J A INDUSTRIES INC, DEFR14A, 1996-07-12

J A INDUSTRIES INC
DEFR14A, 1996-07-12
MISCELLANEOUS PLASTICS PRODUCTS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934

[X] Filed by the Registrant

[ ] Filed by a Party other than the Registrant

Check the appropriate box:

[ ] Preliminary Proxy Statement

[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-b(e)(2))

[X] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to (section mark)240.14a-11(c) or
(section mark)240.14a-12

J.A. INDUSTRIES, INC.
(Name of Registrant as Specified In Its Charter)

J.A. INDUSTRIES, INC.
(Name of Person(s) Filing Proxy Statement If Other Than Registrant)

PAYMENT OF FILING FEE (Check the appropriate box):

[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).

[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:

2) Aggregate number of securities to which transaction applies:

3) Per unit price or other underlying value of transaction computed pursuant to
Exchange
Act Rule 0-11: *

4) Proposed maximum aggregate value of transaction:

5) Total fee paid:

(Set forth the amount on which the filing fee is calculated and state how it was
determined)

[x] Fee previously paid with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

1) Amount Previously Paid: $

2) Form, Schedule or Registration Statement No.:

3) Filing Party:

4) Date Filed:

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J.A. INDUSTRIES, INC.
34A-2755 Lougheed Highway
Port Coquitlam, B.C. V3B 5Y9 Canada

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

MEETING DATE: JULY 29, 1996

NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of J.A.
INDUSTRIES, INC., a Delaware corporation ("Company" or "JA"), will be held at
the offices of Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., at
2500 First Union Capitol Center, Raleigh, North Carolina 27601 on July 29, 1996
at 8:00 a.m. in the forenoon, for the following purposes:

1. To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger by and among the Company, J.A. Industries of North
Carolina, Inc., a newly formed wholly owned subsidiary of the Company
("Sub") and Kenmar Business Groups, Inc. ("Kenmar") (the "Merger
Agreement") and the transactions contemplated thereby. The Merger
Agreement provides for a reverse triangular merger whereby Kenmar will
become a wholly-owned subsidiary of JA. Pursuant to the Merger Agreement
each share of Kenmar's common stock shall be converted into the right to
receive 41 shares (subject to adjustment) of unregistered common stock
of the Company (the "Exchange Ratio"). The Exchange Ratio shall be a
number that upon consummation of the merger will result in the Kenmar
stockholders owning an aggregate number of shares of the Company equal
to 50 percent of the Company's issued and outstanding shares. The
Exchange Ratio will be adjusted at the consummation of the merger. The
Company's common stock issued and exchanged for the Kenmar common stock
is referred to collectively herein as the ("Merger Consideration").
Contemporaneously with the issuance of the Merger Consideration, the
Company shall grant to Kenmar an option to acquire 750,000 shares of its
Common Stock for an aggregate purchase price of one dollar upon the
occurrence of a breach of any representation, warranty, covenant or
other obligation of the Company under the Merger Agreement.

2. To elect (5) directors of the Company for the ensuing year.

3. To approve an amendment to the Company's Certificate of Incorporation to
provide for a change in name to Electronic Manufacturing Services Group,
Inc.

4. To approve a 1 for 4 reverse stock split of each outstanding share of
the Company's Common Stock.

5. To transact such other business as may properly come before the meeting.

Please fill out, sign and mail the enclosed form of proxy, whether or not
you expect to be present at the Special Meeting. A self-addressed envelope is
enclosed for your convenience.

By Order of the Board of Directors

ROBERT KNIGHT, PRESIDENT

Port Coquitlam, B.C.
July 10, 1996

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE FILL IN, DATE AND
RETURN THE PROXY IN THE ENCLOSED ENVELOPE.

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SUMMARY

THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN INFORMATION SET FORTH ELSEWHERE
IN THIS PROXY STATEMENT AND IS NOT INTENDED TO BE COMPLETE. IT IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT, THE ACCOMPANYING APPENDICES AND THE DOCUMENTS INCORPORATED
HEREIN BY REFERENCE.

THE COMPANIES

J.A. INDUSTRIES, INC. The Company was organized under the laws of the State
of Delaware in 1987 and presently has no operations. As of March 31, 1996 the
Company had no assets. The principal executive offices of the Company are
located at 34A-2755 Lougheed Highway #522, Port Coquitlam, B.C. V3B 5Y9 Canada
and its telephone number is (604) 941-3413.

J.A. INDUSTRIES OF NORTH CAROLINA, INC. Sub was organized under the laws of
the State of North Carolina in January 1996 and presently has no operations. As
of March 31, 1996 Sub had no assets. The principal executive offices of Sub are
located at 34A-2755 Lougheed Highway #522, Port Coquitlam, B.C. V3B 5Y9 Canada
and its telephone number is (604) 941-3413.

KENMAR BUSINESS GROUPS, INC. Kenmar was organized under the laws of the
State of North Carolina in 1984 and is a contract provider of manufacturing
services to the electronics industry. As of February 29, 1996 Kenmar had total
assets of $2,376,000. The principal executive offices of Kenmar are located at
6638 Old Forest Wake Road, Raleigh, North Carolina and its telephone number is
(919) 876-6049.

Kenmar provides manufacturing services to original equipment manufacturers
("OEM's") in the electronics industry, including producers of industrial
controls, computers & peripherals and instrumentation. Primary services include
materials procurement, printed circuit card and chassis assembly, and testing.
Kenmar has approximately 20 customers, 6 of which accounted for 79% of its sales
for the six months ending February 29, 1996. Prior to the loss of its largest
customer in 1995, Kenmar conducted its operations in 42,000 square feet of flex
space with 85 employees. Since such loss, steps have been taken to size the
operations to more closely match the revenue without losing its key employees
and skills required to regrow the business. To date, this has caused Kenmar to
incur losses from operations for fiscal 1996. Kenmar currently operates one
facility in Raleigh, North Carolina with approximately 25 employees in 21,000
square feet of flex space. Operations are near 40% capacity with one shift
active.

SPECIAL MEETING

A Special meeting of Shareholders of the Company will be held on July 29,
1996 at 8:00 a.m. local time at the offices of Smith, Anderson, Blount, Dorsett,
Mitchell & Jernigan, L.L.P. at 2500 First Union Capitol Center, Raleigh, North
Carolina 27601 at which time the shareholders of the Company will be asked to
approve the Merger Agreement and the transactions contemplated thereby; elect
directors, amend the Company's Certificate of Incorporation and approve a 1 for
4 reverse stock split. The record holders of the Company's common stock at the
close of business on June 3, 1996 (the "Record Date") are entitled to notice of
and to vote at the special meeting. On the Record Date, there were approximately
301 holders of record of the Company's common stock and 9,417,304 shares of
Company common stock outstanding.

The affirmative vote of the holders of a majority of the outstanding shares
of the Company's common stock present at the meeting is required to approve the
Merger Agreement and other proposals presented herein. Directors will be elected
by a plurality of the votes cast. It is expected that all of the 307,259 shares
of the Company's common stock beneficially owned by the directors and executive
officers of the Company and their affiliates at the Record Date will be voted
for the proposals set forth herein.

EFFECTIVE TIME OF THE MERGER

The Merger will become effective upon the filing of properly executed
Articles of Merger relating thereto with the Secretary of the State of North
Carolina, or at such later time as may be specified therein. See "The
Merger -- Effective Time of the Merger".

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information.................................................................................................. 1
Incorporation of Certain Documents by Reference........................................................................
Information Concerning the Special Meeting
Summary..............................................................................................................
Date, Place and Time of Special Meeting..............................................................................
Voting; Revocation of Proxy..........................................................................................
Solicitation of Proxies..............................................................................................
Quorum and Vote Required.............................................................................................
Dissenters' Rights...................................................................................................
Proposal One -- Approval of the Merger................................................................................. 2
Approval Sought...................................................................................................... 2
History of JA........................................................................................................ 3
Background of the Merger............................................................................................. 3
Terms of the Merger.................................................................................................. 4
Business of Kenmar................................................................................................... 4
Recommendation of the Board of Directors............................................................................. 5
Additional Terms of the Merger Agreement............................................................................. 6
Issuance of Restricted Shares........................................................................................ 7
Registration Rights.................................................................................................. 8
Effective Time of the Merger......................................................................................... 8
Accounting Treatment................................................................................................. 8
Federal Income Tax Consequences...................................................................................... 8
Rights of Dissenting Stockholders.................................................................................... 9
Option Agreement..................................................................................................... 10
Selected Financial Data for the Company and Kenmar..................................................................... 10
JA................................................................................................................... 10
Kenmar............................................................................................................... 11
Per Share Data....................................................................................................... 11
Management's Discussion and Analysis of Financial Condition and Results of Operations.................................. 12
JA................................................................................................................... 12
Liquidity............................................................................................................ 13
Notes Payable and Long Term Debt..................................................................................... 14
Results of Operations................................................................................................
Kenmar............................................................................................................... 19
Results of Operations................................................................................................ 19
Liquidity and Capital Resources...................................................................................... 20
Statements of Income................................................................................................. 22
Consolidated Balance Sheets.......................................................................................... 23
Proposal Two -- Election of Directors.................................................................................. 23
Nominees............................................................................................................. 24
Executive Compensation............................................................................................... 24
Security Ownership of Certain Beneficial Owners and Management......................................................... 26
Principal Stockholders (post merger)................................................................................... 26
Common Stock of the Company............................................................................................ 26
Market Price Information............................................................................................. 26
Dividend Policy...................................................................................................... 27
Post Meeting Financing............................................................................................... 27
Proposal Three -- Approval of Amendment to Certificate of Incorporation................................................ 28
Description of Capital Stock of the Company............................................................................ 28
Proposal Four -- Reverse Stock Split................................................................................... 28
Financial Statements................................................................................................... 29
Presence of Accountants at Special Meeting............................................................................. 29
Stockholder's Proposals................................................................................................ 29
Other Matters.......................................................................................................... 29

EXHIBITS
Section 262 of the Delaware General Corporation Law -- Appraisal Rights................................................ A
Agreement and Plan of Merger........................................................................................... B
Option Agreement....................................................................................................... C
Proposed Amendment to Certificate of Incorporation..................................................................... D
Financial Statements................................................................................................... E
</TABLE>

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AVAILABLE INFORMATION

JA is subject to the information requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files proxy statements, reports and other information with the Securities and
Exchange Commission (the "Commission"). Proxy statements, reports and other
information concerning JA can be inspected and copied at Room 1024 of the
Commission's offices at 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices in New York (7 World Trade Center, 13th Floor,
New York, New York 10048) and in Chicago (Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661). Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.

No person is authorized to give any information or to make any
representation not contained in this Proxy Statement and, if given or made, such
information or representation should not be relied upon as having been
authorized. Neither the delivery of this Proxy Statement, nor any distribution
of the securities issuable in connection with the Merger Agreement, shall, under
any circumstances, create any implication that there has been no change in the
information concerning JA contained in this Proxy Statement since the date of
such information.

The following documents filed with the Securities and Exchange Commission
by the Company pursuant to the Exchange Act accompany this Proxy Statement:

1. Form 10-KSB/A for its fiscal year ended June 30, 1995;

2. Form 10-QSB/A for the quarter ended March 31, 1996.

SOLICITATION OF PROXIES

This Proxy Statement, together with the accompanying Proxy, is furnished in
connection with the solicitation of proxies to be used at the Special Meeting of
Stockholders of J.A. Industries, Inc., a Delaware corporation (hereinafter
called the "Company"), to be held at the offices of Smith, Anderson, Blount,
Dorsett, Mitchell & Jernigan L.L.P., 2500 First Union Capitol Center, Raleigh,
North Carolina on July 29, 1996 at 8:00 in the forenoon or any adjournment
thereof.

A stockholder signing and returning a proxy in the enclosed form has the
power to revoke it any time before the exercise thereof by giving written notice
to that effect to the Secretary of the Company, by the submission of another
signed proxy bearing a later date or by the stockholder's personal attendance at
the meeting and voting by ballot.

The solicitation of proxies in the enclosed form is made on behalf of the
Board of Directors of the Corporation.

The cost of preparing, assembling and mailing the proxy material and of
reimbursing brokers, nominees and fiduciaries for the out-of-pocket and clerical
expense of transmitting copies of the proxy material to the beneficial owners of
stock held in their names will be borne by the Company. The Company does not
intend to solicit proxies other than by the use of the mails, but certain
officers and regular employees of the Company or its subsidiaries, for no
additional remuneration, may use their personal efforts, by telephone or
otherwise, to obtain proxies. No firm has been retained to assist in the
solicitation of broker and nominee proxies.

VOTING SECURITIES OUTSTANDING

At the close of business of June 3, 1996, the record date for the meeting,
the Company had outstanding 9,417,304 shares of Common Stock, each of which
shares is entitled to one vote.

QUORUM AND VOTE REQUIRED

The presence, in person or by proxy, of the holders of at least a majority
of the outstanding shares of Common Stock is necessary to constitute a quorum at
the Special Meeting. Approval of each Proposal will require the affirmative vote
of the holders of at least a majority of the shares of Common Stock of the
Company present in person or by proxy except directors will be elected by a
plurality of the votes cast. Management of the Company recommends that holders
vote their shares in favor of all proposals.

In situations where brokers are prohibited from exercising discretionary
authority for beneficial owners who have not returned Proxies to the brokers
(so-called "broker non-votes"), the affected shares will be counted for purposes
of determining the presence or absence of a quorum for the transaction of
business but will not be included in the vote totals and, therefore, will have
no effect on the outcome of the votes.

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DISSENTERS' RIGHTS.

Pursuant to Section 262 of the General Corporation Law of the State of
Delaware, a copy of which is attached hereto as Exhibit A, any holder of JA
Common Stock who objects to the Merger will be entitled to dissent and exercise
appraisal rights. That Section enables an objecting stockholder to be paid, in
cash, the value of his JA Common Stock as determined by the Delaware Court of
Chancery, provided that the following conditions are satisfied:

(1) Such stockholder must file with the Company a written demand for
appraisal of his shares, separate and apart from any proxy or vote against
the Merger, before the taking of the vote on the Merger. If a stockholder
elects to exercise dissenters' rights, such right may only be exercised as
to all shares of JA capital stock held by the dissenting stockholder.

(2) Such stockholder must not vote in favor of the Merger, nor submit
a proxy in which directions are not given.

(3) Within 120 days after the Effective Date of the Merger, either the
Company or any stockholder who has complied with Section 262 may, by
petition filed in the Delaware Court of Chancery, demand a determination by
the Court of the value of the shares of all objecting stockholders with
whom agreements as to the value of such shares have not been reached.

Within 10 days after the Effective Date of the Merger, the Company will notify
each stockholder who has complied with Section 262 and not voted for, or
consented to, the Merger of the date on which the Merger became effective.

If the Company and the dissenting stockholder cannot agree on the value of
the shares, the Court, based upon an appraisal prepared by an independent
appraiser, will make its own determination. Under Delaware law, the dissenting
shares would be valued on a going concern and not a liquidation basis. An
appraiser would be obligated to determine the intrinsic value of the shares,
without giving effect to the proposed Merger, considering all factors and
elements which reasonably may enter into such a determination, including market
value, asset value, earnings prospects and the nature of the enterprise. The
value determined by the court may be more than, less than or equal to the Merger
consideration (I.E., the value of the JA Common Stock after the Merger).

Notwithstanding the foregoing, at any time within 60 days after the
Effective Date of the Merger or thereafter, with the written approval of the
Company, any objecting stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered pursuant to the Merger, provided
that no appraisal proceeding in the Delaware Court of Chancery may be dismissed
without the approval of such Court. The cost of an appraisal proceeding may be
determined by such Court and taxed upon the parties as the Court deems equitable
under the circumstances.

FAILURE BY A STOCKHOLDER TO FOLLOW THE STEPS REQUIRED BY DELAWARE LAW FOR
PERFECTING HIS DISSENTER'S RIGHTS WILL RESULT IN THE LOSS OF SUCH RIGHTS.

PROPOSAL ONE
APPROVAL OF THE MERGER

APPROVAL SOUGHT.

Stockholders are being asked to approve an Agreement and Plan of Merger,
dated as of March 1,1996 (the "Merger Agreement"), a copy of which, including
all schedules and exhibits, is annexed hereto as Exhibit B, among the Company,
Sub and Kenmar, which provides for, among other things (i) the merger of Sub
with and into Kenmar, with Kenmar continuing as a surviving corporation and a
wholly-owned subsidiary of JA (the "Merger"), and (ii) the conversion of each
outstanding share of common stock, no par value, of Kenmar ("Kenmar Common
Stock") into 41 shares (subject to adjustment) of JA Common Stock.

The Exchange Ratio of 41 shares of JA Common Stock for each share of Kenmar
Common Stock was negotiated by the board of directors of the Company in its
independent judgment concerning the relative value of a share of Kenmar Common
Stock and a share of JA Common Stock, taking into consideration such factors as
the market value of the JA Common Stock, the value of Kenmar's assets, and value
of Kenmar's business and future prospects. See "Background of the Merger."

Pursuant to the Merger Agreement and taking into account the 1 for 4
reverse stock split, approximately 2,734,326 shares of the Company's common
stock will be issued to Kenmar shareholders in exchange for all of the
outstanding shares of Kenmar. It is the intention of the parties that the former
shareholders of Kenmar shall receive such number of shares of the

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Company to enable them to obtain a 50% interest in the post transaction entity.
The Exchange Ratio is subject to adjustment to insure that Kenmar shareholders
will receive a 50% interest in the post transaction entity.

HISTORY OF JA

JA was incorporated in the State of Delaware on July 21, 1987 and was
inactive until September 1991 when its Board made the decision to acquire
companies in the contract manufacturing business. A total of 3 such companies
were acquired. However, because the growth and profitability of its acquired
operations fell short of expectations, beginning in June 1995, the Company began
disposing of its operations. By November 1995 the Company had sold or disposed
of all of its operations.

BACKGROUND OF THE MERGER

In December 1995, the Company initiated discussions with Kenmar, a
privately held company engaged in the contract manufacturing business. After an
analysis by the Board of opportunities available to the Company, in January 1996
the Company agreed to seek to effect a merger between Kenmar and the Company.
The terms of the Merger would be subject to execution of a definitive merger
agreement, stockholder approval and the completion of due diligence. None of the
current members of the Board of Directors of the Company is affiliated with
Kenmar.

The Board also considered the risks and potential disadvantages associated
with the Merger. Effectively, the Merger will result in a change in control.
After the Merger, the stockholders of Kenmar will, in the aggregate, hold 50% of
the outstanding JA Common Stock. Kenmar has 38 Common Stockholder and 42 Class A
Preferred Stockholders. If such shares are voted together, the shares held by
the former Kenmar stockholders might constitute a plurality of the outstanding
shares. Moreover, pursuant to the terms of the Merger Agreement, for a period of
3 years after the Merger, the Company is to be managed by the present management
of Kenmar. See "Additional Terms of the Merger Agreement", page 6.

As a "shell company" with no existing business and an insignificant net
worth, the Board believes that the merger poses little additional risk to
stockholders. The Board believes that if the Merger is not approved, the only
alternatives available to the Company would be to liquidate (in which case it is
unlikely that there would be any distribution to stockholders), or to continue
as a "dormant" company until another business combination is identified and the
Company is uncertain whether any other viable business combination could be
identified. In any event the Board believes that given the current financial
condition of the Company, it is unlikely that any other business combination
would provide the same value to stockholders as the proposed merger with Kenmar.

As a result of the merger, the Company would assume the liabilities of
Kenmar which as of February 29, 1996 totaled $1,355,000 and included the
following:

<TABLE>
<S> <C>
Current maturities of long-term debt............................................................................ $ 4,317
Current obligations under capital leases........................................................................ $ 35,203
Accounts payable -- trade....................................................................................... $ 621,852
Other accrued liabilities....................................................................................... $ 94,833
Total Current Liabilities....................................................................................... $ 756,205
Long term debt, less current maturities......................................................................... $ 541,236
Long-term obligations under capital lease....................................................................... $ 57,750
Total Liabilities............................................................................................... $1,355,191
</TABLE>

The above presentation does not reflect the redemption and dividend obligations
of Kenmar's preferred stock (See "Preferred Stock of Kenmar", page 4).

Kenmar's expenses related to the Merger include legal and accounting fees
estimated at $80,000 and travel and miscellaneous expenses estimated at $20,000.
The Company's expenses are estimated at $93,000, including legal and accounting
expenses estimated at $70,000; travel and miscellaneous expenses estimated at
$20,000; shareholder meeting $2,000; organization of J.A. Industries Inc. of
North Carolina $1,000. In addition, the Company will pay to George Solloum, an
unrelated third party, a finder's fee of 20,000 shares of pre-split Common
Stock. No cash remuneration will be paid to Mr. Solloum. To the extent monies
are raised to fund expenses associated with the Merger, the Company will pay
fees equal to 10% of the monies raised.

<PAGE>
TERMS OF THE MERGER.

At the effective time of the Merger (the "Effective Time"), Sub will merge
with and into Kenmar, with Kenmar continuing as a surviving corporation and a
wholly-owned subsidiary of JA. All of the common stock of Kenmar issued and
outstanding immediately prior to the consummation of the Merger (other than
dissenting shares, if any), will be converted into shares of JA Common Stock.
All of the JA Common Stock which is issued and outstanding immediately prior to
the consummation of the Merger will remain outstanding and will not change as a
result of the Merger. 9,417,994 shares of JA Common Stock are presently
outstanding (there would be 10,937,304 shares outstanding upon the closing of
the private placement, see Post Meeting Financing, page 27). At the Effective
Time after the reverse stock split is consummated, 5,468,652 shares would be
outstanding after issuance of share to the Kenmar shareholders. The Certificate
of Incorporation of JA shall be and remain the certificate of incorporation of
the surviving corporation and the by-laws of JA shall be the by-laws of the
surviving corporation.

At the Effective Time, each share of Kenmar Common Stock outstanding
immediately prior to the Effective Time shall, by virtue of the Merger, be
converted into the right to receive 41 shares of JA Common Stock subject to
adjustment. It is anticipated that the same number of shares of JA Common Stock
presently outstanding will be issued pursuant to the Merger. After giving effect
to the issuance of such shares, the former Kenmar stockholders will hold
approximately 50% of the outstanding JA Common Stock.

On or immediately after the Effective Time, each holder of an outstanding
certificate or certificates which prior thereto represented shares of Kenmar
Common Stock, shall surrender the same to JA. Each Kenmar stockholder who shall
have surrendered its certificate representing shares of Kenmar common stock
shall be entitled to receive in exchange therefor, a certificate or certificates
representing the number of whole shares of JA Common Stock into which the Kenmar
Common Stock shall have been converted.

When the Merger becomes effective, the former stockholders of Kenmar shall
thereupon cease to have any rights in respect of Kenmar Common Stock, other than
the right to receive the certificates for JA Common Stock. Unless and until any
certificates shall be so surrendered and exchanged, (i) the holders of Kenmar
Common Stock shall not have any voting rights in respect of the JA Common Stock
into which the shares of Kenmar Common Stock shall have been converted, and (ii)
dividends or other distributions (if any) payable to holders of record of shares
of JA Common Stock shall not be paid to the holder of the certificate.

Upon surrender of the certificate representing shares of Kenmar Common
Stock, the dividends or other distributions which shall be or become payable
subsequent to the Effective Time with respect to the number of whole shares of
JA Common Stock represented by the certificate issued in exchange for the
surrendered Kenmar certificate, shall be paid, but without interest. No fraction
of a share of JA Common Stock will be issued pursuant to the Merger.

BUSINESS OF KENMAR

Kenmar was organized in 1984 to provide high quality electronic
manufacturing services. The principal offices of Kenmar are located at 6638 Old
Wake Forest Road, Raleigh, North Carolina and the telephone number at that
address is (919) 876-6049.

Kenmar provides manufacturing services to original equipment manufacturers
("OEM's") in the electronics industry, including producers of industrial
controls, computers & peripherals and instrumentation. Primary services include
material procurement, printed circuit cards and chassis assembly, and testing.
Kenmar currently has approximately 20 customers, 6 of which comprise the
majority of its sales. Prior to the loss of its largest customer in 1995, the
Company conducted its operations in 42,000 square feet of flex space with 85
employees. Since such loss described above, steps have been taken to size the
operations to more closely match the revenue without losing the key employees
and skills required to regrow the business. To date, this has caused the Company
to incur losses from operations for fiscal 1996. The Company currently operates
one facility in Raleigh, North Carolina with approximately 25 employees in
21,000 square feet of flex space. Operations are near 40% capacity with one
shift active.

