<PAGE>   1

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                               Washington DC 20549

                                   FORM 10-KSB

 X    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
---   EXCHANGE ACT OF 1934

      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
---   EXCHANGE ACT OF 1934

For the fiscal year ended August 31, 1997          Commission File Number 0-2331

                               GLASSMASTER COMPANY
        (Exact name of small business issuer as specified in its charter)

       South Carolina                                  57-0283724
 (State of incorporation)                         (IRS Employer ID No.)

      PO Box 788, Lexington SC                               29071
(Address of principal executive offices)                  (Zip Code)

Issuer's telephone number, including area code:         803-359-2594

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

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

                     Common Stock, par value $.03 per share
                     --------------------------------------
                                (Title of Class)


Indicate by an "X" whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days.    YES    X         NO
                          -----           -----

Indicate by an "X" if disclosure of delinquent filers in response to Item 405 of
regulation S-B 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 of this Form 10-KSB or any amendment to
this Form 10-KSB.  X
                  ---
State issuer's revenues for its most recent fiscal year.     $21,321,501   

The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $2,001,621 as of October 31, 1997, based on the
average high and low sales price of $3.00 per share.

The number of shares outstanding of the registrant's common stock, as of 
October 31, 1997 was 1,620,096 shares.



                       DOCUMENTS INCORPORATED BY REFERENCE

The information set forth under items 9, 10, 11, and 12 of Part III of this
report is incorporated by reference from the issuer's definitive proxy statement
for the 1998 annual meeting of stockholders that will be filed no later than
December 31, 1997.


<PAGE>   2


                                      - 2 -


                                     PART I


Item 1.  Business

    (a)    General Development of Business

           The Company was founded in 1946 as the Koolvent Metal Awning Company
and incorporated under the laws of the State of South Carolina. During 1958 the
Glassmaster line of fiberglass pleasure boats was introduced. In 1959 the metal
awning division was sold to concentrate efforts on the pleasure boat business,
the corporate name was changed to Glassmaster Plastics Company, and the Company
became a publicly held corporation and presently has approximately 1,250
stockholders.

           In 1982, the corporate name was changed to Glassmaster Company (the
"Company") and, as a result of the cyclical nature of the pleasure boat
business, the Company began to diversify into industrial related manufacturing.
During 1982 and 1983 the Company developed from within manufacturing facilities
to produce extruded monofilament and fiberglass antennas. The ensuing five years
saw these operations experience steady growth and by the end of the 1988 fiscal
year were the dominant business segment of the Company.

           On September 1, 1988, the Company purchased the NYBRAD product line
and related manufacturing assets from Allied-Signal, Inc. NYBRAD is a brush
material of abrasive monofilament used in surface finishing and deburring. On
November 1, 1988, the Company announced the purchase of the industrial control
product line and related manufacturing assets from Speareflex Corporation of
Kalamazoo, Michigan. This business consists primarily of flexible steel wire
controls and plastic control panels for use in industrial and automotive
applications. The acquisition of these two product lines has allowed the Company
to further diversify and expand its line of industrial related products.

           On November 17, 1989, the Company announced its decision to
discontinue the manufacture and sale of fiberglass boats.

           In June, 1994, the Company completed the purchase of a 95,000
square-foot manufacturing plant in Kalamazoo, Michigan, and relocated its
wholly-owned subsidiary, Glassmaster Controls Co., Inc. from a leased facility
in Otsego, Michigan to the new plant during the first quarter of the 1995 fiscal
year.

           On August 16, 1994 a tornado completely destroyed a 25,000
square-foot warehouse in Lexington, SC. During the 1995 fiscal year,
construction was completed on a 35,000 square-foot addition to the Monofilament
plant in Lexington, SC. This addition effectively replaces the warehouse
destroyed by the tornado and gives the Monofilament Division additional
manufacturing space.

           There have been no bankruptcy, receivership, or similar proceedings
to the registrant since its inception. During the last three years there has
been no material acquisition or disposition of any significant amount of assets
other than that described above or in the ordinary course of business.

    (b)    Narrative Description of Business

           The Company is a manufacturer of thermoplastic and thermoset plastic
materials that result in a variety of products within a single industry segment
and are categorized by product line as follows: extruded (thermoplastic)
synthetic monofilament, pultruded (thermoset) fiberglass and composites, and
flexible steel wire controls and molded plastic control panels.



<PAGE>   3


                                      - 3 -


Item 1.  Business (Cont'd)

           The Company's Monofilament Division extrudes monofilaments from
nylon, polyester, polyolefins and other engineering resins for use in a wide
array of markets and applications including textiles (sewing thread), lawn and
garden care (trimmer line), recreational products (fish line), and industrial
weaving and industrial filtration. Monofilament, as produced by the Company,
begins with a thermoplastic resin which is processed through a melting device
(extruder) and subsequently oriented to form single strand fibers of various
diameters, tensile strengths and moduli. Specialized monofilaments for
industrial applications are manufactured for use in other major industries
including paper machine clothing for the paper industry and abrasive bristles
for brushes used in metal and wood finishing. The Company markets its
monofilament products primarily on a private brand basis, which are sold by
company salesmen to original equipment manufacturers and distributors throughout
North America and, to a lesser degree, Europe, South America, and the Pacific
Rim.

           The Company's Composites Division manufactures a line of fiberglass
marine and CB antennas for use in pleasure craft and commercial fishing vessels.
This division also manufactures pultruded fiberglass rod stock used in a number
of specialty products. Antennas and reinforced plastic products are sold through
in-house salesmen and regional manufacturers' sales representatives and
distributed throughout the United States, Canada, and, to a lesser degree,
Europe.

           The Company manufactures and assembles a wide range of flexible steel
wire controls and molded plastic control panels through its wholly-owned
subsidiary, Glassmaster Controls Co., Inc., located in Kalamazoo, Michigan.
These products are used primarily in medium and large capacity trucks and to a
lesser degree in automobiles, farm equipment and recreational boats, and are
sold through manufacturers' representatives or directly to original equipment
manufacturers throughout North America.

           The names "Glassmaster", "CompCore", and "NYBRAD" are registered
trademarks of the Company.

           The Company believes it is a significant competitor in the United
States market for specialty monofilament products and marine CB antennas. While
firm price competition can be experienced within some lines of the monofilament
and flexible wire control products, overall, the Company produces products which
center on performance, engineering and customer service and it is these product
lines which provide the Company with a stable revenue base. Sales and
profitability growth are dependent to varying degrees upon favorable economic
conditions and penetration into the industrial textile and paper machine
clothing industries, as well as the domestic truck industry. Unfavorable weather
conditions can have an impact on monofilament trimmer line sales.

