoring high
speed automatic production machinery.

Sales are primarily made  throughout  North America,  with only 7% of the parent
Company's sales taking place internationally.  The Company's 60% owned Brazilian
subsidiary sells throughout Brazil and certain South American export markets.

Revenue Recognition - Sales and earnings are recognized  primarily upon shipment
of products or when title passes.

Inventories -  Substantially  all  inventories  are valued at the lower of cost,
determined by the use of the first-in, first-out method (FIFO) or market.

A  standard  cost  system is used to value the  inventory  whereby  overhead  is
allocated  to  work-in-process  and  finished  goods  based upon a direct  labor
component.  Portions of product cost  variances  are  allocated to the inventory
value under the FIFO method.

Accounts  Receivable - Accounts  receivable are net of an allowance for doubtful
accounts.  The provision  (recoveries)  for doubtful  accounts and write-off for
uncollectible  accounts were $52,  ($75) and ($46);  $201,  $49, and $21 for the
fiscal years ended February 1998, 1997, and 1996, respectively.

Property,  Plant and  Equipment - Property,  Plant and  Equipment  are stated at
cost.  The Company  provides for  depreciation  and  amortization  for financial
statement purposes on the straight-line or accelerated method over the estimated
useful lives of the various  depreciable  or  amortizable  assets.  In 1998, the
Company  relocated to a smaller facility and wrote off $773 as abandoned assets.
The Company's Brazilian subsidiary purchased three residential apartments in Sao
Paolo,  Brazil, as investment  property.  One apartment was sold in fiscal 1995,
with the proceeds distributed as dividends in a 60% and 40% relationship between
the Company and the minority  interest.  At the end of fiscal 1996, title to one
of the remaining two apartments was  transferred to the Company.  This asset was
written down to $210 and is included in Other  Assets.  The Company has enlisted
the  services  of a broker for the sale of this  apartment  to raise  additional
cash.  The Company has entered  into a contract  for the sale of the  apartment,
with a closing expected prior to December 31, 1998. The third apartment is still
recorded on the Company's Brazilian subsidiary.

Income  Taxes  -  Weldotron   Corporation  and  its  U.S.  subsidiaries  file  a
consolidated federal income tax return.  Accumulated  undistributed  earnings of
the Company's foreign  subsidiary were  approximately $132 at February 28, 1998.
The Company has not  recognized a deferred tax liability  for the  undistributed
earnings of the subsidiary as it is their intention to permanently reinvest such
earnings.  Income taxes are provided based on the liability method of accounting
pursuant  to  Statement  of  Financial   Accounting   Standards  SFAS  No.  109,
"Accounting for Income Taxes." Deferred income taxes are recorded to reflect the
tax  consequences on future years'  differences  between the tax basis of assets
and  liabilities  and  their  financial  reporting  amounts  at  each  year-end.


                                       26
<PAGE>

Valuation  allowances  are  established  for those  income  tax  benefits  whose
recoverability is uncertain.

Cash and Cash Equivalents - Cash and cash  equivalents  include cash on hand and
on deposit in banks and certificates of deposit with an original maturity period
not in excess of three  months.  Cash and cash  equivalents  of $9, and $19 were
designated  for payments  under various bank  agreements as of February 28, 1998
and February 28, 1997, respectively.

Deferred  Costs - Costs  incurred to secure  financing are  capitalized  and are
amortized on a straight-line method over the life of the related borrowings.

Costs incurred in connection with royalty license  agreements are amortized over
the life of the associated patent or the duration of the agreement, whichever is
shorter.

Foreign  Currency  Translation - The U.S. dollar is the functional  currency for
the Brazilian foreign subsidiary operating in a highly inflationary economy, for
which both  translation  adjustments  and gains and  losses on foreign  currency
transactions are included in earnings.

Net Loss Per  Common  Share - Net loss per  common  share  for each of the years
ended  February  28,  1998,  and 1997 and  February  29,  1996 were  computed by
dividing  net loss by the  weighted  average  number  of shares  outstanding  of
2,300,173  each year.  Assumed  exercise of stock  options,  warrants  and stock
rights has not been included in the earnings per common share calculation as the
effect is anti-dilutive.

SFAS No. 128,  "Earnings Per Share,"  requires a  presentation  of basic EPS and
diluted EPS for fiscal years ending after December 15, 1997.  Basic EPS excludes
dilution and is computed by dividing earnings  available to common  stockholders
by the  weighted-average  number of common  shares  outstanding  for the period.
Similar to fully diluted EPS, diluted EPS assumes conversion of convertible debt
and the issuance of common stock for all other potentially  dilutive  equivalent
shares  outstanding,  unless the effect of issuance would have an  anti-dilutive
effect. The adoption of SFAS No, 128 had no effect on the Company.

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

Reclassifications  -  Certain  prior  year  reclassifications  have been made to
conform to 1998 classifications.

Long-lived assets - Long-lived assets,  such as goodwill,  intangible assets and
property and equipment,  are evaluated for impairment  when events or changes in
circumstances  indicate  that  the  carrying  amount  of the  assets  may not be
recoverable through the estimated undiscounted future cash flows from the use of
these  assets.  When any such  impairment  exists,  the  related  assets will be
written down to fair value.  This policy is in accordance  with the Statement of
Financial  Accounting  Standards No. 121, "Accounting for the Impairment of Long
Lived Assets and Long-lived  Assets to Be Disposed of," which was adopted in the
1997 fiscal year.

Stock based  compensation  - The Company  accounts for its stock  option  awards
under the intrinsic  value based method of  accounting  prescribed by Accounting
Principles  Board Opinion No. 25,  "Accounting  for Stock Issued to  Employees."
Under the intrinsic value based method, compensation cost is the excess, if any,
of the quoted market price of the stock at grant date or other  measurement date
over the amount an employee  must pay to acquire  stock.  The Company  makes pro
forma  disclosures  of net  income and  earnings  per share as if the fair value
based  method of  accounting  had been  applied  as  required  by  Statement  of
Financial  Accounting  Standards  No.  123  ("SFAS No.  123"),  "Accounting  for
Stock-Based Compensation."



                                       27
<PAGE>

Fair Value of Financial  Instruments - The Company's  financial  instruments are
comprised  of cash,  accounts  receivable,  accounts  payable and long term debt
which are carried in the balance sheet at amounts which approximate fair value.

Recent Accounting Standards

SFAS No. 130,  "Reporting  Comprehensive  Income,"  requires an entity to report
comprehensive  income  and its  components  for  fiscal  years  beginning  after
December 15, 1997. The Company  believes SFAS No. 130 will have little,  if any,
effect  on  the  information   already  disclosed  in  the  Company's  financial
statements.

SFAS  No.  131,   "Disclosure  About  Segments  of  an  Enterprise  and  Related
Information" requires an entity to report financial and descriptive  information
about its  reportable  operating  segments  for  fiscal  years  beginning  after
December 15, 1997. The Company  believes SFAS No. 131 will have little,  if any,
effect  on  the  information   already  disclosed  in  the  Company's  financial
statements.

Statement  of Position  98-1,  "Accounting  for the Costs of  Computer  Software
Developed  or  Obtained  for  Internal  Use,"  requires an entity to expense all
software  development costs incurred in the preliminary project stage,  training
costs and data  conversion for fiscal years  beginning  after December 15, 1998.
The Company  believes that this statement will not have a material effect on the
Company's accounting for computer software acquisitions.