In anticipation of the Merger, Kenmar has begun exploratory discussions
with numerous potential acquisition candidates. To date, Kenmar has not
consummated any agreements or letters of intent with any of such candidates.

PREFERRED STOCK

Kenmar currently has nine thousand nine hundred twenty-six (9,926) shares
of Class A Cumulative Redeemable Preferred Stock ("Class A Preferred Stock"),
Fifty Dollars ($50) par value, issued and outstanding. The Class A Preferred
Stock

<PAGE>
will not be converted, exchanged or otherwise affected as a result of the
Merger, and will remain issued and outstanding, subject to the terms described
below. The Class A Preferred Stock represents a significant obligation of
Kenmar, and may accordingly have a significant adverse effect on the value of
the Kenmar Common Stock acquired by JA pursuant to the Merger.

Commencing in 1997, the Class A Preferred Stock may be called or put at any
time after five (5) years. Dividends are cumulative from the issue date and
payable quarterly at the rate of ten percent (10%) annually, subject to the
provisions of North Carolina law. Assuming statutory requirements are met
regarding the declaration of dividends, the dividends are declared payable on
3/31, 6/30, 9/30, and 12/31 or each year until the shares are redeemed for
shareholders of record as of 3/15, 6/15, 9/15, and 12/15 of each such year. Any
dividends in arrears may be declared and paid at any time. If only a partial
dividend can be paid, the unpaid balance immediately accumulates. Dividends
payable for any period less than a full period are calculated on a day to day
basis on the basis of a three hundred sixty (360) day year. No other dividends
on any other stock(s) can be either declared or paid until the dividends on the
Class A Preferred Stock are fully paid from all previous periods.

If the Class A Preferred Stock is redeemed, it will be redeemed at a
multiple of one and one half (1 1/2) times the issue price. Additionally, from
the time the securities are either put or called, Kenmar will have the option to
complete the redemption within twelve (12) months. Dividends will continue to
accrue during the phased redemption period. To put the Class A Preferred Stock
to Kenmar, a stockholder must notify Kenmar of said action by first class mail.

The Class A Preferred Stock has no preemptive or subscription rights.
Reacquired shares of Class A Preferred Stock may be redesignated and reissued by
Kenmar.

In the event of a liquidation of Kenmar, the Class A Preferred Stock would
be redeemed at Fifty Dollars ($50) per share plus accrued dividends from assets
of Kenmar. If assets are insufficient to fully redeem, the distribution would be
made ratably. A sale of Kenmar or a merger of Kenmar with another company does
not constitute a liquidation.

As of August 31, 1995, cumulative unpaid dividends are $73,008. Redemption
requirements of the Class A Preferred Stock are currently:

<TABLE>
<S> <C>
1997...................................................................................... $150,000
1998...................................................................................... 447,000
1999...................................................................................... 68,700
2000...................................................................................... 86,250
Total................................................................................... $751,950
</TABLE>

RECOMMENDATION OF THE BOARD OF DIRECTORS

On January 22, 1996, the Board of Directors of JA unanimously agreed for
the Company to enter into a Merger Agreement with Kenmar. The Board believes
that the Merger is in the best interests of stockholders and recommends that
stockholders vote for the proposed Merger.

Numerous factors were considered by the Board in approving and recommending
that stockholders approve the Merger Agreement. Factors considered by the Board
included the agreed upon exchange ratio and the tax-free nature of the
transaction to the stockholders of both companies for federal income tax
purposes. The board also evaluated and took into consideration the following:

(i) the Board's familiarity with the financial condition, business
prospects and strategic objectives of JA. The Company is unable to
enter into a new line of business without a significant capital
infusion. The Board believes that a sale of the Company is not
feasible since the Company has no significant assets to sell.
Accordingly, the Board believes that it is in the best interests
of stockholders to merge with another company.

(ii) the trading history of JA Common Stock;

(iii) the Board's analysis of Kenmar's history, business, financial
condition and prospects;

(iv) the terms and conditions of the Merger Agreement, including the
fact that the consideration will consist of the issuance of
additional shares of Common Stock of the Company.

<PAGE>
While Kenmar reported income of $181,000 on sales of $15,566,000 in 1995,
sales and revenues for the 6 months period ending February 29, 1996 (unaudited)
were $1,354,383. Despite the deterioration in financial results (primarily
attributable to the loss of Kenmar's largest customer), Kenmar listed assets of
$2,377,000 including cash of $745,000. Management of the Company believes, but
cannot assure, Kenmar's relationships with electronic manufacturers will enable
Kenmar to increase its level of sales and achieve profitability.

ADDITIONAL TERMS OF THE MERGER AGREEMENT.

The Merger Agreement provides for customary representations and warranties
by each party to the transaction including, among others, (i) its due
incorporation and organization, (ii) capitalization, (iii) title and condition
of assets, (iv) material contracts, (v) absence of employee benefit plans, (vi)
licenses and permits, (vii) compliance with other instruments, (viii) need for
consents, (ix) compliance with laws, (x) accuracy of financial statements, (xi)
authority and enforceability of Merger Agreement, and (xii) absence of
litigation.

Prior to the Effective Time (as defined in the Merger Agreement), each
corporation has agreed to conduct its business only in the ordinary course of
business and to provide access to the other company to facilitate the completion
of all necessary due diligence investigations.

The obligations of JA and Kenmar to consummate the Merger are subject to
the satisfaction of the following conditions, among others, unless waived: (i)
approval and adoption of the Merger Agreement by the requisite stockholder votes
by the stockholders of JA and Kenmar respectively, (ii) the absence of any
pending litigation or proceeding initiated by any governmental authority to
enjoin or prohibit the Merger, (iii) the continued accuracy of the
representations and warranties made by the parities, (iv) the performance by
each party of its respective obligations under the Merger Agreement, and (v) the
receipt of certain opinions, certificates and consents.

Pursuant to the Merger Agreement, JA, Kenmar, Sub, and Kenneth H. Marks
("Marks") (as representative of the Kenmar stockholders, the "Representative")
will enter into an option agreement, the form of which is attached as Exhibit C
to the Merger Agreement (the "Option Agreement"). Under the Option Agreement,
the Representative will be issued an option (the "Option") to purchase, upon the
occurrence of certain conditions, Seven Hundred Fifty Thousand (750,000) shares
of JA Common Stock for an aggregate purchase price of One Dollar ($1). The
conditions to the exercise of the Option are a breach of any representation,
warranty, covenant, or other obligation of JA or Sub under the Merger Agreement.
In the event the Option is exercised, the Representative will distribute the
shares purchased thereby to the Kenmar stockholders.

The purpose of the Option Agreement is to provide a remedy to the Kenmar
stockholders in the event of any breach of the Merger Agreement by JA. Because
Kenmar will become a subsidiary of JA pursuant to the Merger, and because the
Kenmar stockholders will receive JA Common Stock in exchange for their Kenmar
stock pursuant to the Merger, customary remedies for breach (such as
indemnification payments by JA to Kenmar) are of little value to the Kenmar
stockholders. In light of the circumstances of this transaction, the parties
negotiated the Option Agreement as a mechanism to address Kenmar's desire for a
remedy in the event of any breach by JA.

If exercised, the Option would have the effect of increasing the ownership
position in JA of the current Kenmar stockholders and diluting the current
ownership position of the existing JA stockholders. Immediately upon the
consummation of the Merger, JA anticipates that there will be approximately
5,468,652 shares of its Common Stock outstanding, with the current JA
stockholders owning fifty percent (50%) and the current Kenmar stockholders
owning fifty percent (50%). If the Option were to be exercised (and assuming no
further changes in the capitalization of JA), the current Kenmar stockholders'
ownership position in JA would be increased to 3,125,000 aggregate shares or
approximately fifty-seven percent (57%) of the total shares; the percentage
ownership position of the current JA stockholders would decrease to
approximately forty-three percent (43%).

The Merger Agreement (at Section 6.2) also provides that JA shall use its
best efforts to permit Marks to control and elect a majority of JA's board of
directors for a period of thirty-six (36) months following the Effective Time.
During any period within such thirty-six (36) months when a majority of JA's
board of directors is not comprised of directors voted for and elected by Marks,
except in the event that he intentionally fails to cast his votes in a manner
that would result in his voting for and electing a majority of JA's board of
directors during such period, the written consent of Marks will be required
prior to the occurrence of any "material transactions." "Material transactions"
are defined to include (but not be limited to): (i) any contract or agreement;
(ii) any decision to transfer any material portion of the assets of JA or any
subsidiary; (iii) any amendment to the Certificate of Incorporation of JA; (iv)
the sale, issuance or repurchase of any shares of stock of JA; (v) the
investment of over Ten Thousand Dollars ($10,000) by JA or any subsidiary in any
venture or business investment; (vi) any

<PAGE>
amendment of the Bylaws of JA or any subsidiary; (vii) the declaration or
payment by JA or any subsidiary of any dividends on its Common Stock or the
distribution by JA of its assets to the holders of its Common Stock; (viii) the
incurrance of any indebtedness by JA or any subsidiary; (ix) the sale of stock
by JA or any subsidiary; (x) any decision to pledge or mortgage any assets of JA
or any subsidiary; (xi) any decision to hire or terminate any officer or
executive employee, including but not limited to Marks; (xii) any change in
compensation or responsibilities or any officer or executive employee; (xiii)
any contract payments or payment of consulting fees to G.M. Capital Partners
Ltd., or any other consultant.

In the event that a majority of JA's board of directors is not comprised of
directors voted for and elected by Marks during any period within thirty-six
(36) months from the Effective Time (except in the event that Marks
intentionally fails to cast his votes in a manner that would result in his
voting for and electing a majority of JA's board of directors during such
period), and in the further event that JA undertakes a material transaction
during such period without Marks' written consent, (i) the Option shall become
immediately exercisable by the Representative, as more specifically set forth in
the Option Agreement, and (ii) JA shall, immediately upon Marks' request: (A)
grant Marks access to all of JA's books, records, and shareholder lists (any
notice that might be otherwise required to be given by Marks being expressly
waived), and (B) pay Marks Fifty Thousand Dollars ($50,000) in cash. Also, in
the event that Marks shall fail to serve (except as a result of his voluntary
resignation) as JA's President and Chief Executive Officer, then JA must
promptly pay or prepay, as the case may be, each of the following promissory
notes: (i) Promissory Note, dated October 15, 1992, made by Kenmar in favor of
Lee K. Simon in the original principal amount of Four Hundred Forty-five
Thousand Five Hundred Dollars ($445,000); (ii) Promissory Note, dated October
15, 1992, made by Kenmar in favor of Daniel David Cameron in the original
principal amount of One Hundred Forty-Eight Thousand Five Hundred Dollars
($148,500); and (iii) Promissory Note, dated October 15, 1992, made by Kenmar in
Favor of Joseph T. Hunt in the original principal amount of One Hundred
Forty-Eight Thousand Five Hundred Dollars ($148,500). As of February 29, 1996,
the unpaid balances of the Promissory Notes had been reduced to $304,930,
$101,643 and $101,643 respectively.

The purpose of the provisions relating to control of the board of directors
is to protect the interests of the Kenmar stockholders by ensuring (through
affirmative covenants as well as financial incentives) that Marks will have
operating control of JA for the first three (3) years after the consummation of
the Merger. Kenmar's operations will be JA's sole operations during the initial
period after the Merger (as described above, JA is currently a "shell company"),
and Marks has served as the President or Chief Executive Officer of Kenmar since
its formation in 1984. During the negotiation of the Merger Agreement, Kenmar
indicated that because of Marks' experience in that regard, it would require
that the Merger Agreement be structured to ensure that Marks would lead the
combined entity for the initial three (3)-year period after consummation of the
Merger. The provisions of the Merger Agreement described above represent the
results of the negotiations in that regard.

At or before the Effective Time of the Merger, JA will undertake and
consummate a 1 for 4 reverse stock split, whereby every 4 shares of JA's issued
and outstanding Common Stock will be converted into 1 share of JA's Common
Stock.

ISSUANCE OF RESTRICTED SHARES.

The shares of JA Common Stock issuable pursuant to the Merger will not be
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or the securities laws of any state, but will be issued in reliance upon the
exemption from registration afforded by Section 4(2) of the Securities Act and
Regulation D promulgated by the Securities and Exchange Commission thereunder
and similar exemptions from registration available under state securities laws.
As provided in the Merger Agreement, the shares of JA Common Stock which will be
received by the Kenmar stockholders will not be registered under the Securities
Act or applicable state securities laws and such shares may not be transferred,
sold or assigned until such shares are registered pursuant to the Securities Act
and applicable state securities laws upon certain other circumstances as
described in the Merger Agreement. Kenmar shall notify each of its stockholders
prior to the Effective Time of Merger that such stockholder may not sell,
pledge, transfer, or otherwise dispose of such shares except in compliance with
all applicable federal and state securities laws, rules and regulations and upon
(i) the registration and qualification of such shares under all applicable
federal and state securities laws, (ii) such stockholder's delivery to JA of a
no-action letter from the state and federal agencies having jurisdiction over
such transfer of such shares to the effect that such registration or
qualification is not required in connection therewith, or (iii) such
stockholder's delivery to JA of an opinion prepared by counsel reasonably
acceptable to JA to the effect that neither the sale nor the proposed transfer
constitutes a violation of any federal or state securities laws.

The JA Common Stock issuable to the Kenmar stockholders may not be sold or
transferred in the absence of registration under the Securities Act and
applicable state securities laws, or the availability of an exemption from such
registration

<PAGE>
requirements. Each certificate of JA Common Stock issued pursuant to the Merger
will bear an appropriate restrictive legend prohibiting the transfer of such
shares.

REGISTRATION RIGHTS

The Merger Agreement (in Section 6.8) provides that the Kenmar stockholders
will have demand and "piggyback" registration rights with regard to the shares
of JA Common Stock issued to them in the Merger. Pursuant to the demand
registration rights, JA must use its best efforts to register JA Common Stock if
the holders of fifty percent (50%) or more of JA's "Registrable Securities"
submit a written demand for such registration to JA and the demand is for a
registration of at least fifty percent (50%) of JA's Registrable Securities. The
Merger Agreement defines "Registrable Securities" to mean JA's Common Stock that
has not been (i) sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, or (ii) sold or made
available for sale, in the opinion of counsel to JA, in a single transaction
exempt from the registration and prospectus delivery requirements of the
Securities Act so that all transfer restrictions and restrictive legends with
respect thereto are or may be removed upon the consummation of such sale.
Pursuant to the "piggyback" registration rights, JA must register the shares of
any stockholder who so requests in the event that JA undertakes a registration
of any of its securities (with the exception of registrations relating to
employee benefit plans and registrations relating solely to an SEC Rule 145
transaction).

All registration expenses incurred in connection with one demand
registration and any and all "piggyback" registrations are to be borne by JA.
Generally, all selling expenses relating to securities registered on behalf of
the stockholders and all other registration expenses are to be borne by the
stockholders of such securities pro rata on the basis of the number of shares so
registered.

Other provisions regarding such registration rights are also included in
Section 6.8 of the Merger Agreement, including registration procedures and
indemnification.

EFFECTIVE TIME OF THE MERGER.

The Merger will become effective (the "Effective Time") at the time that a
Certificate of Merger is filed in accordance with the North Carolina Business
Corporation Act. These filings will be made immediately after the Merger
Agreement is approved by the stockholders of JA, unless the parties agree to a
later date.

ACCOUNTING TREATMENT.

The Merger will be accounted for as a reverse acquisition whereby, for
accounting purposes, Kenmar will be the acquirer of JA and the transaction will
be accounted for as a recapitalization of Kenmar. It is characterized as a
reverse acquisition because even though JA will continue as the surviving
corporation, only Kenmar has significant assets or operations. Also, Kenmar
management will manage the combined entity and its stockholders will initially
control the election of the board and other matters.

The unaudited pro forma financial information contained in this Proxy
Statement has been prepared accounting for the Merger as a reverse acquisition.

FEDERAL INCOME TAX CONSEQUENCES.

THE FOLLOWING IS A SUMMARY OF THE OPINION PROVIDED BY COUNSEL TO THE
COMPANY OF THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. THIS
SUMMARY IS A COMPLETE DESCRIPTION OF ALL THE CONSEQUENCES OF THE MERGER.

THIS SUMMARY IS BASED UPON RELEVANT PROVISIONS OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED, THE APPLICABLE TREASURY REGULATIONS PROMULGATED THEREUNDER,
JUDICIAL AUTHORITY AND CURRENT ADMINISTRATIVE RULINGS AND PRACTICE, ALL OF WHICH
ARE SUBJECT TO CHANGE, POSSIBLY ON A RETROACTIVE BASIS. THIS SUMMARY DOES NOT
ADDRESS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO
PARTICULAR STOCKHOLDERS IN LIGHT OF THEIR PERSONAL CIRCUMSTANCES, OR TO
STOCKHOLDERS SUBJECT TO SPECIAL TREATMENT UNDER THE CODE (FOR EXAMPLE, S
CORPORATIONS, CERTAIN ESTATES AND TRUSTS, INSURANCE COMPANIES, FOREIGN PERSONS,
TAX EXEMPT ORGANIZATIONS, TAXPAYERS SUBJECT TO THE ALTERNATIVE MINIMUM

<PAGE>
TAX, FINANCIAL INSTITUTIONS, BROKERS, DEALERS OR HOLDERS THAT OWN 10% OR MORE OF
THE VOTING POWER OF KENMAR.) THE COMPANY HAS NOT REQUESTED A RULING FROM THE
INTERNAL REVENUE SERVICE WITH RESPECT TO THESE MATTERS.

EACH STOCKHOLDER'S INDIVIDUAL CIRCUMSTANCES MAY AFFECT THE TAX CONSEQUENCES
OF THE MERGER TO SUCH STOCKHOLDER. IN ADDITION, NO INFORMATION IS PROVIDED
HEREIN WITH RESPECT TO THE TAX CONSEQUENCES OF THE MERGER UNDER APPLICABLE
FOREIGN, STATE OR LOCAL LAWS. CONSEQUENTLY, EACH KENMAR STOCKHOLDER IS ADVISED
TO CONSULT ITS OWN TAX ADVISOR AS TO THE SPECIFIC IMPACT ON SUCH STOCKHOLDER OF
FEDERAL, FOREIGN, STATE OR LOCAL LAWS.

Steven A. Sanders, P.C., Counsel to the Company has provided its opinion
that the Merger will be treated as a tax-free reorganization as defined in
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"), and that, accordingly, (i) no gain or loss will be recognized by the
stockholders of Kenmar upon the exchange of their shares of Kenmar Common Stock
solely for shares of JA Common Stock pursuant to the Merger; (ii) the basis of
the JA Common Stock received by each stockholder of Kenmar in exchange for
shares of Kenmar Common Stock will be the same, immediately after the exchange,
as the basis of such stockholder's Kenmar Common Stock exchanged therefor, and
(iii) the holding period for any JA Common Stock received in exchange for Kenmar
Common Stock will include the period during which the Kenmar Common Stock
surrendered for exchange was held, provided such stock was held as a capital
asset on the date of the exchange.

A dissenting Kenmar stockholder who receives only cash for his shares of
Kenmar Common Stock will recognize gain or loss for federal income tax purposes
measured by the difference, if any, between such holder's basis in the stock and
the amount received by him for his stock. The gain or loss will be characterized
for federal income tax purposes as capital gain or loss or as ordinary income.
The gain or loss will be characterized as capital if (i) the holder's shares of
Kenmar Common Stock are held as capital asset, and (ii) the holder receives cash
with respect to all shares of Kenmar Common Stock which he owns, including
shares owned by application of the attribution rules of Section 318 of the Code.

Section 318 of the Code provides, in part, that a stockholder will be
considered to be the owner of shares which are owned by certain corporations,
partnerships, trusts and estates in which the stockholder has a beneficial
ownership interest, shares which such stockholder has an option to acquire, and
shares owned by certain members of his family (not including brothers and
sisters). Under certain circumstances, the attribution rules with respect to
shares attributed from a family member may be waived.

RIGHTS OF DISSENTING STOCKHOLDERS.

(2) Such stockholder must not vote in favor of the Merger, nor submit
a proxy in which directions are not given.

<PAGE>
value determined by the court may be more than, less than or equal to the Merger
consideration (I.E., the value of the JA Common Stock after the Merger).

Notwithstanding the foregoing, at any time within 60 days after the
Effective Time of the Merger or thereafter, with the written approval of the
Company, any objecting stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered pursuant to the Merger, provided
that no appraisal proceeding in the Delaware Court of Chancery may be dismissed
without the approval of such Court. The costs of an appraisal proceeding may be
determined by such Court and taxed upon the parties as the Court deems equitable
under the circumstances.

FAILURE BY A STOCKHOLDER TO FOLLOW THE STEPS REQUIRED BY DELAWARE LAW FOR
PERFECTING HIS DISSENTER'S RIGHTS WILL RESULT IN THE LOSS OF SUCH RIGHTS.

OPTION AGREEMENT

As provided in an option agreement constituting an exhibit to the Merger
Agreement, the Company granted Kenmar an option to acquire 750,000 shares of its
post-split Common Stock for a purchase price of $1.00. The option may be
exercised upon the occurrence any breach of any representation, warranty,
covenant or other obligation of the Company under the Merger Agreement. The
option agreement provides for arbitration to resolve any disputed assertion of a
breach of the Merger Agreement by the Company.

SELECTED FINANCIAL DATA
FOR THE COMPANY AND KENMAR

The following is a summary of selected financial data for the JA and
Kenmar. See the financial statements included herein for more complete
information.

J.A. INDUSTRIES

The following year end financial information has been derived from JA's
audited financial statements for each of the fiscal years set forth below, which
statements for the years ended December 31, 1991 and 1992; June 30, 1994 and
1995 are included herein (in December, 1993, the Company changed its fiscal year
to June). The financial information for the six month periods ended June 30,
1993 and the nine month period ending March 31, 1996 was derived from audited
and unaudited financial statements respectively. In the opinion of management,
the unaudited financial statements include all adjustments, consisting of normal
recurring adjustments, necessary to present the financial data for such periods.
The following should be read in conjunction with the financial statements and
notes related thereto included elsewhere herein.

<TABLE>
<CAPTION>
FOR THE PERIOD ENDING
DEC 31-91 DEC 31-92 JUNE 30-93 JUNE 30-94 JUNE 30-95 MAR 31-96
<S> <C> <C> <C> <C> <C> <C>
SALES..................................... $ -- $ -- $ 191,836 $ 4,042,940 $ 4,330,211 $
COST OF SALES............................. -- -- 144,451 3,674,688 3,618,347
GROSS PROFIT.............................. -- -- 47,38 368,252 711,864
SELL AND MARKETING EXP.................... -- -- 8,232 134,163 0 --
G&A EXPENSES.............................. 121,140 47,933 175,566 1,256,765 1,593,838 1,043,970
LOSS FROM OPERATIONS...................... (121,140) (47,933) (136,413) (1,467,617) (1,384,114) (1,043,970)
OTHER INCOME (EXPENSES)................... (500,000) -- (21,126) (85,656) (330,412) (74,591)
CONSOLIDATED NET LOSS..................... (621,140) (47,933) (157,539) (1,553,273) (1,714,526) (1,118,561)
LOSS PER SHARE............................ (3.03) (0.05) (0.04) (0.28) (0.25) (0.12)
WORKING CAPITAL (DEFICIT)................. (178,572) (7,728) 24,238 (705,655) (563,587) (203,695)
TOTAL ASSETS.............................. 3 656,677 610 2,616,445 1,020,723 16,981
TOTAL LIABILITIES......................... 178,575 23,338 539,344 1,948,887 1,061,226 220,676
LONG TERM DEBT............................ -- -- 143,247 249,927 18,046
STOCKHOLDER'S EQUITY...................... (178,572) (7,728) 117,333 667,558 (40,503) (203,695)
</TABLE>

<PAGE>
KENMAR BUSINESS GROUP, INC.

The following year end financial information has been derived from Kenmar's
audited financial statements for fiscal years 1995 and 1994 and unaudited
financial statements for six months ended 2/29/96 and fiscal years 1993, 1992
and 1991 set forth below, which statement are included herein. In the opinion of
management, the unaudited financial statements include all adjustments,
consisting of normal recurring adjustments, necessary to present the financial
data for such periods. The following should be read in conjunction with the
financial statements and notes related thereto included elsewhere herein.

