Electronic Manufacturing Services Group Inc – ‘DEF 14A’ for 3/31/96

As of:  Friday, 6/28/96   ·   For:  3/31/96   ·   Accession #:  950168-96-1167   ·   File #:  0-23528

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Definitive Proxy Solicitation Material   —   Schedule 14A
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Document/Exhibit                   Description                      Pages   Size 

 1: DEF 14A     J.A. Industries #43784.1 DEF 14A                     128    426K 

Document Table of Contents

DEF 14A
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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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 [Preliminary Proxy Statement]

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

 NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

Meeting Date:           , 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 , 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   

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          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

PORT COQUITLAM, B.C.                          ROBERT KNIGHT, PRESIDENT          

, 1996                                                          

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE FILL IN,                  
DATE AND RETURN THE PROXY IN THE ENCLOSED POSTAGE-PAID                          
ENVELOPE.  NO POSTAGE NEED BE AFFIXED IF THE PROXY IS MAILED                    
IN THE UNITED STATES.                                                           

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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    
$3,069,000. 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                                                

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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 , 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.                   

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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

                                                                [Download Table]


                                                    Page  
                                                          
Available Information                                  1  

Incorporation of Certain Documents by Reference        1  

Information Concerning the Special Meeting                

         Summary                                       i  
         Date, Place and Time of Special Meeting      ii  
         Voting; Revocation of Proxy                   2  
         Solicitation of Proxies                       2  
         Quorum and Vote Required                      2  
         Dissenters' Rights                            3  

Proposal One - Approval of the Merger                  5  
         Approval Sought                               5  
         History of JA                                 6  
         Background of the Merger                      6  
         Terms of the Merger                           8  
         Business of Kenmar                            9  

         Recommendation of the Board of Directors     11  
         Additional Terms of the Merger Agreement     12  
         Issuance of Restricted Shares                16  
         Registration Rights                          18  
         Effective Time of the Merger                 19  
         Accounting Treatment                         19  
         Federal Income Tax Consequences              19  
         Rights of Dissenting Stockholders            21  
         Option Agreement                             23  

Selected Financial Data for the Company and Kenmar    23  
         JA                                           23  
         Kenmar                                       25  
         Per Share Data                               26  
Management's Discussion and Analysis of                   
  Financial Condition and Results of Operations       27  
         JA                                           27  
         Liquidity                                    29  

         Notes Payable and Long Term Debt             31  
         Results of Operations                        36  
         Kenmar                                       40  

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         Results of Operations                        40  
         Liquidity and Capital Resources              42  
         Statements of Income                         44  

Proposal Two - Election of Directors                  47  
         Nominees                                     47  
         Executive Compensation                       48  

Security Ownership of Certain Beneficial                  
  Owners and Management                               51  

Principal Stockholders (post merger)                  52  

Common Stock of the Company                           53  
         Market Price Information                     53  
         Dividend Policy                              54  
         Post Meeting Financing                       54  

Proposal Three - Approval of Amendment to                 
         Certificate of Incorporation                 55  

Description of Capital Stock of the Company           55  

Proposal Four - Reverse Stock Split                   56  

Financial Statements                                  56  

Presence of Accountants at Special Meeting            57  

Stockholder's Proposals                               57  

Other Matters                                         57  

 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  

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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 quarters ended March 31, 1996;

          3.         Forms 8-K dated June 30, September 15, 1995 and
                          January 26, 1996 and Form 8-K/A dated July 18, 1995.

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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 __________, 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 ben 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                                                        

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               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.                     

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.             

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           (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.                                              

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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 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.                          

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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", page 35.    

     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  

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(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:                                                         

Current maturites 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

The above presentation does not reflect the redemption and                      
dividend obligations of Kenmar's preferred stock (See "Preferred Stock of       
Kenmar", page 35).                                                              

         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.                        

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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 54). 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.                        

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             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         

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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 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                 

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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:           

                1997                              $150,000
                1998                               447,000
                1999                                68,700
                2000                                86,250
                                                  --------

                         Total                    $751,950

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.                    

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        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.             

                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                              

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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                    

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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                                                                             

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investment of over Ten Thousand Dollars ($10,000) by JA or any subsidiary in any
venture or business investment; (vi) any 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          

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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                                                                          

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

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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.                                                                     

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            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                     

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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 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                                

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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.                                              

             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                 

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        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 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.                                              

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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 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.                                      

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 FOR THE PERIOD ENDING

                                                        [Enlarge/Download Table]


                      DEC 31-91   DEC 31-92  JUNE 30-93   JUNE 30-94   JUNE 30-95     MAR 31-96  

                                                                                                 
SALES                  $ - -       $ - -      $191,836    $4,042,940   $4,330,211    $           

COST OF SALES            - -         - -       144,451    3,674,699     3,618,347                

GROSS PROFIT             - -         - -         47,38      368,252       711,864                

SELL AND MARKETING       - -         - -         8,232      134,163     1,593,838           --   

 EXP                                                                                             

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     (245,683)    (751,726)     (203,695)  

TOTAL ASSETS               3     656,677           610    2,616,445    1,020,723        16,981   

TOTAL                                                                                            

   LIABILITIES       178,575        8,33       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)  


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 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.       

(In thousands)
 at August 31 and for the years then ended

                                                                [Download Table]


                                                                         6 months
                                                                           ended 
                        1991     1992      1993     1994       1995      2/29/96 
                                                                                 
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      541   

PREFERRED STOCK          136       351       529       626        730      730   

STOCKHOLDERS                                                                     
   EQUITY (deficit)       82        99       303    (1,071)     1,021    1,021   


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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 - 65,714                                                      

                                                        [Enlarge/Download Table]

                                       J.A. INDUSTRIES, INC.                                     KENMAR BUSINESS GROUPS, INC.