           Sales of the Company's industrial products are somewhat seasonal with
sales to the lawn and garden care and marine antenna markets concentrated in the
second and third quarters of the fiscal year (December - May). While some
fluctuations in inventory levels will occur from time to time, the Company is
not required to carry significant amounts of inventory to meet delivery
requirements or to carry unusually large amounts of materials and supplies to
insure itself of a continuous allotment of goods from suppliers. The Company
does not provide extended payment terms to its customers in excess of those
normally offered for these industries. The dependence upon any one customer or
small group of customers is not material. The Company currently offers no
product or service requiring government approval and the effect of existing or
probable government regulations on the operations of the Company is considered
to be immaterial.

           At August 31, 1997, the order backlog was $1,897,881 compared to
$1,355,851 at August 31, 1996.

           The Company has no full-time employees engaged in research and
development activities, however, certain employees spend a portion of their time
in new product development and process improvement. Expenditures for research
and development were approximately $373,000 in 1997 and $315,000 in 1996.






<PAGE>   4


                                      - 4 -


Item 1.  Business (Cont'd)

           No material effects have resulted from compliance with federal,
state, and local provisions regulating the discharge of materials into the
environment, or any other regulations protecting the environment. The Company
does not expect to make any material capital expenditures for environmental
control facilities for the current or succeeding fiscal year.

           The Company and its subsidiary furnished employment for approximately
192 persons at August 31, 1997 and 201 persons at August 31, 1996.



Item 2.  Properties

           General corporate offices, the monofilament manufacturing facilities
(Plant I & II), and the Monofilament Division offices are located at 126
Glassmaster Road in Lexington, South Carolina. The total facility is composed of
170,000 square feet, and is owned by the Company in fee simple.

           The Company operates its composites manufacturing plant at 71
Industrial Park Road in Newberry, South Carolina. The total facility is composed
of 31,000 square feet and is owned by the Company in fee simple.

           Glassmaster Controls Co., Inc. operates its industrial controls
business at 831 Cobb Ave. in Kalamazoo, Michigan. The total facility is composed
of 95,000 square feet and is owned by the Company in fee simple.

           The Company believes that facilities are adequate for the immediate
future, and that the machinery and equipment used in these facilities are well
maintained and in good operating condition. Estimated percentage utilization
capacities during the year ended August 31, 1997 were as follows: Monofilament
Plant - 90%; Composites Plant - 30%; Controls Plant - 40%.



Item 3.  Legal Proceedings

           There are no material pending legal proceedings.



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

           There were no matters submitted during the fourth quarter of the
fiscal year covered by this report to a vote of security holders through the
solicitation of proxies or otherwise.





<PAGE>   5

                                      - 5 -

                                     PART II


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

(a)(1) The Company's common stock trades on The Nasdaq SmallCap Market tier of
the Nasdaq Stock Market under the symbol GLMA.

(a)(1)(ii) The table below sets forth the high and low sales price per share
during each quarter in the last two years as quoted on the Small Cap Market tier
of the Nasdaq Stock Market.

                          Quarter Ending        High      Low
                          --------------        ----      ---

                        August 31, 1995        $2.00     $2.00
                        November 30, 1995       2.06      1.88
                        February 29, 1996       2.00      1.50
                        May 31,1996             2.00      1.00
                        August 31, 1996         1.25      1.00
                        December 1, 1996        1.00      1.00
                        March 2, 1997           1.63      1.00
                        June 1, 1997            2.00      1.13
                        August 31, 1997         2.38      1.38

Since September 1, 1997 and to the date of this report, the high and low sales
price per share was $4.69 and $1.50, respectively.

   (b)     There were 1,252 shareholders of record at October 31, 1997.

(c)(1) On October 24, 1997, Directors of the Company declared a cash dividend of
$.03 per common share payable on or about January 30, 1998 to stockholders of
record on January 9, 1998. On January 30, 1996 the Company paid a cash dividend
of $.03 per common share. On January 30, 1995 the Company paid a cash dividend
of $.06 per common share.

(c)(2) According to the terms of a financing agreement, the Company is
restricted from paying cash dividends unless approved by the lending
institution.

Item 6.  Management's Discussion and Analysis

Review of Operations

                           Comparison of 1997 to 1996

           Consolidated sales for the fiscal year ended August 31, 1997 were
$21.3 million compared to $22.3 million last year, a decrease in sales of 4.5%.
Net income for the 1997 fiscal year was $234,699, an increase of 79% when
compared with prior year net income of $131,433. Earnings were $.14 per share
this year as compared with $.08 per share in 1996.

           NET SALES. A significant decline in shipments of bulk and packaged
nylon trimmer line products caused sales by the Monofilament Division to
decrease about 5.6% to $14.6 million. Profit margins on sales of trimmer line
products have been declining for several years due to price competition which
led to the decision to transition the product mix toward more technically
oriented, higher margin products including polyester weaving filaments. Trimmer
line shipments represented 30% of total monofilament sales in 1996 but declined
to less than 17% of sales in 1997, while polyester filaments increased from 16%
of sales in 1996 to 25% of sales during 1997. The shift in product mix had the
intended effect as total gross profit realized by this division increased 14% in
spite of the decline in total sales.
           Sales by the company's Composites Division were $1.3 million in
fiscal year 1997 versus $1.7 million in the prior year. The 23% decrease in
year-to-year sales reported by this division is primarily due to the decision by
a key customer to discontinue purchasing a certain antenna that contributed
significantly to the revenue base of this division. Product development was
intensified during the 1997 fiscal year in an effort to generate sales to
replace the lost revenue but no significant additions to the product line were
completed during the year. The division currently expects these new products to
begin generating meaningful revenue during the third quarter of the 1998 fiscal
year.


<PAGE>   6


                                      - 6 -



Item 6.  Management's Discussion and Analysis (Cont'd)

           Glassmaster Controls Company ("Controls") sales increased 7.2% to
$5.2 million. Prior year investments in new manufacturing equipment,
particularly an expansion of die-casting capabilities, allowed Controls to offer
additional products that contributed significantly to 1997 fiscal year sales. An
improving outlook by the largest segment of customers, heavy-duty truck
manufacturers, and efforts to expand product offerings into electronic control
panel and cable assemblies began to contribute additional sales during the
fourth quarter of 1997. These developments should enable sales generated by
Controls to continue to advance during 1998.

