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

As of:  Thursday, 6/6/96   ·   For:  3/31/96   ·   Accession #:  950168-96-1018   ·   File #:  0-23528

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

 1: PRE 14A     J.A. Industries #43784.1 PRE 14A                     367   1.16M 

Document Table of Contents

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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:                                                      

(X )  Preliminary Proxy Statement                                               
(  )  Confidential, for Use of the Commission Only (as permitted by             
Rule 14a-b(e)(2))                                                   
(  )  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 40 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 March 15, 1996 (the "Record Date") are entitled to notice  
of and to vote at the special meeting. On the Record Date, there were           
approximately 305 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                                         58  

 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.                                                               

 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

              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 September
30 and December 31, 1995; 

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

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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 March 15, 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 40 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.                           

            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 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]

                              1991      1992       1993      1994        1995   
                                                                                
SALES                      $ 1,816   $ 10,015   $ 22,732   $ 22,928    $ 15,566 

NET INCOME                                                                      
   (LOSS)                       39         51        129     (1,359)        181 

WORKING CAPITAL                                                                 
  ( deficit)                   219        265        387     (1,123)       (346)

TOTAL ASSETS                 1,298      2,475      5,526      5,175       3,069 

TOTAL LIABILITIES            1,080      2,024      4,694      5,619       3,326 

LONG TERM DEBT                 122        127        742        780         636 

PREFERRED STOCK                136        351        529        626         730 

STOCKHOLDERS                                                                    
   EQUITY (deficit)             82         99        303     (1,071)       (986)


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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 per Share     $   (0.01)  $   (0.03)   $  0.18       N/A     $ (15.24)    $  15.54     $  21.48      N/A        

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

Income (loss) per Share  $   (0.25)  $   (0.09)   $  0.09    $  0.08    $   1.26     $  19.64     $  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 40 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 
   Miscellaneous income                                  1,724,781           --   
   Interest expense                                        (29,214)      (141,968)
   Miscellaneous expense                                   (18,300)          --   
                                                       -----------    ----------- 

         Other income (expense)                          1,707,710       (139,358)
                                                       -----------    ----------- 

         Income (loss) before income taxes               1,290,950        230,409 

Income tax benefit (expense)                                  --             --   
                                                       -----------    ----------- 

         Net income                                      1,209,950        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  $ 1,249,258    $   179,084 
                                                       -----------    ----------- 

Weighted average number of shares                           64,714         60,369 
                                                       -----------    ----------- 

         Net income per common share and common                                   
         equivalent                                    $     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

Gene Smith                   45           Chief Operating        Chief Oper.    
                                  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                        417,088           7.6%                  

Craig Macnab                             66,534           1.2%                  

Royal Bank of Scotland                  375,000           6.9%                  

Kenneth L. Marks                         18,204           0.3%                  

Ray Steckenrider                          1,154           nil                   

All directors and                                                               
officers as a group                                                             
(4   persons)                           502,980           9.2%                  

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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 March 15, 1996, was approximately 305. 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 is not authorized unissued 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 JA for the years ended
December 31, 1991 and 1992 and June 30, 1994 and 1995 and Kenmar for the years  
ended August 31, 1994 and 1995 included in this proxy statement have been       
audited by Semple & Cooper and KPMG Peat Marwick LLP independent certified      
public accountants, respectively.                                               

 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 A               

SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW       

APPRAISAL RIGHTS              

(a)  Any stockholder of a corporation of this State who holds shares of 
stock on the date of the making of a demand pursuant to subsection (d) of this  
section with respect to such shares, who continuously holds such shares through 
the effective date of the merger or consolidation, who has otherwise complied   
with subsection (d) of this section and who has neither voted in favor of the   
merger or consolidation nor consented thereto in writing pursuant to 228 of this
title shall be entitled to an appraisal by the Court of Chancery                
of the fair value of his shares of stock under the circumstances                
described in subsections (b) and (c) of this section. As used in                
this section, the word "stockholder" means a holder of record of                
stock in a stock corporation and also a member of record of                     
a nonstock corporation; the words "stock" and "share" mean and include          
what is ordinarily meant by those words and also membership interest            
of a member of a nonstock corporation; and the words "depository receipt" mean  
a receipt or other instrument issued by a depository representing an interest   
in one or more shares, or fractions thereof, solely of stock of a corporation,  
which stock is deposited with the depository.                                   

(b) Appraisal rights shall be available for the shares of any class or  
series of stock of a constituent corporation in a merger or consolidation       
to be effected pursuant to 251, 252, 254, 257, 258, 263 or 264 of this title:   

 (1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or       
depository receipts in respect thereof, at the record date fixed to determine   
the stockholders entitled to receive notice of and to vote at the meeting of    
stockholders to act upon the agreement of merger or consolidation, were         
either (i) listed on a national securities exchange or designated as a          
national market system security on an interdealer quotation system by the       
National Association of Securities Dealers, Inc. or (ii) held of record         
by more than 2,000 holders; and further provided that no appraisal rights       
shall be available for any shares of stock of the constituent corporation       
surviving a merger if the merger did not require for its approval the vote      
of the holders of the surviving corporation as provided in subsection (f) of    
251 of this title.                                                              

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(2) Notwithstanding paragraph (1) of this subsection, appraisal rights    
under this section shall be available for the shares of any class or series     
of stock of a constituent corporation if the holders thereof are                
required by the terms of an agreement of merger or consolidation                
pursuant to 251, 252, 254, 257, 258, 263 and 264 of this title                  
to accept for such stock anything except:                                       

    a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;       

    b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock or depository receipts at the      
effective date of the merger or consolidation will be either listed on a  
national securities exchange or designated as a national market system    
security on an interdealer quotation system by the National               
Association of Securities Dealers, Inc. or held of record by              
more than 2,000 holders;                                                  

  c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or  

   d. Any combination of the shares of stock, depository receipts and cash
 in lieu of fractional shares or fractional depository receipts described in
the foregoing subparagraphs a., b. and c. of this paragraph.              

  (3) In the event all of the stock of a subsidiary Delaware corporation party
to a merger effected under 253 of this title is not owned by the parent         
corporation immediately prior to the merger, appraisal rights shall be          
available for the shares of the subsidiary Delaware corporation.                

(c) Any corporation may provide in its certificate of incorporation that  
appraisal rights under this section shall be available for the shares of any    
class or series of its stock as a result of an amendment to its certificate     
of incorporation, any merger or consolidation in which the corporation is a     
constituent corporation or the sale of all or substantially all of the assets   
of the corporation. If the certificate of incorporation contains such a         
provision, the procedures of this section, including those set forth in         
subsections (d) and (e) of this section, shall apply as nearly as is            
practicable.                                                                    

(d) Appraisal rights shall be perfected as follows:                       

(1) If a proposed merger or consolidation for which appraisal rights are  
provided under this section is to be submitted for approval at a meeting of     
stockholders, the corporation, not less than 20 days prior to the meeting,      
shall notify each of its stockholders who was such on the record date for       
such meeting with respect to shares for which appraisal rights are available    
pursuant to subsections (b) or (c) hereof that appraisal rights are available   
for any or all of the shares of the constituent corporations, and shall include 
in such notice a copy of this section. Each stockholder electing to demand the  
appraisal of his shares shall deliver to the corporation, before the taking of  
the vote on the merger or consolidation, a written demand for appraisal of his  
shares. Such demand will be sufficient if it reasonably informs the corporation 
of the identity of the stockholder and that the stockholder intends thereby     
to demand the appraisal of his shares. A proxy or vote against the merger or    
consolidation shall not constitute such a demand. A stockholder electing to     
take such action must do so by a separate written demand as herein provided.    
Within 10 days after the effective date of such merger or consolidation, the    
surviving or resulting corporation shall notify each stockholder of each        
constituent corporation who has complied with this subsection and has not       
voted in favor of or consented to the merger or consolidation of the date       
that the merger or consolidation has become effective; or                       

(2) If the merger or consolidation was approved pursuant to               

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228 or 253 of this title, the surviving or resulting corporation, either        
before the effective date of the merger or consolidation or within 10 days      
thereafter, shall notify each of the stockholders entitled to appraisal         
rights of the effective date of the merger or consolidation and that            
appraisal rights are available for any or all of the shares of the constituent  
corporation, and shall include in such notice a copy of this section. The       
notice shall be sent by certified or registered mail, return receipt            
requested, addressed to the stockholder at his address as it appears on         
the records of the corporation. Any stockholder entitled to appraisal           
rights may, within 20 days after the date of mailing of the notice, demand      
in writing from the surviving or resulting corporation the appraisal of his     
shares. Such demand will be sufficient if it reasonably informs the corporation 
of the identity of the stockholder and that the stockholder intends thereby to  
demand the appraisal of his shares.                                             

  (e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with 
subsections (a) and (d) hereof and who is otherwise entitled to appraisal       
rights, may file a petition in the Court of Chancery demanding a determination  
of the value of the stock of all such stockholders. Notwithstanding the         
foregoing, at any time within 60 days after the effective date of the merger    
or consolidation, any stockholder shall have the right to withdraw his demand   
for appraisal and to accept the terms offered upon the merger or consolidation. 
Within 120 days after the effective date of the merger or consolidation, any    
stockholder who has complied with the requirements of subsections (a) and (d)   
hereof, upon written request, shall be entitled to receive from the corporation 
surviving the merger or resulting from the consolidation a statement setting    
forth the aggregate number of shares not voted in favor of the merger or        
consolidation and with respect to which demands for appraisal have been         
received and the aggregate number of holders of such shares. Such written       
statement shall be mailed to the stockholder within 10 days after his written   
request for such a statement is received by the surviving or resulting          
corporation or within 10 days after expiration of the period for delivery of    
demands for appraisal under subsection (d) hereof, whichever is later.          

(f) Upon the filing of any such petition by a stockholder, service of a   
copy thereof shall be made upon the surviving or resulting corporation, which   
shall, within 20 days after such service, file in the office of the Register    
of Chancery in which the petition was filed a duly verified list containing     
the names and addresses of all stockholders who have demanded payment for       
their shares and with whom agreements as to the value of their shares have      
not been reached by the surviving or resulting corporation. If the petition     
shall be filed by the surviving or resulting corporation, the petition shall    
be accompanied by such a duly verified list. The Register in Chancery, if so    
ordered by the Court, shall give notice of the time and place fixed for the     
hearing of such petition by registered or certified mail to the surviving       
or resulting corporation and to the stockholders shown on the list at the       
addresses therein stated. Such notice shall also be given by 1 or more          
publications at least 1 week before the day of the hearing, in a newspaper      
of general circulation published in the City of Wilmington, Delaware or such    
publication as the Court deems advisable. The forms of the notices by mail      
and by publication shall be approved by the Court, and the costs thereof        
shall be borne by the surviving or resulting corporation.                       

(g) At the hearing on such petition, the Court shall determine the        
stockholders who have complied with this section and who have become            
entitled to appraisal rights. The Court may require the stockholders            
who have demanded an appraisal for their shares and who hold stock represented  
by certificates to submit their certificates of stock to the Register in        
Chancery for notation thereon of the pendency of the appraisal proceedings; and 
if any stockholder fails to comply with such direction, the Court may dismiss   
the proceedings as to such stockholder;                                         

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appraisal, the Court shall appraise the shares, determining their fair value    
exclusive of any element of value arising from the accomplishment or expectation
of the merger or consolidation, together with a fair rate of interest, if any,  
to be paid upon the amount determined to be the fair value. In determining such 
fair value, the Court shall take into account all relevant factors. In          
determining the fair rate of interest, the Court may consider all relevant      
factors, including the rate of interest which the surviving or resulting        
corporation would have had to pay to borrow money during the pendency of the    
proceeding. Upon application by the surviving or resulting corporation or by    
any stockholder entitled to participate in the appraisal proceeding, the Court  
may, in its discretion, permit discovery or other pretrial proceedings and may  
proceed to trial upon the appraisal prior to the final determination of the     
stockholder entitled to an appraisal. Any stockholder whose name appears on the 
list filed by the surviving or resulting corporation pursuant to subsection     
(f) of this section and who has submitted his certificates of stock to the      
Register in Chancery, if such is required, may participate fully in all         
proceedings until it is finally determined that he is not entitled to           
appraisal rights under this section.                                            

(i) The Court shall direct the payment of the fair value of the shares,   
together with interest, if any, by the surviving or resulting corporation       
to the stockholders entitled thereto. Interest may be simple or compound, as    
the Court may direct. Payment shall be so made to each such stockholder, in     
the case of holders of uncertificated stock forthwith, and in the case of       
holders of shares represented by certificates, upon the surrender to the        
corporation of the certificates representing such stock. The Court's decree     
may be enforced as other decrees in the Court of Chancery may be enforced,      
whether such surviving or resulting corporation be a corporation of this State  
or of any state.                                                                

   (j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon application 
of a stockholder, the Court may order all or a portion of the expenses incurred 
by any stockholder in connection with the appraisal proceeding, including,      
without limitation, reasonable attorney's fees and the fees and expenses of     
experts, to be charged pro rata against the value of all the shares entitled    
to an appraisal.                                                                

(k) From and after the effective date of the merger or consolidation, no  
stockholder who has demanded his appraisal rights as provided in subsection (d) 
of this section shall be entitled to vote such stock for any purpose or to      
receive payment of dividends or other distributions on the stock (except        
dividends or other distributions payable to stockholders of record at a         
date which is prior to the effective date of the merger or consolidation);      
provided, however, that if no petition for an appraisal shall be filed within   
the time provided in subsection (e) of this section, or if such stockholder     
shall deliver to the surviving or resulting corporation a written withdrawal    
of his demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation   
as provided in subsection (e) of this section or thereafter with the written    
approval of the corporation, then the right of such stockholder to an           
appraisal shall cease, notwithstanding the foregoing, no appraisal proceeding   
in the Court of Chancery shall be dismissed as to any stockholder without the   
approval of the Court, and such approval may be conditioned upon                
such terms as the Court deems just.                                             

  (l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to   
the merger or consolidation shall have the status of authorized and unissued    
shares of the surviving or resulting corporation.                               

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EXHIBIT B 

AGREEMENT AND PLAN OF MERGER

by and among

 KENMAR BUSINESS GROUPS, INC.,

 J.A. INDUSTRIES, INC.

 and

 J.A. INDUSTRIES OF NORTH CAROLINA, INC.

 Dated as of March 1, 1996

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AGREEMENT AND PLAN OF MERGER      
TABLE OF CONTENTS         

ARTICLE I          THE MERGER                                                   

Section 1.1        The Merger.                                                  
Section 1.2        Option Shares.                                               
Section 1.3        Closing.                                                     
Section 1.4        Transaction Documents.                                       

ARTICLE II         REPRESENTATIONS AND WARRANTIES OF JAI AND ACQUISITION        

Section 2.1        Existence and Good Standing of JAI and Acquisition.          
Section 2.2        Corporate Authority of JAI and Acquisition.                  
Section 2.3        Capital Stock.                                               
Section 2.4        Subsidiaries.                                                
Section 2.5        SEC Reports and Financial Statements.                        
Section 2.6        Liabilities.                                                 
Section 2.7        Litigation.                                                  
Section 2.8        Compliance with Laws.                                        
Section 2.9        No Violations; Consents and Approvals.                       
Section 2.10       Books and Records.                                           
Section 2.11       Assets; Title to Assets; Encumbrances.                       
Section 2.12       Leases.                                                      
Section 2.13       Contracts.                                                   
Section 2.14       Taxes.                                                       
Section 2.15       Employee Benefit Plans.                                      
Section 2.16       Independent Contractor Status.                               
Section 2.17       Broker's or Finder's Fees.                                   
Section 2.18       Insurance.                                                   
Section 2.19       Intellectual Property.                                       
Section 2.20       Governmental Regulation.                                     
Section 2.21       Environmental Matters.                                       

(a)  Certain Definitions.                 
(b)  Compliance with Environmental Laws.  
             (c)  Asbestos, PCBs, Urea Formaldehyde, and Underground
Storage Tanks.                
(d)  Investigations.                      
(e)  Liens.                               
(f)  Hazardous Substances.                
(g)  Environmental Approvals.             

Section 2.22       Employee Relations.                                          
Section 2.23       Restrictive Documents; Consents.                             
Section 2.24       Interests in Clients, Suppliers, Etc.                        
Section 2.25       Bank Accounts; Powers of Attorney.                           

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Section 5.3        Conditions Precedent to Obligations of JAI and Acquisition.  

      (a)  Accuracy of Representations and Warranties.
(b)  Performance by Kenmar.               
(c)  Legal Opinion.                       
(d)  Good Standing and Other Certificates.
(e)  No Adverse Change.                   
(f)  No Litigation Threatened.            
(g)  Consents Under Agreements.           
(h)  Proceedings.                         
(i)  Marks Employment Agreement.          
(j)  GMCP Agreement.                      

ARTICLE VI         CERTAIN COVENANTS AND AGREEMENTS OF THE PARTIES              

Section 6.1        Reverse Stock Split.                                         
Section 6.2        Control of Board of Directors of JAI; President and Chief    
Executive Officer.                    
Section 6.3        Best Efforts.                                                
Section 6.4        Consent of Stockholders; Proxy Statement.                    

(a)  Consent of Stockholders.             
(b)  Proxy Statement.                     

Section 6.5        Employee Benefits; Continued Employment.                     
Section 6.6        Officers' and Directors' Insurance; Indemnification.         
Section 6.7        Stock Transfer Restrictions and Related Matters.             

(a)  Compliance with Securities Laws.     
(b)  Tax-Free Reorganization.             
(c)  Stop Transfer Order.                 
(d)  Certificate Legend.                  

Section 6.8        Demand Registration Rights.                                  

(a)  Certain Definitions.                 
(b)  Demand Registration.                 
(c)  Piggy-Back Registration.             

(i)  Notice of Registration     
(ii) Underwriting.              

(d)  Expenses of Registration.            
(e)  Registration Procedures.             
(f)  Indemnification.                     

Section 6.9        Interim Financial Statements.                                

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ARTICLE VII        SURVIVAL OF REPRESENTATIONS; INDEMNITY                       

Section 7.1        Survival of Representations.                                 
Section 7.2        Indemnification by JAI.                                      
Section 7.3        Indemnification by Kenmar.                                   

ARTICLE VIII       TERMINATION AND ABANDONMENT                                  

Section 8.1        Termination.                                                 
Section 8.2        Effect of Termination.                                       

ARTICLE IX         MISCELLANEOUS                                                

Section 9.1        Fees and Expenses.                                           
Section 9.2        Representations and Warranties.                              
Section 9.3        Extension; Waiver.                                           
Section 9.4        Public Announcements.                                        
Section 9.5        Notices.                                                     
Section 9.6        Entire Agreement.                                            
Section 9.7        Binding Effect; Benefit; Assignment.                         
Section 9.8        Amendment and Modification.                                  
Section 9.9        Further Actions.                                             
Section 9.10       Headings.                                                    
Section 9.11       Counterparts.                                                
Section 9.12       Applicable Law.                                              
Section 9.13       Severability.                                                
Section 9.14       Certain Definitions.                                         
Section 9.15       Signatures.                                                  

Schedules                                                                       

Schedule 2.3     JAI subscriptions, options, warrants, etc.                 
Schedule 2.5     Form 10SB                                                  
Schedule 2.7     Litigation                                                 
Schedule 2.8     Compliance with Laws                                       
Schedule 2.9     Certain Notices                                            
Schedule 2.11    Assets                                                     
Schedule 2.13    Contracts                                                  
Schedule 2.14    Taxes                                                      
Schedule 2.16    Independent Contractors                                    
Schedule 2.18    Insurance Policies                                         
Schedule 2.19    Trademarks, Etc.                                           
Schedule 2.20    Governmental Regulation                                    
Schedule 2.21    Environmental Matters                                      
Schedule 2.22    Employee Relations                                         

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Schedule 2.23    Restrictive Documents                                      
Schedule 2.24    Interests in Clients, Suppliers, Etc.                      
Schedule 2.25    Bank Accounts                                              
Schedule 3.2     Corporate Authority of Kenmar                              
Schedule 3.4     Kenmar subscriptions, options, warrants, etc.              
Schedule 3.6     Restrictive Documents                                      
Schedule 3.7     Litigation                                                 
Schedule 3.8     Compliance with Laws                                       
Schedule 3.9     No Violations; Consents and Approvals                      
Schedule 3.11    Contracts                                                  
Schedule 3.12    Taxes                                                      
Schedule 3.13    Governmental Regulation                                    
Schedule 3.14    Environmental Matters                                      
Schedule 3.15    Employee Relations                                         
Schedule 3.16    Interests in Clients, Suppliers, Etc.                      
Schedule 3.17    Absence of Certain Changes                                 
Schedule 3.18    Disclosure                                                 

Exhibits                                                                        

Exhibit A        Plan of Merger                                             
Exhibit B        Number of Option Shares Per Stockholder                    
Exhibit C        Form of Option Agreement                                   
Exhibit D        Form of Legal Opinion of Steven A. Sanders, P.C.           
Exhibit E        Form of Marks Employment Agreement                         
Exhibit F        Form of Agreement Regarding Substitute Option Agreement    
Exhibit G        Form of Guaranty Agreement                                 
Exhibit H        Form of Legal Opinion of Smith, Anderson, Blount, Dorsett, 
Mitchell & Jernigan, L.L.P.           
Exhibit I        Form of GMCP Agreement                                     

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AGREEMENT AND PLAN OF MERGER

         AGREEMENT  AND  PLAN  OF  MERGER,  dated  as of  March  1,  1996  (this
"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  respective  Boards of  Directors  of JAI and Kenmar have
approved the merger of JAI and Kenmar; and                                      

         WHEREAS, to facilitate such acquisition,  the parties hereto desire for
Acquisition  and  Kenmar to engage  in,  and the  Boards  of  Directors  of JAI,
Acquisition  and Kenmar have approved,  the merger of Acquisition  with and into
Kenmar (the  "Merger")  upon the terms and subject to the  conditions  set forth
herein and in the related Plan of Merger attached as Exhibit A hereto (the "Plan
of Merger");                                                                    

         WHEREAS,  Kenmar and JAI intend and desire for the Merger to constitute
a  reorganization  within the meaning of Section 368(a) of the Internal  Revenue
Code, as amended, for income tax purposes.                                      

         NOW,  THEREFORE,  in  consideration  of the  premises and of the mutual
covenants,  representations,  warranties and agreements  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 agree as follows:                                                

 ARTICLE I
THE MERGER

1.1      The Merger.                                          

                  (a) Upon the  performance of all covenants and  obligations of
the parties  contained  herein and upon the fulfillment of all conditions to the
obligations  of  the  parties  contained  herein  (other  than  such  covenants,
obligations  and  conditions  as shall have been waived in  accordance  with the
terms hereof),  and in accordance with the North Carolina  Business  Corporation
Act, as amended (the  "NCBCA"),  at the Effective Time (as defined in subsection
(b) below),  Acquisition shall be merged with and into Kenmar in accordance with
the Plan of Merger,  the separate  existence  of  Acquisition  shall cease,  and
Kenmar shall be the surviving  corporation  (sometimes referred to herein as the
"Surviving  Corporation")  and shall continue its corporate  existence under the
laws of the State of North Carolina.                                            

                  (b) The Merger  shall be effected by the filing of articles of
merger with the Secretary of State of the State of North  Carolina in accordance
with the  provisions  of  Article  11 of the  NCBCA.  The  merger  shall  become
effective at the time set forth in the articles of merger,  which shall be filed
contemporaneously  with the closing conducted pursuant to Section 1.3 below. The
time and date when the Merger shall become effective is hereinafter  referred to
as the "Effective Time".                                                        

                  (c) For purposes of exchanging shares of Kenmar's Common Stock
for  unregistered  shares of Common Stock of JAI pursuant to the Plan of Merger,
each share of Kenmar's Common Stock shall be converted into the right to receive
Forty-One  (41)  shares  of  unregistered  Common  Stock of JAI  (the  "Exchange
Ratio").  The  Exchange  Ratio shall be a number that upon  consummation  of the
Merger (and taking into account the Reverse  Stock Split,  as defined in Section
6.1, and the exercise of any outstanding                                        

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warrants,  whether  before or after the Reverse  Stock Split,  including but not
limited to warrants granted to Fahnestock & Co., Inc. and/or Bruce Kurchak) will
result in the  Kenmar  stockholders  (the  "Stockholders")  owning an  aggregate
number  of  shares  of JAI  equal  to fifty  percent  (50%)  of the  issued  and
outstanding  shares of JAI as of the  Effective  Time,  and the number set forth
above shall be adjusted  accordingly at the Effective Time. The JAI Common Stock
issued in exchange  for the Kenmar  Common  Stock is  referred  to  collectively
herein as the "Merger  Consideration."  Any  fractional  share  remaining  after
calculation  of the total  number of shares of Common  Stock of JAI  issuable to
each Stockholder shall be eliminated.                                           

                  (d) Kenmar's  Class A Preferred  Stock shall not be converted,
exchanged or otherwise affected by the Merger.                                  

         1.2 Option  Shares.  Contemporaneously  with,  and in addition  to, the
issuances  required by Section 1.1 above and pursuant to the Plan of Merger, and
notwithstanding  any provision  therein to the contrary,  JAI shall grant to the
Representative (as defined in the Option Agreement referred to below), on behalf
of the  Stockholders,  an option (the  "Option") to purchase Seven Hundred Fifty
Thousand  (750,000)  shares of JAI's Common  Stock (the  "Option  Shares") for a
total  consideration  of One Dollar ($1.00) upon the occurrence of any breach of
any representation, warranty, covenant or other obligation of JAI or Acquisition
contained  in this  Agreement.  The  number of Option  Shares in respect of each
Stockholder  is  designated  in Exhibit B hereto as "Number of Option Shares Per
Stockholder." JAI,  Acquisition and Kenmar shall enter into an option agreement,
substantially  in the form of Exhibit C hereto (the "Option  Agreement"),  which
shall contain the terms and conditions  relating to the Option. Upon exercise of
the  Option,  the  Representative  shall  distribute  the  Option  Shares to the
Stockholders pursuant to the terms of the Option Agreement.                     

         1.3  Closing.  Consummation  of the Merger  and the other  transactions
contemplated  by this Agreement and the Plan of Merger shall take place at 10:00
a.m. at the offices of Smith, Anderson,  Blount,  Dorsett,  Mitchell & Jernigan,
L.L.P. on April 12, 1996, or at such other time and date as JAI and Kenmar shall
designate by written  instrument  (such  specified  or other time and date,  the
"Closing Date").                                                                

         1.4  Transaction  Documents.  As  used  in  this  Agreement,  the  term
"Transaction Documents" shall mean,  collectively,  this Agreement,  the Plan of
Merger  (and any  related  articles  or  certificates  of  merger),  the  Option
Agreement,  the Marks Employment Agreement (as defined in Section 5.2(k) below),
the Substitute Option Agreements (as defined in Section 5.2(l) below),  the GMCP
Agreement (as defined in Section 5.3(j) below), and all agreements, instruments,
certificates  and other  documents  executed or delivered in accordance with the
terms of this Agreement or any Transaction Document.                            

ARTICLE II
 REPRESENTATIONS AND WARRANTIES OF JAI AND ACQUISITION

         JAI and  Acquisition  jointly and  severally  represent  and warrant to
Kenmar and agree as follows:                                                    

         2.1 Existence and Good Standing of JAI and Acquisition. Each of JAI and
Acquisition  is a  corporation  duly  organized,  validly  existing  and in good
standing under the laws of its  jurisdiction of  incorporation  and each has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. Each of JAI and Acquisition
is duly qualified or licensed as a foreign corporation to do business, and is in
good  standing  in each  jurisdiction  in which the  property  owned,  leased or
operated  by it or the  nature  of  the  business  conducted  by it  makes  such
qualification  necessary,  except  where the failure to be so duly  qualified or
licensed would not,  either  individually  or in the aggregate,  have a material
adverse effect on the business,  financial condition or results of operations of
JAI or Acquisition taken as a whole.                                            

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         2.2  Corporate  Authority  of JAI  and  Acquisition.  Each  of JAI  and
Acquisition has the corporate power and authority to make, execute,  deliver and
perform this Agreement, and this Agreement has been duly authorized and approved
by all  required  corporate  action  of JAI  and  Acquisition  (other  than  the
requisite  vote  or  consent  of the  stockholders  of JAI  in  accordance  with
applicable law and its Certificate of Incorporation  and By-Laws,  if any). This
Agreement is a valid and binding  obligation of JAI and Acquisition  enforceable
against  JAI and  Acquisition  in  accordance  with  its  terms,  except  as the
enforcement  thereof  may be  limited  by  bankruptcy  and other laws of general
application relating to creditors' rights or general principles of equity.      

         2.3 Capital  Stock.  JAI  currently  has an  authorized  capitalization
consisting of 20,000,000  shares of Common Stock,  9,217,904 of which are issued
and  outstanding,  and  2,000,000  shares  of  Preferred  Stock,  0 of which are
outstanding;  as of the Effective Time (after the Reverse Stock Split), JAI will
have an authorized  capitalization  consisting  of  20,000,000  shares of Common
Stock,  approximately  2,375,000 of which will be outstanding,  and 2,000,000 of
Preferred Stock, 0 of which will be outstanding. None of such outstanding shares
have (or will have) been issued in  violation  of the  preemptive  rights of any
Person.  All  such  outstanding  shares  have  been  (or will  have  been)  duly
authorized and validly issued and are (or will be) fully paid and nonassessable.
There  are no  outstanding  subscriptions,  options,  warrants,  rights,  calls,
commitments, conversion rights, rights of exchange, plans or other agreements of
any character providing for the purchase,  issuance or sale of any shares of the
capital stock of JAI, except as set forth in Schedule 2.3 attached  hereto.  All
shares  constituting  the Merger  Consideration  to be issued in accordance with
this  Agreement  shall be (i) duly  authorized  and validly  issued and shall be
fully paid and  nonassessable,  (ii)  entitled to full voting  rights,  dividend
rights, and the right to receive the proceeds of any liquidation, (iii) free and
clear of all  liens,  encumbrances,  charges,  restrictions  and claims of every
kind, and (iv) subject to a valid exemption from  registration  under applicable
federal and state securities laws.                                              

         2.4 Subsidiaries.  JAI does not own, directly or indirectly,  any share
capital, loan capital, capital stock or other equity or ownership or proprietary
interest in any corporation,  partnership,  association, trust, joint venture or
other entity other than  Acquisition.  JAI is the direct,  record and beneficial
owner of 100% of the  outstanding  shares of capital  stock of  Acquisition.  No
Person  other  than JAI has the  right to vote any of the  outstanding  stock of
Acquisition.  All of such shares so owned by JAI are validly issued,  fully paid
and nonassessable.  There are no outstanding  subscriptions,  options, warrants,
rights,  calls,  commitments,  conversion rights,  rights of exchange,  plans or
other agreements  providing for the purchase,  issuance or sale of any shares of
the  capital  stock  of  Acquisition.  The  term  "Subsidiary"  as  used in this
Agreement  shall  mean with  respect  to Kenmar or JAI,  as the case may be, any
Person of which  Kenmar or JAI,  as the case may be,  (either  alone or together
with any  Subsidiary  of Kenmar or JAI,  as the case may be) owns,  directly  or
indirectly,  more  than  50% of the  stock or other  equity  interests  that are
generally  entitled  to vote for the  election  of a  majority  of the  Board of
Directors  or  governing  body of such Person (as  defined in Section  9.14(a));
provided, however, that with respect to JAI, the term "Subsidiary" shall include
any  and  all  current  and  former  Subsidiaries  of  JAI,  including,  without
limitation, Hutronix, Inc. ("Hutronix") and J.A. Industries (Canada), Inc.      

2.5      SEC Reports and Financial Statements.                

                  (a) JAI has  heretofore  delivered to Kenmar true and complete
copies of all forms, reports,  registration  statements and other filings, filed
by JAI with the United States Securities and Exchange  Commission  ("SEC") since
February 28,  1994,  including  JAI's Report on Form 10-Q for the quarter  ended
December  31,  1995 (such  forms,  reports,  registration  statements  and other
filings,  together with any amendments thereto and any documents incorporated by
reference or required to be  incorporated  by reference,  collectively  the "SEC
Filings"). JAI has filed all forms and reports it has been required to file with
the SEC. As of their  respective  dates, the SEC Filings (i) did not contain any
untrue statement of a material fact or omit                                     

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to state a material fact required to be stated  therein or necessary to make the
statements  therein,  in light of the circumstances  under which they were made,
not misleading and (ii) complied as to form and content in all material respects
with all  applicable  requirements  of the federal  securities  laws and the SEC
rules and regulations promulgated thereunder.                                   

                  (b) The Form 10SB dated  February 28,  1994,  the General Form
for  Registration  of Securities of Small Business  Issuers issued under Section
12(b) or (g) of the  Exchange Act and filed with SEC is attached as Schedule 2.5
hereto,  and all of the information  contained  therein,  at the time filed, was
true and complete in every  respect.  All  information  reflecting  any material
changes to the Form 10SB has been filed in subsequent  reports on Form 10-QSB or
Form 10KSB.                                                                     

                  (c) The  audited  consolidated  balance  sheet  of JAI and its
Subsidiaries  (the "JAI  Balance  Sheet") as at June 30, 1995 (the "JAI  Balance
Sheet  Date"),  and  the  audited  consolidated  balance  sheets  of JAI and its
Subsidiaries as at June 30, 1994 and June 30, 1993, and in each case the related
audited consolidated  statements of income, retained earnings and cash flows and
notes to financial  statements and related reports of accountants for the fiscal
years then  ended,  all as included in the SEC  Filings,  fairly  present in all
material  respects the financial  condition and results of operations of JAI and
its Subsidiaries at such dates and for such periods in accordance with generally
accepted accounting principles. The unaudited consolidated balance sheets of JAI
and its Subsidiaries as at December 31, 1995 and September 30, 1995, and in each
case the related unaudited consolidated  statements of income, retained earnings
and cash  flows  and  notes to  financial  statements  and  related  reports  of
accountants  for the six  months  then  ended do,  and all  unaudited  financial
statements  delivered  by JAI to Kenmar  pursuant  to Section  6.9 hereof  will,
fairly present in all material  respects the financial  condition and results of
operations  of JAI and its  Subsidiaries  at such dates and for such  periods in
accordance with generally accepted accounting principles.                       

         2.6 Liabilities.  The liabilities,  obligations and indebtedness of and
claims  against  JAI and  Acquisition,  known  or  unknown,  due or not yet due,
asserted  or  unasserted   (whether  or  not  probable  of  assertion),   fixed,
contingent, or otherwise do not, in the aggregate,  exceed Five Thousand Dollars
($5,000),   and  JAI  shall  provide   documentary   evidence  to  that  effect,
satisfactory  to  Kenmar,  on  the  Closing  Date.  There  are  no  liabilities,
obligations or indebtedness of or claims against any of JAI's  Subsidiaries that
threaten  to,  or could  conceivably,  have a  material  adverse  effect  on the
business or financial condition of JAI.                                         

         2.7  Litigation.  Except as set forth in Schedule 2.7 attached  hereto,
there  is no  action,  suit,  proceeding  at law or in  equity,  arbitration  or
administrative   or  other   proceeding  or   investigation  by  or  before  any
governmental or other  instrumentality or agency pending or, to JAI's knowledge,
threatened  or likely to be  threatened,  against or affecting JAI or any of its
Subsidiaries  or rights  which could  reasonably  be expected to have a material
adverse  effect on the right or ability of JAI or  Acquisition to carry on their
business as now conducted or on the condition,  whether  financial or otherwise,
or properties of JAI or Acquisition;  and JAI does not know of any basis for any
such  action,   proceeding  or  investigation.   Neither  JAI  nor  any  of  its
Subsidiaries is subject to any judgment,  order or decree entered in any lawsuit
or  proceeding  which may affect  any of JAI's or  Acquisition's  operations  or
business  practices or their ability to acquire any property or conduct business
in any area.                                                                    

         2.8 Compliance with Laws.  Except as set forth in Schedule 2.8 attached
hereto,  JAI and its  Subsidiaries  are in compliance with all applicable  laws,
regulations,  orders,  judgments and decrees. There exists no event, occurrence,
condition  or act which,  with the  giving of  notice,  the lapse of time or the
happening of any further event or condition would  constitute a violation by JAI
or any of its Subsidiaries of any applicable law, regulation, order, judgment or
decree.                                                                         

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         2.9 No Violations;  Consents and Approvals.  The execution and delivery
of  this  Agreement  by  JAI  and  Acquisition  and  the   consummation  of  the
transactions  contemplated  hereby (a) will not  violate  any  provision  of the
Certificate  of  Incorporation  or  Bylaws of JAI or  Acquisition,  (b) will not
violate any state or federal statute, rule,  regulation,  order or decree of any
public  body or  authority  by  which  JAI or  Acquisition  is bound or which is
binding upon any of their respective  properties or assets,  (c) will not result
in a  violation  or breach  of, or  constitute  a default  under,  any  material
license,  franchise,  permit, indenture,  agreement or other instrument to which
JAI or  Acquisition  is a party,  or by which JAI or Acquisition or any of their
respective assets or properties is bound and (d) will not require on the part of
JAI or  Acquisition  any filing with, or permit,  consent or approval of, or the
giving of any notice to, any state or federal  governmental or regulatory  body,
agency or authority or any other Person, except for (i) as set forth in Schedule
2.9  attached  hereto,  (ii) the  filing of the  articles  of  merger  and other
appropriate  merger  documents,  if any,  as  required  by the NCBCA,  (iii) the
requisite  approval of this Agreement and the Merger by the stockholders of JAI,
(iv) the filing with the SEC of the Proxy  Statement (as defined in Section 6.4)
and such reports  under the  Securities  Exchange  Act of 1934,  as amended (the
"Exchange  Act"),  as  may be  required  in  connection  with  the  transactions
contemplated by this  Agreement,  (v) filings under state  securities  laws, and
(vi) such consents, approvals, orders and authorizations contemplated by Section
5.1(e).  JAI has  disclosed  to Kenmar in writing all consents  contemplated  by
Section 5.1(e).                                                                 

2.10     Books and Records.                                   

                           (a)  The  minute  books  of JAI and  Acquisition,  as
previously made available to Kenmar and its  representatives,  contain  accurate
records of all meetings of and corporate action taken by (including action taken
by  written  consent)  the  shareholders  and  Board  of  Directors  of JAI  and
Acquisition.  No meetings of or material actions taken by the Board of Directors
or  shareholders  of  either  of JAI or  Acquisition  have  occurred  except  as
described in the minutes and actions by written consent.  JAI and Acquisition do
not have any of the  originals  of their  records,  systems,  controls,  data or
information recorded, stored, maintained, operated or otherwise wholly or partly
dependent  upon or held by any means  (including any  electronic,  mechanical or
photographic process, whether computerized or not) which (including all means of
access thereto and  therefrom) are not under the exclusive  ownership and direct
control of JAI and Acquisition.                                                 

                           (b) All the books, accounts,  ledgers,  financial and
other  records  of JAI  and  Acquisition  (i)  have  been  fully,  properly  and
accurately  kept  and  completed  in  all  respects,  (ii)  do not  contain  any
inaccuracies or  discrepancies  of any kind, and (iii) show a true and fair view
of  their  respective  trading  transactions  and  their  respective  financial,
contractual and trading positions.                                              

         2.11  Assets;  Title  to  Assets;   Encumbrances.   All  of  JAI's  and
Acquisition's  assets are described in Schedule 2.11 attached  hereto and except
as set forth therein,  JAI and Acquisition have good and marketable title to all
such  assets,  free of all liens and  encumbrances  except for liens for current
taxes, assessments or governmental charges or levies on property not yet due.   