                                                   PRO FORMA    PRO FORMA                            PRO FORMA  PRO FORMA    
                            YEAR END    6 MONTHS    YEAR END     8 MONTHS   YEAR END    6 MONTHS     YEAR END   6 MONTHS     
                            JUN-30-95   DEC-31-95  JUNE-30-95   FEB-29-96   AUG-31-95   FEB-29-96    AUG-31-95  FEB-29-96    
                            ---------   ---------------------   ---------   ---------------------    ---------  ---------    
                                                                                                                             

Book Value (deficit)                                                                                                         
per Share                  $   (0.01)  $   (0.03)   $  0.18       N/A     $ (15.24)    $   4.05     $  21.48      N/A        

Cash Dividend Declared     $     --    $     --     $   --     $   --     $    --      $    --      $    --    $   --        
per Share                                                                                                                    

Income (loss) per Share    $   (0.25)  $   (0.09)   $  0.09    $  0.08    $   2.13     $  19.30     $  11.07   $  9.72       

Income (loss) per common                                                                                                     
share before extraordinary                                                                                                   
item                       $   (0.25)  $   (0.09)   $  0.09    $  0.08    $   2.13     $  (7.35)     $  11.07   $  9.72      

Extraordinary item per                                                                                                       
common share               $     --    $     --     $   --     $   --     $    --      $  26.35      $    --    $   --       

Net Income per common                                                                                                        
share                      $   (0.25)  $   (0.09)   $  0.09    $  0.08    $   2.13     $  19.30     $  11.07   $  9.72       


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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                                                                      

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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.       

        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").            

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  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                                                                     

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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 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.                                                    

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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.                                  

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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.                                         

       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:         

  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            $ 1,021,386

(See also "Preferred Stock of Kenmar", Page 35)               

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:            

                                                   1995       1994
                                               --------   --------
Subordinated promissory notes payable monthly         $524,855   $646,674       
instalments of $9,009 including interest at 8%                                  
through October 2002                                                            

Bank debt collateralized by a first lien on all the       --     $217,932       
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                                      

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Uncollateralized note payable to stockholder          $ 39,482   $ 43,468       
repayable with interest at 8% in 59 monthly                                     
installments of 4610 and a balloon payment                                      
of $30,083 on October 15, 1997                                                  

Notes payable secured by equipment repayable          $ 18,403   $ 42,202       
in monthly installments of $2,435 including                                     
interest at 16.85% through April 1996.                                          
(Subsequently, this note was satisfied)                                         

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

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                   
               =======

Obligations Under Capital Leases of Kenmar:                                     

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

                                                      1995              1994
                                                      ----              ----
Machinery and equipment                              $200,066          $200,066 
Vehicles                                                   -           $ 27,871 
                                                    --------          --------
Total                                                $200,006          $227,937 

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

Year ending August 31                                                           

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1996                               $ 48,272                   
1997                               $ 49,701                   
1998                               $ 29,431                   
                --------
Total minimum lease payment                 $127,404                            

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:                                                                 

1996                               $38,422                    
1997                               $ 2,952                    
1998                               $ 2,460                    

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:                             

1997                       $150,000                           
1998                       $447,000                           
1999                       $ 68,700                           
2000                       $ 86,250                           
--------
Total                      $751,950                           
========

        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.                                                             

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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.                        

       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                                                                   

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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 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  

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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.                              

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 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:                                                                          

                                                                [Download Table]

                                      Six Months Ending February 29, 1996
                                                      & February 28, 1995
                                                1996       1995          
                                                                         
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         
                                               ======     ======         

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     

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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 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.                                                 

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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.                                                         

        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:

                               Year Ending August 31st
                              1995      1994
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)                
                              ======    ======

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                                    

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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'.                                     

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.        

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KENMAR BUSINESS GROUPS, INC.
Statements of Income
 Six-month periods ended February 29, 1996 and February 28, 1995
 UNAUDITED

                                                                [Download Table]


                                                           Six Months Ending       
                                                       February 29,  February 28,  
                                                          1996          1995       
                                                                                   
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  


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KENMAR BUSINESS GROUPS, INC.
 Consolidated Balance Sheets
 February 29, 1996 and February 28, 1995
 UNAUDITED

                                                                [Download Table]

                                                           February 29, February 28,
                                                              1996         1995     
             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   
   Ohter 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   
                                                          ----------   ----------   

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KENMAR BUSINESS GROUPS, INC.
 Consolidated Balance Sheets
 February 29, 1996 and February 28, 1995
 UNAUDITED

                                                        [Enlarge/Download Table]

                                                              February 29,          February 28,   
                                                                  1996                   1995      
                                                                                                   
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 
                                                                ----------------   --------------- 

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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.                                                                      

            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:                                                                     

                                                                [Download Table]


                              PERSONAL INFORMATION                DIRECTOR
NAME                 AGE        AND OCCUPATION                    SINCE   

                                                                          
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.                  

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Alan G. Finkel            62  Has been a director of Kenmar       --      
                              since 1992.  Has been a Manage-             
                              ment 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                                        


(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.                   

                                                        [Enlarge/Download Table]


                    SUMMARY COMPENSATION TABLE                                              

                      Long Term Compensation                                                
                     Annual Compensation      Awards       Payouts                          
       (a)            (b)      (c)     (d)      (e)        (f)      (g)     (h)      (i)    
-----------------   ------   ------  ------   ------     -------  ------  -------  -----    
                                              Other      Restrict         All other         
                                              Annual     ed stock         LTIP     Compensa-
Name and Principal           Bonus/           Compen-    Award    Options Payouts  tion     
Position            Year     Salary    ($)    sation($)    ($)      SARs    ($)      (i)    
------------------  ----     ------  ------   ---------  -------  ------  ------   -----    
                                                                                            
Robert Knight       1995     $36,000                        0       0        0        0     
President           1994     $36,000                        0     10,000                    
                    1993     $36,000                                                        

Alexander Michie    1995     $10,000                        0                0        0     
former director     1994     $36,000                        0     10,000                    
                    1993     $36,000                                                        

Karl Ronstadt       1995     $62,000                        0                0        0     
former director     1994     $72,000                        0     10,000                    
                    1993     $54,000                                                        

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James Burns         1995     $55,000                        0        0       0        0     
Chairman of the     1994        0                                                           
Board               1993        0                                                           

      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

                                                                [Download Table]

  (a)               (b)          (c)               (d)             (e)    
                            Percent of total                              
                            Options/SARs                                  
                  Options/  Granted to                                    
                  SARs      Employee          Exercise or base  Expiration
Name              Granted   Fiscal Year       Price ($/SH)      Date      
                                                                          
Robert W. Knight  0           0               N/A               N/A       

      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

                                                                [Download Table]

