SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 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, 1997

     [    ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
          EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the  Transition  PeriodFrom
          __________ to __________

Commission File Number: 1-8381

                              WELDOTRON CORPORATION
             (Exact Name of registrant as Specified in its Charter)

             New Jersey                             22-160728
      (State or other jurisdiction of               (I.R.S. Employer
      incorporation or organization)                Identification No.)

1532 South Washington Avenue, Piscataway, New Jersey     08855
    (Address of principal executive offices)             (Zip Code)

Registrant's telephone number, including area code:      (908) 752-6700


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

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

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

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

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 Registrant'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. [ ]

Approximate aggregate market value of voting stock held by non-affiliates of the
Registrant as of May 20, 1997

Common Stock...................$577,000

As of May 20, 1997 there were  outstanding  2,300,173 shares of the Registrant's
Common Stock, $.05 Par Value.

DOCUMENTS INCORPORATED BY REFERENCE
None.

<PAGE>


                              WELDOTRON CORPORATION


                            Index to Annual Report on
                                    FORM 10-K
                      Twelve Months Ended February 28, 1997
                          (Dollar Amounts in Thousands)


PART I                                                                  PAGE

Item  1.   Business                                                    3

Item  2.   Properties                                                  8

Item  3.   Legal Proceedings                                           10

Item  4.   Submission of Matters to a Vote of Security Holders         12


PART II

Item  5.   Market for Registrant's Common Stock and Related
           Stockholder Matters                                         13

Item  6.   Selected Financial Data                                     13

Item  7.   Management's Discussion and Analysis of
           Financial Condition and Results of Operations               15

Item  8.   Financial Statements and Supplementary Data                 21

Item  9.   Changes In and Disagreements with Accountants               43


PART III

Item  10.  Directors and Executive Officers of the Registran           44

Item  11   Executive Compensation                                      45

Item  12   Security Ownership of Certain Beneficial
           Owners and Management                                       46

Item  13.  Certain Relationships and Related Transactions              48


PART IV

Item  14.  Exhibits, Financial Statement Schedules,
           and Reports on Form 8-K                                     49


<PAGE>


PART I

ITEM  1.   BUSINESS

Weldotron Corporation (which,  together with its subsidiaries,  is herein called
the "Company" or the "Registrant"),  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  businesses  are Packaging
Systems Group and the Safety and Automation Systems Group located in Piscataway,
New Jersey in addition to the 60% owned subsidiary in Brazil engaged also 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.   A
communications subsidiary,  Valiant International Multi-Media Corp. ("Valiant"),
which was sold effective August 31, 1994,  marketed multimedia  products,  video
products, and audio/visual equipment and supplies.

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,  1997, 1996 and 1995 as restated to give effect to
the sale of Valiant as of August 31, 1994.

                      Fiscal Year             Fiscal Year         Fiscal Year
                        Ended                   Ended               Ended
                   February 28, 1997       February 29, 1996   February 28, 1995
                   -----------------       -----------------   -----------------
                             (Dollars in Thousands)

Packaging .......   $12,130      91%     $15,997        87%     $16,647      85%
Systems

Safety &
Automation
Systems .........     1,156       9%       2,318        13%       3,023      15%

Total ...........   $13,286     100%     $18,315       100%     $19,670     100%

For  additional  details  relating  to industry  segments,  see the Notes to the
Consolidated Financial Statements.

A.    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.

(i) 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 was a pioneer in the shrink  packaging  industry and is considered a
leading  developer  of shrink  packaging  machinery.  The  Company's  Industrial
Packaging  Systems group  manufactures a broad line of shrink packaging  systems
designed to provide  substantial  user benefits such as lower  packaging  costs,
increased  productivity,  and improved  product  appearance and integrity.  Many
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.

Industrial  Packaging's line of manually  operated shrink packaging  machines is
believed to be among the highest quality  machines of their type. 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 unique "vertical rising" seal head
that maximizes machine operating speed and produces stronger seals than pivoting
type seal bars found on  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, CD 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.

(ii) Stretch  Packaging  Systems:  The Company  introduced  the first  automatic
four-way stretch packaging  machines in the United States during the 70's. These
systems  use  semi-elastic  plastic  films to wrap food  products  such as meat,
poultry,  seafood and produce.  These  packaging  systems  mechanically  stretch
plastic film tightly around the food product,  which is generally in a tray, and
then lap the  plastic  film over  itself on the  bottom of the tray and seal the
package. The result is a transparent,  skin-tight wrap on the display surface of
the tray.

B.    Safety and Automation Systems Group

The Safety and Automation Systems Group designs, manufactures 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
manufactured in Piscataway,  New Jersey while others are manufactured  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.
The  addition of the 8230 Thin Line Series will allow the Company to gain market
share.  The Company now offers what it believes to be one of the widest  variety
of sizes and options of presence sensing devices.

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.

During the last fiscal year, this group  introduced a new line of press controls
which complement the existing product line.

C.    Discontinued Operations

Due to  management's  desire to focus on its core  businesses  -- packaging  and
safety and automation -- it decided in the first quarter of Fiscal `95 to divest
its  communications  subsidiary,  Valiant  International  Multi-Media  Corp. The
subsidiary  was sold  effective  August 31, 1994 to a group of  investors  which
included the management of the subsidiary and a former Company director.

The product line of the  discontinued  operation  consisted of video  equipment,
tape  recorders and other audio  devices,  computer  equipment and  accessories,
books and other related products.  These products targeted  professional markets
that included schools,  business and industry,  government agencies,  hospitals,
libraries, television and radio stations and colleges. Some of the products were
produced  to Company  specifications  and were  assembled  and  packaged to meet
market needs. None were manufactured by the Company.

D.    Manufacturing

The Company  currently  conducts  North American  manufacturing  operations in a
leased,  one-story plant  consisting of 256,000 square feet located on a 15 acre
site in Piscataway,  New Jersey. The Company intends to move its operations to a
smaller,  more  efficient  facility in the southern New Jersey area in the third
fiscal quarter.

Manufacturing  of packaging  systems are 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
Company  also  maintains  an extensive  spare parts  inventory to meet  customer
needs.

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 90 days
and its food packaging equipment for a period up to two years.

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

E.    Marketing and Sales

The  Company  sells its  packaging  equipment  in North  America  to  industrial
companies,  food  processors,  and supermarkets  directly and through  packaging
machinery distributors and dealers. For the fiscal year ended February 28, 1997,
approximately  44% of the Company's sales were made directly to the end user and
approximately 56% were made through other  distribution  channels.  Direct sales
are more prevalent in stretch packaging systems than in shrink systems.  Stretch
wrapping  machinery sales to supermarkets,  however,  are generally made through
independent  dealers who  specialize in sales and service in selected  cities or
regions.  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, 1997, February 29, 1996, and February 28, 1995, respectively, sales
to W.R. Grace and Co. accounted for  approximately  7%, 8%, and 6% respectively,
of the consolidated net sales of the Company.

Regional  sales  territories  are managed by the  Company's  staff,  who provide
distributors  sales  training and sales  support.  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  $1,405 and
$2,200 at February 28, 1997 and February 29, 1996, respectively.

Foreign sales,  which aggregated  approximately 6% of net consolidated sales for
the fiscal year ended  February 28, 1997 are carried out directly and by certain
appointed distributors.

The Company's Brazilian subsidiary, Weldotron do Brasil, Ltd. (WdB), is included
in the consolidated results of the Company. It is 60% owned by the Company, with
the  remaining  40% being  Brazilian  owned.  WdB has been a  subsidiary  of the
Company since 1973. The Company believes that WdB has a substantial share of the
Brazilian shrink packaging  equipment market;  however 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.

Although the Brazilian  economy showed  increasing  economic activity this year,
inflation continues to disturb the relative price of goods and services, leaving
the economic situation uncertain.