        2.12     Leases.  Neither JAI nor Acquisition is a party to any lease.

         2.13 Contracts.  Except as set forth in Schedule 2.13 attached  hereto,
neither JAI nor  Acquisition  has, is a party to, or is bound by any  agreement,
contract,  guarantee,  loan or  commitment  whatsoever.  Except as  disclosed on
Schedule  2.13  attached  hereto,  neither  JAI nor  Acquisition,  nor to  JAI's
knowledge any other Subsidiary of JAI, has violated any term or condition of any
contract or agreement.  True and correct  copies of all items listed on Schedule
2.13 have been delivered by JAI to Kenmar.                                      

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                  (a) JAI has not  experienced,  and  does not  anticipate,  any
adverse change in relations between JAI and Baboquivari  Cattle Company ("BCC"),
Karl G. Ronstadt ("KGR") and Marilyn H. Ronstadt ("MHR"), whether as a result of
the  announcement  or  consummation  of the  transactions  contemplated  by this
Agreement or otherwise.  JAI does not have notice or reason to believe that BCC,
KGR or MHR or  Hutronix  intends  to  terminate,  void,  cancel,  file  suit  in
connection  with,  or  otherwise  seek to avoid their  obligations  under,  that
certain Settlement  Agreement dated as of November 10, 1995 between JAI and BCC,
KGR, MHR and Hutronix (the "Settlement Agreement"). The Settlement Agreement (i)
is valid and binding and  enforceable in accordance  with its terms,  and "Final
Closing"  (as defined in the  Settlement  Agreement)  has  occurred and has been
expressly acknowledged in writing by all parties thereto, (ii) releases JAI from
any and all claims  that BCC,  KGR and MHR have  against  JAI (other than claims
relating to the Settlement  Agreement and to "Retained Stock" (as defined in the
Settlement Agreement)), and (iii) provides for indemnification by BCC, Hutronix,
KGR and MHR of JAI from and against third party claims relating in any manner to
BCC,  Hutronix,  KGR,  or MHR,  or the  relationship  of JAI  with  any of those
parties.  No money or  property in excess of $10,000 in the  aggregate  has been
advanced or  "upstreamed"  by any of the HTX Group (as defined in the Settlement
Agreement)  to or for the  account  of any of the JAI Group (as  defined  in the
Settlement  Agreement)  and/or their  officers,  shareholders or directors since
January 1, 1995.                                                                

         2.14 Taxes.  Except as set forth in Schedule 2.14 attached hereto,  JAI
and  Acquisition  have filed or caused to be filed,  or will file or cause to be
filed within the times required by law, all federal,  state and local income tax
returns and tax reports,  which are required to be filed by, or with respect to,
JAI and  Acquisition  (taking into account any extension of time to file granted
to or on behalf of JAI or Acquisition)  (collectively,  the "JAI Returns"). True
and correct copies of all federal and state JAI Returns for JAI's 1992, 1993 and
1994 fiscal years will be delivered  by JAI to Kenmar by the Closing  Date.  JAI
will  provide to Kenmar a copy of any other JAI Return as Kenmar may  reasonably
request.  Except as set forth in Schedule  2.14  attached  hereto,  all federal,
state, local and other income,  profits,  gain, value added,  franchise,  sales,
use,  occupancy,  excise  and other  taxes,  duties and  assessments  (including
interest and penalties) ("Taxes") shown to be due and payable on the JAI Returns
by or with respect to JAI or Acquisition have been or, within the times required
by law,  will be paid.  Except as disclosed on Schedule  2.14,  (a) there are no
waivers in effect of the applicable statute of limitations for federal, state or
local income taxes of JAI and  Acquisition  for any taxable  period,  and (b) no
deficiency  assessment or proposed  adjustment with respect to any tax liability
of JAI or Acquisition  for any taxable period is pending or, to the knowledge of
JAI or  Acquisition,  threatened.  Except as set forth in Schedule  2.14, to the
best of JAI's  knowledge,  all  Subsidiaries  of JAI have  filed or caused to be
filed all  federal,  state,  local or other  income tax returns and tax reports,
which are  required to be filed by, or with  respect to, such  Subsidiaries  and
have paid all taxes shown to be payable in connection therewith. Neither JAI nor
Acquisition has, since the JAI Balance Sheet Date, engaged in or been a party to
any  scheme  or  arrangement  of  which  the  main  purpose,  or one of the main
purposes, was the avoidance of or a reduction in liability to Taxes.            

         2.15  Employee  Benefit  Plans.  Neither  JAI  nor  Acquisition  has an
employee  benefit  plan  within  the  meaning of  Section  3(3) of the  Employee
Retirement Income Security Act of 1974, as amended ("ERISA").                   

         2.16 Independent Contractor Status.  Schedule 2.16 attached hereto sets
forth  a  complete  list  of  the  Persons  (other  than  employees  of  JAI  or
Acquisition) that have been engaged by JAI or Acquisition to render  management,
consulting,  or  similar  services  to  JAI  or  Acquisition  as an  independent
contractor  (each such  Person,  a "JAI  Contractor")  during the past three (3)
years. No such person is currently  engaged by JAI and JAI and Acquisition  have
no  obligations  in  connection  with any  such  prior  engagement.  Each of JAI
Contractor  was  at all  times  during  the  course  of  such  JAI  Contractor's
engagement  by JAI or  Acquisition  an                                          

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independent  contractor  to,  and not an  employee  of, JAI or  Acquisition  for
purposes of all applicable income tax withholding requirements and otherwise.   

         2.17 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of JAI or  Acquisition  is, or will be,  entitled to any commission or
broker's or finder's  fees from any of the  parties  hereto,  or from any Person
controlling,  controlled  by or under  common  control  with any of the  parties
hereto, in connection with any of the transactions  contemplated herein,  except
for Rudy  Miller  and/or the Miller  Group and  George  Salloum,  whose fees and
expenses will be paid in accordance with Section 9.1.                           

         2.18  Insurance.  Set  forth in  Schedule  2.18  attached  hereto  is a
complete  list of insurance  policies  which JAI and  Acquisition  maintain with
respect to their business, properties and employees, together with a description
of all claims  thereon in excess of $10,000  during the past three  years.  Such
policies are in full force and effect and are free from any right of termination
on the part of the  insurance  carriers.  Such  policies,  with respect to their
amounts and types of coverage,  are customary for companies  engaged in the same
or  similar  business  as JAI  and  Acquisition,  including  without  limitation
professional liability, and do not require the payment of any unusual premium or
surcharge  as a result of the  experience  of JAI's or  Acquisition's  business.
There  are no  outstanding  unpaid  premiums  except in the  ordinary  course of
business,   and  neither  JAI  nor   Acquisition  has  received  any  notice  of
cancellation  or  non-renewal  of any such  policy or any  increase  in premiums
therefor.  Since the JAI  Balance  Sheet Date,  there has not been any  material
adverse change in JAI's or  Acquisition's  relationship  with its insurers or in
the premiums payable pursuant to such policies. There exists no event of default
or event, occurrence,  condition or act (including the transactions contemplated
by this Agreement)  which,  with the giving of notice,  the lapse of time or the
happening of any further  event or  condition  would  reasonably  be expected to
become a default or  occasion a premium  increase  under any such policy or give
rise to, and JAI and  Acquisition  have no  anticipation  of, any termination or
cancellation thereof or premium increase therefor.                              

         2.19  Intellectual  Property.  Neither  JAI nor  Acquisition  have  any
registered  Intellectual  Property  (as defined  below) and have not applied for
registration  of any rights in respect of Intellectual  Property.  Schedule 2.19
sets forth a complete  list of all  trademarks  and  tradenames  and Third Party
Intellectual  Property (as defined below) used by JAI or Acquisition  during the
past three years. The lawful operation of the business of JAI and Acquisition as
currently  conducted and as currently planned to be conducted requires no rights
under Third Party  Intellectual  Property  other than rights under  Intellectual
Property  listed in  Schedule  2.19 and  rights  granted  to JAI or  Acquisition
pursuant  to  agreements  listed  in  Schedule  2.19.  No claim  adverse  to the
interests of JAI or  Acquisition  in any  Intellectual  Property  used by JAI or
Acquisition has been made in litigation against JAI or Acquisition. To JAI's and
Acquisition's  knowledge,  no such claim has been  threatened or asserted and no
basis or alleged  basis  exists for any such claim.  To JAI's and  Acquisition's
knowledge,  no Person has infringed or otherwise violated JAI's or Acquisition's
rights in any Intellectual Property. Neither the Intellectual Property listed in
Schedule  2.19 nor  JAI's nor  Acquisition's  use of any  Intellectual  Property
infringes  or has  infringed  at any time upon the valid  Intellectual  Property
rights of another,  and no litigation is pending  wherein JAI or  Acquisition is
accused of infringing or otherwise violating the Intellectual  Property right of
another,  or  of  breaching  a  contract  conveying  rights  under  Intellectual
Property.  To JAI's and Acquisition's  knowledge,  no claim for infringement has
been asserted or threatened against JAI or Acquisition,  nor are there any facts
that  would  give  rise to such a claim.  For  purposes  of this  Section  2.19,
"Intellectual Property" means domestic and foreign patents, patent applications,
registered and unregistered  trademarks and service marks, trademark and service
mark applications, trade names, registered and unregistered copyrights, computer
programs,  data bases,  trade  secrets,  know how and  proprietary  information.
"Third Party  Intellectual  Property" means  Intellectual  Property owned by any
person other than JAI or Acquisition.                                           

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         2.20  Governmental  Regulation.  Except as set forth in  Schedule  2.20
attached hereto,  each of JAI and Acquisition  hold all licenses,  certificates,
permits, franchises,  authorizations,  approvals and rights from all appropriate
governmental  authorities and regulatory commissions which are necessary for the
conduct of its business as presently conducted (the "Operating Rights"). JAI and
Acquisition are in compliance with the terms of the Operating Rights.  Except as
set forth in  Schedule  2.20  attached  hereto,  there are  pending  no suits or
proceedings  with respect to suspension,  revocation or nonrenewal of any of the
Operating  Rights and, to the knowledge of JAI and  Acquisition,  no event which
will or may result in a  suspension,  revocation or failure to renew any thereof
has occurred.                                                                   

2.21     Environmental Matters.                               

                  (a) Certain Definitions. For purposes of this Section 2.21 and
Section  3.14,  the  following  terms  shall have the  following  meanings:  (A)
"Facilities"  shall  mean  any  and  all  portions  of any  and  all  buildings,
structures and properties of any sort owned, leased, operated or occupied by JAI
or its Subsidiaries at any time; (B) "Hazardous  Materials" shall mean any solid
or liquid  substance,  waste,  or material  characterized,  defined or listed as
"hazardous" or "toxic" or regulated under Environmental Laws (as defined below),
including any and all  constituents of such substance,  waste, or material,  and
shall  include,  without  limitation,  solid or liquid  raw  materials,  wastes,
petroleum  and petroleum  products,  and source,  special  nuclear or by-product
material  as defined  by the Atomic  Energy  Act of 1954,  as  amended;  and (C)
"Environmental  Laws" shall mean any and all federal,  state,  local and foreign
statutes,  laws, regulations,  ordinances,  rules,  judgments,  orders, decrees,
judicial  decisions,   permits,  concessions,   grants,  franchises,   licenses,
agreements or other  governmental  restrictions or requirements  relating to the
environment  or hazardous or toxic  materials or  substances,  the protection of
human health and the environment,  or the release of any materials or substances
into the  environment,  whether  existing or  hereafter  enacted or issued which
govern  behavior,  activities or conditions with respect to the Facilities prior
to the Closing  Date,  including  without  limitation  The  Hazardous  Substance
Accounting  Act of  1981,  as  amended,  and  The  Hazardous  Substance  Control
Accounting Act of 1981, as amended.                                             

                  (b)  Compliance  with  Environmental  Laws.  Each  of JAI  and
Acquisition is in compliance with all applicable  Environmental Laws,  including
without limitation those relating to product registration, pollution control and
environmental contamination and those governing the generation, use, collection,
discharge,  or disposal of Hazardous Materials and record keeping,  notification
and reporting requirements  respecting Hazardous Materials.  Except as disclosed
in Schedule 2.21 attached hereto,  JAI and Acquisition have not violated or been
alleged  to have  violated,  nor  has JAI or  Acquisition  been  subject  to any
administrative or judicial  proceeding pursuant to, any Environmental Law at any
time.  Except as disclosed in Schedule 2.21, there are no facts or circumstances
which  could  form the  basis for the  assertion  of any  claim  against  JAI or
Acquisition relating to environmental matters,  including without limitation any
claim arising from past or present  environmental  practices  asserted under any
Environmental  Law, which might have an adverse effect on the business,  results
of operations, financial condition or prospects of JAI or Acquisition.          

                  (c) Asbestos, PCBs, Urea Formaldehyde, and Underground Storage
Tanks. There is not and has never been constructed,  placed, deposited,  stored,
disposed   of   nor   located   on  or  at  any   Facility   any   asbestos   or
asbestos-containing-materials,  any PCBs or any insulating  materials containing
urea  formaldehyde  in any form, and no  underground  treatment or storage tanks
(excluding  septic  tanks)  or  sumps  are or  have  ever  been  located  on the
Facilities, except as listed in Schedule 2.21.                                  

                  (d)   Investigations.   There   have  been  no   environmental
investigations,  studies, audits, tests, reviews or other analyses conducted by,
or on behalf of, or which are in the possession or control of                   

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JAI or Acquisition  in relation to the  Facilities,  except those  identified on
Schedule  2.21  attached  hereto,  copies of which have been  provided by JAI to
Kenmar.                                                                         

                  (e) Liens. There are no liens arising under or pursuant to any
Environmental Law on the Facilities and no actions by any governmental authority
have been taken or are in process which likely would  subject the  Facilities to
such liens,  and neither JAI nor  Acquisition is required to place any notice or
restriction relating to the presence of any Hazardous Materials at any Facility.

(f)      Hazardous Substances.              

                           (i)  Except as set forth on  Schedule  2.21  attached
hereto, neither JAI nor Acquisition, nor any previous owner, tenant, occupant or
user of the  Facilities,  nor any other person,  has engaged in or permitted any
operations or activities upon, or any use or occupancy of the Facilities, or any
portion  thereof,  for the  purpose  of or in any way  involving  the  handling,
manufacture,  treatment, storage, use, generation, release, discharge, refining,
dumping or disposal of any Hazardous  Substance on, under, or in the Facilities,
or transported any Hazardous Substance to, from or across the Facilities,  which
activity  violated or violates or created,  creates,  or could create  liability
under  any  Environmental   Laws,  nor  is  any  Hazardous  Substance  presently
deposited,  stored,  or otherwise located on, under, in or about the Facilities,
nor has any Hazardous  Substance  migrated from the  Facilities  upon or beneath
other  properties,  nor has any  Hazardous  Substance  migrated or threatened to
migrate  from other  properties  on,  under,  or beneath the  Facilities,  which
activity  violated or violates or  created,  creates or could  create  liability
under any Environmental Laws.                                                   

                           (ii)  Except as set forth on Schedule  2.21  attached
hereto,  neither  JAI  nor  Acquisition  has  transported  or  arranged  for the
transportation  of any Hazardous  Substance  from the Facilities to any location
which is listed on the  National  Priorities  List under  CERCLA,  or listed for
possible  inclusion  on  the  National  Priorities  List  by  the  Environmental
Protection  Agency  in  CERCLIS  or on any  similar  state  list or which is the
subject of federal,  state, or local enforcement actions or other investigations
which may lead to claims against JAI or Acquisition for cleanup costs,  remedial
work, damages to natural resources or for personal injury claims, including, but
not limited to, claims under CERCLA.                                            

                           (iii)  No  Hazardous  Substance  generated  by JAI or
Acquisition at the Facilities has been recycled, treated, stored, disposed of or
released by JAI or  Acquisition  or its agents or  contractors  at any  location
other than those listed in Schedule 2.21 attached hereto.                       

                  (g) Environmental Approvals. Schedule 2.21 contains a complete
and accurate list of all  registrations,  licenses,  permits,  and  governmental
approvals  that are or are expected to be required under  Environmental  Laws of
JAI or  Acquisition,  for  the  ownership,  operation,  and  maintenance  of the
Facilities (the "Environmental Approvals"). All such Environmental Approvals set
forth in  Schedule  2.21  attached  hereto  have  been duly  obtained  by JAI or
Acquisition  and are in full  force  and  effect  and all  conditions  contained
therein  that need to be  satisfied  as of the date hereof have been  satisfied.
There is no proceeding or  investigation  pending or, to JAI's or  Acquisition's
knowledge,  threatened  which seeks, or may reasonably be expected,  to rescind,
terminate,  modify, suspend, or decline to renew any Environmental Approval, nor
are  there  to the best of JAI's or  Acquisition's  knowledge  after  reasonable
inquiry,  any facts or  circumstances  which may  cause a  governmental  body to
rescind,  terminate,  modify,  suspend,  or  decline  to  renew  or  reissue  an
Environmental Approval.                                                         

         2.22 Employee  Relations.  Schedule 2.22  attached  hereto  contains an
accurate list of all of JAI's and Acquisition's employees,  showing for each his
or her  position,  date of  birth,  date of  employment,  1995  compensation  or
remuneration,   and  current  annualized  salary.  To  JAI's  and  Acquisition's
knowledge,  there                                                               

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has not been and will not be any adverse  change in relations  with employees of
JAI  and  Acquisition  as a  result  of any  announcement  of  the  transactions
contemplated  by this  Agreement.  Except as set forth in Schedule 2.22 attached
hereto,  no employees of JAI or Acquisition  are represented by a union or other
labor organization or covered by any collective bargaining agreement.  There are
no material  controversies  pending or, to the knowledge of JAI or  Acquisition,
threatened  between JAI or any of its  Subsidiaries and any  representatives  of
their respective employees, and, to the knowledge of JAI and Acquisition,  there
are no material organizational efforts presently being made involving any of the
presently unorganized employees of JAI or Acquisition.  JAI and its Subsidiaries
have, to the knowledge of JAI and Acquisition, complied in all material respects
with  all  laws  relating  to  the  employment  of  labor,  including,   without
limitation,   any  provisions  thereof  relating  to  wages,  hours,  collective
bargaining and the payment of social  security and similar taxes,  and no Person
has, to the  knowledge of JAI or  Acquisition,  asserted  that JAI or any of its
Subsidiaries  is liable in any  material  amount for any arrears of wages or any
taxes or penalties  for failure to comply with any of the  foregoing.  Except as
set forth in Schedule 2.22 attached hereto, there is no material action, suit or
proceeding  by any Person  pending or, to the  knowledge of JAI or  Acquisition,
threatened,  against  JAI  or  any  of  its  Subsidiaries  involving  employment
discrimination or wrongful discharge or similar claims.                         

   2.23 Restrictive Documents;  Consents. Except  as  set  forth  in
Schedule  2.23  attached  hereto,  neither  JAI  nor Acquisition is subject     
to, or a party to, any charter,  bylaw,  mortgage,  lien, lease, license,       
agreement,  contract, permit, instrument, law, rule, ordinance, regulation,     
order,  judgment or decree, or any other restriction of any kind or character,  
which  adversely  affects  the  business  practices,  operations  or condition  
of JAI or  Acquisition  or any of their  assets or property,  or which would    
be  violated  by,  prevent  or  impair  (whether  by  acceleration  of any      
liability,  creation of any lien or  encumbrance  or  otherwise)  or require any
approval,  consent, clearance, notice or assumption (other than any approvals or
consents  already  obtained and in effect) of any Person in connection  with the
consummation  of  the  transactions   contemplated  by  this  Agreement  or  any
Transaction  Document,  compliance  by  JAI  and  Acquisition  with  the  terms,
conditions and provisions hereof or thereof,  or continued operation of JAI's or
Acquisition's   business   after  the  date  hereof  or  the  Closing   Date  on
substantially the same basis as heretofore  operated or which would restrict the
ability of JAI or Acquisition to acquire any property or conduct business in any
area.                                                                           

         2.24  Interests  in Clients,  Suppliers,  Etc.  Except as  described in
Schedule  2.24  attached  hereto,  no officer,  director,  or greater than three
percent (3%) shareholder of JAI possesses, directly or indirectly, any financial
interest  in (other  than  ownership  of less than 5% of the  equity  capital or
similar  interest),  or is a director,  officer or employee of, any corporation,
firm,  association  or  business  organization  which  is  a  client,  supplier,
customer,  lessor,  lessee,  or  competitor  of JAI or  Acquisition  (a "Related
Person").  Each of JAI and Acquisition has conducted each and every  transaction
with  any  Related  Person  on  an  arm's-length  basis  in a  manner  fair  and
commercially reasonable to JAI and Acquisition and such Related Person.         

         2.25 Bank  Accounts;  Powers of  Attorney.  Set forth in Schedule  2.25
attached  hereto is an  accurate  and  complete  list  showing  (a) the name and
address of each bank in which JAI or Acquisition  has an account or safe deposit
box, the number of any such account or any such box and the names of all persons
authorized to draw thereon or to have access  thereto,  and (b) the names of all
persons,  if any,  holding  powers of  attorney  from JAI or  Acquisition  and a
summary statement of the terms thereof.                                         

         2.26 Absence of Certain Changes.  Since the JAI Balance Sheet Date, (i)
there has not been any adverse  change in the business,  financial  condition or
the results of operations of JAI or Acquisition;  (ii) the businesses of JAI and
Acquisition have been conducted only in the ordinary  course;  (iii) neither JAI
nor Acquisition has incurred any liabilities  (direct,  contingent or otherwise)
or engaged in any material  transaction  or entered into any material  agreement
outside of the ordinary course of business;  (iv) JAI and  Acquisition          

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have not increased the compensation of any officer or granted any general salary
or benefits increase to their employees; and (v) neither JAI nor Acquisition has
taken any  action  prohibited  by  Section  4.1 hereof  except as  permitted  or
required by this Agreement.                                                     

         2.27  Disclosure.  None of this  Agreement,  the  financial  statements
referred to in Section 2.5 hereof (including the notes thereto), any Transaction
Document,  or any Schedule,  Exhibit or certificate attached hereto or delivered
in accordance with the terms hereof contains any untrue  statement of a material
fact or omits any  statement of a material  fact  necessary in order to make the
statements   contained  herein  or  therein  not  misleading.   All  appraisals,
valuations,  estimates or other  projections  concerning JAI and  Acquisition or
JAI's  securities (in each case whether in the possession of JAI or Acquisition,
or any  affiliate  thereof)  which would be material to a reasonable  investor's
investment  decision  with  respect  to the  transactions  contemplated  by this
Agreement  have  been  provided  to  Kenmar.  There  is no fact  known to JAI or
Acquisition,  or any of  their  officers  or  directors,  which  materially  and
adversely affects the business,  prospects,  valuation or financial condition of
JAI or  Acquisition  or either of their  properties or assets which has not been
set forth in this Agreement, the financial statements referred to in Section 2.5
hereof  (including the notes thereto),  or any Schedule,  Exhibit or certificate
attached hereto or delivered in accordance with the terms hereof or any document
or  statement  in  writing  which  has been  supplied  by or on behalf of JAI or
Acquisition  or by any of their  directors  or officers in  connection  with the
transactions contemplated by this Agreement.                                    

         2.28 Copies of Documents.  JAI and Acquisition have delivered to Kenmar
and its advisers true,  complete and correct copies of all documents referred to
in this Article II or in any Schedule attached hereto.                          

         2.29  Independent  Operations  of JAI. All revenues and expenses  which
properly  should have been allocated or attributed to JAI have been so allocated
or attributed in the financial  statements referred to in Section 2.5, and there
are no intercompany  transactions between JAI and any of its shareholders or any
affiliate of JAI which have not been disclosed in such financial statements.    

         2.30 Securities  Exemption.  The Merger  Consideration  shall be issued
pursuant to a valid exemption from  registration  under  applicable  federal and
state securities laws,  including but not limited to the Securities Act of 1933,
as amended.                                                                     

         2.31 Officer's Certificate.  The certificate required by Section 5.2(a)
shall be true and correct.                                                      

  2.32 Absence of Certain  Conditions.  To JAI's and Acquisition's
knowledge, there exists no event, occurrence,  condition or act which, with     
the giving of notice or the lapse of time, would constitute a breach of or      
cause any of the  representations and warranties in this Article II to become   
untrue.                                                                         

         The  representations  and  warranties  set forth in this Article II are
cumulative.  The subject  matter covered by any Section of this Article II shall
not be  exclusive  as to such  subject  matter to the extent  covered by another
Section  of this  Article  II, and the  specificity  of any  representation  and
warranty shall not affect or limit the generality of any other representation or
warranty.                                                                       

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 ARTICLE III
REPRESENTATIONS AND WARRANTIES OF KENMAR

Kenmar represents and warrants as follows:                    

         3.1 Existence and Good Standing of Kenmar. Kenmar is a corporation duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of its
jurisdiction  of  incorporation  and  has  all  requisite  corporate  power  and
authority to own,  lease and operate its properties and to carry on its business
as now  being  conducted.  Kenmar is duly  qualified  or  licensed  as a foreign
corporation  to do business,  and is in good  standing in each  jurisdiction  in
which the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary,  except where the failure to
be so duly  qualified  or  licensed  would not,  either  individually  or in the
aggregate,  have a material adverse effect on the business,  financial condition
or results of operations of Kenmar taken as a whole.                            

         3.2 Corporate Authority of Kenmar.  Except as set forth in Schedule 3.2
attached hereto,  Kenmar has the corporate power and authority to make, execute,
deliver and perform this Agreement,  and this Agreement has been duly authorized
and  approved  by all  required  corporate  action  of  Kenmar  (other  than the
requisite vote or consent of the  Stockholders in accordance with applicable law
and its Certificate of Incorporation  and By-Laws,  if any). This Agreement is a
valid and binding obligation of Kenmar enforceable  against Kenmar in accordance
with its terms,  except as the enforcement  thereof may be limited by bankruptcy
and other laws of general  application  relating to creditors' rights or general
principles of equity.                                                           

         3.3 Subsidiaries. The only Subsidiary of Kenmar is Test Services, Inc.,
a North Carolina corporation.  Kenmar is the direct, record and beneficial owner
of 100% of the outstanding shares of capital stock of such Subsidiary. No Person
other  than  Kenmar has the right to vote any of the  outstanding  stock of such
Subsidiary. All of such shares so owned by Kenmar are validly issued, fully paid
and nonassessable and are owned free and clear of any claim,  lien,  encumbrance
or agreement with respect thereto.                                              

         3.4 Capital Stock. Kenmar has an authorized  capitalization  consisting
of 100,000 Common Shares, 65,714 of which are issued and outstanding, and 30,000
shares of Class A Preferred  Stock,  9,926 of which are issued and  outstanding.
None of such outstanding  shares have been issued in violation of the preemptive
rights of any Person.  All such outstanding shares have been duly authorized and
validly  issued and are fully paid and  nonassessable.  There are no outstanding
subscriptions, options, warrants, rights, calls, commitments, conversion rights,
rights of exchange, plans or other agreements of any character providing for the
purchase,  issuance or sale of any shares of the capital stock of Kenmar, except
as set forth in Schedule 3.4 attached hereto.                                   

3.5      Financial Statements; Exchange Act.                  

                  (a)  Kenmar has  heretofore  furnished  JAI with an  unaudited
consolidated  balance  sheet and an unaudited  statement of income of Kenmar and
its  Subsidiary  as at December 31, 1995,  and an audited  consolidated  balance
sheet and related audited consolidated  statements of income,  retained earnings
and cash  flows  and  notes to  financial  statements  and  related  reports  of
accountants,  for the fiscal  year  ended  August 31,  1995  (collectively,  the
"Financial  Statements").  Such  Financial  Statements  fairly  present  in  all
material respects the financial condition and results of operations of Kenmar at
such dates and for such periods in accordance with generally accepted accounting
principles consistently applied.                                                

                  (b) Kenmar is not subject to the reporting requirements of the
Exchange Act.                                                                   

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  3.6 Restrictive  Documents. Except as set forth in Schedule  3.6
attached  hereto,  Kenmar is not  subject  to, or a party to, any charter,      
bylaw, mortgage,  lien, lease, license,  permit,  agreement,  contract,         
instrument, law, rule, ordinance,  regulation, order, judgment or decree, or any
other  restriction of any kind or character  which would be violated by, prevent
or impair materially (whether by acceleration of any liability,  creation of any
lien or  encumbrance  or  otherwise)  or  require  any  approval  or  consent in
connection with consummation of the transactions  contemplated by this Agreement
or compliance by Kenmar with the terms, conditions and provisions hereof.       

         3.7  Litigation.  Except as set forth in Schedule 3.7 attached  hereto,
there  is no  action,  suit,  proceeding  at law or in  equity,  arbitration  or
administrative   or  other   proceeding  or   investigation  by  or  before  any
governmental  or  other  instrumentality  or  agency  pending  or,  to  Kenmar's
knowledge, threatened or likely to be threatened, against or affecting Kenmar or
rights which could  reasonably be expected to have a material  adverse effect on
the right or ability of Kenmar to carry on its  business as now  conducted or on
the  condition,  whether  financial or otherwise,  or properties of Kenmar;  and
Kenmar  does  not  know  of  any  basis  for  any  such  action,  proceeding  or
investigation. Kenmar is not subject to any judgment, order or decree entered in
any  lawsuit  or  proceeding  which may  affect any of  Kenmar's  operations  or
business practices or its ability to acquire any property or conduct business in
any area.                                                                       

         3.8 Compliance with Laws. To Kenmar's knowledge, except as set forth in
Schedule  3.8  attached  hereto,  Kenmar  is in  material  compliance  with  all
applicable  laws,  regulations,  orders,  judgments  and  decrees.  To  Kenmar's
knowledge,  there exists no event, occurrence,  condition or act which, with the
giving of notice,  the lapse of time or the  happening  of any further  event or
condition would constitute a violation of any applicable law, regulation, order,
judgment or decree.                                                             

         3.9 No Violations;  Consents and Approvals.  The execution and delivery
of  this  Agreement  by  Kenmar  and  the   consummation  of  the   transactions
contemplated  hereby (a) will not violate any  provision of the  Certificate  of
Incorporation or Bylaws of Kenmar,  (b) will not materially violate any state or
federal  statute,  rule,  regulation,  order or  decree  of any  public  body or
authority  by  which  Kenmar  is  bound  or  which  is  binding  upon any of its
properties or assets,  (c) will not result in a material violation or breach of,
or  constitute  a  default  under,  any  material  license,  franchise,  permit,
indenture, agreement or other instrument to which Kenmar is a party, or by which
Kenmar or any of its assets or  properties  is bound and (d) will not require on
the part of Kenmar any filing  with,  or permit,  consent or approval of, or the
giving of any notice to, any state or federal  governmental or regulatory  body,
agency or authority or any other Person, except for (i) as set forth in Schedule
3.9  attached  hereto,  (ii) the  filing of the  articles  of  merger  and other
appropriate  merger  documents,  if any,  as  required  by the NCBCA,  (iii) the
requisite  approval of this  Agreement and the Merger by the  Stockholders,  and
(iv) such consents, approvals, orders and authorizations contemplated by Section
5.1(e).                                                                         

3.10     Books and Records.                                   

                  (a) To Kenmar's knowledge,  the minute book of Kenmar contains
accurate  records of all  material  meetings of and  corporate  action  taken by
(including  action  taken by  written  consent)  the  shareholders  and Board of
Directors of Kenmar.  No meetings of or material  actions  taken by the Board of
Directors or  shareholders  of Kenmar have  occurred  except as described in the
minutes  and  actions  by  written  consent.  Kenmar  does  not  have any of the
originals of its  records,  systems,  controls,  data or  information  recorded,
stored,  maintained,  operated or otherwise  wholly or partly  dependent upon or
held by any means (including any electronic, mechanical or photographic process,
whether  computerized  or not) which  (including all means of access thereto and
therefrom) are not under the exclusive ownership and direct control of Kenmar.  

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                  (b) To Kenmar's knowledge,  all the books, accounts,  ledgers,
financial  and  other  records  of  Kenmar  (i) have been  fully,  properly  and
accurately kept and completed in all respects,  (ii) do not contain any material
inaccuracies  or  discrepancies,  and  (iii)  show a true and fair view of their
respective trading transactions and their respective financial,  contractual and
trading positions.                                                              

         3.11 Contracts.  Except as set forth in Schedule 3.11 attached  hereto,
Kenmar does not have,  and is not a party to, and is not bound by any agreement,
contract,  guarantee, loan or commitment pursuant to which Kenmar is entitled to
receive,  or is  required  to pay,  $100,000  or more.  Except as  disclosed  on
Schedule 3.11 attached hereto, to Kenmar's knowledge,  it is not in violation of
any material  term or condition of any contract or agreement  listed on Schedule
3.11.  True and correct  copies of all items  listed on Schedule  3.11 have been
delivered by Kenmar to JAI.                                                     

         3.12 Taxes. To Kenmar's knowledge,  it has filed or caused to be filed,
or will file or cause to be filed within the times required by law, all federal,
state and local  income tax returns and tax  reports,  which are  required to be
filed by, or with respect to, Kenmar  (taking into account any extension of time
to file granted to or on behalf of Kenmar) (collectively, the "Kenmar Returns").
True and correct  copies of all federal and state  Kenmar  Returns for  Kenmar's
1992,  1993 and 1994 fiscal years have been  delivered by Kenmar to JAI, or will
be delivered by Kenmar to JAI prior to the Effective  Time.  Kenmar will provide
to JAI a copy of any other Kenmar Return as JAI may reasonably  request.  Except
as set forth in Schedule 3.12 attached  hereto,  all federal,  state,  local and
other income,  profits,  gain, value added,  franchise,  sales, use,  occupancy,
excise  and  other  taxes,  duties  and  assessments   (including  interest  and
penalties)  ("Taxes")  shown to be due and  payable on the Kenmar  Returns by or
with respect to Kenmar have been or,  within the times  required by law, will be
paid.  Except as disclosed on Schedule  3.12, (a) there are no waivers in effect
of the  applicable  statute of  limitations  for federal,  state or local income
taxes of Kenmar for any taxable  period,  and (b) no  deficiency  assessment  or
proposed  adjustment with respect to any tax liability of Kenmar for any taxable
period is pending or, to the  knowledge of Kenmar,  threatened.  Kenmar has not,
since the date of the most  current  balance  sheet  provided to JAI pursuant to
Section 3.5 above,  engaged in or been a party to any scheme or  arrangement  of
which the main purpose,  or one of the main purposes,  was the avoidance of or a
reduction in liability for Taxes.                                               

         3.13  Governmental  Regulation.  Except as set forth in  Schedule  3.13
attached  hereto,  to  Kenmar's  knowledge,  it  holds  all  material  licenses,
certificates, permits, franchises, authorizations, approvals and rights from all
appropriate  governmental  authorities  and  regulatory  commissions  which  are
necessary  for the conduct of its business as presently  conducted  (the "Kenmar
Operating Rights"). To its knowledge,  Kenmar is in material compliance with the
terms of the  Kenmar  Operating  Rights.  Except as set forth in  Schedule  3.13
attached  hereto,  there are  pending no suits or  proceedings  with  respect to
suspension,  revocation or nonrenewal of any of the Kenmar Operating Rights and,
to the  knowledge of Kenmar,  no event which will or may result in a suspension,
revocation or failure to renew any thereof has occurred.                        

         3.14  Environmental  Matters.  To its knowledge,  Kenmar is in material
compliance with all applicable  Environmental Laws and is in material compliance
with the  requirements  of any  permits  issued  under  Environmental  Laws.  To
Kenmar's  knowledge,  except  as set forth in  Schedule  3.14  attached  hereto,
Hazardous  Substances  have not at any time been  generated,  used,  treated  or
stored on, or  transported  to or from, or released or disposed of on,  Kenmar's
real property outside of the ordinary course of Kenmar's  business.  To Kenmar's
knowledge,  there are not now and never have been any underground  storage tanks
located on Kenmar's real property.                                              

         3.15  Employee  Relations.   Schedule  3.15  attached  hereto  contains
Kenmar's current payroll listing. To Kenmar's knowledge,  there has not been and
will not be any materially  adverse change in relations with                    

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employees  of  Kenmar  as a  result  of any  announcement  of  the  transactions
contemplated  by this  Agreement.  Except as set forth in Schedule 3.15 attached
hereto,  no  employees  of  Kenmar  are  represented  by a union or other  labor
organization  or covered by any  collective  bargaining  agreement.  To Kenmar's
knowledge,  there are no material  controversies  pending or threatened  between
Kenmar  and any  representatives  of their  respective  employees,  and,  to the
knowledge  of Kenmar,  there are no material  organizational  efforts  presently
being made involving any of the presently  unorganized  employees of Kenmar.  To
its  knowledge,  Kenmar has  complied  in all  material  respects  with all laws
relating  to  the  employment  of  labor,  including,  without  limitation,  any
provisions  thereof  relating to wages,  hours,  collective  bargaining  and the
payment  of  social  security  and  similar  taxes,  and no Person  has,  to the
knowledge of Kenmar,  asserted that Kenmar is liable in any material  amount for
any arrears of wages or any taxes or penalties for failure to comply with any of
the foregoing. Except as set forth in Schedule 3.15 attached hereto, to Kenmar's
knowledge, there is no material action, suit or proceeding by any Person pending
or threatened  against Kenmar involving  employment  discrimination  or wrongful
discharge or similar claims.                                                    

         3.16  Interests  in Clients,  Suppliers,  Etc.  Except as  described in
Schedule 3.16 attached hereto, to Kenmar's knowledge,  no officer,  director, or
greater than three percent (3%)  shareholder  of Kenmar  possesses,  directly or
indirectly,  any financial  interest in (other than ownership of less than 5% of
the equity capital or similar interest),  or is a director,  officer or employee
of, any  corporation,  firm,  association  or business  organization  which is a
client, supplier,  customer,  lessor, lessee, or competitor of Kenmar (a "Kenmar
Related  Person").  To  Kenmar's  knowledge,  it has  conducted  each and  every
transaction with any Kenmar Related Person on an arm's-length  basis in a manner
fair and commercially reasonable to Kenmar and such Kenmar Related Person.      