Statement of Position 98-5  "Accounting  for Start-up  Costs,"  requires that an
entity expense all start-up and related costs, as incurred, for all fiscal years
beginning after December 15, 1997. The Company believes that this statement will
not have a material effect on its accounting for start-up costs.

2.          MANAGEMENT PLANS AND INTENTIONS

The Company's  financial  statements  for the year ended  February 28, 1998 have
been prepared on a going concern basis which  contemplates  the  realization  of
assets and the settlement of liabilities and commitments in the normal course of
business.  The Company incurred substantial net losses in recent years and as of
February 28, 1998 had a working capital  deficiency of $6,050 and an accumulated
deficit of $5,543.  Management actions were implemented  throughout fiscal 1996,
1997 and 1998 in an attempt to restore the Company to financial stability. Among
these actions were the divestiture of non-core business,  substantial reductions
of operating  expenses,  the  reestablishment  of a major  distributorship,  the
outsourcing of certain  manufacturing  operations at more favorable  costs,  the
implementation of alternative marketing strategies, and the reemphasis upon high
cash  contributing  product  lines.  To date  these  efforts  have been  largely
unsuccessful.  Despite all of these efforts the Company continues to lose money.
In an effort,  to return to  profitability  the Company has  continued to reduce
staff,  lower overall costs of  manufacturing  and reduce  selling,  general and
administrative  expenses  during Fiscal 1999. The Company is  investigating  new
products to increase sales.  The Company is dependent on related party financing
until  it  returns  to  profitability.  No  assurances  can be  given  as to the
Company's ability to obtain financing or to the future results of operations.

3.          RESTRUCTURING AND OTHER INVENTORY CHARGES

In  fiscal  1997 and 1996  the  Company  recorded  reserves  of $91 and  $1,085,
respectively, to write down inventory to net realizable value. In October, 1997,
the Company relocated to a smaller facility in Bridgewater,  New Jersey. As part
of the relocation, $773 of leasehold improvements was written off.



                                       28
<PAGE>

4.          ROYALTY AGREEMENTS

In 1992, the Company licensed one of its patents to several other manufacturers.
The Company  received  royalty revenue related to licensing  agreements of $ 58,
$60,  and $42 for fiscal years ended  February  28, 1998,  February 28, 1997 and
February 29, 1996 respectively.  The Company has filed two design patents on its
custom roofing shingle bundling machine.

Charges incurred to obtain patents are capitalized.

5.          INVENTORIES

Inventories consist of the following at February 28, 1998 and 1997:

                                                             1998        1997
                                                             ----        ----
Finished goods                                          $     531      $1,704
Work in process                                               647       2,094
Raw material                                                1,151       1,290
                                                          -------      ------
                                                         $  2,329      $5,088
                                                         ========      ======
6.          DEBT

Debt consists of the following at February 28, 1998 and 1997:
 
                                                             1998        1997
                                                             ----        ----

Revolving line of credit (Including Weldotron do Brasil) $  1,132    $  1,396
Notes payable -- Related Party                              2,251       1,446
                                                            -----       -----
                                                            3,383       2,842
Less current portion                                        3,233       1,842
                                                            -----       -----
                                                          
Long-term portion                                        $    150      $1,000
                                                         ========      ======
                                                         

In June 1991, the Company entered into a credit facility (the "Credit Facility")
with Congress Financial Corporation,  ("Congress") which was amended on June 10,
1996.  It  provided  a  revolving  line of credit  and term loan of  $2,500,  an
interest rate of 3.75% over the Core States  floating base rate, a maturity date
of June 25, 1997, and financial  covenants as follows:  minimum domestic working
capital of $1,700 and minimum domestic tangible net worth of $1,050.

The Credit Facility was collateralized by substantially all of the assets of the
Company and its domestic subsidiaries. Borrowings under the Credit Facility were
limited to certain  percentages  of eligible  inventory and accounts  receivable
including stipulations as to the ratio of advances collateralized by receivables
compared to advances collateralized by inventory.

The Company was in default of its minimum working capital and tangible net worth
covenants  of the Credit  Facility as of August 31, 1996 and  November 30, 1996.
Subsequently,  Congress  Financial  Corporation  notified  the  Company  of  its
intention  to  terminate  the Credit  Facility due to the default as well as the
reduced size of the  outstanding  loan (below $1,000) and provided the Company a
period of time in which to seek  alternative  sources of financing.  On December
10, 1996, the Company  successfully entered into a new credit facility (the "New
Credit  Facility")  with  Business  Alliance  Capital  Corporation,  ("BACC") to
provide a revolving line of credit for working  capital  purposes.  The interest
rate is 3.0% over the Core States  floating base rate.  The New Credit  Facility
further  requires that the Company pay fees on the average  outstanding  loan of
0.33% per month, for administration and upon early termination of the New Credit
Facility. The maximum line of credit is $1,500 and the maturity date is December
10,  1998.  Management  does not believe  that the Company will be able to repay
borrowings  under  the  New  Credit  Facility  at  maturity  without  additional
financing. The Company has not received a commitment for additional financing.



                                       29
<PAGE>

The New Credit Facility is  collateralized by substantially all of the assets of
the  Company  and its  domestic  subsidiaries.  Borrowings  under the New Credit
Facility are limited to certain  percentages of eligible  inventory and accounts
receivable  as  well  as a  stipulation  as to  the  maximum  advance  level  on
inventory.  The Company is currently in technical  default  under the New Credit
Facility,  but BACC has not chosen to declare a default  and  continues  to work
with the Company.

At February 28, 1998,  the Company had used  approximately  $1,076 of borrowings
available  under Business  Alliance  Capital New Credit  Facility.  Based on the
advance  percentages  of eligible  receivables  and  inventory,  the Company had
unused borrowing availability of approximately $17 at February 28, 1998.

On  August  31,  1994,  the  Company  borrowed  $500  from  Lyford   Corporation
("Lyford"),   an  affiliated  company  that  owned  19.56%  of  the  issued  and
outstanding  common  stock of the  Company  as of July  31,  1998.  The  Company
executed and delivered to Lyford a promissory  note, a security  agreement and a
Common  Stock  Purchase  Warrant  granting to Lyford the right to purchase up to
200,000 shares of the Company's common stock at an initial exercise price of two
dollars per share,  the closing price for the Company's common stock on the date
the warrant was granted. The warrant expires on August 4, 2004.

On March 1, 1995, the Company concluded the rolling of this note into a new note
in the amount of $1,000.  The new obligation is evidenced by a certain  Amended,
Extended and Restated  Promissory  Note dated as of March 1, 1995 (the "Restated
Note"). In consideration for the new loan, the Company executed and delivered to
Lyford the Restated Note and an additional  Common Stock Purchase  Warrant.  The
Restated  Note was  originally  due and payable on or before  March 31, 1996 and
bore interest at 12% per annum. The Note was  subsequently  extended three times
-- first until April 1, 1997,  then until April 1, 1998 and finally  until April
1, 1999 and the interest  rate was  increased to 16%. The new warrant  grants to
Lyford the right to  purchase up to  1,000,000  shares of the  Company's  common
stock at an initial  exercise price of One Dollar ($1.00) per share.  The market
price of the Company's  common stock was $.875 on the date of the warrant grant.
The new warrant expires by its terms on April 12, 2005. The Company's management
considers  the note to be at fair  value and has not  assigned  any value to the
warrants. The loan transaction closed pursuant to documents dated as of March 1,
1995 and, in the case of the new warrant,  April 13, 1995.  These loan documents
were  contingent  on the Company's  obtaining the consent of its senior  lender,
which consent was obtained on May 5, 1995. The Lyford loan is  collateralized by
a junior lien on substantially all of the assets of the Company.