  (a)              (b)             (c)       (d)              (e)     
                                                         Value of     
                                          Number of      Unexercised  
                                          Unexercised    In-the-money 
                                          Options/SAR    Options/SAR  
                  Shares                  at FY-end (#)  at FY-end (#)
                  Acquired on   Value     Exercisable/   Exercisable/ 
Name              Exercise (#)  Realized  Unexercisable  Unexercisable
                                                                      
Robert W. Knight      0           N/A       10,000           0        

      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

                                                        [Enlarge/Download Table]

   (a)                 (b)             (c)           (d)          (e)          (f)   
                                   Performance                                       
                    Number of      or Other                                          
                    Shares, Units  Period Until                                      
                    or Other       maturation or  Threshold      Target      Maximum 
Name                Rights (#)     Payout         ($ or#)        $ or #)     ($ or #)
------------------  -------------  -------------  -------------  ----------  --------
                                                                                     
Robert W. Knight      0               0             N/A            N/A         N/A   

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              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:                                                     

                                                           Present
Name                         Age            Title             Position at Kenmar

Kenneth H. Marks             32           President              President      
                                          Chief Executive        Chief Executive
                                  Officer                Officer

Kenneth L. Marks             61           Secretary              Secretary      

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.                                                                

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           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 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.                                              

Stockholder                   Beneficially owned       Class                    

Karl Gelbard                         10,000             0.1%                    
4001 South Ocean Drive                                                          
Hollywood, FL 33019                                                             

Robert W. Knight                    297,259             3.2%                    
4025 Sunset Boulevard                                                           

North Vancouver, B.C                                                            
Canada                                                                          

All directors and                   307,259             3.2%                    
offices as a group                                                              

(2 persons)                                                                     

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 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.                                                            

Stockholder                        Beneficially owned     Class                 

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%                  

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 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.    

COMMON STOCK

Period                                               Bid Price                  
                                          High         Low

through April 30, 1996                               3/4         13/32          
Quarter ended March 31, 1996                         21/32       13/32          
Quarter ended December 31, 1995                      11/16         .19          
Quarter ended September 30, 1995                     1 3/8       27/32          
Quarter ended June 30, 1995                          1 3/8       1              
Quarter ended March 31, 1995                         2           1              
Quarter ended December 31, 1994                      2 1/8       1 9/16         
Quarter ended September 30, 1994                     2           1 1/2          
Quarter ended June 30, 1994                          2           1 3/4          
Quarter ended March 31, 1994                         2 1/4       1 5/8          
Quarter ended December 31, 1993                      2 3/8       1 3/8          
Quarter ended September 30, 1993                     21/2        1 1/2          

              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.                             

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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:

Commissions                          $    51,000
Professional Fees                         70,000
Accounts Payable                         168,000
Working Capital                          221,000
                                        --------
                                      $  510,000

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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.                                                                        

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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.                                                                         

          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.                  

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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: March ____, 1996                                                         

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 J.A. INDUSTRIES, INC.

 PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
SPECIAL MEETING ON      , 1996    

                The undersigned hereby constitutes and appoints Robert W. Knight
who is authorized to act as attorney and proxy with full power of substitution  
according to the number of shares of Common Stock of J.A. Industries, Inc. which
the undersigned may be entitled to vote with all powers which the undersigned   
would possess if personally present at the Special Meeting of its Stockholders  
to be held on _________, 1996 at 8:00 a.m. in the forenoon at the offices of    
Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P. at 2500 First     
Union Capitol Center Raleigh, North Carolina 27601 and at any adjournment       
thereof, on matters properly coming before the Meeting. Without otherwise       
limiting the general authorization hereby given, said attorney and proxy is     
instructed to vote on the proposals set forth below and described in the Proxy  
Statement dated ______________, 1996.                                           

             The undersigned acknowledges receipt of the Notice of Special
Meeting and Proxy Statement, each dated _________, 1996.                        

     UNLESS OTHERWISE SPECIFIED IN THE SPACE PROVIDED, THE
UNDERSIGNED'S VOTE IS TO BE CAST "FOR" THE ELECTION OF ALL LISTED NOMINEES;     
"FOR" APPROVAL OF AGREEMENT AND PLAN OF MERGER; "FOR" APPROVAL OF AMENDMENT TO  
THE CERTIFICATE OF INCORPORATION AND "FOR" THE APPROVAL OF A REVERSE STOCK SPLIT
AND IN ACCORDANCE WITH THE DIRECTOR'S RECOMMENDATIONS, ON ANY OTHER MATTERS THAT
MAY PROPERLY COME BEFORE THE MEETING.                                           

 PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY.

        A vote "FOR" is recommended by the Board of Directors on the following
proposals.                                                                      

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I.       Approval of Agreement and Plan of Merger                               

( )   FOR            ( )   AGAINST         ( )   ABSTAIN      

II.      The election of five directors                                         

NOMINEES:       KENNETH H. MARKS, CRAIG MACNAB, ALAN G. FINKEL, KENNETH L. MARKS
AND RAY STACKENRIDER                                                            

( )   FOR            ( )   AGAINST         ( )   ABSTAIN      

For all nominees except as noted above                                          

III.  Approval of Amendment to the Certificate of Incorporation to provide for  
change of name.                                                                 

( )   FOR           ( )   AGAINST          ( )   ABSTAIN      

IV.      Approval of a 1 for 4 reverse stock split.                             

( )   FOR           ( )   AGAINST          ( )   ABSTAIN      

IMPORTANT: IN SIGNING THIS PROXY, PLEASE SIGN YOUR NAME OR NAMES ON THE         
SIGNATURE LINES BELOW IN THE EXACT FORM APPEARING ON THIS PROXY. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE YOU FULL    
TITLE AS SUCH.                                                                  
EACH JOINT TENANT MUST SIGN.                                                    

SIGNATURE:                                  DATE:                               

SIGNATURE:                                  DATE:                               

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 AMENDMENT TO AGREEMENT AND PLAN OF MERGER

AMENDMENT (the "Amendment") TO AGREEMENT AND PLAN OF MERGER,  
dated as of , 1996 (the "Agreement") by and among J.A. Industries, Inc., a      
Delaware corporation ("JAI"), J.A. Industries of North Carolina, Inc., a North  
Carolina corporation and a wholly-owned subsidiary of JAI ("Acquisition"), and  
Kenmar Business Groups, Inc., a North Carolina corporation ("Kenmar").          