         3.17 Absence of Certain  Changes.  Except as described in Schedule 3.17
attached hereto, to the best of Kenmar's  knowledge,  since the date of the most
current  balance sheet provided to JAI pursuant to Section 3.5 above,  (i) there
has not been any material adverse change in the business, financial condition or
the  results of  operations  of  Kenmar;  (ii) the  business  of Kenmar has been
conducted  only in the  ordinary  course;  (iii)  Kenmar  has not  incurred  any
liabilities  (direct,  contingent  or  otherwise)  or  engaged  in any  material
transaction  or entered  into any  material  agreement  outside of the  ordinary
course of business; (iv) Kenmar has not materially increased the compensation of
any officer or granted any material  general salary or benefits  increase to its
employees;  and (v) Kenmar has not taken any action  prohibited  by Section  4.1
hereof except as permitted or required by this Agreement.                       

         3.18 Disclosure.  To Kenmar's  knowledge,  none of this Agreement,  the
financial  statements  referred  to in Section 3.5 hereof  (including  the notes
thereto),  any  Transaction  Document,  or any Schedule,  Exhibit or certificate
attached  hereto or delivered in accordance  with the terms hereof  contains any
materially  untrue  statement  of a material  fact or omits any  statement  of a
material  fact  necessary in order to make the  statements  contained  herein or
therein not  materially  misleading.  To  Kenmar's  knowledge,  all  appraisals,
valuations,  estimates  or  other  projections  concerning  Kenmar's  securities
(whether in the  possession of Kenmar or any affiliate  thereof)  which would be
material to a  reasonable  investor's  investment  decision  with respect to the
transactions  contemplated by this Agreement have been provided to JAI. There is
no fact known to Kenmar or any of its officers or  directors,  which  materially
and adversely affects the business, prospects,  valuation or financial condition
of  Kenmar  or its  properties  or  assets  which has not been set forth in this
Agreement, the financial statements referred to in Section 3.5 hereof (including
the notes thereto),  or any Schedule,  Exhibit or certificate attached hereto or
delivered  in  accordance  with the terms hereof or any document or statement in
writing  which  has been  supplied  by or on  behalf  of Kenmar or by any of its
directors or officers in connection with the  transactions  contemplated by this
Agreement.                                                                      

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         3.19 Copies of Documents. To its knowledge, Kenmar has delivered to JAI
and its advisers true,  complete and correct copies of all documents referred to
in this Article III or in any Schedule attached hereto.                         

         3.20 Absence of Certain Conditions. To Kenmar's knowledge, there exists
no event,  occurrence,  condition or act which, with the giving of notice or the
lapse of  time,  would  constitute  a  material  breach  of or cause  any of the
representations and warranties in this Article III to become materially untrue. 

         The  representations  and  warranties set forth in this Article III are
cumulative.  The subject matter covered by any Section of this Article III shall
not be  exclusive  as to such  subject  matter to the extent  covered by another
Section of this Article  III,  and the  specificity  of any  representation  and
warranty shall not affect or limit the generality of any other representation or
warranty.                                                                       

ARTICLE IV
CONDUCT OF BUSINESS; EXCLUSIVE DEALING; REVIEW

         4.1 Conduct of the Business of JAI,  Acquisition and Kenmar Pending the
Effective  Time.  JAI,  Acquisition  and  Kenmar  each  agree  that,  except  as
permitted,  required or specifically contemplated by, or otherwise described in,
this Agreement or otherwise  consented to or approved in writing by JAI,  during
the period commencing on the date hereof and ending at the Effective Time:      

                  (a) JAI,  Acquisition and Kenmar will conduct their respective
operations  only  according to their  ordinary and usual courses of business and
will use their  best  efforts  to  preserve  intact  their  respective  business
organizations,  keep  available the services of their officers and employees and
maintain  satisfactory  relationships with licensors,  suppliers,  distributors,
clients and others having business relationships with them; and                 

                  (b) Neither  JAI,  Acquisition  nor Kenmar  shall (i) make any
change in or  amendment  to its  Certificate  of  Incorporation  or  Bylaws  (or
comparable  governing  documents);  (ii) issue or sell any shares of its capital
stock or any of its other securities,  or issue any securities convertible into,
or options,  warrants or rights to purchase or  subscribe  to, or enter into any
arrangement  or contract  with respect to the issuance or sale of, any shares of
its capital stock or any of its other  securities,  or make any other changes in
its  capital  structure,  except as may be agreed by JAI and Kenmar in  writing;
(iii) declare,  pay or make any dividend or other  distribution  or payment with
respect to, or split,  redeem or  reclassify,  any shares of its capital  stock,
other than the Reverse Stock Split (as defined  below) and dividends  payable or
which become payable with respect to any Kenmar preferred  stock;  (iv) purchase
or  otherwise  acquire  any shares of its  capital  stock  except in a fiduciary
capacity; (v) enter into any contract or commitment or incur any debt, including
without  limitation,   any  acquisition  of  a  material  amount  of  assets  or
securities,  any  disposition  of a material  amount of assets or  securities or
release or relinquish any material contract rights, provided, that Kenmar may do
any of the  foregoing  in the  ordinary  course of its  business;  (vi) amend or
terminate  any  employee or  non-employee  benefit  plan or program,  employment
agreement,  license  agreement  or  retirement  agreement,  or pay any  bonus or
contingent  compensation;  (vii) agree, in writing or otherwise,  to take any of
the  foregoing  actions;  or  (viii)  agree to the  settlement  of any  material
litigation.                                                                     

         4.2  Exclusive  Dealing.  During  the  period  from  the  date  of this
Agreement  to the  Closing  Date,  neither JAI nor  Acquisition  shall take (and
neither  shall  authorize  or  permit  its  directors,  officers,  employees  or
representatives  so to take) any action to encourage or initiate  discussions or
negotiations with any Person, other than Kenmar,  concerning any merger, sale of
substantial assets or similar transaction involving JAI or Acquisition.         

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         4.3  Access  to  Records  and  Properties.  Between  the  date  of this
Agreement  and the Effective  Time of the Merger,  JAI,  Acquisition  and Kenmar
agree to give to the other parties hereto and their respective  representatives,
including  accountants and legal counsel,  reasonable access to the premises and
books and records of JAI,  Acquisition  and  Kenmar,  as the case may be, and to
cause  the  officers  of JAI,  Acquisition  and  Kenmar,  as the case may be, to
furnish the other parties  hereto with such  financial  and  operating  data and
other   information  with  respect  to  the  business  and  properties  as  JAI,
Acquisition  and Kenmar,  as the case may be, shall from time to time reasonably
request,  provided that any such investigation shall be conducted in such manner
as not to  interfere  unreasonably  with the  operation  of the business of JAI,
Acquisition  or Kenmar.  Prior to the Effective Date on the event of termination
of this Agreement,  the parties shall keep confidential any material information
obtained  from the  other  parties  concerning  the other  parties'  properties,
operations and business (unless readily  ascertainable  from public or published
information  or trade  sources) until the same ceases to be material (or becomes
so  ascertainable)  and, at the request of the party from which the  information
was obtained,  the party obtaining such  information  shall return all copies of
any  schedules,  statements,  documents or other  written  information  obtained
pursuant to this Section 4.3 or otherwise in the "due diligence" process.       

 ARTICLE V
CONDITIONS PRECEDENT TO MERGER

         5.1 Conditions Precedent to Obligations of JAI, Acquisition and Kenmar.
The respective obligations of JAI and Acquisition,  on the one hand, and Kenmar,
on the other  hand,  to effect  the Merger are  subject to the  satisfaction  or
waiver  (subject to applicable law) at or prior to the Effective Time of each of
the following conditions:                                                       

                  (a) Approval of  Stockholders.  This  Agreement and the Merger
shall have been  approved  and adopted by the  requisite  vote or consent of the
Stockholders  in accordance  with  applicable  law and Kenmar's  Certificate  of
Incorporation and Bylaws.                                                       

                  (b) Approval of JAI's  Stockholders.  This  Agreement  and the
Merger shall have been approved and adopted by the requisite  vote or consent of
the stockholders of JAI in accordance with applicable law and JAI's  Certificate
of Incorporation and Bylaws, regardless of whether such vote is required by such
law, Certificate of Incorporation or Bylaws.                                    

                  (c)  Injunction.  No  preliminary  or permanent  injunction or
other  order  shall  have been  issued by any  court or by any  governmental  or
regulatory  agency,  body or authority which  prohibits the  consummation of the
Merger  and the  transactions  contemplated  by this  Agreement  and which is in
effect at the Effective Time.                                                   

                  (d) Statutes. No statute, rule,  regulation,  executive order,
decree or order of any kind shall have been  enacted,  entered,  promulgated  or
enforced by any court or governmental authority which prohibits the consummation
of the Merger.                                                                  

                  (e) Governmental  Regulatory Approval.  To the extent required
by applicable law, any orders, consents, authorizations and approvals shall have
been entered by or obtained from all federal,  state or local  governmental  and
regulatory authorities having jurisdiction, granting the authority necessary for
the approval of this Agreement and for the consummation of the Merger.          

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                  (f) Business  Combination  Statutes.  The  consummation of the
Merger  and the  other  transactions  contemplated  by this  Agreement  shall be
permitted by and not be inconsistent with applicable state law.                 

         5.2 Conditions  Precedent to  Obligations of Kenmar.  The obligation of
Kenmar to effect the Merger is also subject to the satisfaction or waiver, at or
prior to the Effective Time, of each of the following conditions:               

                  (a)   Accuracy  of   Representations   and   Warranties.   All
representations and warranties of JAI and Acquisition  contained herein shall be
true and correct in all material respects as of the date hereof and at and as of
the Effective  Time,  with the same force and effect as though made at and as of
the Effective  Time,  and Kenmar shall have received (i) a certificate  from the
Chief Executive  Officer and the Chief Financial Officer of JAI and Acquisition,
respectively,  to such effect, and (ii) any additional  evidence that Kenmar may
reasonably  request to verify that all such  representations  and warranties are
true and correct.                                                               

                  (b)  Performance  by JAI  and  Acquisition.  Each  of JAI  and
Acquisition  shall have performed in all material  respects all  obligations and
agreements,  and  complied  in all  material  respects  with all  covenants  and
conditions,  contained in this  Agreement to be performed or complied with by it
prior to the Closing Date, and Kenmar shall have received a certificate from the
Chief Executive  Officer and the Chief Financial Officer of JAI and Acquisition,
respectively, to such effect.                                                   

                  (c) Legal  Opinion.  Kenmar shall have received from Steven A.
Sanders,  P.C.,  counsel to JAI and Acquisition,  a favorable  opinion dated the
Closing Date in form and substance satisfactory to Kenmar,  substantially in the
form of Exhibit D attached hereto.                                              

                  (d) Good  Standing  and Other  Certificates.  JAI  shall  have
delivered to Kenmar,  each as of a recent date prior to the Closing Date:  (i) a
copy of JAI's  Certificate of Incorporation,  including all amendments  thereto,
certified by the  Secretary of State of Delaware,  (ii) a copy of  Acquisition's
Articles of Incorporation,  including all amendments  thereto,  certified by the
Secretary of State of North Carolina,  (iii) a certificate from the Secretary of
State of  Delaware to the effect  that JAI is in good  standing in Delaware  and
listing  all  charter  documents  of JAI on file,  (iv) a  certificate  from the
Secretary of State of North  Carolina to the effect that  Acquisition is in good
standing in North  Carolina and listing all charter  documents of Acquisition on
file,  (v) a  certificate  from the  Secretary  of  State  or other  appropriate
official  in each state in which JAI is  qualified  to do business to the effect
that JAI is in good  standing in such State,  (vi) a  certificate  as to the tax
status of JAI from the appropriate officials of Delaware and each state in which
JAI is qualified to do business, (vii) a copy of the Bylaws of JAI, certified by
the  Secretary  of JAI as being true and  correct  and in effect on the  Closing
Date, (viii) a copy of the Bylaws of Acquisition,  certified by the Secretary of
Acquisition as being true and correct and in effect on the Closing Date,  (ix) a
copy of  resolutions,  certified as of the Closing Date by the Secretary of JAI,
adopted by the Board of Directors and  shareholders  of JAI and  authorizing the
execution  and  delivery  by JAI of this  Agreement  and the  other  Transaction
Documents,  the performance by JAI of its  obligations  hereunder and thereunder
and the consummation by JAI of the transactions contemplated hereby and thereby,
and (x) a copy of resolutions, certified as of the Closing Date by the Secretary
of  Acquisition,   adopted  by  the  Board  of  Directors  and  shareholders  of
Acquisition  and  authorizing  the execution and delivery by Acquisition of this
Agreement and the other Transaction Documents, the performance by Acquisition of
its obligations  hereunder and thereunder and the consummation by Acquisition of
the transactions contemplated hereby and thereby.                               

                  (e) No Adverse Change.  Prior to the Closing Date, there shall
be no adverse  change in the assets or  liabilities,  the business or condition,
financial or otherwise, the results of operations,  or                          

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prospects of JAI,  whether as a result of any legislative or regulatory  change,
revocation of any license or rights to do business,  fire, explosion,  accident,
casualty, labor trouble, flood, drought, riot, storm, condemnation or act of God
or  other  public  force or  otherwise,  and the  Secretary  of JAI  shall  have
delivered to Kenmar a certificate, dated the Closing Date, to such effect.      

                  (f)  Reverse  Stock  Split.  JAI shall  have  consummated  the
Reverse Stock Split (as defined below).                                         

                  (g)  Hutronix/Ronstadt  Dispute.  There shall have  occurred a
"Final  Closing"  of the  Settlement  Agreement  (as  defined in the  Settlement
Agreement),  and the dispute  between JAI, BCC, KGR, MHR and Hutronix shall have
been resolved in a manner  satisfactory to Kenmar in its sole discretion.  There
shall not be any action pending or threatened to void, cancel, terminate,  undo,
or challenge the Settlement  Agreement.  Bank One of Arizona, N.A. ("Bank One"),
shall have given its irrevocable written release to JAI and any existing, former
or future  affiliates of JAI, forever releasing JAI and any such affiliates from
any and all  liabilities or obligations  whatsover owed to Bank One, in form and
substance  satisfactory to Kenmar. JAI shall have received  irrevocable releases
from Henry Dahlberg,  E.M.  Huston,  and William Mann, and any other existing or
former  shareholder  of JAI,  Hutronix,  or any existing or former  affiliate of
either such company, in form and substance satisfactory to Kenmar.              

                  (h) Option Agreement.  JAI, the  Stockholders,  Kenmar and the
Representative  (as defined therein) shall have entered into an option agreement
substantially  in the form of that  attached  as Exhibit C hereto  (the  "Option
Agreement," as defined in Section 1.2 above).                                   

                  (i) No Litigation  Threatened.  No action or proceedings shall
have been instituted or threatened before a court or other government body or by
any public authority,  and no claim shall have been asserted or threatened to be
asserted,  to restrain or prohibit any of the transactions  contemplated hereby,
and JAI shall have delivered to Kenmar a certificate, dated the Closing Date, to
such effect.                                                                    

                  (j) JAI Stock Price.  The trading  price of JAI's Common Stock
as of the Effective Time shall be at least $1.50 per share.                     

                  (k)  Marks  Employment  Agreement.  JAI and Marks  shall  have
entered into an employment agreement  satisfactory to Marks and substantially in
the form of Exhibit E attached hereto (the "Marks  Employment  Agreement"),  and
JAI shall have  performed  all  obligations  required of it thereunder as of the
Effective Time.                                                                 

                  (l) Options.  Kenmar shall have  received a written  agreement
from each holder of any option to purchase  shares of Common  Stock of Kenmar in
the form of Exhibit F, completed with the additional  terms  described below and
duly executed by such holder,  to the effect that such  holder's  option (his or
her "Kenmar  Option")  shall be cancelled and replaced as of the Effective  Time
with a substitute corresponding option to purchase shares of Common Stock of JAI
(such holder's "JAI Option") (collectively, the "Substitute Option Agreements").
Each such  holder's  JAI Option  shall:  (i) be granted  pursuant to JAI's "1993
Employee Stock Option Plan";  (ii) have term  provisions  equivalent to those in
such  holder's  Kenmar  Option  and be fully  vested;  (iii) be  exercisable  to
purchase the number of shares of JAI's Common Stock (less any fractional  share,
which shall be  eliminated)  determined by  multiplying  the number of shares of
Kenmar's  Common  Stock  then  subject  to such  holder's  Kenmar  Option by the
Exchange Ratio (as defined in Section 1.1(c) above);  and (iv) be exercisable at
an exercise  price per share of JAI's  Common Stock  determined  by dividing the
exercise  price per share of Kenmar's  Common Stock under such  holder's  Kenmar
Option by the Exchange Ratio.  Kenmar also shall have received for cancellation,
together with each such holder's written                                        

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agreement  described  above,  the original  agreement  evidencing  such holder's
Kenmar  Option.  JAI agrees and  acknowledges  that the  failure to satisfy  the
foregoing  condition,  although  relieving Kenmar of its obligations  hereunder,
shall not constitute a breach of this Agreement.                                

                  (m)  Resignations.   Kenmar  shall  have  received  a  written
resignation  from Robert Knight as an officer and director of JAI, and a written
resignation  from Robert Knight as an officer of  Acquisition,  both in form and
substance reasonably satisfactory to Kenmar.                                    

                  (n)  Intra-Company  Debt. All  indebtedness  of  stockholders,
directors, officers and employees of JAI to JAI shall have been repaid in full. 

                  (o) Satisfaction  with Review of JAI and  Acquisition.  Kenmar
shall  have  completed  its  review of the  properties,  books and  records  and
financial  and legal  condition of JAI and  Acquisition  pursuant to Section 4.3
above and shall be  satisfied in all  respects,  in Kenmar's  sole  judgment and
discretion, with the results thereof.                                           

                  (p)  Proceedings.  All  proceedings  to be taken in connection
with the transactions  contemplated by this Agreement and all documents incident
thereto shall be satisfactory in form and substance to Kenmar,  and Kenmar shall
have received copies of all such documents,  certificates and other evidences as
it or its counsel may reasonably  request in connection with or to establish the
consummation  of  such  transactions  and  the  taking  of  all  proceedings  in
connection therewith.                                                           

                  (q) No Dissent.  As of the Closing Date, no Stockholder  shall
have demanded or otherwise  purported to exercise his or her dissenter's rights,
if any,  pursuant  to the  NCBCA  with  respect  to all or any  portion  of such
Stockholder's Common Stock.                                                     

                  (r) Securities  Exemption.  The Merger  Consideration shall be
subject to a valid  exemption from  registration  under  applicable  federal and
state securities laws.                                                          

                  (s) Assets and  Liabilities of JAI. At the Effective Time, JAI
shall have a book value of Two Hundred Thousand Dollars  ($200,000),  consisting
of at least Two Hundred Thousand  Dollars  ($200,000) in cash, and shall provide
evidence thereof to Kenmar, satisfactory to Kenmar in its sole discretion.      

                  (t) Board of Directors of JAI at the Effective Time. The Board
of Directors of JAI at the  Effective  Time shall be comprised of the  following
five (5) individuals:                                                           

        Kenneth H. Marks
      Alan G. Finkel
    Craig Macnab
        Kenneth L. Marks
        Ray Steckenrider

(u) Certain Corporate Matters.              

                           (i) The  name  of JAI  shall  have  been  changed  to
"Electronic Manufacturing Services Group, Inc."                                 

                           (ii) The stock symbol for JAI shall have been changed
to "EMSG".                                                                      

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                           (iii) The principal  corporate  office and all books,
records and  corporate  documents  of JAI shall have been  relocated to 6638 Old
Wake Forest Road, Raleigh, North Carolina.                                      

                  (v)  Guaranty  Agreement.  JAI shall have  executed a Guaranty
Agreement,  satisfactory  to Kenmar and  substantially  in the form of Exhibit G
attached hereto, in favor of Lee K. Simon, Daniel David Cameron, Jr., and Joseph
T. Hunt, Jr.                                                                    

                  (w) Tax  Returns.  JAI shall have filed all of the JAI Returns
required to have been filed by applicable law, and shall have presented evidence
to Kenmar, satisfactory to Kenmar in its sole discretion, that such Returns have
been  filed  and that  all  Taxes  and  other  obligations  and  liabilities  in
connection therewith have been fully satisfied.                                 

                  (x) Broker Fees. JAI shall pay, or cause to be paid,  prior to
the Closing Date, the fees,  costs and expenses of Rudy Miller and/or the Miller
Group,  George  Salloum,  and any other broker or  consultant  who might be owed
compensation as a result of the transaction contemplated by this Agreement.     

                  (y)  Return  of  Stock.   The  following   entitities   and/or
individuals,  and any additional entities and/or individuals under a contractual
or other obligation to do so, shall have returned to JAI all JAI stock owned, or
formerly owned by them, which is in their possession or under their control, and
such stock shall have been  cancelled  on the books and records of JAI: (i) BCC;
(ii) Torik, Inc. (and/or the present or former shareholders of Torik, Inc.); and
(iii) Capital City Plastics, Inc.                                               

                  (z) Termination of Guaranty of Lease. That certain Guaranty of
Lease,  dated  November 1, 1993,  between Rush  Hinsdale and JAI shall have been
terminated in a manner satisfactory to Kenmar in its sole discretion.           

         5.3 Conditions  Precedent to Obligations  of JAI and  Acquisition.  The
obligations of JAI and  Acquisition to effect the Merger are also subject to the
satisfaction  or  waiver,  at or prior  to the  Effective  Time,  of each of the
following conditions:                                                           

                  (a)   Accuracy  of   Representations   and   Warranties.   All
representations  and  warranties  of Kenmar  contained  herein shall be true and
correct  in all  material  respects  as of the date  hereof and at and as of the
Effective  Time,  with the same force and effect as though made on and as of the
Effective Time, and JAI shall have received a certificate  from the President of
Kenmar to such effect.                                                          

                  (b) Performance by Kenmar.  Kenmar shall have performed in all
material  respects all obligations and agreements,  and complied in all material
respects with all covenants and  conditions,  contained in this  Agreement to be
performed or complied with by it prior to the Closing  Date,  and JAI shall have
received a certificate from the President of Kenmar to such effect.             

                  (c)  Legal  Opinion.  JAI  shall  have  received  from  Smith,
Anderson,  Blount, Dorsett,  Mitchell & Jernigan,  counsel to Kenmar, an opinion
dated the Closing Date substantially in the form of Exhibit H attached hereto.  

                  (d) Good  Standing and Other  Certificates.  Kenmar shall have
delivered to JAI, each as of a recent date prior to the Closing Date: (i) a copy
of  Kenmar's  Articles  of  Incorporation,  including  all  amendments  thereto,
certified by the Secretary of State of North Carolina,  (ii) a certificate  from
the  Secretary  of State of North  Carolina to the effect that Kenmar is in good
standing in North Carolina and listing all charter  documents of Kenmar on file,
(iii) a certificate from the Secretary of State or other appropriate official   

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in each state in which  Kenmar is  qualified  to do  business to the effect that
Kenmar is in good  standing  in such  State,  (iv) a  certificate  as to the tax
status of Kenmar from the appropriate officials of North Carolina and each state
in which Kenmar is qualified to do business, (v) a copy of the Bylaws of Kenmar,
certified by the  Secretary of Kenmar as being true and correct and in effect on
the Closing Date,  and (vi) a copy of  resolutions,  certified as of the Closing
Date  by the  Secretary  of  Kenmar,  adopted  by the  Board  of  Directors  and
Stockholders  and  authorizing  the  execution  and  delivery  by Kenmar of this
Agreement and the other Transaction Documents,  the performance by Kenmar of its
obligations  hereunder  and  thereunder  and the  consummation  by Kenmar of the
transactions contemplated hereby and thereby.                                   

                  (e) No Adverse Change.  Prior to the Closing Date, there shall
be no materially  adverse  change  (other than any change  disclosed in Schedule
3.17  attached  hereto)  in the  business,  financial  condition  or  results of
operations  of Kenmar,  whether  as a result of any  legislative  or  regulatory
change,  revocation  of any license or rights to do business,  fire,  explosion,
accident,  casualty, labor trouble, flood, drought, riot, storm, condemnation or
act of God or other public force or otherwise, and the Secretary of Kenmar shall
have delivered to JAI a certificate, dated the Closing Date, to such effect.    

                  (f) No Litigation  Threatened.  No action or proceedings shall
have been instituted or threatened before a court or other government body or by
any public authority, and no claim shall have been asserted or, to the knowledge
of Kenmar,  threatened  to be  asserted,  to  restrain  or  prohibit  any of the
transactions  contemplated  hereby,  and Kenmar  shall have  delivered  to JAI a
certificate, dated the Closing Date, to such effect.                            

                  (g) Consents  Under  Agreements.  Any  consents and  approvals
shall have been  granted by all  Persons  whose  consent  or  approval  shall be
required in order to permit the succession by the Surviving Corporation pursuant
to the Merger or by JAI to any obligation, right or interest of Kenmar under any
loan or  credit  agreement,  note,  bond,  mortgage,  indenture,  lease or other
agreement or instrument, or any permit, concession, franchise or license, except
those for which the  failure to obtain such  consents  and  approvals  would not
individually or in the aggregate have a material adverse effect on the business,
financial  condition or results of  operations  of Kenmar taken as a whole or on
the Surviving Corporation.                                                      

                  (h)  Proceedings.  All  proceedings  to be taken in connection
with the transactions  contemplated by this Agreement and all documents incident
thereto shall be reasonably  satisfactory  in form and substance to JAI, and JAI
shall  have  received  copies  of all such  documents,  certificates  and  other
evidences as it or its counsel may reasonably  request in connection  with or to
establish  the  consummation  of  such   transactions  and  the  taking  of  all
proceedings in connection therewith.                                            

                  (i)  Marks  Employment  Agreement.  JAI and Marks  shall  have
entered into the Marks Employment Agreement substantially in the form of Exhibit
E attached hereto.                                                              

                  (j) GMCP Agreement.  JAI and G.M.  Capital Partners Ltd. shall
have entered into a consulting agreement  substantially in the form of Exhibit I
attached hereto (the "GMCP Agreement").                                         

ARTICLE VI
 CERTAIN COVENANTS AND AGREEMENTS OF THE PARTIES

         6.1 Reverse Stock Split.  On or prior to the Closing  Date,  but in any
event prior to the Effective  Time, JAI shall undertake and consummate a 1 for 4
reverse  stock  split,  whereby  every  four  (4)  shares  of JAI's  issued  and
outstanding  Common Stock will be  converted  into one (1) share of JAI's Common
Stock (the "Reverse  Stock  Split").  All  fractional  shares  arising from such
Reverse Stock Split shall be retired and                                        

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cancelled  without  additional  liability on the part of JAI. The Exchange Ratio
shall be calculated and determined after the Reverse Stock Split.               

         6.2 Control of Board of Directors of JAI; President and Chief Executive
Officer.                                                                        

                  (a) JAI  shall use its best  efforts  and  undertake  all acts
within its power to permit  Marks to control and elect a majority of JAI's Board
of Directors  for a period of  thirty-six  (36) months  following  the Effective
Time.  During any period  when a majority  of JAI's  Board of  Directors  is not
comprised of Directors voted for and elected by Marks,  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 JAI's  Board of  Directors  during  such
period,  the written  consent of Marks shall be required prior to the occurrence
of any  material  transactions,  as  hereinafter  defined.  For purposes of this
Section 6.2, "material  transactions" shall include but shall not be limited to:
(i) any  contract or  agreement;  (ii) any  decision to  transfer  any  material
portion  of the  assets of JAI or any  Subsidiary;  (iii) any  amendment  to the
Certificate of  Incorporation  of JAI; (iv) the sale,  issuance or repurchase of
any shares of stock of JAI;  (v) the  investment  of over Ten  Thousand  Dollars
($10,000) by JAI or any Subsidiary in any venture or business  investment;  (vi)
any amendment of the Bylaws of JAI or any  Subsidiary;  (vii) the declaration or
payment by JAI or any  Subsidiary  of any  dividends  on its Common Stock or the
distribution by JAI of its assets to the holders of its Common Stock; (viii) the
incurrence of any indebtedness by JAI or any Subsidiary;  (ix) the sale of stock
by JAI or any  Subsidiary;  (x) any decision to pledge or mortgage any assets of
JAI 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  of any officer or executive  employee;  (xiii)
any  contract  payments or payment of  consulting  fees to Robert  Knight,  G.M.
Capital Partners Ltd., or any other consultant.                                 

                  (b)  JAI   acknowledges   and  agrees   that  Kenmar  and  the
Stockholders  have  bargained  for the  right of Marks to  control  the Board of
Directors of JAI for a period of thirty-six  (36) months from the Effective Time
and that Kenmar and the Stockholders would be irreparably harmed if such control
were not effected.  Accordingly, in the event of any breach of the provisions of
Section  6.2(a),  Kenmar and the  Stockholders  shall be  entitled  to  specific
performance  and  other  equitable  remedies,   including  but  not  limited  to
injunctive  relief, and JAI shall not require Kenmar or the Stockholders to post
a bond with respect to any such remedies.                                       

                  (c) The provisions set forth in Section 6.2(a) above regarding
Marks'  written  consent to material  transactions  are  contractual  and are in
addition to any rights and obligations he may have as an officer or director.   

                  (d) In the event that a majority of JAI'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 JAI's  Board of  Directors  during  such
period),  and in the further  event that JAI  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) JAI shall,  immediately upon Marks' request: (A)
grant Marks access to all of JAI's books,  records,  and shareholder  lists (any
notice that might be otherwise required to be given by Marks is hereby expressly
and forever waived), and (B) pay Marks Fifty Thousand Dollars ($50,000) in cash.

                  (e)  Notwithstanding  the  foregoing,  in the  event of Marks'
death,  incapacitation,  inability  or  unwillingness  to  control  and  elect a
majority  of JAI's  Board of  Directors,  then  each of the  rights  and  powers
described in Sections  6.2(a) - (d) shall reside in any  individual  selected by
the majority  vote of Alan                                                      

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G.  Finkel,  Craig  Macnab,  Kenneth  L. Marks and Ray  Steckenrider;  provided,
however,  that in order for any of the  aforementioned  individuals to vote with
respect to such matter, he must be either a shareholder, noteholder, or director
of JAI at the time of such vote.                                                

                  (f) In the event that Marks  shall fail to serve  (except as a
result of his voluntary  resignation)  as JAI's  President and Chief  Excecutive
Officer,  then JAI shall 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 ($445,500); (ii) Promissory Note, dated
October  15,  1992,  made by  Kenmar  in favor of Daniel  David  Cameron  in the
original  principal  amount of One Hundred  Forty-Eight  Thousand  Five  Hundred
Dollars  ($148,500);  and (iii) Promissory Note, dated October 15, 1992, made by
Kenmar  in favor of  Joseph  T.  Hunt in the  original  principal  amount of One
Hundred Forty-Eight Thousand Five Hundred Dollars ($148,500).                   

         6.3 Best Efforts.  Each of JAI,  Acquisition and Kenmar shall cooperate
and use  their  respective  best  efforts  to take,  or cause to be  taken,  all
appropriate  action,  and to make, or cause to be made,  all filings  necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions  contemplated by this Agreement,  including,  without
limitation,  their  respective  best efforts (i) to facilitate  and preserve the
treatment of the Merger as a tax-free reorganization under Section 368(a) of the
Code including,  if necessary,  the establishment by Kenmar of an escrow account
for the  payment  of  claims of  dissenting  shareholders,  if any,  and (ii) to
obtain, prior to the Closing Date, all licenses,  permits, consents,  approvals,
authorizations,   qualifications  and  orders  of  governmental  and  regulatory
authorities  and parties to contracts  with JAI and Kenmar as are  necessary for
consummation of the  transactions  contemplated by this Agreement and to fulfill
the conditions to the Merger.                                                   

6.4      Consent of Stockholders; Proxy Statement.            

                  (a) Consent of Stockholders.  As promptly as practicable after
the date  hereof,  each of JAI and  Kenmar  will take all  action  necessary  in
accordance  with  applicable  law and its  governing  instruments  to obtain the
approval  of this  Agreement  and the Merger  and  related  transactions  by the
holders  JAI's  Common Stock  entitled to vote  thereon and by the  Stockholders
entitled  to vote  thereon,  respectively.  The Boards of  Directors  of JAI and
Kenmar shall,  subject to their respective members' fiduciary duties,  recommend
such approval and take all lawful action to solicit such approval.              

                  (b)  Proxy  Statement.  JAI  shall  promptly  prepare  a proxy
statement (the "Proxy  Statement")  satisfying all applicable  state and federal
securities laws and will promptly send the Proxy Statement to its  stockholders,
for the purpose of  considering  and voting upon this  Agreement and the Merger.
JAI shall be solely  responsible  for any statement,  information or omission in
the Proxy Statement.                                                            

6.5      Employee Benefits; Continued Employment.             

                  (a) After the Effective  Time,  JAI agrees to provide  current
officers and employees of Kenmar with employee benefits  following the Effective
Time and  continuing  thereafter  for a period of at least three  months,  which
employee benefits shall be at least equal to the employee  benefits,  taken as a
whole,  provided  from  time to time by JAI to its  officers  and  employees  of
comparable position and responsibility.                                         

                  (b) JAI  agrees  that it will  refrain  from  terminating  any
employee of Kenmar,  for a period of three months  commencing  at the  Effective
Time, except for cause as determined in the good faith judgment of JAI.         

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                  (c) JAI agrees to give  credit to each of  Kenmar's  employees
for the years of service for which such employees would be credited  pursuant to
such employee  benefit plans if such  employees were employed by JAI as of their
initial date of hire by Kenmar.                                                 

                  (d)  JAI  agrees  that  it  shall  maintain  or  cause  to  be
maintained  for a period of three  months  after the  Effective  Time,  for each
employee of Kenmar  immediately prior to the Merger, the salary or wages of such
employee at least at the level paid by Kenmar  immediately  prior to the Merger.
Thereafter,  salary and wages of such  employees  then  employed  by JAI and its
affiliates shall be determined in accordance with JAI's policy.                 

                  (e) JAI  agrees  that  retirees  of Kenmar  who are  receiving
medical benefits at the Effective Time will be permitted to participate in JAI's
medical  benefit plan, as it may exist from time to time, and that JAI shall pay
the  required  premium,  provided  that  the  right  of  each  such  retiree  to
participate  in such  medical  benefit  plan  shall  terminate  at the time such
retiree attains age 70.                                                         

         6.6 Officers' and Directors' Insurance;  Indemnification.  For a period
of six years  commencing at the Effective  Time,  JAI agrees (i) to maintain all
rights to indemnification now existing in favor of the directors and officers of
Kenmar as provided in the Certificate of Incorporation or Bylaws of Kenmar, with
respect to acts and omissions occurring prior to the Effective Time, and (ii) to
have in place and  maintain a policy or policies  of  directors'  and  officers'
liability   insurance  covering  directors  and  officers  of  Kenmar,  JAI  and
Acquisition   having  terms  no  less  favorable  than  the  policies  presently
maintained  by Kenmar on the date of this  Agreement.  Such  policy or  policies
shall cover acts and  omissions  of officers and  directors of Kenmar  occurring
prior to the Effective  Time, and shall cover acts and omissions of officers and
directors of JAI and the Surviving Corporation after the Effective Time.        

6.7      Stock Transfer Restrictions and Related Matters.     

                  (a) Compliance with Securities Laws. Kenmar  acknowledges that
the shares of Common  Stock of JAI issued  pursuant to Section 1.1 above and the
Plan of Merger, upon issuance,  shall not have been registered under any federal
or state securities laws and may not be sold or transferred  without  compliance
with  the  registration  or  qualification   provisions  thereof  or  applicable
exemptions therefrom.  Kenmar shall notify each Stockholder prior to the Closing
Date 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
law,  (ii) such  Stockholder's  delivery to JAI of a  no-action  letter from the
state and federal agencies having  jurisdiction over the 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 JAI of an opinion
prepared by counsel reasonably  acceptable to JAI to the effect that neither the
sale nor the proposed  transfer  constitutes a violation of any federal or state
securities laws.                                                                

                  (b) Tax-Free Reorganization. Neither JAI nor Kenmar shall take
any  action  which  would  disqualify  the  transactions  contemplated  by  this
Agreement from treatment as a tax-free  reorganization  of Kenmar, to the extent
that such treatment is otherwise available.                                     

                  (c)  Stop  Transfer  Order.  JAI  shall  not be  bound  by any
attempted  transfer,  sale  or  other  disposition  in  violation  of any of the
restrictions set forth in this Section 6.7, and JAI shall be entitled to deliver
to JAI's  transfer  agent  an  appropriate  stop  transfer  order in  connection
therewith,  pursuant to which such transfer agent shall refrain from registering
any such attempted transfer, sale or disposition.                               

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                  (d) Certificate  Legend.  The  certificates  representing  the
Merger Consideration issued pursuant to Section 1.1 above and the Plan of Merger
shall bear legends in substantially the following forms:                        

                  THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE HAVE NOT BEEN
                  REGISTERED UNDER ANY FEDERAL OR STATE SECURITIES LAWS AND HAVE
                  BEEN ISSUED UNDER EXEMPTIONS THAT DEPEND IN PART ON THE INTENT
                  OF THE HOLDER  HEREOF NOT TO SELL OR  TRANSFER  SUCH SHARES IN
                  ANY MANNER NOT PERMITTED BY SUCH LAWS. THESE SHARES MAY NOT BE
                  SOLD  OR  TRANSFERRED   EXCEPT  UPON  REGISTRATION  UNDER  ALL
                  APPLICABLE  FEDERAL AND STATE SECURITIES LAWS OR UPON DELIVERY
                  TO JAI OF EITHER  (A) A  NO-ACTION  LETTER  FROM THE STATE AND
                  FEDERAL AGENCIES HAVING JURISDICTION THEREOF OR (B) AN OPINION
                  OF COUNSEL ACCEPTABLE TO THE CORPORATION THAT NEITHER THE SALE
                  NOR THE  PROPOSED  TRANSFER  CONSTITUTES  A  VIOLATION  OF ANY
FEDERAL OR STATE SECURITIES LAW.            