In October 1994, the local management of the company submitted a proposal to buy
the  Brazilian  operations.  However,  the  Company  rejected  the  offer due to
unsatisfactory  terms. The Company obtained the services of an investment banker
to  prepare a  valuation  of the  entire  Brazilian  operations  comprising  the
packaging  machinery business and the real estate.  According to this valuation,
the entire value of this business was  approximately  $1,950,  before the fiscal
1996  distribution  of  capital.  The  Company  instructed  this  firm to find a
possible buyer for the Brazilian  operations assuming an appropriate price would
be  realized.  Subsequently,  after  receiving  no  legitimate  offers  for  the
business, efforts to sell the Brazilian operations were discontinued.

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.

F.    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
comparable  in size  to the  Company.  Although  definitive  statistics  are not
available, the Company believes that it has an important share of the high-speed
automatic shrink packaging equipment market in the United States.

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.

G.    Employees

At February  28,  1997,  the Company had  approximately  88 domestic  employees,
including  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. Comparatively, last year the Company had approximately
111  domestic  employees,  which  included  68  engaged in  manufacturing,  6 in
engineering  and design,  6 in technical  service and  support,  21 in sales and
marketing and 10 in general and administrative functions.

The  Company's  manufacturing  employees  predominantly  work  a  single  shift.
Approximately  17 of the Company's  manufacturing  employees are  represented by
Local 427 of the  International  Union of Electrical,  Radio and Machine Workers
AFL-CIO.

Because of the reduced level of business,  the Company has made subsequent staff
reductions in the first and second  Quarters of Fiscal 1998. At August 31, 1997,
the  Company  had   approximately   49   employees,   including  26  engaged  in
manufacturing  and 23  engaged  in  marketing  and  general  and  administrative
functions.

A labor contract covering the Company's manufacturing employees was successfully
concluded  in March  1997 for the period  March 1997  through  March  1998.  The
Company generally considers its labor relations to be satisfactory.

The Company's Brazilian subsidiary employs about 64 people.


ITEM  2.   PROPERTIES

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

<PAGE>


WELDOTRON CORPORATION AND SUBSIDIARIES
PROPERTIES

<TABLE>
<S>         <C>          <C>          <C>                 <C>             <C>         <C>       <C>

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

                                                                                                 (1)
Piscataway,   256,000     35% (1)                         Packaging        Leased     2005
New Jersey                             Manufacturing,     Systems,

                                       Warehousing,       Communications
                                       General            and
                                       and                Controls
                                       Corporate
                                       Office

Sao Paulo,     3,000       100%        General            Packaging        Leased     1998
Brazil                                                    Systems

Nova          21,000       100%                           Packaging         Owned      N/A       (2)
Odessa,                                Manufacturing,     Systems
Brazil                                 Warehousing,
                                       General
                                       Office

</TABLE>


Notes:

(1)   Personnel  reductions  and reduced  space  requirements  due to the use of
      demand flow manufacturing  concepts. The current space requirement is only
      35,000 - 70,000 sq. ft.  Therefore,  the  Company has  actively  sought to
      sublease the excess square footage.  It was anticipated  that the sublease
      income would exceed the remaining lease  obligations  and  amortization of
      the leasehold improvements.  See discussion of Legal Proceedings regarding
      the current status of this property.

(2) Property is free of encumbrances.

<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 as of
February 28, 1997. Some of the actions involve claims for compensatory, punitive
or  other  damages.  The  Company  presently  believes  that  any  compensatory,
punitive, and other damage claims are adequately covered by insurance.


Martin Siegel vs. Weldotron Corporation

On November 23, 1994,  the  Registrant 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 Corp. 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,  with  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 the payment of
his deferred  compensation benefits upon the Company in May of 1997. In June, as
was 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 Court for a confessed judgment 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  is in
discussions with Mr. Siegel concerning a potential settlement of its obligations
to Mr.  Siegel.  As of February  28,  1997,  the Company had accrued $810 as the
present value of this obligation.


<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 put the Company on 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
intends to meet with Seymour Siegel and his counsel in an effort to settle these
claims.  As of February  28,  1997,  the Company has accrued $355 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 the 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,  successfully  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 1997; and (3) Weldotron  agreed to make certain  cosmetic changes to
the appearance of its new domestically sourced products.

Weldotron has made the first 3 installment payments, totaling approximately $48,
under  the terms of the  settlement  with  Riken.  Weldotron  suspended  further
payments in April of 1997.  Riken has  notified  Weldotron  that it will seek to
pursue the enforcement of the settlement terms against the Company and will seek
to obtain a judgment in the amount of the  remaining  settlement  payments.  The
Company  anticipates  having  further  discussions  with  Riken in an  effort to
compromise the remaining payment obligations of the Company.

Mackman Realty Corp. vs. Weldotron Corporation

The Company currently occupies 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
utilizes  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 has, for the
last two years,  sought to sublease said  facility and to move to smaller,  more
efficient quarters.  Because the existing facility is dated and because updating
would require a 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  Weldotron'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  judgment  in favor of  Mackman  for
possession of the facility on August 15, 1997.  The Company  continues to occupy
the facility,  under an interim  arrangement  with Mackman,  through October 15,
1997.

The Company has located a smaller, more efficient facility in the immediate area
of the existing  facility into which it intends to move by said October 15, 1997
date. Negotiations for a lease for the new facility are proceeding.  As a result
of the Court's decision,  the Company will be required to write-off the value of
unamortized  leasehold  improvements for the existing facility during the second
fiscal quarter of 1998, which are estimated at $662.

Product Safety Program

The Company has a product safety program which has been  implemented in response
to the  burgeoning  litigation  against  corporations  in  America.  The program
includes, among other things, taking a proactive and aggressive course of action
to defend against alleged claims for damages including  immediate  investigation
if an injury is reported.

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

      None.


<PAGE>


PART II


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


The Company's  Common Stock was traded on the American  Stock  Exchange  (Symbol
WLD) until November 8, 1996.  High and low prices for each quarter during Fiscal
Year 1997 and Fiscal Year 1996 and information relating to dividends are:


             For the year ended February 28,     For the year ended February 29,
                        1997                                   1996
                   High          Low                    High             Low
1st Quarter ....   $1-1/2      $   1               $1-1/8             $ 9/16
2nd Quarter ....        1      11/16                  7/8                1/2
3rd Quarter15/16     5/16       5/16                1-1/4               7/16
4th Quarter ....      5/8       1/16               1-5/16                5/8

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  538  stockholders of record at February 28, 1997. 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:


<PAGE>



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

                        For Fiscal Years Ended February,
                            1997 1996 1995 1994 1993
Net Sales                       $13,286    $18,315   $19,670   $21,462  $19,046

Gross Profit                      3,460      5,901     7,234     6,265    5,341

(Loss) From Continuing
  Operations                    (2,233)   (2,754)   (3,202)    (2,361)   (3,009)

Other Income (Expense)            (274)       99      (110)       101        (7)

Loss from Continuing
  Operations Net of Taxes       (2,347)   (3,134)   (3,418)    (2,223)   (3,099)

Gain (Loss) From
  Discontinued Operations            --        --      (16)        12       (22)

Net Loss                        (2,347)   (3,134)   (3,434)    (2,211)   (3,121)

Net (Loss) Earnings Per
  Share:
  Continuing Operations          (1.02)    (1.36)    (1.49)     (1.05)    (1.70)
  Discontinued Operations           --        --       .00        .01      (.01)

Net Loss Per Share               (1.02)    (1.36)    (1.49)     (1.04)    (1.71)

Total Assets                     9,031     12,217    15,286    17,047    18,550
Working Capital                    579      3,989     5,933     7,621     8,649
Long-Term Debt                   1,000      1,750     1,250       777       835
Stockholders' Equity                95      2,442     5,576     9,010    10,114

See Item 7 for Management's  Discussion and Analysis of Financial  Condition and
Liquidity and Results of Operations.

Statements of Operations and balance sheet data is reclassified for discontinued
operations. (See Note 4 to the consolidated financial statements).

No cash dividends have been distributed during the periods presented.


<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 the caption,  "Selected  Consolidated  Financial
Data". All information is based on the Company's fiscal year-end of February.
All amounts are in thousands except as noted.

FINANCIAL CONDITION AND LIQUIDITY
The primary and secondary  sources of financing for the Company  during the year
were notes from  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.