<TABLE>
<CAPTION>
6
MONTHS
ENDED
1991 1992 1993 1994 1995 2/29/96
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
AT AUGUST 31 AND FOR THE YEARS THEN ENDED
SALES......................................................... $1,816 $10,015 $22,732 $22,928 $15,566 $1,357
NET INCOME (LOSS)............................................. 39 51 129 (1,359) 181 (416)
WORKING CAPITAL (deficit)..................................... 219 265 387 (1,123) (346) 963
TOTAL ASSETS.................................................. 1,298 2,475 5,526 5,175 3,069 2,376
TOTAL LIABILITIES............................................. 1,080 2,024 4,694 5,619 3,326 1,355
LONG TERM DEBT................................................ 122 127 742 780 636 598
PREFERRED STOCK............................................... 136 351 529 626 730 759
STOCKHOLDERS EQUITY (deficit)................................. 82 99 303 (986) 1,021 263
</TABLE>

PER SHARE DATA

J.A. INDUSTRIES, INC. SHARES OUTSTANDING

June 30, 1995 -- 7,551,603

February 29, 1995 -- 7,906,603

KENMAR BUSINESS GROUPS, INC. SHARES OUTSTANDING

August 31, 1995 -- 64,714

February 29, 1996 -- 64,714

<TABLE>
<CAPTION>
J.A. INDUSTRIES, INC. KENMAR BUSINESS GROUPS, INC.**
PRO FORMA PRO FORMA PRO FORMA
YEAR END 6 MONTHS YEAR END 8 MONTHS YEAR END 6 MONTHS YEAR END
JUN-30-95 DEC-31-95 AUG-31-95 FEB-29-96 AUG-31-95 FEB-29-96 AUG-31-95
<S> <C> <C> <C> <C> <C> <C> <C>
Book Value (deficit) per
Share....................... $ (0.01) $ (0.04) $ (0.10) 0.13 $(15.24) $ 4.05 $ (4.18)
Cash Dividend Declared per
Share....................... $ -- $ -- $ -- $ -- $ -- $ -- $ --
Income (loss) per common
share*...................... $ (0.25) $ (0.07) $ (.16) $ (.17) $ 1.26 $ (7.35) $ (6.56)

<CAPTION>
PRO FORMA
6 MONTHS
FEB-29-96
<S> <C>
Book Value (deficit) per
Share....................... $ 5.33
Cash Dividend Declared per
Share....................... $ --
Income (loss) per common
share*...................... $ (6.97)
</TABLE>

* From continuing operations applicable to common stockholders

** The equivalent pro forma data is based upon the pro forma activity of JA
divided by the exchange ratio (the exchange ratio used in the calculation is
41 to 1).

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

J.A. INDUSTRIES, INC.

The following discussion of the results of operations and financial
condition should be read in conjunction with the audited financial statements
and related notes appearing subsequently under the caption "Financial
Statements".

OVERVIEW

In July of 1992, the existing management took over the direction of J.A.
Industries, Inc. It was the intention of the management to enhance the value of
its shares on behalf of its shareholders by acquiring cash flow entities which
were, firstly, synergistic with existing subsidiaries and secondly were
companies with consistent growth potential.

The first acquisition was Torik, Inc. in September, 1992, which at that
time was just breaking even on its sales of $300,000 per month. Subsequent to
the Torik acquisition, the Company had entered into litigation and lost the case
to the former management of Torik returning all shares back to the Torik
management. The Company was booking that acquisition at the cost of $200 which
has been written off.

The second acquisition of the assets of Pacific Rim Polytech, took place in
February, 1993 by the Company's wholly owned subsidiary J.A. Industries (Canada)
Inc. ("J.A. Canada"). J.A. Canada immediately started the manufacturing of
underground junction boxes and cable tray. In June, 1995 the Company sold J.A.
Canada to a non-affiliate British Columbia Corporation.

The Company also entered into two licensing agreements and manufacturing
agreements for the manufacture and distribution of electronic ballasts of which
both licenses are inactive.

In September of 1993, the Company acquired Hutronix, Inc., of Tucson, Az
("Hutronix"). Subsequent to the year ended, 1996, the Company returned the
shares of Hutronix to Baboquivari Cattle Company ("BCC") to settle outstanding
liabilities with BCC.

In December of 1993, the Company acquired the assets of Capital City
Plastic ("CCP"). CCP had been inactive since May of 1993. As CCP was unable to
deliver the equipment as detailed in the purchase agreement, the Company
cancelled the purchase agreement.

In May, 1994 the Company signed an option agreement to acquire 100% of Link
Technologies (Canada) Ltd. ("Link"). The Company was to pay $500,000 USD plus
issue 500,000 shares of common stock to acquire 100% of Link. The Company was
also to provide $1,500,000 USD in working capital for Link. Subsequent to this
agreement the option has expired and no further agreement has been reached.

On March 30, 1994 Granite Marketing Corporation. ("Granite"), then a wholly
owned subsidiary of the Company, entered into an agreement with Queensland
Industries, Inc. ("Queensland") whereby Queensland purchased from Granite an
exclusive license to manufacture, promote, market, sell and distribute the
products of J.A. Canada relating to polyurethane underground junction boxes.
Queensland is a wholly owned subsidiary of Wincanton, Corporation ("Wincanton"),
a publicly traded Washington State Corporation. Subsequent to this agreement,
the Company rescinded the licensing agreement in exchange for a $50,000 USD
payment by Queensland Industries to Granite. Granite is currently inactive.
Subsequent to the year end, Granite was sold to an unrelated third party in
exchange for assumption of Granite's liabilities.

On June 28, 1995 the Company signed a letter of intent to merge with
privately held MiNT Corporation ("Mint") through a stock for stock exchange. The
share exchange would have resulted in a change of control of J.A. Industries to
the majority shareholders of Mint. Mint is in the business of providing high
quality contract manufacturing of electronic and electromechanical printed
circuit board assemblies. Subsequent to this letter of intent and subsequent to
the year ended June 30, 1995, the shareholders of Mint elected not to proceed
with the acquisition.

Subsequent to the year ended June 30, 1995, the Company entered into an
Agreement and Plan of Merger with Kenmar of Raleigh, NC. Kenmar founded in 1984,
is a provider of high quality electronic manufacturing services. It is located
in the Research Triangle area of North Carolina. Kenmar has a broad array of
technical capabilities to bring products to the market from concept to final
production. Kenmar's manufacturing team has experience in producing electronic
and electro-mechanical subassemblies and products for use in the
telecommunication, industrial control, computer, medical and instrumentation
industries. Kenmar has both Surface Mount Technology and Pin Thru-Hole
capabilities as well as cable, harnesses and interconnect assembly lines.

<PAGE>
Pursuant to the terms of the agreement, current shareholders of Kenmar will
receive common stock of J.A. Industries such that Kenmar shareholders will own
approximately 50% of the outstanding shares of J.A. Industries, Inc. on closing.
Upon completion of the Merger, current management of Kenmar would assume
management of the Company. The merger is subject to shareholder's approval of
both companies. Another condition of the Merger is the settlement of a dispute
with a former stockholder, Karl Ronstadt and Hutronix, Inc. Subsequent to the
year ended June 30, 1995, the Company did resolve its outstanding dispute with
Baboquivari Cattle Company as described above (see "Hutronix").

Prior to the Merger, the Company must reduce its liabilities and contingent
liabilities to zero and have working capital of a minimum of two hundred
thousand ($200,000) dollars. To this end, the Company has disposed of, settled
or is in the process of settling all outstanding liabilities. The Company has
reached agreements and has signed releases for potential contingent liability
claims arising or potentially arising from several of the Company's former
agreements.

The Company intends to fund its capital requirements through a private
placement to meet the terms of the agreement. To date the funds necessary to
complete the Merger are being held in escrow pending shareholder approval of the
merger and will be released to the Company upon such approval. If Shareholder's
approval is not obtained to complete the Merger, then the funds in escrow would
not be released to the Company.

Management believes that the trend towards outsourcing in the electronic
manufacturing industry is expanding. To this end, management still believes that
its strategy to acquire synergistic businesses in the contract manufacturing
industry is a sound plan. The planned Merger between the Company and Kenmar is
the first step in trying to re-establish that plan.

Seasonal factors do not influence the Company's sales.

LIQUIDITY AND CAPITAL RESOURCES

During fiscal 1994 the Company principally provided for its cash needs
through equity financing from a Regulation D Rule 504 offering. Most
acquisitions were completed with a combination of shares and cash. The
day-to-day operations were funded from cash flow provided by the operating
entities and an infusion of working capital from the parent Company. The
subsidiary J.A. Industries (Canada) Inc. lost money in 1995, and it was sold to
a non-affiliate in June, 1995. The agreement called for the buyer to assume all
of the liabilities of J.A. Canada. Hutronix, Inc. also lost money for the year
ending June 30, 1995. Subsequent to the year end, Hutronix was returned to
Baboquivari Cattle Company (former shareholder of Hutronix, "BCC") for release
of all liabilities owed by the Company to BCC and BCC's assumption of all
liabilities associated with Hutronix.

Subsequent to the year ended June 30, 1995, the Company had disposed of all
of its operating assets and there is currently not an adequacy of cash flow from
operations to cover capital resources and liquidity requirements. In the year
ending June 30, 1994 the Company had revenues of $4,042,940 to allow the Company
to manage its day to day operations. The Company's financial results were
prepared assuming it would continue as a going concern. However, the report of
its auditor raised substantial doubts about the Company's ability to continue as
a going concern. For the year ending June 30, 1995, the Company's audited report
reflected the subsequent disposition of all operations. Revenue of $4,330,211
from operations for the period ended June 30, 1995, though, was used to fund the
day to day operations of the subsidiaries. Currently, the Company has no cash
flow and its ability to maintain operations is severely impaired. If the Company
cannot raise additional capital it is unlikely the Company would be able to
operate and it may be forced to seek protection under Chapter 11 of the
Bankruptcy Act.

During the period commencing September, 1992 and ending June 30, 1995, the
Company raised $1,185,000 through two Regulation D Rule 504 offerings and
$496,250 through private placements of the Company's common stock. It is the
Company's goal in the fiscal year ending June 30, 1996 to find a suitable
acquisition candidate. Management anticipates that the Company will do further
equity financing. Management believes that from these sources the Company will
adequately fund the operations of the Company and allow it to maintain its
aggressive acquisition strategy. To date, no commitments for such capital have
been received and the likelihood of such financing cannot be guaranteed.

To address the accountant's report of a "going concern" uncertainty, it is
anticipated that the Company will continue to look for new opportunities in the
contract manufacturing area. On March 1, 1996 the Company entered into an
agreement to merge with Kenmar to fulfill the Company's business strategy. As
part of the Merger, the Company must eliminate all outstanding liabilities and
have working capital of $200,000. At the date of this report, the Company has
approximately $133,000 in liabilities it must satisfy to complete the Merger. As
of May 15, 1996, the Company has raised the required funds to complete the
Merger through a private placement of its common stock. The funds are in escrow
with the Company's legal counsel and will be released to the Company upon it
shareholder's approval of the Merger. In the event the Company does

<PAGE>
not receive shareholder approval, the funds would not be released from escrow
and the Company would not be able to meet its financial requirements pursuant to
the Merger Agreement.

In the event that the conditions of the Merger are satisfied and the Merger
is completed it is anticipated that cash flow from ongoing operations will
satisfy the day to day needs of the Company. Furthermore, as of February 29,
1996, Kenmar had approximately $744,500 in cash or cash equivalents (unaudited).
It is anticipated that the merged company will use these funds to maintain and
grow the existing business that it has. It is also the Company's goal to try and
arrange an equity financing in the amount of $3 million dollars to expand its
business. No commitment for such financing has been arranged and the likelihood
of its completion cannot be guaranteed. In the event the merged company could
not raise any additional capital, it is anticipated that current rates of growth
of the merged company would satisfy its working capital requirements.

Future cash needs of the merged entity would include funds to implement the
Company's acquisition strategy and to sustain the Company through a period of
restructuring and growth.

NOTES PAYABLE AND LONG TERM DEBT

Hutronix, Inc. a former subsidiary has a note payable to Bank One executed
through the Industrial Development Authority of the City of Douglas due in
quarterly instalments of $12,821, plus interest at 65% of prime (7.25% as of
June 30, 1994), due may 2005; secured by a deed of trust on the real estate held
for sale and an irrevocable letter of credit from a bank in the amount of the
outstanding note payable balance guaranteed by the Company. At June 30, 1995 the
amount outstanding was $546,125. The subsequent agreement between BCC and the
Company calls for BCC and Hutronix to indemnify the Company against any
liability under this bond. As the solvency of Hutronix, Inc. is uncertain, the
ability for Hutronix, Inc. to indemnify the Company is unlikely. Furthermore, on
November 21, 1995 an agreement was reached between Baboquivari Cattle Company,
Karl and Marilyn Ronstadt, Hutronix, Inc. and the Company whereby the parties
exchanged mutual releases relieving the Company of any liabilities that it had
or might have in the future with the parties. On March 4, 1996 the liability
under the guarantee to Bank One was satisfied.

On closing of the Merger between Kenmar and the Company, the Company is
obligated to pay a former minority shareholder of Hutronix, Inc. $10,000 and
issue 50,000 shares of restricted common stock in exchange for a release from
all future obligations the minority shareholder may be entitled to. Also, on
closing, the Company is obligated to pay the former landlord of Hutronix, Inc. a
fee for releasing the Company from a Corporate guarantee on the lease of the
building located at 1150 E. Palmdale, Tucson, AZ. The funds for these
transactions are part of the funding needed for the closing of the Merger
agreement. If the Merger is not completed, these liabilities would still be
outstanding.

On June 30, 1995 the Company sold its wholly owned subsidiary, J.A.
Industries (Canada) Inc. to an unrelated third party. The sale relieved the
Company of any long term debt associated with the subsidiary. Furthermore, the
Company obtained releases for all corporate guarantees that it had provided for
the subsidiary subject to certain cash payments as follows. The Company settled
with one creditor by issuing shares of restricted stock in the amount of 136,000
shares to satisfy approximately $34,000 USD of debt. On completion of the Merger
between Kenmar and the Company, the Company will incurred a cost of $5,000 USD
to settle with one creditor that comes from a corporate guarantee of the
Company. The funds for settling this amount will come from the funds necessary
to close the Merger transaction. If the Merger is not completed, then this
liability would still be outstanding with the creditor.

In March, 1996, the Company came to a final agreement with the former
owners of Capital City Plastics whereby Capital City Plastic and John Szaniszlo
will provide the Company with a release from all liabilities and deliver to the
Company 600,000 shares of common stock issued to Capital City Plastics in
exchange for the Company's release from liabilities, $10,000 and the issuance of
50,000 restricted common stock of the Company.

The funds necessary to complete this transaction are part of the funding
needs of the Merger. If the necessary funds were not raised or the Merger was
not completed, the Company's position would be that there are no liabilities
outstanding with Capital City Plastic or John Szaniszlo as they had breached the
original agreement between the parties.

<PAGE>
On completion of the Merger, for which there can be no guarantee, the
Company will be assuming the following liabilities based on the Kenmar audited
financial statements for the period ending August 31, 1995 and unaudited
financial statements for the six month period ending February 29, 1996:

<TABLE>
<S> <C>
Line of credit/loans............................................ $ 0
Current maturities of long term debt............................ $ 4,317
Current obligations under capital lease......................... $ 35,203
Accounts payable -- trade....................................... $ 621,852
Income tax payable.............................................. $ 0
Other accrued liabilities....................................... $ 94,833
Total Current Liabilities....................................... $ 756,205

Long Term Debt, less current maturities......................... $ 541,236
Long term obligations under capital lease....................... $ 57,750
Total Liabilities as of February 29, 1996....................... $1,355,191
</TABLE>

(See also "Preferred Stock of Kenmar", Page 4)

LINE OF CREDIT: In March, 1994, Kenmar negotiated a $4 million revolving
line of credit with a commercial lender which allowed it to borrow up to 80% of
eligible receivables and was secured by a first lien on all the Company's
receivables and inventory. Borrowing under this line bears interest at prime
plus 2.5% (minimum 7.5%) in addition to an annual facility fee and other costs.
Kenmar paid off the line of credit in the fourth quarter of its fiscal year
ended August 31, 1995. Kenmar has not requested a renewal of the line of credit.

LONG-TERM DEBT: Long term debt of Kenmar consists of the following:

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Subordinated promissory notes payable monthly instalments of $9,009 including interest at 8% through
October 2002........................................................................................ $524,855 $646,674
Bank debt collateralized by a first lien on all the Company's plant, equipment, furniture and fixtures
payable in monthly instalments of $7,950, including interest at prime +1%. This loan was paid off
prior to August 31, 1995............................................................................ -- $217,932
Uncollateralized note payable to stockholder repayable with interest at 8% in 59 monthly installments
of 4610 and a balloon payment of $30,083 on October 15, 1997........................................ $ 39,482 $ 43,468
Notes payable secured by equipment repayable in monthly installments of $2,435 including interest at
16.85% through April 1996. (Subsequently, this note was satisfied).................................. $ 18,403 $ 42,202
Note payable to stockholder in monthly installments of $2,535 including interest at 8% through April,
1994, collateralized by certain equipment........................................................... -- --
$582,380 $950,276
Less current maturities............................................................................... $ 22,359 $293,242
$560,021 $657,034
</TABLE>

Principal maturities of debt Kenmar at August 31, 1995 are as follows:

<TABLE>
<S> <C>
Year ending August 31
1996............................................................ $ 22,359
1997............................................................ $ 73,269
1998............................................................ $104,776
1999............................................................ $ 80,451
2000............................................................ $ 87,130
Thereafter...................................................... $214,395
Total Long-term debt............................................ $582,380
</TABLE>

<PAGE>
OBLIGATIONS UNDER CAPITAL LEASES OF KENMAR:

Kenmar leases equipment under capital leases which expire on various dates
through 1998.

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Machinery and equipment............................... $200,066 $200,066
Vehicles.............................................. -- $ 27,871
Total................................................. $200,006 $227,937
</TABLE>

The following is a schedule by years of future minimum lease payments under
capital leases as of august 31, 1995 for Kenmar

FURTHER KENMAR COMMITMENTS:

Kenmar leases certain office and production space, machinery and equipment
under noncancellable operating leases expiring at various dates through 1998.
During the years ended August 31, 1995, 1994 and 1993, Kenmar incurred rental
expenses of $214,505, $271,488 and $230,175 respectively under these leases.
Future minimum lease payments under the terms of the above leases are as
follows:

PREFERRED STOCK OF KENMAR:

The aggregate number of authorized shares of preferred stock is 100,000. Of
the 100,000 shares of preferred stock 30,000 shares have been designated as
Class A cumulative preferred stock. The designation of the remaining 70,000
shares will be determined by the Board of Directors of Kenmar.

Kenmar issued 1,150 shares of $50 par value Class A cumulative preferred
stock ("Class A Preferred") in 1994. During 1993, the Company issued 716 shares
of Class A Preferred including upon receipt of the issue price, 200 shares
subscribed at August 31, 1992. Each share of Class A Preferred may be called or
put at any time after five years from the date of issuance at a rate of one and
one-half times the issue price. Redemption requirements of Class A Preferred
stock at August 31, 1995 were as follows:

<TABLE>
<S> <C>
1997.............................................................. $150,000
1998.............................................................. $447,000
1999.............................................................. $ 68,700
2000.............................................................. $ 86,250
Total............................................................. $751,950
</TABLE>

The Class A Preferred is entitled to a 10% cumulative dividend payable
quarterly, subject to the provisions of North Carolina law. Cumulative unpaid
dividends are $73,008, $23,378, and $7,643 as of August 31, 1995, 1994, and 1993
respectively.

Upon liquidation, the Class A shares have preference over holders of common
stock in an amount equal to the issue price plus cumulative dividends in
arrears. Cash dividends of $0, $32,910 and $40,031 were paid in 1995, 1994, and
1993, respectively.

RESULTS OF OPERATIONS

The following information is derived from the attached financial statements
and sets forth, for the periods indicated, the relative percentage that certain
income and expense items bear to net sales.

<PAGE>
FISCAL PERIOD YEAR ENDED JUNE 30, 1995 COMPARED TO FISCAL PERIOD YEAR ENDED
JUNE 30, 1994. The auditors report for the period ending June 30, 1995 states
that as a result of the discontinuation of operations of the Company there is
substantial doubt about the Company's ability to continue as a going concern.
The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

In June, 1995 the Company disposed of one of its wholly owned operating
subsidiaries J.A. Industries (Canada) Inc. Subsequent to the year end the
Company disposed of an inactive subsidiary, Granite Marketing Corporation. In
early March 1995, the Company entered into negotiations with Karl G. Ronstadt
and Baboquivari Cattle Company, former shareholders of Hutronix, Inc. to settle
outstanding issues and potential liabilities. The Company and the former
shareholders could not come to any resolution. On September 23, 1995, the former
shareholder of Hutronix, Inc. exercised his right under a put/call agreement
dated September 23, 1993 and attached to the original purchase agreement of
Hutronix, Inc. dated September 15, 1993. The put option allowed the former
shareholder to put 262,000 shares of the Company to the Company at a price of
$2.25 creating a liability of $589,500. The Company did not have the resources
to pay the liability. On November 21, 1995, subsequent to the year end, the
Company entered into an agreement to reverse the acquisition of Hutronix, Inc.
the only remaining operating subsidiary of the Company to satisfy all
outstanding liabilities between the former shareholder of Hutronix and the
Company. The condition that effected the decision to enter into the agreement to
reverse the Hutronix acquisition occurred prior to the Company's year end.
Although the assets and operations of Hutronix were included in the Company's
June 30, 1995 financial statement, they were subsequently disposed of and it was
so reported in the Company's December 31, 1995 financial statement.

As of June 30, 1995, the Company had revenue of $4,330,211 which was a 7.8%
increase over the comparable period ended June 30, 1994. Cost of sales were
$3,618,347 for the period ended June 30, 1995 as compared cost of sales of
$3,674,688 for the corresponding period ending June 30, 1994. The maintaining of
cost of sales at the same level as 1994 but an increase in revenue by 7.8%
generated a gross margin of $711,864 or 16.9% of Sales for the period ended June
30, 1995 compared to gross margin of $368,252 or 9.1% for the period ended June
30, 1994. General and administrative expenses for June 30, 1995 were $1,623,487
which was a 22.8% increase compared to the corresponding period for June 30,
1994 of $1,256,765. The increase is partly reflected by the increase in
management expenses to increase the revenue for the period. Part of the General
and Administrative expenses for 1995 were paid of non-cash items whereby the
Company issued restricted common shares for services rendered or settlement of
debt in the amount of $51,982 compared to the issuance of no shares for the
corresponding period ending June 30, 1994 for similar reasons. The Company had a
total loss for the year of $1,714,526 or ($0.25)/shares as compared to a total
loss of $1,497,305 or ($0.28)/share for the period ending June 30, 1994.

Subsequent to the year ending June 30, 1995 the Company entered into a
Merger with Kenmar. A condition of the Merger is that the Company is to have no
liabilities and working capital of $200,000. To this end, though the Company has
an inactive status, there are substantial one time charges to eliminate all
liabilities and to settle contract obligations.

For the first quarter period ending September 30, 1995 the Company had
revenue of $532,310, compared to sales of $1,179,629 for the corresponding
period in 1994. The decrease in sales can be attributed to the disposition of
J.A. Industries (Canada) Inc. prior to year end June 30, 1995 as Hutronix, Inc.,
the only remaining operating subsidiary, had an increase in sales of 18% over
the corresponding period ended September 30, 1994. Cost of sales for the 3 month
period ended September 30, 1995 were $455,030 generating a gross profit margin
of $77,280 or 14.5% of sales compared to a cost of sales of $1,013,768
generating a gross profit of $165,861 or 14% of sales for the 3 month period
ended September 30, 1994. Again, the decrease in cost of sales can be attributed
to the disposition of J.A. Industries (Canada) Inc. prior to the year ended June
30, 1995. For the three month period ending September 30, 1995 G&A was $781,384
compared to $239,620 for the corresponding period in 1994. Increased legal and
accounting expenses accounted for approximately $75,000 of the expense. As well,
a large portion of the expense was a one time charge to pay outstanding
liabilities and the termination of outstanding contracts. The preceding items,
except for accounting fees, were mostly settled with the issuance of restricted
common stock of the Company. On September 23, 1995, Baboquivari Cattle Company
exercise its put option under a put/call agreement dated September 23, 1993. The
option obligated the Company to purchase 262,000 shares of the Company's stock
from Baboquivari at a price of $2.25 creating an unfunded liability of $589,500.
Subsequent to the first quarter ended September 30, 1995, the Company entered
into an agreement with Baboquivari Cattle Company to reverse its September 15,
1993 acquisition agreement of Hutronix, Inc. in exchange for the release of all
liabilities from Hutronix, Inc and Baboquivari Cattle Company.