As a result of the continuing  deterioration in the financial performance of the
Company and the  negative  impact of the events  described in Note 7, Lyford has
advanced  additional sums to the Company to protect its collateral  position and
to fund ongoing  operations.  As of February 28, 1998, the principal balance and
unpaid  accrued  interest  due and owing to Lyford  amounted to $1,452 and $381,
respectively.

In January,  1996 the Company  entered into a $500 revolving loan agreement with
Exford Corp. an affiliate of Lyford.  The Company has outstanding  borrowings of
$350 under this  agreement,  as of February  28,  1998,  which  borrowings  bear
interest  at 14%,  and were  originally  due on January 31,  1997.  The note was
subsequently  extended twice, first until January 1, 1998 and then until January
1, 1999. In connection  with this  revolving  loan,  the Company has assigned to
Exford its right,  title and  interest  as tenant  under the lease for its prior
facility,  together with any rents due and payable to the Company.  On September
1, 1997, Lyford purchased the Exford loan. As of February 28, 1998 the principal
balance and unpaid accrued  interest due and owing to Lyford under the revolving
loan agreement amounted to $552 and $93, respectively.

In February 1997,  the Company  entered into a one-year  promissory  note in the
amount of $96 with  Mentmore  Holdings,  an affiliate of Lyford.  The note bears
interest at two  percentage  points  above the prime rate,  with a default  rate
equal to the interest rate otherwise  payable plus five percent for late payment
of interest or principal.  The note originally  expired on February 11, 1998 and
has been extended for 1 year until February 11, 1999.



                                       30
<PAGE>

Company  Payables to Related  Parties  include  director  fees  ($83),  interest
accrued on related notes ($474),  and  management  advisory fees due to Mentmore
($914). The short-term borrowings due to related parties ($2,101) consist of the
loans due to Lyford and Mentmore.

Debt is carried in the balance sheet at amounts which approximate fair value.

7.          COMMITMENTS AND CONTINGENCIES

The Company is involved in various legal actions  arising in the ordinary course
of business and several claims have been asserted  against the Company.  Some of
the actions involve tort claims for compensatory, punitive or other damages. The
Company  presently  believes that it has valid  defenses to the tort claims that
have been  asserted  and that any  compensatory  damage  claims  are  covered by
insurance.  However,  the Company has elected to retain a significant portion of
litigation exposure through the use of deductibles under its insurance policies.
In addition to claims arising in the ordinary course of business,  the following
material legal actions have been asserted:

Martin Siegel vs. Weldotron Corporation

On November  23,  1994,  the  Company was served with a lawsuit  filed by Martin
Siegel in the Superior Court of New Jersey, naming the Company as the defendant.
The other  defendants  named were:  William L.  Remley and  Richard C.  Hoffman,
officers and directors of the Company;  Richard Kramer,  John D. Mazzuto,  Bryon
Fusini  and Fred H.  Rohn,  directors  of the  Company;  Lyford  Corp.,  a major
shareholder of the Company and Mentmore Holdings Corporation. Until earlier that
year, Mr. Siegel served as Chairman of the Board and Chief Executive  Officer of
the Company.  On or about November 2, 1994, the Company  terminated Mr. Siegel's
employment agreement for cause. Mr. Siegel alleged, among other things, that the
Company  breached  its  obligations  to him under his  employment  agreement  by
forcing his  resignation as Chairman of the Board and Chief  Executive  Officer,
ceasing  his  regular  salary and  failing to fund a grantor  trust  designed to
secure Mr. Siegel's  deferred  compensation  benefits.  The defendants were also
served with an Order to Show Cause,  seeking to secure an  immediate  funding of
the grantor trust and summary disposition of his claims.

On January 3, 1995,  the court  denied Mr.  Siegel's  request for a  preliminary
injunction  mandating  the  immediate  funding of the grantor  trust and for the
matter to proceed  summarily.  Periodic payments of Mr. Siegel's annual deferred
compensation  benefits were  deposited  into an escrow  account  pending a final
determination of this matter.

On April 13, 1995, the Company  reached a full and final  settlement with Martin
Siegel. Under the terms of the settlement,  which was approved by the Court: (1)
all claims and counterclaims  by, between and among Mr. Siegel,  the Company and
the other parties to the litigation were dismissed,  without prejudice,  (2) Mr.
Siegel and the Company  exchanged mutual releases,  (3) Mr. Siegel's  Employment
Agreement with the Company dated March 1, 1988, as amended, was terminated,  and
(4) Mr. Siegel was awarded a lifetime  annual deferred  compensation  benefit of
$100. The annual deferred compensation benefit is an unsecured obligation of the
Company.

The  Company  made  regular  monthly  payments to Mr.  Siegel  under the revised
deferred compensation benefit arrangement until April of 1997 when such payments
were  suspended.  Mr. Siegel served  written notice of default in payment of his
deferred  compensation  benefits  upon  the  Company  in May of  1997.  In June,
pursuant  to Mr.  Siegel's  right under the terms of the  deferred  compensation
agreement  entered into as part of the settlement of the prior  litigation,  Mr.
Siegel  made  application  to the New  Jersey  Superior  Court  for a  confessed
judgement  against  the  Company  in the  amount  of the  present  value  of the
remaining payments due him under the deferred compensation agreement.



                                       31
<PAGE>

On June 24, 1997,  the Superior  Court of Bergen  County,  New Jersey  awarded a
judgment in Mr.  Siegel's favor in the amount of $772. The Company  entered into
discussions with Mr. Siegel concerning a potential settlement of its obligations
to Mr.  Siegel.  Mr.  Siegel has now  brought an action  against the Company and
others seeking to enforce an alleged verbal  settlement of his claim against the
Company for a payment of $85. As of February 28,  1998,  the Company had accrued
$875 as the present value of this obligation.

Seymour Siegel vs. Weldotron Corporation

Seymour Siegel,  who is the brother of Martin Siegel,  was formerly an executive
officer and  director of the Company who retired  from the Company as an officer
in 1993  and as a  director  in  1994.  Under  the  terms  of  Seymour  Siegel's
Employment  Agreement  with the Company,  upon his  retirement he was to receive
annual deferred compensation benefits of $50. These annual deferred compensation
benefits are unsecured  obligations  of the Company.  Such benefits were paid in
monthly installments to Seymour Siegel until April 1997, at which time they were
suspended by the Company. Seymour Siegel has given the Company notice of default
and has  threatened to retain  counsel to pursue his rights unless said payments
are resumed.  To pursue his claims against the Company,  Seymour Siegel would be
required to initiate  litigation against the Company.  The Company has discussed
with  Seymour  Siegel and his counsel a potential  settlement  of these  claims.
Recently the Company broke off  discussions  with Mr.  Siegel's  counsel.  As of
February  28, 1998,  the Company had accrued  $383 as the present  value of this
obligation.

Riken Optech Corp. vs. Weldotron Corporation

Riken  Optech  Corp.  ("Riken")  is  a  Japanese  manufacturer  of  solid  state
industrial  electronic  control  systems which  formerly  provided  products for
resale by the  Safety  and  Automation  Systems  Group of the  Company  under an
exclusive  distributorship  agreement (the  "Distributorship  Agreement")  which
originated in late 1970's.