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, 1997, the Company had used approximately  $1,172 of the Business
Alliance Capital New Credit Facility (See note 7 to the  consolidated  financial
statements).  Based on the  advance  percentages  of  eligible  receivables  and
inventory,  the Company had unused borrowing  availability of approximately $306
at February 28, 1997.

On August 31, 1994, the Registrant borrowed $500 Dollars from Lyford Corporation
("Lyford"), an affiliated company that owns 19.56% of the issued and outstanding
common stock of the  Company.  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  Registrant  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 new note was originally due and payable on or before March 31, 1996
and bears interest at 12% per annum.  The note was  subsequently  extended twice
-first until April 1, 1997,  then until April 1, 1998 and the interest  rate was
increased  to  14%.  The new  loan is  secured  by a  junior  lien on all of the
Company's  assets.  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 ($1.00) Dollar 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 August 31, 1997, the
current balance due and owing to Lyford,  including  unpaid and accrued interest
is $1,684.

In January,  1996 the  Registrant  entered into a $500  revolving loan agreement
with Exford Corp.  "Exford",  an affiliated  company of Lyford.  The  Registrant
borrowed $350 under this agreement  which  borrowings  bear interest at 14%, and
was originally due on January 31, 1997. The note was subsequently extended until
January 31,  1998.  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.

In February,  1997 the Registrant entered into a one year promissory note in the
amount of $96 with Mentmore Holdings.  The note bears interest at two percentage
points above the prime rate,  with a default rate of the interest rate plus five
percent for late payment of interest or principal.  The note expires on February
11, 1998.

The Company's net working  capital and current ratio  decreased  from last year.
Net  working  capital  decreased  from  $3,989  to $579  and the  current  ratio
decreased from 1.67 to 1.09.  The major changes in the net working  capital from
year to year were the following:

Accounts receivable decreased from $2,000 last year to $1,299 this year due to a
27% decline in  consolidated  sales from last year.  Inventories  decreased from
$6,653 to $5,088 this year due to efforts to keep inventory  levels in line with
reduced sales, particularly in the domestic side of the business.

Prepaid  expenses and other current assets decreased from $563 last year to $399
this year due  primarily  to  reductions  in prepaid  insurance  resulting  from
premium  savings and prepaid  payroll taxes due to timing  differences  from one
year to the next.

Investment  in real  estate held for sale  decreased  from $377 to $0 due to the
reclassification  of this asset to long term after  reevaluating its probability
of sale within the next twelve months.

Cash  overdraft  increased  from $0 last year to $211,  due to the  issuance  of
checks prior to the funding from an unused borrowing availability as of February
28th of $306.

Short-term  borrowings  increased  from $835 to $1,396 due primarily to the $750
portion of last year's  credit  facility that was  classified as long-term,  and
increases in short-term obligations at our Brazilian subsidiary.

Short-term  borrowing  -  Related  Party  increased  from  $150 to  $446  due to
additional  financing  of $200 under the  Exford  line of credit and $96 from an
additional note with Mentmore Holdings.

Accounts payable and other current  liabilities  decreased from $4,963 to $4,173
due to a  combination  of reduced  purchases  consistent  with volume  declines,
negotiated  forgiveness  of debt with a former  supplier,  and reduced  customer
deposits.

Capital expenditures excluding finance-type leases were $92 for 1997 compared to
$231 last year.

The Company  expects  capital  expenditures to be minimal in 1998 and intends to
use leases to finance such investments  where  practical.  At February 28, 1997,
the Company had no commitments for capital expenditures.

The Company's sixty percent owned Brazilian subsidiary, Weldotron do Brasil, was
financially self-sufficient for the year and is expected to be so again in 1998.
Brazil operates in a highly inflationary  economy. As a hedge against inflation,
in prior  years,  Weldotron  do Brazil had  invested  excess  cash in three real
estate apartments as investment property. One apartment was sold in fiscal 1995,
with the proceeds distributed as dividends in a 60% and 40% relationship between
Weldotron U. S. and the minority  interest.  At the end of fiscal 1996, title to
one  of  the  remaining  two  apartments  was  transferred  to  Weldotron,  U.S.
(approximately a 60% interest in the total value of the two) at a carrying value
of $377.  The Company has enlisted the services of a broker for the sale of this
apartment to raise additional cash.

The major  component  affecting the operating  cash flow adversely this year and
last year was the operating losses.  However, these adverse changes were largely
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 Company  invested $137 in property plant and equipment this year  (including
$45  in  finance-type   leases)  compared  to  $231  last  year.  These  capital
expenditures were primarily for tooling and engineering support services.

The effect of exchange  rate changes on cash and cash  equivalents  for the year
ended  February  28,  1997 and the prior year was $(148) and $306  respectively.
This  is  attributable  to  Brazil'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 1995,
1996 and 1997. 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.  Special  efforts will be made in
fiscal 1998 to sell off slower moving inventory of spare parts, finished product
to secondary markets, and underutilized  manufacturing  equipment.  Certain cost
reduction  programs have been implemented and others are in process in the areas
of business insurance,  employee benefits, utilities and professional fees. With
new  marketing  strategies  and  potential  opportunities  for  exports  to  the
Brazilian  and  South   American   marketplaces   coupled  with  the  continuing
streamlining of the organization and more favorable  advance rates under the new
Credit Facility, the Company's cash requirements for operating needs and capital
expenditures  in the next twelve  months may be met.  The Company is involved in
various  legal  actions,  among which is the lawsuit  filed by a former  officer
(Martin  Siegel) in the amount of  $772,396.49.  Whereas the Company is not in a
position to settle such claim in full at this time,  discussions with Mr. Siegel
are in process concerning a suitable settlement arrangement for both parties.

The Company incurred net losses in recent years, and as of February 28, 1997 had
an accumulated deficit of $9,698. Whereas the Company's financial statements for
the year ended February 28, 1997 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, 1997.


RESULTS OF OPERATIONS
Fiscal Year 1997 Compared To 1996

Net Sales from continuing operations were $13,286,  which is a decrease of 27.5%
from $18,315 in 1996.  Domestic  packaging sales declined from $11,050 to $8,863
or 19.8%.  Sales in the Control segment declined from $2,318 to $1,156 or 50.1%.
The Brazilian  subsidiary  experienced a decline in sales from $4,947 in 1996 to
$3,267 in 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  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 Control segment  continued to feel the effects of last year's extended
period  of  being  without  inventory  due to  exorbitant  price  increases  and
unfavorable foreign exchange rates with its former major offshore supplier.  The
supplier  situation has since been resolved with the procurement of high quality
material from domestic  sources,  and the segment  continues to gradually regain
market share.

The Company is developing  alternative  marketing  strategies in response to the
continued revenue declines,  and has begun to explore applications of certain of
its product  lines with their  advanced  technologies,  within the Brazilian and
South  American  marketplaces,  in  which  our  subsidiary  already  has a  long
established presence of respectability, reliability, and quality.

The Loss From Continuing  Operations  decreased to $2,347 from $3,134 last year.
The decrease  resulted  from the absence of major  restructuring  and  inventory
charges  this  year,  as well as reduced  selling,  general  and  administrative
expenses.

Gross Margin  decreased  from 32.2% of sales to 26.0% in 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 our  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 domestic  packaging  segment's and control  segment's
gross margins declined $728 and $667, respectively.

The Company's selling,  general and administrative  expenses decreased this year
by $1,857 to $4,801 compared to last year. 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  expenses  of $180 due to the 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 Brazil was evenly  distributed  between marketing and general  administrative
expenses.

In the  current  year,  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
the prior year.

Deferred  compensation  expense this year  decreased  slightly to $113 from $124
last year.

Other income and expenses this year included a foreign currency translation loss
of $148  compared  to a gain of $345  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.  Brazil 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 the  current  year was 9%  compared  to 15% for the prior  year.  The
official  selling rates of exchange to the U.S.  dollar were $1 equals  R$1.0394
this  year  compared  to $1  equals  R$0.9726  last year (In  fiscal  1995,  the
Brazilian  currency  was  changed  from  Cruzeiros  to Reals).  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  this year was $60  compared  to $42 last year.  The  Company  expects to
receive future  royalties on patents through 2002.  Commission  income generated
entirely by our Brazilian  subsidiary decreased from $489 last year to $414 this
year.