On November 21, 1995 the Company entered into an agreement with Baboquivari
Cattle Company to transfer all title of Hutronix, Inc. to Baboquivari Cattle
Company in exchange for a release of all liabilities. Due to this disposition of
the last operating subsidiary of the Company, the Company had no revenue for the
three month period ending December 31, 1995

<PAGE>
compared to of $1,237,956 for the three month period and $2,417,585 for the six
month period ending December 31, 1994. General and administrative expenses for
the period three month period ended December 31, 1995 were $81,921 compared to
the corresponding three month period in 1994 of $239,877. The Company
experienced a net loss of $83,316 for the three month period ending December 31,
1995 compared to a loss of $86,107 for the corresponding period in 1994. The net
loss from operations for the six month period ending December 31, 1995 was
$746,960 compared to $190,989 for the corresponding period in 1994. The loss in
1995 is attributed to the reorganization and elimination of ongoing contracts
and liabilities the Company needed to satisfy to proceed with its Merger with
Kenmar. The Company had a shareholder's deficit of $282,683 for the period ended
December 31, 1995 compared to net equity of $595,265 for the corresponding
period in 1994. Accounts payable at December 31, 1995 were $138,167 compared to
$928,358 for the corresponding period 1994. Due to the discontinuation of
operations, the Company's payables were reduced dramatically. Most of the
expense is attributed to legal and accounting costs due to the restructuring of
the Company. Subsequent to the disposition of Hutronix, the Company was relieved
of its obligation to guarantee the mortgage on the facilities occupied by
Hutronix in Douglas, Arizona. Therefore, long term debt was reduced to zero from
$561,842 in the corresponding prior year period.

For the three month period ending March 31, 1996 the Company had no
operations and therefore no revenue compared to sales of $1,035,397 for the
three month period ended March 31, 1995 and sales of $3,452,982 for the nine
month period ended March 31, 1995. General and Administrative expenses for the
three month period ended March 31, 1996 were $298,405 compared to $262,027 for
the corresponding period in 1995. G&A for the nine month period ended March 31,
1996 was $1,043,970 compared to $741,524 for the corresponding period in 1995.
The G&A costs can be attributed to the restructuring and reorganization the
Company experienced from the disposition and discontinuation of operations and
the Merger agreement the Company entered into with Kenmar Business Groups, Inc.
The Company had a net loss from operations of $1,118,561 for nine month period
ended March 31, 1996 compared to $300,884 for the corresponding nine month
period in 1995. The Company had a Shareholder's deficit of $203,695 at March 31,
1996 compared to Net Equity of $670,141 for the same period 1995. Current
liabilities were significantly reduce due to cessation of operations to 220,276e
for the period ended March 31, 1996 compared to Current Liabilities of $964,465
for the corresponding period ended March 31, 1995.

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS

GENERAL

Kenmar provides manufacturing services to original equipment manufacturers
("OEM's") in the electronics industry, including producers of industrial
controls, computers & peripherals and instrumentation. Primary services include
materials procurement, printed circuit card and chassis assembly, and testing.
Kenmar has approximately 20 customers, 6 of which accounted for 79% of its sales
for the six months ending February 29, 1996. Following to the loss of its
largest customer in 1995, Kenmar conducted its operations in 42,000 square feet
of flex space with 85 employees. Since such loss, steps have been taken to size
the operations to more closely match the revenue without losing the key
employees and skills required to regrow the business. To date, this has caused
Kenmar to incur losses from operations for fiscal 1996. Kenmar currently
operates one facility in Raleigh, North Carolina with approximately 25 employees
in 21,000 square feet of flex space. Operations are near 40% capacity with one
shift active.

Operating results are generally affected by a number of factors, including
the relative mix of higher volume/lower margin business and lower volume/higher
margin business, price competition, raw material costs, labor efficiencies, the
degree of automation that can be used in the assembly process and the
efficiencies achieved by Kenmar in managing inventories and fixed assets. The
amount of sales Kenmar has derives from turnkey manufacturing in which it
procures some or all of the components necessary for production vs the amount of
sales derived from labor sales directly effects the overall gross margin of the
business. Inflation has not been a significant factor in the results of Kenmar's
operations because Kenmar's price quotations for turnkey jobs are generally
valid for thirty days and Kenmar typically reserves the right to pass on certain
cost increases under some of its turnkey orders or contracts.

The financial information and discussion below should be read in
conjunction with the unaudited financial statements dated February 29, 1996 and
February 28, 1995 and the audited financial statements, and the notes attached
thereto, dated August 31, 1995.

RESULTS OF OPERATIONS

COMPARISON OF SIX MONTHS ENDED FEBRUARY 28, 1995 AND FEBRUARY 29,
1996 BASED ON THE UNAUDITED FINANCIAL STATEMENTS REFERENCED HEREIN

The following table sets forth certain operating data as a percentage of
net sales:

<TABLE>
<CAPTION>
SIX MONTHS ENDING
FEBRUARY 29, FEBRUARY 28,
1996 1995
<S> <C> <C>
Net sales......................................................................................... 100% 100%
Cost of goods sold................................................................................ 101.4 90.1
Gross profit...................................................................................... (1.4) 9.9
Selling, general, and administrative.............................................................. 29.3 5.4
Operating income.................................................................................. (30.7) 4.5
Interest & other expenses (net)................................................................... 126.1 (1.7)
Income before income taxes........................................................................ 95.4 2.8
Income taxes...................................................................................... -- --
Net income........................................................................................ 95.4 2.8
</TABLE>

The factors affecting changes in the percentages shown in the foregoing
table are discussed below.

SETTLEMENTS:

During the first quarter of fiscal 1996, Kenmar reached various Settlements
with its largest customer, which represented 80% of Kenmar's ongoing order input
at such time, and its suppliers for the cancellation and discontinuation of
production of nearly fifty products and assemblies. As a part of the settlement,
Kenmar signed an agreement with its then largest customer that relieved Kenmar
of trade accounts payable to the customer and other suppliers of $1,121,151. The
agreement provided the customer relief of trade payables to Kenmar of $52,957.
Further, suppliers to Kenmar for materials and services used on behalf of its
largest customer and related product lines relieved Kenmar of approximately
$500,000 of accounts payable. Supplier Settlements were essentially 50% of the
amount owed with half of the 50% being paid in quarterly installments

<PAGE>
beginning January 1, 1996. Though a significant number of suppliers were
involved above, Kenmar has been able to continue to purchase materials through
ordinary sources, including some of the suppliers mention above.

With eighty percent less order input than that of the prior period and a
reduced infrastructure, Kenmar continued operations with a core group of
employees and an average base revenue of approximately $225,000 per month.
Kenmar's financial performance more closely mirrors that of a company emerging
from a new company with fixed overheads established to support higher levels of
revenue than are currently attainable; however, without such overhead and
infrastructure, Kenmar will not be able to attract its targeted business.

NET SALES. Net sales for 1996 were $1,354,383, $6,911,885 less than that of
the same period in 1995 primarily due to a $7,434,602 decrease in shipments to
Kenmar's largest customer, offset by increases to other customers. Three new
customers with approximately $250,000 of new orders were added in 1996.

GROSS PROFIT. Gross profit was reduced $835,702 from 1995 to 1996 resulting
primarily from the substantial drop in net sales. Material cost of sales were
18% lower, offsetting the effect of volume reduction. There were also offsetting
cost reductions in direct labor of $366,554 and manufacturing overhead of
$280,155. Operations were run at a loss, as planned, due to the fixed overhead
expenses kept in place to regrow the business during 1996. Such overhead could
not be fully absorbed by the level of sales during the six month period
discussed.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A"). SG&A expense for
1996 was $49,175 less than that of 1995, resulting from $86,050 reduction in
sales commissions, partially offset by compensation to a new sales employee.
Kenmar evaluates, when circumstances warrant, the recoverability of the cost in
excess of net assets of acquired businesses by comparing the sum of the
undiscounted projected future cash flows attributable to each customer to the
carrying value of the related asset. Projected cash flows are estimated for a
period approximating the remaining lives of Kenmar's long-lived assets. As a
result of such evaluation Kenmar took a writedown of $160,000 during the year
ended August 31, 1995.

OPERATING INCOME. Profit from operations for 1996 prior to the addition of
misc. income was ($416,760) or $664,240 less than that of 1995. This is the
result of substantial lower volume offset by margin mix and cost reductions as
explained above. The misc. income of $1,724,781 reflects the income generated
from the Settlements described above.

INTEREST EXPENSE. Interest for 1996 of $29,214 was substantially reduced
from $141,968 in 1995 as a result of Kenmar's cash and cash equivalents position
which has permitted operations without outside banking or any other lending
sources.

INCOME TAX EXPENSE. Kenmar has not recorded an income tax provision at this
time due to the tax loss carry forward from fiscal 1994. In addition, Kenmar
believes that it met the insolvency tests per section 108 of the Internal
Revenue Code prior to the Settlements causing the income at that time to be
exempt from taxation. If Kenmar fails to pass the aforementioned insolvency
test, the booking of a tax provision could adversely effect its net income and
earnings per share for the period ending February 29, 1996.

LIQUIDITY AND CAPITAL RESOURCES

Kenmar's cash and cash equivalents increased by $699,187 from 2/28/95
through 2/29/96. The majority of the cash flow generated during 1996 came from
the Settlements as described above.

Kenmar used approximately $50,000 in cash in investing activities primarily
for capital expenditures in new test equipment to support new customer programs.

Payments were made to reduce long-term debt during 1996 as well as the
first quarterly installment due per the Settlements, as described above, in an
approximate amount of $46,500 on January 1, 1996. Dividends for the Class A
Cumulative Preferred stock were paid during 1996 for the first quarter ending
11/30/95 in the amount of $12,408.

As of February 29, 1996, Kenmar has not required financing from outside
banking or any lending sources.

<PAGE>
COMPARISON OF YEARS ENDED AUGUST 31, 1994 AND AUGUST 31, 1995
BASED ON THE AUDITED FINANCIAL STATEMENTS REFERENCED HEREIN

The follow table sets forth certain operating data as a percentage of net
sales:

<TABLE>
<CAPTION>
YEAR ENDING
AUGUST 31ST
1995 1994
<S> <C> <C>
Net sales....................................................................................................... 100% 100%
Cost of goods sold.............................................................................................. 89.2 98.9
Gross profit.................................................................................................... 10.8 1.1
Selling, general, and administrative............................................................................ 7.9 6.4
Operating income................................................................................................ 2.9 (5.3)
Interest & other expenses (net)................................................................................. (1.7) (1.0)
Income before income taxes...................................................................................... 1.2 (6.4)
Income taxes.................................................................................................... -- (0.4)
Net income...................................................................................................... 1.2 (6.0)
</TABLE>

The factors affecting changes in the percentages shown in the foregoing
table are discussed below.

NET SALES. Net sales are net of discounts and customer returns and are
recognized upon shipment of an order to a customer. Net sales decreased
$7,361,935 or 32% from $22,927,597 in 1994 to $15,565,662 in 1995 due to a
decrease of $8,070,393 of our highest volume product line at that time, offset
by other increases. Shipments to Kenmar's largest customer accounted for
approximately 81% of sales in 1995 and approximately 65% of sales during 1994.

GROSS PROFIT. Gross Profit equals net sales less cost of goods sold, which
consist of labor and material, manufacturing costs (primarily lease payments
for, and depreciation of, manufacturing equipment and facilities) and other
manufacturing costs. Gross profit increased in 1995 to $1,682,572 from $242,429
in 1994 as Kenmar consolidated its operations from two facilities into one and
focused on its strategic customers and their key products. The negative effect
of the $7,361,935 volume drop was offset by a better product mix and by
reductions in direct labor of $193,393 and manufacturing expenses of $506,902.
There were also non-recurring expenses related to downsizing. During 1995,
Kenmar reviewed its leasehold improvements, machinery, equipment and computer
hardware and software for impairment as a result of it ceasing to do business
with its major customer. Kenmar estimated future cash flows and compared it with
the net asset value of the related assets. This analysis resulted in a write
down of approximately $180,000 which is included as part of cost of goods sold
in the income statement.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses ("SG&A") consist primarily of non-manufacturing
salaries, sales commissions, and other general expenses. SG&A expense were
reduced from $1,466,289 in 1994 to $1,223,587 in 1995 as the above mentioned
consolidation was effected. Changes made included a reduction of sales and
marketing expenses of $148,000, mostly sales commissions of $136,000, and other
reductions of administrative expenses of $35,000. There were also non-recurring
expenses in 1994 of approximately $60,000.

OPERATING INCOME. Operating income is gross profit less SG&A. Operating
income increased from a loss of $1,223,860 in 1994 to $448,985 in 1995 as Kenmar
eliminated the above mentioned product lines and consolidated its operations.

INTEREST & OTHER INCOME. The interest & other income for 1995 increased
slightly from $233,795 in 1994 to $267,487 due mainly to the increased cost of
capital from its lenders.

INCOME TAX EXPENSE. Kenmar did not book an income tax provision due to the
tax loss carry forward from fiscal 1994.

LIQUIDITY AND CAPITAL RESOURCES

In past years Kenmar has financed its operations primarily with borrowing
from banks, lending institutions, private lenders and cash flow from operating
activities. Cash flow provided by operating activities was $3,392,419 and used
by operating activities was $184,162 in 1995 and 1994 respectively. Of the cash
provided/(used) in 1995, the major items were a 55% reduction of inventory, 30%
reduction of accounts receivable, and a (22%) reduction of accounts payable. The
majority of the cash flow from operating activities in 1995 was the result of
the phase-out of the manufacturing activities that resulted in the Settlements
described above in "Results of Operations".

<PAGE>
Kenmar used cash in investing activities primarily for capital expenditures
in 1994 and 1995. These outlays consisted primarily of manufacturing equipment
and leasehold improvements.

Kenmar generated cash from financing activities in 1994 from the issuance
of short & long-term debt and Class A Cumulative Preferred and Common stock
totaling $443,982. In 1995 Kenmar repaid $1,810,054 in debt obligations.

KENMAR BUSINESS GROUPS, INC.

STATEMENTS OF INCOME

SIX-MONTH PERIODS ENDED FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
UNAUDITED

<TABLE>
<CAPTION>
SIX MONTHS ENDING
FEBRUARY 29, FEBRUARY 28,
1996 1995
<S> <C> <C>
Sales............................................................................................. $1,354,383 $8,266,268
Cost of Goods Sold................................................................................ 1,373,793 7,449,976
Gross profit................................................................................. (19,410) 816,292
General, selling and administrative expenses...................................................... 397,350 446,525
Operating income (loss)...................................................................... (416,760) 369,767
Other income (expense)
Interest income................................................................................. 30,443 2,610
Interest expense................................................................................ (29,214) (141,968)
Miscellaneous expense........................................................................... (18,300) --
Other income (expense)....................................................................... (17,071) (139,358)
Income (loss) before income taxes and extraordinary items.................................... (433,831) 230,409
Income tax benefit (expense)...................................................................... -- --
Income (loss) before extraordinary item........................................................... (433,831) 230,409
Extraordinary Item................................................................................ 1,724,781 --
Net Income........................................................................................ 1,290,950 230,409
Accretion of preferred stocks..................................................................... (29,285) (27,003)
Undeclared dividend on preferred stock............................................................ (12,408) (24,323)
Net income applicable to common stockholders................................................. $1,249,257 $ 179,084
Weighted average number of shares................................................................. 64,714 60,369
Income (loss) per common share before extraordinary item.......................................... (7.35) 2.97
Extraordinary item per common share............................................................... 26.65 --
Net income per common share....................................................................... 19.30 2.97
</TABLE>

<PAGE>
KENMAR BUSINESS GROUPS, INC.

CONSOLIDATED BALANCE SHEETS

FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
UNAUDITED

<TABLE>
<CAPTION>
FEBRUARY 29, FEBRUARY 28,
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................................................... $ 744,533 $ 45,346
Accounts receivable -- trade, net of allowance for doubtful accounts of $5,500 in 1996 and
$65,807 in 1995. Also net of allowance for returns of $22,410 in 1995........................ 531,478 2,165,026
Accounts receivable -- other.................................................................... 15,865 3,609
Inventories..................................................................................... 317,531 1,256,409
Prepaid expenses and other current assets....................................................... 110,085 51,296
Total current assets......................................................................... 1,719,492 3,521,686
Property and equipment -- net..................................................................... 496,337 908,665
Other assets:
Deposits and other assets....................................................................... 72,998 352,382
Cost in excess of net assets of acquired business net of accumulated amortization of $212,250 In
1996 and $35,000 in 1995..................................................................... 87,750 265,000
Total other assets........................................................................... 160,748 617,382
Total assets................................................................................. 2,376,577 5,047,733
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Line of credit.................................................................................. -- 1,911,547
Current maturities of long-term debt............................................................ 4,317 132,003
Current obligations under capital leases........................................................ 35,203 35,203
Accounts payable, trade......................................................................... 621,852 2,397,521
Other accrued liabilities....................................................................... 94,833 57,182
Total current liabilities.................................................................... 756,205 4,533,456
Long-term debt, less current maturities........................................................... 541,236 627,614
Long-term obligations under capital leases........................................................ 57,750 94,283
Class A preferred stock, including accretion and accrued dividends................................ 759,129 626,206
Stockholders' equity (deficit)
Common stock, $1 par value; authorized 100,000 shares in 1996 and 1995 issued and outstanding... 64,714 64,714
Additional paid-in capital........................................................................ 213,941 243,226
Retained earnings (deficit)....................................................................... (16,398) (1,141,766)
Total stockholders' equity (deficit)......................................................... 262,257 (833,826)
Total liabilities and stockholders' equity (deficit)....................................... $2,376,577 $5,047,733
</TABLE>

PROPOSAL 2

ELECTION OF DIRECTORS

Five (5) directors are to be elected at the Special Meeting, each to hold
office until the next Annual Meeting of Stockholders and until a successor is
elected. It is the intention of the persons named in the enclosed proxy form to
vote, if authorized, the proxies for the election as directors of the five (5)
persons named below as nominees. If any nominee declines or is unable to service
as a director (which is not anticipated), the persons named as proxies reserve
full discretion to vote for any other persons who may be nominated.

<PAGE>
None of the nominees have previously held positions with the Corporation.
Election of the nominees is a condition precedent for the effectiveness of the
Merger Agreement. The following table sets forth for each nominee for election
as a director his or her name and his or her principal occupation:

<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PERSONAL INFORMATION AND OCCUPATION SINCE
<S> <C> <C> <C>
Kenneth H. Marks 32 Has been Chief Executive, President, and a --
director of Kenmar since 1984. Kenneth H. Marks
is the son of Kenneth L. Marks listed below.
Craig Macnab 39 Has been a director of Kenmar Since 1993. He has --
been a managing partner with McNeil Advisors
since 1992. Prior to joining McNeil Advisors,
Mr. Macnab was the Managing Partner Of Bradford
& Co. He is a director of J.D.N. Realty.
Alan G. Finkel 62 Has been a director of Kenmar since 1992. Has --
been a Management consultant since 1989 Prior to
1989 he held numerous Positions with ITT,
including President & General Manager of MacKay
Communications, a division of ITT.
Kenneth L. Marks (1) 61 Has been a director of Kenmar since 1984. --
Management Consultant Since October 1995.
Director of Labor Relations and personnel
positions from 1974 thru 1995 with Carolina
Freight Carriers Corporation. Is the father of
Kenneth H. Marks, listed above.
Ray Steckenrider 71 Has been a director of Kenmar since 1995. Has --
been President of Autotron Corporation since
1986.
</TABLE>

(1) Kenneth L. Marks is the father of Kenneth H. Marks.

EXECUTIVE COMPENSATION

The following table shows all the cash compensation paid or to be paid by
the Company or any of its subsidiaries, as well as certain other compensation
paid or accrued, during the fiscal years indicated, to the Chief Executive
Officer for such period in all capacities in which he served. No other Executive
received total annual salary and bonus in excess of $100,000.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION PAYOUTS
ANNUAL COMPENSATION AWARDS (F) (H)
(E) RESTRICTED (G) ALL OTHER
(A) (B) (C) (D) OTHER ANNUAL STOCK OPTIONS LTIP
NAME AND PRINCIPAL POSITION YEAR BONUS/SALARY ($) COMPENSATION($) AWARD($) SARS PAYOUTS($)
<S> <C> <C> <C> <C> <C> <C> <C>
Robert Knight 1995 $ 36,000 0 0 0
President 1994 $ 36,000 0 10,000
1993 $ 36,000
Alexander Michie 1995 $ 10,000 0 10,000 0
former director 1994 $ 36,000 0
1993 $ 36,000
Karl Ronstadt 1995 $ 62,000 0 10,000 0
former director 1994 $ 72,000 0
1993 $ 54,000
James Burns 1995 $ 55,000 0 0 0
Chairman of the Board 1994 0
1993 0

<CAPTION>
(A) (I)
NAME AND PRINCIPAL POSITION COMPENSATION(I)
<S> <C>
Robert Knight 0
President
Alexander Michie 0
former director
Karl Ronstadt 0
former director
James Burns 0
Chairman of the Board
</TABLE>

<PAGE>
The following table sets forth information with respect to the Chief
Executive Officer concerning exercise of options during the last fiscal year and
unexercised options and SARs held as of the end of the fiscal year:

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
(C)
PERCENT OF TOTAL
(B) OPTIONS/SARS (D)
(A) OPTIONS/SARS GRANTED TO EMPLOYEE EXERCISE OR BASE (E)
NAME GRANTED FISCAL YEAR PRICE ($/SH) EXPIRATION DATE
<S> <C> <C> <C> <C>
Robert W. Knight....................................... 0 0 N/A N/A
</TABLE>

The following table sets forth information with respect to the Chief
Executive Officer concerning exercise of options during the last fiscal year and
unexercised options and SARs held as of the end of the fiscal year:

AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR
<TABLE>
<CAPTION>
(D)
NUMBER OF
UNEXERCISED
OPTIONS/SAR
(B) AT FY-END (#)
(A) SHARES ACQUIRED (C) EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED UNEXERCISABLE
<S> <C> <C> <C>
Robert W. Knight................................................. 0 N/A 10,000

<CAPTION>
(E)
VALUE OF
UNEXERCISED
IN-THE-MONEY
OPTIONS/SAR
AT FY-END (#)
(A) EXERCISABLE/
NAME UNEXERCISABLE
<S> <C>
Robert W. Knight................................................. 0
</TABLE>

The following table sets forth information with respect to the Chief
Executive officer concerning the grants of options and Stock Appreciation Rights
("SAR") during the past fiscal year:

ESTIMATED FUTURE PAYOUT UNDER NON-STOCK
PRICE BASED PLANS

<TABLE>
<CAPTION>
(C)
(B) PERFORMANCE OR (F)
NUMBER OF SHARES, OTHER PERIOD (D) (E) MAXIMUM
(A) UNITS OR OTHER UNTIL MATURATION THRESHOLD TARGET ($ OR
NAME RIGHTS (#) OR PAYOUT ($ OR #) ($ OR #) #)
<S> <C> <C> <C> <C> <C>
Robert W. Knight........................................ 0 0 N/A N/A N/A
</TABLE>

Under the terms of the Merger Agreement, the following persons have been
designated to serve as executive officers of the Company following the
consummation of the Merger:

<TABLE>
<CAPTION>
PRESENT POSITION
NAME AGE TITLE AT KENMAR
<S> <C> <C> <C>
Kenneth H. Marks................................................................. 32 President President
Chief Executive Chief Executive
Officer Officer
Kenneth L. Marks................................................................. 61 Secretary Secretary
</TABLE>

As a condition precedent of the Merger, JA shall enter into a management
consulting agreement with G.M. Capital Partners Ltd. ("GMCP") a, corporation
unaffiliated with any parties to the Merger Agreement. The agreement provides
for a term of 12 months with monthly payments to GMCP of $5,000. In addition,
certain additional fees shall be paid to GMCP in the event it arranges any
financing for the benefit of the Company.