           GROSS PROFIT. Gross profit as a percentage of sales increased to
17.8% this fiscal year versus 16.8% last year. The increase in gross margins
compared to the prior year is primarily due to a better mix of products sold
combined with favorable raw material costs at Monofilament and improved
manufacturing efficiencies at Controls. The improvement in profit margins has
been significantly restrained due to the addition of technical and production
personnel at Composites to assist in new product development efforts. Profit
margins at Composites will continue to be impacted until additional product
sales are realized.

           EXPENSES. Selling expenses during 1997 declined from the prior year
by approximately $47,000, but remained at just under 5% of sales. General and
Administrative and Other expenses totalled $1.75 million and increased over the
1996 amount by approximately 3.7% due to an increase in the average net cost per
employee for health insurance benefits of approximately 9%. The Provision for
Doubtful Accounts declined by 60% to $43,376 when compared with the prior year.
Last year's amount included a charge off of $103,323 related to a former
customer's bankruptcy proceedings (See Note 2 to the Notes to Financial
Statements). This year's specific charge off related to this account was
$24,985.

           INCOME FROM OPERATIONS. Although 1997 sales decreased by 4.5% from
last year, operating income increased 9.5% to $933,241 when compared with the
prior year. The increase in operating income was due primarily to the improved
product mix and resulting higher gross margins at Monofilament and better
manufacturing efficiencies at Controls.

           INTEREST EXPENSE. Interest expense declined slightly from the prior
year but remained just under 3% of sales. Average interest rates remained
relatively unchanged and total debt decreased by $221,575, or 3.3%, when
compared with 1996.

           PROVISION FOR INCOME TAXES. Total income tax expense was $65,169, or
21.7% of pre-tax income for 1997 compared with $70,260, or 34.8% of pre-tax
income, during 1996. The decrease in the effective income tax rate is primarily
due to a reduction in the amount of alternative minimum tax due this year versus
1996.


                           Comparison of 1996 to 1995
                      (Excerpted from the 1996 Form 10-KSB)

           Net consolidated sales for the fiscal year ended August 31, 1996 were
$22.3 million, a decrease of $1.8 million, or 7.4%, when compared to net sales
of $24.1 million in fiscal year 1995. Each of the company's operating divisions
experienced some decrease in sales in fiscal year 1996 when compared to the 1995
fiscal year. Net Income for the 1996 fiscal year was $131,433, compared with
$351,362 during the prior year. The prior year net income includes an
Extraordinary Gain of $287,061 (net of related income taxes of $170,772).
Excluding the Extraordinary Gain, net income for the prior year was $64,301.

           NET SALES. The Monofilament Division had net sales of $15.5 million
for the 1996 fiscal year, a decrease of 7.1% when compared to sales of $16.6
million last year. This decrease in sales is due to the loss of a key customer
that began to produce and package its own weed trimmer line in June, 1995, and
the loss of another significant customer in the textile weaving business that
filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy code
in January, 1996. Sales to all other customers of this division increased almost
8%. This increase in adjusted monofilament sales this year versus last year is
primarily the result of an increase in the average selling price of sewing
thread, textile weaving products, and fishing line that took affect in August,
1995. Also contributing to the increase in sales was a 15% year over year
increase in sales of bulk, non-packaged, nylon trimmer line this year compared
to last year.


<PAGE>   7


                                      - 7 -


Item 6.  Management's Discussion and Analysis (Cont'd)

           Sales by the company's Composites Division (formerly referred to as
Industrial Products and Fiberglass Division) totalled $1.7 million in fiscal
year 1996, a decrease of approximately 13% when compared to last year's $2.0
million. The decrease in sales is primarily due to this division replacing their
entire line of marine antennas during the first quarter of the 1996 fiscal year
with the introduction of a new line of commercial and recreational marine
antennas. Orders and shipments of the new antennas were restrained during the
first half of the 1996 fiscal year due to delays by authorized dealers in
ordering the redesigned antennas pending the sale of their existing retail
inventories. During the second half of the 1996 fiscal year, sales and shipments
of the new antennas began to improve and the company expects the 1997 fiscal
year will see a significant improvement in sales generated by the new products
of the Composites Division.
           Glassmaster Controls Company ("Controls") reported 1996 fiscal year
sales of $4.8 million, a decrease of 5.0% when compared to sales of $5.1 million
during the prior year. The decrease in sales is attributable to a slowdown in
the medium and heavy duty truck manufacturing business. Shipments of steel wire
controls and control panels to the truck industry currently represents
approximately 75% of this division's sales. The truck industry has forecasted
production levels for 1996 will be 20% to 25% below those for 1995. The industry
slowdown is expected to continue into 1997. However, the company expects recent
efforts to develop new products and broaden the customer base within the farm
equipment and marine industries will allow the Controls division to realize an
overall increase in sales during the 1997 fiscal year.

           GROSS PROFIT. Gross profit margins improved to 16.8% of sales during
the 1996 fiscal year compared with 15.9% of sales during the prior year. The
increase in profit margins can be attributed to the effects of selling price
adjustments and cost cutting at Composites, and better manufacturing
efficiencies realized at Controls subsequent to the relocation of operations
into a new facility during the second quarter of the 1995 fiscal year. New
process equipment at Controls also contributed to the improvement in gross
profit margins. Raw material purchase price increases at Monofilament were
generally passed along to customers in the way of selling price adjustments and
gross profit margins at Monofilament were relatively unchanged from the prior
fiscal year at approximately 17.2% of sales.

           EXPENSES. Selling, general and administrative, and other expenses
decreased by 8.7% to $2.9 million during 1996 and as a percentage of sales were
relatively unchanged from the prior year at 13% of sales. The decrease is
primarily due to reduced costs associated with employee benefit plans. The
Provision for Doubtful Accounts was $107,980 for the 1996 fiscal year compared
with $52,149 last year. Approximately $103,000 was charged to the reserve in
1996 to write down the amount receivable from a single customer of the
Monofilament Division that declared bankruptcy in January, 1996 (See Note 2 of
the Notes to Financial Statements).

           INTEREST EXPENSE. Interest expense for all of 1996 increased 19.7%
over the prior year to $651,730. The increase in interest is primarily due to
higher average debt levels associated with the term debt financing of
monofilament extrusion equipment acquired in August, 1995 and May, 1996.