RESULTS OF OPERATIONS
Fiscal Year 1996 Compared To 1995

Net Sales from  continuing  operations  were $18,315 which is a decrease of 6.9%
from $19,670 in 1995. The sales decrease was all domestically related.  Domestic
packaging systems sales declined from $13,097 to $11,050 or 15.6%, whereas sales
in the Control  segment  declined from $3,023 to $2,318 or 23.3%.  The Brazilian
subsidiary  increased its sales from $3,550 in 1995 to $4,947 in 1996, or 39.4%.
Domestically, the Company streamlined its product offering this year eliminating
several low margin,  custom made products which required  extensive  engineering
time, as well as certain imported product lines which became less profitable due
to unfavorable changes in exchange rates. The Control segment suffered from lack
of inventory,  unfavorable  exchange rates and exorbitant  price  increases.  In
response,  it shifted sourcing to domestic production on 50% of its product line
and  discontinued  products  accounting  for 15% of previous  year's sales.  The
control segment is now producing  domestically adequate inventory at competitive
prices to support demand, and is rebuilding its business.

Continued  cautious  capital  spending in the economy and fierce  competition in
certain segments of the market have contributed to the domestic revenue decline.
In response to the latter  situation,  the Company has  rationalized its product
lines into three major segments, manual, semi-automatic, and fully automatic and
high speed, and lowered prices on certain products,  while restructuring certain
manufacturing operations to minimize any margin impacts.

The Loss From Continuing  Operations  decreased to $3,134 from $3,418 last year.
The decrease resulted from substantially reduced operating expenses and deferred
compensation this year.

Gross margin  decreased  from 36.8% to 32.2% of sales in 1996 and from $7,234 to
$5,901 in dollars.  $1,085 in inventory  valuation  reserves were charged to the
period  and  despite  certain  savings  achieved  in  material  and labor  costs
domestically,  the Brazilian  subsidiary's material cost increased from 29.8% of
sales to 33.3%.

In terms  of  dollar  contribution,  the  Brazilian  subsidiary's  gross  margin
increased  $664 due to higher  sales on a  relatively  fixed  level of  overhead
expenses, while the Control segment's and the Domestic Packaging segment's gross
margins declined $316 and $1,681 respectively.

The Company's selling,  general, and administrative expenses decreased this year
by $1,406 to $6,658 compared to last year. The  Piscataway,  New Jersey location
had a decrease of $1,710,  while the Brazilian location had an increase of $304.
The decrease in Piscataway  was in: a) salaries and wages of $801, b) legal fees
of $290,  c) benefits of $203 and d)  advertising  and trade shows of $183.  The
increase at Brazil was primarily due to selling and distribution expenses.

In the  current  year,  the  Company  recorded a reserve of $1,085 to write down
inventory to net realizable  value. This compares to a total charge of $1,031 in
the prior year  comprised  of $390 in  reserves to write down  inventory  to net
realizable value, and $641 of write offs due to discontinued  product lines. The
inventory write off related to discontinued product lines was part of an overall
reassessment  program  of future  product  plans and  streamlining  of  existing
products that began during calendar 1993 and which continued through fiscal 1995
due to the complexity of the review process.

The  decrease in deferred  compensation  expense this year by $497 is due to the
effect  of a  settlement  last  year of a lawsuit  brought  by a former  officer
resulting from early termination which increased his deferred  compensation from
$80 to $100 per annum and the  recognition of increased  life  expectancy of two
former officers reflected in the valuation.

Other Income and Expenses this year included a foreign currency translation gain
of $345  compared  to $344 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.  Brazil  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 the
current year was 15% compared to 869% for the prior year.  The official  selling
rates of exchange to the U.S.  dollar were $1 equals R$0.9726 this year compared
to $1 equals  R$0.8460 last year.  (In fiscal 1995,  the Brazilian  currency was
changed from Cruzeiros to Reals). 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 $121 due to increased
average  borrowings  from a Related  Party and higher  interest  rates.  Royalty
income  this year was $42  compared  to $84 last year.  The  Company  expects to
receive future  royalties on patents through 2002.  Commission  income generated
entirely by our Brazilian  subsidiary increased from $109 last year to $489 this
year.


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
is not required.


WELDOTRON CORPORATION

Consolidated Financial Statements and
Supplemental Schedule for the
Years Ended February, 1997, 1996, and 1995
and Independent Auditors' Report



<PAGE>






                     REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



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

We have  audited  the  accompanying  consolidated  balance  sheet  of  Weldotron
Corporation   and   subsidiaries  as  of  February  28,  1997  and  the  related
consolidated  statements of operations,  stockholders' equity and cash flows for
the year 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 audit.

We conducted our audit 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 audit provides 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  at February 28,  1997,  and the results of their
operations  and their  cash  flows for the year 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
that raise  substantial  doubt about its ability to continue as a going concern.
Management's  plans in regard to these matters are also described in Note 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 3, 1997



<PAGE>


Weldotron Corporation and Subsidiaries  Consolidated Balance Sheets February 28,
1997 and February 29, 1996 (Amounts in thousands, except share data)

                                                            1997      1996
Assets
CURRENT ASSETS
      Cash and cash equivalents                            $  19     $ 344
      Accounts receivable (less allowance
       for doubtful accounts:
       1997, $184; 1996, $271                              1,299     2,000
      Inventories                                          5,088     6,653
      Prepaid expenses and other current assets              399       563
      Investment in real estate held for sale                 --       377
                                                           -----     -----
           Total current assets                            6,805     9,937
                                                           -----     -----

PROPERTY, PLANT AND EQUIPMENT:
      Land and buildings                                     660       746
      Fixtures and equipment                               8,781     8,947
      Leasehold improvements                               1,758     1,758
      Automotive equipment                                   164       152
                                                           -----     -----
           Total property, plant and equipment            11,363    11,603

      Less accumulated depreciation and amortization       9,676     9,497

           Property, plant and equipment, net              1,687     2,106

DEFERRED COSTS AND OTHER ASSETS                              539       174
                                                           -----     -----

TOTAL ASSETS                                              $9,031   $12,217
                                                          ==================


Liabilities and Stockholders' Equity CURRENT LIABILITIES:
      Cash overdraft                                      $ 211     $  --
      Short-term borrowings                               1,396       835
      Short-term borrowings - related party                 446       150
      Accounts payable                                    1,721     2,077
      Payables to related parties                           807       418
      Accrued payroll, vacation and payroll taxes           539       666
      Customer deposits                                     163       595
      Other current liabilities                             943     1,207
                                                          -----     -----

           Total current liabilities                      6,226     5,948
                                                          -----     -----

LONG-TERM DEBT                                               --       750
LONG-TERM DEBT - Related Party                            1,000     1,000
                                                          -----     -----

           TOTAL LONG-TERM DEBT                           1,000     1,750
                                                          -----     -----

DEFERRED COMPENSATION                                     1,165     1,201
                                                          -----     -----

MINORITY INTEREST IN SUBSIDIARY                             478       715
                                                          -----     -----

OTHER LONG-TERM LIABILITIES                                  67       161
                                                          -----     -----

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

      Preferred stock, par value $.05 per share; authorized
       1,000,000 shares; 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                                            (9,698)   (7,351)

      Common stock in treasury, at cost - 52,547 shares
       1997 and 1996                                       (123)     (123)
                                                           -----     -----

           Total stockholders' equity                        95     2,442
                                                          -----     -----
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY               $9,031   $12,217
                                                         ======   =======

See Notes to Consolidated Financial Statements.