These additional fees include a cash payment equal to 10% of the gross
proceeds of any private financing it arranges for the Company. In the event GMCP
arranges a public offering or sells more than 5% of the Company, its fees shall
be a cash payment of 3% of the gross proceeds of the offering. GMCP had no role
in connection with the proposed merger between the Company and Kenmar.

The Company has sole discretion in accepting financing arranged by GMCP and
all additional fees earned by GMCP shall be paid on the closing of the
transaction.

Commencing at the Effective Time of the Merger, the Company shall enter
into an employment agreement with Kenneth H. Marks providing for Mr. Marks to
become its Chief Executive Officer for a period of 5 years at a salary of
$125,000 per

<PAGE>
year. Among additional terms, the agreement also provides for a yearly bonus
equal to 8% of the net after tax profit of the Company; a 5% annual salary
increase; a grant of 350,000 options pursuant to a Qualified Stock Option Plan
and either a $100,000 (1) loan or (2) payment upon the signing of an employment
agreement.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF MANAGEMENT

The following table sets forth, as of March 15, 1996 information with
respect to (1) any person known by the Company to own beneficially more than
five percent (5%) of the Company's Common Stock, (2) the shares of Common Stock
beneficially owned by each officer and director of the Company, and (3) the
total of the Company's Common Stock beneficially owned by the Company's officers
and directors as a group.

<TABLE>
<CAPTION>
STOCKHOLDER BENEFICIALLY OWNED CLASS
<S> <C> <C>
Karl Gelbard
4001 South Ocean Drive
Hollywood, FL 33019................................. 10,000 0.1%
Robert W. Knight
4025 Sunset Boulevard
North Vancouver, B.C.
Canada.............................................. 297,259 3.2%
All directors and offices as a group (2 persons).... 307,259 3.2%
</TABLE>

PRINCIPAL STOCKHOLDERS OF J.A. INDUSTRIES, INC.
(AFTER MERGER WITH KENMAR)

The following table sets forth as of the effective date of the merger and
after the 1 for 4 reverse split, certain information with respect to the shares
of the Company's Common Stock to be beneficially owned by (i) stockholders
owning more than 5% of the Company's Common Stock, (ii) the Company's directors
and officers, and (iii) all of the Company's directors and officers as a group.

<TABLE>
<CAPTION>
STOCKHOLDER BENEFICIALLY OWNED CLASS
<S> <C> <C>
Kenneth H. Marks.................................... 1,668,352 30.4 %
Craig Macnab........................................ 266,136 4.8 %
Royal Bank of Scotland.............................. 375,000 6.9 %
Kenneth L. Marks.................................... 72,816 1.2 %
Ray Steckenrider.................................... 4,616 nil
All directors and officers
as a group (4 persons)............................ 2,011,920 36.7 %
</TABLE>

COMMON STOCK OF THE COMPANY

MARKET PRICE INFORMATION

The Company's Common Stock is traded over-the-counter and its quotations
are carried in the National Quotation Bureau's daily "Pink Sheets."

The following table shows the range of high and low bid or last trade
quotations for the Company's Common Stock in the over-the-counter market as
reported to the Company by the National Quotation Bureau Incorporated. The
quotations reflect prices between dealers, without retail mark-ups, mark-downs
or commissions and may not necessarily represent actual transactions or be
indicative of prices at which the Company's stock was traded. In November of
1992, the Company effected a reverse stock split on a one for five basis. All
bids reflected below have been adjusted to give effect to the reverse split.

<PAGE>
COMMON STOCK

<TABLE>
<CAPTION>
BID PRICE
PERIOD HIGH
<S> <C>
Quarter ended June 30, 1996..................................................................................... 7/8
Quarter ended March 31, 1996.................................................................................... 21/32
Quarter ended December 31, 1995................................................................................. 11/16
Quarter ended September 30, 1995................................................................................ 1 3/8
Quarter ended June 30, 1995..................................................................................... 1 3/8
Quarter ended March 31, 1995.................................................................................... 2
Quarter ended December 31, 1994................................................................................. 2 1/8
Quarter ended September 30, 1994................................................................................ 2
Quarter ended June 30, 1994..................................................................................... 2
Quarter ended March 31, 1994.................................................................................... 2 1/4
Quarter ended December 31, 1993................................................................................. 2 3/8
Quarter ended September 30, 1993................................................................................ 21/2

PERIOD LOW

<S> <C>
Quarter ended June 30, 1996..................................................................................... 7/16

Quarter ended March 31, 1996.................................................................................... 13/32

Quarter ended December 31, 1995................................................................................. .19

Quarter ended September 30, 1995................................................................................ 27/32

Quarter ended June 30, 1995..................................................................................... 1

Quarter ended March 31, 1995.................................................................................... 1

Quarter ended December 31, 1994................................................................................. 1 9/16

Quarter ended September 30, 1994................................................................................ 1 1/2

Quarter ended June 30, 1994..................................................................................... 1 3/4

Quarter ended March 31, 1994.................................................................................... 1 5/8

Quarter ended December 31, 1993................................................................................. 1 3/8

Quarter ended September 30, 1993................................................................................ 1 1/2

</TABLE>

The number of record holders of the Company's Common Stock, as of June 3,
1996, was approximately 301. However, the Company believes that there may be
substantially more beneficial holders.

DIVIDEND POLICY

The Company has not paid any dividends on its Common Stock since its
inception. The Company anticipates that for the foreseeable future, earnings, if
any, will be retained for use in the business or for other corporate purposes,
and it is not anticipated that cash dividends will be paid on its Common Stock.

POST MEETING FINANCING

In a private transaction, subject to stockholder approval of the Merger
Agreement, the Company has raised $510,000 through the sale of 1,500,000 shares
(pre-split) of its Common Stock. The monies are being held in escrow, to be
released to the Company upon the approval by stockholders of the terms of the
Merger Agreement. As of May 31, 1996 there were approximately 9,437,304 shares
of the Company's Common Stock outstanding. In the event the Merger Agreement is
approved by the stockholders an additional 1, 500,000 shares would be issued and
accordingly, approximately 10,937,304 shares will then be outstanding. As a
result of the issuance of these additional 1,500,000 shares, the existing
shareholders of the Company will receive a 43% interest in the merged entity and
the holder of the 1,500,000 shares 7% interest. The interest of the former
Kenmar shareholders in the merged entity remains at 50%.

Proceeds of the post meeting financing shall be used as follows:

<TABLE>
<S> <C>
Commissions....................................................... $ 51,000
Professional Fees................................................. 70,000
Accounts Payable.................................................. 168,000
Working Capital................................................... 221,000
$510,000
</TABLE>

<PAGE>
PROPOSAL 3
APPROVAL OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION TO
PROVIDE FOR A CHANGE OF NAME

On January 22, 1996, the Company's Board of Directors approved subject to
stockholder approval, an amendment to the Company's Certificate of Incorporation
to provide for a change in name of the Corporation to Electronic Manufacturing
Services Group, Inc. The purpose of the change in name is to more adequately
describe the future operations of the Company.

The affirmative vote of a majority of the votes present or represented by
proxy and entitled to vote at the Special Meeting of Stockholders, at which a
quorum representing a majority of all outstanding shares of Common Stock of the
Company is present and voting, either in person or by proxy, is required for
approval of this proposal. Abstentions and broker non-votes will each be counted
as present for purposes of determining the presence of a quorum. Abstentions
will have the same effect as a negative vote. Broker non-votes, on the other
hand, will have no effect on the outcome of the vote.

The Board of Directors unanimously recommends a vote "FOR" approval of the
proposed amendment to the Certificate of Incorporation to provide for a change
of name.

DESCRIPTION OF CAPITAL STOCK OF THE COMPANY

The Company is authorized to issue twenty million (20,000,000) shares of
Common Stock, $.0025 par value per Share and 2,000,000 shares of Preferred
Stock, $.01 par value per share. Each outstanding Share of Common Stock is
entitled to one vote, either in person or by proxy, on all matters that may be
voted upon by the owners thereof at meetings of the stockholders.

The holders of Common Stock (i) have equal ratable rights to dividends from
funds legally available therefor, when, and if declared by the Board of
Directors of the Company; (ii) are entitled to share ratably in all of the
assets of the Company available for distribution to holders of Common Stock upon
liquidation, dissolution or winding up of the affairs of the Company; (iii) do
not have preemptive, subscription or conversion rights, or redemption or sinking
fund provisions applicable thereto; and (iv) are entitled to one non-cumulative
vote per Share on all matters on which stockholders may vote at all meeting of
stockholders.

There are no preferred shares currently designated, issued or outstanding.
The Board of Directors is empowered to designate classes of the Company's Common
and Preferred Stock and to establish relative rights, preferences,
qualifications and restrictions with regard to any designated classes.

PROPOSAL 4
APPROVAL FOR A 1 FOR 4 REVERSE STOCK SPLIT

On January 22, 1996 the Company's Board of Directors approved, subject to
stockholder approval, a 1 for 4 reverse stock split in which one (1) share of
Common Stock will be outstanding for each four (4) shares of Common Stock
previously outstanding. The primary reason for the proposed reverse stock split
is to reduce the number of outstanding shares as well as comply with the
provisions of the Merger Agreement.

Currently, the Company is authorized pursuant to its Certificate of
Incorporation to issue 20,000,000 shares of Common Stock and 2,000,000 shares of
Preferred Stock. As of May 31, 1996, there were 9,437,304 shares of Common Stock
outstanding and no shares of Preferred Stock outstanding. Presuming the issuance
1,500,000 pre split shares of Common Stock in the private transaction, the
reverse split will result in a reduction in the number of shares of Common Stock
outstanding to approximately 2,734,326 shares. The reverse split will not alter
the number of authorized shares of stock or any other provision of the Company's
Certificate of Incorporation.

Presently, the Company has 9,437,304 shares of Common Stock outstanding and
10,562,696 unissued shares. If the reverse split and merger are approved by the
stockholders (and 1,500,000 shares are issued pursuant to the private
placement), outstanding shares will be reduced to 2,734,326 and unissued shares
increased to 17,265,674. Potential uses for such authorized unissued shares
include acquisitions, additional stock option plans and stock dividends. At the
present time, the Company has no plans to issue additional authorized shares.

<PAGE>
The Board of Directors unanimously recommends a vote "For" approval of a
proposed amendment to the Certificate of Incorporation to provide for 1 for 4
Reverse Stock Split of each outstanding share of the Company's common stock.

FINANCIAL STATEMENTS

The audited financial statements of J.A. for the years ended June 30, 1994
and 1995 included in this proxy statement, have been audited by MacKay &
Partners and Semple & Cooper, independent certified public accountants,
respectively. On July 17, 1995 the Board of Directors of the Registrant engaged
the firm of Semple & Cooper, to act as the Company's independent certified
public accountants as successor to MacKay & Partners. At the time of the
dismissal of the MacKay firm, during the company's two most recent fiscal years
or any later interim period there were no adverse opinions, disclaimer of
opinion or modification or disagreements with the MacKay firm. The audited
financial statements of Kenmar for the years ended August 31, 1994 and 1995
included in this proxy statement, have been audited by KPMG Peat Marwick LLP,
independent certified public accountants.

PRESENCE OF ACCOUNTANTS AT SPECIAL MEETING

Representatives of JA's and Kenmar's independent accountants are not
expected to be present at the Special Meeting, but will be available by
telephone to respond to appropriate questions of stockholders.

STOCKHOLDER'S PROPOSAL

From time to time, stockholders present proposals which may be proper
subjects for inclusion in the Proxy Statement and for consideration at the
Annual Meeting. To be considered, proposals must be submitted on a timely basis.
Proposals for the 1996 Annual Meeting must be received by the Corporation no
later than March 15, 1997.

OTHER MATTERS

At the date of the proxy statement, the only business which management
intends to present or knows that others will present at the meeting is
hereinabove set forth. If any other matter or matters are properly brought
before the meeting, or any adjournment thereof, it is the intention of the
persons named in the accompanying form of proxy to vote the proxy on such
matters in accordance with their best judgment.

ROBERT KNIGHT,
President

Dated: July 10, 1996

<PAGE>
EXHIBIT E

J.A. INDUSTRIES, INC./KENMAR BUSINESS GROUPS, INC.
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
J.A. -- Financial Statements
Report of Independent Auditors.............................................................................. F-1-F-2
Balance Sheets as of June 30, 1995 and 1994................................................................. F-3
Statements of Operations for the years ended June 30, 1995 and 1994......................................... F-4
Statements of Stockholder Equity for the years ended June 30, 1995 and 1994................................. F-5
Statements of Cash Flows for the years ended June 30, 1995 and 1994......................................... F-6
Notes to Financial Statements............................................................................... F-7-F-15
J.A. -- Pro Forma Consoldiated Financial Statements (Unaudited)
Balance Sheet as of August 31, 1995......................................................................... F-16
Statement of Operations for the year ended August 31, 1995.................................................. F-17
Statement of Operations for the six months ended February 29, 1996.......................................... F-18
J.A. -- Financial Statements (Unaudited)
Balance Sheets as of March 31, 1995 and 1996................................................................ F-19
Statements of Operations for nine months ended March 31, 1996 and 1995...................................... F-20
Statement of operations for three months ended March 31, 1996 and 1995......................................
Statement of Changes in Financial Position for nine months ended March 31, 1996and 1995..................... F-21
Statement of Changes in Stockholder's Equity for nine months ended March 31, 1996 and the year ended June
30, 1995................................................................................................. F-22
Notes to Financial Statements................................................................................. F-23-F-25
Kenmar -- Financial Statements (Audited)
Report of Independent Auditors.............................................................................. F-26
Balance Sheets as of August 31, 1995 and 1994............................................................... F-27
Statements of Income (Loss) years ended August 31, 1995 and 1994............................................ F-28
Statement of Stockholder's Deficit years ended August 31, 1995 and 1994..................................... F-29
Statement of Cash Flows years ended August 31, 1995 and 1994................................................ F-30
Notes to Financial Statements............................................................................... F-31-F-37
Kenmar -- Financial Statements (Unaudited)
Balance Sheets as of February 29, 1996 and 1995............................................................. F-38
Statements of Income, six months ended February 29, 1996 and 1995........................................... F-39
Statements of Cash Flows.................................................................................... F-40
Notes to Financial Statements............................................................................... F-41
</TABLE>

<PAGE>
INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS OF
J.A. INDUSTRIES, INC. AND SUBSIDIARIES

We have audited the accompanying consolidated balance sheet of J.A.
Industries, Inc. and Subsidiaries as of June 30, 1995 and the related
consolidated statements of operations, changes in stockholders' equity
(deficit), and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 an 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 J.A.
Industries, Inc. and Subsidiaries as of June 30, 1995, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As shown in the
financial statements, the Company incurred a net loss of $1,714,526, and a cash
flow deficit from operations of $133,297 during the year ended June 30, 1995,
and as of that date had a working capital deficiency of $566,587, and a net
capital deficiency of $40,503. Additionally, as of the date of the auditors'
report, the Company has sold subsidiaries which accounted for all of the
operating activities of the consolidated corporation. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

/s/ Semple & Cooper, P.L.C.
Certified Public Accountants

Phoenix, Arizona
November 20, 1995
(except for Note 18 as to which
the date is May 12, 1996).

F-1

<PAGE>

INDEPENDENT AUDITORS' REPORT

TO THE SHAREHOLDERS
J.A. INDUSTRIES INC.

We have audited the consolidated balance sheet of J.A. Industries Inc. as
at June 30, 1994 and related consolidated statements of loss, changes in
shareholders' 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 an audit to obtain
reasonable assurance 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, these consolidated financial statements present fairly, in
all material respects, the financial position of the company as at June 30,
1994, and the results of its operations and the changes in the shareholders'
equity and changes in its financial position for the year then ended in
conformity with U.S.A. generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared
assuming that the company will continue as a going concern. As shown in the
financial statements, the company incurred a net loss of $1,497,305 and a cash
flow deficit from operations of $976,513 during the year ended June 30, 1994,
and as at that date had a working capital deficiency of $180,031 and a net worth
of $667,558. As described in Notes 8 and 11 to the financial statements, the
company is not in compliance with certain loan covenants on two notes and the
company's revolving line of credit matures in October 1994. These conditions
raise substantial doubt about the company's ability to continue as a going
concern, however, no adjustments have been made to reflect this outcome.

/s/ MacKay & Partners
Chartered Accountants

Vancouver, Canada
September 29, 1994
(except for notes 8, 11, and 12
as to which the date is October 19, 1994)

F-2

<PAGE>
J.A. INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JUNE 30, 1995 AND 1994

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 1).............................................................. $ 45,274 $ 6,679
Accounts receivable (Notes 1 and 9)
-- trade.................................................................................... 246,180 485,943
-- other.................................................................................... 73 18,363
Inventory (Notes 1, 4 and 9).................................................................... 170,261 454,982
Prepaid expenses................................................................................ 14,805 27,338
Total Current Assets....................................................................... 476,593 993,305
Real Estate Held for Sale (Notes 6 and 9)......................................................... 488,750 875,000
Property and Equipment, Net
(Notes 1, 5 and 9).............................................................................. 53,330 598,533
Investments (Note 7).............................................................................. -- 22,075
Intangible Assets, Net (Notes 1 and 8)............................................................ 2,050 127,532
544,130 1,623,140
$1,020,723 $2,616,445
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Notes payable -- current portion (Note 9)....................................................... $ 590,986 $ 922,436
Loans payable -- related parties (Note 10)...................................................... 35,766 --
Accounts payable................................................................................ 165,625 776,474
Accrued expenses................................................................................ 250,753 --
Income taxes payable (Notes 1 and 12)........................................................... 50 50
Total Current Liabilities.................................................................... 1,043,180 1,698,960
Notes Payable -- Long-Term Portion (Note 9)....................................................... 18,046 117,563
Loans Payable -- Related Parties (Note 10)........................................................ -- 132,364
18,046 249,927
Commitments and Contingencies: (Note 11).......................................................... -- --
Stockholders' Equity (Deficit):
Common stock (Note 14).......................................................................... 18,879 16,234
Additional paid-in capital...................................................................... 4,993,915 3,849,152
Accumulated deficit............................................................................. (4,904,793) (3,190,267)
108,001 675,119
Stock subscriptions receivable.................................................................. (144,000) --
Cumulative translation adjustment (Note 1)...................................................... (4,504) (7,561)
(40,503) 667,558
$1,020,723 $2,616,445
</TABLE>

The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements

F-3

<PAGE>
J.A. INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED JUNE 30, 1995 AND 1994

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Sales........................................................................................... $ 4,330,211 $ 4,042,940
Cost of Sales................................................................................... 3,618,347 3,674,688
Gross Profit.................................................................................... 711,864 368,252
Selling and Marketing Expense................................................................... -- 134,163
General and Administrative Expense.............................................................. 1,593,838 1,256,765
Impairment of real estate held for sale (Note 6)................................................ 386,250 444,941
Impairment of goodwill (Note 8)................................................................. 115,890 --
2,095,978 1,835,869
Loss from Operations............................................................................ (1,384,114) (1,467,617)
Other Income (Expense):
Interest income............................................................................... 952 373
Interest expense.............................................................................. (72,868) (93,989)
Gain on foreign exchange translation.......................................................... -- 7,960
Loss on sale of assets (Note 5)............................................................... (59,726) --
Loss on sale of subsidiary (Note 3)........................................................... (198,770) --
(330,412) (85,656)
Loss before Income Taxes........................................................................ (1,714,526) (1,553,273)
Income Tax Benefit.............................................................................. -- 65,973
(1,714,526) (1,487,300)
Pre-acquisition Earnings of Hutronix, Inc....................................................... -- (10,005)
Net Loss........................................................................................ $(1,714,526) $(1,497,305)
Net Loss per Share.............................................................................. $ (.25) $ (.28)
Weighted Average Shares Outstanding............................................................. 6,724,440 5,389,500
</TABLE>

The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements

F-4

<PAGE>
J.A. INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE YEARS ENDED JUNE 30, 1995 AND 1994

<TABLE>
<CAPTION>
EQUITY
ADJUSTMENT
ADDITIONAL FROM FOREIGN STOCK
COMMON STOCK PAID-IN ACCUMULATED CURRENCY SUBSCRIPTION
SHARES AMOUNT CAPITAL DEFICIT TRANSLATION RECEIVABLE
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1993..................... 4,107,129 $10,268 $1,800,027 $(1,692,962) $ -- $ --
Issued for cash............................ 993,950 2,485 1,005,578 -- -- --
Issued for equipment....................... 600,000 1,500 52,148 -- -- --
Issued for shares of Hutronix, Inc......... 717,699 1,794 895,330 -- -- --
Issued for legal services.................. 25,000 62 7,944 -- -- --
Issued to repay debt....................... 50,000 125 88,125 -- -- --
Aggregate adjustment resulting from
translation of financial statement into
U.S. dollars............................. -- -- -- -- (7,561) --
Net loss for the year ended June 30,
1994..................................... -- -- -- (1,497,305) -- --
Balance, June 30, 1994..................... 6,493,778 16,234 3,849,152 (3,190,267) (7,561) --
Issued for cash............................ 631,383 1,578 494,672 -- -- --
Issued for consulting fees................. 1,032,292 2,581 637,517 -- -- (144,000)
Issued to repay debt....................... 50,000 125 51,982 -- -- --
Issued as compensation..................... 12,600 32 12,569 -- -- --
Reverse equipment purchase................. (600,000) (1,500) (52,148) -- -- --
Shares cancelled........................... (68,450) (171) 171 -- -- --
Aggregate adjustment resulting from
translation of financial statements into
U.S. dollars............................. -- -- -- -- 3,057 --
Net loss for the year ended June 30,
1995..................................... -- -- -- (1,714,526) -- --
7,551,603 $18,879 $4,993,915 $(4,904,793) $ (4,504) $ (144,000)
</TABLE>

The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements

F-5

<PAGE>
J.A. INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED JUNE 30, 1995 AND 1994

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Cash Used by Operating Activities:
Net loss...................................................................................... $(1,714,526) $(1,497,305)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization.............................................................. 110,623 113,549
Loss on sale of fixed assets............................................................... 59,726 --
Issuance of stock for services and debt repayment.......................................... 514,759 --
Impairment on real estate held for sale.................................................... 386,250 444,941
Impairment of goodwill..................................................................... 115,890 --
Loss on sale of subsidiary................................................................. 198,770 --
Changes in Assets and Liabilities:
Accounts receivable
-- trade................................................................................ 239,763 (350,711)
-- other................................................................................ 18,290 --
Inventory.................................................................................. 284,721 (324,732)
Prepaid expenses........................................................................... 12,533 (10,147)
Accounts payable........................................................................... (610,849) 662,081
Accrued expenses........................................................................... 250,753 --
Income taxes payable....................................................................... -- 50
Equipment loans............................................................................ -- 119,048
Purchase agreement......................................................................... -- (133,287)
Cash used by operations.................................................................... (133,297) (976,513)
Investing Activities:
Proceeds from sale of fixed assets......................................................... 244 --
Purchase of property and equipment......................................................... (4,578) (1,713,705)
Disposal of license agreement.............................................................. -- 50,000
Acquisition of intangible assets........................................................... -- (140,409)
Disposal (acquisition) of investment....................................................... 21,875 (21,875)
Cash provided (used) by investing activities............................................... 17,541 (1,825,989)
Financing Activities:
Issuance of common stock................................................................... 496,250 2,055,091
Loans from related parties................................................................. 35,766 13,065
Proceeds from debt......................................................................... 72,288 753,722
Repayment of debt.......................................................................... (423,079) --
Repayment of debt from related parties..................................................... (22,370) --
Cash provided by financing activities...................................................... 158,855 2,821,878
Effect of exchange rate changes on cash and cash equivalents.................................... (4,504) (7,561)
Net Change in Cash and Cash Equivalents......................................................... 38,595 11,815
Cash and Cash Equivalents at Beginning of Year.................................................. 6,679 (5,136)
Cash and Cash Equivalents at End of Year........................................................ $ 45,274 $ 6,679
</TABLE>

The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements

F-6

<PAGE>
J.A. INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

NATURE OF CORPORATION:

J.A. Industries, Inc. is a Corporation organized under the laws of the
State of Delaware. The principal purpose of the Corporation is to act as the
holding company of its subsidiaries. Subsequent to the balance sheet date, the
Company disposed of its only remaining operating subsidiary through a reversal
of the acquisition (Note 3).

PERVASIVENESS 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.

PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include the accounts of:

J.A. Industries, Inc., a Delaware corporation, and the following
wholly-owned subsidiaries:

J.A. Industries (Canada) Inc., a Canadian corporation

Granite Marketing Corp., a Cayman Island corporation

Hutronix, Inc., an Arizona corporation

QDS, deMexico, S.A. de C.V., a Mexican corporation and the 96%
owned subsidiary Hutronix de Mexico, S.A. de C.V., (a
subsidiary of Hutronix, Inc., which has been inactive since
August 17, 1982)

All significant intercompany balances and transactions have been eliminated
in consolidation.

As further described in Note 3, J.A. Industries (Canada) Inc. was sold
during the year ended June 30, 1995, and Hutronix, Inc. and QDS, de Mexico, S.A.
de C.V. were disposed of subsequent to the balance sheet date through a reversal
of the acquisition (Note 3).

CASH AND CASH EQUIVALENTS:

Cash and cash equivalents are considered to be all highly liquid
investments with an initial maturity of three (3) months or less.

ACCOUNTS RECEIVABLE:

The Company follows the allowance method of recognizing uncollectible
accounts receivable. The allowance is provided for based upon a review of the
individual accounts outstanding and the prior history of uncollectable accounts
receivable. At June 30, 1994, an allowance has been provided for potentially
uncollectible accounts receivable in the amount of $30,803. At June 30, 1995, no
allowance has been provided for as management believes all accounts receivable
to be collectible.

INVENTORY:

Raw materials are valued at the lower of cost or replacement cost. Work in
process and finished goods are valued at the lower of cost or net realizable
value. Cost for all inventory is determined on the first-in, first-out method
which, for work in process and finished goods, includes the cost of material,
direct labor and applied manufacturing overhead.

PROPERTY AND EQUIPMENT:

Property and equipment are recorded at cost. Depreciation is provided for
on the straight-line method over the estimated useful lives of the assets,
ranging from five to seven years. Maintenance and repairs that neither
materially add to the value of the property nor appreciably prolong its life are
charged to expense as incurred. Betterments or renewals are capitalized when
incurred.

F-7

<PAGE>
J.A. INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- Continued
LONG-LIVED AND INTANGIBLE ASSETS:

Long-lived assets include office and manufacturing equipment and real
estate. Intangible assets include goodwill, incorporation costs, and patent
development costs, and are being amortized on the straight-line method over
their estimated useful lives as disclosed in Note 8. Goodwill represents the
excess of the cost of acquiring Hutronix, Inc. over the fair value of the net
assets at the date of acquisition. The carrying value of the assets will be
periodically reviewed by the Company and impairments, if any, will be recognized
when expected future operating cash flows derived from the assets are less than
their carrying value.

INCOME TAXES:

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis, in addition to the use of net operating losses. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.

TRANSLATION OF FOREIGN CURRENCIES:

Account balances and transactions denominated in foreign currencies and the
accounts of the Corporation's foreign operations have been translated into
United States funds, as follows:

Assets and liabilities at the rates of exchange prevailing at the
balance sheet date;

Revenue and expenses at average exchange rates for the period in which
the transaction occurred;

Exchange gains and losses arising from foreign currency transactions
are included in the determination of net earnings for the period;

Exchange gains and losses arising from the translation of the
Corporation's foreign operations are deferred and included as a separate
component of stockholders' equity.

LOSS PER SHARE:

The loss per share calculation is based on the weighted average number of
shares outstanding during the year. Fully diluted loss per share has not been
presented because the effect of exercising the options outstanding would be
anti-dilutive.

2. BUSINESS COMBINATIONS:

In 1994, the Company purchased all of the outstanding shares of Hutronix,
Inc. for common share consideration. The acquisition was accounted for by the
purchase method. The results of operations are included in the accounts from the
effective date of acquisition, September 15, 1993.

Details of the purchase are as follows:

<TABLE>
<S> <C>
Fair market value of assets acquired:
Working capital deficiency............................................................ $ (42,739)
Fixed assets.......................................................................... 1,462,099
Other liabilities..................................................................... (69,814)
Long-term debt........................................................................ (581,189)
Goodwill.............................................................................. 128,767
$ 897,124
Consideration given:
Common shares issued.................................................................. $ 897,124
</TABLE>

As further described in Note 3, the acquisition of Hutronix, Inc. and QDS,
de Mexico, S.A. de C.V. was reversed subsequent to the year ended June 30, 1995.

F-8

<PAGE>
J.A. INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. SALE OF SUBSIDIARIES:

During the year ended June 30, 1995 and subsequent to year end, the Company
disposed of one operating subsidiary and entered into a plan to reverse the
purchase of another operating subsidiary. These two subsidiaries comprised
principally all of the operating activity of the consolidated entity. The
disposals are as follows:

J.A. INDUSTRIES (CANADA) INC.:

On June 30, 1995, the Company sold all of the common stock of J.A.
Industries (Canada) Inc. for $73. The transaction resulted in a loss of
$198,770, which has been included in loss on sale of subsidiary for the year
ended June 30, 1995.

HUTRONIX, INC.:

On November 21, 1995, the Company entered into an agreement to reverse the
acquisition of Hutronix, Inc. and its Mexican manufacturing subsidiary, QDS, de
Mexico, S.A. de C.V. The Company returned all of the common shares of Hutronix,
Inc. in exchange for cancellation of a buy/sell agreement for 262,500 common
shares of J.A. Industries, Inc. with the former principal stockholder of
Hutronix, Inc. The Company realized a loss on the subsequent disposition of
Hutronix, Inc. of approximately $70,000, which has not been included in the
accompanying consolidated statement of operations for the year ended June 30,
1995.

4. INVENTORY:

As of June 30, 1995 and 1994, inventory consists of the following:

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Raw materials............................................................... $ 352,223 $ 532,435
Less: reserve for obsolescence.............................................. (210,000) (190,000)
142,223 342,435
Work in process............................................................. 25,170 91,962
Finished goods.............................................................. 2,868 20,585
$ 170,261 $ 454,982
</TABLE>

5. PROPERTY AND EQUIPMENT:

As of June 30, 1995 and 1994, property and equipment consist of the
following:

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Forklift.................................................................... $ -- $ 10,049
Vehicles.................................................................... 13,121 14,046
Office equipment............................................................ 46,382 53,834
Computers................................................................... 152,361 147,778
Manufacturing equipment..................................................... 277,230 576,051
Assets not-in-service....................................................... -- 232,520
489,094 1,034,278
Less: accumulated depreciation.............................................. (435,764) (435,745)
$ 53,330 $ 598,533
</TABLE>

Assets not-in-service represents manufacturing equipment and production
molds purchased but not yet on location or in use.

F-9

<PAGE>
J.A. INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. PROPERTY AND EQUIPMENT: -- Continued

These assets were purchased by way of an agreement with 488190 Alberta Ltd.
dated December 3, 1993. Consideration given in exchange for the equipment was:

600,000 shares of J.A. Industries, Inc.;
$100,000 relocation fee payable upon relocation; and
$ 78,872 assumption of debt and chattel mortgage against the equipment.

This transaction has been recorded as follows:

<TABLE>
<S> <C>
Shares issued......................................... $ 53,648
Debt assumed.......................................... 78,872
Relocation fee........................................ 100,000
Fair market value of the equipment.................... $232,520
</TABLE>

Subsequent to June 30, 1995, the Company entered into an agreement to
reverse the equipment purchase agreement. The equipment was returned to 488190
Alberta Ltd., which returned the 600,000 common shares of J.A. Industries, Inc.
A loss on disposal of fixed assets of $59,823 was recorded, which is made up of
payments made by J.A. Industries, Inc. against the chattel mortgage and expenses
incurred in moving the equipment.

6. REAL ESTATE HELD FOR SALE:

In January, 1994, Hutronix, Inc. ceased all manufacturing operations at its
Douglas, Arizona facility. As of June 30, 1995 and 1994, the Company recorded
real estate held for sale in the amounts of $488,750 and $875,000, respectively.
The Company recognized impairment losses for June 30, 1995 and 1994 in the
amounts of $386,250 and $444,941, respectively. The impairment losses recognized
reduces the carrying value of the Douglas Arizona facility to management's best
estimate of the facility's net realizeable value.

7. INVESTMENTS:

On March 30, 1994, Granite Marketing Corp. entered into a licensing
agreement with Queensland Industries, Inc. Under the agreement, Queensland
Industries, Inc. was granted a license of certain patents to manufacture,
promote, market, sell and distribute industrial electrical products. The license
provides for an exclusive territory, including Asia, Japan, Australia, Zimbabwe,
Nambia, South Africa, and all nations who are currently members of the European
Economic Community. The purchase price for the license was $10,000,000, with
$2,500,000 payable upon signing of the agreement and four (4) equal payments of
$1,875,000 due 120, 210, 300 and 390 days from signing.

Wincanton Corporation, 100% stockholder of Queensland Industries, Inc., has
agreed to guarantee the payment obligations of Queensland Industries, Inc.

At June 30, 1994, the sale of this license was recorded at a nominal
$50,000. At June 30, 1994, the investment was recorded at $22,075. The first two
(2) installments were paid in the form of 875,000 shares of Wincanton
Corporation, which have been recorded at $0.0249 each, which represents the net
asset value per share of Wincanton Corporation at June 30, 1994.

During 1995, Wincanton Corporation paid Granite Marketing Corp. $50,000 to
cancel the licensing agreement. In addition, Granite Marketing Corp. returned
the 875,000 shares of Wincanton Corporation.

F-10

<PAGE>
J.A. INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. INTANGIBLE ASSETS:

Intangible assets at June 30, 1995 and 1994 are comprised of the following:

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Goodwill amortized over ten years (Note 2).................................. $ -- $ 128,767
Incorporation costs amortized over five years............................... 3,000 3,000
Patent pending amortized over five years from final patent.................. -- 8,642
3,000 140,409
Amortization................................................................ (950) (12,877)
$ 2,050 $ 127,532
</TABLE>

During the year ended June 30, 1995, the Company recognized an impairment
of the valuation of goodwill in the amount of $115,890.

9. NOTES PAYABLE:

As of June 30, 1995 and 1994, notes payable consist of the following:

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Note payable to a bank executed through the Industrial Development Authority of the City of
Douglas, Arizona, due in quarterly installments of $12,821, plus interest at 65% of prime (7.25%
as of June 30, 1994), due May, 2005; secured by a deed of trust on the real estate held for sale,
an irrevocable letter of credit from a bank in the amount of the outstanding note payable balance
and the assignment of a life insurance policy owned by a related party, on the president of
Hutronix, Inc. At June 30, 1994, the Company was not in compliance with certain restrictive
covenants contained in this note................................................................. $ 546,125 $ 576,908
Note payable to a vendor, due in monthly installments of $594, plus interest at 8.5%, due
September, 1994; secured by equipment............................................................ -- 1,883
Note payable to a supplier, due in quarterly installments of $8,361 plus interest at 6%; unsecured,
due March 15, 1995............................................................................... -- 25,084
Note payable to an employee in monthly installments of $2,500, plus interest at 7%, due July, 1994;
secured by the common stock of QDS, de Mexico, S.A. de C.V....................................... -- 5,000
Unsecured promissory note payable to a lender. The principal of $36,155 (CDN $50,000) plus accrued
interest at 24% per annum is payable on demand. The lender has stated that it is not her
intention to demand repayment of the note before June 30, 1995................................... -- 47,636
Unsecured note payable to the Province of British Columbia, Canada, due in monthly payments of
$1,808 (CDN $2,500) plus interest at 6% per annum. The principal balance is due July 1, 1995..... -- 91,619
Revolving line of credit for $250,000 with a bank. Credit line is payable at $5,000 per month until
October, 1994 when all principal and accrued interest is due in full. The credit line accrues
interest at prime plus two percent; collateralized by accounts receivable, inventory, property,
plant and equipment, and 2,025 shares of common stock............................................ -- 172,821
Equipment loan for the "assets not-in-service" described in Note 5. Note was due on demand with no
stated interest rate............................................................................. -- 119,048
8% note payable to ITT Cannon, monthly installments of $1,500, including principal and interest,
due June, 1997; unsecured........................................................................ 33,907 --
8% note payable to Molloy, Jones & Donahue, P.C., monthly installments of $1,381, including
principal and interest, due February, 1996; unsecured............................................ 10,725 --
10% note payable to KPMG Peat Marwick, L.L.P., due on demand; unsecured............................ 18,275 --
609,032 1,039,999
Less: current portion.............................................................................. (590,986) (922,436)
$ 18,046 $ 117,563
</TABLE>

F-11

<PAGE>
J.A. INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. NOTES PAYABLE: -- Continued
A schedule of future minimum principal payments due on the notes payable,
is as follows:

<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, AMOUNT
<S> <C>
1996 $590,986
1997 18,046
$609,032
</TABLE>

10. RELATED PARTY TRANSACTIONS:

LOANS PAYABLE -- RELATED PARTIES:

As of June 30, 1995 and 1994, loans payable -- related parties consist of
the following:

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Loan payable to Alexander Michie, balance due on demand with no stated interest rate.................. $ 15,000 $ --
Loan payable to 391566 B.C., Ltd., balance due on demand with no stated interest rate................. 20,766 --
Loan payable to Alexander Michie. The loan is unsecured and has no terms of repayment. The loan has a
stated interest rate of prime plus 2%............................................................... -- 132,364
35,766 132,364
Less: current portion................................................................................. (35,766) --
$ -- $132,364
</TABLE>

OTHER TRANSACTIONS:

The Company paid $25,200 in 1994 to a related party to maintain a life
insurance policy on the life of the president of Hutronix, Inc. Included in
accounts payable at June 30, 1994 is $10,346 due to the related party.

The Company also paid a combined $46,800 to its president (a former
stockholder) under a salary and management fee commitment in the year ended June
30, 1994. The commitment requires the Company to pay $6,000 per month and
expires December 31, 1995.

Repayment of the mortgage from the Province of British Columbia has been
guaranteed by A. Michie, a stockholder.

11. COMMITMENTS AND CONTINGENCIES:

Under the terms of various agreements, the Company has guaranteed payment
of $18,275 in accounting fees and the $546,125 mortgage on the Douglas, Arizona
plant owned by Hutronix, Inc. The reversal of the Hutronix, Inc. purchase in
November, 1995 included an indemnification on the above guarantees. Should the
other party fail to perform, additional obligations could be asserted against
the Company. The Company has been unable to estimate any liability for potential
payments as a guarantor on the debt.

12. INCOME TAXES:

As of June 30, 1995, the components of the deferred income tax asset, are
as follows:

<TABLE>
<S> <C>
Deferred Tax Asset
Net operating loss carryforwards........................................... $ 498,000
Less: valuation allowance.................................................. (498,000)
Net deferred tax asset....................................................... $ --
</TABLE>

The valuation allowance for the deferred tax asset as of June 30, 1994 is
$368,371. The net change in the total valuation allowance for the year ended
June 30, 1995 was an increase of $129,629.

F-12

<PAGE>
J.A. INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. INCOME TAXES: -- Continued
At June 30, 1995, the Company has net operating loss carryforwards for
federal purposes, as follows:

<TABLE>
<CAPTION>
EXPIRING JUNE 30, AMOUNT
<S> <C>
2009 $ 540,000
2010 2,780,000
$3,320,000
</TABLE>

For the years ended June 30, 1995 and 1994, the Company reported provisions
for income taxes in the amount of $50. The provisions relate to state income
taxes.

13. SIGNIFICANT CUSTOMERS AND VENDORS:

Four (4) customers comprised approximately 91.1% of total sales for the
year ended June 30, 1995, and 54% of total accounts receivable at June 30, 1995.

Three (3) customers comprised approximately 68% of total sales for the year
ended June 30, 1994, and 70% of total accounts receivable at June 30, 1994.

Five (5) vendors provided approximately 44% of total raw materials
purchased during the year ended June 30, 1995.

Four (4) vendors provided approximately 52% of total raw materials
purchased during the year ended June 30, 1994.

14. COMMON STOCK:

Common stock is comprised of $.0025 par value, 20,000,000 shares
authorized, 7,551,603 and 6,493,778 shares issued and outstanding as of June 30,
1995 and 1994, respectively.

15. MANAGEMENT'S PLAN TO ADDRESS GOING CONCERN CONSIDERATIONS:

The management of the Company is in the process of attempting to secure
additional capital sources to acquire additional companies to fit their
corporate mission.

16. STOCK OPTION PLAN:

Under its employee stock option plan, which authorizes the issuance of up
to 1,000,000 common shares with a par value of $0.0025 each, the Company has
issued and outstanding options to purchase 98,600 shares at $2.00 each, and
520,000 shares at $1.10 each. These options expire on December 31, 1999.

17. STATEMENT OF CASH FLOWS:

NON-CASH INVESTING AND FINANCING ACTIVITIES:

During the year ended June 30, 1995, the Company recognized investing and
financing activities that affected assets, liabilities and equity, but did not
result in cash receipts or payments. These non-cash activities are as follows:

The Company reversed an equipment purchase agreement with C.C.
Plastics. The Company recognized a loss of $59,823 on the transaction due
to payments on the debt obligation, which were subsequently voided for
return of the equipment.

The Company issued 1,032,292 shares, with an average price of $.62 per
share, for payment of consulting services. Additionally, the Company issued
12,600 shares, valued at $1 per share, to employees for performance
bonuses.

The Company issued 50,000 shares at $1.04 per share, for payment of a
debt obligation.

F-13

<PAGE>
J.A. INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17. STATEMENT OF CASH FLOWS: -- Continued

NON-CASH INVESTING AND FINANCING ACTIVITIES:

During the year ended June 30, 1994, the Company recognized investing and
financing activities that affected assets, liabilities and equity, but did not
result in cash receipts or payments. These non-cash activities are as follows:

The Company issued 600,000 shares to C.C. Plastic to purchase equipment.

The Company issued 717,699 shares to acquire all of the outstanding common
stock of Hutronix, Inc.

The Company issued 25,000 shares as payment for legal fees.

The Company issued 50,000 shares for payment of a debt obligation.

Cash paid for interest for the year ended June 30, 1994 was $155. For the
year ended June 30, 1995, the Company did not pay any income taxes.

18. RESTATEMENT OF THE CONSOLIDATED FINANCIAL STATEMENTS:

The previously issued financial statements gave retroactive effect to the
disposal of Hutronix, Inc., which was formally disposed of under contract in
November, 1995. These financial statements do not provide retroactive treatment
for the disposal of the subsidiary.

In addition, management had proposed a prior period adjustment for
approximately $65,000 of expenses paid by a third party on the Company's behalf,
which were expenses for the year ended June 30, 1994. Management was unable to
obtain the prior accountant's concurrence with the adjustment, and determined
that, due to immateriality, they would forego the prior period adjustment.

As a consequence of restoring the balance sheet of Hutronix, Inc. as of
June 30, 1995, the Company recorded an impairment allowance for one hundred
percent of the remaining goodwill of approximately $128,000. In addition, the
original financial statements reported a misallocation on the net loss on
disposal of J.A. Industries (Canada), Inc. and Hutronix, Inc. Both companies
were disposed of at losses of approximately $200,000 and $70,000, respectively.

A summary of the changes and their effects, is as follows:

<TABLE>
<S> <C>
Net loss, as originally reported........................................... $(1,590,820)
Deferral of loss on disposition of Hutronix, Inc........................... 69,946
Impairment of goodwill of Hutronix, Inc.................................... (128,000)
Reversal of prior period adjustment........................................ (65,652)
Net effect (.02 per share)................................................. (123,706)
Restated net loss.......................................................... $(1,714,526)
</TABLE>

19. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma condensed consolidated financial
statements give effect to the reverse acquisition by J.A. Industries, Inc. of
Kenmar Business Group, Inc., pursuant to the Agreement and Plan of Merger
between the parties, and is based on the estimates and assumptions set forth
herein and in the notes to such statements. This pro forma information has been
prepared utilizing the historical financial statements and notes thereto, which
are incorporated by reference herein. The pro forma financial data does not
purport to be indicative of the results which actually would have been obtained
had the purchase been effected on the dates indicated or of the results which
may be obtained in the future.

The pro forma financial information is based on the purchase method of
accounting for the merger of Kenmar Business Group, Inc.. The pro forma entries
are described in the accompanying notes to the unaudited pro forma condensed
consolidated financial statements. The pro forma unaudited condensed
consolidated balance sheet assumes the merger took place on the date of the
balance sheet. The pro forma unaudited condensed consolidated statements of
operations assume the acquisition took place on the first day of the period
presented.

F-14

<PAGE>
J.A. INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

19. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- Continued
Unaudited pro forma adjustments are based upon historical information,
preliminary estimates and certain assumptions that management deems appropriate.
The unaudited pro forma combined financial data presented herein are not
necessarily indicative of the results the Company would have obtained had such
events occurred at the beginning of the period, as assumed, or of the future
results of the Company. The pro forma combined financial statements should be
read in conjunction with the other financial statements and notes thereto
included elsewhere in this Prospectus.

MERGER:

On March 1, 1996, J.A. Industries, Inc. entered into an Agreement and Plan
of Merger with Kenmar Business Group, Inc. Under the Agreement, J.A. Industries,
Inc. will issue a private placement of stock, the proceeds of which will be used
to pay outstanding liabilities of J.A. Industries, Inc., provide at least
$200,000 of cash, and a book value of $200,000. J.A. Industries, Inc. will then
perform a 1 for 4 reverse stock split, and issue common stock of an amount equal
to the post-split number of shares outstanding to provide Kenmar Business Group,
Inc. a fifty percent ownership interest.

F-15

<PAGE>
J.A. INDUSTRIES, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

FEBRUARY 29, 1996

The following represents the unaudited pro forma condensed consolidated
balance sheet for February 29, 1996, assuming the following transactions were
consummated on February 29, 1996:

(1) Issuance of stock through private placements to meet capital
conditions of the Agreement, and to terminate consulting agreements

(2) Reverse merger of Kenmar Business Group, Inc. for issuance of
approximately 2,400,000 shares of common stock of J.A. Industries, Inc.

<TABLE>
<CAPTION>
J.A.
INDUSTRIES, KENMAR
INC. AND BUSINESS
SUBSIDIARIES GROUP, INC. PRO FORMA PRO FORMA
DECEMBER 31, FEBRUARY 29, MERGER CONSOLIDATED
1995 1996 ADJUSTMENTS AMOUNTS
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents......................................... $ -- $ 744,533(1) $ 560,000 $ 1,304,533
Other current assets.............................................. -- 974,959 974,959
Total Current Assets......................................... -- 1,719,492 2,279,492
Property and Equipment, Net......................................... -- 496,337 496,337
Other Assets........................................................ -- 160,748 160,748
$ -- $2,376,577 $ 2,936,577
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt................................. $ 68 $ 39,520 39,588
Accounts payable.................................................. 138,167 621,852(1) (50,000) 710,019
Share subscription deposits....................................... 123,383 --(1) (123,383) --
Accrued expenses.................................................. -- 94,833 94,833
Total Current Liabilities...................................... 261,618 756,205 844,440
Long-term debt.................................................... 21,064 598,986 620,050
Preferred stock................................................... -- 759,129 759,129
21,064 1,358,115 1,379,179
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock...................................................... 19,792 64,714(1) 7,666 11,797
(2) (80,375)
Additional paid-in capital........................................ 5,129,253 213,941(1) 807,466 717,559
(2) (5,433,101)
Accumulated deficit............................................... (5,427,223) (16,398)(1) (81,749) (16,398)
(2) (5,508,972)
Cumulative translation adjustment................................. (4,504) (2) 4,504 --
(282,682) 262,257 712,958
Total Liabilities and Stockholders' Equity..................... $ -- $2,376,577 $ 2,936,577
</TABLE>

J.A. Industries, Inc.'s balance sheet was prepared using the Company's
December 31, 1995 balance sheet. Kenmar Business Group, Inc.'s balance sheet was
prepared using their February 29, 1996 balance sheet. J.A. Industries, Inc. did
not enter into any significant transactions subsequent to December 31, 1996 that
would materially distort the financial position of the pro forma combined
company as of February 29, 1996.

F-16

<PAGE>

J.A. INDUSTRIES, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED OPERATING STATEMENT

FOR THE YEAR ENDED AUGUST 31, 1995

The following represents the unaudited pro forma condensed consolidated
operating statement for the year ended August 31, 1995, assuming the following
transactions were consummated on August 31, 1994:

(1) Record disposal of Hutronix, Inc. and J.A. (Canada), Inc.