                  TRANSFER OF THE SECURITIES  REPRESENTED BY THIS CERTIFICATE IS
                  SUBJECT TO COMPLIANCE WITH CERTAIN  TRANSFER  RESTRICTIONS SET
                  FORTH IN A MERGER  AGREEMENT  DATED AS OF MARCH 1, 1996  AMONG
                  JAI AND CERTAIN OTHER  PARTIES,  A COPY OF WHICH IS ON FILE IN
                  THE  OFFICE OF JAI AND  AVAILABLE  TO THE HOLDER  HEREOF  UPON
WRITTEN REQUEST THEREFOR.                   

                  THIS RESTRICTIVE LEGEND SHALL BE VOID AND OF NO FURTHER EFFECT
AS OF APRIL 12, 1998.                       

6.8      Demand Registration Rights.                          

                  (a) Certain  Definitions.  As used in this  Section  6.8,  the
following terms shall have the following respective meanings:                   

                           (i)   "Initiating   Stockholders"   shall   mean  the
Stockholders  who in the  aggregate  hold at least  fifty  percent  (50%) of the
Registrable Securities;                                                         

                           (ii)  "Registrable  Securities" shall mean any Common
Stock of JAI; provided, however, that shares of Common Stock shall be treated as
Registrable  Securities only if and so long as they have not been (A) sold to or
through a broker or dealer or underwriter in a public  distribution  or a public
securities  transaction,  or (B) sold or made available for sale, in the opinion
of counsel to JAI,  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;                                             

                           (iii)  "Register,"  "registered"  and  "registration"
shall refer to a  registration  effected by preparing  and filing with the SEC a
registration   statement  in  compliance   with  the  Securities  Act,  and  the
declaration or ordering of the effectiveness of such registration statement;    

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                           (iv) "Registration Expenses" shall mean all expenses,
except Selling  Expenses,  incurred by JAI in complying with Sections 6.8(b) and
6.8(c) hereof, including,  without limitation,  all registration,  qualification
and filing fees,  printing  expenses,  escrow fees,  fees and  disbursements  of
counsel for JAI, blue sky fees and expenses,  the expense of any special  audits
incident to or required by any such registration (but excluding the compensation
of  regular  employees  of JAI  which  shall be paid in any event by JAI) in the
event of one exercise of a demand  registration  provided for in Section  6.8(b)
hereof  and in the event of any  piggyback  registrations  pursuant  to  Section
6.8(c) hereof;                                                                  

                           (v) "Securities Act" shall mean the Securities Act of
1933, as amended,  or any similar  federal statute and the rules and regulations
of the SEC thereunder, all as the same shall be in effect at the time; and      

                           (vi) "Selling  Expenses" shall mean all  underwriting
discounts,  selling  commissions  and stock  transfer  taxes  applicable  to the
securities  registered  by the  Stockholder  and all fees and  disbursements  of
counsel for any Stockholder.                                                    

                  (b) Demand  Registration.  In case JAI shall  receive from the
Initiating  Stockholders a written  demand that JAI effect a registration  under
the  Securities  Act with  respect  to not less  than  fifty  percent  (50%) (as
adjusted for recapitalizations) of the Registrable Securities, JAI will:        

                           (i)  promptly  give  written  notice of the  proposed
registration, qualification or compliance to all other Stockholders, and        

                           (ii) as soon as practicable,  use its best efforts to
effect   such   registration   (including,   without   limitation,   appropriate
qualification  under  applicable  blue sky or other  state  securities  laws and
appropriate  compliance with applicable  regulations issued under the Securities
Act  and  any  other  governmental  requirements  or  regulations)  as may be so
requested and as would permit or facilitate the sale and  distribution of all or
such portion of such  Registrable  Securities  as are specified in such request,
together  with  all  or  such  portion  of  the  Registrable  Securities  of any
Stockholder  or  Stockholders  joining  in such  request as are  specified  in a
written  request  received by JAI within  twenty (20) days after receipt of such
written notice from JAI; provided,  however,  that JAI shall not be obligated to
take any action to effect any such  registration,  qualification  or  compliance
pursuant to this Section  6.8(b) prior to twelve (12) months after the Effective
Time.                                                                           

                  Subject  to the  foregoing,  JAI  shall  file  a  registration
statement  covering the Registrable  Securities so requested to be registered as
soon as  practicable  after receipt of the request or requests of the Initiating
Stockholders.                                                                   

(c)      "Piggyback" Registration           

                           (i)  Notice of  Registration.  If at any time or from
time to time JAI shall determine to register any of its  securities,  either for
its own account or the account of a security holder or holders, other than (A) a
registration  relating to employee benefit plans or (B) a registration  relating
solely to an SEC Rule 145 transaction, JAI will:                                

                                    (1)  promptly   give  to  each   Stockholder
written notice thereof; and                                                     

                                    (2)  include in such  registration  (and any
related  qualification  under  blue  sky laws or  other  compliance)  and in any
underwriting  involved  therein all the  Registrable  Securities  specified in  

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a written  request or requests made by any  Stockholder or  Stockholders  within
twenty (20) days after receipt of such written notice from JAI.                 

                           (ii)  Underwriting.  If the registration of which JAI
gives notice is for a registered public offering involving an underwriting,  JAI
shall so advise the  Stockholders as a part of the written notice given pursuant
to  Section  6.8(c)(i)(1).  In  such  event  the  right  of any  Stockholder  to
registration  pursuant to this  Section  6.8(c) shall be  conditioned  upon such
Stockholder's  participation  in such  underwriting  and the  inclusion  of such
Stockholder's  Registrable Securities in the underwriting to the extent provided
herein.  All Stockholders  proposing to distribute their Registrable  Securities
through  such  underwriting  (together  with  JAI  and  any  other  stockholders
distributing  their securities  through such  underwriting)  shall enter into an
underwriting  agreement in customary form with the managing underwriter selected
for such  underwriting  by JAI.  Notwithstanding  any  other  provision  of this
Section 6.8(c),  if the managing  underwriter  determines that marketing factors
require a limitation  of the number of shares to be  underwritten,  the managing
underwriter  may  limit  the  Registrable  Securities  to be  included  in  such
registration.  JAI shall so advise all  Stockholders and the number of shares of
Registrable Securities that may be included in the registration and underwriting
shall  be  allocated  among  all  Stockholders  in  proportion,   as  nearly  as
practicable,  to the respective  amounts of Registrable  Securities held by such
Stockholders at the time of filing the registration statement. To facilitate the
allocation of shares in accordance with the above provisions,  JAI may round the
number  of shares  allocated  to any  Stockholder  or other  stockholder  to the
nearest  one hundred  (100)  shares.  If any  Stockholder  or other  stockholder
disapproves  of the terms of any such  underwriting,  he may  elect to  withdraw
therefrom by written notice to JAI and the managing underwriter.  Any securities
excluded  or  withdrawn  from such  underwriting  shall be  withdrawn  from such
registration,  and shall not be  transferred in a public  distribution  prior to
ninety (90) days after the effective date of the registration statement relating
thereto,  or such other shorter period of time as the  underwriters may require.
JAI may  include  shares  of  Common  Stock  held  by  stockholders  other  than
Stockholders in a registration statement pursuant to this Section 6.8(c) if, and
to the extent that, the amount of Registrable Securities otherwise includable in
such registration statement would not thereby be diminished.                    

                  (d)  Expenses  of  Registration.   All  Registration  Expenses
incurred in connection with (i) one registration pursuant to Section 6.8(b), and
(ii) any and all  registrations  pursuant to Section  6.8(c),  shall be borne by
JAI.  Unless  otherwise  provided in this  Section  6.8,  all  Selling  Expenses
relating to securities  registered on behalf of the  Stockholders  and all other
Registration  Expenses shall be borne by the Stockholders of such securities pro
rata on the basis of the number of shares so registered.                        

                  (e) Registration Procedures. In the case of each registration,
qualification  or  compliance  effected by JAI pursuant to this Section 6.8, JAI
will keep each  Stockholder  advised  in writing  as to the  initiation  of each
registration,  qualification and compliance and as to the completion thereof. At
its expense, JAI will:                                                          

                           (i)  Prepare  and file  with  the SEC a  registration
statement with respect to such securities and use its best efforts to cause such
registration  statement to become and remain  effective for at least one hundred
twenty  (120) days,  and prepare and file with the SEC such  amendments  to such
registration  statement and supplements to the prospectus  contained  therein as
may be necessary to keep such registration  statement effective for at least one
hundred twenty (120) days, provided that no such registration shall constitute a
shelf  registration  under Rule 415  promulgated by the SEC under the Securities
Act;                                                                            

                           (ii) Enter into a written  underwriting  agreement in
customary form and substance  reasonably  satisfactory to JAI, the  Stockholders
participating in such registration and the managing  underwriter                

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or underwriters of the public offering of such securities, if the offering is to
be underwritten in whole or in part;                                            

                           (iii) Furnish to the  Stockholders  participating  in
such  registration  and to the  underwriters of the securities  being registered
such  reasonable  number of copies of the  registration  statement,  preliminary
prospectus,  final  prospectus  and such other  documents  as such  underwriters
reasonably may request to facilitate the public offering of such securities;    

                           (iv) Use its best  efforts to register or qualify the
securities covered by such registration statement under such state securities or
blue  sky  laws  of  such  jurisdictions  as  such  participating   Stockholders
reasonably may request within ten (10) days prior to the original filing of such
registration statement;                                                         

                           (v)    Notify    the     Stockholders    (or    their
attorneys-in-fact)  participating in such registration,  promptly after it shall
receive notice thereof, of the time when such registration  statement has become
effective or a supplement to any prospectus  forming a part of such registration
statement has been filed;                                                       

                           (vi)    Notify    such    Stockholders    or    their
attorneys-in-fact  promptly  of any  request  by the  SEC for  the  amending  or
supplementing  of such  registration  statement or prospectus or for  additional
information;                                                                    

                           (vii)  Prepare and file with the SEC,  promptly  upon
the request of any such  Stockholders,  any  amendments or  supplements  to such
registration statement or prospectus which, in the reasonable opinion of counsel
for such  Stockholders,  is required  under the  Securities Act or the rules and
regulations  thereunder in connection  with the  distribution of the Registrable
Securities by such Stockholders;                                                

                           (viii)  Prepare and  promptly  file with the SEC, and
promptly notify such Stockholders or their  attorneys-in-fact  of the filing of,
such amendment or supplement to such registration statement or prospectus as may
be necessary to correct any statements or omissions therein if, at the time when
a prospectus  relating to such  securities is required to be delivered under the
Securities  Act,  any  event  has  occurred  as the  result  of  which  any such
prospectus  or any other  prospectus  as then in effect would  include an untrue
statement  of a material  fact or omit to state any material  fact  necessary to
make the  statements  therein not  misleading in light of the  circumstances  in
which they were made;                                                           

                           (ix)  In  case  any  of  such   Stockholders  or  any
underwriter  for any such  Stockholders is required to deliver a prospectus at a
time  when the  prospectus  then in  effect  may no  longer  be used  under  the
Securities  Act,  prepare  promptly upon request such amendment or amendments to
such registration  statement and such prospectuses as may be necessary to permit
compliance with the requirements of the Securities Act; and                     

                           (x)    Advise    such     Stockholders    or    their
attorneys-in-fact,  promptly after it shall receive  notice or obtain  knowledge
thereof,  of  the  issuance  of  any  stop  order  by  the  SEC  suspending  the
effectiveness of such registration statement or the initiation or threatening of
any  proceeding  for that purpose,  and promptly use its best efforts to prevent
the  issuance of any stop order or to obtain its  withdrawal  if such stop order
should be issued.                                                               

                  (f) Indemnification. JAI will indemnify each Stockholder, each
of  such  Stockholder's  officers,  directors  and  partners,  and  each  person
controlling such Stockholder  within the meaning of Section                     

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15 of the Securities Act, with respect to which  registration,  qualification or
compliance has been effected pursuant to this Section 6.8, and each underwriter,
if any,  and each  person who  controls  any  underwriter  within the meaning of
Section 15 of the Securities Act, against all expenses, claims, losses, damages,
or liabilities (or actions in respect  thereof),  including any of the foregoing
incurred in settlement of any litigation,  commenced or threatened,  arising out
of or based on any untrue statement (or alleged untrue  statement) of a material
fact contained in any registration statement,  prospectus,  offering circular or
other  document,  or any amendment or supplement  thereto,  incident to any such
registration,  qualification or compliance, or based on any omission (or alleged
omission)  to state  therein a material  fact  required to be stated  therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by JAI of the Securities Act or
any rule or regulation promulgated under the Securities Act applicable to JAI in
connection with any such registration, qualification or compliance, and JAI will
reimburse  each  such  Stockholder,  each of  such  Stockholder's  officers  and
directors,  and each person controlling such Stockholder,  each such underwriter
and each person who controls any such  underwriter,  for any legal and any other
expenses  reasonably  incurred in connection  with  investigating,  preparing or
defending any such claim, loss, damage, liability or action.                    

         6.9 Interim Financial  Statements.  Within 30 days after the end of the
each calendar month, occurring after the date of execution of this Agreement and
prior to the  Effective  Time,  JAI shall  deliver to Kenmar  unaudited  interim
financial statements normally generated by JAI for each such month, in each case
certified by the chief financial  officer of JAI. All such financial  statements
shall  fairly  present in all  material  respects the  financial  condition  and
results  of  operations  of JAI at the dates and for the  periods  indicated  in
accordance with generally accepted accounting  principles  consistent with those
applied in connection with JAI's audited financial statements, subject to normal
year-end audit adjustments.                                                     

 ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNITY

         7.1 Survival of  Representations.  The respective  representations  and
warranties of JAI,  Acquisition and Kenmar contained in this Agreement or in any
Schedule  attached hereto or delivered in accordance with the terms hereof shall
survive  the  Closing  and  shall  remain  in  full  force  and  effect  forever
thereafter,  notwithstanding  any  investigation or examination of, or knowledge
with respect to, the subject matter thereof.                                    

7.2      Indemnification by JAI.                              

                  (a) JAI agrees to defend,  indemnify and hold harmless  Kenmar
and its affiliates and their respective officers,  directors,  employees, agents
and Stockholders  (each, an "Indemnitee") to the full extent permitted in law or
equity,  from  and  against  any  and  all  losses,  claims,  actions,  damages,
liabilities,  costs  and  expenses  (including  attorneys'  fees  and  expenses)
(collectively,  "Losses"),  joint or several,  relating to or arising from or in
connection  with  (i)  any  misrepresentation,  or  any  non-fulfillment  of any
representation,   warranty,   covenant,   obligation  or  agreement  by  JAI  or
Acquisition  contained in or made pursuant to this Agreement or any of the other
agreements,  documents, or instruments  contemplated hereby, or in any officer's
certificate,  or other  certificate  delivered to Kenmar in connection with this
Agreement,  (ii) any litigation,  action, claim, proceeding or investigation (in
the case of investigations, only those investigations as to specific occurrences
or events) by any third  party  relating  to or arising  out of the  business or
operations  of JAI or any  Subsidiary of JAI prior to the  Effective  Time,  and
(iii) the  enforcement by Kenmar of its rights  pursuant to this Section 7.2, or
any litigation,  proceeding or  investigation  relating to any of the foregoing;
and (iv) any act or  omission  by JAI, or its  affiliates  and their  respective
officers, directors,  employees, agents and shareholders which occurred prior to
the  Effective  Time.  In  addition,  JAI agrees to advance  or  reimburse      

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each Indemnitee,  on demand and prior to a final determination,  for any and all
expenses reasonably incurred by such Indemnitee in investigating, preparing for,
defending  or  taking  any  other  action  in  respect  of any such  Loss or any
proceeding  related  thereto,  whether or not such Indemnitee is a party to such
proceeding.                                                                     

                  (b) JAI's  obligations  to indemnify and hold harmless  Kenmar
pursuant to this Section 7.2 shall survive the  consummation of the transactions
contemplated  by this  Agreement  and shall not be to the exclusion of any other
right or remedy available to Kenmar under applicable law.                       

         7.3 Indemnification by Kenmar.  Kenmar agrees to defend,  indemnify and
hold  harmless  JAI from and against  any and all Losses  relating to or arising
from or in connection with any misrepresentation,  or any non-fulfillment of any
representation,  warranty, covenant, obligation or agreement by Kenmar contained
or made pursuant to this Agreement or any of the other agreements, documents, or
instruments  contemplated  hereby,  or in any  officer's  certificate,  or other
certificate delivered to JAI in connection with this Agreement.                 

7.4      Matters Involving Third Parties.                     

                  (a) If any third  party  shall  notify any party  hereto  (the
"Indemnified  Party") with respect to any matter (a "Third Party  Claim")  which
may give rise to a claim  for  indemnification  against  any  other  party  (the
"Indemnifying  Party") under this Article VII, then the Indemnified  Party shall
promptly notify the Indemnifying  Party thereof in writing;  provided,  however,
that no delay on the part of the Indemnified Party in notifying any Indemnifying
Party shall relieve the Indemnifying Party from any obligation  hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.   

                  (b) The  Indemnifying  Party will have the right to defend the
Indemnified  Party  against  the Third  Party  Claim with  counsel of its choice
satisfactory  to the  Indemnified  Party so long as (A) the  Indemnifying  Party
notifies the  Indemnified  Party in writing  within  fifteen (15) days after the
Indemnified   Party  has  given  notice  of  the  Third  Party  Claim  that  the
Indemnifying  Party will  indemnify the  Indemnified  Party from and against the
entirety of any Losses the Indemnified Party may suffer resulting from,  arising
out of,  relating to, in the nature of, or caused by the Third Party Claim,  (B)
the Indemnifying  Party provides the Indemnified Party with evidence  reasonably
acceptable to the Indemnified  Party that the  Indemnifying  Party will have the
financial  resources  to defend  against  the Third  Party Claim and fulfill its
indemnification  obligations hereunder,  (C) the Third Party Claim involves only
money  damages and does not seek an injunction or other  equitable  relief,  (D)
settlement of, or an adverse  judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party,  likely to establish a
precedential  custom or practice adverse to the continuing business interests of
the Indemnified  Party, and (E) the  Indemnifying  Party conducts the defense of
the Third Party Claim actively and diligently.                                  

                  (c) So  long  as the  Indemnifying  Party  is  conducting  the
defense of the Third Party Claim in accordance  with Section  7.4(b) above,  (A)
the Indemnified Party may retain separate co-counsel at its cost and expense and
participate in the defense of the Third Party Claim,  (B) the Indemnified  Party
will not consent to the entry of any judgment or enter into any settlement  with
respect  to the Third  Party  Claim  without  the prior  written  consent of the
Indemnifying Party (not to be withheld  unreasonably),  and (C) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior  written  consent of the
Indemnified Party (not to be unreasonably withheld).                            

                  (d) In the event any of the conditions in Section 7.4(b) above
is or  becomes  unsatisfied,  however,  (A) the  Indemnified  Party  may  defend
against,  and consent to the entry of any judgment or enter into any  settlement
with  respect  to, the Third Party  Claim in any manner it  reasonably  may deem
appropriate  (and the  Indemnified  Party need not consult  with,  or obtain any
consent  from,  any  Indemnifying  Party  in                                    

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connection therewith), (B) the Indemnifying Party will reimburse the Indemnified
Party  promptly and  periodically  for the costs of defending  against the Third
Party Claim  (including  reasonable  attorneys' fees and expenses),  and (C) the
Indemnifying  Party will remain responsible for any Losses the Indemnified Party
may suffer  resulting  from,  arising out of,  relating to, in the nature of, or
caused by the Third Party Claim to the fullest  extent  provided in this Article
VII.                                                                            

ARTICLE VIII
 TERMINATION AND ABANDONMENT

         8.1 Termination.  This Agreement may be terminated and the transactions
contemplated  hereby may be abandoned,  at any time prior to the Effective Time,
whether  before or after  approval  of the Merger by the  Stockholders  or JAI's
stockholders:                                                                   

(a) by mutual consent of Kenmar and JAI;    

                  (b) by either JAI or Kenmar,  if the Effective  Time shall not
have occurred on or prior to May 31, 1996;                                      

                  (c) by  either  JAI or  Kenmar  if there  has been a  material
breach of any representation,  warranty, covenant or agreement set forth in this
Agreement on the part of the other party;                                       

         8.2  Effect of  Termination.  In the event of the  termination  of this
Agreement pursuant to Section 8.1 hereof by JAI or Acquisition, on the one hand,
or Kenmar, on the other hand, written notice thereof shall forthwith be given to
the other party or parties  specifying  the provision  hereof  pursuant to which
such  termination  is made,  and this  Agreement  shall  become void and have no
effect,  and  there  shall  be no  liability  hereunder  on  the  part  of  JAI,
Acquisition  or Kenmar,  except that  Article  VII,  Section 4.3 with respect to
confidentiality,  and Section 9.1 hereof shall survive any  termination  of this
Agreement. Nothing in this Section 8.2 shall relieve any party to this Agreement
of liability for breach of this Agreement, or shall be construed as a limitation
on the  rights and  remedies  of any party for  breach of this  Agreement,  and,
accordingly, each party to this Agreement shall have all the rights and remedies
afforded by law as against any party breaching this Agreement.                  

ARTICLE IX
 MISCELLANEOUS

         9.1 Fees and  Expenses.  All costs and expenses  incurred in connection
with this Agreement and the consummation of the transactions contemplated hereby
shall be paid by the party incurring such costs and expenses,  provided that JAI
agrees to pay,  or to cause to be paid,  prior to the  Closing  Date,  the fees,
costs and expenses of Rudy Miller and/or the Miller Group and George Salloum.   

         9.2 Representations and Warranties.  The respective representations and
warranties of Kenmar,  on the one hand,  and JAI and  Acquisition,  on the other
hand, contained herein or in any certificates or other documents delivered prior
to or at the Effective Time shall not be deemed waived or otherwise  affected by
any investigation made by any party.                                            

         9.3  Extension;  Waiver.  At any time prior to the Effective  Time, the
parties  hereto,  by action  taken by or on behalf of the  respective  Boards of
Directors  of  Kenmar,  JAI or  Acquisition,  may (i)  extend  the  time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any  inaccuracies  in the  representations  and warranties  contained
herein by any other applicable party or in any                                  

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document,  certificate  or  writing  delivered  pursuant  hereto  by  any  other
applicable  party or  (iii)  waive  compliance  with  any of the  agreements  or
conditions  contained herein. Any agreement on the part of any party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.                                                 

         9.4  Public  Announcements.  Kenmar,  on the  one  hand,  and  JAI  and
Acquisition,  on the other hand, agree to consult promptly with each other prior
to issuing  any press  release or  otherwise  making any public  statement  with
respect to the transactions  contemplated  hereby,  and shall not issue any such
press release or make any such public  statement prior to such  consultation and
review  by the  other  party  of a copy of such  release  or  statement,  unless
required by applicable law.                                                     

         9.5  Notices.  All  notices,  requests,   demands,  waivers  and  other
communications  required or permitted to be given under this Agreement  shall be
in writing and shall be deemed to have been duly given if delivered in person or
sent by telex,  telecopy or by  registered  or certified  mail or by  recognized
overnight courier, postage prepaid, addressed as follows:                       

(a)      if to Kenmar, to it at:            

P.O. Box 58674            
    Raleigh, North Carolina  27658
                           Attention:  Kenneth H. Marks, Chief Executive Officer

with a copy to:                             

       Smith, Anderson, Blount, Dorsett,
           Mitchell & Jernigan
     2500 First Union Capitol Center
   Raleigh, North Carolina 27601

      Attention: Gerald F. Roach, Esq.

       (b)      if to either JAI or Acquisition, to it at:

1580 Kebet Way            
   Port Coquitlam, B.C.  V3C 5W9
Attention:  Robert Knight 

with a copy to:                             

Steven A. Sanders, P.C.   
50 Broad Street           
Suite 437                 
New York, New York  10004 

or to such  other  Person or  address  as any party  shall  specify by notice in
writing  to each of the other  parties.  All such  notices,  requests,  demands,
waivers and communications  shall be deemed to have been given as of the date so
delivered, sent by telecopier, telex or mailed.                                 

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         9.6 Entire  Agreement.  This Agreement and the schedules,  exhibits and
other documents  referred to herein or delivered  pursuant hereto,  collectively
contain  the entire  understanding  of the parties  hereto  with  respect to the
subject  matter   contained  herein  and  supersede  all  prior  agreements  and
understandings, oral and written, with respect thereto.                         

         9.7 Binding Effect; Benefit;  Assignment. This Agreement shall inure to
the  benefit  of and be binding  upon the  parties  hereto and their  respective
successors  and  permitted  assigns,  but neither this  Agreement nor any of the
rights,  interests  or  obligations  hereunder  shall be  assigned by any of the
parties hereto without the prior written  consent of the other parties.  Nothing
in this  Agreement,  expressed  or implied,  is intended to confer on any Person
other than the  parties  hereto or their  respective  successors  and  permitted
assigns, any rights, remedies,  obligations or liabilities under or by reason of
this Agreement.                                                                 

         9.8  Amendment  and  Modification.  Subject  to  applicable  law,  this
Agreement may be amended,  modified and  supplemented  in writing by the parties
hereto in any and all respects  before the Effective Time  (notwithstanding  any
stockholder approval),  by action taken by the respective Boards of Directors of
JAI,  Acquisition  and Kenmar or by the respective  officers  authorized by such
Boards of  Directors,  provided  that after any such  stockholder  approval,  no
amendment  shall  be  made  which  by law  requires  further  approval  by  such
stockholders without such further approval.                                     

         9.9 Further Actions. Each of the parties hereto agrees that, subject to
its legal  obligations,  it will use its best efforts to fulfill all  conditions
precedent  specified  herein,  to the extent that such conditions are within its
control,   and  to  do  all  things  reasonably   necessary  to  consummate  the
transactions contemplated hereby.                                               

         9.10 Headings.  The  descriptive  headings of the several  Articles and
Sections of this Agreement are inserted for convenience  only, do not constitute
a part of this  Agreement  and  shall  not  affect  in any  way the  meaning  or
interpretation of this Agreement.                                               

         9.11   Counterparts.   This   Agreement  may  be  executed  in  several
counterparts,  each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.                     

         9.12 Applicable Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of North  Carolina,  without  regard  to the  conflict  of laws  rules
thereof.                                                                        

         9.13  Severability.  If any term,  provision,  covenant or  restriction
contained  in this  Agreement is held by a court of  competent  jurisdiction  or
other  authority to be invalid,  void,  unenforceable  or against its regulatory
policy,  the  remainder of the terms,  provisions,  covenants  and  restrictions
contained in this  Agreement  shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.                                    

9.14     Certain Definitions.                                 

                  (a)  "Person"  shall  mean  and  include  an   individual,   a
partnership,  a  joint  venture,  a  corporation,  a  trust,  an  unincorporated
organization, a group and a government or other department or agency thereof.   

                  (b)  References to the  "knowledge of Kenmar" or "knowledge of
JAI" contained  herein shall mean the actual  knowledge after due inquiry of the
executive officers of Kenmar or JAI and Acquisition, as the case may be, and the
actual knowledge of the promoter of JAI, and its affiliates.                    

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         9.15  Signatures.  This  Agreement  may be signed  via  telecopier  and
signatures obtained in this manner shall be deemed originals.                   

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

                                    KENMAR BUSINESS GROUPS, INC.

ATTEST:                                     By:(Signature of Kenneth L. Marks   
                                       appears here)
                                      Name: Kenneth L. Marks
                          Title: CEO

By: (Signature of Joseph Coletta                                                
appears here)                                                   
Name: Joseph Coletta                                                      
Title: ????????                                                           

                             J.A. INDUSTRIES, INC.

ATTEST:                                     By: (Signature of Robert Knight     
                                     appears here)
                                   Name: Robert Knight
                                Title: President

By: (Signature of Nancy Fox                                                     
appears here)                                                   
Name: Nancy Fox                                                           
Title:                                                                    

                                   J.A. INDUSTRIES OF NORTH CAROLINA, INC.

ATTEST:                                     By: (Signature of Robert Knight     
                                         appears here)
                                     Name: Robert Knight
                                  Title: President

By: (Signature of Nancy Fox                                                     
appears here)                                                   
Name: Nancy Fox                                                           
Title:                                                                    

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SCHEDULE 2.3          
JAI SUBSCRIPTIONS, OPTIONS, WARRANTS, ETC.            

1.  1993 Employee Stock Option Plan (as amended)                                

2.  Options issued under 1993 ESOP                                              
- J.A. Michie 200,000 Post Split                                    
- Robert Knight 50,000 Post Split                                   

3.  Warrant outstanding in favor of Fahnestock & Co., Inc.                      
- 75,000 Pre Split (18,750 Post Split)                              

4.  J.A. Industries, Inc. 1994 Employee, Consultant and Advisor Stock           
Compensation Plan                                                       

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SCHEDULE 2.5              
FORM 10SB               

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SCHEDULE 2.7              
LITIGATION              

None              

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SCHEDULE 2.8              
COMPLIANCE WITH LAWS              

NONE              

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SCHEDULE 2.9              
CERTAIN NOTICES             

NONE            

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SCHEDULE 2.11             
ASSETS              

1.  Assets as of January 1, 1996         - None                                 
2.  Assets at Closing                    - Minimum $200,000 USD                 

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SCHEDULE 2.13             
CONTRACTS             

J.A. INDUSTRIES, INC.                                                           

1.  Confidentiality Agreement between Chelsea Capital and J.A. Industries, Inc. 
2.  Confidentiality Agreement between Chapman Spira and J.A. Industries, Inc.   
3.  Confidentiality Agreement between J.C. Bradford and J.A. Industries, Inc.   
4.  G.M. Capital Agreement                                                      
5.  Knight Agreement                                                            
6.  Ronstadt/Hutronix Settlement Agreement                                      

ACQUISITION                                                                     

None                                                                            

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SCHEDULE 2.14             
TAXES             

1.  Tax returns have not been filed as January 1, 1996.                         
2.  Tax returns will be completed and filed by closing date.                    

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SCHEDULE 2.16             
INDEPENDENT CONTRACTORS               

J.A. INDUSTRIES, INC.                                                           

1.  The Miller Group Agreement                                                  
2.  Phil Fox Consulting Agreement - March 1, 1995                               
3.  Phil Fox Consulting Agreement - June 1, 1995                                
4.  Admirality Consulting Agreement                                             
5.  Phil Fox Consulting Agreement - May 16, 1994                                
6.  Bill Zupner Consulting Agreement                                            
7.  D.D.M. Equity Management Corp. Consulting Agreement                         
8.  427968 B.C. Ltd. Consulting Agreement - May 25, 1994                        
9.  462610 B.C. Ltd. Consulting Agreement                                       
10. John B. Lowy, P.C. Consulting Agreement                                     
11. International Treasury Consulting Agreement                                 
12. Phil Fox Consulting Agreement - September 1, 1995                           
13. 427968 B.C. Ltd. Consulting Agreement - December 1, 1995                    
14. 427968 B.C. Ltd. Consulting Agreement - September 1, 1995                   

ACQUISITION                                                                     

None                                                                            

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SCHEDULE 2.18             
INSURANCE POLICIES              

NONE              

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SCHEDULE 2.19             
TRADEMARKS, ETC.            

NONE            

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SCHEDULE 2.20             
GOVERNMENT REGULATIONS              

NONE            

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SCHEDULE 2.21             
ENVIRONMENTAL MATTERS             

NONE            

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SCHEDULE 2.22             
EMPLOYEE RELATIONS            

1.  Robert Knight - President                                                   
4025 Sunset Boulevard                                                   
North Vancouver, B.C.                                                   
V3C 5W9 Canada                                                          

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SCHEDULE 2.23             
RESTRICTIVE DOCUMENTS             

NONE            

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SCHEDULE 2.24             
INTEREST IN CLIENTS, SUPPLIERS, ETC               

NONE            

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SCHEDULE 2.25             
BANK ACCOUNTS             

J.A. INDUSTRIES, INC.                                                           

1.  Chase Manhattan Bank                                                        
1 Chase Plaza                                                           
New York, NY 10081                                                      

Account #910-1-849629                                                   
Signing Authority - Robert W. Knight                                    

ACQUISITION                                                                     

None                                                                            

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Schedule 3.2              
Corporate Authority of Kenmar             

None                                                                            

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Schedule 3.4              
Kenmar's subscriptions, options, warrants, etc.       

Stock options outstanding:                                                      

Person                             Qty of Shares                                

Gonzalo Fernandez                   400                                         
Gene R. Smith                       4166                                        
Kenneth E. Mayhew, Jr.              400                                         
Craig Macnab                        1400                                        
Kenneth L. Marks                    250                                         
Alan G. Finkel                      2500                                        
Craig Ostrander                     278                                         
Fritz Ackermann                     100                                         
Joe Snyder                          100                                         
Jim Meese                           100                                         
Bernard Hardy                       50                                          

Total:       9744                 

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Schedule 3.6              
Restrictive Documents               

1.  Shareholders Agreement, dated September 1, 1985, by and between             
Kenmar and its shareholders party thereto (as amended).                 

2.  Agreement on transfer of corporate ownership, dated October 15,             
1992, by and between Lee K. Simon, Daniel D. Cameron, Jr., Joseph       
T. Hunt, Jr., and Kenmar, as modified by that certain Modification      
and Release Agreement dated as of January 19, 1996 by and among         
Kenmar, JAI, Lee K. Simon, Daniel D. Cameron, Jr., Joseph T. Hunt, Jr.  

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Schedule 3.7              
Litigation                

None                                                                            

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Schedule 3.8              
Compliance with Laws              

None                                                                            

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Schedule 3.9              
No Violations; Consents and Approvals                 

None                                                                            

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Schedule 3.11             
Contracts               

1.  Lease commitment with Copelco Capital pending close in Q1'96 upon           
successful installation of Teradyne test equipment. Approx. amount      
$188,000; $50,000 down payment with the balance due in 35 monthly       
installments.                                                           

2.  Kenmar anticipates signing an employment agreement with Gene R.             
Smith to join EMSG as its Chief Operations Officer upon closing of      
this merger. Annual compensation of $125,000 and a 50,000 share         
stock option with immediate vesting as consideration for signing.       

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Schedule 3.12             
Taxes               

None                                                                            

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Schedule 3.13             
Governmental Regulation             

None                                                                            

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Schedule 3.14             
Environmental Matters             

None                                                                            

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Schedule 3.15             
Employee Relations              

None                                                                            

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Schedule 3.16             
Interest in Clients, Suppliers, Etc.              

None                                                                            

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Schedule 3.17             
Absence of Certain Changes            

None                                                                            

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Schedule 3.18             
Disclosure              

None                                                                            

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 EXHIBIT A

PLAN OF MERGER

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PLAN OF MERGER

         THIS PLAN OF MERGER is made and dated as of  ___________________,  1996
by and  among  KENMAR  BUSINESS  GROUPS,  INC.,  a  North  Carolina  corporation
("Kenmar" or the "Surviving  Corporation"),  J.A.  INDUSTRIES OF NORTH CAROLINA,
INC., a North Carolina corporation  ("Acquisition") and ELECTRONIC MANUFACTURING
SERVICES  GROUP,  INC.,  a  Delaware  corporation  and the sole  shareholder  of
Acquisition ("EMSG") (EMSG has changed its name from J.A.                       
Industries, Inc.).                                                              

         WHEREAS,  Kenmar,  EMSG and Acquisition  desire to effect the merger of
Acquisition with and into Kenmar upon the terms set forth herein; and           

         WHEREAS,  Kenmar,  EMSG  and  Acquisition  have  entered  into a Merger
Agreement  dated as of March 1,  1996 (the  "Merger  Agreement")  setting  forth
certain representations, warranties, covenants and agreements in connection with
the transactions therein and herein contemplated; and                           

         WHEREAS,  the boards of directors of Kenmar,  EMSG and  Acquisition  by
resolution  duly  approved  the  Merger  Agreement  and this Plan of Merger  and
directed  that the Merger  Agreement and this Plan of Merger be submitted to the
shareholders of Kenmar, EMSG and Acquisition for approval and adoption.         

         NOW,  THEREFORE,  the parties  hereto do hereby  approve and adopt this
Plan of Merger for the purpose of setting forth the terms and  conditions of the
merger referred to above and the mode of carrying the same into effect.         

 ARTICLE I

THE MERGER

         1.1  Merger.  Acquisition  shall be merged  with and into  Kenmar  (the
"Merger") pursuant to Article 11 of the North Carolina Business Corporation Act,
as amended (the "NCBCA").                                                       

         1.2  Effective  Time.  The Merger  shall be  effected  by the filing of
articles of merger with the Secretary of State of the State of North Carolina in
accordance  with the  provisions  of Article 11 of the NCBCA.  The Merger  shall
become effective at the time set forth in the articles of merger, which shall be
filed  contemporaneously  with the closing conducted  pursuant to Section 1.3 of
the Merger  Agreement.  The time and date when the Merger shall become effective
is herein referred to as the "Effective Time".                                  

         1.3 Effect of the Merger. At the Effective Time, the separate corporate
existence of Acquisition shall cease, and Kenmar, as the Surviving  Corporation,
shall  continue  its  corporate  existence  under the laws of the State of North
Carolina  and  shall  thereupon  and  thereafter  possess  all  of  the  rights,
privileges, immunities, powers and franchises of each of Kenmar and Acquisition;
all of the property,  real, personal and mixed, and every other asset of each of
Kenmar and Acquisition shall vest in the Surviving  Corporation  without further
act or deed;  the Surviving  Corporation  shall assume and be liable for all the
liabilities  and  obligations of each of Kenmar and  Acquisition;  and all other
effects of the Merger  specified  in Section  55-11-06 of the NCBCA shall result
therefrom.                                                                      

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ARTICLE II

 CONVERSION AND ISSUANCE OF SHARES

2.1      Conversion of Shares.                                

                  (a)  Each  share  of  Common   Stock  of  Kenmar   issued  and
outstanding  immediately  prior to the  Effective  Time shall,  by virtue of the
Merger and without any action on the part of the holder  thereof,  be  converted
into the right to receive the number of shares of unregistered EMSG Common Stock
determined  according to the exchange ratio defined in Section 2.1(b) below upon
surrender of the certificate representing such share.                           