           PROVISION FOR INCOME TAXES. Income tax expense for 1996 was $70,260,
an effective tax rate of 34.8% of pre-tax income. Last year's Provision for
Income Taxes was $49,120 for an effective tax rate of 43.3%. The prior year tax
rate is higher due to state income taxes. No provision for state income taxes is
included in the current year amount because there is no taxable income for state
tax purposes.

Liquidity and Capital Resources

           The Company's operating activities provided $971,488 of cash during
the 1997 fiscal year, a decrease of approximately 7% when compared to the prior
year. The decline in cash provided during the 1997 period was primarily due to
increases in accounts receivable outstanding at Monofilament and Controls versus
the prior year end.

           A 25% decrease in capital expenditures during the 1997 fiscal year
led to a corresponding decline in the net cash used by investing activities when
compared to prior year levels. The Company utilized a five-year operating lease
to acquire an additional $625,000 of manufacturing equipment and tooling during
1997 (See Note 5 of the Notes to Financial Statements).




<PAGE>   8


                                      - 8 -

Item 6.  Management's Discussion and Analysis (Cont'd)

Liquidity and Capital Resources (Cont'd)

           Net cash used in financing activities was $218,574 in 1997 compared
with $122,513 during the prior year period. The net increase in cash used was
due to a net reduction in long-term debt during 1997 of $617,220 whereas the
corresponding year ago period saw long-term debt increase by $337,851. Partially
offsetting the differences in long-term debt year to year was a net increase in
the company's revolving line of credit during 1997 of $395,646. Last year, these
revolving credit lines, which are secured by accounts receivable and
inventories, decreased by $420,008. These short-term financing agreements
provide for total revolving credit of up to $4.5 million. Total borrowings under
these agreements were $2.3 million as of August 31, 1997 and totalled $1.9
million at prior year end.

           The company currently anticipates its cash requirements during the
1998 fiscal year will be provided from operations and borrowings under existing
and committed credit lines.


Item 7.  Financial Statements

           Financial Statements of Glassmaster Company and the Notes to
Financial Statements for the fiscal years ended August 31, 1997 and 1996 appear
on pages 11 through 21, the Index to the Exhibits and Exhibits appear on pages
23 through 25, and the Report of Independent Auditors appears on page 22 of this
report.


Item 8.  Changes in Disagreements with Accountants on Accounting and
         Financial Disclosure

           There have been no changes in or disagreements with accountants on
accounting financial disclosures.


                                    PART III


Items 9, 10, 11, and 12. Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16 (a) of the Exchange Act; Executive
Compensation; Security Ownership of Certain Beneficial Owners and Management;
and Certain Relationships and Related Transactions.

           Information for items 9-12 of this report appears in the Proxy
Statement for the 1998 Annual Meeting of Shareholders to be held on January 23,
1998 and is incorporated herein by reference.





<PAGE>   9


                                      - 9 -


                                     PART IV


Item 13.  Exhibits and Reports on Form 8-K

    (a)    Exhibits (numbered in accordance with Item 601 of Regulation S-B)

           Exhibit No.                          Exhibit
           -----------                          -------

               3.1                  Amended and Restated Certificate of
                                    Incorporation of the Company, filed as
                                    Exhibit 3.1 to Form 10-K for the year ended
                                    August 31, 1991 and incorporated herein by
                                    reference.

               3.2                  Amended and Restated Bylaws of the
                                    Company, filed as exhibit 3.2 to Form
                                    10-K for the year ended August 31,
                                    1991 and incorporated herein by
                                    reference.

              10                    Amended and restated Glassmaster
                                    Company 1992 Incentive Stock Option
                                    Plan, filed as exhibit 10 to Form
                                    10-KSB for the year ended August 31,
                                    1993 and incorporated herein by
                                    reference.

              11                    Statement re Computation of Per Share 
                                    Earnings

              21                    Subsidiaries of the Registrant

              27                    Financial Data Schedule (SEC use only)

    (b)    Reports on Form 8-K

           No reports on Form 8-K were filed during the fourth quarter of the
           fiscal year ended August 31, 1997.




<PAGE>   10


                                     - 10 -



                                   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.



GLASSMASTER COMPANY


By /s/ Raymond M. Trewhella                   By /s/ Steven R. Menchinger
   ----------------------------------            -------------------------------
   Raymond M. Trewhella, President               Steven R. Menchinger, Corporate
   (Principal Executive Officer)                 Controller and Treasurer
                                                 (Principal Financial Officer)
                                                 (Principal Accounting Officer)

Date      November 21, 1997                   Date       November 21, 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.


By /s/ Stephen W. Trewhella                 By  /s/ Raymond M. Trewhella
   ----------------------------------           --------------------------------
   Stephen W. Trewhella, Director               Raymond M. Trewhella, Director

Date      November 21, 1997                   Date       November 21, 1997
     --------------------------------              -----------------------------


By /s/ H. D. Harrelson                      By  /s/ Melvin L. Chavis
   ----------------------------------           --------------------------------
   H. D. Harrelson, Director                    Melvin L. Chavis, Director

Date      November 21, 1997                   Date       November 21, 1997
     --------------------------------              -----------------------------


By  /s/ James F. Kane                       By  /s/ John Taylor
    ---------------------------------           --------------------------------
    James F. Kane, Director                     John Taylor, Director

Date      November 21, 1997                   Date       November 21, 1997
     --------------------------------              -----------------------------







<PAGE>   11








                               GLASSMASTER COMPANY

                                  LEXINGTON, SC

                              FINANCIAL STATEMENTS

                   FISCAL YEARS ENDED AUGUST 31, 1997 AND 1996



                                                               Page No.
                                                               --------

          Balance Sheet .................................           12
          Statement of Stockholders Equity ..............           13
          Income Statement ..............................           14
          Statement of Cash Flows .......................           15
          Notes to Financial Statements .................        16-21

          Independent Auditor's Report ..................           22




<PAGE>   12



                               GLASSMASTER COMPANY
                                  LEXINGTON SC
                                  BALANCE SHEET
                            AUGUST 31, 1997 AND 1996


<TABLE>
<CAPTION>
                                                                      August 31, 1997                  August 31, 1996
                                                                 -------------------------        -------------------------
<S>                                                              <C>            <C>               <C>            <C>       
Assets
Cash                                                                            $  119,072                       $  129,342
Accounts Receivable - Trade                                      $3,268,863                       $2,780,193
Less:  Allowance for Doubtful Accts                                  56,394      3,212,469            55,288      2,724,905
                                                                 ----------                       ----------
Accounts Receivable - Other                                                        144,457                          176,399
Inventories                                                                      2,740,768                        2,900,288
Prepaid Expenses                                                                    11,290                           60,479
Deferred Income Taxes                                                               19,702                           20,408
                                                                               -----------                      -----------
Current Assets                                                                   6,247,758                        6,011,821