 WITNESSETH:

        WHEREAS, the parties to the Agreement desire to amend the Agreement as
set forth herein.                                                               

    NOW, THEREFORE, in consideration of the premises and of the mutual
agreement herein contained and of other good and valuable consideration, the    
receipt and legal sufficiency of which they hereby acknowledge, and intending to
be legally bound hereby, the parties hereto agrees as follows:                  

    1. Section 6.7(d) of the Agreement is hereby amended to delete the
following language from the certificate legend set forth therein: "THIS         
RESTRICTIVE LEGEND SHALL BE VOID AND OF NO FURTHER EFFECT AS OF APRIL 12, 1998."

2. Except as expressly provided this Amendment, all terms and 
conditions of the Agreement shall remain in full force and effect.              

         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, all of the date
first above written.                                                            

KENMAR BUSINESS GROUPS, INC.

ATTEST:                                BY:                                      
         NAME:
          TITLE:
BY:                                                                             
NAME:                                                                     
TITLE:                              J.A. INDUSTRIES, INC.                 

ATTEST:                                BY:                                      
         NAME:
          TITLE:
BY:                                                                             
NAME:                                                                     
 TITLE:                              J.A. INDUSTRIES OF NORTH CAROLINA, INC.

ATTEST:                                                                         
 BY:
BY:                                          NAME:                              
NAME:                                     TITLE                           
TITLE:                                                                    

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MacKay                                                                          
& Partners                                                                      
Chartered Accountants                                                           

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 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.        

The financial statements as at June 30, 1993 and for the period then            
ended were audited by other independent auditors who expressed an               
opinion without restriction on those statements in their report dated           
September 29, 1993.                                                             

                                     /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)                                       

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Exhibit E 

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J.A. INDUSTRIES, INC./KENMAR BUSINESS GROUPS, INC.

 INDEX TO FINANCIAL STATEMENTS

J.A.- Financial Statements                                                      

  Report of Independent Auditors                               F-1
    Balance Sheets as of June 30, 1995 and 1994                  F-2/3
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-21

J.A.- Pro Forma Consoldiated Financial                                          
Statements-Unaudited                                          

   Balance Sheet as of August 31, 1995                          F-22
Statement of Operations for the year                          
     ended August 31, 1995                                      F-23
Statement of Operations for the six                           
     months ended February 29, 1996                             F-24

J.A.- Financial Statements (Unaudited)                                          

Balance Sheets as of December 31, 1995                        
        and 1996                                                   F-25/26
Statements of Operations for six months                       
        ended December 31, 1995 and 1994                           F-27/28
Statement of Changes in Financial Position                    
for six months ended December 31, 1995                    
     and 1994                                                   F-29
Statement of Changes in Stockholder's Equity                  
for six months ended December 31, 1995 and                
     June 30, 1995                                              F-30
        Notes to Financial Statements                                F-31-F-35

Kenmar - Financial Statements (Audited)                                         

   Report of Independent Auditors                               F-36
   Balance Sheets as of August 31, 1995 and 1994                F-37
Statements of Income (Loss) years ended                       
     August 31, 1995 and 1994                                   F-38
Statement of Stockholder's Deficit years                      
     ended August 31, 1995 and 1994                             F-39

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Statement of Cash Flows years ended August                    
        31, 1995 and 1994                                          F-40/41
        Notes to Financial Statements                                F-42-F-51

Kenmar - Financial Statements (Unaudited)                                       

      Balance Sheets as of February 29, 1996 and 1995              F-52/53
Statements of Income, six months ended February               
     29, 1996 and 1995                                          F-54

   Statements of Cash Flows                                     F-55

   Notes to Financial Statements                                F-56

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    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.                                    

(Signature of Semple & Cooper, P.L.C. appears here)                             

Certified Public Accountants                                                    

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

   F-1

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          J.A. INDUSTRIES, INC. AND SUBSIDIARIES
           CONSOLIDATED BALANCE SHEETS
          June 30, 1995 and 1994

            ASSETS

                                                                [Download Table]

                                              1995        1994   
                                              ----        ----   
                                                                 
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
                                           ==========  ==========


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

         F-2

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      J.A. INDUSTRIES, INC. AND SUBSIDIARIES
       CONSOLIDATED BALANCE SHEETS (Continued)
            June 30, 1995 and 1994

        LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

                                                                [Download Table]


                                                 1995         1994    
                                                 ----         ----    
                                                                      
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 
                                              ==========   ========== 


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

       F-3

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          J.A. INDUSTRIES, INC. AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF OPERATIONS
        For The Years Ended June 30, 1995 and 1994

                                                                [Download Table]


                                               1995          1994    
                                               ----          ----    

                                                                     
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 
                                           ===========   =========== 


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

       F-4

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      J.A. INDUSTRIES, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
      For The Years Ended June 30, 1995 and 1994

                                                        [Enlarge/Download Table]

                                                                                      Equity                 
                                                                                    Adjustment               
                                                        Additional                 from Foreign     Stock    
                                      Common Stock        Paid-in    Accumulated     Currency    Subscription
                                  Shares      Amount      Capital      Deficit      Translation    Receivable
                                                                                                             
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)
                              =========   ==========   ===========   ===========   ===========   =========== 

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

   F-5

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        J.A. INDUSTRIES, INC. AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF CASH FLOWS
        For The Years Ended June 30, 1995 and 1994

                                                        [Enlarge/Download Table]

                                                                                    1995          1994    
                                                                                    ----          ----    
                                                                                                          
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 
                                                                                ===========   =========== 


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

       F-6

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  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, de Mexico, 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).            

   F-7

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              J.A. INDUSTRIES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.      Summary of Significant Accounting Policies: (Continued)                 

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.                         

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.                                                 

   F-8

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              J.A. INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.      Summary of Significant Accounting Policies: (Continued)                 

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.                             