                  (b) For purposes of exchanging shares of Kenmar's Common Stock
for EMSG Common  Stock,  each share of Kenmar's  Common Stock shall be converted
into the right to receive Forty-One (41) shares of unregistered  Common Stock of
EMSG (the  "Exchange  Ratio").  The  Exchange  Ratio shall be a number that upon
consummation  of the Merger (and taking into account the Reverse Stock Split, as
defined  in  Section  6.1 of the  Merger  Agreement)  will  result in the Kenmar
stockholders  owning an aggregate number of shares of EMSG Common Stock equal to
fifty percent (50%) of the issued and outstanding  shares of EMSG's Common Stock
as of the Effective Time. Any fractional  share  remaining after  calculation of
the total  number of shares of EMSG  Common  Stock  issuable  to each  holder of
shares of Kenmar's Common Stock shall be eliminated.                            

                  (c) Each option to purchase  shares of Common  Stock of Kenmar
granted and outstanding immediately prior to the Effective Time shall, by virtue
of the Merger and  pursuant  to the  written  agreements  referred to in Section
5.2(l) of the Merger  Agreement,  be cancelled  and replaced as of the Effective
Time with a substitute  corresponding  option to purchase  shares of EMSG Common
Stock as provided in such Section 5.2(l).                                       

                  (d) Each  share of  Common  Stock of  Acquisition  issued  and
outstanding  immediately  prior to the  Effective  Time shall,  by virtue of the
Merger and without any action on the part of the holder  thereof,  be  converted
into and become  exchangeable  for one  fully-paid  and  nonassessable  share of
Common Stock of the Surviving  Corporation.  From and after the Effective  Time,
each outstanding certificate which theretofore represented shares of Acquisition
Common  Stock shall be deemed for all  purposes to evidence  ownership of and to
represent the number of shares of Surviving  Corporation Common Stock into which
such shares of Acquisition Common Stock shall have been converted.              

         2.2 Payment  for Shares.  Upon  surrender  to EMSG of each  certificate
representing shares of Kenmar's Common Stock issued and outstanding  immediately
prior to the Effective Time, such  certificate  shall forthwith be cancelled and
the holder thereof shall be entitled to receive in exchange  therefor the shares
of EMSG Common Stock due such holder in accordance with Section 2.1 above. Until
surrendered in accordance  with the  provisions  hereof,  each such  certificate
shall  represent  for all purposes the right to receive EMSG Common Stock on the
basis provided in this Article II.                                              

 ARTICLE III

 ARTICLES OF INCORPORATION, BYLAWS, DIRECTORS AND OFFICERS

         3.1 Articles of Incorporation and Bylaws. The Articles of Incorporation
and Bylaws of the  Surviving  Corporation  shall be identical to the Articles of
Incorporation and Bylaws of Kenmar in effect  immediately prior to the Effective
Time until thereafter amended as provided by law.                               

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         3.2 Directors and Officers.  The directors of the Surviving Corporation
shall be Kenneth H.  Marks,  Alan G.  Finkel and Gene R.  Smith,  who shall hold
office until their  respective  successors shall have been elected and qualified
as provided in the bylaws of the Surviving  Corporation  or by law. The officers
of the Surviving Corporation shall be as listed below, each holding office until
his or her respective  successor has been duly elected and qualified as provided
in the bylaws of the Surviving Corporation or by law:                           

Kenneth H. Marks  Chief Executive Officer   
           Gene R. Smith     President and Chief Operating Officer

ARTICLE IV

 SUBMISSION TO SHAREHOLDERS; TERMINATION AND AMENDMENT

         4.1 Approval by Shareholders. This Plan of Merger shall be submitted to
the shareholders of each of Kenmar,  EMSG and Acquisition for their approval and
shall have no force or effect  unless  approved by the  shareholders  of each of
Kenmar, EMSG and Acquisition in the manner provided by the NCBCA.               

         4.2  Termination.  This Plan of Merger shall  terminate  automatically,
whether  before  or  after  approval  of the  shareholders  of  Kenmar,  EMSG or
Acquisition, if the Merger Agreement shall be terminated pursuant to Section 8.1
thereof.                                                                        

         4.3  Amendment.  This  Plan of Merger  may be  amended  by the  parties
hereto,  by action taken by their  respective  boards of directors,  at any time
before or after approval hereof by the respective  shareholders of Kenmar,  EMSG
or Acquisition,  but, after any such approval,  no amendment shall be made which
shall reduce the amount or change the form of the  consideration  to be received
by the shareholders of Kenmar without the further approval of such shareholders.
This Plan of Merger may not be amended except by an instrument in writing signed
on behalf of each of the parties hereto.                                        

 ARTICLE V

 MISCELLANEOUS

         5.1  Headings.  The article and  section  captions  used herein are for
reference  purposes  only  and  shall  not in any  way  affect  the  meaning  or
interpretation of this Plan of Merger.                                          

         5.2 Publicity. Except as otherwise required by law, none of the parties
hereto shall issue any press release or make any other public statement, in each
case  relating to,  connected  with or arising out of this Plan of Merger or the
matters contained herein,  without obtaining the prior approval of Kenmar to the
contents and the manner of presentation and publication thereof.                

         5.3  Counterparts.  This Plan of Merger may be  executed in two or more
counterparts, all of which taken together shall constitute one instrument.      

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         IN WITNESS  WHEREOF,  Kenmar,  EMSG, and Acquisition  have caused their
respective  corporate  names to be  hereunder  subscribed  by  their  respective
officers  thereunto  duly  authorized,  all as of the day and year  first  above
written.                                                                        

                  KENMAR BUSINESS GROUPS, INC.

ATTEST:                            By:                                          
       Name:
        Title:

By:                                                                             
Name:                                                                     
Title:                                                                    

                                   ELECTRONIC MANUFACTURING SERVICES GROUP, INC.

ATTEST:                            By:                                          
       Name:
        Title:

By:                                                                             
Name:                                                                     
Title:                                                                    

                            J.A INDUSTRIES OF NORTH CAROLINA, INC.

ATTEST:                            By:                                          
       Name:
        Title:

By:                                                                             
Name:                                                                     
Title:                                                                    

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EXHIBIT B       

NUMBER OF OPTION SHARES PER STOCKHOLDER       

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Exhibit B       

Number of Option Shares per Stockholder       

               Issued              %             Options
Stockholder                Shares          Ownership          Shares            

Andrew T. Brown              750              1.1%              8,560           
Catherine M. Prince          200              0.3%              2,283           
Christian B. Johnson         200              0.3%              2,283           
Craig Macnab               6,396              9.7%             72,998           
David J. Thurlow             100              0.2%              1,141           
David M. Welsh               500              0.8%              5,707           
Deborah R. Michael           100              0.2%              1,141           
Deirdre Macnab               700              1.1%              7,989           
Dennis Taylor                250              0.4%              2,853           
Donald I.N. McKenzie         100              0.2%              1,141           
Dorothy Ellison              250              0.4%              2,853           
Erma H. Schuster              60              0.1%                685           
Eugene M. Tate                20              0.0%                228           
F.I. Nebhut, Jr.             500              0.8%              5,707           
Francis F. Putnam            500              0.8%              5,707           
Fritz Ackermann              750              1.1%              8,560           
Harold S. Workman            350              0.5%              3,995           
Henry White (PEG)            250              0.4%              2,853           
Joe B. Putnam, Jr.           500              0.8%              5,707           
John H. Putnam             1,000              1.5%             11,413           
Joseph B. Stroup             750              1.1%              8,560           
Kay V. Marks                 250              0.4%              2,853           
Kenneth E. Mayhew, Jr.     6,900             10.5%             78,750           
Kenneth H. Marks          40,095             61.0%            457,608           
Kenneth L. Marks           1,750              2.7%             19,973           
Lee K. Simon                 703              1.1%              8,023           
Mabel Ann Steckenrider       111              0.2%              1,267           
Margaret Ann Huffstetier     156              0.2%              1,780           
Marsha Prince                100              0.2%              1,141           
MLN Research                 100              0.2%              1,141           
Peter A. Cesaro              100              0.2%              1,141           
Ralph S. Pickett             100              0.2%              1,141           
Richard C. Bisbee, Sr.       750              1.1%              8,560           
Richard D. Adelman           100              0.2%              1,141           
Robert Scott Nieboer         200              0.3%              2,283           
Sue Kruger                    23              0.0%                263           
Wayne C. Craft                50              0.1%                571           
               -------------------------------------------
               65,714            100.0%            750,000

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EXHIBIT C 

FORM OF OPTION AGREEMENT

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OPTION AGREEMENT

         THIS  OPTION  AGREEMENT  (the  "Agreement")  is made  and  dated  as of
___________________,  1996, by and among KENMAR BUSINESS  GROUPS,  INC., a North
Carolina corporation ("Kenmar"),  Electronic Manufacturing Services Group, Inc.,
a Delaware  corporation  ("EMSG"),  J.A.  Industries of North Carolina,  Inc., a
North Carolina Corporation  ("Acquisition"),  and the Representative (as defined
below).                                                                         

 WITNESSETH:

         WHEREAS,   Kenmar,   EMSG  (which  has  changed  its  name  from  "J.A.
Industries,  Inc.") and Acquisition  entered into a Merger Agreement dated as of
March 1, 1996 (the "Merger  Agreement")  providing for the merger of Acquisition
with and into Kenmar;                                                           

         WHEREAS,  pursuant to the Merger  Agreement,  EMSG and Acquisition have
made certain representations, warranties and covenants for the benefit of Kenmar
and the Stockholders (as defined in the Merger Agreement) as provided therein;  

         WHEREAS,   pursuant  to  the  Merger  Agreement,   Kenmar,   EMSG,  and
Acquisition  have  agreed  that  EMSG's and  Acquisition's  representations  and
warranties  pursuant to the Merger  Agreement shall survive the  consummation of
the transactions contemplated by the Merger Agreement;                          

         WHEREAS,  Section 1.2 of the Merger Agreement  provides that EMSG shall
grant the  Representative  an option to purchase  Seven Hundred  Fifty  Thousand
(750,000)  shares  of  EMSG's  Common  Stock  for One  Dollar  ($1.00)  upon the
occurrence  of any breach of any  representation,  warranty,  covenant  or other
obligation of EMSG or Acquisition contained in the Merger Agreement;            

         WHEREAS,  Section  1.2 of  the  Merger  Agreement  provides  that  upon
exercise of such option, the Representative  shall distribute such shares to the
Stockholders pursuant to the terms of this Agreement; and                       

         WHEREAS,  the  Representative  is  willing  to act in the  capacity  of
Representative  hereunder  subject to, and upon the terms and conditions of this
Agreement.                                                                      

         NOW,  THEREFORE,  in  consideration  of  the  premises,  covenants  and
agreements  set  forth  in  this  Agreement  and  of  other  good  and  valuable
consideration,   the  receipt  and  legal   sufficiency  of  which  they  hereby
acknowledge,  and intending to be legally bound hereby, and as an inducement for
the execution and delivery of the Merger Agreement,  Kenmar, EMSG,  Acquisition,
and the Representative hereby agree as follows:                                 

         1. Grant of Option.  EMSG hereby grants to the Representative on behalf
of the  Stockholders,  an  irrevocable  option (the  "Option") to purchase Seven
Hundred  Fifty  Thousand  (750,000)  shares of EMSG's  Common Stock (the "Option
Shares") at the purchase price set forth below.                                 

         2.   Exercise  of  Option.   The  Option  may  be   exercised   by  the
Representative  upon  the  occurrence  of  any  breach  of  any  representation,
warranty,  covenant, or other obligation of EMSG or Acquisition under the Merger
Agreement, as more fully described in this Section 2.                           

                  (a) Notice;  Closing. If at any time the Representative  shall
elect,  in its  judgment,  to assert that EMSG or  Acquisition  has breached any
representation,  warranty  or  covenant  made by either of such  parties  in the
Merger  Agreement  and,  as a  result  thereof,  to  exercise  the  Option,  the
Representative  shall                                                           

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give EMSG  notice in writing of such  breach and of the  exercise  of the Option
(the "Notice").  Such notice shall specify a date,  which date shall not be less
than twenty (20) days from the date such notice is given, for the closing of the
purchase of the Option Shares (the "Option Closing").  Such Option Closing shall
take place at 10:00 A.M. local time, on the date specified in such notice at the
offices of Smith, Anderson,  Blount, Dorsett, Mitchell & Jernigan,  L.L.P., 2500
First Union Capital Center,  Raleigh, North Carolina, or at such other place and
time as the parties may mutually agree. At the Option Closing, EMSG will deliver
to  the  Representative   certificates   representing  the  Option  Shares.  The
certificates shall be issued in the names of the Stockholders, and in the number
of Option  Shares to be issued in  respect of each  Stockholder  as set forth in
Exhibit A hereto.                                                               

                  (b) Disputed  Assertion of Breach. If, within twenty (20) days
after the  Notice is given by the  Representative  to EMSG  under  Section  2(a)
above, EMSG shall notify the Representative,  in writing, that EMSG disputes and
denies the asserted  breach,  then EMSG and the  Representative  shall use their
respective reasonable best efforts to effect a settlement and compromise of such
dispute  prior to the date set forth in the Notice for the  Option  Closing  (or
prior to such later date upon which the parties may, but are not  obligated  to,
agree). Any such settlement and compromise shall be set forth in writing by EMSG
and the Representative,  and the Option may be exercised, if at all, in whole or
in part in accordance with such settlement and compromise.                      

                  (c) Arbitration to Resolve  Disputed  Assertion of Breach.  If
EMSG and the  Representative  are unable to settle and  compromise  any disputed
assertion of a breach, the Option Closing shall take place on the date set forth
in the Notice (or on such later  date upon which the  parties  may,  but are not
obligated  to,  agree).  The dispute  shall  thereafter  be submitted by EMSG to
binding arbitration pursuant to Section 8 of this Agreement.  The Representative
shall hold the Option Shares,  and shall not distribute them to the Stockholders
or to EMSG,  pending the determination of the arbitrator or arbitrators,  as the
case may be. If the arbitrator(s) determine that a breach of any representation,
warranty,  covenant or other obligation of EMSG or Acquisition  contained in the
Merger  Agreement has  occurred,  then promptly  after such  determination,  the
Representative  shall  distribute  the  Option  Shares  to the  Stockholders  as
provided in Section 6 of this Agreement.  If the arbitrator(s) determine that no
breach of any representation,  warranty, covenant or other obligation of EMSG or
Acquisition   contained  in  the  Merger   Agreement  has  occurred,   then  the
Representative shall return the Option Shares to EMSG.                          

         3. Purchase  Price.  At the Option Closing,  the  Representative  shall
purchase the Option Shares from EMSG by delivering as  consideration  therefor a
total cash payment of One Dollar ($1.00) for all of the Option Shares.          

         4. Designation of  Representative.  Kenmar, on behalf of itself and the
Stockholders,  hereby  irrevocably  constitutes and appoints Kenneth H. Marks as
Kenmar's and the Stockholders' true and lawful agent and  attorney-in-fact  (the
"Representative")  with respect to all matters  arising in connection  with this
Agreement,  including  but not limited to the power and  authority  on behalf of
such  Stockholders  (other  than in his own  right)  to do any one or all of the
following:                                                                      

                  (a) enter  into this  Agreement  and  accept  the grant of the
Option;                                                                         

                  (b) exercise  the Option,  or elect not to exercise the Option
after it becomes exercisable, in the Representative's reasonable judgment;      

                  (c) settle or compromise  any disputed  assertion of a breach,
as set forth in Section 2(b) of this Agreement;                                 

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                  (d)  give  any  written  notices  or  consents  and  seek  any
declaratory judgments, damages or other appropriate relief from a court or other
tribunal that the Representative may consider necessary or appropriate;         

                  (e)  make,   execute  and  deliver  such   amendments  of  and
supplements to this Agreement or any other agreements,  instruments or documents
relating hereto that the  Representative  may consider  necessary or appropriate
and not  materially  adverse  to the  Stockholders'  interests  hereunder,  such
authority to be  conclusively  evidenced by the execution and delivery  thereof;
and otherwise                                                                   

                  (f) take all  actions  and do all  things,  including  but not
limited to the  execution  and  delivery of all  documents  necessary or proper,
required, contemplated or deemed advisable by the Representative,  and generally
to act  for and in the  name  of each  such  Stockholder  with  respect  to this
Agreement.                                                                      

         For purposes of this Agreement, the term "Representative" shall include
any of Kenneth H. Marks' successors, heirs, beneficiaries and assigns.          

5.       Rights and Liability of the Representative.          

                  (a) The Representative may resign as Representative  hereunder
at any time without  liability upon giving notice to EMSG. In the event that the
Representative  shall  resign or otherwise  cease to act as the  Representative,
EMSG shall provide written notice of such resignation to the  Stockholders,  and
the  Stockholders  may  proceed  to  select a  successor  Representative  to act
hereunder.                                                                      

                  (b) The Representative shall have no liability with respect to
any  acts  or  omissions  under  this  Agreement,  except  with  respect  to the
Representative's gross negligence or willful misconduct.  The Representative may
act in  reliance  upon the  advice of  counsel  in  reference  to any  matter in
connection  with this Agreement and shall not incur any liability for any action
taken in good  faith in  accordance  with such  advice.  EMSG and  Kenmar  shall
jointly and severally  indemnify the Representative from and against any and all
damages, losses, demands, claims, costs,  liabilities,  judgments,  deficiencies
and expenses (including  reasonable attorneys' fees) incurred in connection with
the  Representative's  acts or  omissions  under this  Agreement or by virtue of
serving in his capacity as the  Representative,  except to the extent  resulting
from the Representative's gross negligence or willful misconduct.               

         6.  Distribution of Option Shares.  Except as set forth in Section 2(c)
above,  as  soon  as  reasonably  practicable  after  the  Option  Closing,  the
Representative shall distribute the Option Shares to the Stockholders.          

         7.  Adjustments.  If at any time the outstanding  shares of EMSG Common
Stock are  changed  into a different  number of shares or a  different  class by
reason  of  any  reclassification,   recapitalization,   split-up,  combination,
exchange of shares or readjustment  or if a stock dividend  thereon is declared,
then the number of shares of EMSG Common  Stock  subject to the Option  shall be
appropriately  adjusted (the  purchase  price for the Option Shares shall remain
fixed at One Dollar ($1.00) and no adjustment thereof shall be made).           

         8.  Arbitration.  Any  unresolved  dispute  under this  Agreement  with
respect to any matter shall be  submitted to and settled by binding  arbitration
in accordance with the Commercial  Rules,  existing at the date thereof,  of the
American  Arbitration  Association.  The  dispute  shall  be  submitted  to  one
arbitrator  agreed  to by  EMSG  and the  Representative  or,  if  EMSG  and the
Representative cannot agree on one arbitrator,  by three arbitrators selected in
accordance with said Rules, and shall be heard in Raleigh, North Carolina.  Each

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arbitrator  must be experienced in the subject matter in dispute.  The costs and
expenses of the arbitration (including without limitation attorneys' fees) shall
be  paid  by  EMSG,  in the  event  EMSG  is the  non-prevailing  party  in such
arbitration,  and Kenmar, in the event the  Representative is the non-prevailing
party in such arbitration.                                                      

         9.  Successors and Assigns.  This Agreement shall be binding on Kenmar,
EMSG,  Acquisition,  and the Representative and their respective  successors and
assigns,  whether so expressed or not. The parties  hereto intend and agree that
the Stockholders shall be third party beneficiaries of this Agreement.          

         10.  Waiver of  Consent.  No  failure or delay on the part of any party
hereto in  exercising  any power or right  hereunder  shall  operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any  abandonment  or  discontinuance  of steps to enforce such a right or power,
preclude  any other or further  exercise  thereof or the  exercise  of any other
right or power. The rights and remedies of the parties  hereunder are cumulative
and not  exclusive of any rights or remedies  which they would  otherwise  have.
Without  limiting the  generality of the  foregoing,  the parties agree that the
rights of Kenmar and the  Representative (as representative of the Stockholders)
under  this  Agreement  shall be in  addition  to,  and  shall in no way  limit,
Kenmar's  rights  against  EMSG  for  breach  by  EMSG  or  Acquisition  of  any
representation,  warranty,  covenant or other  obligation of EMSG or Acquisition
under the Merger Agreement or otherwise under applicable law. No modification or
waiver of any provision of this  Agreement,  nor consent to any departure by any
party  therefrom,  shall in any event be  effective  unless the same shall be in
writing, and then such waiver or consent shall be effective only in the specific
instance  and for the  purpose  for which  given.  No notice to or demand on any
party in any case shall  entitle  such  party to any other or further  notice or
demand in similar or other circumstances.                                       

         11.  Captions.  The Article and  Section  captions  used herein are for
reference  purposes  only  and  shall  not in any  way  affect  the  meaning  or
interpretation of this Agreement.                                               

  12.  Notices.  Any  notice or other  communication  required  or
permitted  hereunder shall be sufficiently  given if delivered in person or sent
by telex, telecopy or by registered or certified mail or by recognized overnight
courier, postage prepaid, addressed as follows:                                 

If to EMSG or Acquisition, to:                                

 Electronic Manufacturing Services Group, Inc.
6638 Old Wake Forest Road                   
Raleigh, North Carolina  27604              
Attention:  Kenneth H. Marks                

with a copy to:                                               

Smith, Anderson, Blount, Dorsett,           
Mitchell & Jernigan, L.L.P.             
Post Office Box 2611                        
Raleigh, North Carolina 27602-2611          
Attention:  Gerald F. Roach, Esq.           

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if to Kenmar or the Representative, to:                       

Kenneth H. Marks                            
6638 Old Wake Forest Road                   
Raleigh, North Carolina  27604              

with copy to:                                                 

Smith, Anderson, Blount, Dorsett,           
Mitchell & Jernigan, L.L.P.             
Post Office Box 2611                        
Raleigh, North Carolina 27602-2611          
Attention:  Gerald F. Roach, Esq.           

and such  notice or  communication  shall be deemed to have been given as of the
date so delivered, sent by telecopier, telex or mailed.                         

         13.  Counterparts.  This  Agreement  may be  executed  in  two or  more
counterparts,  all of which shall be considered  one and the same  agreement and
each of which shall be deemed an original.                                      

         14.  Governing Law. This Agreement shall be governed by the laws of the
State of North Carolina  (regardless of the laws that might be applicable  under
principles of conflicts of law) as to all matters,  including but not limited to
matters of validity, construction, effect and performance.                      

         15. Severability.  If any term,  provision,  covenant or restriction of
this Agreement is held by a court of competent  jurisdiction  or other authority
to be  invalid,  void,  unenforceable  or against  its  regulatory  policy,  the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected,  impaired
or invalidated.                                                                 

         16.  Capitalized  Terms.  Any  capitalized  terms  used  herein and not
otherwise  defined herein shall have the meanings ascribed to them in the Merger
Agreement.                                                                      

         IN WITNESS  WHEREOF,  Kenmar,  EMSG, and Acquisition  have caused their
corporate names to be hereunto subscribed by their respective officers thereunto
duly authorized,  and the Representative has executed this Agreement,  all as of
the day and year first above written.                                           

                                                  KENMAR BUSINESS GROUPS, INC.

                             By:
                                           Name:
                                            Title:

[Additional signatures appear on next page.]

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                               ELECTRONIC MANUFACTURING SERVICES
         GROUP, INC.

   By:
                 Name:
                  Title:

                                         J.A. INDUSTRIES OF NORTH CAROLINA, INC.

       By:
                     Name:
                      Title:

                   REPRESENTATIVE:

                      Kenneth L. Marks

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 EXHIBIT A
to
OPTION AGREEMENT

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               Issued              %             Options
Stockholder                Shares          Ownership          Shares            

Andrew T. Brown              750              1.1%              8,560           
Catherine M. Prince          200              0.3%              2,283           
Christian B. Johnson         200              0.3%              2,283           
Craig Macnab               6,396              9.7%             72,998           
David J. Thurlow             100              0.2%              1,141           
David M. Welsh               500              0.8%              5,707           
Deborah R. Michael           100              0.2%              1,141           
Deirdre Macnab               700              1.1%              7,989           
Dennis Taylor                250              0.4%              2,853           
Donald I.N. McKenzie         100              0.2%              1,141           
Dorothy Ellison              250              0.4%              2,853           
Erma H. Schuster              60              0.1%                685           
Eugene M. Tate                20              0.0%                228           
F.I. Nebhut, Jr.             500              0.8%              5,707           
Francis F. Putnam            500              0.8%              5,707           
Fritz Ackermann              750              1.1%              8,560           
Harold S. Workman            350              0.5%              3,995           
Henry White (PEG)            250              0.4%              2,853           
Joe B. Putnam, Jr.           500              0.8%              5,707           
John H. Putnam             1,000              1.5%             11,413           
Joseph B. Stroup             750              1.1%              8,560           
Kay V. Marks                 250              0.4%              2,853           
Kenneth E. Mayhew, Jr.     6,900             10.5%             78,750           
Kenneth H. Marks          40,095             61.0%            457,608           
Kenneth L. Marks           1,750              2.7%             19,973           
Lee K. Simon                 703              1.1%              8,023           
Mabel Ann Steckenrider       111              0.2%              1,267           
Margaret Ann Huffstetier     156              0.2%              1,780           
Marsha Prince                100              0.2%              1,141           
MLN Research                 100              0.2%              1,141           
Peter A. Cesaro              100              0.2%              1,141           
Ralph S. Pickett             100              0.2%              1,141           
Richard C. Bisbee, Sr.       750              1.1%              8,560           
Richard D. Adelman           100              0.2%              1,141           
Robert Scott Nieboer         200              0.3%              2,283           
Sue Kruger                    23              0.0%                263           
Wayne C. Craft                50              0.1%                571           
               -------------------------------------------
               65,714            100.0%            750,000

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EXHIBIT D 

FORM OF LEGAL OPINION OF STEVEN A. SANDERS, P.C.

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 [Letterhead of Steven A. Sanders, P.C.]

 _____________, 1996

                                                                  (212) 344-0500

Kenmar Business Groups, Inc.                                                    
6638 Old Wake Forest Road                                                       
Raleigh, North Carolina  27604                                                  

                 Re:      Electronic  Manufacturing  Services Group,  Inc. and
              J.A.  Industries of North Carolina, Inc.

Gentlemen:                                                                      

         This firm is counsel to Electronic  Manufacturing Services Group, Inc.,
a Delaware corporation (which has changed its name from "J.A. Industries, Inc.")
("EMSG")  and  J.A.  Industries  of  North  Carolina,  Inc.,  a  North  Carolina
corporation  ("Acquisition") in connection with the transactions contemplated by
the Merger  Agreement  dated as of March 1, 1996 among Kenmar  Business  Groups,
Inc., a North  Carolina  corporation  ("Kenmar"),  EMSG,  and  Acquisition  (the
"Merger Agreement"). We are rendering this opinion pursuant to Section 5.2(c) of
the Merger  Agreement.  All  capitalized  terms used but not  otherwise  defined
herein  shall  have  the  respective  meanings  ascribed  to them in the  Merger
Agreement.                                                                      

         In connection with the preparation of our opinions  expressed below, we
have made such  investigations  and examined  originals or copies,  certified or
otherwise identified to our satisfaction,  of the Merger Agreement,  each of the
various other documents  referred to therein and such corporate  records of EMSG
and   Acquisition,   certificates  of  public  officials  and  other  documents,
agreements and instruments as we have deemed necessary or appropriate.          

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Kenmar Business Groups, Inc.                                                    
_____________, 1996                                                             
Page 2                                                                          

         For  purposes  of  these  opinions,   we  have  assumed,   without  any
independent  investigation or verification of any kind, (i) the due promulgation
and  validity  of  all   statutes,   regulations,   administrative   procedures,
determinations,  permits and orders;  (ii) the  authenticity and completeness of
all documents  submitted to us as originals,  (iii) the  conformity to authentic
original  documents  and  completeness  of  all  documents  submitted  to  us as
certified,  conformed  or  photostatic  copies,  (iv)  that  there  have been no
modifications, waivers or amendments to any of the agreements or other documents
reviewed by us and (v) that the  certificates of public  officials dated earlier
than the date  hereof  (but not  earlier  than  ________________,  1996)  remain
accurate from such earlier date through and including the date hereof.          

         Based upon and subject to the foregoing,  and subject to the additional
qualifications  and  limitations  set forth  below,  we  express  the  following
opinions:                                                                       

         1. Each of EMSG and  Acquisition  has the full legal  right,  power and
authority  to  enter  into  and  deliver  the  Merger  Agreement  and the  other
Transaction  Document,  to perform its obligations  thereunder and to consummate
the transactions contemplated thereby.                                          
         2. The Merger  Consideration is constituted entirely of duly authorized
and validly  issued  Common  Stock of EMSG.  The Merger  Consideration  has been
issued pursuant to a valid exemption from registration  under applicable federal
and state securities laws. All shares constituting the Merger  Consideration are
fully paid and  non-assessable,  and free and clear of all liens,  encumbrances,
restrictions  and  claims  of every  kind,  with  the  exception  of the  legend
appearing on each stock certificate  issued as part of the Merger  Consideration
and the legal basis for such restriction.                                       

         3. The Option  Shares  issuable  upon  exercise of the Option have been
duly and validly authorized and reserved, and when issued in accordance with the
terms  of  the  Option  Agreement,  will  be  validly  issued,  fully  paid  and
nonassessable.                                                                  

         4. EMSG is a corporation  duly  organized  and validly  existing and in
good standing  under the laws of the State of Delaware.  It has the power to own
its property and to carry on its business as now being  conducted.  Further,  it
has the power and authority to enter into and deliver the Merger Agreement,  the
Plan  of  Merger,  and the  Other  Transaction  Documents,  and to  perform  its
obligations thereunder and consummate the transactions contemplated thereby. The
execution,  delivery,  and  performance  of the  Merger  Agreement,  the Plan of
Merger, and the other Transaction Documents by EMSG, and its consummation of the
transactions  contemplated thereby, have been duly and validly authorized by all
corporate,  shareholder and other action required of EMSG by applicable law, its
Certificate of                                                                  

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Kenmar Business Groups, Inc.                                                    
_____________, 1996                                                             
Page 3                                                                          

Incorporation,  or Bylaws.  EMSG is not  required  to be  qualified  to transact
business in any other state in order to consummate this transaction.            

         5. Acquisition is a corporation duly organized and validly existing and
in good standing under the laws of the State of North Carolina. It has the power
to own its  property  and to  carry  on its  business  as now  being  conducted.
Further,  it has the power and  authority  to enter into and  deliver the Merger
Agreement,  the Plan of  Merger,  and the Other  Transaction  Documents,  and to
perform its obligations thereunder and consummate the transactions  contemplated
thereby. The execution,  delivery, and performance of the Merger Agreement,  the
Plan of Merger,  and the other  Transaction  Documents by  Acquisition,  and its
consummation  of the  transactions  contemplated  thereby,  have  been  duly and
validly  authorized by all corporate,  shareholder  and other action required of
Acquisition  by  applicable  law,  its  Articles  of  Incorporation,  or Bylaws.
Acquisition  is not required to be  qualified to transact  business in any other
state in order to consummate this transaction.                                  

         6. The Merger  Agreement,  the Plan of Merger and the other Transaction
Documents have been duly executed and delivered by each of EMSG and  Acquisition
(to the extent each is a party thereto),  enforceable against them in accordance
with their terms.                                                               

         7. EMSG has an authorized  capitalization  consisting of Twenty Million
(20,000,000)  shares of common  stock,  $.0025  par  value per  share,  of which
___________________________________  (____________)  are issued and outstanding,
and Two Million  (2,000,000)  shares of preferred  stock,  $______ par value per
share,  of  which  Zero  (0) are  issued  and  outstanding.  Acquisition  has an
authorized capitalization consisting of _________________________ (____________)
shares   of   common   stock,   $_____   par   value   per   share,   of   which
____________________   (_________)  are  issued  and  outstanding.  All  of  the
aforementioned  outstanding shares have been duly authorized and validly issued,
are fully paid and  nonassessable,  and all  shares  issued to date by EMSG have
been issued in full compliance with all applicable state and federal  securities
laws.  There  are  no  outstanding  options,  warrants,  rights  (preemptive  or
otherwise), calls, commitments,  conversion rights, rights of exchange, plans or
other agreements of any character providing for the purchase,  issuance, or sale
of any  shares  or the  capital  stock  of EMSG  or  Acquisition  other  than as
contemplated by the Merger Agreement.                                           

         8. Neither  EMSG nor  Acquisition  owns,  directly or  indirectly,  any
capital  stock or other  equity or  ownership  or  proprietary  interest  in any
corporation, partnership, association, trust, joint venture.                    

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Kenmar Business Groups, Inc.                                                    
_____________, 1996                                                             
Page 4                                                                          

         9.  Except  as set  forth in  Schedule  2.23 to the  Merger  Agreement,
neither EMSG nor Acquisition is subject to, bound by or a party to, any charter,
bylaw, mortgage, lien, lease, license, permit, agreement,  contract, instrument,
law,  rule,  ordinance,  regulation,  order,  judgment  or decree,  or any other
restriction  of any kind or  character  which  materially  affects the  business
practices,  operations  or  conditions  of EMSG or  Acquisition  or any of their
assets or property,  or which would be violated by, prevent or impair materially
(whether by acceleration  of any liability,  creation of any lien or encumbrance
or  otherwise),  or require  any  approval,  consent,  notice or  assumption  in
connection  with  consummation  of the  transactions  contemplated by the Merger
Agreement,  the Plan of Merger, and the other Transaction Documents,  compliance
by EMSG or Acquisition  with the terms,  conditions  and  provisions  thereof or
continued  operation of EMSG's or Acquisition's  business after the Closing Date
on substantially the same basis as theretofore  operated or which would restrict
the ability of EMSG or Acquisition  to acquire any property or conduct  business
in any area.                                                                    

         10. No  authorizations,  consents or  approvals  of or filings with any
Delaware,  North Carolina or federal  governmental  agencies or authorities  are
required in connection with the execution, delivery or performance of the Merger
Agreement  or any other  agreement  or other  document  attached  as an  Exhibit
thereto by EMSG or Acquisition.                                                 

         11.  There are no  actions,  suits,  proceedings  at law or in  equity,
arbitrations or administrative  proceedings pending or threatened against either
EMSG or  Acquisition.  There are no judgments,  orders or decrees against either
EMSG or Acquisition.                                                            

         12.  Each of  EMSG  and  Acquisition  is and  has  been in  substantial
compliance with all applicable laws, regulations, orders, judgments and decrees.

         13. No facts have come to our attention to cause us to believe that the
Merger Agreement or any schedule,  exhibit or certificate attached to the Merger
Agreement or delivered in accordance with the terms thereof  contains any untrue
statement of a material fact or omits any statement of a material fact necessary
in order to make the statements therein not misleading.                         

         14. To the best knowledge of the  undersigned,  neither EMSG's Board of
Directors nor its shareholders, and neither Acquisition's Board of Directors nor
its  shareholders,  have taken any  material  action  except as  described in or
contemplated  by the Merger  Agreement or the Transaction  Documents,  including
without limitation, the issuance of any securities.                             

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Kenmar Business Groups, Inc.                                                    
_____________, 1996                                                             
Page 5                                                                          

 * * *

         The  foregoing  opinions  are  subject  to the  following  assumptions,
qualifications and limitations:                                                 

                  (A) We have  assumed  that the  parties  (other  than EMSG and
Acquisition) to the Merger  Agreement and the other  Transaction  Documents have
the requisite  power and  authority to enter into the Merger  Agreement and such
other  Transaction   Documents;   that  the  Merger  Agreement  and  such  other
Transaction Documents have been duly authorized,  executed and delivered by each
such party; and that the Merger Agreement and such other  Transaction  Documents
to which each such party is a party  constitute  the  legal,  valid and  binding
obligations  of  each  such  party,  enforceable  against  each  such  party  in
accordance with their respective terms.                                         

                  (B) The  foregoing  opinions are subject to the effects of (i)
bankruptcy,  insolvency,  reorganization,  receivership,  moratorium  and  other
similar  laws now or hereafter  in effect  relating to or  affecting  creditors'
rights or remedies generally, (ii) general principles of equity, whether applied
by a court of law or equity, and (iii) applicable laws and court decisions,  now
or  hereafter  in  effect,  that may limit or  restrict  the  enforceability  or
availability of certain terms,  provisions,  rights or remedies contained in the
Merger Agreement or the other Transaction Documents,  but which, in our opinion,
should not make such documents  inadequate for the practical  realization of the
material benefits intended to be afforded to the parties thereby.               

         These opinions are provided  solely for your benefit in connection with
the  transactions  contemplated  by the Merger  Agreement and may not be used or
relied upon by, or published or  communicated  to, any other person  without our
prior written consent.                                                          

         We bring to your  attention  the fact  that our legal  opinions  are an
expression of professional judgment and are not a guarantee of a result.        

         Our  opinions  are as of the date  hereof,  and we do not  undertake to
advise you of matters which might come to our  attention  subsequent to the date
hereof which may affect our legal opinions expressed herein.                    

                                          Sincerely yours,

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 EXHIBIT E

  FORM OF MARKS EMPLOYMENT AGREEMENT

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  EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement ("Agreement") is made and effective this    
[Closing] day of [Closing], 1996, by and between Electronic Manufacturing       
Services Group, Inc., a Delaware Corporation ("Company") and Kenneth H.         
Marks, ("Executive").                                                           

NOW, THEREFORE, the parties hereto agree as follows:                            

1. Employment.                                                                  

Company hereby agrees to employ Executive as its President and Chief Executive  
Officer and Executive hereby accepts such employment in accordance with the     
terms of this Agreement and the terms of employment applicable to regular       
employees of the Company. In the event of any conflict or ambiguity between     
the terms of this Agreement and the terms of employment applicable to regular   
employees, the terms of this Agreement shall control.                           