Fixed Assets (Net of Depreciation)
   Manufacturing Property                                                        5,802,591                        5,876,317

Other Assets                                                                       436,547                          338,757
                                                                               -----------                      -----------

Total Assets                                                                   $12,486,896                      $12,226,895
                                                                               ===========                      ===========


Liabilities
Accounts Payable                                                                 1,421,762                        1,268,443
Accrued Expenses                                                                   239,290                          194,871
Accrued Income Taxes                                                                11,754                            1,886
Notes and Mortgages Payable - Current                                            3,410,457                        3,049,697
                                                                               -----------                      -----------
Current Liabilities                                                              5,083,263                        4,514,897

Other Liabilities
   Notes and Mortgages Payable - Long Term                        3,085,984                        3,668,318
   Deferred Income Taxes                                            550,752      3,636,736           514,482      4,182,800
                                                                -----------    -----------        ----------    -----------

Total Liabilities                                                                8,719,999                        8,697,697

Stockholders' Equity
Capital Stock (Authorized 5,000,000 Shares
   $.03 Par - 1,620,096 (1997), 1,617,096 (1996)
   Shares Issued and Outstanding)                                    48,603                           48,513
Paid-In Capital                                                   1,344,058                        1,341,148
Donated Capital                                                     124,210                          124,210
Retained Earnings                                                 2,250,026      3,766,897         2,015,327      3,529,198
                                                                  ---------    -----------        ----------    -----------

Total Liabilities and Equity                                                   $12,486,896                      $12,226,895
                                                                               ===========                      ===========

</TABLE>


         The accompanying notes to financial statements are an integral
                            part of this statement.




<PAGE>   13





                               GLASSMASTER COMPANY
                                  LEXINGTON SC
                        STATEMENT OF STOCKHOLDERS EQUITY
                   FISCAL YEARS ENDED AUGUST 31, 1997 AND 1996



<TABLE>
<CAPTION>
                                      August 31, 1997      August 31, 1996
                                      ---------------      ---------------
<S>                                   <C>                  <C>       
Capital Stock:
   Balance - September 1                 $   48,513          $   48,052
   Proceeds from Sale of Shares
      Under Stock Option Plan                    90                 461
                                         ----------          ----------
   Balance - August 31                       48,603              48,513
                                         ----------          ----------

Additional Paid In Capital:
   Balance - September 1                  1,341,148           1,323,170
   Proceeds from Sale of Shares
      Under Stock Option Plan                 2,910              17,978
                                         ----------          ----------
   Balance - August 31                    1,344,058           1,341,148
                                         ----------          ----------

Donated Capital:                            124,210             124,210
                                         ----------          ----------

Retained Earnings:
   Balance - September 1                  2,015,327           1,932,226
   Net Income (Loss)                        234,699             131,433
   Common Stock Dividends Paid                                  (48,332)
                                         ----------          ----------
   Balance - August 31                    2,250,026           2,015,327
                                         ----------          ----------

Total Stockholders Equity                $3,766,897          $3,529,198
                                         ==========          ==========

</TABLE>





         The accompanying notes to financial statements are an integral
                            part of this statement.





<PAGE>   14





                               GLASSMASTER COMPANY
                                  LEXINGTON SC
                                INCOME STATEMENT
                   FISCAL YEARS ENDED AUGUST 31, 1997 AND 1996


<TABLE>
<CAPTION>
                                                     August 31, 1997      August 31, 1996
                                                     ---------------      ---------------

<S>                                                  <C>                  <C>        
Sales                                                  $21,321,501         $22,323,467
  Cost of Sales                                         17,536,019          18,569,514
                                                       -----------         -----------

Gross Profit on Sales                                    3,785,482           3,753,953

Expenses
  Selling Expense                                        1,057,839           1,105,110
  General and Administrative and Other Expense           1,751,026           1,688,440
  Provision for Doubtful Accounts                           43,376             107,980
                                                       -----------         -----------
      Total Expenses                                     2,852,241           2,901,530
                                                       -----------         -----------

Income from Operations                                     933,241             852,423

  Interest Expense                                         633,373             650,730
                                                       -----------         -----------

Income Before Income Taxes                                 299,868             201,693

Provision for Income Taxes
  Current                                                   36,307              32,480
  Deferred                                                  28,862              37,780
                                                       -----------         -----------
      Total - Provision for Income Taxes                    65,169              70,260
                                                       -----------         -----------

Net Income                                             $   234,699         $   131,433
                                                       ===========         ===========


Net Income Per Common Share 
   (Primary and Fully Diluted)

      Net Income Per Share                             $       .14         $      .08
                                                       ===========         ==========

</TABLE>


         The accompanying notes to financial statements are an integral
                            part of this statement.




<PAGE>   15



                               GLASSMASTER COMPANY
                                  LEXINGTON SC
                             STATEMENT OF CASH FLOWS
                   FISCAL YEARS ENDED AUGUST 31, 1997 AND 1996


<TABLE>
<CAPTION>
                                                                  August 31, 1997     August 31, 1996
                                                                  ---------------     ---------------
<S>                                                               <C>                 <C>        
Cash Flows From Operating Activities
   Net Income                                                       $ 234,699          $   131,433
   Adjustments to Reconcile Net Income to Net Cash Provided
    (Used) by Operating Activities:
      Depreciation & Amortization                                     757,235              710,488
      Increase in Deferred Income Taxes                                28,862               37,780
      Changes in Operating Assets and Liabilities:
         Accounts Receivable Decrease (Increase)                     (455,623)             700,593
         Inventories Decrease (Increase)                              149,519             (150,547)
         Prepaid Expenses Decrease (Increase)                          49,189              (12,017)
         Prepaid Income Taxes Decrease (Increase)                                           68,108
         Accounts Payable Increase (Decrease)                         153,320             (387,285)
         Accrued Expenses Increase (Decrease)                          44,419              (55,485)
         Income Taxes Payable Increase (Decrease)                       9,868                1,886
                                                                    ---------          -----------

   Net Cash Provided (Used) by Operating Activities                   971,488            1,044,954
                                                                    ---------          -----------

Cash Flows From Investing Activities
   Cash Payments for the Purchase of Fixed Assets                    (675,681)            (895,633)
   Cash Surrender Value - Life Insurance                              (87,503)             (59,275)
                                                                    ---------          -----------