<PAGE>


Weldotron Corporation and Subsidiaries
Consolidated Statements of Operations
For the Years Ended February 28, 1997 and
February 29, 1996 and February 28, 1995
(Dollar amounts in thousands, except per share amounts.)
                                                 1997       1996        1995


NET SALES                                      $13,286     $18,315    $19,670

COST AND EXPENSES
      Cost of sales                              9,826      12,414     12,436
      Selling, general and administrative        4,801       6,658      8,064
      Depreciation and amortization                388         488        506
      Deferred compensation expenses               113         124        621
      Restructuring and other inventory charges     91       1,085      1,031
      Related party charges                        300         300        214
                                                ------      ------      -----
                                                15,519      21,069     22,872
                                                ------      ------     ------
LOSS FROM OPERATIONS                            (2,233)     (2,754)    (3,202)
                                                -------     -------     -------

OTHER INCOME (EXPENSES)
      Foreign currency translation gain (loss)    (148)        345        344
      Interest expense                            (621)       (613)      (492)
      Royalty income                                60          42         84
      Other (expense) income                        21        (164)      (155)
      Commission income                            414         489        109
                                                ------      ------      -----

                                                  (274)         99       (110)


LOSS FROM CONTINUING OPERATIONS
   BEFORE MINORITY INTEREST IN
   SUBSIDIARY AND INCOME TAXES                  (2,507)     (2,655)    (3,312)
   INCOME TAX (PROVISION) BENEFIT                  (37)       (270)       (60)
MINORITY INTEREST IN FOREIGN
   SUBSIDIARY'S (INCOME) LOSS                      197       (209)        (46)
                                                ------      ------      ------
LOSS FROM CONTINUING OPERATIONS                 (2,347)     (3,134)    (3,418)
                                                -------     -------    -------

DISCONTINUED OPERATIONS
      Income from operations                        --          --         66
      Loss on disposal                              --          --        (82)
                                                ------       ------     ------

NET LOSS                                      $ (2,347)    $(3,134)    $(3,434)
                                              =========    ========    ========

NET LOSS PER COMMON SHARE:
      Continuing operations                  $   (1.02)   $  (1.36)   $  (1.49)
      Discontinued operations                       --           --        .00
                                          ------------------------------------

NET LOSS PER COMMON SHARE                    $   (1.02)   $  (1.36)   $  (1.49)
                                             ==========   =========   =========

See Notes to Consolidated Financial Statements.

<PAGE>



Weldotron Corporation and Subsidiaries
Consolidated Statement of Stockholders' Equity
For the Years Ended February 28, 1997,
 February 29, 1996, and February 28, 1995 (Dollar amounts in thousands.)


                                                          Common
                                Additional    (Deficit)   Stock In
                      Common    Paid-In       Retained    Treasury,
                       Stock    Capital       Earnings    At Cost        Total
BALANCE,
FEBRUARY 28, 1994     $   118      $9,798    $   (783)    $  (123)    $ 9,010
Net Loss                   --          --      (3,434)         --      (3,434)
                     --------  ----------      -------   --------      -------

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



See notes to consolidated financial statements.



<PAGE>


Weldotron Corporation and Subsidiaries Consolidated Statements of Cash Flows For
The Years Ended  February  28,  1997,  February  29, 1996 and  February 28, 1995
(Dollars amounts in thousands)

                                               1997        1996           1995
                                            ----------  ----------     -------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Loss                                    $(2,347)    $(3,134)    $(3,434)
                                              --------    --------    --------
  Adjustments to reconcile net loss to
  net cashflows provided by (used in)
  operating activities:

    Depreciation and amortization                 388         488         506
    Foreign currency translation (gain) loss      148        (345)       (344)
    Bad debt provision (recoveries)               (75)        (46)        201
    Non-cash inventory reductions                  91       1,085       1,031
    Income from discontinued operations            --          --         (66)
    Deferred compensation expense                 113         122         621
    Minority interest in subsidiary
    net income (loss)                            (197)        209          46
    (Gain) Loss on sale of property,
    plant and equipment                          (148)        (13)         75

    Changes in operating assets and liabilities, net of
      proceeds from sale of business
     (Increase) decrease in assets:

 Accounts receivable                              833         379         423
    Inventories                                 1,651       1,100      (1,150)
    Prepaid expenses and other current assets     120        (126)         (5)
    Other assets                                  (17)         19          18
    Increase (decrease) in current
             liabilities                       (1,305)        538         (23)
    Increase (decrease) in related
             party liabilities                    389         334          85
    Increase (decrease) in other
             long-term liabilities               (150)      (158)         (66)
    Total adjustments                           1,841       3,586       1,352
                                            ----------   ---------  ---------
    Net cash provided by (used in)
             operating activities                (506)        452      (2,082)
                                            ----------  ----------  ----------




<PAGE>



CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment     (137)       (231)       (399)
  Proceeds from the sales of property, plant and
    equipment                                     148         132         287
  Proceeds from sale of business                   --           --        762
                                         ------------------------------------
  Net cash (used in) provided by
    investing activities                           11         (99)        650
                                          ------------   ---------   --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds (repayments) under short-term
    borrowings                                   (179)     (1,347)        569
  Proceeds from debt - related party              296         650         500
  Principal payments under capital
    lease obligations                             (10)        (33)        (47)
  Cash overdraft                                  211          --          --
  Dividends paid by subsidiary to minority
    shareholder                                    --         (23)        (28)
                                           -----------  ---------- -----------
  Net cash (used in) provided by financing
    activities                                    318        (753)        994
    ----------                                    ---        -----        ---

EFFECT OF EXCHANGE RATE CHANGES ON
  CASH AND CASH EQUIVALENTS                     (148)         306         375
                                            ---------   ----------    -------

NET DECREASE IN CASH AND CASH
  EQUIVALENTS                                   (325)         (94)        (63)

CASH AND CASH EQUIVALENTS,
  BEGINNING OF YEAR                              344          438         501
                                          ---------- -------------    -------

CASH AND CASH EQUIVALENTS,
  END OF YEAR                             $       19   $      344 $       438
                                          ===================================

SUPPLEMENTAL DISCLOSURES OF
 CASH FLOW INFORMATION
  Cash (paid) received during the year for:
    Interest Paid                            $   (403)  $    (631) $     (511)
    Taxes                                        (178)       (169)        (62)
    Interest received                              45          23          32


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  $       --



<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  December  31,  1996,  1995 and 1994.  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 6% 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 for doubtful  accounts and write-off for  uncollectible
accounts  were $(75),  $(46),  $201 and $12, $21, $68 for the fiscal years ended
February 1997, 1996, and 1995, 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.  The Company's
Brazilian operations transferred title in fiscal 1996 to Weldotron U.S. of a 60%
interest in certain  residential  real estate which consists of apartments  held
for investment purposes. The title to the remaining 40% interest was transferred
to the holder of the minority interest.

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 $355 at February 28, 1997.
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.  Determination of the liability is not  practicable.  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.   Valuation   allowances  are
established for those income tax benefits whose reliability is uncertain.

Investment  in  real  estate  held  for  sale  - The  Company  reclassified  its
investment  in real estate held for sale from current  assets to deferred  costs
and other  assets after  reevaluating  its  probability  of sale within the next
twelve months.  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 $1, and $184 were  designated  for payments  under  various bank
agreements as of February 28, 1997 and February 29, 1996, 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, 1997,  February 29, 1996, and February 28, 1995 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.

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 1997 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 to Be Disposed of," which was adopted in the 1997 fiscal year.
No impairment losses have been necessary through February 28, 1997

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 the 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."

Recent Accounting Standards - In March, 1997, the Financial Accounting Standards
Board  issued  Statement of Financial  Accounting  Standards  No. 128 ("SFAS No.
128"),   "Earnings  Per  Share".   SFAS  No.  128  specifies  the   computation,
presentation and disclosure requirements for earnings per share. SFAS No. 128 is
effective  for periods  ending after  December  15,  1997.  The adoption of this
statement  is  not  expected  to  have a  material  effect  on the  consolidated
financial statements.