2. Duties of Executive.                                                         

The duties of Executive shall include the performance of all of the duties      
typical of the office held by Executive as described in the Company's bylaws    
and such other projects as may be assigned by the Company's board of directors  
provided, however, that the responsibilities assigned shall be of a character   
and dignity appropriate to a senior executive in a similar business and         
provided that such assignments are reasonably consistent with Executive's       
education, experience, and background. Executive shall devote substantially     
all of his normal business time and attention to the affairs of the Company     
and the promotion of its interest. Executive's principal office shall be in     
Raleigh, North Carolina.                                                        

3. Compensation.                                                                

Executive will be paid compensation during this Agreement as follows:           

A. A base salary of $125,000 USD per year, payable in installments according    
to the Company's regular payroll schedule. The base salary shall be increased   
at the end of each year of employment by 5% or at the discretion of the         
Company's board of directors.                                                   

B. Executive shall be entitled to a yearly bonus equal to eight (8%) percent    
of the net after tax profit of the Company. Such bonus will be due and payable  
within ninety (90) days of the Company's fiscal year end or sooner at the       
discretion of the Company's board of directors. Payment may be made, at         
Executive's sole discretion, in a combination of one or more of the following   
ways: (1) cash payment, (2) forgiveness of liabilities owed the Company by      
Executive, and/or (3) transfer of ownership, and any cash value therein, of     
life insurance policie(s) that cover the Executive's life. Executive will be    
entitled to a draw against an anticipated bonus in an amount up to 70% of the   
anticipated bonus based on unaudited financial statements with the balance      
being paid as described in the time above.                                      

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C. The Company will grant Executive stock options in the amount of 350,000      
shares of common stock of the Company. Such stock options shall have five       
year term and shall be issued pursuant to a qualified Incentive Stock Option    
Plan under Section 422 of the Internal Revenue Code of 1986 as amended through  
August 15, 1993. Provisions of such plan shall be attached to and become part   
of this Agreement.                                                              

Such Stock Option Plan and Option agreements covering the options which are the 
subject of this section of this Agreement shall include the right of Executive  
to exercise the option, on the date of the option or any date thereafter prior  
to the option termination date, all of the shares exercisable under the term    
of such option. Further, the Company agrees that Executive may finance the      
acquisition of option shares through the issuance of a note to the Company.     
Such note shall have a term of at least five (5) years, with interest only      
payments required until the principal amount of such note is paid, with         
interest at the applicable mid-term Federal rate determined under Section 127(d)
of the Internal Revenue Code at the time of interest payment. Collateral for    
such note and the only recourse for such note shall be the shares being         
financed. The Company agrees to release to Executive shares collateralizing the 
loan provided the principal amount of the loan is reduced by payment to the     
Company of an amount equal to the number of shares released times the strike    
price of the option. In the event the total value of the shares serving as      
collateral exceeds the principal amount of the note at any time during the term 
of the note, the number of shares serving as collateral shall be reduced to     
that the value of the remaining shares equal the value of the principal balance 
of subject note providing that the released shares are under the joint control  
of the Company and Executive. Upon the sale of any such shares the proceeds     
will be divided so that the first payment will be applied to reduce principal   
amount of the note by the value of the option price times the number of         
shares sold and secondly any remaining funds to be paid to Executive. In the    
event Executive exercises such option with a note as described herein,          
Executive may, at his sole discretion, satisfy payment for any interest or      
principal amount due to the Company, by his cancellation of any amounts owed    
him by the Company. Such amounts may include due but unpaid remuneration,       
expenses, or any other amount that may be due but unpaid to Executive on the    
date payment of such interest and/or principal is due. Common shares issued     
under the Incentive Stock Option Plan attached hereto shall have no restriction 
on resale other than those imposed by the Securities Act of the SEC, the State  
of Delaware, and the State of North Carolina Blue Sky laws. Such shares issued  
pursuant to this plan shall contain a provision authorizing and requiring the   
Company to register, at its expense, such shares in order that these shares may 
be traded on any exchange which currently, or thereafter, permit the stock of   
the Company to be traded, within three months following receipt of such stock   
or as a "piggyback" registration to any registration of securities undertaken   
by the Company for its common stock, whichever occurs earliest.                 

In the event of termination under the terms of this Agreement, options          
exercisable at the date of termination shall be exercisable by Executive for a  
period of ninety days (90) after the date of termination, regardless of the     
reason of termination. Further, in the event of termination, such shares        
exercisable at the date of termination may be financed by Executive as          
described in the above paragraph.                                               

D. As additional consideration for assuming the responsibilities herein,        
Executive may accept one of the following two alternatives as payment for such  
consideration:                                                                  

   i. The Company shall make to Executive upon signing of this Agreement
     a zero (0) percent interest unsecured loan payable in full one (1) year
  from the date of signing of this Agreement in the amount of $100,000
       USD as additional consideration for assuming the responsibilities herein.
The loan will have twenty five (25) renewal periods, renewable at 
  Executives sole discretion, at the identical terms described herein.
Such loan may be paid at maturity or paid early without penalty by
     Executive in cash or with the Company's common stock based on the value
   of such stock on the day in which the loan is paid. For tax purposes,
     the rate used for imputed interest will be at the lowest allowable rate
 as defined by the Internal Revenue Code for such year in which such
  interest is deemed to have been paid. In the event of termination of
this Agreement for any reason or cause by either party, the loan  
     described herein may be forgiven in its entirety at the sole discretion
of Executive at anytime after the date of termination.            

or                                                              

       ii. The Company shall pay to Executive upon signing of this Agreement a
      single, non-refundable gross payment of $100,000 USD. Ordinary payroll
  taxes are to be deducted and paid on behalf of Executive as in the
ordinary course of business.                                    

E. As additional consideration for assuming the responsibilities outlined and   
as consideration for continued guarantee of certain liabilities of the Company  
or its subsidiaries that may exist at the time of signing of this Agreement,    
the Company agrees to indemnify Executive for any and all personal guarantees   
made be Executive for the Company or any of its subsidiaries. Such              
indemnification includes prepayment, as directed by Executive, of any           
reasonable fees or expenses necessary to defend Executive for the Company's     
breach (or alleged breach) of its obligation(s). Further, the Company agrees    
to make its best efforts to relieve Executive of any and all personal           
guarantees made by the Executive on behalf of the Company. The Company agrees   
that such indemnification will survive any termination or resignation of        
Executive regardless of cause.                                                  

4. Benefits.                                                                    

A. Vacation. Executive will be entitled to at least three (3) weeks paid        
vacation each calendar year in addition to the Company's ordinary paid holidays.
Company will notify Executive on or about the beginning of each calendar year   
with respect to the holiday schedule for the coming year. Vacation will be      
scheduled in advance subject to requirements of the Company. Such vacation must 
be taken during the calendar year and cannot be carried forward into the next   
year.                                                                           

B. Sick Leave. Executive shall be entitled to sick leave and emergency leave    
according to the regular policies and procedures of the Company. Additional     
sick or emergency leave over and above paid leave provided by the Company, if   
any, shall be unpaid and shall be granted at the discretion of the Company's    
board of directors.                                                             

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C. Expense Reimbursement. Executive shall be entitled to reimbursement for all  
reasonable expenses, including travel and entertainment, incurred by Executive  
in the performance of Executive duties. Executive will maintain records and     
written receipts as required by the Company policy and reasonably requested by  
the Company's board of directors to substantiate such expenses.                 

D. Employment Date. For the purpose of benefits related issues, including but   
not limited to insurance, options, etc..., Executive's date of employment is    
September 18, 1984.                                                             

E. Other Benefits. Executive is entitled to certain other benefits as listed:   
(1) a car leased and maintained by the Company, (2) a country club membership   
and dues, (3) keyman life insurance, (4) medical health insurance for           
Executive and his immediate family, and (5) long term disability insurance      
commensurate with Executive's salary and bonus.                                 

5. Term and Termination.                                                        

A. The term of this Agreement shall commence on [Closing], 1996 and it shall    
continue in effect for a period of five (5) years until [Closing], 2001. This   
Agreement shall be extended for an additional year on [Closing] of each year    
unless either party gives to the other written notice of termination. This      
Agreement and Executive's employment may be terminated at the Company's         
discretion, provided that the Company shall pay Executive an amount equal to    
payment at Executive's base salary rate for the remaining period of the         
Agreement to a maximum of three years (3) plus any bonus to which Executive may 
be entitled, payable in full by certified check on the date of termination.     

B. This Agreement may be terminated by Executive at Executive's discretion by   
providing at least ninety (90) days prior written notice to the Company. In the 
event of termination by Executive pursuant to this subsection, Company may      
immediately relieve Executive of all duties and immediately terminate this      
Agreement, provided that the Company shall pay Executive at the then applicable 
base salary rate to the termination date included in Executive's original       
termination notice. Such payment shall be made by certified check on the date   
of notice of termination.                                                       

C. The Company may terminate this Agreement in the event of repeated and        
demonstrable failure on the part of Executive to perform the material duties of 
Executive's position (as described in paragraph 2) in a competent manner and    
failure of the Executive to substantially remedy such failure within ninety (90 
days) of receiving specific written notice of such failure from the Company. In 
addition, the Company may terminate this Agreement if Executive is convicted of 
a felony during the term of this Agreement. In the event of termination as      
described in this section 5.C., the Executive shall be given ninety (90) days   
written notice and be entitled to payment through the notice period at the then 
base salary rate plus any bonuses or expenses due, payable by the Company in    
full by certified check on the date of written notice of termination.           

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D. In the event that Executive shall fail, because of illness or injury, to     
render services under this Agreement for six (6) consecutive calendar months    
or for shorter periods aggregating one hundred thirty (130) or more business    
days in any twelve (12) month period, the compensation provided for in section  
3 and his employment by the Company may be terminated as of six (6) months after
the end of such six (6) month or one hundred thirty (130) day period. The       
Company shall offset against Executive's payment of salary any payments received
by him as a result of such illness or injury pursuant to any federal or state   
program or any salary continuation or similar program established by the Company
except payments intended as reimbursement for past or anticipated medical and   
other expenses.                                                                 

E. In the event of the death of Executive, the Company shall pay to Executive's 
legal representative two (2) years salary at the then base salary rate, payable 
as would have been paid to the Executive if he were alive. In addition,         
Executive's immediate family and dependents shall have the same rights as       
Executive would have had during the two (2) year payout period, including the   
rights to demand registration of restricted securities, the right to exercise   
stock options, and the right to Executive's benefits as listed in Section 4     
above.                                                                          

F. In the event that the Company becomes a party to any merger or acquisition   
in which it is not the surviving company, or if the Company sells all or        
substantially all of its assets, or if there should occur a change in control   
of the Company by virtue of a change or changes in ownership of its outstanding 
voting securities that would deminish Executive's voting rights and/or          
position as is at the time of signing of this Agreement, without his prior      
written consent of such change in voting rights and/or position, Executive      
(or, in the event of death, his legal representative) will be paid an amount    
equal to three (3) years of Executives then base annual salary immediately by   
certified check on the occurrence of such event as determined by the discretion 
of Executive. During the three year period following such event, Executive and  
his dependents, beneficiaries and estate, shall continue to be entitled to all  
benefit plans Executive was entitled to prior to such event. The employment of  
Executive will be considered terminated by the Company per section 5.A. if      
Executive voluntarily terminates his employment because of any of the events set
forth in this paragraph and Executive provides not less than thirty (3) days    
written notice.                                                                 

G. In the event that a majority of the Board of Directors of the Company is not 
elected to the satisfaction of Executive from the effective date of this        
Agreement through a period of three years thereafter, the Company shall pay     
Executive an amount equal to three (3) years of the then base annual salary,    
payable immediately by certified check on the date of the shareholders' meeting 
of which such election of the Board of Directors takes place. At Executives sole
discretion, such payment may be made by the issuance of common stock of the     
Company at the then past ten day average trading price at twice the amount that 
would be paid in cash. In the event that Executive decides to accept payment by 
the issuance of the Company's common stock, Executive may request, and the      
Company will use its best efforts to immediately have such stock registered so  
that it may be traded without restriction. In either case of payment as         
described in this paragraph, shall not to be construed as Executive's giving or 
accepting termination of this Agreement. Further, the Company and Executive     
agree that this Agreement will not be and cannot be terminated for any reason   
other than the sole discretion of the Executive, during a period in which a     
majority of the Company's Board of Directors is not elected to the satisfaction 
of Executive from the effective date of this Agreement through a period of three
(3) years.                                                                      

H. Executive is irrevocably authorized to make payment from Company accounts, or
to authorize the appropriate individuals within the Company, its successor,     
assigns, subsidiaries or divisions, to make payment from Company accounts to    
Executive as provided under the terms of this Agreement, and any such action by 
Executive shall not be deemed as a breach of any responsibility that he may     
have as an officer or director of the Company. Termination of this Agreement by 
the Company for any reason with respect to any paragraph within this Agreement  
in which the Company may give notice of termination shall not have any force or 
effect until Executive has acknowledged in writing the receipt of any monies due
him. Payment of monies due per sections 5.F and/or 5.G are not mutually         
exclusive and payment of monies due per either section is in addition to any    
monies that may otherwise be due because of termination of this Agreement. All  
references herein made to payment by certified check may be effected by other   
means (such as wire transfer, electronic transfer of funds, etc...) acceptable  
to Executive.                                                                   

6. Notices.                                                                     

Any notice required by this Agreement or given in connection with it, shall be  
in writing and shall be given to the appropriate party by personal delivery or  
by certified mail, postage prepaid, or recognized overnight delivery services:  

If to the Company:                                              

Electronic Manufacturing Services Group, Inca.                  
6638 Old Wake Forest Road                                       
Raleigh, NCR 27604                                              

If to Executive:                                                

Kenneth H. Marks                                                
9508 Kimball Drive                                              
Raleigh, NCR 27615                                              

7. Final Agreement.                                                             

This Agreement terminates and supersedes all prior understanding or agreements  
on the subject matter hereof. This Agreement may be modified only by a further  
writing that is duly executed by both parties.                                  

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8. Governing Law.                                                               

This Agreement shall be construed and enforced in accordance with the laws of   
the State of North Carolina.                                                    

9. Headings.                                                                    

Headings used in this Agreement are provided for convenience only and shall be  
be used to construe meaning or intent.                                          

10. No Assignment.                                                              

Neither this Agreement nor any interest in this Agreement other than            
specifically stated above may be assigned by Executive or the Company without   
the prior written approval of the both parties, with exeception of Executives   
representative or estate.                                                       

11. Misc.                                                                       

It is agreed that Executive, at his sole discretion, may make payment to the    
Company for any moneys due the Company by Executive with the Company's common   
stock based on the trading price of such stock on the day payment is made.      
Failure of Executive to waive, approve or endorse any action as may be required 
herein does not constitute a waiver by Executive of any rights he may have      
regardless of the time that may pass.                                           

12. Severability.                                                               

If any term of this Agreement is held by a court of competent jurisdiction to be
invalid or unforeseeable, then this Agreement, including all of the remaining   
terms, will remain in full force and effect as if such invalid or unenforceable 
term had never been included.                                                   

IN WITNESS WHEREOF, the parties hereto, having duly been authorized, have       
executed his Agreement as of the date first above written.                      

Electronic Manufacturing Services Group, Inc.   Witness                         

___________________________________________     _______________________________ 
President                                                                       

Executive                                       Witness                         

___________________________________________     _______________________________ 
Kenneth H. Marks                                                                

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EXHIBIT F 

FORM OF AGREEMENT REGARDING SUBSTITUTE OPTION AGREEMENT 

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[FOOTNOTES AND PARENTHETICAL INFORMATION ARE FOR INFORMATIONAL PURPOSES ONLY AND
WILL NOT CONSTITUTE PART OF THE ACTUAL OPTION AGREEMENTS]                       

 ELECTRONIC MANUFACTURING SERVICES GROUP, INC.

 NONQUALIFIED STOCK OPTION AGREEMENT

         THIS   STOCK   OPTION    AGREEMENT   is   made   this   ____   day   of
______________________________,  1996, by and between  Electronic  Manufacturing
Services  Group,  Inc.,  a  corporation  formed  under  the laws of the State of
Delaware ("EMSG"), and _________________, a citizen and resident of the State of
_______________, (the "Optionee").                                              

 WITNESSETH:

         WHEREAS,  the Optionee  has an option to purchase  shares of the common
stock  of  Kenmar  Business  Groups,   Inc.   ("Kenmar")  pursuant  to  Kenmar's
Nonqualified Stock Option Plan (the "Kenmar Option"); and                       

         WHEREAS,  pursuant  to the terms of the Merger  Agreement  by and among
EMSG (which has changed its name from "J.A. Industries,  Inc."), J.A. Industries
of North  Carolina,  Inc., a North  Carolina  corporation  ("Acquisition"),  and
Kenmar dated as of March 1, 1996 (the  "Merger  Agreement"),  the Kenmar  Option
will be  cancelled  and  replaced  with a  substitute  corresponding  option  to
purchase  shares of the $.0025 par value  common  stock of EMSG  pursuant to the
provisions of the "J.A.  Industries,  Inc. 1993 Employee Stock Option Plan" (the
"Plan")  effective  as of the  consummation  of the merger  contemplated  by the
Merger Agreement (the "Merger").                                                

         NOW,  THEREFORE,  in consideration of the premises contained herein and
in the Plan, it is agreed as follows:                                           

         (1)  Cancellation of Kenmar Option and Grant of EMSG Option.  Effective
as of the consummation of the Merger:                                           

                (a)      The Kenmar Option is cancelled in all respects, and

                  (b)      subject to the terms and conditions  contained herein
                           and in the Plan,  EMSG hereby grants the Optionee the
                           right,   privilege  and  option  (the   "Option")  to
                           purchase  ___________________  (____)1  shares of the
                           $.0025 par value  common  stock of EMSG at a price of
                    __________________ Dollars ($____)2 per share.

          (2) Term and Vesting of Option.  The term of the Option  commences  on
the date hereof and, unless sooner terminated as set forth below or in the Plan,
terminates  on  ____________________  [SUPPLY  THE DATE  DETERMINED  PURSUANT TO
SECTION 5 OF THE KENMAR OPTION  AGREEMENT] (which date shall be no more than ten
(10) years from the date the Option is granted) (the "Term") and, subject to the
terms and  provisions  hereof and the Plan, the Option shall be fully vested and
immediately                                                                     

---------------------------                                                     
    1 The number of shares  shall be  determined  by  multiplying  the number of
shares of Kenmar stock  subject to the Kenmar Option by the Exchange  Ratio,  as
defined in the Merger Agreement (41 shares of JAI stock for each share of Kenmar
stock). Fractional shares shall be eliminated.                                  

    2 The price per share shall be determined by dividing the exercise price per
share of the Kenmar common stock under the Kenmar Option by the Exchange Ratio. 

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exercisable.  Subject to the foregoing,  the Option may be exercised in whole or
in part with respect to all or any portion of the shares to which it relates.   

          (3)  Method  of  Exercise.  The  Option  shall  be  exercised  by  the
transmittal  of  written  notice  thereof  to EMSG  at its  principal  place  of
business.  The notice shall include the Optionee's  designation of the number of
shares to be  purchased  and the  Optionee's  check in payment  of the  purchase
price.  Upon receipt of such notice and  negotiation  of said check,  EMSG shall
deliver  to the  Optionee  a  certificate  representing  the  shares  purchased,
provided  that if any law or  regulation  requires  EMSG to take any action with
respect to the shares specified in such notice before the issuance thereof,  the
date of delivery of the shares shall be extended for the necessary period.      

          (4) Plan; Restrictions.  In all respects this Agreement and the Option
granted herein shall be subject to the terms and provisions of the Plan which is
attached hereto as Schedule A and incorporated herein by reference. Accordingly,
the rights of the Optionee  under this  Agreement and the shares of common stock
of EMSG  which the  Optionee  may  purchase  hereunder  are  subject  to certain
restrictions as set forth in the Plan.                                          

          (5) Rights  Prior to Exercise of Option.  The  Optionee  shall have no
rights as a  stockholder  with  respect  to the  shares of stock  subject to the
Option until the exercise of his rights  hereunder and the issuance and delivery
to Optionee of a certificate or certificates evidencing such shares.            

          (6)  Assignment.  The Option shall not be  transferable  other than by
will or the laws of descent and  distribution,  and the Option may be exercised,
during the lifetime of the Optionee,  only by the Optionee.  More  particularly,
(but without limiting the generality of the foregoing),  the Option,  may not be
assigned, transferred (except as provided above), pledged or hypothecated in any
way,  shall not be  assignable  by  operation of law and shall not be subject to
execution, attachment or similar processes. Any attempted assignment,  transfer,
pledge,  hypothecation  or  other  disposition  of the  Option  contrary  to the
provisions hereof, and the levy of any execution,  attachment or similar process
upon the Option shall be null and void and without effect.                      

         (7) Applicable  Laws. The validity,  construction,  interpretation  and
enforceability  of this  Agreement  and the  capacity  of the  parties  shall be
determined and governed by the laws of the State of North Carolina.             

          (8)  Severability.  The provisions of this Agreement are severable and
if any one or more  provisions  may be  determined  to be illegal  or  otherwise
unenforceable,  in whole or in part, the remaining provisions, and any partially
unenforceable  provision to the extent  enforceable in any  jurisdiction,  shall
nevertheless be binding and enforceable.                                        

          (9) Waiver.  The waiver by EMSG of a breach of any  provision  of this
Agreement  by  Optionee  shall not  operate or be  construed  as a waiver of any
subsequent breach by Optionee.                                                  

         (10) Binding Effect.  The provisions of this Agreement shall be binding
upon the parties  hereto,  their  successors  and  assigns,  including,  without
limitation,  the estate of the Optionee  and the  executors,  administrators  or
trustees  of  such  estate  and  any   receiver,   trustee  in   bankruptcy   or
representative of the creditors of the Optionee.                                

         (11) Construction.  This Agreement is subject to and shall be construed
in accordance  with the Plan, the terms of which are explicitly  made applicable
hereto.  Unless otherwise  defined herein,  capitalized                         

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terms in this  Agreement  shall  have the same  definitions  as set forth in the
Plan. In the event of any conflict  between the  provisions  hereof and those of
the Plan, the provisions of the Plan shall govern.                              

         THIS STOCK OPTION AGREEMENT is hereby confirmed and executed as of this
_____ day of ________________, 1996.                                            

                                               ELECTRONIC MANUFACTURING SERVICES
                         GROUP, INC.
ATTEST:                                                                         

___________________________________ By:     ____________________________________
Secretary                          Title:   ____________________________________

[Corporate Seal]                                                                

 OPTIONEE:

                                   _______________________________________(SEAL)
Name:     

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SCHEDULE A

 (J.A. Industries, Inc. 1993 Employee Stock Option Plan)

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J.A. INDUSTRIES, INC. 1993 EMPLOYEE STOCK OPTION PLAN 

1. Purposes.                                                                    

    The J.A. INDUSTRIES,  INC. 1993 EMPLOYEE STOCK OPTION PLAN (the "Plan") is
intended to provide the employees of J.A. Industries, Inc. (the "Company") with 
an added incentive to continue their services to the Company and to induce them 
to exert their maximum efforts toward the Company's  success. By thus           
encouraging employees and promoting their continued  association with the       
Company, the Plan may be expected to benefit the Company and its  Shareholders. 
The Plan allows the Company to grant  Incentive  Stock  Options  ("ISOs") (as   
defined in Section 422A(b)  of  the  Internal   Revenue Code of 1986, as amended
[the  "Code"]), Non-Qualified  Stock  Options  ("NQSOs")  not intended to       
qualify under Section 422A(b) of the Code, Stock Appreciation  Rights ("SARs")  
and Stock Depreciation Rights  ("SDRs")  (collectively  the  "Options").        

2. Shares Subject to the Plan.                                                  

  The total  number of shares of Common Stock of the  Company,  $.0025 par
value per share (the "Common  Shares"),  that may be subject to Options granted 
under the Plan shall be 250,000 in the  aggregate,  subject to  adjustment as   
provided in Paragraph 8 of the Plan; however, the grant of any NQSO to an       
employee together with a tandem SAR or SDR shall only require one Common Share  
available subject to the Plan to satisfy such joint Option. The Company shall at
all times while the Plan is in force reserve such number of Common Shares as    
will be sufficient to satisfy the  requirement of outstanding  Options  granted 
under the Plan. In the event any Option  granted  under the Plan shall expire or
terminate for any reason without  having  been  exercised  in full or shall     
cease for any  reason to be exercisable in whole or in part, the  unpurchased   
shares subject thereto shall again be available for granting of Options under   
the Plan.                                                                       

3.  Eligibility.                                                                

   Options  may be  granted  to  employees,  which  term as used in the Plan
includes officers and directors of the Company or of a "subsidiary" or "parent" 
of the Company, as the quoted terms are defined within Section 425 of the Code. 
Options may be granted from time to time under the Plan to one or employees of  
the Company, including employees who have previously been granted Options under 
the Plan.                                                                       

4.  Administration  of the Plan.                                                

     The Plan shall be  administered by the Board of Directors of the Company as
such Board of Directors may be composed from time to time or by a Stock Option  
Committee (the  "Committee")  comprised  of  three  disinterested persons (the  
term "disinterested"  having  the  meaning  ascribed  to  it by  Rule  16b-3  of
the Securities  Exchange Act of 1934 [the "1934 Act"])  appointed by such Board 
of Directors of the Company. As and to the extent                               

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authorized by the Board of Directors of the Company, the Committee may          
exercise the power and authority vested in the Board of Directors under the     
Plan. Within the limits of the express provisions of the Plan, the Board of     
Directors shall have the authority, in its discretion, to determine the         
individuals to whom, and the time or times at which, Options shall be granted,  
the character of such Options (whether ISO, NQSO and/or SAR or SDR in tandem    
with a NQSO) and the number of Common Shares to be subject to each Option,      
and to interpret the Plan, to prescribe, amend and rescind rules and            
regulations relating to the Plan, to determine the term and provisions of       
Option agreements that may be entered into in connection with Options (which    
need not be identical), subject to the limitation that agreements granting      
ISOs must be consistent with requirements for the ISOs being qualified as       
"incentive stock options" as provided in Section 422A of the Code, and          
to make all other determinations and take all other actions necessary           
or advisable for the administration of the Plan. In making such determinations, 
the Board of Directors may take into account the nature of the services         
rendered by such individuals, their present and potential contributions         
to the Company's success, and such other factors as the Board of Directors,     
in its discretion, shall deem relevant. The Board of Directors' determinations  
on the matters referred to in this paragraph shall be conclusive.               

5. Terms of Options.                                                            

    The Board or the Committee may grant either ISOs or NQSOs or SARs and/or
SDRs in tandem with NQSOs. An ISO or an NQSO enables the optionee to purchase   
from the Company, at any time during a specified exercise period, a specified   
number of Common Shares at a specified price (the "Option Price"). The          
optionee, if granted an SAR in tandem with an NQSO, may receive from the        
Company, in lieu of exercising his option to purchase shares pursuant to his    
NQSO, at one of the certain specified times during the exercise period of       
the NQSO as set by the Board or the Committee, the excess of the fair market    
value upon such exercise (as determined in accordance with subparagraph         
(b) of this Paragraph 5) of one Common Share over the Option Price per share    
specified upon grant of the NQSO/SAR multiplied by the number of Common         
Shares covered by the SAR so exercised. The optionee, if granted an SDR in      
tandem with an NQSO, may receive from the Company at such date after the        
optionee's exercise of the NQSO with which the SDR is in tandem and the SDR     
itself, which date shall be determined by the Board or the Committee in its     
sole discretion, the excess of the fair market value of one Common Share upon   
the optionee's exercise of the NQSO with which the SDR is in tandem over the    
greater of the (i) fair market value on the date six months and one day after   
the exercise of such NQSO and (ii) the option price paid on the exercise        
thereof, multiplied by the number of Common Shares covered by the NQSO/SDR      
so exercised. The character and terms of each Option granted under the Plan     
shall be determined by the Board of Directors consistent with the provisions    
of the Plan, including the following:                                           

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 (a)  An Option granted under the Plan must be granted within 10 years
from the date the Plan is adopted, or the date the Plan is approved by the      
Shareholders of the Company, whichever is earlier.                              

(b)  The Option Price of the Common Shares subject to each ISO shall
not be less than the fair market value of such Common Shares at the time such   
ISO is granted. Such fair market value shall be determined by the Board of      
Directors and, if the Common Shares are listed on a national securities         
exchange or traded on the over-the-counter market, the fair market value        
shall be the closing price on such exchange, or the mean of the closing bid and 
asked prices of the Common Shares on the over-the-counter market, as reported   
by the National Association of Securities Dealers Automated Quotation System    
or the National Quotation Bureau, Inc., as the case may be, on the day on       
which the Option is granted or, if there is no closing price or bid or asked    
price on that day, the closing price or mean of the closing bid and asked       
prices on the most recent day preceding the day on which the Option is granted  
for which such prices are available. If an ISO is granted to any individual     
who, immediately before the ISO is to be granted, owns (directly or through     
attribution) more than 10% of the total combined voting power of all classes    
of capital stock of the Company or a subsidiary or parent of the Company, the   
Option Price of the Common Shares subject to such ISO shall not be less than    
110% of the fair market value per share of the Common Shares at the time such   
ISO is granted.                                                                 

 (c)  The Option Price of the Common Shares subject to an NQSO or an SAR
or SDR in tandem with an NQSO granted pursuant to the Plan shall be determined  
by the Board of Directors or the Committee, in its sole discretion.             

(d)  In no event shall any Option granted under the Plan have an    
expiration date later than 10 years from the date of its grant, and all Options 
granted under the Plan shall be subject to earlier termination as expressly     
provided in Paragraph 6 hereof. If an ISO is granted to an individual who,      
immediately before the ISO is granted, owns (directly or through attribution)   
more than 10% of the total combined voting power of all classes of capital      
stock of the Company or of a subsidiary or parent of the Company, such ISO      
shall by its terms expire and shall be exercisable after the expiration of      
five (5) years from the date of its grant.                                      

 (e)  An SAR may be exercised at any time after six months of the date
of the grant thereof during the exercise period of the NQSO with which it is    
granted in tandem and prior to the exercise of such NQSO, but only within the   
specified 10 day period referred to in subsection (e)(3) of Rule 16b-3 of the   
1934 Act (generally, the 10 days immediately following the publication of the   
Company's quarterly financial information). The exercise of an SAR granted in   
tandem with an NQSO shall be deemed to cancel such number of shares subject to  
the unexercised Option as were prior to the expiration date of the NQSO granted 
in tandem with the SDR and after six months from the exercise of the NQSO       
granted in tandem with the SDR. The Board or the Committee has discretion to    
determine                                                                       

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and impose conditions on SDRs such as setting the time of payment at the date   
six months and one day following the date of exercise, the date of the sale     
of the Common Shares received upon the exercise of the NQSO which was granted   
in tandem with the SDR, or some other date (but not later than the expiration   
date of the option), and reducing the amount of the distribution to take into   
account appreciation in the fair market value of the aforementioned Common      
Shares prior to the payment of the distribution. The Board or the Committee     
also has the discretion to alter the terms of the SDRs if necessary to comply   
with Federal or state securities law. Amounts to be paid by the Company in      
connection with an SAR or SDR may, in the Board's or the Committee's discretion,
be made in cash, Common Shares or a combination thereof. An NQSO granted in     
tandem with an SAR or SDR may not be exercised within six months of the grant   
thereof.                                                                        

     (f)  Unless otherwise provided in any Option agreement under the Plan, an
Option granted under the Plan shall become exercisable, in whole at any time or 
in part from time to time, but in no case may an Option (i) be exercised as to  
less than one hundred (100) Common Shares at any one time, or the remaining     
Common Shares covered by the Option if less than one hundred (100), and (ii)    
become fully exercisable more than five years from the date of its grant nor    
shall less than 20% of the Option become exercisable in any of the first five   
years of the Option.                                                            

(g)  An Option granted under the Plan shall be exercised by the     
delivery by the holder thereof to the Company at its principal office           
(to the attention of the Secretary) of written notice of the number of          
full Common Shares with respect to which the Option is being exercised,         
accompanied by payment in full, in cash or by certified check payable to        
the order of the Company, of the Option Price of such Common Shares, or,        
at the discretion of the Committee or the Board, by the delivery of             
Common Shares having a fair market value equal to the Option Price              
(provided, in order to qualify as an ISO, more than two years shall have        
passed since the date of grant and one year from the date of exercise),         
or at the option of the Committee or the Board, by a combination of cash        
and such shares (subject to the restriction above) held by the employee         
that have a fair market value together with such cash that shall equal          
the Option Price, and at the discretion of the Committee or Board by            
having the Company withhold from the Common Shares to be issued upon            
exercise of the Option that number of shares having a fair market value         
equal to the tax withholding amount due, or in the event an employee is         
granted an NQSO is tandem with an SAR and/or SDR and desires to exercise        
such SAR or SDR, such written notice shall so state such intention.             

(h)  The holder of an Option shall have none of the rights of a       
Shareholder with respect to the Common Shares covered by such holder's Option   
until such Common Shares shall be issued to such holder upon the exercise       
of the Option.                                                                  

(i)  An ISO granted under the Plan shall not be transferable otherwise
than by will or the laws of descent and distribution, and any ISO granted       
under the Plan may be                                                           

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exercised during the lifetime of the holder thereof only by the holder. No      
Option granted under the Plan shall be subject to execution, attachment or      
other process.                                                                  

      (j)  The aggregate fair market value, determined as of the time any ISO is
granted and in the manner provided for by subparagraph (b) of this Paragraph 5, 
of the Common Shares with respect to which ISOs granted under the Plan are      
exercisable for the first time during any calendar year and under Incentive     
Stock Options qualifying as such in accordance with Section 422A of the Code    
granted under any other Incentive Stock Option plan maintained by the Company or
its parent or subsidiary corporations, shall not exceed $100,000.               

6. Death or Termination of Employment.                                          

(a)  If the employment of a holder of an ISO under the Plan shall be
terminated voluntarily by the employee or for cause, such holder's ISO shall    
expire within thirty (30) days after such termination. If such employment       
shall terminate for any reason other than death, voluntary termination by       
the employee or for cause, then such ISO may be exercised at any time within    
three (3) months after such termination, subject to the provisions of           
subparagraph (f) of this Paragraph 6. For the purposes of this subparagraph     
(a), the retirement of an individual either pursuant to a pension or            
retirement plan adopted by the Company or at the normal retirement date         
prescribed from time to time by the Company shall be deemed to be a             
termination of such individual's employment other than voluntarily by the       
employee or for cause.                                                          

  (b)  If the holder of an ISO under the Plan dies (i) while employed by
the Company or a subsidiary or parent corporation or (ii) within three          
(3) months after the termination of such holder's employment other than         
voluntarily by the employee or for cause, such ISO may, subject to the          
provisions of subparagraph (f) of this Paragraph 6, be exercised by a legatee   
or legatees of such Option under such individual's last will or by such         
individual's personal representatives or distributees at any time within        
one year after the individual's death.                                          

 (c)  If the employment of a holder of an NQSO or SAR or SDR under the
Plan shall be terminated voluntarily the employee or for cause, then such       
holder's NQSO, SAR or SDR shall expire within thirty (30) days after such       
termination. If such employment shall terminate for any reason other than       
death, voluntary termination by the employee or for cause, then such            
NQSO, SAR or SDR may be exercised at any time within three (3) months after     
the date of such termination, subject to the provisions of subparagraph (f)     
of this Paragraph 6. For the purposes of this subparagraph (c), the             
retirement of an individual either pursuant to a pension or retirement plan     
adopted by the Company or at the normal retirement date prescribed from         
time to time by the Company shall be deemed to be a voluntary termination       
of such individual's employment by the employee.                                

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(d) If the holder of an NQSO, SAR or SDR under the Plan dies (i) while    
employed by the Company or a subsidiary or parent corporation or (ii) within    
three (3) months after the termination of his employment either voluntarily     
or for cause, such NQSO, SAR or SDR may, subject to the provisions of           
subparagraph (f) of this Paragraph 6, be exercised by a legatee or legatees     
of such NQSO, SAR or SDR under such individual's last will or by such           
individual's personal representatives or distributees at any time within        
one year after the individual's death.                                          

(e) If the holder of an Option under the Plan becomes disabled within     
the definition of section 104(d) of the Code while employed by the Company      
or a subsidiary or parent corporation, such Option may, subject to the          
provisions of subparagraph (f) of this Paragraph 6, be exercised at any time    
within one year after such holder's termination of employment due to the        
disability.                                                                     

(f) An Option may not be exercised pursuant to this Paragraph 6 except to 
the extent that the holder was entitled to exercise the Option at the time      
of termination of employment or death, and in any event may not be exercised    
after the original expiration date of the Option.                               

7. Leave of Absence.                                                            

For the purposes of the Plan, an individual who is on military or sick leave    
or other bona fide leave of absence (such as temporary employment by the        
Government) shall be considered as remaining in the employ of the Company       
or of a subsidiary or parent corporation for ninety (90) days or such longer    
period as such individual's right to reemployment is guaranteed either          
by statute or by contract.                                                      

8. Adjustment Upon Changes in Capitalization.                                   

(a) In the event that the outstanding Common Shares are hereafter changed 
by reason of recapitalization, reclassification, stock split-up, combination    
or exchange of Common Shares or the like, or by the issuance of dividends       
payable in Common Shares, an appropriate adjustment shall be made by the        
Board of Directors in the aggregate number of Common Shares available           
under the Plan and in the number of Common Shares and price per Common          
Share subject to outstanding Options. In the event of the proposed              
dissolution, liquidation, merger or sale of substantially all of the assets     
of the Company, all outstanding Options under the Plan will automatically       
terminate, unless otherwise provided by the Board of Directors. The             
Board of Directors or the Committee may in its discretion make provision        
for accelerating the exercisability of Options under the Plan in such           
circumstances.                                                                  

(b) Any adjustment in the number of Common Shares shall apply             
proportionately to only the unexercised portion of the Options granted          
hereunder. If fractions of Common                                               

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Shares would result from any such adjustment, the adjustment shall be revised to
the next lower whole number of Common Shares.                                   

9. Further Conditions of Exercise.                                              

(a) Unless the Common Shares issuable upon the exercise of an Option      
under the Plan have been registered with the Securities and Exchange            
Commission pursuant to the Securities Act of 1933, as amended, prior to         
the exercise of the Option, the notice of exercise shall be accompanied         
by a representation or agreement of the individual exercising the Option        
to the Company to the effect that such Common Shares are being acquired         
for investment and not with a view to the resale or distribution thereof        
or such other documentation as may be required by the Company, unless in        
the opinion of counsel to the Company such representation, agreement or         
documentation is not necessary to comply with said Act.                         

(b) The Company shall not be obligated to deliver any Common Shares       
until they have been listed on each securities exchange on which the            
Common Shares may then be listed or until there has been qualification          
under or compliance with such state or federal laws, rules or regulations       
as the Company may deem applicable. The Company shall use reasonable            
efforts to obtain such listing, qualification and compliance.                   