<TABLE>
<CAPTION>
J.A.
INDUSTRIES,
INC.,
J.A. AS KENMAR
INDUSTRIES RECORD ADJUSTED, BUSINESS
INC. DISPOSAL OF FOR THE GROUP, INC.
FOR THE HUTRONIX, INC. YEAR FOR THE
YEAR ENDED AND J.A. ENDED YEAR ENDED PRO FORMA PRO FORMA
JUNE 30, (CANADA) JUNE 30, AUGUST 31, MERGER CONSOLIDATED
1995 (A) INC. (1) 1995 1995 (A) ADJUSTMENTS AMOUNTS
<S> <C> <C> <C> <C> <C> <C>
Revenue.................................. $ 4,330,211 $ (4,330,211) $ -- $15,565,662 $ 15,565,662
Cost of Sales............................ 3,618,347 (3,618,347) -- 13,883,090 13,883,090
Gross Profit........................... 711,864 -- 1,682,572 1,682,572
General, Selling and Administrative...... 2,095,978 (1,328,210) 767,768 1,233,587 2,001,355
Operating Income (Loss)................ (1,384,114) (767,768) 448,985 (318,783)
Other Income (Expense)................... (330,412) 270,928 (59,484) (267,487) (326,971)
Income (Loss) before Income Taxes........ (1,714,526) (827,252) 181,498 (645,754)
Income Taxes............................. -- -- -- --
Net Income (Loss)........................ (1,714,526) (827,252) 181,498 (645,754)
Accretion of Preferred Stock............. -- -- (54,006) (54,006)
Undeclared Dividends on Preferred
Stock.................................. -- -- (49,630) (49,630)
Net Income (Loss) Applicable to Common
Shareholders........................... $(1,714,526) $ (827,252) $ 77,862 $ (749,390)
Net Income (Loss) per Share.............. $ (.25) $ (.12) $ 1.26 $ (.16)
Weighted Average Shares
Outstanding............................ 6,724,440 6,724,440 61,999 4,715,473
</TABLE>

(a) J.A. Industries, Inc.'s income statement was prepared using the
Company's June 30, 1995 year end. Kenmar Business Group, Inc.'s income statement
was prepared using their August 31, 1995 year end. J.A. Industries, Inc. did not
enter into any significant transactions subsequent to their June 30, 1995 fiscal
year end that would materially distort the operating results of the pro forma
combined company for the year ended August 31, 1995, except for the disposition
of the Hutronix division in November 1995.

F-17

<PAGE>
J.A. INDUSTRIES, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED OPERATING STATEMENT

FOR THE SIX MONTH PERIOD ENDING FEBRUARY 29, 1996

The following represents the unaudited pro forma condensed consolidated
operating statement for February 29, 1996, assuming the following transactions
were consummated on August 31, 1995:

(1) Record disposal of Hutronix, Inc. as of November 23, 1995.

<TABLE>
<CAPTION>
J.A.
INDUSTRIES KENMAR
INC. AND BUSINESS
SUBSIDIARIES GROUP, INC.
FOR THE FOR THE
SIX MONTH SIX MONTH
PERIOD PERIOD
ENDED RECORD J.A. ENDED
DECEMBER DISPOSAL INDUSTRIES, FEBRUARY PRO FORMA PRO FORMA
31, OF HUTRONIX, INC., 29, MERGER CONSOLIDATED
1995 (A) INC. (1) AS ADJUSTED 1996 (A) ADJUSTMENTS AMOUNTS
<S> <C> <C> <C> <C> <C> <C>
Revenue................................... $ 709,747 $ (709,747) $ -- $ 1,354,383 $ 1,354,383
Cost of Sales............................. 606,707 (606,707) -- 1,373,793 1,373,793
Gross Profit (Loss)..................... 103,040 -- (19,410) (19,410)
General, Selling and Administrative....... 550,879 (157,231) 393,648 397,350 872,747
Operating Loss.......................... (447,839) (393,648) (416,760) (892,157)
Other Expense............................. (74,591) (86) (74,677) (17,071) (91,748)
Loss before Income Taxes.................. (522,430) (468,325) (433,831) (983,905)
Income Taxes.............................. -- -- -- --
Net Income from Continuing
Operations.............................. (522,430) (468,325) (433,831) (983,905)
Accretion of Preferred Stock.............. -- -- (29,285) (29,285)
Undeclared Dividends on Preferred Stock... -- -- (12,408) (12,408)
Net Loss from Continuing
Operations Applicable to Common
Shareholders............................ $ (522,430) $ (468,325) $ (475,524) $ (1,025,598)
Net Loss per Share from Continuing
Operations.............................. $ (0.07) $ (.06) $ (7.35) $ (.21)
Weighted Average Shares Outstanding....... 7,696,310 7,696,310 64,714 4,925,009
</TABLE>

(a) J.A. Industries, Inc.'s operating statement was prepared using the
Company's December 31, 1995 six month operating statement. Kenmar Business
Group, Inc.'s operating statement was prepared using their February 29, 1996 six
month operating statement. J.A. Industries, Inc. did not enter into any
significant transactions subsequent to December 31, 1995 that would materially
distort the operating results of the pro forma combined company for the six
month period ended February 29, 1996.

F-18

<PAGE>

J.A. INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

<TABLE>
<CAPTION>
MARCH 31
1996 1995
<S> <C> <C>
ASSETS
CURRENT
Cash.......................................................................................... $ 2,081 $ --
Accounts receivable
Trade...................................................................................... -- 561,107
Other...................................................................................... 14,900 80,168
Inventory (note 3)............................................................................ -- 385,449
Prepaid expenses and deposits................................................................. -- 44,803
16,981 1,071,527
Real estate held for resale..................................................................... -- 875,000
Property and equipment (note 4)................................................................. -- 271,224
Investments..................................................................................... -- 200
Intangible assets (note 5)...................................................................... -- 117,775
$ 16,981 $ 2,335,726
LIABILITIES
CURRENT
Bank indebtedness............................................................................. $ -- $ 102,023
Accounts payable.............................................................................. 158,576 663,380
Accrued liabilities........................................................................... 29,000 --
Due to shareholders........................................................................... 33,100 80,943
Equipment loans............................................................................... --
Current portion of long-term debt (note 7).................................................... -- 118,119
220,676 964,465
Loans from shareholders (note 6)................................................................ -- 136,940
Long-term debt (note 7)......................................................................... -- 564,180
220,676 1,665,585
Share Capital and Deficit
Capital stock:
Authorized:
20,000,000 common shares with a par value of $0.0025 per share
Issued:
9,417,904 shares (1995 -- 6,703,417)....................................................... 23,545 16,759
Additional paid-in capital...................................................................... 5,504,157 4,268,092
Accumulated deficit............................................................................. (4,904,793) (3,621,833)
Cumulative translation adjustment............................................................... (4,504) 7,124
Treasury stock, at cost......................................................................... (131,250) --
487,155 670,142
$ 707,831 $ 2,335,727
</TABLE>

F-19

<PAGE>

J.A. INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED
MARCH 31
1996 1995
<S> <C> <C>
SALES.............................................................................................. $ 709,747 $3,452,982
Cost of sales...................................................................................... 606,707 2,897,666
Gross profit....................................................................................... 103,040 555,316
Selling and marketing expenses..................................................................... 244 114,676
General and administrative expenses................................................................ 719,055 741,524
Loss from operations............................................................................... (616,259) (300,884)
Other income (expense)............................................................................. (1,395) (130,683)
Loss on disposal of subsidiary..................................................................... (73,196) --
Consolidated net loss.............................................................................. $(690,850) $ (431,567)
Loss per share..................................................................................... $ 0.07 $ 0.06

FOR THE THREE MONTHS
ENDED
MARCH 31
1996 1995
<S> <C> <C>
SALES.............................................................................................. $ -- $1,035,397
Cost of sales...................................................................................... -- 920,208
Gross profit....................................................................................... -- 115,189
Selling and marketing expenses..................................................................... -- 17,422
General and administrative expenses................................................................ 194,119 262,027
Loss from operations............................................................................... (194,119) (164,260)
Other income (expense)............................................................................. -- (76,309)
Loss on disposal of subsidiary..................................................................... -- --
Consolidated net loss.............................................................................. $(194,119) $ (240,569)
Loss per share..................................................................................... $ 0.02 $ 0.04
</TABLE>

F-20

<PAGE>
J.A. INDUSTRIES, INC.

CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION

(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
MARCH 31
1996 1995
<S> <C> <C>
CASH PROVIDED BY (USED IN)
Operating activities
Net loss for the period....................................................................... $ (690,850) $ (431,566)
Items not affecting cash:
Amortization............................................................................... 20,392 114,180
Issuance of stock for services............................................................. 171,475 --
Loss on sale of subsidiary................................................................. 74,591 54,470
Changes in non-cash working capital........................................................... 201,099 (117,102)
(223,293) (380,018)
Financing activities
Issue of common shares........................................................................ 170,000 473,113
Cancellation of shares on settlement of debt.................................................. -- (53,648)
Equipment Loans............................................................................... -- (119,048)
Loan from shareholders........................................................................ 10,000 4,576
Long-term debt................................................................................ -- (65,831)
180,000 239,162
Investing activities
Purchase of property and equipment............................................................ -- (4,578)
Proceeds on sale of subsidiary................................................................ 100 172,656
Proceeds on disposition of investments........................................................ -- 21,875
100 189,953
Increase (decrease) in cash position............................................................ (43,193) 49,097
Effect of currency translation on cash flow..................................................... -- 15,022
Cash position beginning of period............................................................... 45,274 (166,142)
Cash position end of period..................................................................... $ 2,081 $ (102,023)
Represented by:
Cash.......................................................................................... $ 2,081 $ --
Bank indebtedness............................................................................. -- (102,023)
$ 2,081 $ (102,023)
</TABLE>

F-21

<PAGE>
J.A. INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(UNAUDITED)
FOR THE NINE MONTHS ENDED MARCH 31, 1996
AND THE YEAR ENDED JUNE 30, 1995

<TABLE>
<CAPTION>
ADDITIONAL FOREIGN STOCK
CAPITAL STOCK PAID IN OPERATING CURRENCY SUBSCRIPTION TREASURY
SHARES AMOUNT CAPITAL DEFICIT TRANSLATION RECEIVABLE STOCK
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE JUNE 30, 1994........... 6,493,778 $16,234 $3,849,152 $(3,190,267) $(7,561) $ -- $ --
Issued for cash................. 631,383 1,578 494,672 -- -- -- --
Issued for consulting fees...... 1,032,292 2,581 637,517 -- -- (144,000) --
Issued to repay debt............ 50,000 125 51,982 -- -- -- --
Issued as compensation.......... 12,600 32 12,569 -- -- -- --
Reverse equipment purchase...... (600,000) (1,500) (52,148) -- -- -- --
Shares cancelled................ (68,450) (171) 171 -- -- -- --
Aggregate adjustment resulting
from translation of financial
statements into U.S.
dollars....................... -- -- -- -- 3,057 -- --
Net loss for the year ended June
30, 1995...................... -- -- -- (1,714,526) -- -- --
Balance June 30, 1995........... 7,551,603 18,879 4,993,915 (4,904,793) (4,504) (144,000) --
Issued for cash................. 500,000 1,250 168,750 -- -- -- --
Issued for consulting fees...... 100,000 250 27,225 -- -- -- --
Services rendered as
consideration for shares...... -- -- -- -- -- 144,000 --
Reverse Hutronix, Inc.
acquisition................... -- -- -- -- -- -- (131,250)
Issued to pay debt.............. 1,266,301 3,166 314,267 -- -- -- --
Net loss for the nine months
ended March 31, 1996.......... -- -- -- $ -- -- --
Balance March 31, 1996.......... 9,417,904 $23,545 $5,504,157 $(4,904,793) $(4,504) $ -- $(131,250)
</TABLE>

F-22

<PAGE>

J.A. INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)
MARCH 31, 1996 AND 1995

1. SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of:

J.A. Industries, Inc., a Delaware corporation and the following wholly
owned subsidiaries:

J.A. Industries (Canada), Inc., a Canadian corporation. Granite Marketing
Corp., a Cayman Island corporation. Hutronix, Inc. an Arizona corporation. QDS,
de Mexico, S.A. de C.V. a Mexican corporation. and the 96% owned subsidiary,
Hutronix de Mexico, S.A. de C.V. which has been inactive since August 17, 1982.

All significant inter-company balances and transactions have been
eliminated on consolidation.

J.A. Industries (Canada), Inc. was disposed of during the year ended June
30, 1995. Hutronix, Inc. and QDS de Mexico were disposed of during the year
ended June 30, 1996 subject to shareholder approval.

Translation of Foreign Currencies

Account balances and transactions denominated in foreign currencies have
been translated into U.S. funds as follows:

Assets and liabilities at the rates of exchange prevailing at the balance
sheet date; Revenue and expenses at average exchange rates for the period in
which the transaction occurred; Exchange gains and losses arising from foreign
currency transactions are included in the determination of net earnings for the
period.

2. SALE OF SUBSIDIARY

On November 23, 1995, the Company sold all of the common shares of
Hutronix, Inc. and on and on August 15, 1995 the Company sold all of the common
share of Granite Marketing Corporation for $100. The two transaction resulted in
a loss of $73,196, which has been included in other expense for the period ended
December 31, 1995. Granite Marketing Corp. was inactive during the period.

3. INVENTORY

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Inventory consists of:
Raw materials.................................................................... $ -- $531,321
Less: Reserve for obsolescence................................................... -- 190,000
-- 341,321
Work-in-process.................................................................. -- 104,604
Finished goods................................................................... -- 7,349
$ -- $453,274
</TABLE>

F-23

<PAGE>

J.A. INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996 AND 1995

4. PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
ACCUMULATED NET BOOK VALUE
COST AMORTIZATION 1995 1994
<S> <C> <C> <C> <C>
Land............................................................................. $ -- $ -- $ -- $ --
Building......................................................................... -- -- -- --
Forklift......................................................................... -- -- -- 7,410
Vehicles......................................................................... -- -- -- 81
Office equipment................................................................. -- -- -- 46,264
Computer equipment............................................................... -- -- -- 27,957
Manufacturing equipment.......................................................... -- -- -- 199,669
Leasehold improvements........................................................... -- -- -- 935
Assets not-in-service............................................................ -- -- -- 232,520
$ -- $ -- $ -- $514,836
</TABLE>

5. INTANGIBLE ASSETS

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Intangible assets comprise the following:
Goodwill........................................................................................ $ -- $ 128,767
Incorporation costs............................................................................. -- 3,000
Patent costs.................................................................................... -- 8,895
-- 140,662
Amortization.................................................................................... -- 16,096
$ -- $ 124,566
</TABLE>

6. LOANS FROM SHAREHOLDERS

Loans from shareholders comprise the following:

<TABLE>
<S> <C> <C>
Loan payable to Alexander Michie, balance due on demand with no stated interest rate................... $20,000 $ --
Loan payable to 391566 B.C. Ltd., balance due on demand with no stated interest rate................... 1,064 --
Loan payable to Alexander Michie. The loan is unsecured and has no terms of repayment. The loan has a
stated interest rate of prime plus 2%................................................................ -- 138,146
$21,064 $138,146
</TABLE>

F-24

<PAGE>

J.A. INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996 AND 1995

7. LONG-TERM DEBT

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Note payable to a bank executed through the Industrial Development Authority of the City of Douglas,
Arizona due in quarterly instalments of $12,821, plus interest at 65% of prime (9.0% as of March 31,
1995), due May 2005; secured by a deed of trust on the real estate held for sale, an irrevocable letter
of credit from a bank in the amount of the outstanding note payable balance and the assignment of a
life insurance policy owned by a related party on the president of Hutronix, Inc. At March 31, 1995 the
company was not in compliance with certain restrictive covenants contained in this note................ $ -- $564,087
Note payable to a supplier due in quarterly instalments of $8,361 plus interest at 6% unsecured, due
March 15, 1995......................................................................................... -- 8,086
Promissory note payable to a lender. The principal of $36,155 (CDN $50,000) plus accrued interest at 24%
per annum is payable on demand. The lender has stated that it is not her intention to demand repayment
of the note before March 31, 1996...................................................................... -- 51,283
Mortgage payable, on manufacturing equipment, to the Province of British Columbia, Canada due in monthly
payments of $1,787 (CDN $2,500) plus interest at 6% per annum. The principal balance is due July 1,
1995................................................................................................... -- 83,078
-- 706,534
Less: Current portion.................................................................................... -- 155,270
$ -- $551,264
</TABLE>

8. INCOME TAX

The Company has losses for income tax purposes which may be carried forward
and applied to reduce future income taxes. The deferred tax benefit related to
these losses has not been recorded in the accounts as there is not virtual
certainty of realization.

All of the income attributable to Granite Marketing Corp. (a Cayman Island
corporation) is reported as non-taxable.

9. COMMITMENTS AND CONTIGENCIES

Under the terms of various agreements, the Company has guaranteed payment
of $18,275 in accounting fees and the $546,125 mortgage on the Douglas, Arizona
plant owned by Hutronix, Inc. The reversal of the Hutronix, Inc. purchase
included an idemnification on the above guarantees. Should the other party fail
to perform, the obligations could be asserted against the Company.

10. SUBSEQUENT EVENT

On January 26, 1996 the shareholders ratified the sale of Hutronix, Inc.
and QDS, de Mexico, S.A. de C.V.

11. CORRECTION OF ERRORS IN PREVIOUSLY ISSUED FINANCIAL STATEMENTS

The Company recorded the results of operation for Hutronix, Inc. and
related subsidiaries for the period until disposition. This had been omitted
because it was the Company's intention to dispose of the subsidiary at the
beginning of the fiscal period. Furthermore, the effect of audit adjustments
from fiscal 1995 were recorded.

As a result of these changes the Company's net loss for the nine months
ended March 31, 1996 decreased by $427,711 and the net loss for the three months
ended March 31, 1996 decreased by $104,286. The Company's net loss per share for
the nine months ended March 31, 1996 decreased by $0.05 and the net loss per
share for the three months ended March 31, 1996 decreased by $0.01.

F-25

<PAGE>
INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS
KENMAR BUSINESS GROUPS, INC.:

We have audited the accompanying consolidated balance sheets of Kenmar
Business Groups, Inc. as of August 31, 1995 and 1994, and the related
consolidated statements of income (loss), stockholders' deficit, and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the 1995 and 1994 financial statements referred to above
present fairly, in all material respects, the financial position of Kenmar
Business Groups, Inc. as of August 31, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

As discussed in note 3, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed of " on September 1, 1994.

/s/ KPMG PEAT MARWICK LLP

October 20, 1995

F-26

<PAGE>
KENMAR BUSINESS GROUPS, INC.

CONSOLIDATED BALANCE SHEETS

AUGUST 31, 1995 AND 1994

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents....................................................................... $1,632,620 74,478
Accounts receivable-trade, net of allowance for doubtful accounts of $5,500 and $80,000 in 1995
and 1994, respectively (note 7).............................................................. 273,062 2,139,121
Accounts receivable-other (note 15)............................................................. 19,132 10,007
Inventories (notes 4 and 7)..................................................................... 331,540 1,377,292
Recoverable income taxes........................................................................ -- 103,208
Prepaid expenses and other current assets....................................................... 87,146 11,481
Total current assets......................................................................... 2,343,510 3,715,587
Property and equipment, net (notes 5, 8 and 9).................................................... 590,307 1,023,614
Other assets:
Deposits and other assets....................................................................... 38,398 163,220
Cost in excess of net assets of acquired business, net of accumulated amortization of $220,537 and
45,537 in 1995 and 1994, eruptively (note 6).................................................... 97,500 272,500
Total other assets........................................................................... 135,898 435,720
Liabilities and Stockholders' Deficit............................................................. $3,069,715 5,174,921
Current liabilities:
Line of credit (note 7)......................................................................... -- 1,396,953
Current maturities of long-term debt (note 8)................................................... 22,359 293,242
Current obligations under capital leases (note 9)............................................... 35,203 40,313
Accounts payable, trade......................................................................... 2,206,535 2,954,433
Other accrued liabilities....................................................................... 425,956 154,708
Total current liabilities.................................................................... 2,690,053 4,839,649
Long-term debt, less current maturities (notes 8 and 15).......................................... 560,021 657,034
Long-term obligations under capital leases (note 9)............................................... 76,172 122,784
Class A cumulative preferred stock, $50 par value; with a preference in liquidation over the
holders of common stock of $50 plus accrued dividends; authorized 30,000 shares, 9,926 shares in
1995 and 1994 issued and outstanding (note 11).................................................. 729,844 166,208
Stockholders' deficit (notes 12 and 15):
Preferred stock, undersignated; authorized 70,000 shares; no shares issued...................... -- --
Common Stock, $1 par value; authorized 100,000 shares, 64,714 and 58,197 shares issued and
outstanding in 1995 and 1994, respectively................................................... 64,714 58,197
Additional paid-in capital 99,667 203,303 Retained deficit (1,150,756) (1,332,254) Commitments
(notes 9 and 10)............................................................................. (986,375) (1,070,754)
$3,069,715 5,174,921
</TABLE>

See Notes to consolidated financial statements.

F-27

<PAGE>
KENMAR BUSINESS GROUPS, INC

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

YEARS ENDED AUGUST 31, 1995 AND 1994

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Sales............................................................................................ $15,565,662 22,927,597
Cost of goods sold............................................................................... 13,883,090 22,685,168
Gross profit................................................................................... 1,682,572 242,429
General, selling and administrative expenses..................................................... 1,233,587 1,466,289
Operating income (loss)........................................................................ 448,985 (1,223,860)
Other income (expenses):
Interest income................................................................................ 6,321 7,669
Miscellaneous income........................................................................... -- 10,868
Interest expenses.............................................................................. (273,808) (252,332)
Other expenses, net............................................................................ (267,487) (233,795)
Income (loss) become income taxes........................................................... 181,498 (1,457,655)
Income tax benefit (note 13)..................................................................... -- 98,768
Net income.................................................................................. 181,498 (1,358,887)
Accretion of preferred stock..................................................................... (54,006) (24,188)
Undeclared dividends on preferred stock.......................................................... (49,630) (48,645)
Net income (loss) applicable to common shareholders......................................... $ 77,862 (1,431,720)
Weighted average number of shares................................................................ 61,999 56,988
Net income (loss) per common share and common share equivalent (note 16)......................... $ 1.26 (25.12)
</TABLE>

See accompanying notes to consolidated financial statements.

F-28

<PAGE>
KENMAR BUSINESS GROUPS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

YEARS ENDED AUGUST 31, 1995 AND 1994

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON STOCK PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS DEFICIT
<S> <C> <C> <C> <C> <C>
Balance at August 31, 1993....................................... 56,586 $56,586 186,704 59,543 302,833
Dividends paid................................................... -- -- -- (32,910) (32,910)
Issuance of common stock for cash, net of $16,862 issuance
costs.......................................................... 1,611 1,611 56,522 -- 58,133
Accretion of preferred stock..................................... -- -- (24,188) -- (24,188)
Undeclared dividends on preferred stock.......................... -- -- (15,735) -- (15,735)
Net loss......................................................... -- -- -- (1,358,887) (1,358,887)
Balance at August 31, 1994....................................... 58,197 58,197 203,303 (1,332,254) (1,070,754)
Issuance of common stock of cash................................. 6,517 6,517 -- -- 6,517
Accretion of preferred stock..................................... -- -- (54,006) -- (54,006)
Undeclared dividends on preferred stock.......................... -- -- (49,630) -- (49,630)
Net income....................................................... -- -- -- 181,498 181,498
Balance at August 31, 1995....................................... 64,714 $64,714 99,667 (1,150,756) (986,375)
</TABLE>

See notes to consolidated financial statements.