   Net Cash Provided (Used) by Investing Activities                  (763,184)            (954,908)
                                                                    ---------          -----------

Cash Flows From Financing Activities
   Proceeds From Issuance of Common Stock                               3,000               18,439
   Proceeds From Issuance of Short-term Debt                          100,000
   Proceeds From Issuance of Long-Term Debt                           174,588            2,747,108
   Principal Payments on Short-Term Debt                             (100,000)
   Principal Payments on Long-Term Debt                              (791,808)          (2,409,257)
   Dividends Paid                                                                          (48,332)
   Net Increase (Decrease) in Line of Credit                          395,646             (420,008)
   Cash Payments for Loan Closing Costs                                                    (10,463)
                                                                    ---------          -----------

   Net Cash Provided (Used) by Financing Activities                  (218,574)            (122,513)
                                                                    ---------          -----------

Net Increase (Decrease) in Cash                                       (10,270)             (32,467)

Cash at Beginning of Year                                             129,342              161,809
                                                                    ---------          -----------

Cash at End of Year                                                 $ 119,072          $   129,342
                                                                    =========          ===========

Supplemental Disclosures of Cash Flow Information
   Cash Paid For:
     Interest (Net of Amount Capitalized)                           $ 616,895          $   643,648
     Income Taxes Paid                                                 26,439              100,000

</TABLE>

         The accompanying notes to financial statements are an integral
                            part of this statement.


<PAGE>   16




                          NOTES TO FINANCIAL STATEMENTS
                            AUGUST 31, 1997 AND 1996


Note 1.  Summary of Significant Accounting Policies

         Description of Business

                  Glassmaster Company is a manufacturer of extruded
         (thermoplastic) synthetic monofilament, pultruded (thermoset)
         fiberglass composites, and flexible steel wire controls and molded
         plastic control panels. The company markets its monofilament products
         primarily on a private brand basis, which are sold by company salesmen
         to original equipment manufacturers and distributors throughout North
         America, and to a lesser degree, Europe, South America, and the Pacific
         Rim. The Company's fiberglass products and composites are sold through
         in-house salesmen and regional manufacturers' sales representatives and
         are distributed throughout the United States and Canada. Flexible steel
         wire controls and control panels are sold through manufacturers'
         representatives or directly to original equipment manufacturers
         throughout North America.

         Use of Estimates

                  The preparation of financial statements in conformity with
         generally accepted accounting principles requires management to make
         estimates and assumptions that affect certain reported amounts and
         disclosures. Accordingly, actual results could differ from those
         estimates.

         Principles of Consolidation

                  The consolidated financial statements for the year ended
         August 31, 1997 and 1996 include the accounts of Glassmaster Company
         and its wholly-owned subsidiary, Glassmaster Controls Company, Inc.,
         which was organized and incorporated under the laws of the State of
         Michigan, on October 28, 1988. All material inter-company transactions
         have been eliminated.

         Cash and Cash Equivalents

                  For the purpose of the statement of cash flows, the company
         considers all short-term debt securities purchased with a maturity of
         three months or less to be cash equivalents.

         Accounts Receivable

                  The company provides an allowance for losses on trade
         receivables based on a review of its past collection history. Accounts
         receivables have been reduced by an allowance for doubtful accounts in
         the amount of $56,394 and $55,288 for the years ended August 31, 1997
         and 1996 respectively.

         Inventories

                  The method of determining the amount of inventories is lower
         of cost or market on a first-in, first-out basis. Inventories as shown
         on the Balance Sheet are classified below:

<TABLE>
<CAPTION>
                                                      1997              1996
                                                  -----------       -----------
<S>                                               <C>               <C>        
                 Materials & Supplies             $ 1,603,906       $ 1,617,020
                 Work In Process                      468,722           651,635
                 Finished Products                    668,140           631,633
                                                  -----------       -----------

                 Total                            $ 2,740,768       $ 2,900,288
                                                  ===========       ===========
</TABLE>



<PAGE>   17



                          NOTES TO FINANCIAL STATEMENTS
                            AUGUST 31, 1997 AND 1996


Note 1.  Summary of Significant Accounting Policies (Cont'd)

         Fixed Assets

                  The basis for determining the values of fixed assets is cost.
         Included in land is property valued at $100,374 which was donated to
         the Company by Lexington County, South Carolina.

                  The provision for depreciation charged against income for the
         fiscal years ended August 31, 1997, and 1996, totaled $722,421, and
         $698,279 respectively. The company computes depreciation using the
         straight-line method over the estimated useful lives of the assets as
         indicated below. The company uses applicable accelerated methods for
         tax purposes.

<TABLE>
<CAPTION>
                                                                                             Estimated
               Asset Classification                   1997                 1996             Useful Life
               --------------------               ------------         ------------         -----------
<S>                                               <C>                  <C>                  <C> 
               Land                               $   190,274          $   190,274              N/A
               Buildings                            3,793,946            3,670,180          30-40 Years
               Furniture & Fixtures                   376,597              338,320            5-7 Years
               Automotive Equipment                   304,416              288,114            3-5 Years
               Plant Equipment                      5,673,978            5,315,428           7-10 Years
               Tooling and Dies                       756,095              630,829            3-5 Years
                                                  ------------         ------------
                 Total                             11,095,306           10,433,145

               Less:  Accumulated Depreciation     (5,292,715)          (4,556,828)
                                                  ------------         ------------

               Net                                $ 5,802,591          $ 5,876,317
                                                  ============         ===========

</TABLE>

         Income Taxes

                  Components of the provision for income taxes on continuing
         operations are shown below:

<TABLE>
<CAPTION>
                                                         1997                            1996
                                                         ----                            ----
                                                 Current      Deferred          Current        Deferred
                                                 --------     --------          --------       --------
<S>                                              <C>          <C>               <C>            <C>     
                           Federal               $ 36,307     $ 32,251          $ 32,480       $ 30,778
                           State                                (3,389)                           7,002
                           Foreign                  -0-          -0-               -0-            -0-
                                                 --------     --------          --------       --------
                           Total                 $ 36,307     $ 28,862          $ 32,480       $ 37,780
                                                 ========     ========          ========       ========

</TABLE>

                  The principal elements accounting for the difference between
         the statutory federal income tax rate and the effective rates are:

<TABLE>
<CAPTION>
                                                                         1997           1996
                                                                       --------       --------
<S>                                                                    <C>            <C>     
                   Expected tax at statutory rates                     $100,198       $ 61,910
                   Increase (decrease) resulting from effect of:
                     Depreciation                                       (49,439)       (49,011)
                     Net effect of increase in CSV of Life
                       Insurance over premiums paid                     (13,592)        (2,672)
                     Alternative Minimum Tax                              1,438         19,795
                     Other                                               (2,298)         2,458
                                                                       ---------      --------

                   Current Tax Provision                               $ 36,307       $ 32,480
                                                                       =========      ========
</TABLE>




<PAGE>   18



                          NOTES TO FINANCIAL STATEMENTS
                            AUGUST 31, 1997 AND 1996


Note 1.   Summary of Significant Accounting Policies (Cont'd)

          Income Taxes (Cont'd)

               For South Carolina tax purposes a net operating loss
          carry-forward of $132,277 is available for future periods. The
          carry-forward will expire in the year ended August 31, 2012.