(c) The Board or Committee may make such provisions and take such steps     
as it may deem necessary or appropriate for the withholding of any taxes        
that the Company is required by any law or regulation of any governmental       
authority, whether federal, state or local, domestic or foreign, to withhold    
in connection with the exercise of any Option, including, but not limited       
to (i) the withholding of payment of all or any portion of such Option          
and/or SAR and/or SDR until the holder reimburses the Company for the           
amount the Company is required to withhold with respect to such taxes, or       
(ii) the cancelling of any number of Common Shares issuable upon exercise       
of such Option and/or SAR and/or SDR in an amount sufficient to reimburse       
the Company for the amount it is required to so withhold, or (iii) the          
selling of any property contingently credited by the Company for the            
purpose of exercising such Option, in order to withhold or reimburse the        
Company for the amount it is required to so withhold.                           

10. Termination, Modification and Amendment.                                    

The Plan (but not Options previously granted under the Plan) shall        
terminate ten (10) years from the earliest of the date of its adoption          
by the Board of Directors, or the date the Plan is approved by the              
Shareholders of the Company, or such date of termination, as hereinafter        
provided, and no Option shall be granted after termination of the Plan.         

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The Plan may from time to time be terminated, modified or amended by the  
affirmative vote of the holders of a majority of the outstanding shares of      
capital stock of the Company entitled to vote thereon.                          

The Board of Directors of the Company may at any time, prior to ten       
(10) years from the earlier of the date of the adoption of the Plan by such     
Board of Directors or the date the Plan is approved by the Shareholders,        
terminate the Plan or from time to time make such modifications or              
amendments of the Plan as it may deem advisable; provided, however, that        
the Board of Directors shall not, without approval by the affirmative vote      
of the holders of a majority of the outstanding shares of capital stock         
of the Company entitled to vote thereon, increase (except as provided           
by Paragraph 8) the maximum number of Common Shares as to which Options may     
be granted under the Plan, materially change the standards of eligibility       
under the Plan or materially increase the benefits which may accrue to          
participants under the Plan. Any amendment to the Plan which, in the            
opinion of counsel to the Company, will be deemed to result in the              
adoption of a new Plan, will not be effective until approved by the             
affirmative vote of the holders of a majority of the outstanding shares         
of capital stock of the Company entitled to vote thereon.                       

    No termination, modification or amendment of the Plan may adversely affect
the rights under any outstanding Option without the consent of the individual   
to whom such Option shall have been previously granted.                         

11. Effective Date of the Plan.                                                 

    The Plan shall become effective upon adoption by the Board of Directors of
the Company. The Plan shall be subject to approval by the affirmative vote      
of the holders of a majority of the outstanding shares of capital stock of      
the Company entitled to vote thereon within one year before or after adoption   
of the Plan by the Board of Directors.                                          

12. Not a Contract of Employment.                                               

    Nothing contained in the Plan or in any option agreement executed pursuant
hereto shall be deemed to confer upon any individual to whom an Option is or    
may be granted hereunder any right to remain in the employ of the Company       
or of a subsidiary or parent of the Company or in any way limit the right       
of the Company, or of any parent or subsidiary thereof, to terminate the        
employment of any employee.                                                     

13. Other Compensation Plans.                                                   

The adoption of the Plan shall not affect any other stock option plan,
incentive plan or any other compensation plan in effect for the employees       
of the Company, nor shall the Plan preclude the Company from establishing       
any other form of stock option plan, incentive plan or any other compensation   
plan for employees of the Company.                                              

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AMENDMENT         

At a special meeting of Shareholders held March 31, 1995, Shareholders
approved an amendment to the 1993 Employee Stock Option Plan pursuant to        
which the number of shares covered by the plan were increased from 250,000      
to 1,000,000 shares.                                                            

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EXHIBIT G       

FORM OF GUARANTY AGREEMENT

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NORTH CAROLINA                                                                  
                                                GUARANTY AGREEMENT
WAKE COUNTY                                                                     

         ELECTRONIC  MANUFACTURING  SERVICES GROUP, INC., a Delaware corporation
(hereinafter "Guarantor"), in consideration of the extension of credit by LEE K.
SIMON of Wilmington,  North Carolina, DANIEL DAVID CAMERON, JR. of Durham, North
Carolina,  and  JOSEPH  T.  HUNT  of  Knightdale,  North  Carolina  (hereinafter
"Holders")  to  KENMAR  BUSINESS  GROUPS,  INC.,  a North  Carolina  corporation
(hereinafter  "Obligor"),  evidenced by three (3)  promissory  notes executed in
connection  with that certain  Agreement  on Transfer of Corporate  Ownership of
October  15,  1992  (hereinafter  the  "Notes")  and  other  good  and  valuable
consideration,  the  receipt  of which is hereby  acknowledged,  Guarantor  does
hereby  covenant and agree with Holders,  their  successors,  heirs,  executors,
administrators, and assigns, as follows:                                        
         1. Guarantor fully and unconditionally  guarantees to Holders and their
assigns,  jointly and severally,  the prompt and punctual payment of any and all
installments  of principal  and interest and other amounts that may be or become
due to Holders under the Notes and that each and all of the obligations, duties,
and  covenants in the Notes to be performed by Obligor will be fully  performed.
In addition,  Guarantor will pay all damages or loss, including attorneys' fees,
that may  arise in  consequence  of a  default  or  failure  by  Obligor  or its
successors to perform each and every obligation under the Notes.                
         2.  Guarantor  shall make full payment or cause full  performance to be
made within fifteen (15) days after notice from                                 

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Holders to Guarantor of any such default or failure  to  pay  by  Obligor.  Said
fifteen-day  period shall commence to run within  forty-eight  (48) hours of the
time that  Holders  mail to  Guarantor,  certified or  registered  mail,  return
receipt  requested,  any such notice or a copy of any such notice as may be sent
by Holders to Obligor. It is expressly understood,  stipulated, and agreed upon,
that this guaranty is a guaranty of payment and not a guaranty of collection.   

     3. That at the option of Holders,  Guarantor may be joined in any action or
proceeding  commenced by Holders  against  Obligor in connection  with and based
upon the Notes and that recovery may be had against Guarantor in any such action
or proceeding,  or in any  independent  action or proceeding  against  Guarantor
without any  requirement  that  Holders or their  respective  heirs,  executors,
administrators,  successors,  or assigns,  jointly or  severally,  first assert,
prosecute,  or exhaust any remedy or claim against Obligor, or its successors or
any  other  security.                                                           

     4. That the  interest  of Holders  under  this  Guaranty  Agreement  may be
assigned  by  Holders,  their  successors  and  assigns  by way of  security  or
otherwise,  without  notice to  Guarantor  and without  reducing or changing the
obligations of Guarantor  hereunder.                                            

     5. This Guaranty  Agreement shall inure to the benefit of the heirs,  legal
representatives,  successors,  and  assigns of the  Holders and shall be binding
upon and enforceable against the Guarantor and its successors and assigns.      

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     6. Guarantor  expressly  waives:  (a) notice of acceptance of this guaranty
and of all  extensions  of credit to  Obligor;  (b)  presentment  and demand for
payment of any of the debts of  Obligor;  and (c) protest and notice of dishonor
or of default  to any party with  respect to any of the debts of Obligor or with
respect to any security therefor.                                               

     IN WITNESS  WHEREOF,  this Guaranty  Agreement has been executed and sealed
this ____ day of ___________________, 1996.                                     

                                   ELECTRONIC MANUFACTURING SERVICES GROUP, INC.

ATTEST:                            By:                                          
     Name:
      Title:

By:                                                                             
Name:                                                                 
Title:                                                                

[CORPORATE SEAL]                                                                

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EXHIBIT H           

FORM OF LEGAL OPINION OF SMITH, ANDERSON,         
BLOUNT, DORSETT, MITCHELL & JERNIGAN, L.L.P.        

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[Letterhead of Smith, Anderson, Blount, Dorsett,
Mitchell & Jernigan]

                                     ___________________, 1996

                                                                  (919) 821-1220

Electronic Manufacturing Services Group, Inc.                                   
6638 Old Wake Forest Road                                                       
Raleigh, North Carolina  27604                                                  

Re: Kenmar Business Groups, Inc.

Gentlemen:                                                                      

         We have acted as  counsel  to Kenmar  Business  Groups,  Inc.,  a North
Carolina corporation ("Kenmar") in connection with the transactions contemplated
by the Merger Agreement (the "Merger Agreement") dated as of March 1, 1996 among
Kenmar,  Electronic  Manufacturing  Services Group, Inc., a Delaware corporation
(which has  changed its name from "J.A.  Industries,  Inc.")  ("EMSG")  and J.A.
Industries   of   North   Carolina,   Inc.,   a   North   Carolina   corporation
("Acquisition"). We are rendering this opinion pursuant to Section 5.3(c) of the
Merger  Agreement.  All capitalized  terms used but not otherwise defined herein
shall have the respective meanings ascribed to them in the Merger Agreement.    

         In connection with the preparation of our opinions  expressed below, we
have made such  investigations  and examined  originals or copies,  certified or
otherwise identified to our satisfaction,  of the Merger Agreement,  each of the
various  other  documents  referred  to therein  and such  corporate  records of
Kenmar,  certificates of public  officials and other  documents,  agreements and
instruments as we have deemed necessary or appropriate.                         

         For  purposes  of  these  opinions,   we  have  assumed,   without  any
independent  investigation or verification of any kind, (i) the due promulgation
and  validity  of  all   statutes,   regulations,   administrative   procedures,
determinations,  permits and orders;  (ii) the  authenticity and completeness of
all documents  submitted to us as originals,  (iii) the  conformity to authentic
original  documents  and  completeness  of  all  documents  submitted  to  us as
certified,  conformed  or  photostatic  copies,  (iv)  that  there  have been no
modifications, waivers or amendments to any of the agreements or other documents
reviewed by us and (v) that the  certificates of public  officials dated earlier
than the date  hereof  (but not  earlier  than  ________________,  1996)  remain
accurate from such earlier date through and including the date hereof.          

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Electronic Manufacturing Services Group, Inc.                                   
_________________, 1996                                                         
Page 2                                                                          

         As to questions of fact material to this  opinion,  we have relied upon
the  representations  and warranties made in the Merger  Agreement and the other
documents   referred  to  therein  or  delivered   pursuant   thereto  and  upon
certificates and other documents of officers or representatives of Kenmar and of
public  officials and have made such other  inquiries and  investigations  as we
have deemed necessary or appropriate.                                           

         Based upon and subject to the foregoing,  and subject to the additional
qualifications  and  limitations  set forth  below,  we  express  the  following
opinions:                                                                       

                  1. Kenmar is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of North  Carolina.  Kenmar has
all requisite power and authority to enter into and deliver the Merger Agreement
and the other  Transaction  Documents,  perform its  obligations  thereunder and
consummate the transactions contemplated thereby.  Kenmar's execution,  delivery
and performance of the Merger Agreement and the other Transaction  Documents and
Kenmar's  consummation of the transactions  contemplated  thereby have been duly
and validly  authorized by all corporate,  shareholder and other action required
of Kenmar by applicable law, its Articles of Incorporation or Bylaws.           

     2. To our actual knowledge without independent investigation, Kenmar is not
subject to any charter,  bylaw, mortgage,  lien, lease,  agreement,  instrument,
order,  law, rule,  regulation,  judgment or decree, or any other restriction of
any kind or character  which would be violated by, prevent or impair  materially
(whether by acceleration  of any liability,  creation of any lien or encumbrance
or  otherwise)  consummation  of the  transactions  contemplated  by the  Merger
Agreement,  except for (i) that certain Shareholders' Agreement, dated September
1, 1985, by and between Kenmar and the  shareholders of Kenmar party thereto (as
amended),  and (ii) that certain  Agreement on Transfer of Corporate  Ownership,
dated  October 15,  1992,  by and between Lee K. Simon  ("Simon"),  Daniel David
Cameron, Jr. ("Cameron"),  Joseph T. Hunt, Jr. ("Hunt"), and Kenmar, as modified
by that  certain  Modification  and Release  Agreement,  dated as of January 19,
1996, by and among Kenmar, J.A. Industries, Inc., Simon, Cameron, and Hunt.     

         The  foregoing  opinions  are  subject  to the  following  assumptions,
qualifications and limitations:                                                 

     (A) We have  assumed  that the parties  (other  than  Kenmar) to the Merger
Agreement  and the other  Transaction  Documents  have the  requisite  power and
authority  to enter  into  the  Merger  Agreement  and  such  other  Transaction
Documents;  that the Merger Agreement and such other Transaction  Documents have
been duly authorized, executed and delivered by each such party; and that the   

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Electronic Manufacturing Services Group, Inc.                                   
_______________________, 1996                                                   
Page 3                                                                          

Merger Agreement and such other Transaction Documents to which each             
such party is a party  constitute  the legal,  valid and binding  obligations of
each such party,  enforceable  against each such party in accordance  with their
respective terms.                                                               

                  (B) The  foregoing  opinions are subject to the effects of (i)
bankruptcy,  insolvency,  reorganization,  receivership,  moratorium  and  other
similar  laws now or hereafter  in effect  relating to or  affecting  creditors'
rights or remedies generally, (ii) general principles of equity, whether applied
by a court of law or equity, and (iii) applicable laws and court decisions,  now
or  hereafter  in  effect,  that may limit or  restrict  the  enforceability  or
availability of certain terms,  provisions,  rights or remedies contained in the
Merger Agreement or the other Transaction Documents,  but which, in our opinion,
should not make such documents  inadequate for the practical  realization of the
material benefits intended to be afforded to the parties thereby.               

                  (C) We are  members of the Bar of the State of North  Carolina
only and  express no opinion as to the laws of any  jurisdiction  other than the
State of North Carolina and the federal laws of the United States of America.   

         These opinions are provided  solely for your benefit in connection with
the  transactions  contemplated  by the Merger  Agreement and may not be used or
relied upon by, or published or  communicated  to, any other person  without our
prior written consent.                                                          

         We bring to your  attention  the fact  that our legal  opinions  are an
expression of professional judgment and are not a guarantee of a result.        

         Our  opinions  are as of the date  hereof,  and we do not  undertake to
advise you of matters which might come to our  attention  subsequent to the date
hereof which may affect our legal opinions expressed herein.                    

                              Sincerely yours,

                                               SMITH, ANDERSON, BLOUNT, DORSETT,
                                                     MITCHELL & JERNIGAN, L.L.P.

                             By:
                                                   Gerald F. Roach

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EXHIBIT I               
FORM OF GMCP AGREEMENT                  

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February   , 1996                                                               

Electronic Manufacturing Services Group, Inc.                                   
Mr. Kenneth Marks                                                               
6638 Old Wake Forest Road                                                       
Raleigh, NC                                                                     
27604                                                                           

Dear Mr. Marks                                                                  

This letter confirms the engagement agreement (the "Agreement") between         
G.M. Capital Partners, Ltd. ("GMC") and Electronic Manufacturing Services       
Group, Inc., a Delaware Corporation, (hereinafter "EMSG" or the "Company")      
pursuant to which GMC will furnish management consulting, financial             
advisory and investor relations services to EMSG. GMC will assist EMSG          
in the capacity as detailed below.                                              

1.  RESPONSIBILITY OF GMC                                                       

A.  Subject to the terms and conditions hereof, GMC services will include,      
among other things, a due diligence overview of the Company including reviewing 
EMSG's current financial position and projections relating to EMSG's capital    
requirements, analyzing the proforma effects of the financing on such           
projections, and rendering advice on methods of structuring such                
financing ("Financing").                                                        

B.  GMC shall use its best efforts to obtain Financing for EMSG; however,       
it is expressly acknowledged and agreed by the parties hereto that GMC's        
obligations do not insure the successful negotiation of or obtaining of any     
type of Financing for EMSG. GMC is not a registered broker dealer.              

C.  GMC shall use its best efforts to attract suitable entities who are in      
the business of or interested in making equity or debt investments in companies 
such as EMSG. GMC shall assist the Company in proposing an equity or debt       
investment in EMSG to prospective investors, presenting its analysis in         
support of the investment, and structuring and negotiating the financial        
terms of the investment.                                                        

D.  GMC shall assist EMSG in the coordination of the parties involved in        
connection with a Financing and attend to the numerous technical details        
required in arranging and finalizing any transaction. These tasks often         
present substantive issues or other difficulties and constitute the most        
time-consuming aspects of a Financing, requiring an anticipation of problems    
and experienced coordination of attorneys and other parties, as appropriate.    

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2.  INFORMATION                                                                 

A.  GMC will perform services for the Company in all areas generally            
considered to be management consulting, financial advisory and investor         
relations, including but not limited to the preparation and dissemination       
of financial publicity, annual and interim reports for stockholders and the     
financial community, preparation and dissemination of information concerning    
the Company's operations, and consultation with respect to financial            
negotiations with investment banking firms, lenders and private investors.      

B.  Information to be released by GMC will be disseminated to general,          
financial and trade media, the investment banking community, banks and          
statistical organizations, all as deemed necessary or appropriate by GMC        
and the Company; provided, however, that GMC shall not release or otherwise     
make public any information regarding or relating to EMSG without the prior     
written consent of EMSG.                                                        

C.  All information to be disseminated through GMC will be based upon written   
material furnished by the Company and will be released only after receipt by    
GMC of final approval from the Company. The Company recognizes that GMC may     
have, either at the present time or in the future, obligations imposed upon     
it by the federal securities laws to verify independently certain of the        
information contained in release being made through it. Accordingly, the        
Company agrees that GMC shall have the right to make such reasonable inquiries  
as it shall deem necessary or appropriate of officers and employees of the      
Company and its counsel and auditors with respect to information being          
released by GMC. The Company recognizes that the accuracy and completeness      
of all information contained in release ultimately rests with the Company       
and agrees to indemnify and hold GMC harmless from and against any loss         
and expense arising out of a claim that any information released by GMC         
is inaccurate or incomplete, so long as such information is identical to        
that approved in writing by EMSG, and the release thereof was approved          
in writing by EMSG.                                                             

D.  You acknowledge and understand that GMC, in order to perform its services   
effectively under this agreement, and to satisfy such obligation as may be      
imposed upon it by the federal securities laws, requires the prompt receipt     
of all material information with respect to the Company, its operations         
and its prospects. Accordingly, you agree to furnish promptly to GMC copies     
of all reports and other filings with the Securities and Exchange Commission,   
all material communications with Stockholders and all reports received from     
your auditors. Furthermore, you recognize the necessity of promptly notifying   
GMC of all material developments concerning the Company, its business and       
prospects and to supply GMC with sufficient information necessary for GMC       
to make a determination as to its compliance with its own procedures as well    
as any legal requirements. The term "prompt" above means reasonably timely      
with respect to the release of information.                                     

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3.  COMPENSATION TO GMC                                                         

In consideration of our services as set forth above, GMC shall be entitled      
to receive, and EMSG agrees to pay to GMC the following:                        

A.  GMC will receive an initial payment of $5,000 to paid with the execution    
of this Agreement.                                                              

B.  GMC will receive a success fee ("Success Fee") in the form of a cash        
payment in the amount of ten percent (10%) of the gross proceeds of any         
private Financing it arranges, including any form of equity, convertible        
debt, debt with warrants, debt with equity incentives to the lender, or any     
other form of equity, debt or guarantees obtained by or invested in EMSG        
payable upon closing and receipt of funds by EMSG or any entity described       
in Paragraph 6, whichever is earlier. In the event EMSG does a public           
financing arranged by GMC or sells more than five (5%) percent of EMSG to any   
party arranged by GMC, GMC will be entitled to a cash payment in the total      
amount of three (3%) percent of the gross proceeds of the investment. In the    
event that GMC arranges a public financing through a registered broker-dealer,  
then GMC will be entitled to a cash payment in the total amount of three (3%)   
percent of the gross proceeds of the financing and not to the ten percent       
cash payment as described as the Success Fee.                                   

C.  EMSG shall have sole discretion in determining what constitutes an          
acceptable Financing as contemplated by this Agreement. GMC shall earn the      
Success Fee only upon the closing and receipt of funds from a Financing as      
described in 3.B, above, and not merely for presenting a financing option       
or prospective investor which in EMSG's sole discretion is unacceptable.        

D.  GMC will be retained as Financial Advisor, Management Consultant and        
Investors Relations firm for the Company at a fee of $5,000 per month.          
Excluding the initial payment, monthly payments will commence on the       ,    
1996, and will be payable on the 1st of each month for twelve (12) consecutive  
months.                                                                         

4.  EXPENSE REIMBURSEMENT                                                       

EMSG agrees to reimburse GMC all amounts due and owing GMC, under the terms     
of this Agreement, no later than thirty (30) days after receiving an invoice    
for all customary or reasonable out-of-pocket expenses, including but not       
limited to, the cost of telephone calls, travel, facsimile transmission,        
translation, interpretation, paper duplication, due diligence reports,          
postage and delivery services, or fees of counsel incurred in connection        
with the performance by GMC of its duties as contemplated by this Agreement.    
All out-of-town travel, counsel, or third party consultant fees, and other      
significant expenses (Over $250) must be approved by EMSG in advance. EMSG      
will make arrangements directly with and be responsible for cost of accountants,
appraisers, counsel and other experts and for the costs of printing and         
circulating a business plan, memorandum or other documents prepared in          
connection with performing appropriate due diligence of this Financing. If      
we must file a lawsuit to collect any outstanding fees, out-of-pocket expenses, 
or other expenses due from EMSG, EMSG agrees to pay reasonable costs            
and attorney's fees for such action.                                            

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5.  ASSIGNMENT AND TRANSFER OF OBLIGATION                                       

In the event that EMSG contributes, pledges, guarantees or otherwise conveys    
any of its assets (including without limitation the assets of its               
subsidiaries or affiliates) to, or incurs any liabilities on behalf of, or      
grants the authority to operate its business(es) or affiliated business(es)     
to a new entity, whether a corporation, partnership, sole proprietorship,       
or national person ("New Entity") for the purpose of obtaining Financing        
as contemplated by this Agreement, then GMC will be compensated by EMSG         
for whatever funds were received by the New Facility on the same basis as if    
the funds were invested directly in EMSG, so long as such transaction was       
arranged by GMC. The parties further agree that all EMSG's rights and           
obligations under the Agreement will be equally binding upon New Entity         
and that EMSG will not enter into or create any agreement, undertaking or       
legal obligation with a New Entity without requiring said New Entity to         
accept and satisfy EMSG's right and obligations under this Agreement as         
if they were their own.                                                         

6.  TWO YEAR PROVISION                                                          

If, within two (2) years from the termination of this Agreement, EMSG or its    
officers consummate any Financing with any party to whom EMSG or its officers   
were first introduced by GMC or who was contacted by GMC in connection with     
its services for EMSG hereunder, or who received information prepared by GMC    
in connection with the Financing, then EMSG shall pay to GMC the agreed upon    
compensation.                                                                   

7.  TERMINATION                                                                 

This Agreement shall terminate twelve (12) months from the above written        
date of this Agreement unless extended in writing and signed by both            
parties. GMC shall be paid by EMSG all fees earned through Termination          
Date together with reimbursement of all expenses due hereunder. All such        
fees and reimbursement due GMC shall be paid on or before the Termination       
Date.                                                                           

Notwithstanding anything expressed or implied herein to the contrary, the       
terms and provisions of Section 2, 3, 4, 5, 6, 7, 9, 10, 11, 12, 13, 14,        
and 15 shall survive the termination of this Agreement.                         

8.  INDEMNIFICATION                                                             

EMSG agrees to indemnify and hold harmless GMC against any and all losses,      
claims, damages, liabilities or costs (and all actions in respect thereof       
and any reasonable legal or other expenses in giving testimony or               
furnishing documents in response to a subpoena or otherwise), including         
the costs of investigating, preparing or defending any such action or claim     
(collectively "Losses"), as and when incurred, caused by, relating to, based    
upon, or arising out of: (a) any Financing (as defined in or contemplated       
by this engagement letter agreement, as it may be amended from time to time     
(the "Agreement")); or (b) GMC's acting for EMSG; provided, however such        
indemnity agreement shall not apply to any such loss, claim, damage, liability  
or cost to the                                                                  

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extent it is found to have resulted from the gross negligence or willful        
misconduct of GMC or the violation of any laws by GMC.                          

GMC shall indemnify and hold harmless EMSG against any Losses, as and when      
incurred, caused by, relating to, based upon, or arising out of the             
negligent acts or omissions or willful misconduct of GMC, or the violation      
of any laws by GMC, in connection with GMC's performance under this             
Agreement.                                                                      

If any action proceeding, or investigation is commenced or claim is made        
as to which either party proposes to demand indemnification, it will notify     
the other party with reasonable promptness. The indemnifying party reserves     
the right to assume the defense of the indemnified party with counsel of its    
choosing, which counsel shall be reasonably acceptable to the indemnified       
party. The indemnifying party shall not be liable for any settlement of any     
claim against the indemnified party made without its written consent. The       
indemnified party may not settle any claim without the prior written consent    
of the indemnifying party.                                                      

No person found liable for fraudulent misrepresentation shall be entitled       
to contribution from any person who is not also found liable for such           
fraudulent misrepresentation.                                                   

9.  ENTIRE AGREEMENT                                                            

The Parties agree that the Agreement embodies the entire agreement and          
understanding of the Parties and that no understanding or agreements,           
verbal or otherwise, exists between the Parties excepts set forth in the        
Agreement. Any modification to the Agreement must be reduced to writing,        
signed by both Parties, and attached to the Agreement to be effective.          

10.  SEVERABILITY                                                               

Should any section or any part of any section of the Agreement be rendered      
void, invalid, or unenforceable by any court of law for any reason such         
determination shall not render void, invalid, or unenforceable any other        
section or any part of any section in the Agreement.                            

11.  SURVIVAL OF REPRESENTATIONS                                                

Each Party, for itself, and its successors, heirs, executors, administrators,   
representatives, insures, agents, and assigns, covenants and agrees that all    
representations made hereunder and obligations created hereunder shall apply    
to their successors and assigns provided however, that GMC shall not assign     
this Agreement to a third party without the prior written consent of a duly     
authorized representative of EMSG which consent shall not be unreasonable       
withheld.                                                                       

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12.  NOTICES                                                                    

Any required notices under this Agreement shall be made by overnight courier    
or certified mail, postage prepaid and return receipt requested as follows:     

If to GMC:                                                              

G.M. Capital Partners, Ltd.                                         
Hirzel House, Smith Street                                          
St. Peters Port, Guernsey                                           
Channel Islands, GY1 2NG                                            

With copies to:                                                         

Mr. J.A. Michie                                                       
North American Business Agent                                         
G.M. Capital Partners, Ltd.                                           
P.O. Box 231                                                          
Port Coquitlam, B.C.                                                  
V3C 3V7 Canada                                                        

If to EMSG:                                                             

Mr. Kenneth Marks                                                     
6638 Old Wake Forest Road                                             
Raleigh, NC                                                           
27604                                                                 

13.  CHOICE OF LAW                                                              

The validity and interpretation of this Agreement shall be governed by the laws 
of the State of North Carolina, without giving effect to the State of North     
Carolina's choice of law principle and all actions arising under this Agreement 
or arising out of the operative facts represented by services performed         
pursuant to this Agreement shall be resolved in the courts of the State of North
Carolina.                                                                       

14.  HEADINGS                                                                   

The headings are for informational purposes only and shall not constitute a part
of this Agreement.                                                              

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15.  NO WAIVER OF BREACH                                                        

Waiver of any one breach of the provisions of this Agreement shall not be deemed
a waiver of any other breach of the same or any other provision of this         
Agreement.                                                                      

AGREED AND ACCEPTED:                                                            

Please confirm that the foregoing correctly sets forth our mutual understanding 
by signing and returning the copy of this Agreement provided for that purpose.  

Electronic Manufacturing Services Group, Inc.       G.M. Capital Partners, Ltd  
Kenneth Marks, President                            J.A. Michie                 
                                                    North America Business Agent
---------------------------------------------       ----------------------------
Date:________________________________________       Date:_______________________

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Amendment No. 1               
to Merger Agreement               

[FOOTNOTES AND PARENTHETICAL INFORMATION ARE FOR INFORMATIONAL PURPOSES       
ONLY AND WILL NOT CONSTITUTE PART OF THE ACTUAL OPTION AGREEMENTS]        

ELECTRONIC MANUFACTURING SERVICES GROUP, INC.         

NONQUALIFIED STOCK OPTION AGREEMENT         

   THIS STOCK OPTION AGREEMENT is made this ____ day of ___________________,
1996, by and between Electronic Manufacturing Services Group, Inc., a           
corporation formed under the laws of the State of Delaware ("EMSG"), and        
________________, a citizen and resident of the State of __________________,    
(the "Optionee").                                                               

WITNESSETH:         

    WHEREAS, the Optionee has an option to purchase shares of the common stock
of Kenmar Business Groups, Inc. ("Kenmar") pursuant to Kenmar's Nonqualified    
Stock Option Plan (the "Kenmar Option"); and                                    

  WHEREAS, pursuant to the terms of the Merger Agreement by and among EMSG
(which has changed its name from "J.A. Industries, Inc."), J.A. Industries of   
North Carolina, Inc., a North Carolina corporation ("Acquisition"), and Kenmar  
dated as of March 1, 1996 (the "Merger Agreement"), the Kenmar Option will be   
cancelled and replaced with a substitute corresponding option to purchase       
shares of the $.0025 par value common stock of EMSG pursuant to the provisions  
of the "J.A. Industries, Inc. 1993 Employee Stock Option Plan" (the "Plan")     
effective as of the consummation of the merger contemplated by the Merger       
Agreement (the "Merger").                                                       

  NOW, THEREFORE, in consideration of the premises contained herein and in
the Plan, it is agreed as follows:                                              

          (1)  Cancellation of Kenmar Option and Grant of EMSG Option. Effective
as of the consummation of the Merger:                                           

      (a)  The Kenmar Option is cancelled in all respects, and
           (b)  subject to the terms and conditions contained herein and
               in the Plan, EMSG hereby grants the Optionee the right,
       privilege and option (the "Option") to purchase
              ___________________ (______)1 shares of the $.0025 par
                  value common stock of EMSG at a price of _________________
Dollars ($______)2 per share.           

     (2)  Term and Vesting of Option. The term of the Option commences
on the date hereof and, unless sooner terminated as set forth below or in the   
Plan, terminates on _____________________ [SUPPLY THE DATE DETERMINED PURSUANT  
TO SECTION 5 OF THE KENMAR OPTION AGREEMENT] (which date shall be no more       
than ten (10) years from the date the Option is granted) (the "Term") and,      
subject to the terms and provisions hereof and the Plan, the Option shall       
be fully vested and immediately                                                 

___________________                                                             
1 The number of shares shall be determined by multiplying the number
of shares of Kenmar stock subject to the Kenmar Option by the Exchange          
Ratio, as defined in the Merger Agreement (41 shares of JAI stock for each      
share of Kenmar stock). Fractional shares shall be eliminated.                  

2 The price per share shall be determined by dividing the exercise  
price per share of the Kenmar common stock under the Kenmar Option by the       
Exchange Ratio.                                                                 

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exercisable. Subject to the foregoing, the Option may be exercised in whole or  
in part with respect to all or any portion of the shares to which it relates.   

(3)  Method of Exercise. The Option shall be exercised by the         
transmittal of written notice thereof to EMSG at its principal place of         
business. The notice shall include the Optionee's designation of the            
number of shares to be purchased and the Optionee's check in payment of         
the purchase price. Upon receipt of such notice and negotiation of said         
check. EMSG shall deliver to the Optionee a certificate representing the        
shares purchased, provided that if any law or regulation requires EMSG to take  
any action with respect to the shares specified in such notice before the       
issuance thereof, the date of delivery of the shares shall be extended for the  
necessary period.                                                               

(4)  Plan; Restrictions. In all respects this Agreement and the Option
granted herein shall be subject to the terms and provisions of the Plan which   
is attached hereto as Schedule A and incorporated herein by reference.          
Accordingly, the rights of the Optionee under this Agreement and the shares of  
common stock of EMSG which the Optionee may purchase hereunder are subject to   
certain restrictions as set forth in the Plan. In addition, the Optionee's      
right and ability of sell shares of EMSG common stock that the Optionee may     
purchase pursuant to the Option shall be restricted as follows: (i) during      
the ninety (90)-day period immediately following the Effective Time (as defined 
in the Merger Agreement), the Optionee shall not sell any shares of EMSG common 
stock purchased pursuant to the Option; and (ii) during any three month period, 
the Optionee shall not sell more than one-eighth (1/8) of the total number of   
shares purchasable pursuant to the Option.                                      

    (5)  Rights Prior to Exercise of Option. The Optionee shall have no rights
as a stockholder with respect to the shares of stock subject to the Option      
until the exercise of his rights hereunder and the issuance and delivery to     
Optionee of a certificate or certificates evidencing such shares.               

  (6)  Assignment. The Option shall not be transferable other than by will
or the laws of descent and distribution, and the Option may be exercised,       
during the lifetime of the Optionee, only by the Optionee. More particularly,   
(but without limiting the generality of the foregoing), the Option, may not     
be assigned, transferred (except as provided above), pledged or hypothecated    
in any way, shall not be assignable by operation of law and shall not be        
subject to execution, attachment or similar processes. Any attempted assignment,
transfer, pledge, hypothecation or other disposition of the Option contrary to  
the provisions hereof, and the levy of any execution, attachment or similar     
process upon the Option shall be null and void and without effect.              

(7)  Applicable Laws. The validity, construction, interpretation and  
enforceability of this Agreement and the capacity of the parties shall be       
determined and governed by the laws of the State of North Carolina.             

  (8)  Severability. The provisions of this Agreement are severable and if
any one or more provisions may be determined to be illegal or otherwise         
unenforceable, in whole or in part, the remaining provisions, and any partially 
unenforceable provision to the extent enforceable in any jurisdiction, shall    
nevertheless be binding and enforceable.                                        

(9)  Waiver. The waiver by EMSG of a breach of any provision of this  
Agreement by Optionee shall not operate or be construed as a waiver of any      
subsequent breach by Optionee.                                                  

 (10)  Binding Effect. The provisions of this Agreement shall be binding
upon the parties hereto, their successors and assigns, including, without       
limitation, the estate of the Optionee and the executors,                       

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administrators or trustees of such estate and any receivers, trustee in         
bankruptcy or representative of the creditors of the Optionee.                  

 (11)  Construction. This Agreement is subject to and shall be construed
in accordance with the Plan, the terms of which are explicitly made applicable  
hereto. Unless otherwise defined herein, capitalized terms in this Agreement    
shall have the same definitions as set forth in the Plan. In the event of       
any conflict between the provisions hereof and those of the Plan, the           
provisions of the Plan shall govern.                                            

 THIS STOCK OPTION AGREEMENT is hereby confirmed and executed as of this
______ day of ____________________, 1996.                                       

                       ELECTRONIC MANUFACTURING SERVICES
 GROUP, INC.

ATTEST:                                                                         

______________________________     By:    ____________________________          
Secretary                          Title: ____________________________          

[Corporate Seal}                                                                

OPTIONEE: 

                            ________________________________(SEAL)
Name:     

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EXHIBIT C 

FORM OF OPTION AGREEMENT

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OPTION AGREEMENT

         THIS  OPTION  AGREEMENT  (the  "Agreement")  is made  and  dated  as of
___________________,  1996, by and among KENMAR BUSINESS  GROUPS,  INC., a North
Carolina corporation ("Kenmar"),  Electronic Manufacturing Services Group, Inc.,
a Delaware  corporation  ("EMSG"),  J.A.  Industries of North Carolina,  Inc., a
North Carolina Corporation  ("Acquisition"),  and the Representative (as defined
below).                                                                         

 WITNESSETH:

         WHEREAS,   Kenmar,   EMSG  (which  has  changed  its  name  from  "J.A.
Industries,  Inc.") and Acquisition  entered into a Merger Agreement dated as of
March 1, 1996 (the "Merger  Agreement")  providing for the merger of Acquisition
with and into Kenmar;                                                           

         WHEREAS,  pursuant to the Merger  Agreement,  EMSG and Acquisition have
made certain representations, warranties and covenants for the benefit of Kenmar
and the Stockholders (as defined in the Merger Agreement) as provided therein;  

         WHEREAS,   pursuant  to  the  Merger  Agreement,   Kenmar,   EMSG,  and
Acquisition  have  agreed  that  EMSG's and  Acquisition's  representations  and
warranties  pursuant to the Merger  Agreement shall survive the  consummation of
the transactions contemplated by the Merger Agreement;                          

         WHEREAS,  Section 1.2 of the Merger Agreement  provides that EMSG shall
grant the  Representative  an option to purchase  Seven Hundred  Fifty  Thousand
(750,000)  shares  of  EMSG's  Common  Stock  for One  Dollar  ($1.00)  upon the
occurrence  of any breach of any  representation,  warranty,  covenant  or other
obligation of EMSG or Acquisition contained in the Merger Agreement;            

         WHEREAS,  Section  1.2 of  the  Merger  Agreement  provides  that  upon
exercise of such option, the Representative  shall distribute such shares to the
Stockholders pursuant to the terms of this Agreement; and                       

         WHEREAS,  the  Representative  is  willing  to act in the  capacity  of
Representative  hereunder  subject to, and upon the terms and conditions of this
Agreement.                                                                      

         NOW,  THEREFORE,  in  consideration  of  the  premises,  covenants  and
agreements  set  forth  in  this  Agreement  and  of  other  good  and  valuable
consideration,   the  receipt  and  legal   sufficiency  of  which  they  hereby
acknowledge,  and intending to be legally bound hereby, and as an inducement for
the execution and delivery of the Merger Agreement,  Kenmar, EMSG,  Acquisition,
and the Representative hereby agree as follows:                                 

         1. Grant of Option.  EMSG hereby grants to the Representative on behalf
of the  Stockholders,  an  irrevocable  option (the  "Option") to purchase Seven
Hundred  Fifty  Thousand  (750,000)  shares of EMSG's  Common Stock (the "Option
Shares") at the purchase price set forth below.                                 

         2.   Exercise  of  Option.   The  Option  may  be   exercised   by  the
Representative  upon  the  occurrence  of  any  breach  of  any  representation,
warranty,  covenant, or other obligation of EMSG or Acquisition under the Merger
Agreement, as more fully described in this Section 2.                           