   F-9

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            J.A. INDUSTRIES, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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:                         

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
                                              ==========

     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.                                                  

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.                                       

    F-10

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J.A. INDUSTRIES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.      Sale of Subsidiaries: (Continued)                                       

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:

                                          1995          1994
                                          ----          ----

        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
                                          ==========    ==========
5.      Property and Equipment:                                                 

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

      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
                                         ==========     ==========

    F-11

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          J.A. INDUSTRIES, INC. AND SUBSIDIARIES
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5.      Property and Equipment: (Continued)                                     

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

        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:            

Shares issued                        $   53,648           
Debt assumed                             78,872           
Relocation fee                          100,000           
                          ----------

Fair market value of the equipment   $  232,520           
                          ==========

     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 losses represented  management's best estimate of the
net realizable value of the property.                           

    F-12

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          J.A. INDUSTRIES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.           

8.      Intangible Assets:                                                      

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

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
                                                       ==========   ==========

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

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            J.A. INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9.      Notes Payable:                                                          

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

                                                        [Enlarge/Download Table]

                                                                            1995        1994   
                                                                            ----        ----   
                                                                                               
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


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    J.A. INDUSTRIES, INC. AND SUBSIDIARIES
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9.      Notes Payable: (Continued)                                              

                                                        [Enlarge/Download Table]


                                                                            1995         1994    
                                                                            ----         ----    
                                                                                                 
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 
                                                                         ==========   ========== 


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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:                                         

Year Ended              
         June 30,                 Amount

           1996               $  590,986
           1997                   18,046
                              ----------

                              $  609,032
                              ==========

10.     Related Party Transactions:                                             

Loans Payable - Related Parties:                                

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

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
                                        ==========    ==========

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      J.A. INDUSTRIES, INC. AND SUBSIDIARIES
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10.     Related Party Transactions: (Continued)                                 

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:                                                 

Deferred Tax Asset                                        

Net operating loss carryforwards          $  498,000  

Less: valuation allowance                   (498,000) 
                                        ----------

Net deferred tax asset                      $     -       
                                        ==========

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        J.A. INDUSTRIES, INC. AND SUBSIDIARIES
        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12.     Income Taxes: (Continued)                                               

        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.           

        At June 30, 1995, the Company has net operating loss  carryforwards  for
federal purposes, as follows:                                   

Expiring June 30,                     Amount

       2009                       $  540,000
       2010                        2,780,000
                                  ----------

                                  $3,320,000
                                  ==========

        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.                                              

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      J.A. INDUSTRIES, INC. AND SUBSIDIARIES
        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.              

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.                                     

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J.A. INDUSTRIES, INC. AND SUBSIDIARIES
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17.     Statement of Cash Flows: (Continued)                                    

Non-Cash Investing and Financing Activities: (Continued)        

        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:      

            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)
                                                                 -----------

            Restated net loss                                     $(1,714,526)
                                                                 ===========

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      J.A. INDUSTRIES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.            

        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.                 

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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.                                                  

                                                        [Enlarge/Download Table]

                                              J.A.                                                 
                                           Industries,     Kenmar                                  
                                            Inc. and      Business                                 
                                           Subsidiaries  Group, Inc.       Pro forma    Pro forma  
                                           December 31,  February 29,        Merger    Consolidated
ASSETS                                        1995          1996          Adjustments    Amounts   
                                              ----          ----          -----------    -------   
                                                                                                   

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  
                                           ==========    ==========                    ==========  


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.                                                           

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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.                  
(2)  Issuance of stock through private placements to meet conditions of the     
Agreement.                                                            

                                                        [Enlarge/Download Table]


                                                          J.A.                                                 
                            J.A.                      Industries,      Kenmar                                  
                        Industries,      Record           Inc.        Business                                 
                            Inc.       Disposal of    as Adjusted,   Group, Inc.                               
                          for the      Hutronix, Inc.    for the       for the                                 
                         Year Ended     and J.A.       Year 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   
                            ----         ----              ----         ----          -----------    -------   
                                                                                                               

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)  $   81,749      2,083,104 
                        -----------                   -----------   -----------                    ----------- 
      Operating Income                                                                                         
        (Loss)           (1,384,114)                    (767,768)       448,985                       (400,532)

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                       (727,503)

Income Taxes                   -                            -              -                              -    
                        -----------                   -----------   -----------                    ----------- 
Net Income (Loss)        (1,714,526)                    (827,252)       181,498                       (727,503)

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                    $  (831,139)
                        ===========                   ===========   ===========                    =========== 
Net Income (Loss)                                                                                              
  per Share             $      (.25)                  $      (.12)  $      1.26                    $      (.19)
                        ===========                   ===========   ===========                    =========== 
Weighted Average                                                                                               
  Shares Outstanding      6,724,440                     6,724,440        61,999                      4,415,473 
                        ===========                   ===========   ===========                    =========== 


(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.                            

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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.                 
(2) Issuance of stock  through  private  placements  to meet  conditions  of the
Agreement and to terminate consulting agreements.                               

                                                        [Enlarge/Download Table]


                           J.A. Industries                                 Kenmar                                 
                              Inc. and                                    Business                                
                            Subsidiaries                                 Group, Inc.                              
                              For The                                      For The                                
                             Six Month         Record          J.A.       Six Month                               
                            Period Ended      Disposal      Industries,  Period Ended     Pro Forma    Pro Forma  
                            December 31,     of Hutronix,      Inc.,     February 29,       Merger    Consolidated
                              1995 (a)          Inc. (1)   As Adjusted      1996 (a)     Adjustments    Amounts   
                              ----             -----       -----------      ----         -----------    -------   
                                                                                                                  

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 (2)  $   81,749       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 
                           ==========                      ==========    ==========                   =========== 


(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.             