In 1995, as a result of unfavorable  exchange rates between the Japanese Yen and
the U. S. Dollar, Riken unilaterally  increased the prices at which its products
would  be sold to the  Company  to a  prohibitive  level.  The  Company  pursued
discussions  with  Riken  to  license  production  of  the  Riken  products  and
simultaneously  initiated  separate  efforts  to  design,  fabricate  and source
comparable  products  domestically.  Discussions  ensued between the Company and
Riken during which time the Company suspended further payments upon certain open
invoices  with Riken.  In  December  of 1995,  Riken  allegedly  terminated  the
Company's  exclusive  Distributorship  Agreement with the Company.  Negotiations
were terminated and the Company  exclusively pursued its domestic product design
and  fabrication  efforts.  Thereafter,  the  Company,  through  its  Safety and
Automation Group,  introduced and began marketing its domestically  sourced line
of industrial electronic control systems.

In early 1996, the Company commenced an action in New Jersey State Court against
Riken and a former  employee of its Safety and Automation  Group who had left to
join a competitor,  asserting various claims in relation to Riken's  termination
of the exclusive  Distributorship  Agreement,  predatory pricing practices,  and
tortious interference with existing contractual relationships.

In late 1996,  Riken  commenced  a separate  action  against  the Company in the
United  States  District  Court for the Southern  District of New York,  seeking
payment in respect of the  outstanding  unpaid  invoices and  asserting  various
claims  in  relation  to  the  Company's  new  domestically  sourced  industrial
electronic control system products.

In January of 1997, the Company,  Riken, and the former Company employee reached
a settlement  of the claims  raised in the New Jersey State and New York Federal
Court  actions.  Under  the  terms  of  the  settlement:   (1)  All  claims  and
counterclaims  were  released  and the two court  actions  were  dismissed  with


                                       32
<PAGE>

prejudice;  (2) the Company agreed to pay Riken the sum of approximately $185 in
installments  over a  14-month  period,  which the  Company  had  accrued  as of
February 28, 1998; and (3) the Company agreed to make certain  cosmetic  changes
to the appearance of its new domestically sourced products.

Weldotron made four payments totaling  approximately $59, under the terms of the
settlement with Riken, then suspended all further payments.  Riken then notified
the Company that it would seek to pursue the enforcement of the settlement terms
against  the Company and  obtained a  judgement  in the amount of the  remaining
settlement  payments.  In July  1998,  the  Company  reached  a full  and  final
settlement with Riken for $70, which has been paid.

Mackman Realty Corp. vs. Weldotron Corporation

The Company formerly occupied a 256,000 square foot manufacturing,  warehousing,
and corporate  facility in Piscataway,  New Jersey under a long-term lease whose
original  term  was set to  expire  in May of 2005.  Because  the  Company  only
utilized  approximately  35% of said facility and because the rent payable under
said lease was substantially  below current  prevailing market rents for similar
facilities in the  proximate  geographic  marketplace,  the Company had, for the
last two years,  sought to sublease said  facility and to move to smaller,  more
efficient  quarters.  Because the facility was dated and because  updating would
have required  significant  expenditure of funds to make the facility attractive
to potential users, the Company chose to defer certain maintenance items until a
suitable subtenant could be identified.

In  January  of 1997,  the  Landlord  of this  facility,  Mackman  Realty  Corp.
("Mackman")  sought to declare a default  under the Lease and to  terminate  the
Lease  by  reason  of the  Company's  alleged  failure  to meet its  repair  and
maintenance  obligations  under  said  Lease.  Mackman  commenced  an action for
summary  possession  in New Jersey  Court.  The  Company  then filed a motion to
transfer the case to another court, as there were substantial issues of fact and
interpretation  and the need for discovery and expert  testimony.  The Company's
motion was granted and the parties commenced discovery efforts. Despite repeated
attempts at settlement,  negotiations broke down and a trial was held before the
Court in July.  The Court  issued  its  order on July 11,  1997,  declaring  the
Company's  lease  terminated  and  granting  judgement  in favor of Mackman  for
possession of the facility on August 15, 1997.  The Company  continued to occupy
the facility  under an interim  arrangement  with Mackman,  through  October 15,
1997. Mackman continues to assert monetary claims against the Company for unpaid
rent,  attorneys' fees and the cost of certain  repairs to the former  facility.
Trial is scheduled for October of 1998.

On October 15, 1997, the Company relocated to a smaller, more efficient facility
in the  immediate  area of the  previous  facility.  As a result of the  Court's
decision,  the Company wrote off the value of unamortized leasehold improvements
for the prior facility during the second fiscal quarter of 1998,  which amounted
to $662.

Reju vs. Weldotron

Varghese Reju, the Company's  former Chief Financial  Officer,  was dismissed as
part of an overall  downsizing and reduction of overhead in October of 1995. The
Company  offered  and Mr.  Reju  received  a  severance  based upon his years of
service  with the  Company.  Mr. Reju then  brought an action  asserting  he was
entitled to benefits under a written  Severance  Agreement  entered into between
Mr.  Reju and the  Company  in 1993.  Under the terms of the  written  Severance
Agreement,  Mr.  Reju would be  entitled  to receive  two times his base  salary
(approximately  $165) in the event he was terminated as a result of a "change of
control" as defined in the Agreement. In its defense of this action, the Company
asserts that the "change of control," as  contemplated  in Mr. Reju's  Severance
Agreement,  never occurred,  and even if it did, there was no connection between
any such "change of control" and Mr. Reju's  termination  some  eighteen  months
later.  Management  believes  that the  lawsuit is without  merit and intends to
vigorously defend the action;  however,  the outcome cannot be determined.  This
matter is scheduled to go to trial in September 1998.



                                       33
<PAGE>

Mentmore Holdings Corporation vs. Weldotron Corporation

Mentmore Holdings Corporation ("Mentmore" or "Mentmore Holdings"),  an affiliate
of Lyford and Exford Corporations,  provides management advisory services to the
Company  pursuant to an agreement  dated as of June 14, 1994.  See discussion in
Section 13-"Certain  Relationships and Related  Transactions." The Company is in
default of certain  payments  due  Mentmore  under the terms of said  agreement.
Mentmore  initiated an action  against the Company in the Superior  Court of New
Jersey, Law Division,  Somerset County,  New Jersey. In February 1998,  Mentmore
obtained a  judgment  against  the  Company in the amount of $914 which has been
accrued at year-end.  Mentmore has not pursued  execution upon said judgment and
continues to provide services to the Company under the agreement.

Richard C. Hoffman, P. C. vs. Weldotron Corporation.

Richard C. Hoffman, P.C., a professional corporation,  provides legal services
to the  Company.  Richard  C.  Hoffman,  a  Director  of the  Company  and its
Secretary,  is the president and sole shareholder of Richard C. Hoffman,  P.C.
The Company is delinquent  in payment for fees and cost for services  provided
by Richard C.  Hoffman,  P.C.  Richard C.  Hoffman,  P.C.  initiated an action
against the  Company in the  Superior  Court of New Jersey,  Court of Somerset
County,  New Jersey.  On March 18, 1998 Richard C.  Hoffman,  P.C.  obtained a
judgment  against the Company in the amount of $424 which has been  accrued at
year end.  Richard  C.  Hoffman,  P.C.  has not  pursued  execution  upon said
judgment and continues to provide services to the Company.