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

2.    MANAGEMENT PLANS AND INTENTIONS

The Company's  financial  statements  for the year ended  February 28, 1997 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 net losses in recent years and as of February 28,
1997 had an accumulated  deficit of $9,698.  Management actions were implemented
at the end of  fiscal  1995  and  throughout  fiscal  1996  and 1997 to begin to
restore the Company to financial  strength and  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.  The  aforementioned  actions  lead  management  to believe that
operations  will  improve.  However,  no assurance can be given that the Company
will be successful in achieving  these cost savings and increased  sales levels,
as well as the  Company's  ability to maintain or  increase  existing  financing
arrangements.  Further, there can be no assurance, assuming the Company achieves
the cost savings,  additional  sales,  and working capital that the Company will
achieve profitability or positive cash flow.

3.    RESTRUCTURING AND OTHER INVENTORY CHARGES

In fiscal 1994 the Company  recorded a restructuring  charge of $625 as a result
of a  strategic  decision  taken  by the  Company's  Board of  Directors,  which
consisted  of  $150  of  severance  payments  for a  terminated  employee  and a
write-off  of $475 of  inventories  related to certain  products and parts which
were discontinued. In fiscal 1995 the Company discontinued several other product
lines which were either aging or not a part of the core  packaging or industrial
safety  and  automation  business  which  resulted  in a  write-off  of  $641 of
inventories.  In addition  during fiscal 1996 the Company  recorded a reserve of
$1,085 to write down inventory to net realizable value.

4.    DISCONTINUED OPERATIONS

In August 1994, the Company  adopted a plan to discontinue the operations of its
100%   owned   subsidiary,   Valiant   International   Multi-media   Corporation
("Valiant"), and reported the subsidiary as a discontinued operation as of
August 31, 1994.


<PAGE>



The  consolidated  statements of  operations  and cash flows of the Company have
been   reclassified  to  present  the  operating  results  of  the  discontinued
operation.  Summarized  operating results for the discontinued Valiant operation
were as follows ($000's omitted):

                                                   Mar. 1,
                                                   1994 to
                                  Aug. 31, 1994
                                             --------------
Net Sales                                          $ 5,246
Cost and Expense                                    (5,180)
                                                   -------
Income (Loss) from Discontinued Operations       $      66

There was no income  tax  expense  or  benefit  related  to income  (loss)  from
operations.

The sale of Valiant's  Assets was  consummated  as of August 31, 1994 to a group
which included the subsidiary's  management and a former director/officer of the
Company.

The sale  resulted  in a loss on  disposal  of $82 or $.04 per share.  This loss
consists of costs in connection  with the sale.  There was no current income tax
expense or benefit related to the loss on disposal.

5.    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 $60,
$42,  and $84 for fiscal years ended  February  28, 1997,  February 29, 1996 and
February 28, 1995 respectively.  The Company has filed two design patents on its
custom roofing shingle bundling machines.

Charges incurred to obtain patents are capitalized.


<PAGE>


6.    INVENTORIES

Inventories consist of the following at February 28, 1997 and February 29, 1996:

                                                    1997      1996
                                                    ----      ----
Finished goods                                    $1,704    $2,870
Work in process                                    2,094     2,508
Raw material                                       1,290     1,275
                                                  -------   ------
                                                  $5,088    $6,653

7.    DEBT

Debt consists of the following at February 28, 1997 and February 29, 1996:

                                                    1997      1996
                                                    ----      ----
Term loan                                      $     --  $     750
Revolving line of credit (Including Brazil)        1,353       818
Notes payable -- Related Party                     1,446     1,150
Installment notes and capitalized lease
  obligations                                         43        17
                                                  ------    ------
                                                   2,842     2,735
Less current portion                               1,842       985
                                                 -------- --------
Long-term portion                                 $1,000    $1,750
                                                  =======   ======

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.

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, 1997, the Company had used  approximately  $1,172 of
the  Business  Alliance  Capital  New  Credit  Facility.  Based  on the  advance
percentages  of  eligible  receivables  and  inventory,  the  Company had unused
borrowing availability of approximately $306 at February 28, 1997.

On August  31,  1994,  the  Registrant  borrowed  $500 from  Lyford  Corporation
("Lyford"), an affiliated company that owns 19.56% of the issued and outstanding
common stock of the  Company.  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  Registrant  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 new note was originally due and payable on or before March 31, 1996
and bears interest at 12% per annum.  The note was  subsequently  extended twice
--first until April 1, 1997,  then until April 1, 1998 and the interest rate was
increased  to  14%.  The new  loan is  secured  by a  junior  lien on all of the
Company's  assets.  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 ($1.00) Dollar 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 8, Lyford has
advanced  additional sums to the Company to protect its collateral  position and
to fund ongoing operations.

In January,  1996 the  Registrant  entered into a $500  revolving loan agreement
with Exford Corp.  ("Exford"),  an affiliated  company of Lyford. The Registrant
borrowed $350 under this agreement  which  borrowings  bear interest at 14%, and
was originally due on January 31, 1997. The note was subsequently extended until
January 31,  1998.  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.

In February,  1997 the Registrant entered into a one year promissory note in the
amount of $96 with Mentmore Holdings.  The note bears interest at two percentage
points above the prime rate,  with a default rate of the interest rate plus five
percent for late payment of interest or principal.  The note expires on February
11, 1998.

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


<PAGE>


8.    COMMITMENTS AND CONTINGENCIES

Legal  Proceedings - The Company is involved in certain legal actions and claims
arising in the ordinary course of business and otherwise.

Martin Siegel vs. Weldotron Corporation

On November 23, 1994,  the  Registrant 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 Corp. 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,  with  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 the payment of
his deferred  compensation benefits upon the Company in May of 1997. In June, as
was 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 Court for a confessed judgment 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  is in
discussions with Mr. Siegel concerning a potential settlement of its obligations
to Mr.  Siegel.  As of February  28,  1997,  the Company had accrued $810 as the
present value of this obligation.


<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 put the Company on 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
intends to meet with Seymour Siegel and his counsel in an effort to settle these
claims.  As of February  28,  1997,  the Company has accrued $355 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 the 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,  successfully  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 1997; and (3) Weldotron  agreed to make certain  cosmetic changes to
the appearance of its new domestically sourced products.  Weldotron has made the
first 3 installment payments, totaling approximately $48, under the terms of the
settlement with Riken.  Weldotron  suspended  further payments in April of 1997.
Riken has notified  Weldotron that it will seek to pursue the enforcement of the
settlement  terms  against the Company and will seek to obtain a judgment in the
amount of the remaining  settlement  payments.  The Company  anticipates  having
further  discussions with Riken in an effort to compromise the remaining payment
obligations of the Company.

Mackman Realty Corp. vs. Weldotron Corporation

The Company currently occupies 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
utilizes  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 has, for the
last two years,  sought to sublease said  facility and to move to smaller,  more
efficient quarters.  Because the existing facility is dated and because updating
would require a 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  Weldotron'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  judgment  in favor of  Mackman  for
possession of the facility on August 15, 1997.  The Company  continues to occupy
the facility,  under an interim  arrangement  with Mackman,  through October 15,
1997.

The Company has located a smaller, more efficient facility in the immediate area
of the existing  facility into which it intends to move by said October 15, 1997
date. Negotiations for a lease for the new facility are proceeding.  As a result
of the Court's decision,  the Company will be required to write-off the value of
unamortized  leasehold  improvements for the existing facility during the second
fiscal quarter of 1998, which are estimated at $662.

Management believes that the ultimate outcome of such litigation and claims will
not have a material adverse impact on the Company's financial position.

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.

Leases - The  Company  rents  office and  manufacturing  facilities  under lease
arrangements  classified  as  operating  leases which  expire  during 2005.  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  $291,  $266 and $188  for the  years  ended  February  28,  1997,
February 29, 1996 and February 28, 1995,  respectively.  Sublease income was $7,
$30,  and $147 for the years ended  February  28,  1997,  February  29, 1996 and
February 28, 1995 respectively.