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J.A. Industries, Inc.                                                                                         

Consolidated Balance Sheets                                                                                   
(unaudited)                                                                                                   
--------------------------------------------------------------------------------------------------------------

                                                                                    December 31               
                                                                             1995                   1994      
                                                                       ----------------       ----------------
                                                                                                              

Assets                                                                                                        

Current                                                                                                       
    Cash                                                               $        ---           $         5,538 
    Accounts receivable                                                                                       
      Trade                                                                     ---                   569,292 
      Other                                                                     ---                    59,437 
    Inventory (note 3)                                                          ---                   453,274 
    Prepaid expenses and deposits                                               ---                    21,892 
                                                                       ----------------       ----------------

                                                                                ---                 1,109,433 

Real estate held for resale                                                     ---                   875,000 

Property and equipment (note 4)                                                 ---                   514,836 

Investments                                                                     ---                    22,075 

Intangible assets (note 5)                                                      ---                   120,978 
                                                                       ----------------       ----------------

                                                                       $        ---           $     2,642,322 
                                                                       ----------------       ----------------


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J.A. Industries, Inc.                                                                                         

Consolidated Balance Sheets                                                                                   
(unaudited)                                                                                                   
--------------------------------------------------------------------------------------------------------------

                                                                                    December 31               
                                                                              1995                   1994     
                                                                       ----------------       ----------------
                                                                                                              

Liabilities                                                                                                   

Current                                                                                                       
    Bank indebtedness                                                  $            68        $       105,000 
    Accounts payable                                                           269,417                928,358 
    Due to shareholders                                                         ---                    51,426 
    Share subscription deposits                                                123,383                 ---    
    Equipment loans                                                             ---                   119,048 
    Current portion of long-term debt (note 7)                                  ---                   155,270 
                                                                       ----------------       ----------------

                                                                               392,869              1,359,102 

Loans from shareholders (note 6)                                                21,064                136,691 

Long-term debt (note 7)                                                        -                      551,264 
                                                                       ----------------       ----------------

                                                                               413,933              2,047,057 
                                                                       ----------------       ----------------

Share Capital and Deficit                                                                                     

Capital stock:                                                                                                
    Authorized:                                                                                               
      20,000,000 common shares with a par value of $0.0025 per share                                          
    Issued:                                                                                                   
    7,906,603 shares (1994 - 6,817,034)                                         19,792                 17,043 

Additional paid-in capital                                                   5,129,253              3,948,343 

Accumulated deficit                                                         (5,427,223)            (3,381,265)

Cumulative translation adjustment                                               (4,504)                11,144 

Treasury stock, at cost                                                       (131,250)                ---    
                                                                       ----------------       ----------------

                                                                              (413,933)               595,265 
                                                                       ----------------       ----------------

                                                                       $        ---           $     2,642,322 
                                                                       ----------------       ----------------


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J.A. Industries, Inc.                                                                                         

Consolidated Statements of Operations                                                                         
(unaudited)                                                                                                   
--------------------------------------------------------------------------------------------------------------

                                                                              For the six months ended        
                                                                                    December 31               
                                                                            1995                   1994       
                                                                       ----------------       ----------------

                                                                                                              

Sales                                                                  $       709,747        $     2,417,585 

Cost  of sales                                                                 606,707              1,977,458 
                                                                       ----------------       ----------------

Gross profit                                                                   103,040                440,127 

Selling and marketing expenses                                                     244                 97,254 

General and administrative expenses                                            505,635                479,497 
                                                                       ----------------       ----------------

Loss from operations                                                          (447,839)              (136,624)

Other income (expense)                                                          (1,395)               (54,374)

Loss on disposal of subsidiary                                                 (73,196)                   --- 
                                                                       ----------------       ----------------

Consolidated net loss                                                  $      (522,430)       $      (190,998)
                                                                       ----------------       ----------------

Loss per share                                                         $          0.07        $          0.03 
                                                                       ----------------       ----------------


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J.A. Industries, Inc.                                                                                         

Consolidated Statements of Operations                                                                         
(unaudited)                                                                                                   
--------------------------------------------------------------------------------------------------------------

                                                                             For the three months ended       
                                                                                    December 31               
                                                                             1995                   1994      
                                                                       ----------------       ----------------

                                                                                                              

Sales                                                                  $       177,437        $     1,237,956 

Cost  of sales                                                                 151,677                963,690 
                                                                       ----------------       ----------------

Gross profit                                                                    25,760                274,266 

Selling and marketing expenses                                                      61                 71,820 

General and administrative expenses                                             85,252                239,877 
                                                                       ----------------       ----------------

Income/(loss) from operations                                                  (59,553)               (37,431)

Other income (expense)                                                          (1,459)               (48,676)

Loss on disposal of subsidiary                                                 (73,196)                  ---  
                                                                       ----------------       ----------------

Consolidated net loss                                                  $      (134,208)       $       (86,107)
                                                                       ----------------       ----------------

Loss per share                                                         $          0.02        $          0.01 
                                                                       ----------------       ----------------


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J.A. Industries, Inc.                                                                                         

Consolidated Statement of Changes in Financial Position                                                       
(unaudited)                                                                                                   
--------------------------------------------------------------------------------------------------------------

                                                                              For the six months ended        
                                                                                    December 31               
                                                                             1995                   1994      
                                                                       ----------------       ----------------
                                                                                                              

Cash provided by (used in)                                                                                    
Operating activities                                                                                          
    Net loss for the period                                            $      (522,430)       $      (190,998)
    Items not affecting cash:                                                                                 
      Amortization                                                              ---                    80,543 
      Issuance of stock for services                                           160,251                 ---    
      Loss on sale of subsidiary                                                73,196                 ---    

    Changes in non-cash working capital                                        138,243                 85,991 
                                                                       ----------------       ----------------

                                                                              (150,740)               (24,464)
                                                                       ----------------       ----------------

Financing activities                                                                                          
    Issue of common shares                                                     120,000                100,000 
    Loan from shareholders                                                     (14,702)                 4,327 
    Long-term debt                                                              ---                   (41,596)
                                                                       ----------------       ----------------

                                                                               105,298                 62,731 
                                                                       ----------------       ----------------

Investing activities                                                                                          
    Purchase of property and equipment                                          ---                    (4,578)
    Proceeds on sale of subsidiary                                                 100                 ---    
                                                                       ----------------       ----------------

                                                                                   100                 (4,578)
                                                                       ----------------       ----------------

Increase (decrease) in cash position                                           (45,342)                33,689 

Effect of currency translation on cash flow                                     ---                    32,991 

Cash position beginning of period                                               45,274               (166,142)
                                                                       ----------------       ----------------

Cash position end of period                                            $           (68)       $       (99,462)
                                                                       ----------------       ----------------

Represented by:                                                                                               
    Cash                                                               $        ---           $         5,538 
    Bank indebtedness                                                              (68)              (105,000)
                                                                       ----------------       ----------------