               For income tax reporting, an Alternative Minimum Tax credit of
          $30,135 is indefinitely available to reduce future regular taxes. For
          financial statement reporting, the credit has been recognized as a
          deferred tax asset.

               The net deferred tax assets and liabilities consisted of the
          following components as of August 31, 1997 and 1996.
<TABLE>
<CAPTION>
                                                            1997           1996
                                                           ------         -----
 <S>                                                        <C>            <C>       
             Deferred Tax Assets Relating to:
                Allowance for Doubtful Accounts           $  19,702      $  20,408
                Alternative Minimum Tax Credit               30,135         28,635
                South Carolina Tax NOL Carryovers             6,614
             Deferred Tax Liabilities Relating to:
                Property and Equipment                     (550,752)      (514,482)
                                                          ---------      ---------

             Net Deferred Tax Liability                   $(494,301)     $(465,439)
                                                          =========      =========

</TABLE>

               The components giving rise to the deferred tax assets and
          liability described above have been included in the accompanying
          balance sheet as of August 31, 1997 and 1996 as follows:
<TABLE>
<CAPTION>
                                                       1997             1996
                                                      ------           -----
<S>                                                   <C>              <C>      
               Current Assets                       $  19,702        $  20,408
               Other Assets                            36,749           28,635
               Other Liabilities                     (550,752)        (514,482)

</TABLE>

          Advertising

               The company follows the policy of charging the costs of
          advertising to expense as incurred. Advertising expense was $77,144
          and $79,566 for the years ended August 31, 1997 and 1996,
          respectively.

Note 2.   Accounts Receivable - Other

               Accounts Receivable - Other consists mainly of management's
          estimate of the amount it will recover from a customer currently in
          bankruptcy proceedings. The company has recorded a receivable of
          $130,000 and $154,985 as of August 31, 1997 and 1996 respectively.

Note 3.   Other Assets

               Other assets are composed of the following:
<TABLE>
<CAPTION>
                                                          1997           1996
                                                          ----           ----
<S>                                                       <C>            <C>      
                  CSV Life Insurance                   $ 337,758      $ 250,255
                  Deferred Tax Asset                      36,749         28,635
                  Loan fees, net of Amortization          22,040         29,867
                  Other                                   40,000         30,000
                                                       ---------      ---------

                       Total                           $ 436,547      $ 338,757
                                                       =========      =========
</TABLE>



<PAGE>   19




                          NOTES TO FINANCIAL STATEMENTS
                            AUGUST 31, 1997 AND 1996

Note 4.   Notes and Mortgages Payable

               Substantially all property, plant and equipment and a portion of
          CSV Life Insurance are pledged as collateral for the scheduled
          borrowings. In addition, inventories and customer receivables are
          pledged as collateral to provide the Company with a revolving line of
          credit for working capital requirements. The amount available for
          borrowings under this line of credit varies with fluctuations in the
          amount of inventories on hand and customer receivables outstanding
          with a maximum available credit line of $4.0 million. The balance as
          of August 31, 1997 was $1,894,914 and at August 31, 1996 was
          $1,709,268. This credit agreement is subject to renegotiation and
          renewal every three-year period. The current contract will expire
          March 31, 1998.

               Special provisions of the loan agreements restrict payment of
          cash dividends without the consent of the lender as well as providing
          for minimum working capital requirements and maximum debt to net worth
          requirements in addition to providing for other minimum financial
          ratio requirements. The company was not in violation of any of these
          loan covenants as of August 31, 1997.

               The following table sets forth the Company's indebtedness at the
          end of fiscal years 1997 and 1996.

<TABLE>
<CAPTION>
                                                                       1997                              1996
                                                                       ----                              ----
                                                             Current        Long-Term          Current        Long-Term
                                                             -------        ---------          -------        ---------
<S>                                                          <C>            <C>                <C>            <C>       
          Financial Institutions
          Mortgages, interest ranging from 8.882% fixed
            to Prime + .875%, maturities to 2005            $  249,525      $1,823,955        $  218,414      $2,088,542
          Notes, interest ranging from Prime + .5% to
            Prime + 1.25%, maturities within 12 months       2,329,914           ---           1,934,268           ---
          Installment Notes, interest range from
            1.9% to Prime + 1.25%, maturities to 2001          822,970       1,090,932           888,655       1,401,254
          Local Government 2nd Mortgage, interest at 3%
            fixed, maturity November 9, 2004                     8,048         171,023             8,360         178,522
                                                            ----------      ----------        ----------      ----------

            Totals                                          $3,410,457      $3,085,910        $3,049,697      $3,668,318
                                                            ==========      ==========        ==========      ==========
</TABLE>


               The Prime interest rate was 8.50% and 8.25% respectively, for the
          years ended August 31, 1997 and 1996.

               The principal maturities on the notes and mortgages payable over
          the next five years is as follows:

                             Fiscal
                           Year Ending                       Principal
                           -----------                      ----------
                              1998                          $3,410,457
                              1999                             924,295
                              2000                             688,100
                              2001                           1,386,165
                              2002                              37,690
                           After 2002                           49,659
                                                            ----------

                           Total                            $6,496,366
                                                            ==========



<PAGE>   20



                          NOTES TO FINANCIAL STATEMENTS
                            AUGUST 31, 1997 AND 1996

Note 5.  Leases

               The Company entered into an operating lease for various pieces of
          equipment on August 19, 1997. The lease calls for monthly payments of
          $11,171 for a period of sixty months. Future minimum lease payments
          under the lease are as follows:

                             Fiscal
                           Year Ending                         Amount
                           -----------                        --------
                              1998                            $134,052
                              1999                             134,052
                              2000                             134,052
                              2001                             134,052
                              2002                             122,881
                                                              --------

                              Total                           $659,089
                                                              ========

Note 6.  Earnings Per Share

               Primary earnings per share amounts are computed based on the
          weighted average number of shares actually outstanding plus the shares
          that would be outstanding assuming exercise of dilutive stock options.
          The number of shares that would be issued from the exercise of stock
          options has been reduced by the average market price of the company's
          stock. The number of shares used in the computations were 1,618,904 in
          1997 and 1,616,020 in 1996.