Self  Insurance - The Company is party to personal  injury and  property  damage
litigation  arising out of  incidents  involving  the use of its  products.  The
Company  obtains  insurance  for  product and general  liability.  However,  the
Company has elected to retain a significant  portion of expected  losses through
the use of  deductibles.  Provisions  for  losses  are  recorded  based upon the
Company's estimates of the aggregate liability for claims incurred. Estimates of
such accrued  liabilities are based on an evaluation of the merits of individual
claims and historical claims experience;  thus, the Company's ultimate liability
may exceed or be less than the amount  accrued.  Amounts  accrued  are paid over
varying periods, which generally do not exceed five years. The methods of making
such estimates and  establishing  the resulting  accrued  liability are reviewed
continually,  and any adjustments  resulting  therefrom are reflected in current
earnings.  As of  February  28,  1998 and 1997 the  Company has accrued in other
current liabilities $188 and $466 respectively to cover anticipated loses.

Leases - The  Company  rents  office and  manufacturing  facilities  under lease
arrangements classified as operating leases that expire during 2000. The Company
is responsible  for the payment of real estate taxes,  water and sewer rates and
charges and janitorial and general maintenance charges upon the facilities.

Rent  expense  for  continuing   operations,   net  of  sublease   income,   was
approximately  $254,  $291,  and $266 for the years  ended  February  28,  1998,
February 28, 1997 and February 29, 1996,  respectively.  Sublease income was $0,
$7, and $30 for the years ended  February 28,  1998,  1997 and February 29, 1996
respectively.  Aggregate net minimum lease  payments for the remainder of leases
are as follows:

                         Fiscal Year         Operating
                       Ended February          Leases
                       --------------          ------

                            1999              $ 168
                            2000                126

Employment  Agreements - The Company has no employment  or severance  agreements
with  officers  that  provide  severance  pay if  certain  changes in control or
employment status take place.




                                       34
<PAGE>


8.    INCOME TAXES

The domestic and foreign components of pretax income (loss) are as follows:

                             Feb. 28,           Feb. 28,          Feb. 29,
                               1998               1997              1996
                               ----               ----              ----
Domestic                     $(5,417)         $ (2,049)          $ (3,447)
Foreign - Before
    minority interest           (370)             (458)               792
                                ----              ----                ---
                            
Total                        $(5,787)         $ (2,507)          $ (2,655)
                             =======          ========           ======== 
                             

The  Company's  effective  income tax rate  varied  from the  statutory  U. S.
Federal income tax rate because of the following:

                                            1998         1997          1996
                                            ----         ----          ----
Computed (benefit) provision at
   statutory rate                         $(1,968)       $(852)        $(903)
Increase (decrease) resulted from:
Change in valuation allowance               2,168          820         1,010
Other                                        (200)          69           163
                                             -----          --           ---
                                          $    --       $   37         $ 270
                                          ========      ======         =====

At February 28, 1998,  $16,013  federal tax loss carry forwards are available to
offset  future  domestic  taxable  income.  These loses expire in the years 2007
through 2013.

The net  deferred  tax asset at February 28, 1998 and 1997 is comprised of the
following:

                                                        1998            1997
                                                        ----            ----
Deferred tax assets:
   Inventory capitalization                              $69        $    127
   Net operating losses                                6,302           3,925
   Deferred compensation                                 504             467
   Reserves                                              845           1,208
   Bad debt allowance                                     39              48
                                                    ---------      ---------
Total assets                                           7,759           5,775

Deferred tax liability:
   Fixed assets                                          (59)            (27)
   Deferred assets                                       (56)            (52)
   LIFO reserve recapture                               (220)           (440)
                                                    ---------        --------
Total liabilities                                       (335)           (519)
                                                    ---------        --------

Net deferred tax asset                                 7,424           5,256
Valuation allowance                                   (7,424)         (5,256)
                                                     --------         -------

Deferred tax asset                                $       --       $      --
                                                  ===========      =========

A valuation  allowance has been recognized to fully offset the related  deferred
tax  asset  due to  the  uncertainly  of  realizing  the  benefit  of  the  loss
carryforwards.




                                       35
<PAGE>




9.    STOCK OPTIONS AND WARRANTS

The Company has an Incentive  and  Non-Qualified  Stock Option Plan that permits
the granting of options to purchase  100,000  shares of common stock.  Under the
plan,  the option price,  as to the incentive  options,  cannot be less than the
fair market value of the stock as of the date of grant and at least 110% of fair
market value for certain  management  employees.  The purchase  price under each
non-qualified  stock  option  is  determined  by a  Committee  of the  Board  of
Directors.  Options were granted until May 1993 and are  exercisable  within ten
years of the date of grant.

In June 1988,  the  stockholders  approved the 1988 Stock Option Plan.  The Plan
permits the  granting of options to purchase  100,000  shares of common stock at
100% of the fair market value at the time the option is granted.  Options, which
may be granted to March 1998,  are  exercisable  only during the  continuance of
employment, subject to certain limitations.

The Company applies  Accounting  Principles Board Opinion No. 25,  "Accounting
for Stock  Issued to  Employees,"  and related  interpretations  for its stock
option  grants.  Generally,  compensation  expense is not recognized for stock
option grants.

In  accordance  with  Statement  of  Financial  Accounting  Standards  No.  123,
"Accounting for Stock-Based  Compensation" (SFAS 123), the Company discloses the
pro forma impact of recording  compensation  expense utilizing the Black-Scholes
option pricing model. The Black-Scholes option valuation model was developed for
use in  estimating  the fair  value  of  traded  options  that  have no  vesting
restrictions and are fully transferable.

Since no options were granted in 1998,  1997 or 1996, the accounting  provisions
of SFAS No. 123 did not have an effect on the Company's pro forma net income and
earnings per share and thus have not been presented.

Changes under the stock option plans for the fiscal years ended  February  1998,
1997, 1996 and 1995, are as follows:

                                                               Shares
                                    Option                Price Per Share
                                    ------                ---------------

Outstanding, February 28, 1995     99,000                   2.50 - 4.50

Granted                                --
Canceled                          (54,000)
                                  ------- 

Outstanding, February 29, 1996     45,000                   2.50 - 4.50

Canceled                          (20,000)
                                  ------- 

Outstanding, February 28, 1997     25,000                      2.50

Canceled                          (24,000)
                                  ------- 

Outstanding, February 28, 1998      1,000                      2.50
                                    =====                     
                                    
In connection with financing  provided by Lyford  Corporation  (see note 7), the
Company  granted  Lyford on August 5, 1994, a Common Stock  Purchase  Warrant to
purchase up to 200,000  shares of common  stock at $2.00 per share and on May 5,
1995 a warrant to purchase up to 1 million shares of the Company's  common stock
at an exercise price of $1.00 per share.  The warrants expire in August 2004 and
April 2005, respectively. The market price of the Company's stock at the date of
the grants was $2 in August 1994 and $.875 in May 1995.



                                       36
<PAGE>

10.   EMPLOYEE BENEFIT PLANS

The Company sponsors a 401(k) savings plan. The Company contributes at a minimum
75% of each participating  employee's annual  contribution  limited to 4% of the
employee's   annual   compensation.   Additionally,   the   Company's   matching
contribution  increases  on  a  sliding  scale  based  on  pretax  profits  as a
percentage of net worth.  The  additional  contribution  is based on the audited
results of the Company's fiscal year immediately  preceding the beginning of the
plan year.  Savings Plan  expense was  approximately  $11,  $25, and $63 for the
fiscal years ended February 1998, 1997 and 1996, respectively.

The Company participates in a multi-employer  pension plan that provides defined
benefits to substantially all union employees.  Amounts charged to pension costs
and  contributed  to the Plan were $28,  $58, and $62 for the fiscal years ended
February 1998, 1997 and 1996, respectively.