                                                                       $           (68)       $       (99,462)
                                                                       ----------------       ----------------


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J.A. Industries, Inc.                                                                                                               

Consolidated Statements of Changes in Shareholders' Equity                                                                          
(unaudited)                                                                                                                         
--------------------------------------------------------------------------------------------------------------------------------    

For the six months ended December 31, 1995                                                                                          
and the year ended June 30, 1995                                                                                                    

                                           Capital Stock             Additional                 Foreign       Stock                 
                                                                      Paid In     Operating    Currency    Subscription    Treasury 
                                       Shares          Amount         Capital      Deficit    Translation   Receivable      Stock   
                                    ------------------------------------------------------------------------------------------------
                                                                                                                                    

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                             300,000        750          119,250       ---          ---         ---           ---    

Issued for consulting fees                   55,000        163           16,088       ---          ---         ---           ---    

Services rendered as consideration                                                                                                  
for shares                                   ---        ---              ---          ---          ---        144,000        ---    

Reverse Hutronix, Inc. acquisition           ---        ---              ---          ---          ---         ---         (131,250)

Net loss for the six months ended                                                                                                   
December 31, 1995                            ---        ---              ---        (522,430)      ---         ---           ---    
                                      ----------------------------------------------------------------------------------------------

Balance December 31, 1995                 7,906,603 $   19,792 $      5,129,253 $ (5,427,223)$     (4,504)$    ---    $    (131,250)
                                      ----------------------------------------------------------------------------------------------


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J.A. Industries, Inc.                                                           

Notes to Consolidated Financial Statements                                      
(unaudited)                                                                     
December 31, 1995 and 1994                                                      
--------------------------------------------------------------------------------

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  $74,591,  which has been  included in
      other expense for the period ended  December 31, 1995.  Granite  Marketing
Corp. was inactive during the period.                               

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J.A. Industries, Inc.                                                           

Notes to Consolidated Financial Statements                                      
(unaudited)                                                                     
December 31, 1995 and 1994                                                      
--------------------------------------------------------------------------------

3.    Inventory                                                                 

   Inventory consists of:                          1995               1994

     Raw materials                         $         ---      $        531,321
     Less: Reserve for obsolescence                  ---               190,000
                                            -----------------  -----------------

                                                     ---               341,321
     Work-in-process                                 ---               104,604
     Finished goods                                  ---                 7,349
                                            -----------------  -----------------

                                           $         ---      $        453,274
                                            -----------------  -----------------

4.    Property and equipment                                                    

                                                        [Enlarge/Download Table]


                                              Accumulated                Net Book Value            
                               Cost           amortization             1995               1994     
                         -----------------  -----------------  -----------------  -----------------
                                                                                                   

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


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J.A. Industries, Inc.                                                           

Notes to Consolidated Financial Statements                                      
(unaudited)                                                                     
December 31, 1995 and 1994                                                      
--------------------------------------------------------------------------------

5.    Intangible assets                                                         

  Intangible assets comprise the following:      1995               1994

     Goodwill                                  $     ---      $        128,767
     Incorporation costs                             ---                 3,000
     Patent costs                                    ---                 8,895
                                                -------------  -----------------
                                                     ---               140,662
     Amortization                                    ---                16,096
                                                -------------  -----------------

                                               $     ---      $        124,566
                                                -------------  -----------------

6.    Loans from shareholders                                                   

                                                        [Enlarge/Download Table]


Loans from shareholders comprise the following:                          1995               1994     
                                                                                                     

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

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J.A. Industries, Inc.                                                           

Notes to Consolidated Financial Statements                                      
(unaudited)                                                                     
December 31, 1995 and 1994                                                      
--------------------------------------------------------------------------------

7.    Long-term debt                                                            

                                                        [Enlarge/Download Table]


                                                                                   1995               1994
                                                                                                          

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

                                                                                     0            706,534 

Less: Current portion                                                           ---               155,270 
                                                                      -----------------  -----------------

                                                                      $              0   $        551,264 
                                                                      -----------------  -----------------

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.                            

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J.A. Industries, Inc.                                                           

Notes to Consolidated Financial Statements                                      
(unaudited)                                                                     
December 31, 1995 and 1994                                                      
--------------------------------------------------------------------------------

9 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 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 financial statements for the period ended December 31, 1995 have
been issued twice previously.                                       

   The first amended financial statements recorded the loss on disposition
 of Hutronix, Inc. and related subsidiaries during the second quarter.
This had been omitted because it was the Company's intention to     
dispose of the subsidiary at the beginning of the fiscal period.    

As a result of this change the Company's net loss for the six months
ended December 31, 1995 and the three months ended December 31, 1995
increased by $73,196. The net loss per share was unchanged from the 
amounts previously reported.                                        

The second amended financial statement's recorded the results of    
operation for Hutronix, Inc. and related subsidiaries for the period
until disposition. Futhermore, the effect of audit adjustments from 
fiscal 1995 were recorded.                                          

  As a result of these changes the Company's net loss for the six months
ended December 31, 1995 decreased by $297,726 and the net loss for  
the three months ended December 31, 1995 decreased by $22,304. The  
   Company's net loss per share for the six months ended December 31, 1995
    decreased by $0.02 and the net loss per share for the three months ended
December 31, 1995 increased by $0.01.                               

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KPMG Peat Marwick LLP                                                           

150 Fayetteville Street Mall                                            
Suite 1200                                                              
Post Office Box 29543                                                   
Raleigh, NC 27626-0543                                                  

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                                                                

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KENMAR BUSINESS GROUPS, INC.

Consolidated Balance Sheets 

August 31, 1995 and 1994

                                                                [Download Table]

Assets                                                      1995            1994   
                                                                                   
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 
                                                           ==========   ========== 

See Notes to consolidated financial statements.                                 

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KENMAR BUSINESS GROUPS, INC 

Consolidated Statements of Income (Loss)

Years ended August 31, 1995 and 1994

                                                        [Enlarge/Download Table]

                                                                  1995          1994   
                                                                                       
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)


See accompanying notes to consolidated financial statements.                    

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KENMAR BUSINESS GROUPS, INC.