Note 7.  Stock Options

               The Company has an incentive stock option plan. Under the plan
          the Company may grant options for up to 260,000 shares of common
          stock. Options granted under the plan become exercisable at varying
          percentages from date of grant through expiration, either at
          termination of employment or ten years after date of grant. The
          exercise price of each option is equal to the market price of the
          company's stock on the date of grant. The exercise prices for the
          options range from $1 to $4.

               Following is a summary of the status of the incentive stock
          options for the years ended August 31, 1997 and 1996:

<TABLE>
<CAPTION>
                                                       1997                        1996
                                            ------------------------    -------------------------
                                             Weighted                     Weighted
                                             Average                      Average
                                              Number        Exercise       Number        Exercise
                                            Of Shares         Price      Of Shares         Price
                                            ---------       --------     ---------       --------
<S>                                         <C>             <C>          <C>             <C>   
          Outstanding-Beginning of Year        70,300         $ 2.74        91,634         $ 2.46
          Exercised                            (3,000)          1.00       (15,734)          1.19
          Forfeited                           (17,600)          2.22        (5,600)          2.52
                                            ---------                    ---------
          Outstanding-End of Year              49,700           3.03        70,300           2.74
                                            =========                    =========

          Options Exercisable at
            End of Year                        37,100           2.70        50,200           2.35
                                            =========                    =========
</TABLE>





<PAGE>   21



                          NOTES TO FINANCIAL STATEMENTS
                            AUGUST 31, 1996 AND 1995

Note 7.   Stock Options (Cont'd)

               Following is a summary of the status of the incentive options 
          outstanding at August 31, 1997:

<TABLE>
<CAPTION>
                Outstanding Options                             Exercisable Options
---------------------------------------------------          --------------------------
                           Weighted
                           Average         Weighted
                          Remaining        Average
Exercise                 Contractual       Exercise                            Exercise
  Price         Number      Life            Price            Number              Price
--------        ------   -----------      ---------          ------            --------
<C>             <C>      <C>              <C>                <C>               <C>   
$ 2.25           5,200     1 year          $ 2.25             5,200             $ 2.25
  1.00          13,000     5 years           1.00            13,000               1.00
  4.00          31,500     7 years           4.00            18,900               4.00
</TABLE>



Note 8.   Defined Contribution Plan

               The Company established a qualified 401(K) defined contribution
          plan effective January 1, 1990. The plan year ends on December 31.
          Participation in the plan is voluntary and employees may contribute
          from 1% to 15% of eligible compensation on a tax-deferred basis.

               The amount to be contributed by the Company will be determined
          each year prior to December 1. The proposed match for the plan year
          (1997) is $.25 for each $1.00 of employee contributions up to a
          maximum 6% of eligible compensation.

               The plan provides for the Company to make a discretionary
          contribution on behalf of all eligible employees (those with one full
          year of active service) regardless of whether they have elected to
          voluntarily participate in the plan. This discretionary contribution
          will be allocated based on a ratio of the employees' total W-2
          earnings to the total W-2 earnings of all eligible employees. Any
          discretionary contribution will be dependent upon the overall
          profitability of the corporation and will be made with the approval of
          the Board of Directors.

               The amount of expense charged to operations was $63,525 for the
          year ended August 31, 1997 and $60,314 for 1996.

Note  9.  Reclassification of Financial Statement Presentation

               Certain reclassifications have been made to the August 31, 1996
          financial statements to conform with the 1997 financial statement
          presentation. Such reclassifications had no effect on net income as
          previously reported.

Note 10.  Financial Instruments

           (A) Balance Sheet Financial Instruments
               The carrying amount reported in the balance sheets for cash and
          cash equivalents, accounts receivable and accounts payable
          approximates fair value because of the immediate or short-term
          maturity of these financial instruments. The carrying amount for
          long-term debt approximates fair value because the underlying
          instruments are primarily variable rate notes that fluctuate with the
          prime rate.

           (B) Concentration of Credit Risk
               Financial instruments which potentially subject the Company to
          concentrations of credit risk consist of accounts receivable. All
          receivables originate from the Company's normal business activities as
          described in note one. These receivables are unsecured.


<PAGE>   22









                               GLASSMASTER COMPANY

                                 LEXINGTON, S.C.

                                NOVEMBER 6, 1997





          We have audited the consolidated balance sheets of Glassmaster Company
and subsidiary as of August 31, 1997 and 1996, and the related statements of
income, stockholders' equity, and cash flows, for the two-year period ended
August 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

          In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Glassmaster Company and subsidiary as of August 31, 1997 and 1996, and the
respective results of its operations and its cash flows for the two-year period
ended August 31, 1997, in conformity with generally accepted accounting
principles.




                                    Brittingham, Dial & Jeffcoat
                                    Certified Public Accountants
                                    501 State Street
                                    PO Box 5949
                                    West Columbia, SC 29171





<PAGE>   23





                                  EXHIBIT INDEX



<TABLE>
<CAPTION>
Exhibit No.                              Exhibit                                                      Sequential Page No.
-----------                              -------                                                      -------------------
<S>            <C>                                                                                    <C>
    3.1        Amended and Restated Certificate of Incorporation of the Company, filed as
               Exhibit 3.1 to Form 10-K for the year ended August 31, 1991 and incorporated
               herein by reference.                                                                           ---

    3.2        Amended and Restated Bylaws of the company, filed as Exhibit 3.2 to Form 10-K
               for the year ended August 31, 1991 and incorporated herein by reference.                       ---

   10          Amended and restated Glassmaster Company 1992 Incentive Stock Option Plan,
               filed as exhibit 10 to Form 10-KSB for the year ended August 31, 1993 and
               incorporated herein by reference.                                                              ---

   11          Computation of Earnings Per Share for two years ended August 31, 1997 and 1996.                24

   21          Subsidiaries of the Company.                                                                   25

   27          Financial Data Schedule (SEC use only).                                                        ---

</TABLE>