11.   RELATED PARTIES

The  Company  entered  into an initial  one-year  management  advisory  services
agreement in June 1994 with Mentmore Holdings, an affiliate of Lyford and Exford
Corporations,  two  related  companies.  (See also note #7.) The  agreement  was
automatically  extended  for  successive  one-year  periods  thereafter,  and is
subject to termination upon written notice by either party not less than 90 days
prior to the  expiration of any extended  term.  The  agreement  provides for an
annual  fee of $300.  All  unpaid  monthly  installments  of the fee shall  bear
interest at the lesser rate of 12% per annum, or the maximum rate allowed by law
until such time as such installments are paid. Management fees and expenses were
$300 for each of the years ended February 28, 1998,  1997,  and 1996,  under the
agreement. (See also Note 7)

12.   INDUSTRY SEGMENTS

The Company operates  primarily in two business  segments:  Packaging  Systems
and  Controls.  The  Packaging  Systems  segment  designs,   manufactures  and
markets a variety of  industrial  and food  packaging  systems.  The  Controls
segment manufactures electronic controls systems.

Sales  to one  customer,  primarily  from  the  Packaging  Systems  Group,  were
approximately  $466,  $1,243,  and $1,417 or 9%, 7%, and 8% of net sales for the
fiscal years ended February 1998, 1997, and 1996 respectively.




                                       37
<PAGE>


Summary financial information by industry segment is as follows:

Industrial Segments                            1998       1997        1996
                                               ----       ----        ----
Net Sales:
Packaging Systems                            $ 6,886     $12,130   $ 15,997
Safety and Automation Systems                  1,009       1,156      2,318
                                             --------   --------   --------
                                             $ 7,895     $13,286   $ 18,315
                                             ========    ========  ========
Operating (loss) Income:
Packaging Systems                            $(5,485)    $(2,690)  $ (3,061)
Safety and Automation Systems                     99         113        578
                                             --------   --------   --------   
                                             $(5,386)    $(2,577)  $ (2,483)
                                             ---------   --------  -------- 
Unallocated corporate expense                   (401)       (419)      (497)
Other income (expense)                            --          489       325
                                             --------   --------   --------
                                             $(5,787)    $(2,507)  $ (2,655)
                                             ========    ========  =========
Identifiable assets:
Packaging Systems                            $ 4,421     $ 8,420   $ 11,140
Safety and Automation Systems                     --         554        681
Corporate                                          5          57        396
                                             --------   --------   --------
                                             $ 4,426     $ 9,031   $ 12,217
                                             =======     =======   ========
                                             

Capital expenditures:
Packaging Systems                            $    69     $   137   $    231
Safety and Automation Systems                     --          --         --
Corporate                                         --          --         --
                                             --------    -------   --------   
                                             $    69     $   137   $    231
                                             =======     =======   ========
                                             
Depreciation and amortization:
Packaging Systems                            $   192     $   367   $    461
Controls                                          --          --         --
Corporate                                         --          21         27
                                             --------    -------   --------
                                             $   192     $   388   $    488
                                             =======     =======   ========
                                           
Sales and identifiable assets by geographic region are as follows:

                                               1998        1997       1996
                                               ----        ----       ----
Net Sales:
United States                                $ 5,046     $10,019    $13,368
Brazil                                         2,849       3,267      4,947
                                             --------    -------    -------
                                            $  7,895     $13,286    $18,315
                                            =========    =======    =======

Operating Income (loss):
United States                               $ (5,417)    $(2,049)  $ (3,447)
Brazil                                          (370)       (458)       792
                                            $ (5,787)    $(2,507)  $ (2,655)
                                            =========    ========  =========
Identifiable assets:
United States                               $   2,529    $ 6,632   $  9,262
Brazil                                          1,897      2,399      2,955
                                            ---------    -------   --------
                                            $   4,426    $ 9,031    $12,217
                                            =========    ========   =======


                                       38
<PAGE>


13.   SHAREHOLDERS' RIGHTS PLAN

On February 25, 1988,  the Board of Directors  declared a dividend of one common
share purchase right (the "Rights") on each outstanding share of common stock of
the Company (the "Common  Stock").  The Rights  attached to the Common Stock and
entitle  the  holder to buy one share of Common  Stock at an  exercise  price of
$30.00 per share until March 30,  1998,  unless they are redeemed  earlier.  The
exercise price and the number of shares issuable upon exercise of the Rights are
subject to adjustment to prevent dilution. The Rights have no voting or dividend
rights and  2,500,000  shares of Common Stock are  reserved  for  issuance  upon
exercise of the Rights.

The Rights can be  redeemed by the  Company's  Board of  Directors  for $.05 per
Right at any time until ten days  after 20% of the  Company's  Common  Stock has
been acquired or the Rights expire.

The Rights only become exercisable, or transferable apart from the common stock,
ten  business  days after a person or group (the  "Acquiring  Person")  acquires
beneficial  ownership  of 30% or more  of the  Common  Stock;  or  commences  or
announces  an offer for 30% or more of the Common  Stock.  Thereafter,  upon the
occurrence of certain events (for example, if the Company is a party to a merger
or other business  combination  transaction or the Company is a surviving entity
in a reverse merger),  each Right not owned by the Acquiring Person would become
exercisable for the number of shares of the Acquiring  Person (or of the Company
in the case of a reverse merger) which, at that time,  would have a market value
of twice the exercise price of the Right.

14.   CONCENTRATION OF CREDIT RISK

Financial  instruments that potentially subject the Company to concentrations of
credit risk, as defined by Statement of Financial Accounting Standards No.
105, consist of certain trade receivables.

The Company's  customer  base includes a customer that  represents a significant
portion of the Company's sales and accounts receivables. Although the Company is
directly  affected by the well being of this  significant  customer,  management
does not believe significant credit risks exist at February 28, 1998.

ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE

On February 20, 1997, the Board of Directors of Weldotron  Corporation  approved
BDO Seidman,  LLP as its certifying  accountant for the year ending February 28,
1997. On February 27, 1997 management  informed the former accountant,  Deloitte
and Touche LLP, that it had been dismissed.  Except as stated immediately below,
there were no adverse  opinion,  disclaimer  of  opinion  or  qualifications  or
modifications as to uncertainty,  audit scope or accounting principles regarding
the report of Deloitte and Touche LLP on the Company's financial  statements for
the fiscal year ended  February 29, 1996.  The report of Deloitte and Touche LLP
on the Company's  financial  statements  for the fiscal year ended  February 29,
1996 was modified with respect to uncertainty regarding the Company's ability to
continue  as  a  going  concern  based  on  recurring   losses  from  operations
experienced at the time. There were no reportable  disagreements with the former
accountants  on any matter of  accounting  principles  or  practices,  financial
statement disclosure, or auditing scope or procedure leading to their dismissal.