Consolidated Statements of Stockholders' Deficit

Years ended August 31, 1995 and 1994

                                                        [Enlarge/Download Table]


                                                                Additional                   Total     
                                              Common Stock       paid-in       Retained   stockholders'
                                         Shares         Amount   capital       earnings     deficit    
                                                                                                       
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)   


See notes to consolidated financial statements.                                 

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KENMAR BUSINESS GROUPS, INC.

Consolidated Statements of Cash Flows 

Years ended August 31 and 1995, 1994

                                                        [Enlarge/Download Table]

                                                                     1995          1994   
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 
                                                                               (Continued)

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KENMAR BUSINESS GROUPS, INC.

Consolidated Statement of Cash Flows, Continued 

Years ended August 31, 1995 and 1994

                                                                [Download Table]

                                                                    1995      1994  
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.                                                                  


See accompanying notes to consolidated financial statements.                    

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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.                                                     

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(3)     Summary of Significant Accounting Policies, Continued                   

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.

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.     

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(3)     Summary of Significant Accounting Policies, Continued                   

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:                                         

                                                      1995          1994

                       Raw materials                  $193,649       997,549
                       Work-in-progress                111,330       249,620
                       Finished goods                   26,561       130,123
                                                      $331,540     1,337,292

(5)     Property and Equipment                                                  

Property and equipment consist of the following:                

                                  1995                1994
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           

        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.                             

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KENMAR BUSINESS GROUPS, INC.        

Notes to Consolidated Financial Statements, Continued         

(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:

Assets acquired                 $966,145        
Liabilities assumed              216,145        
                        --------
Purchase price                  $750,000        
                        ========

       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.      

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KENMAR BUSINESS GROUPS, INC.        

Notes to Consolidated Financial Statements, Continued         

(8)     Long-Term Debt                                                          

Long-term debt consists of the following:                       

                                                                [Download Table]

                                                          1995        1994  

                                                                            
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


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

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

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KENMAR BUSINESS GROUPS, INC.        

Notes to Consolidated Financial Statements, Continued         

(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:                   

                                            1995    1994
                                            ----    ----
      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
                                          ========   =======

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

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
                               =======

(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:                                                     

1996                    $38,422 
1997                      2,952 
1998                      2,460 

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KENMAR BUSINESS GROUPS, INC.        

Notes to Consolidated Financial Statements, Continued         

(11)    Preferred Stock                                                         

        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.

   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:                                 

1997                    $150,000
1998                     447,000
1999                      68,700
2000                      86,250
                        --------
                        $751,950
                        ========

    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.

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KENMAR BUSINESS GROUPS, INC.        

Notes to Consolidated Financial Statements, Continued         

(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.                                         

Components of income tax benefit are as follows:                

                                             1995     1994
                                              -----    -----
Taxes currently payable:                                        
  Federal and State                             $  -    (98,768)

Deferred:                                                       
Federal and State                                -        - 
                                               ------  -------
                                                $  -    (98,768)
                                               ======  =======

     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:      

                                               1995       1994
                                                -----      -----
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
                                                   =========   =======

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KENMAR BUSINESS GROUPS, INC.        

Notes to Consolidated Financial Statements, Continued         

(13)    Income Taxes, Continued                                                 

      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.           

(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%.                                                     

    F-50

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KENMAR BUSINESS GROUPS, INC.        

Notes to Consolidated Financial Statements, Continued         

(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-51

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     KENMAR BUSINESS GROUP, INC.
     Consolidated Balance Sheets
     February 29, 1996 and February 28, 1995
 UNAUDITED

                                            February 29,    February 28,
                                            1996            1995
                                             ------------    -------------
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    
                                           ---------       ---------

F-52            

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            KENMAR BUSINESS GROUPS, INC.
           Consolidated Balance Sheets

February 29, 1996 and February 28, 1995         
UNAUDITED         

                                                  February 29,    February 28,
                                                 1996             1995

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

F-53        

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KENMAR BUSINESS GROUPS, INC.
Statements of Income
 Six-month periods ended February 29, 1996 and February 28, 1995
 UNAUDITED

                                                                [Download Table]


                                                           Six Months Ending       
                                                       February 29,  February 28,  
                                                          1996          1995       
                                                                                   
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  


F-54        

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KENMAR BUSINESS GROUPS, INC.      
STATEMENTS OF CASH FLOWS        

                                                   Six months ending
                                                      February 29,  February 28,
                                                     1996             1995

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

F-55      

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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:                                                                

                         August 31, 1995     February 29, 1996

Raw materials                      $193,649                  202,529            
Work-in-process                     111,330                  104,066            
Finished goods                       26,561                   10,936            
                       --------                  -------
                       $331,540                  317,531
                       --------                  -------

(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-56    

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘DEF 14A’ Filing		Date		First		Last			Other Filings
		10/15/02		117
		12/31/99		91
		4/12/98		68
		10/15/97		41
		3/15/97		65
		12/31/96		71		94
		8/31/96		117		118			10KSB,  NT 10-K
		6/30/96		38		103			8-K
Filed on:		6/28/96
		6/3/96		5		61
		5/31/96		62		64
		5/15/96		38
		5/12/96		73
For Period End:		3/31/96		4		106			10QSB,  10QSB/A,  PRE 14A
		3/15/96		59
		3/4/96		39
		3/1/96		38		93
		2/29/96		4		128
		1/26/96		9		107
		1/22/96		19		64
		1/1/96		49		128
		12/31/95		43		107			10QSB/A
		11/23/95		96		103
		11/21/95		39		83
		11/20/95		73
		10/20/95		108
		9/30/95		44					10QSB/A
		9/23/95		43		44
		9/18/95		123		128
		9/15/95		9
		8/31/95		19		128
		8/15/95		103
		7/18/95		9
		7/17/95		64					8-K/A
		7/1/95		87		106
		6/30/95		9		103			10KSB/A
		6/28/95		36
		3/31/95		45		106
		3/15/95		86		106
		2/28/95		48		126
		12/31/94		44		107
		10/19/94		69
		9/30/94		44
		9/29/94		69
		9/1/94		108
		8/31/94		42		122
		6/30/94		31		92
		3/30/94		36		85
		12/3/93		84
		9/29/93		69
		9/23/93		43		44
		9/15/93		43		82
		9/1/93		115		121
		8/31/93		42
		6/30/93		31		69
		10/15/92		23		117
		8/31/92		42		120
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