Aggregate net minimum lease payments for the remainder of leases are as follows:

                    Fiscal Year Ended   Operating
                      February            Leases
                       1998             $  297
                       1999                295
                       2000                295
                       2001                295
                       2002                295
                       Thereafter          959

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

9.    INCOME TAXES

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

                                               Feb. 28,   Feb. 29,   Feb. 28,
                                                  1997       1996       1995
                                                 -----      -----      -----
Domestic                                       $(2,049)  $ (3,447)  $ (3,487)
Foreign-Before minority interest                  (458)       792        175
--------------------------------                 -----      -----      -----

     Total                                     $ 2,507)    (2,655)  $ (3,312)
                                                 -----      -----      -----

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

                                                  1997      1996        1995
Computed (benefit) provision at statutory rate  $ (852)   $  903)   $ (1,126)
Increase (decrease) resulted from:
Change in valuation allowance                      820     1,010       1,181
Other                                               69       163           5
                                                 $  37  $    270     $    60
                                                 -----      -----      -----

At February 28, 1997,  $10,071 of Federal tax loss carry  forwards are available
to offset future domestic taxable income.

The net  deferred  tax asset at  February  28,  1997 and  February  29,  1996 is
comprised of the following:

                                                     1997     1996
Deferred tax assets:
  Inventory capitalization                          $ 127 $    114
  Net operating losses                              3,925    3,321
  Deferred compensation                               467      481
  Reserves                                          1,208    1,206
  Bad debt allowance                                   48       55
                                                    --------------
Total assets                                        5,775    5,177
                                                    -----  -------

Deferred tax liability:
  Fixed assets                                       (27)      (68)
  Deferred assets                                    (52)      (13)
  LIFO reserve recapture                            (440)     (660)
                                                    -----  --------
Total liabilities                                   (519)     (741)
                                                    -----  --------

Net deferred tax asset                              5,256    4,436
Valuation allowance                                (5,256)  (4,436)
                                                    ------- -------


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.

10.   STOCK OPTIONS AND WARRANTS

The Company has an Incentive and  Non-Qualified  Stock Option Plan which 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
model.  The  Black-Scholes  option  valuation  model  was  developed  for use in
estimating the fair value of traded  options which have no vesting  restrictions
and are fully transferable.

Since no options were granted in 1997 and 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  1997,
1996, 1995, and 1994, are as follows:

                                         Option                    Shares
                                                          Price Per Share

Outstanding, February 28, 1994           79,750              2.50 - 4.50
Granted                                  20,000                     2.50
Canceled                                  (750)                     2.50
                                   ------------

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
                                         ======
Exercisable, February 28, 1997           25,000                     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.  The market price of the  Company's  stock at the date of the grants
was $2 in August 1994 and $.875 in May 1995.

11.   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  $25 , $63 and $87 for the
fiscal years ended February 1997, 1996 and 1995, respectively.

The Company participates in a multi-employer pension plan which provides defined
benefits to substantially all union employees.  Amounts charged to pension costs
and  contributed  to the Plan were $58,  $62, and $94 for the fiscal years ended
February 1997, 1996 and 1995, respectively.

12.   DEFERRED COMPENSATION

The Company has deferred compensation  agreements with two former officers which
provides for an aggregate of $150 to be paid annually for the remainder of their
lives. The Company  recorded the present value of the future estimated  payments
over the remaining lives of these former employees based upon actuarial  tables.
Deferred  compensation  expense under these  agreements was $113, $124, and $621
for the fiscal years ended February, 1997, 1996 and 1995, respectively. Payments
made  during  the  fiscal  years  ended  February  1997,   1996  and  1995  were
approximately  $150,  $160,  and $66,  respectively.  The  increase  in deferred
compensation  expense in 1995 is due to the effect of a settlement  of a lawsuit
brought by one officer  resulting from early  termination,  which  increased his
deferred  compensation  from $80 to $100 per annum, the recognition of increased
life  expectancy  of the former  officers  reflected  in the current  valuation,
offset by an increase in the discount rate.

13.   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,  1997 and  February  29,  1996,
respectively, and $214 for the year ended February 28, 1995 under the agreement.
(See also note #7).

14.   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  segment,  were
approximately $1,243,  $1,417, and $1,214 or 9%, 8%, and 6% of net sales for the
fiscal years ended February 1997, 1996 and 1995 respectively.


<PAGE>


Summary financial information by industry segment is as follows:

Industrial Segments                            1997        1996        1995
                                            -------------------------------
Net Sales:
Packaging Systems                             $12,130    $ 15,997     $ 16,647
Controls                                        1,156       2,318        3,023
                                            ----------   ---------    --------
                                              $13,286    $ 18,315     $ 19,670
                                              ========   =========    ========
Operating (loss) Income:
Packaging Systems                             $(2,690)   $ (3,061)   $ (3,171)
Controls                                          113         578         532
                                            ---------- ----------- ----------
                                              $(2,577)   $ (2,483)   $ (2,639)
                                              --------   ---------   ---------
Unallocated corporate expense                    (419)       (497)       (778)
Other income                                      489         325         105
                                            ---------- ----------------------
                                              $(2,507)   $ (2,655)   $ (3,312)
                                              ========   =========   =========
Identifiable assets:
Packaging Systems                             $ 8,420     $11,140     $13,636
Controls                                          554         681       1,133
Corporate                                          57         396         517
                                           -----------  ----------  ---------
                                              $ 9,031     $12,217     $15,286
                                              ========    ========    =======

Capital expenditures:
Packaging Systems                           $     137   $     231   $     391
Controls                                           --          --          --
Corporate                                          --          --           8
                                            $     137   $     231   $     399
                                            ==========  ==========  =========
Depreciation and amortization:
Packaging Systems                           $     367   $     461   $     469
Controls                                           --          --          --
Corporate                                          21          27          37
                                          ------------ -----------  ---------
                                            $     388   $     488   $     506
                                            ==========  ==========  =========

Sales and identifiable assets by geographic region are as follows:

                                               1997        1996        1995
                                            -------------------------------
Net Sales:
United States                                 $10,019     $13,368     $16,120
Brazil                                          3,267       4,947       3,550
                                            ---------    ---------   --------
                                              $13,286     $18,315     $19,670
                                              =======     =======     =======

Operating Income (loss):
United States                                 $(2,049)   $ (3,447)   $ (3,487)
Brazil                                           (458)        792         175
                                            ----------   --------------------
                                              $(2,507)   $ (2,655)   $ (3,312)
                                              ========   =========   =========

Identifiable assets:
United States                                 $ 6,632    $  9,262     $12,138
Brazil                                          2,399       2,955       3,148
                                             ---------  ----------   --------
                                              $ 9,031     $12,217     $15,286
                                              ========    ========    =======
<PAGE>



15.   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  common share of the
Company  (the  "Common  Stock").  The Rights  attached  to the Common  Stock and
entitles  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 is
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 20% 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.

16.   CONCENTRATION OF CREDIT RISK

Financial instruments which 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 which  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, 1997.


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 20, 1997 management  informed the former accountant,  Deloitte
and Touche LLP, that it had been dismissed.  Except as stated immediately below,
there was 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 Registrant's  financial  statements
for the fiscal year ended  February 29, 1996.  The report of Deloitte and Touche
LLP on the Registrant's  financial statements for the fiscal year ended February
29, 1996 was modified with respect to  uncertainty  regarding  the  Registrant'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.

PART III


ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The names,  ages and  positions  of the  directors  and  executive  officers  of
Weldotron as of August 31, 1997 are as follows:

                     Principal Occupation,
Names                Employment, etc.                                       Age

Richard L. Kramer    Chairman of the Board of the Corporation (Since         47
                     June, 1994); Chairman of the Board & Secretary
                     of CPT Holdings, Inc., a NASDAQ Small Market
                     Cap company (since January, 1992); Chairman of
                     the Board, Republic Properties Corp., a private real
                     estate investment company (since prior to 1989);
                     Chairman of the Board, Sunderland Industrial Holdings
                     Corporation, engaged in various industrial manufacturing
                     businesses (since prior to 1989); Chairman of the Board
                     (since November, 1994) and Director (since May, 1994),
                     Texfi Industries, Inc., manufacturing and marketing of
                     textiles and apparel.

William L. Remley    Vice Chairman of the Board, President and CEO of        46
                     the Corporation (Since June, 1994); President and
                     Treasurer, CPT Holdings, Inc. (January 1993 to
                     present); Vice Chairman, Sunderland Industrial Holdings
                     Corp.(since prior to 1989); Director, CPT Holdings, Inc.
                     (since Jan. 1992); CEO and President (Since November,
                     1994) and Director, (Since May, 1994) Texfi Industries,
                     Inc., manufacturing and marketing of textiles and apparel.