                                       39
<PAGE>


PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
-------------------------------------------------------------------------------

Names               Principal Occupation, Employment, etc.                Age
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Richard L. Kramer   Chairman  of the  Board  of the  Corporation  (Since  48
                    June,  1994),  Mr. Kramer  is  also  Chairman  and a
                    director of  Mentmore  Holdings,  Texfi  Industries,
                    Inc., a textile and apparel  manufacturing firm, CPT
                    Holdings,  Inc., a manufacturer  of specialty  steel
                    profiles,  Orion Acquisition Corp. II, an investment
                    company,  MC Equities,  Inc.,  an insurance  holding
                    company,  Precise Technology,  Inc., a full-service,
                    custom   injection   molder  of  precision   plastic
                    products,  Stellex Industries,  Inc., a manufacturer
                    of microwave devices and aerospace  components,  and
                    Republic  Properties  Corporation.  Mr.  Kramer is a
                    director of J & L Structural,  Inc., Precise Holding
                    Corporation,    Trinity    Investment    Corp.   and
                    Sunderland Industrial Holdings Corporation.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
William L. Remley   Vice  Chairman  of the Board,  President  and CEO of  47
                    the  Corporation  (Since June 1994).  Mr.  Remley is
                    also Vice Chairman,  Chief  Executive  Officer and a
                    director   of   Stellex    Industries,    Inc.,    a
                    manufacturer  of  microwave  devices  and  aerospace
                    components,  President,  Chief Executive Officer and
                    a  director   of  Mentmore   Holdings   Corporation,
                    Vice-Chairman,   Chief   Executive   Officer  and  a
                    director of Texfi Industries  Inc.,  President and a
                    director of CPT  Holdings  Inc.,  Orion  Acquisition
                    Corp.  II and MC Equities  Inc.  and Vice  Chairman,
                    Treasurer   and  a  director   of  Precise   Holding
                    Corporation,    Trinity    Investment    Corp.   and
                    Sunderland Industrial Holdings Corporation.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

Richard C. Hoffman  Secretary  and General  Counsel of the  Corporation.  50
                    Currently  practices  law as Richard C. Hoffman P.C.
                    in Connecticut
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

Fred H. Rohn        Director,  General  Partner,  North American Venture  72
                    Capital Funds (Since 1989).
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

Bryon P. Fusini     Director,  Vice  President,   Investments  at  Smith  44
                    Barney,   Inc.  a  stock   brokerage  and  financial
                    services concern (since prior to 1989).
-------------------------------------------------------------------------------

Marvin D.  Kantor,  Director  of the  Company  since  July 1992,  resigned  as a
Director  effective May 1, 1997 for personal reasons.  Effective August 1, 1997,
John D. Mazzuto,  a Director of the Company  since April of 1994,  resigned as a
Director for personal reasons.

The remaining  members of the Board of Directors  have  determined not to fill
the vacancies left by the resignations of Messrs. Kantor and Mazzuto.

ITEM 11.    EXECUTIVE COMPENSATION

The following  table shows,  as to the Chairman of the Board and Chief Executive
Officer, information concerning compensation paid for services to the Company in
all  capacities  during the fiscal  years ended  February  28, 1998 and 1997 and
February 29, 1996.


                                       40
<PAGE>






                           SUMMARY COMPENSATION TABLE

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

      Name and                                  Other Annual   All Other
 Principal Position     FY    Salary    Bonus   Compensation  Compensation
                                                  (1) (2)        (1)
                                                   
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Richard L. Kramer      1998      -0-      -0-        -0-
Chairman of the Board  1997      -0-      -0-        -0-         6,000
                       1996      -0-      -0-        -0-         6,000
-------------------------------------------------------------------------
-------------------------------------------------------------------------

William L. Remley      1998      -0-      -0-        -0-
President and          1997      -0-      -0-        -0-         6,000
Chief Executive        1996      -0-      -0-        -0-         6,000
Officer
-------------------------------------------------------------------------

1)    Directors' Fees which total $6,000 annually.

2)    Richard  L.  Kramer and  William L.  Remley  are  executive  officers  and
      directors of Mentmore  Holdings  Corporation,  which  provides  management
      services to the Company.  See Item 13, "Certain  Relationships and Related
      Transactions."

No options were granted nor exercised by any of the named executive  officers or
directors  during  the  fiscal  year.  The  Company  has not  granted  any stock
appreciation rights.


                                       41
<PAGE>




ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Holdings of Management

The following table sets forth as of July 31, 1998,  information  concerning the
ownership  of  shares  of  Common  Stock  by each  Director  or  nominee  of the
Corporation  individually,  by each  officer  named in the Summary  Compensation
Table above and by all executive  officers and Directors of the Corporation as a
group, and the percentage  ownership of such  outstanding  Common Stock based on
information  furnished by such individuals.  Except for share beneficially owned
by spouses or other family members, such officers and Directors have sole voting
power and sole investment power with respect to such shares.
-------------------------------------------------------------------------------

    Name of Director or         Amount and Nature of Beneficial     Percentage
Nominee or Identity of Group       Ownership of Common Stock         of Class
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Bryon P. Fusini                             0                         0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
Richard C. Hoffman                          0                         0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Richard L. Kramer                           0 (1)                     0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Fred H. Rohn                                0                         0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

William L. Remley                           0 (1)                     0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

All executive officers and                100                         *%
Directors as a group (7 persons)
--------------------------------------------------------------------------------

*Less than one percent.

(1)   Mr. Kramer and Mr.  Remley are executive  officers and directors of Lyford
      Corporation,  record owner of 450,000  shares of Common Stock and warrants
      to purchase an additional  1,200,000  shares of common stock,  as to which
      stock and warrants they both disclaim beneficial ownership.


                                       42
<PAGE>




Principal Holders of Voting Securities

The following  table  indicates the only persons known by the Board of Directors
to be the beneficial owners of more than five percent of Common Stock as of July
31, 1998.
-------------------------------------------------------------------------------

           Name and Address of                Amount and Nature
             Beneficial Owner                   of Beneficial      Percentage
                                            Ownership of Common     of Class
                                                    Stock
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

Lyford Corporation (1)                            1,650,000           47.14%
1430 Broadway, 13th Floor
New York, New York 10018
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

Michael N. Kreiger (2)                             219,000             9.50%
205 Church Street, 3rd Floor
New Haven, CT 06510
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
                                                   143,200             6.23%
Walter J. Schloss Associates (3)
Walter J. Schloss & Edwin W. Schloss
52 Vanderbilt Avenue New York, NY 10017
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

Martin Siegel (4)                                  140,000             6.09%
26 Egan Place
Englewood Cliffs, NJ 07632
-------------------------------------------------------------------------------

1)   Partially  based  upon  information  contained  in the named  Shareholder's
     Schedule 13D dated  October 22, 1993,  as amended by Amendment  No. 1 dated
     February 17, 1994,  filed pursuant to the Securities  Exchange Act of 1934.
     Consists  of  450,000  shares of  common  stock and  warrants  to  purchase
     1,200,000 shares of common stock. The capital stock of Lyford is indirectly
     held by trusts  established for the benefit of certain relatives of Richard
     L. Kramer and William L. Remley,  executive  officers and  directors of the
     Company.

2)   Based upon information contained in named Shareholder's  Schedule 13D dated
     May 23,  1996,  as  amended  by  Amendment  No. 1 dated  July 31,  1996 and
     Amendment No. 2 dated January 14, 1997,  filed  pursuant to the  Securities
     Exchange Act of 1934.

3)   Based upon information contained in named Shareholder's  Schedule 13D dated
     October,  1990,  as amended by  Amendment  No. 3 dated July 30, 199,  filed
     pursuant to the  Securities  Exchange  Act of 1934,  which  Schedule 13D as
     amended  also  stated the named  Shareholders  had sole  voting  power with
     respect  to 143,200  shares as  follows:  Walter J.  Schloss  Associates  -
     127,200  shares;  Walter J. Schloss - 10,000  shares and Edwin W. Schloss -
     6,000  shares and sole  dispositive  power with  respect to 143,200  shares
     hereinabove set forth.

4)   Based upon information contained in named Shareholder's  Schedule 13D dated
     April 19,  1979,  as amended by  Amendment  No. 4 dated  February 17, 1994,
     filed pursuant to the Securities Exchange Act of 1934.