F-29

<PAGE>
KENMAR BUSINESS GROUPS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED AUGUST 31 AND 1995, 1994

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Cash flow from operating activities:
Net income (loss)................................................................................. $ 181,498 (1,358,887)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization................................................................... 422,787 236,925
Loss on disposal of property and equipment...................................................... 30,657 5,932
Writedown of property and equipment............................................................. 179,076 --
Provision (credit) for deferred income taxes -- 2,200 Changes in operating assets and
liabilities:
Decrease (increase) in accounts receivable................................................... 1,866,059 (357,332)
Decrease (increase) in inventories........................................................... 1,045,752 1,002,133
Decrease (increase) in recoverable income taxes.............................................. 103,208 (102,208)
Decrease (increase) in prepaid expenses and other current assets............................. (75,665) 14,888
Increase in accounts receivable, other....................................................... (9,125) (6,255)
Decrease (increase) in deposits and other assets............................................. 124,822 (19,223)
Increase (decrease) in accounts payable, trade............................................... (747,898) 376,532
Increase (decrease) in income taxes payable.................................................. -- (63,626)
Increase in other accrued liabilities........................................................ 271,248 85,759
Net cash provided by (used in) operating activities........................................ 3,392,419 (184,162)
Cash flow from investing activities:
Capital expenditures............................................................................ (24,213) (333,451)
Net cash used in investing activities...................................................... (24,213) (333,451)
Cash flow from financing activities:
Proceeds from issuance of preferred stock....................................................... -- 57,500
Proceeds from issuance of common stock.......................................................... 6,517 58,133
Net borrowings (repayment) on line of credit.................................................... (1,396,953) 251,518
Proceeds from issuance of note payable.......................................................... 350,122 --
Principle payments on note payable.............................................................. (350,122) --
Proceeds from issuance of long-term debt........................................................ -- 250,000
Principal payments on long-term debt............................................................ (367,896) (118,937)
Principal payments on capital lease obligations................................................. (51,722) (21,322)
Dividends paid.................................................................................. -- (32,910)
Net cash provided by (used in) financing activities........................................ (1,810,054) 443,983
Net increase (decrease) in cash and cash equivalents....................................... 1,558,152 (73,631)
Cash and cash equivalents:
Beginning of year............................................................................... 74,478 148,109
End of year..................................................................................... $ 1,632,630 74,478
Supplement disclosure of cash information:
Cash paid during year for:
Interest..................................................................................... $ 352,765 237,069
Income taxes................................................................................. $ -- 73,255
Supplemental schedule of non-cash investing and financing activities:
During 1994 the Company entered into capital lease obligations totalling $114,911. The Company
did not enter into any capital leases in 1995.
During 1994, the Company entered into a financing agreement to purchase a new software system.
Total financed amount was $49,320.
</TABLE>

See accompanying notes to consolidated financial statements.

F-30

<PAGE>
KENMAR BUSINESS GROUPS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 1995 AND 1994

(1) DESCRIPTION OF BUSINESS

Kenmar Business Groups, Inc.'s (the "Company") principal business activity
is the manufacture of electronic products and assemblies for original equipment
manufactures (OEM) located in the southeastern United States. The Company
provides products and services to OEM's in the telecommunications, industrial
controls, instrumentation, medical devices, and computer industries.

(2) CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMER

The Company manufactured more than fifty different products and repaired
and refurbished over one hundred different products for its largest customer,
which is comprised of five different operating locations and two subsidiaries.
Accounts receivable from this customer accounted for approximately 19% and 75%
of total receivables at August 31, 1995 and 1994, respectively. The Company's
sales to this customer during 1995 comprised 81% of the Company's total sales.
During the fourth quarter of 1995, the Company ceased doing business with this
customer. (See note 17). Accordingly, the Company has taken various steps to
restructure the business to be commensurate with the reduction in volume. The
Company may have to take additional measures in the future as a result of the
decrease in volume.

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and Test Services, Inc. ("TSI") which was inactive in the years ended August 31,
1995 and 1994. All intercompany accounts and transactions have been eliminated
in consolidation.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand, amounts on deposit with
banks and all highly liquid investments with a maturity of 90 days or less when
purchased.

INVENTORIES

Inventories are stated at the lower of cost, determined by the first-in,
first-out (FIFO) method, or market. A provision is made for obsolete and slow
moving inventory.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Equipment under capital leases
is stated at the present value of the minimum lease payments at the inception of
the lease. Depreciation is calculated using the half-year convention,
straight-line method over the estimated useful lives of the respective assets
which range from 3 to 7 years. Equipment held under capital leases are amortized
on a straight-line basis over the lesser of the lease term or estimated useful
life of the asset. Maintenance and repairs are charged to expenses as incurred.
The cost and related accumulated depreciation of the assets are removed from the
accounts upon disposition and any resulting gain or loss is reflected in
operations.

ACCOUNTS RECEIVABLE

The Company performs ongoing credit evaluations of its trade receivables
and generally does not require collateral. An allowance is provided for
estimated uncollectible accounts.

REVENUE RECOGNITION

The Company recognizes revenue upon shipment of products to customers.

F-31

<PAGE>
KENMAR BUSINESS GROUPS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
COST IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESS

The excess cost of net assets of acquired business relates principally to
the value assigned to customer relationships and is being amortized by the
straight-line method over a period of 20 years.

The Company evaluates, when circumstances warrant, the recoverability of
the cost in excess of net assets of acquired businesses by comparing the sum of
the undiscounted projected future cash flows attributable to each customer to
the carrying value of the related asset. Projected cash flows are estimated for
a period approximating the remaining lives of the Company's long-lived assets.

As a result of such evaluation the Company took an writedown of $160,000
during the year ended August 31, 1995.

INCOME TAXES

In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes.
Statement 109 requires a change from the deferred method of accounting for
income taxes of APB Opinion 11 to the asset and liability method of accounting
for income taxes. Under the asset and liability method of Statement 109,
deferred tax assets and liabilities are recognized for future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Under Statement 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.

The Company has adopted Statement of Financial Accounting Standards No. 109
(SFAS No. 109), "Accounting for Income Taxes", effective September 1, 1993. As
of September 1, 1993, there is no impact as a result of adopting SFAS No. 109
and as such no cumulative effect adjustment was required for the adoption of
SFAS No. 109. Due to the Company's operating loss carryforwards, management has
determined that a valuation allowance equal to the amount of net deferred tax
assets is required.

EARNINGS PER SHARE

Earnings per share are based upon the weighted average number of common and
common equivalent shares outstanding during the period.

IMPAIRMENT OF LONG-LIVED ASSETS

During the year ended August 31, 1995, the Company adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of". Statement 121
requires the Company to determine whether recognition of an impairment loss is
required and, if so, to measure the impairment. If the sum of the expected
future cash flows, undiscounted and without interest costs, is less than the
asset's carrying amount, an impairment loss is recognized. Any impairment loss
recognized upon adoption for assets to be held and used is recorded in
continuing operations.

(4) INVENTORIES

Inventories consist of:

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Raw materials.................................................... $193,649 997,549
Work-in-progress................................................. 111,330 249,620
Finished goods................................................... 26,561 130,123
$331,540 1,337,292
</TABLE>

F-32

<PAGE>
KENMAR BUSINESS GROUPS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(5) PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Leasehold improvements......................................... $ 164,912 233,816
Machinery and equipment........................................ 672,538 737,578
Computer hardware and software................................. 343,578 408,000
Furniture and fixtures......................................... 92,015 91,469
Vehicles....................................................... 9,182 37,053
Total........................................................ $1,282,225 1,507,916
Less accumulated depreciation and amortization................. 691,918 484,320
Property and equipment, net.................................... $ 590,307 1,023,614
</TABLE>

Depreciation expense was $247,787 and $203,888 in 1995 and 1994,
respectively.

The Company reviewed its leasehold improvements, machinery and equipment
and computes hardware and software for impairment as a result of the Company
ceasing to do business with its major customer (see notes 2 and 17). The Company
estimated future cash flows and compared it with the net asset value of the
related assets. This analysis resulted in a writedown of approximately $180,000
which is included as part of cost of goods sold in the income statement.

(6) ACQUISITION

On October 15, 1992 the Company purchased all of the outstanding stock of
TSI, a manufacturer of electronic printed circuit board assemblies for original
equipment manufacturers, for a purchase price of approximately $750,000
consisting of $7,500 cash and three subordinated promissory notes totaling
$742,500. The promissory notes are being paid in equal monthly installments over
ten years and bear a fixed interest rate of 8%.

The acquisition has been accounted for using the purchase method of
accounting. The following table presents the allocation of the purchase price to
the fair value of the assets acquired and liabilities assumed:

<TABLE>
<S> <C>
Assets acquired............................................................... $966,145
Liabilities assumed........................................................... 216,145
Purchase price................................................................ $750,000
</TABLE>

As a result of the TSI acquisition, the principal stockholder and chief
executive of TSI entered into a ten year non-compete agreement in return for a
monthly payment of $3,000 for ten years ending October 15, 2002. Cash payments
under the agreement were $72,000 and $36,000 and in 1995 and 1994, respectively.
Cash payments in 1995 relate to years ended August 31, 1995 and 1996.

(7) LINE OF CREDIT

In March 1994, the Company negotiated a $4,000,000 revolving line of credit
with a commercial lender which allowed it to borrow up to 80% of eligible
receivables and was secured by a first lien on all the Company's receivables and
inventory. Borrowings under this line bear interest at prime plus 2.5% (minimum
7.5%) in addition to an annual facility fee and other costs. The Company paid
off the line of credit in the fourth quarter of its fiscal year ended August 31,
1995. The Company has not requested a renewal of the line of credit.

F-33

<PAGE>
KENMAR BUSINESS GROUPS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(8) LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Subordinated promissory notes payable in monthly installments of $9,009, including interest at 8%,
through October 2002................................................................................ $524,855 646,674
Bank debt collateralized by a first lien on all the Company's plant, equipment, furniture and fixtures
payable in monthly installments of $7,950, including interest at prime + 1%. This loan was paid off
prior to August 31, 1995............................................................................ -- 217,932
Uncollateralized note payable to stockholder repayable with interest at 8% in 59 monthly installments
of $610 and a balloon payment of $30,083 on October 15, 1997........................................ 39,482 43,468
Notes payable secured by equipment repayable in monthly installments of $2,435 including interest at
16.85% through April 1996........................................................................... 18,043 42,202
582,380 950,276
Less current maturities............................................................................... 22,359 293,242
$560,021 657,034
</TABLE>

Principal maturities of debt at August 31, 1995 are as follows:

<TABLE>
<S> <C>
Year ending August 31,
1996........................................................................ $ 22,359
1997........................................................................ 73,269
1998........................................................................ 104,776
1999........................................................................ 80,451
2000........................................................................ 87,130
Thereafter.................................................................. 214,395
Total long-term debt........................................................ $582,380
</TABLE>

(9) OBLIGATION UNDER CAPITAL LEASES

The Company leases equipment under capital leases which expire on various
dates through 1998. Included in property and equipment are the following amounts
applicable to these leases:

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Machinery and equipment............................................ $200,066 200,066
Vehicles........................................................... -- 27,871
200,066 227,937
Less accumulated amortization...................................... 59,043 44,397
$141,023 183,540
</TABLE>

The following is a schedule by years of future minimum lease payments under
capital leases as of August 31, 1995:

<TABLE>
<S> <C>
Year ending August 31
1996............................................................ $ 48,272
1997............................................................ 49,701
1998............................................................ 29,431
Total minimum lease payments.................................... 127,404
Less amounts representing interest.............................. 16,029
Present value of future minimum lease payments.................. 111,375
Less current maturities......................................... 35,203
$ 76,172
</TABLE>

F-34

<PAGE>
KENMAR BUSINESS GROUPS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(10) COMMITMENTS

The Company leases certain office and production space, machinery and
equipment under noncancellable operating leases expiring at various dates
through 1998. During the years ended August 31, 1995 and 1994, the Company
incurred rental expenses of $214,505 and $271,448, respectively, under these
leases.

Future minimum lease payments under the terms of the above leases are as
follows:

(11) PREFERRED STOCK

The Company issued 1,150 shares of $50 par value Class A cumulative
preferred stock ("Class A Preferred Stock") in 1994. During 1993, the Company
issued 716 shares of $50 par value Class A cumulative preferred stock including
upon receipt of the issue price, the 200 shares subscribed at August 31, 1992.
Each share of Class A preferred stock may be called or put at any time after
five years from the date of issuance at a rate of one and one-half times the
issue price. Redemption requirements of Class A cumulative preferred stock at
August 31, 1995 are as follows:

The Class A preferred stock is entitled to a 10% cumulative dividend
payable quarterly, subject to the provisions of North Carolina law. Cumulative
unpaid dividends are $73,008 and $23,378 as of August 31, 1995 and 1994,
respectively.

Upon liquidation, the Class A shares have preference over holders of common
stock in an amount equal to the issue price ($50 per share) plus cumulative
dividends in arrears. Cash dividends of $-0- and $32,910 were paid in 1995 and
1994, respectively.

(12) STOCK OPTION PLAN

The Company adopted a non-qualified stock option plan in 1992 to attract
and retain employees, officers, directors and advisors.

As of August 31, 1995 there were 4,178 options outstanding of which 3,878
were vested. Options run for 10 years from the grant date and entitle the holder
to convert each option into one share of common stock at $45 per share. No
options have been exercised as of August 31, 1995.

(13) INCOME TAXES

As discussed in note 3, the Company adopted Statement 109 as of September
1, 1993. There is no cumulative effect of this change in accounting for income
taxes as reported in the statement of earnings for the year ended August 31,
1994. Prior years' financial statements have not been restated.

F-35

<PAGE>
KENMAR BUSINESS GROUPS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(13) INCOME TAXES -- Continued
Components of income tax benefit are as follows:

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Taxes currently payable:
Federal and State................................................ $ -- (98,768)
Deferred:
Federal and State................................................ -- --
$ -- (98,768)
</TABLE>

Deferred income tax expense (benefit) results from timing differences in
the recognition of income and expense for tax and financial statement purposes.
Such timing differences relate primarily to differences in financial statement
and tax depreciation expense, amounts accrued and expensed for financial
statement purposes but not deductible for taxes until paid, and tax uniform
capitalization rules for inventory.

The components of net deferred tax assets and the net deferred tax
liabilities as of August 31, 1995 and 1994 are as follows:

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward.................................................................... $ 72,566 232,918
Inventories, principally due to additional costs inventoried for tax purposes, pursuant to the Tax
Reform Act of 1986 and inventory reserves....................................................... 83,470 122,815
Amortization of customer lists..................................................................... 16,575 10,725
Accounts receivable, principally due to allowance for doubtful accounts............................ 2,145 31,200
Other accruals..................................................................................... 29,962 21,756
Property, plant and equipment, principally due to differences in depreciation and FAS 121
writedowns...................................................................................... 125,311 --
Total gross deferred tax assets................................................................. 330,029 419,414
Valuation allowance................................................................................ (330,029) (408,864)
Net deferred tax assets......................................................................... $ -- 10,550
Deferred tax liabilities:
Property, plant and equipment, principally due to differences in depreciation...................... $ -- 10,550
Total gross deferred tax liabilities............................................................ $ -- 10,550
</TABLE>

The actual income tax expense (benefit) for 1995 and 1994 differs from the
"expected" amount (computed by applying the statutory federal income tax rate of
34% to the earnings before income taxes and cumulative effect of a change in
accounting principle) and is principally due to loss carryforwards,
nondeductible travel and entertainment expenses, state income taxes net of
federal tax benefit, non-deductible officer's life insurance and changes in the
amount of the valuation allowance.

At August 31, 1995, the Company has a net operating loss carryforward of
approximately $187,000 and a net economic loss carryforward for state income
taxes of approximately $984,000, expiring in various amounts through 2010.

(14) EMPLOYEE BENEFIT PLANS

The Company has a 401(k) defined contribution plan (the "Plan") covering
substantially all full-time employees who meet certain age and length of service
requirements. Participants are eligible to contribute up to 15% of their annual
compensation, not to exceed legal limits. The Company does not make
contributions to the Plan. Participants vest immediately in their contributions.

F-36

<PAGE>
KENMAR BUSINESS GROUPS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(15) RELATED PARTY TRANSACTION

During October 1992, a member of the Board of Directors granted a ten year
unsecured loan to the Company in the amount of $445,500. As of August 31, 1995
and 1994, the outstanding principal balance was approximately $315,000 and
$388,000, respectively. Such amount is included in long term debt.

During October 1992, the Company entered into a non-compete agreement with
a former member of the Board of Directors (see note 6).

During 1995, a Director, in conjunction with an unrelated party entered
into an Agreement to lend the Company $350,122 on a 120 day Note,
collarteralized by all the Company's plant, equipment, furniture and fittings.
The proceeds of the loan was used to repay approximately $105,000 of bank debt
and for operational purposes. The loan carried an interest rate of 12%. Under
the Agreement, the lenders purchased 6,380 shares of common stock, at a price of
$1 per share (representing approximately 10% of the present outstanding common
stock).

At August 31, 1995, accounts receivable -- other included a note receivable
from an officer of the Company of $10,866 with an interest rate of 8%.

(16) NET INCOME PER COMMON SHARE

At August 31, 1995, there were 4,178 stock options outstanding.

The net income per common share and common equivalent share are calculated
by deducting dividends applicable to preferred shares from net income and
dividing the result by the weighted average number of shares of common share and
common share equivalents outstanding during each of the years. Presentation of
fully diluted earnings per share is not required because the effect is
anti-dilutive.

(17) SUBSEQUENT EVENTS

On September 18, 1995, the Company signed an agreement with its largest
customer (see note 2). The provisions of the agreement relieved the Company of
trade accounts payable to the customer and other suppliers of $1,121,151. The
agreement provided the customer relief of trade payables to the Company of
$52,957 and required the customer to pay cash to the Company in the amount of
$250,000. This agreement also provided for the release of both parties from any
claims that might arise from past business relations or transactions.

Subsequent to the year end the Company entered into negotiations with its
major suppliers. These negotiations have resulted in the suppliers forgiving
approximately $440,000 of the accounts payable balance at August 31, 1995 in
return for payment of 25% of the balance due with a further 25% due in four
quarterly installments beginning January 1, 1996.

F-37

<PAGE>
KENMAR BUSINESS GROUP, INC.

CONSOLIDATED BALANCE SHEETS

FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
FEBRUARY 29, FEBRUARY 28,
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................................................. $ 744,533 $ 45,346
Accounts receivable -- trade, net of allowance for doubtful accounts of $5,500 in 1996 and
$65,807 in 1995. Also net of allowance for returns of $22,410 in 1995.................. 513,478 2,165,026
Accounts receivable -- other.............................................................. 15,865 3,609
Inventories............................................................................... 317,531 1,256,409
Prepaid expenses and other current assets................................................. 110,085 51,296
Total current assets................................................................... 1,719,492 3,521,686
Property and equipment -- net............................................................... 496,337 908,665
Other assets:
Deposits and other assets................................................................. 72,998 352,382
Cost in excess of net assets of acquired business net of accumulated amortization of
$212,250 in 1996 and $35,000 in 1995................................................... 87,750 265,000
Total other assets..................................................................... 160,748 617,382
Total assets........................................................................... 2,376,577 5,047,733
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Line of credit............................................................................ -- 1,911,547
Current maturities of long-term debt...................................................... 4,317 132,003
Current obligations under capital leases.................................................. 35,203 35,203
Accounts payable, trade................................................................... 621,852 2,397,521
Other accrued liabilities................................................................. 94,833 57,182
Total current liabilities.............................................................. 756,205 4,533,456
Long-term debt, less current maturities..................................................... 541,236 627,614
Long-term obligations under capital leases.................................................. 57,750 94,283
Class A preferred stock, including accretion and accrued dividends.......................... 759,129 626,206
Stockholders' equity (deficit)
Common stock, $1 par value; authorized 100,000 shares in 1996 and 1995 issued and
outstanding............................................................................ 64,714 64,714
Additional paid-in capital.................................................................. 213,941 243,226
Retained earnings (deficit)................................................................. (16,398) (1,141,766)
Total stockholders' equity (deficit)...................................................... 262,257 (833,826)
Total liabilities and stockholders' equity (deficit)................................... $2,376,577 $5,047,733
</TABLE>

F-38

<PAGE>
KENMAR BUSINESS GROUPS, INC.

STATEMENTS OF INCOME

SIX-MONTH PERIODS ENDED FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDING
FEBRUARY 29, FEBRUARY 28,
1996 1995
<S> <C> <C>
Sales....................................................................................... $1,354,383 $8,266,268
Cost of Goods Sold.......................................................................... 1,373,793 7,449,976
Gross profit........................................................................... (19,410) 816,292
General, selling and administrative expenses................................................ 397,350 446,525
Operating income (loss)................................................................ (416,760) 369,767
Other income (expense)
Interest income........................................................................... 30,443 2,610
Interest expense.......................................................................... (29,214) (141,968)
Miscellaneous expense..................................................................... (18,300) --
Other income (expense).................................................................... (17,071) (139,358)
Income (loss) before income taxes and extraordinary items................................. (433,831) 230,409
Income tax benefit (expense)................................................................ -- --
Income (loss) before extraordinary item..................................................... (433,831) 230,409
Extraordinary Item.......................................................................... 1,724,781 --
Net Income.................................................................................. 1,290,950 230,409
Accretion of preferred stocks............................................................... (29,285) (27,003)
Undeclared dividend on preferred stock...................................................... (12,408) (24,323)
Net income applicable to common stockholders........................................... $1,249,257 $ 179,084
Weighted average number of shares........................................................... 64,714 60,369
Income (loss) per common share before extraordinary item.................................... (7.35) 2.97
Extraordinary item per common share......................................................... 26.65 --
Net income per common share................................................................. 19.30 2.97
</TABLE>

F-39

<PAGE>
KENMAR BUSINESS GROUPS, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDING
FEBRUARY 29, FEBRUARY 28,
1996 1995
<S> <C> <C>
Cash flow from operating activities:
Net income...................................................................................... $1,290,950 $ 230,409
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization................................................................ 111,588 162,626
Changes in operating assets and liabilities:
(Increase) in accounts receivable.......................................................... (258,416) (25,905)
(Increase) in deposits and other assets.................................................... (34,600) (189,162)
Decrease in inventories.................................................................... 14,009 120,885
Decrease in recoverable income tax......................................................... -- 103,205
(Increase) in prepaid expenses and other current assets.................................... (22,939) (39,814)
Decrease in accounts receivable other...................................................... 3,267 8,398
(Decrease) in accounts payable, trade...................................................... (1,584,683) (558,915)
(Decrease) in other accrued liabilities.................................................... (331,123) (97,526)
Net cash provided by (used in) operating activities..................................... (811,947) (295,796)
Cash flow from investing activities:
Capital expenditures............................................................................ (7,888) (40,177)
Cash flow from financing activities:
Proceeds from issuance of common stock.......................................................... -- 6,517
Net borrowing on line of credit................................................................. -- 514,594
Principal payments on long term debt............................................................ (36,827) (190,659)
Principal payments on capital lease obligations................................................. (18,422) (33,611)
Repurchase of common stocks..................................................................... (625) --
Dividends paid.................................................................................. (12,408) --
Net cash provided by (used in) financing activities.......................................... (68,282) 296,841
Net increase (decrease) in cash and cash equivalents......................................... (888,097) (29,132)
Cash and cash equivalents:
Beginning of period............................................................................. 1,632,630 74,478
End of period................................................................................... $ 744,533 $ 45,346
</TABLE>

F-40

<PAGE>
KENMAR BUSINESS GROUPS, INC.

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION:

The accompanying Consolidated Condensed Financial Statements are unaudited.
In management's opinion, all adjustments necessary for a fair presentation have
been made. The accompanying financial information should be read in conjunction
with the Company's annual audited financial statements for the year ended August
31, 1995.

(2) INVENTORIES:

<TABLE>
<CAPTION>
AUGUST FEBRUARY 29,
31, 1995 1996
<S> <C> <C>
Raw materials......................................................... $193,649 $202,529
Work-in-process....................................................... 111,330 104,066
Finished goods........................................................ 26,56 10,936
$331,540 $317,531
</TABLE>

(3) EXTRAORDINARY ITEMS:

On September 18, 1995, the Company signed an agreement with its largest
customer. The provisions of the agreement relieved the Company of trade accounts
payable to the customer and other suppliers of $1,127,519. The agreement
provided the customer relief of trade payables to the Company of $52,957 and
required the customer to pay cash to the Company in the amount of $250,000. This
agreement also provided for the release of both parties from any claims that
might arise from past business relations or transactions.

During the six months ended February 29, 1996, the Company renegotiated
$1,097,881 of its accounts payable balances with its major suppliers. These
renegotiations resulted in the suppliers forgiving $507,619 of the amounts due
in return for payment of 25% of the remaining balance due principally in
September and October 1995 with a further 25% due in four quarterly installments
beginning January 1, 1996.

The above transactions resulted in an extraordinary gain of $1,724,781 (net
of legal and other consulting fees of $107,400) or $26.65 per common share and
are included in the accompanying unaudited consolidated condensed statement of
income for the six months ended February 29, 1996.

F-41

<PAGE>