Richard              C.   Hoffman   Secretary   and   General   Counsel      49
                     of  the Corporation; Attorney   -   President,
                     InterUrban Management,  Inc., a real estate
                     brokerage and  management company.  Currently
                     practices law as Richard C. Hoffman P.C. in
                     Connecticut.

Fred H. Rohn         General Partner, North American Venture Capital         71
                     Funds (since 1989).

Bryon                P.  Fusini Vice  President,  Investments                43
                     at Smith  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 Chief Executive Officer and each of the two
other  most  highly  compensated  executive  officers  whose  salary  plus bonus
exceeded $100,000,  information concerning compensation paid for services to the
Company in all  capacities  during the fiscal year ended  February 28, 1997,  as
well as the total  compensation  paid to each such  individual for the Company's
previous two fiscal years (if such person was the Chief Executive  Officer or an
executive officer, as the case may be, during any part of such fiscal year).

                           SUMMARY COMPENSATION TABLE


                                             Other                 All
Name and Principal                           Annual                Other
Position                FY    Salary  Bonus  Compensation(1)(4)  Compensation(2)

Richard L. Kramer(5)    1997  $ -0-    -0-    $  -0-          $      6,000
Chairman of the Board   1996    -0-    -0-       -0-                 6,000
                        1995    -0-    -0-       -0-                 6,000

William L. Remley(5)    1997  $ -0-    -0-    $  -0-          $      6,000
President and           1996    -0-    -0-       -0-                 6,000
Chief Executive Officer 1995    -0-    -0-       -0-                 6,000

Martin Siegel (3), (4)  1997  $ -0-    -0-    $100,000        $       -0-
Chairman of the Board   1996    -0-    -0-     100,000                -0-
                        1995  138,090  -0-       4,000              32,581

1)  Includes amounts paid for car allowances.

2) Includes amount of matching  contributions  under the Company's  401(K) Plan,
   which may be subject to vesting  requirements and Directors' Fees which total
   $6,000 annually.

3) Martin Siegel resigned as Chairman of the Board and Chief  Executive  Officer
   on June 14,  1994.  Thereafter  and until  November 3, 1994 he  continued  to
   receive  compensation under his Employment  Agreement dated March 1, 1988, as
   amended, when his employment was terminated by the Company.

4) Includes  deferred  compensation  benefits  pursuant to Employment  Agreement
   referred to in (3) above from  November 4, 1994  through  December  31, 1994.
   From  and  after  January  1,  1995  Mr.  Siegel   receives  annual  deferred
   compensation  of  $100,000  for  life  pursuant  to a  Deferred  Compensation
   Agreement  dated as of January 1, 1995 which was entered into as a result and
   in settlement of certain litigation between Mr. Siegel and the Company.

5)  Not involved in the day to day activities of the business.

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.


ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
           AND MANAGEMENT

Security Holdings of Management

The following table sets forth as of August 31, 1997, information concerning the
ownership  of  shares  of  Common  Stock  by each  Director  or  nominee  of the
Corporation individually and by all 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 shares 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.


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

Bryon P. Fusini                          0                       0%
Richard C. Hoffman                       0                       0%
Marvin D. Kantor                         0                       0%
Richard L. Kramer                        0 (1)                   0%
John D. Mazzuto                          0                       0%
Fred H. Rohn                             0                       0%
William L. Remley                        0 (1)                   0%

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



*Less than one percent.

1) Mr.  Kramer  is the  Chairman  and Mr.  Remley  is the  President  of  Lyford
Corporation,  owner of 450,000  shares of Common  Stock,  as to which stock they
both disclaim beneficial ownership.


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
August 31, 1997.


Name and Address of                 Amount and Nature         Percentage
or Beneficial Owner                 of Beneficial Ownership   of Class

Lyford Corporation (1)                      450,000              19.56%
1430 Broadway, l3th Floor
New York, NY 10018

Michael N. Kreiger (2)                      219,000               9.50%
205 Church Street, 3rd Floor
New Haven, CT 06510

Walter J. Schloss Associates (3)            143,200               6.23%
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) 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.

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 the named  Shareholder's  Schedule 13D
   dated October, 1990, as amended by Amendment No. 3 dated July 30, 1993, 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:   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,   including  information  contained  in  the  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.


Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities  Exchange Act of 1934 requires the Corporation's
officers and Directors and persons who own more than ten percent of a registered
class of the  Corporation's  equity  securities  ("Reporting  Persons")  to file
reports of ownership and changes in ownership  with the  Securities and Exchange
Commission and the American Stock Exchange.  The Reporting  Persons are required
by SEC regulations to furnish the  Corporation  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 4 were
required for those persons, the Corporation believes that during the fiscal year
ended  February 28, 1995,  all filing  requirements  applicable to its Reporting
Persons were complied with on a timely basis.


ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On August 31, 1994, the Registrant borrowed $500 Dollars from Lyford Corporation
("Lyford"), an affiliated company that owns 19.56% of the issued and outstanding
common stock of the  Company.  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  Registrant  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 new note was originally due and payable on or before March 31, 1996
and bears interest at 12% per annum.  The note was  subsequently  extended twice
-first until April 1, 1997,  then until April 1, 1998 and the interest  rate was
increased  to  14%.  The new  loan is  secured  by a  junior  lien on all of the
Company's  assets.  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 ($1.00) Dollar 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 August 31, 1997, the
current balance due and owing to Lyford,  including  unpaid and accrued interest
is $1,684.

In January,  1996 the  Registrant  entered into a $500  revolving loan agreement
with Exford Corp.  "Exford",  an affiliated  company of Lyford.  The  Registrant
borrowed $350 under this agreement  which  borrowings  bear interest at 14%, and
was originally due on January 31, 1997. The note was subsequently extended until
January 31,  1998.  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.

In February,  1997 the Registrant entered into a one year promissory note in the
amount of $96 with Mentmore Holdings.  The note bears interest at two percentage
points above the prime rate,  with a default rate of the interest rate plus five
percent for late payment of interest or principal.  The note expires on February
11, 1998.

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,  1997 and  February  29,  1996,
respectively, and $214 for the year ended February 28, 1995 under the agreement.
(See also note #7).


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

(a)   1. Financial Statements
      The following  Consolidated  Financial  Statements of the  Registrant  are
filed as part of this Report in Item 8:

      Independent Auditors' Report

      Consolidated Balance Sheets at February 28, 1995 and February 29,1996.

      Consolidated  Statements  of Operations  for the years ended  February 28,
      1997, February 29, 1996, and February 28, 1995.

      Consolidated  Statements  of  Stockholders'  Equity  for the  years  ended
      February 28, 1997, February 29, 1996, and February 28, 1995.

      Consolidated  Statements  of Cash Flows for the years ended  February  28,
      1997, February 29, 1996 and February 28, 1995.

      Notes to Consolidated Financial Statements

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

(b)  Reports on Form 8-K

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

      None.

(c) Reference is made to Item 14(a) (3) above.

(d) Reference is made to Item 14(a) (2) above.



<PAGE>


SIGNATURES

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

                               WELDOTRON CORPORATION
                               (Registrant)

                               By: /s/ Richard L. Kramer
                               -------------------------
                                    Richard L. Kramer,
                                    Chairman of the Board


Date: September 16, 1997


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  Registrant 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      September 16, 1997
--------------------------
Richard L. Kramer

/s/William L. Remley              Vice Chairman and CEO      September 16, 1997
--------------------------
William L. Remley

/s/Fred H. Rohn                   Director                   September 16, 1997
Fred H. Rohn

/s/Bryon P. Fusini                Director                   September 16, 1997
--------------------------
Bryon P. Fusini

/s/Richard C. Hoffman             Corp. Secretary, Director  September 16, 1997
--------------------------
Richard C. Hoffman

/s/Michael McKee                  Vice President, Finance    September 16, 1997
------------------
Michael McKee