                                       43
<PAGE>

Compliance with Section 16 (a) of the Exchange Act

Section  16(a) of the  Securities  Exchange Act of 1934  requires the  Company's
executive  Officers and Directors and persons who own more than ten percent of a
registered class of the Company's  equity  securities  ("Reporting  Persons") to
file  reports of  ownership  and changes in ownership  with the  Securities  and
Exchange  Commission and any securities  exchange on which the Company's  equity
securities  are  then  listed.   The  Reporting  Persons  are  required  by  SEC
regulations  to furnish the Company with copies of all Section  16(a) forms they
file.

Based  solely on its  review  of the  copies of such  forms  received  by it, or
written  representations  from  certain  Reporting  Persons  that no forms  were
required for those  persons,  the Company  believes  that during the fiscal year
ended  February 28, 1998,  all filing  requirements  applicable to its Reporting
Persons were complied with on a timely basis.

PART IV

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On  August  31,  1994,  the  Company  borrowed  $500  from  Lyford   Corporation
("Lyford"),   an  affiliated  company  that  owned  19.56%  of  the  issued  and
outstanding  Common  stock of the  Company  as of July  31,  1998.  The  Company
executed and delivered to Lyford a promissory  note, a security  agreement and a
Common  Stock  Purchase  Warrant  granting to Lyford the right to purchase up to
200,000 shares of the Company's common stock at an initial exercise price of two
dollars per share,  the closing price for the Company's common stock on the date
the warrant was granted. The warrant expires on August 4, 2004.

On March 1, 1995, the Company concluded the rolling of this note into a new note
in the  amount of  $1,000,000.  The new  obligation  is  evidenced  by a certain
Amended,  Extended and Restated  Promissory  Note dated as of March 1, 1995 (the
"Restated  Note").  In consideration  for the new loan, the Company executed and
delivered to Lyford the Restated  Note and an additional  Common Stock  Purchase
Warrant. The Restated Note was originally due and payable on or before March 31,
1996 and bears  interest at 12% per annum.  The Restated  Note was  subsequently
extended three times -- first until April 1, 1997,  then until April 1, 1998 and
finally until  April1,  1999 and the interest rate was increased to 16%. The new
warrant  grants to Lyford the right to  purchase up to  1,000,000  shares of the
Company's  Common Stock at an initial  exercise  price of One Dollar ($1.00) per
share.  The market price of the Company's  Common Stock was $.875 on the date of
the warrant grant.  The new warrant  expires by its terms on April 12, 2005. The
Company's management considers the note to be at fair value and has not assigned
any value to the warrants.  The loan  transaction  closed  pursuant to documents
dated as of March 1, 1995 and, in the case of the new  Warrant,  April 13, 1995.
These loan documents were  contingent on the Company's  obtaining the consent of
its senior lender, which consent was obtained on May 5, 1995. The Lyford loan is
collateralized  by a  junior  lien on  substantially  all of the  assets  of the
Company.  Mr. Kramer and Mr.  Remley,  directors  and executive  officers of the
Company,  are also directors and executive officers of Lyford. The capital stock
of Lyford is indirectly  held by trusts  established  for the benefit of certain
relatives of Messrs. Kramer and Remley.

As a result of the continuing  deterioration in the financial performance of the
Company and the  negative  impact of the events  described  under "Item 3, Legal
Proceedings",  Lyford has advanced additional sums to the Company to protect its
collateral  position and to fund ongoing  operations.  As of July 31, 1998,  the
balance  due and owing to Lyford,  including  unpaid and accrued  interest,  was
$1,684.

In January 1996 the Company  entered into a $500  revolving  loan agreement with
Exford Corp., an affiliate of Lyford. The Company had outstanding  borrowings of
$350 under this  agreement  which  borrowings  bear  interest  at 14%,  and were
originally due on January 31, 1997. The note was  subsequently  extended  twice,


                                       44
<PAGE>

first until January 1, 1998 and then until  January 1, 1999. In connection  with
this  revolving  loan,  the Company has assigned to Exford its right,  title and
interest as tenant under the main operating  lease,  together with any rents due
and payable to the Company.  On September 1, 1997,  Lyford  purchased the Exford
loan.

In February  1997 the Company  entered  into a one-year  promissory  note in the
amount of $96 with Mentmore.  The note bears  interest at two percentage  points
above the prime rate,  with a default rate equal to the interest rate  otherwise
payable plus five percent for late  payment of interest or  principal.  The note
originally expired on February 11, 1998 and has been extended for one year until
February 11, 1999.

The  Company  entered  into an initial  one-year  management  advisory  services
agreement  in June of 1994 with  Mentmore  Holdings,  an affiliate of Lyford and
Exford  Corporations,  two related  companies.  The agreement was  automatically
extended  for  successive  one-year  periods  thereafter,   and  is  subject  to
termination  upon written  notice by either party not less than 90 days prior to
the expiration of any extended term. The agreement provides for an annual fee of
$300.  All unpaid  monthly  installments  of the fee shall bear  interest at the
lesser rate of 12% per annum, or the maximum rate allowed by law until such time
as such  installments are paid.  Management fees and expenses were $300 for each
of the years ended February 28, 1998, 1997 and February 29, 1996,  respectively.
(See also Note 7 to the  Consolidated  Financial  Statements  included  herein).
Messrs. Kramer and Remley are directors and executive officers of Mentmore.

PART IV.

ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
            REPORTS ON FORM 8-K

(a)   1.  Financial Statements

          The  following  Consolidated  Financial  Statements of the Company are
          filed as part of this Report in Item 8:

          Report of Independent Certified Public Accountants

          Consolidated Balance Sheets at February 28, 1998 and 1997.

          Consolidated Statements of Operations for the years ended February 28,
          1998 and 1997 and February 29, 1996.

          Consolidated  Statements of  Stockholders'  Equity for the years ended
          February 28, 1998 and 1997 and February 29, 1996.

          Consolidated  Statements of Cash Flows for the years ended February 28
          1998, and 1997 and February 29, 1996.

          Notes to Consolidated Financial Statements

      2.   Financial Statement Schedules

          None

      3.  Exhibits

          See  accompanying  Index to  Exhibits.  Company  will  furnish  to any
          stockholder,   upon  written  request,   any  exhibit  listed  in  the
          accompanying  Index to Exhibits  upon payment by such  stockholder  of
          Company's reasonable expenses in furnishing any such exhibit.

                                       45
<PAGE>

(b)   Reports on Form 8-K

          The  following  reports on Form 8-K were  filed by Company  during the
          last quarter of the period covered by this Report.

          None



                                       46
<PAGE>



SIGNATURES

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

WELDOTRON CORPORATION
(Company)

By:      /s/Richard L. Kramer
         Richard L. Kramer,
         Chairman of the Board
Date:    October 5, 1998

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 dates  indicated.  Each such person,  in the capacity
indicated  below,   constitutes  and  appoints   Richard  C.  Hoffman,   as  his
attorney-in-fact, to sign any and all amendments to this report.

/s/Richard L. Kramer     Chairman of the Board         October 5, 1998
Richard L. Kramer

/s/William L. Remley     Vice Chairman and CEO         October 5, 1998
William L. Remley

/s/Fred H. Rohn          Director                      October 5, 1998
Fred H. Rohn

/s/Bryon P. Fusini       Director                      October 5, 1998
Bryon P. Fusini

/s/Richard C. Hoffman    Corp. Secretary, Director     October 5, 1998
Richard C. Hoffman

/s/P. Roger Byer         Chief Financial Officer       October 5, 1998
P. Roger Byer            (principal financial and
                         accounting officer)



                                       47
<PAGE>