                  (a) Notice;  Closing. If at any time the Representative  shall
elect,  in its  judgment,  to assert that EMSG or  Acquisition  has breached any
representation,  warranty  or  covenant  made by either of such  parties  in the
Merger  Agreement  and,  as a  result  thereof,  to  exercise  the  Option,  the
Representative  shall                                                           

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give EMSG  notice in writing of such  breach and of the  exercise  of the Option
(the "Notice").  Such notice shall specify a date,  which date shall not be less
than twenty (20) days from the date such notice is given, for the closing of the
purchase of the Option Shares (the "Option Closing").  Such Option Closing shall
take place at 10:00 A.M. local time, on the date specified in such notice at the
offices of Smith, Anderson,  Blount, Dorsett, Mitchell & Jernigan,  L.L.P., 2500
First Union Capital Center,  Raleigh, North Carolina, or at such other place and
time as the parties may mutually agree. At the Option Closing, EMSG will deliver
to  the  Representative   certificates   representing  the  Option  Shares.  The
certificates shall be issued in the names of the Stockholders, and in the number
of Option  Shares to be issued in  respect of each  Stockholder  as set forth in
Exhibit A hereto.                                                               

                  (b) Disputed  Assertion of Breach. If, within twenty (20) days
after the  Notice is given by the  Representative  to EMSG  under  Section  2(a)
above, EMSG shall notify the Representative,  in writing, that EMSG disputes and
denies the asserted  breach,  then EMSG and the  Representative  shall use their
respective reasonable best efforts to effect a settlement and compromise of such
dispute  prior to the date set forth in the Notice for the  Option  Closing  (or
prior to such later date upon which the parties may, but are not  obligated  to,
agree). Any such settlement and compromise shall be set forth in writing by EMSG
and the Representative,  and the Option may be exercised, if at all, in whole or
in part in accordance with such settlement and compromise.                      

                  (c) Arbitration to Resolve  Disputed  Assertion of Breach.  If
EMSG and the  Representative  are unable to settle and  compromise  any disputed
assertion of a breach, the Option Closing shall take place on the date set forth
in the Notice (or on such later  date upon which the  parties  may,  but are not
obligated  to,  agree).  The dispute  shall  thereafter  be submitted by EMSG to
binding arbitration pursuant to Section 8 of this Agreement.  The Representative
shall hold the Option Shares,  and shall not distribute them to the Stockholders
or to EMSG,  pending the determination of the arbitrator or arbitrators,  as the
case may be. If the arbitrator(s) determine that a breach of any representation,
warranty,  covenant or other obligation of EMSG or Acquisition  contained in the
Merger  Agreement has  occurred,  then promptly  after such  determination,  the
Representative  shall  distribute  the  Option  Shares  to the  Stockholders  as
provided in Section 6 of this Agreement.  If the arbitrator(s) determine that no
breach of any representation,  warranty, covenant or other obligation of EMSG or
Acquisition   contained  in  the  Merger   Agreement  has  occurred,   then  the
Representative shall return the Option Shares to EMSG.                          

         3. Purchase  Price.  At the Option Closing,  the  Representative  shall
purchase the Option Shares from EMSG by delivering as  consideration  therefor a
total cash payment of One Dollar ($1.00) for all of the Option Shares.          

         4. Designation of  Representative.  Kenmar, on behalf of itself and the
Stockholders,  hereby  irrevocably  constitutes and appoints Kenneth H. Marks as
Kenmar's and the Stockholders' true and lawful agent and  attorney-in-fact  (the
"Representative")  with respect to all matters  arising in connection  with this
Agreement,  including  but not limited to the power and  authority  on behalf of
such  Stockholders  (other  than in his own  right)  to do any one or all of the
following:                                                                      

                  (a) enter  into this  Agreement  and  accept  the grant of the
Option;                                                                         

                  (b) exercise  the Option,  or elect not to exercise the Option
after it becomes exercisable, in the Representative's reasonable judgment;      

                  (c) settle or compromise  any disputed  assertion of a breach,
as set forth in Section 2(b) of this Agreement;                                 

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                  (d)  give  any  written  notices  or  consents  and  seek  any
declaratory judgments, damages or other appropriate relief from a court or other
tribunal that the Representative may consider necessary or appropriate;         

                  (e)  make,   execute  and  deliver  such   amendments  of  and
supplements to this Agreement or any other agreements,  instruments or documents
relating hereto that the  Representative  may consider  necessary or appropriate
and not  materially  adverse  to the  Stockholders'  interests  hereunder,  such
authority to be  conclusively  evidenced by the execution and delivery  thereof;
and otherwise                                                                   

                  (f) take all  actions  and do all  things,  including  but not
limited to the  execution  and  delivery of all  documents  necessary or proper,
required, contemplated or deemed advisable by the Representative,  and generally
to act  for and in the  name  of each  such  Stockholder  with  respect  to this
Agreement.                                                                      

         For purposes of this Agreement, the term "Representative" shall include
any of Kenneth H. Marks' successors, heirs, beneficiaries and assigns.          

5.       Rights and Liability of the Representative.          

                  (a) The Representative may resign as Representative  hereunder
at any time without  liability upon giving notice to EMSG. In the event that the
Representative  shall  resign or otherwise  cease to act as the  Representative,
EMSG shall provide written notice of such resignation to the  Stockholders,  and
the  Stockholders  may  proceed  to  select a  successor  Representative  to act
hereunder.                                                                      

                  (b) The Representative shall have no liability with respect to
any  acts  or  omissions  under  this  Agreement,  except  with  respect  to the
Representative's gross negligence or willful misconduct.  The Representative may
act in  reliance  upon the  advice of  counsel  in  reference  to any  matter in
connection  with this Agreement and shall not incur any liability for any action
taken in good  faith in  accordance  with such  advice.  EMSG and  Kenmar  shall
jointly and severally  indemnify the Representative from and against any and all
damages, losses, demands, claims, costs,  liabilities,  judgments,  deficiencies
and expenses (including  reasonable attorneys' fees) incurred in connection with
the  Representative's  acts or  omissions  under this  Agreement or by virtue of
serving in his capacity as the  Representative,  except to the extent  resulting
from the Representative's gross negligence or willful misconduct.               

         6.  Distribution of Option Shares.  Except as set forth in Section 2(c)
above,  as  soon  as  reasonably  practicable  after  the  Option  Closing,  the
Representative shall distribute the Option Shares to the Stockholders.          

         7.  Adjustments.  If at any time the outstanding  shares of EMSG Common
Stock are  changed  into a different  number of shares or a  different  class by
reason  of  any  reclassification,   recapitalization,   split-up,  combination,
exchange of shares or readjustment  or if a stock dividend  thereon is declared,
then the number of shares of EMSG Common  Stock  subject to the Option  shall be
appropriately  adjusted (the  purchase  price for the Option Shares shall remain
fixed at One Dollar ($1.00) and no adjustment thereof shall be made).           

         8.  Arbitration.  Any  unresolved  dispute  under this  Agreement  with
respect to any matter shall be  submitted to and settled by binding  arbitration
in accordance with the Commercial  Rules,  existing at the date thereof,  of the
American  Arbitration  Association.  The  dispute  shall  be  submitted  to  one
arbitrator  agreed  to by  EMSG  and the  Representative  or,  if  EMSG  and the
Representative cannot agree on one arbitrator,  by three arbitrators selected in
accordance with said Rules, and shall be heard in Raleigh, North Carolina.  Each

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arbitrator  must be experienced in the subject matter in dispute.  The costs and
expenses of the arbitration (including without limitation attorneys' fees) shall
be  paid  by  EMSG,  in the  event  EMSG  is the  non-prevailing  party  in such
arbitration,  and Kenmar, in the event the  Representative is the non-prevailing
party in such arbitration.                                                      

         9.  Successors and Assigns.  This Agreement shall be binding on Kenmar,
EMSG,  Acquisition,  and the Representative and their respective  successors and
assigns,  whether so expressed or not. The parties  hereto intend and agree that
the Stockholders shall be third party beneficiaries of this Agreement.          

         10.  Waiver of  Consent.  No  failure or delay on the part of any party
hereto in  exercising  any power or right  hereunder  shall  operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any  abandonment  or  discontinuance  of steps to enforce such a right or power,
preclude  any other or further  exercise  thereof or the  exercise  of any other
right or power. The rights and remedies of the parties  hereunder are cumulative
and not  exclusive of any rights or remedies  which they would  otherwise  have.
Without  limiting the  generality of the  foregoing,  the parties agree that the
rights of Kenmar and the  Representative (as representative of the Stockholders)
under  this  Agreement  shall be in  addition  to,  and  shall in no way  limit,
Kenmar's  rights  against  EMSG  for  breach  by  EMSG  or  Acquisition  of  any
representation,  warranty,  covenant or other  obligation of EMSG or Acquisition
under the Merger Agreement or otherwise under applicable law. No modification or
waiver of any provision of this  Agreement,  nor consent to any departure by any
party  therefrom,  shall in any event be  effective  unless the same shall be in
writing, and then such waiver or consent shall be effective only in the specific
instance  and for the  purpose  for which  given.  No notice to or demand on any
party in any case shall  entitle  such  party to any other or further  notice or
demand in similar or other circumstances.                                       

         11.  Captions.  The Article and  Section  captions  used herein are for
reference  purposes  only  and  shall  not in any  way  affect  the  meaning  or
interpretation of this Agreement.                                               

  12.  Notices.  Any  notice or other  communication  required  or
permitted  hereunder shall be sufficiently  given if delivered in person or sent
by telex, telecopy or by registered or certified mail or by recognized overnight
courier, postage prepaid, addressed as follows:                                 

If to EMSG or Acquisition, to:                                

 Electronic Manufacturing Services Group, Inc.
6638 Old Wake Forest Road                   
Raleigh, North Carolina  27604              
Attention:  Kenneth H. Marks                

with a copy to:                                               

Smith, Anderson, Blount, Dorsett,           
Mitchell & Jernigan, L.L.P.             
Post Office Box 2611                        
Raleigh, North Carolina 27602-2611          
Attention:  Gerald F. Roach, Esq.           

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if to Kenmar or the Representative, to:                       

Kenneth H. Marks                            
6638 Old Wake Forest Road                   
Raleigh, North Carolina  27604              

with copy to:                                                 

Smith, Anderson, Blount, Dorsett,           
Mitchell & Jernigan, L.L.P.             
Post Office Box 2611                        
Raleigh, North Carolina 27602-2611          
Attention:  Gerald F. Roach, Esq.           

and such  notice or  communication  shall be deemed to have been given as of the
date so delivered, sent by telecopier, telex or mailed.                         

         13.  Counterparts.  This  Agreement  may be  executed  in  two or  more
counterparts,  all of which shall be considered  one and the same  agreement and
each of which shall be deemed an original.                                      

         14.  Governing Law. This Agreement shall be governed by the laws of the
State of North Carolina  (regardless of the laws that might be applicable  under
principles of conflicts of law) as to all matters,  including but not limited to
matters of validity, construction, effect and performance.                      

         15. Severability.  If any term,  provision,  covenant or restriction of
this Agreement is held by a court of competent  jurisdiction  or other authority
to be  invalid,  void,  unenforceable  or against  its  regulatory  policy,  the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected,  impaired
or invalidated.                                                                 

         16.  Capitalized  Terms.  Any  capitalized  terms  used  herein and not
otherwise  defined herein shall have the meanings ascribed to them in the Merger
Agreement.                                                                      

         IN WITNESS  WHEREOF,  Kenmar,  EMSG, and Acquisition  have caused their
corporate names to be hereunto subscribed by their respective officers thereunto
duly authorized,  and the Representative has executed this Agreement,  all as of
the day and year first above written.                                           

                                                KENMAR BUSINESS GROUPS, INC.

                             By:
                                           Name:
                                            Title:

[Additional signatures appear on next page.]

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                               ELECTRONIC MANUFACTURING SERVICES
         GROUP, INC.

   By:
                 Name:
                  Title:

                                         J.A. INDUSTRIES OF NORTH CAROLINA, INC.

       By:
                     Name:
                      Title:

                   REPRESENTATIVE:

                      Kenneth L. Marks

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EXHIBIT D                   

CERTIFICATE OF AMENDMENT                    
OF                      
CERTIFICATE OF INCORPORATION                  
OF                      
J.A. INDUSTRIES, INC.                   

The undersigned corporation, in order to amend its Certificate of               
Incorporation, hereby certifies as follows:                                     

FIRST: The name of the corporation is:                                          

J.A. INDUSTRIES, INC.                     

SECOND: The corporation hereby amends its Certificate of Incorporation          
as follows:                                                                     

(a) Paragraph FIRST of the Certificate of Incorporation, relating to the        
corporate title of the corporation, is hereby amended to read as follows:       

FIRST: The name of the corporation is                                           

     ELECTRONIC MANUFACTURING SERVICES GROUP, INC.

(b) Paragraph Fourth of the Certificate of Incorporation, relating to           
authorized shares, is hereby amended to add the following paragraph:            

"At the effective time of this amendment of the Certificate of Incorporation    
and without further action on the part of the corporation or the holders of     
its stock, each share of Common Stock of the corporation outstanding or held    
in the treasury immediately prior thereto shall be changed and converted        
into 0.25 fully paid and nonassessable shares of Common Stock of the            
Corporation, and at such time each holder of record of Common Stock shall,      
without further action, be and become the holder of 0.25 share of Common        
Stock for each share of Common Stock held of record immediately prior thereto.  

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In lieu of any fractional shares to which the holder of Common Stock would      
otherwise be entitled, the corporation shall pay cash equal to such fraction    
multiplied by the fair market value of one share of Common Stock as             
determined by the Board of Directors of the corporation."                       

THIRD: The amendment effected herein was authorized by the affirmative vote     
of the holders of a majority of the outstanding shares entitled to vote         
thereon at a meeting of shareholders pursuant to Sections 222 and 242 of the    
General Corporation Law of the State of Delaware.                               

IN WITNESS WHEREOF, we hereunto sign our names and affirm that the statements   
made herein are true under the penalties of perjury, this    day of             
1996.                                                                           

                   J.A. INDUSTRIES, INC.

                  /s/ KENNETH L. MARKS
                      Kenneth L. Marks

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Exhibit E 

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

 INDEX TO FINANCIAL STATEMENTS

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

  Balance Sheet as of August 31, 1995                          F-1
Statement of Operations for the year                          
    ended August 31, 1995                                      F-2
Statement of Operations for the six                           
    months ended February 29, 1996                             F-3

J.A.- Financial Statements                                                      

  Report of Independent Auditors                               F-4
    Balance Sheets as of June 30, 1995 and 1994                  F-5/6
Statements of Operations for the years                        
    ended June 30, 1995 and 1994                               F-7
Statements of Stockholder Equity for the                      
     years ended June 30, 1995 and 1994                        F-8
Statements of Cash Flows for the years                        
     ended June 30, 1995 and 1994                              F-9
        Notes to Financial Statements                                F-10-F-20

J.A.- Financial Statements (Unaudited)                                          

Balance Sheets as of December 31, 1995                        
        and 1996                                                   F-21/22
Statements of Operations for six months                       
        ended December 31, 1995 and 1994                           F-23/24
Statement of Changes in Financial Position                    
for six months ended December 31, 1995                    
     and 1994                                                   F-25
Statement of Changes in Stockholder's Equity                  
for six months ended December 31, 1995 and                
     June 30, 1995                                              F-26
        Notes to Financial Statements                                F-27-F-31

Kenmar - Financial Statements (Audited)                                         

   Report of Independent Auditors                               F-32
   Balance Sheets as of August 31, 1995 and 1994                F-33
Statements of Income (Loss) years ended                       
     August 31, 1995 and 1994                                   F-34
Statement of Stockholder's Deficit years                      
     ended August 31, 1995 and 1994                             F-35

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Statement of Cash Flows years ended August                    
        31, 1995 and 1994                                          F-36/37
        Notes to Financial Statements                                F-38-F-48

Kenmar - Financial Statements (Unaudited)                                       

      Balance Sheets as of February 29, 1996 and 1995              F-49/50
Statements of Income, six months ended February               
     29, 1996 and 1995                                          F-51

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            J.A. INDUSTRIES, INC. AND SUBSIDIARIES
              PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
                 August 31, 1995

The following represents the unaudited pro forma condensed  consolidated balance
sheet for August 31, 1995, assuming the following  transactions were consummated
on August 31, 1995:                                                             

(1) Record disposal of Hutronix, Inc.                             
      (2) Issuance of stock through  private  placements to meet conditions of
the Agreement                                             
(3) Record debt reduction on Kenmar Business Group, Inc.          
     (4) Merger of Kenmar Business Group, Inc. for issuance of approximately
2,700,000 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  
                                             June 30,     August 31,         Merger    Consolidated
ASSETS                                        1995          1995          Adjustments    Amounts   
                                              ----       ----------       -----------    -------   
                                                                                                   
Current Assets:                                                                                    
   Cash and cash equivalents               $   45,274    $1,632,630 (1)  $  (44,821)   $2,313,083  
                                                                    (2)     680,000                
   Other current assets                       431,319       710,880 (1)    (431,246)      710,953  
                                           ----------    ----------                    ----------  
      Total Current Assets                    476,593     2,343,510                     3,024,036  
                                           ----------    ----------                    ----------  
Real Estate Held for Sale                     488,750               (1)    (488,750)         -     
Property and Equipment, Net                    53,330       590,307 (1)     (53,330)      590,307  
Other Assets                                    2,050       135,898                       137,948  
                                           ----------    ----------                    ----------  
                                           $1,020,723    $3,069,715                    $3,752,291  
                                           ==========    ==========                    ==========  
LIABILITIES AND STOCKHOLDERS' EQUITY                                                               
Current Liabilities:                                                                               
   Current portion of long-term debt       $  626,752    $   57,562 (1)    (626,752)       57,562  
   Accounts payable                           165,625     2,206,535 (1)    (110,116)      487,263  
                                                 -             -    (2)     (50,000)         -     
                                                 -             -    (3)  (1,724,781)         -     
   Accrued expenses                           250,803       425,956 (1)    (225,803)      450,956  
                                           ----------    ----------                    ----------  
      Total Current Liabilities             1,043,180     2,690,053                       995,781  
                                           ----------    ----------                    ----------  

   Long-term debt                              18,046       636,193 (1)     (18,046)      636,193  
   Preferred stock                               -          729,844            -          729,844  
                                           ----------    ----------                    ----------  
                                               18,046     1,366,037                     1,366,037  
                                           ----------    ----------                    ----------  
STOCKHOLDERS' EQUITY (DEFICIT)                                                                     
   Common stock                                18,879        64,714 (2)       8,579        34,294  
                                                 -             -    (4)     (57,878)         -     
   Additional paid-in capital               4,993,915        99,667 (2)     942,804     6,668,289  
                                                 -             -    (4)     631,903          -     
   Accumulated deficit                     (4,904,793)   (1,150,756)(1)     (73,196)   (5,163,606) 
                                                 -             -    (2)    (185,617)         -     
                                                 -             -    (3)   1,724,781          -     
                                                 -             -    (4)    (574,025)         -     
   Stock subscription receivable             (144,000)         -               -         (144,000) 
   Cumulative translation adjustment           (4,504)         -               -           (4,504) 
                                           ----------    ----------                    ----------  
                                              (40,503)     (986,375)                    1,390,473  
                                           ----------    ----------                    ----------  
      Total Liabilities and Stockholders'                                                          
        Equity                             $1,020,723    $3,069,715                    $3,752,291  
                                           ==========    ==========                    ==========  


J.A. Industries, Inc.'s balance sheet was prepared using the Company's          
June 30, 1995 year end. Kenmar Business Group, Inc.'s balance sheet was         
prepared using their August 31, 1995 balance sheet. 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                 
financial position of the pro forma combined company as of August 31,           
1995.                                                                           

   F-1

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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 August 31, 1995,  assuming the  following  transactions
were consummated on August 31, 1994:                                            

(1) Record disposal of Hutronix, Inc.                                           
(2) Issuance of stock  through  private  placements  to meet  conditions  of the
Agreement                                                               
(3) Record debt reduction on Kenmar Business Group, Inc.                        
(4) Merger of Kenmar Business Group, Inc. for issuance of approximately         
2,700,000 shares of common stock of J.A. Industries, Inc.               

                                                        [Enlarge/Download Table]

                                                      Kenmar                                   
                                         J.A.        Business                                  
                                      Industries,   Group, Inc.                                
                                      Inc. For The   For The                                   
                                      Year Ended    Year Ended.        Pro forma    Pro forma  
                                       June 30,      August 31,          Merger    Consolidated
                                        1995 (a,b)      1995 (b)      Adjustments    Amounts   
                                        ----            ----          -----------    -------   
                                                                                               
Revenue                              $     -        $15,565,662                    $15,565,662 

Cost of Sales                              -         13,883,090                     13,883,090 
                                     ----------     -----------                    ----------- 

      Gross Profit                         -          1,682,572                      1,682,572 

General, Selling and                                                                           
  Administrative                        767,768       1,233,587 (2)  $  185,617      2,186,972 
                                     ----------     -----------                    ----------- 

      Operating Income (Loss)          (767,768)        448,985                       (504,400)

Other Income (Expense)                  (59,484)       (267,487)(1)     (73,196)     1,324,614 
                                                                (3)   1,724,781                
                                     ----------     -----------                    ----------- 

Income (Loss) before Income Taxes      (827,252)        181,498                        820,214 

Income Taxes                               -               -                              -    
                                     ----------     -----------                    ----------- 
Net Income                             (827,252)        181,498                        820,214 

Accretion of Preferred Stock               -            (54,006)                       (54,006)

Undeclared Dividends on                                                                        
  Preferred Stock                          -            (49,630)                       (49,630)
                                     ----------     -----------                    ----------- 

Net Income (Loss) Applicable                                                                   
  to Common Shareholders             $ (827,252)    $    77,862                    $   716,578 
                                     ==========     ===========                    =========== 

Net Income (Loss) per Share          $     (.12)    $      1.26                    $       .16 
                                     ==========     ===========                    =========== 

Weighted Average Shares Outstanding   6,724,440          61,999                      4,415,473 
                                     ==========     ===========                    =========== 


(a)  Assumes the disposal of the operating subsidiaries of J.A. Industries, Inc.
(b)  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.                                                     

   F-2

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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.                                           
(2) Issuance of stock  through  private  placements  to meet  conditions  of the
Agreement                                                               
(3) Record debt reduction on Kenmar Business Group, Inc.                        
(4) Merger of Kenmar Business Group, Inc. for issuance of approximately         
2,700,000 shares of common stock of J.A. Industries, Inc.               

                                                        [Enlarge/Download Table]

                                     J.A. Industries     Kenmar                              
                                        Inc. and        Business                             
                                      Subsidiaries    Group, Inc.                            
                                        For The         For The                              
                                      Eight Month      Six Month                             
                                      Period Ended    Period Ended   Pro forma    Pro forma  
                                      February 29,    February 29,     Merger    Consolidated
                                         1996            1996       Adjustments    Amounts   
                                         ----         ----------    -----------    -------   
                                                                                             
Revenue                              $     -          $1,354,383                 $1,354,383  

Cost of Sales                              -           1,373,793                  1,373,793  
                                     ----------       ----------                 ----------  

      Gross Profit (Loss)                  -             (19,410)                   (19,410) 

General, Selling and                                                                         
  Administrative                        610,586          397,350                  1,007,936  
                                     ----------       ----------                 ----------  

      Operating Income (Loss)          (610,586)        (416,760)                (1,027,346) 

Other Income (Expense)                     -           1,707,710                  1,707,710  
                                     ----------       ----------                 ----------  

Income (Loss) before Income Taxes      (610,586)       1,290,950                    680,364  

Income Taxes                               -                -                          -     
                                     ----------       ----------                 ----------  

Net Income                             (610,586)       1,290,950                    680,364  

Accretion of Preferred Stock               -             (29,285)                   (29,285) 

Undeclared Dividends on                                                                      
  Preferred Stock                          -             (12,408)                   (12,408) 
                                     ----------       ----------                 ----------  

Net Income (Loss) Applicable                                                                 
  to Common Shareholders             $ (610,586)      $1,249,257                 $  638,671  
                                     ==========       ==========                 ==========  

Net Income (Loss) per Share          $    (0.08)      $    19.30                 $     0.13  
                                     ==========       ==========                 ==========  

Weighted Average Shares Outstanding   7,696,310           64,714                  4,925,009  
                                     ==========       ==========                 ==========  


       F-3

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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-4

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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

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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

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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

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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

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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

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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-10

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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-11

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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.                             

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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.                                       

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

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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.                           

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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:                   

        Management relied upon the advice of the American Institute of Certified
        Public  Accountants  in the  original  preparation  of the  accompanying
        consolidated financial statements.  Their advice was to give retroactive
        effect to the disposal of Hutronix, Inc., which was formally disposed of
        under  contract in November,  1995.  Upon  submission  and review of the
        United States Securities and Exchange Commission,  it was their position
        that  retroactive  treatment would not apply. As such, the  consolidated
financial statements have been restated.                        

        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.                                                                                         

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                                                           138,167                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 
                                                                       ----------------       ----------------

                                                                               261,619              1,359,102 

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

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

                                                                               282,683              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                                                   5,445,253              3,948,343 

Accumulated deficit                                                         (5,611,973)            (3,381,265)

Cumulative translation adjustment                                               (4,504)                11,144 

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

                                                                              (282,683)               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                                                                  $        ---           $     2,417,585 

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

Gross profit                                                                    ---                   440,127 

Selling and marketing expenses                                                  ---                    97,254 

General and administrative expenses                                            745,565                479,497 
                                                                       ----------------       ----------------

Loss from operations                                                          (745,565)              (136,624)

Other income (expense)                                                         (74,591)               (54,374)
                                                                       ----------------       ----------------

Consolidated net loss                                                  $      (820,156)       $      (190,998)
                                                                       ----------------       ----------------

Loss per share                                                         $          0.09        $          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                                                                  $        ---           $     1,237,956 

Cost  of sales                                                                  ---                   963,690 
                                                                       ----------------       ----------------

Gross profit                                                                    ---                   274,266 

Selling and marketing expenses                                                  ---                    71,820 

General and administrative expenses                                             81,921                239,877 
                                                                       ----------------       ----------------

Loss from operations                                                           (81,921)               (37,431)

Other income (expense)                                                         (74,591)               (48,676)
                                                                       ----------------       ----------------

Consolidated net loss                                                  $      (156,512)       $       (86,107)
                                                                       ----------------       ----------------

Loss per share                                                         $          0.01        $          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                                            $      (820,156)       $      (190,998)
    Items not affecting cash:                                                                                 
      Amortization                                                              ---                    80,543 
      Issuance of stock for services                                           476,251                 ---    
      Loss on sale of subsidiary                                                74,591                 ---    

    Changes in non-cash working capital                                        163,395                 85,991 
                                                                       ----------------       ----------------

                                                                              (105,918)               (24,464)
                                                                       ----------------       ----------------

Financing activities                                                                                          
    Issue of common shares                                                     120,000                100,000 
    Loan from shareholders                                                     (14,703)                 4,327 
    Long-term debt                                                              ---                   (41,596)
                                                                       ----------------       ----------------

                                                                               105,297                 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                                              (521)                33,689 

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

Cash position beginning of period                                                  453               (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 $ (3,255,919)$     (7,561)$    ---    $      ---    

Issued for cash                             581,383      1,453          494,797       ---          ---         ---           ---    

Issued for consulting fees                  582,292      1,456          524,642       ---          ---        (30,000)       ---    

Issued and unpaid                           500,000      1,250          428,750       ---          ---       (430,000)       ---    

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

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

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                                 ---        ---              ---      (2,155,220)      ---         ---           ---   
                                      ----------------------------------------------------------------------------------------------

Balance June 30, 1995                     7,551,603     18,879        5,309,915   (5,411,139)      (4,504)   (460,000)     (131,250)

Issued for cash                             300,000        750          119,250       ---          ---         ---           ---    

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

Services rendered as consideration                                                                                                  
for shares                                   ---        ---              ---          ---          ---        460,000        ---    

Net loss for the six months ended                                                                                                   
December 31, 1995                            ---        ---              ---        (820,156)      ---         ---           ---    
                                      ----------------------------------------------------------------------------------------------

Balance December 31, 1995                 7,906,603 $   19,792 $      5,445,253 $ (6,231,295)$     (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.                                    

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INDEPENDENT AUDITORS' REPORT

The Board of Directors                                                          
Kenman 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 required 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 1, 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.                      

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%.                                                     

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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.                                                

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

            KENMAR BUSINESS GROUPS, INC.
           Consolidated Balance Sheets

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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

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

                                       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    
Miscellaneous income                           1,724,781               -    
Interest expense                                 (29,214)       (141,968)   
Miscellaneous expense                            (18,300)              -    

   Other income (expense)                   1,707,710        (139,358)

  Income (loss) before income taxes        1,290,950         230,409

Income tax benefit (expense)                             -               -      

  Net income                               1,209,950         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                            $1,249,258      $  179,084

Weighted average number of shares                   64,714          60,369      

Net income per common share and common                          
  equivalent                              $    19.30      $     2.97

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                                   U.S. Securities and Exchange Commission
                                  Washington, D.C. 20549

                                   FORM 10-KSB/A

[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
  ACT OF 1934 [Fee Required] For the fiscal year ended June 30, 1995

[ ]     TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
        ACT OF 1934 [No Fee Required] For the transition  period from ..........
to ................                                             

 Commission File Number: 0-23528

 J.A. INDUSTRIES, INC.
(Name of small business issuer in its charter)

Delaware                                           13-3421337 
(State or other jurisdiction                             (I.R.S. Employer       
incorporation or organization                            Identification No.)    

 34A-2755 Lougheed Highway, Suite 522, Port Coquitlam, B.C. V3B 5W9 Canada
(Address of principal executive offices)

Issuer's telephone number:  604-941-3413                                        

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

Not applicable                                        Not applicable      
Title of each class                         Name of Exchange in which registered

Securities registered under Section 12(g) of the Exchange Act:                  
Common Stock par value $.0025                                             
(Title of Class)                                              

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing  requirements  for the past 90 days.  Yes: X No: Check if
there  is no  disclosure  of  delinquent  filers  in  response  to  Item  405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB: [X]                                       

State issuer's revenue for its most recent fiscal year: $                       
State the  aggregate  market  value of the voting  stock held by  non-affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and asked  prices of such stock,  as of a specified  date within the past 60
days. $3,443,826                                                                

 DOCUMENTS INCORPORATED BY REFERENCE

         If the following  documents  are  incorporated  by  reference,  briefly
describe  them and  identify the part of the Form 10-KSB into which the document
is  incorporated:  (1) any annual report to security  holders;  (2) any proxy or
information  statement;  and (3) any prospectus filed pursuant to Rule 424(b) or
(c) of the  Securities  Act of 1933  ("Securities  Act").  The list of documents
should be clearly described for identification purposes.                        
Transitional Small business Disclosure Format (check one):    
Yes.......; No..x.....                                        

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 Table of Contents
                               PART I                           Page

Item 6.           Management's Discussion and Analysis or                1      
Plan of Operation                           

Item 7.           Financial Statements                                  11      

Item 10.          Executive Compensation                                33      

Signature Page                                                          35      

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Item 6.                                                                         

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                                                                            

 1

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

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

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

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

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

         Prior to the  Merger,  the  Company  must  reduce its  liabilities  and
contingent liabilities to                                                       

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

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

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

Seasonal factors do not influence the Company's sales.        

Liquidity and Capital Resources                                                 

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

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

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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.                                                    

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                              

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trust on the real estate held for sale and an irrevocable  letter of credit from
a bank in the amount of the outstanding  note payable balance  guaranteed by the
Company.  At June 30, 1995 the amount  outstanding was $546,125.  The subsequent
agreement  between BCC and the Company  calls for BCC and  Hutronix to indemnify
the Company  against any liability under this bond. As the solvency of Hutronix,
Inc. is uncertain,  the ability for  Hutronix,  Inc. to indemnify the Company is
unlikely.  Furthermore,  on November 21, 1995 an agreement  was reached  between
Baboquivari Cattle Company,  Karl and Marilyn Ronstadt,  Hutronix,  Inc. and the
Company whereby the parties  exchanged mutual releases  relieving the Company of
any  liabilities  that it had or might have in the future with the  parties.  On
March 4, 1996 the liability under the guarantee to Bank One was satisfied.      

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

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

         In March,  1996, the Company came to a final  agreement with the former
owners of Capital City Plastics  whereby Capital City Plastic and John Szaniszlo
will provide the Company with a release from all  liabilities and deliver to the
Company  600,000  shares of common  stock  issued to Capital  City  Plastics  in
exchange for the Company's release from liabilities, $10,000 and the issuance of
50,000 restricted  common stock of the Company.  The funds necessary to complete
this  transaction are part of the funding needs of the Merger.  If the necessary
funds were not raised or the Merger was not  completed,  the Company's  position
would be that there are no liabilities  outstanding with Capital City Plastic or
John Szaniszlo as they had breached the original agreement between the parties. 

         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                                             

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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

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.                                     

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                                                  

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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                                                           
1996                               $ 48,272                   
1997                               $ 49,701                   
1998                               $ 29,431                   

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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
attributed  to the  reorganization  and  elimination  of ongoing  contracts  and
liabilities the Company needed to satisfy                                       

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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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Item 7. Financial Statements                                                    

    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).    

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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

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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

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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

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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

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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

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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).            

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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.                                                 

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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.                             

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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.                                       

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

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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.                           

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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:                   

        Management relied upon the advice of the American Institute of Certified
        Public  Accountants  in the  original  preparation  of the  accompanying
        consolidated financial statements.  Their advice was to give retroactive
        effect to the disposal of Hutronix, Inc., which was formally disposed of
        under  contract in November,  1995.  Upon  submission  and review of the
        United States Securities and Exchange Commission,  it was their position
        that  retroactive  treatment would not apply. As such, the  consolidated
financial statements have been restated.                        

        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.                                                                                         

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                                                           138,167                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 
                                                                       ----------------       ----------------

                                                                               261,619              1,359,102 

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

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

                                                                               282,683              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                                                   5,445,253              3,948,343 

Accumulated deficit                                                         (5,611,973)            (3,381,265)

Cumulative translation adjustment                                               (4,504)                11,144 

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

                                                                              (282,683)               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                                                                  $        ---           $     2,417,585 

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

Gross profit                                                                    ---                   440,127 

Selling and marketing expenses                                                  ---                    97,254 

General and administrative expenses                                            745,565                479,497 
                                                                       ----------------       ----------------

Loss from operations                                                          (745,565)              (136,624)

Other income (expense)                                                         (74,591)               (54,374)
                                                                       ----------------       ----------------

Consolidated net loss                                                  $      (820,156)       $      (190,998)
                                                                       ----------------       ----------------

Loss per share                                                         $          0.09        $          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                                                                  $        ---           $     1,237,956 

Cost  of sales                                                                  ---                   963,690 
                                                                       ----------------       ----------------

Gross profit                                                                    ---                   274,266 

Selling and marketing expenses                                                  ---                    71,820 

General and administrative expenses                                             81,921                239,877 
                                                                       ----------------       ----------------

Loss from operations                                                           (81,921)               (37,431)

Other income (expense)                                                         (74,591)               (48,676)
                                                                       ----------------       ----------------

Consolidated net loss                                                  $      (156,512)       $       (86,107)
                                                                       ----------------       ----------------

Loss per share                                                         $          0.01        $          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                                            $      (820,156)       $      (190,998)
    Items not affecting cash:                                                                                 
      Amortization                                                              ---                    80,543 
      Issuance of stock for services                                           476,251                 ---    
      Loss on sale of subsidiary                                                74,591                 ---    

    Changes in non-cash working capital                                        163,395                 85,991 
                                                                       ----------------       ----------------

                                                                              (105,918)               (24,464)
                                                                       ----------------       ----------------

Financing activities                                                                                          
    Issue of common shares                                                     120,000                100,000 
    Loan from shareholders                                                     (14,703)                 4,327 
    Long-term debt                                                              ---                   (41,596)
                                                                       ----------------       ----------------

                                                                               105,297                 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                                              (521)                33,689 

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

Cash position beginning of period                                                  453               (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 $ (3,255,919)$     (7,561)$    ---    $      ---    

Issued for cash                             581,383      1,453          494,797       ---          ---         ---           ---    

Issued for consulting fees                  582,292      1,456          524,642       ---          ---        (30,000)       ---    

Issued and unpaid                           500,000      1,250          428,750       ---          ---       (430,000)       ---    

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

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

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                                 ---        ---              ---      (2,155,220)      ---         ---           ---   
                                      ----------------------------------------------------------------------------------------------

Balance June 30, 1995                     7,551,603     18,879        5,309,915   (5,411,139)      (4,504)   (460,000)     (131,250)

Issued for cash                             300,000        750          119,250       ---          ---         ---           ---    

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

Services rendered as consideration                                                                                                  
for shares                                   ---        ---              ---          ---          ---        460,000        ---    

Net loss for the six months ended                                                                                                   
December 31, 1995                            ---        ---              ---        (820,156)      ---         ---           ---    
                                      ----------------------------------------------------------------------------------------------

Balance December 31, 1995                 7,906,603 $   19,792 $      5,445,253 $ (6,231,295)$     (4,504)$    ---    $    (131,250)
                                      ----------------------------------------------------------------------------------------------


                    F-26

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


    F-28

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

    F-29

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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.                            

    F-30

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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.                                    

    F-31

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Item 10.          Executive Compensation                                        

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

SUMMARY COMPENSATION TABLE

                                                        [Enlarge/Download 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                                                      

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

(a)         (b)           (c)           (d)           (e)          Percent      
                                                              of total

                                                                [Download Table]

                            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

(a)          (b)           (c)          (d)             (e)                 
Value of                                    
Number of                 Unexercised       
Unexercised               In-the-money      

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                                                        [Enlarge/Download Table]


                                                            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    

-34-

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SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.                                                      

(Registrant)  J.A. INDUSTRIES, INC.                                             

By (Signature and Title)      per/s:/Robert Knight    President                 

Date     May 16, 1996                                                           

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated.                                                         

By (Signature and Title)    per/s:/Robert Knight     Chairman of the Board      

Date    May 16, 1996                                                            

-35-

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 Form 10-QSB/A

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

 For the Quarterly period ended September 30, 1995

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
                          For the transition period from        to

                                Commission file number:    0-23528

 J.A. INDUSTRIES, INC.
 (Exact name of small business issuer as specified on its charter)

Delaware                                         13-3421337     
(State or other jurisdiction of                       (I.R.S. Employer          
incorporation or organization)                        Identification No.)       

 34A-2755 Lougheed Highway, Suite 522, Port Coquitlam, B.C. V3B 5W9 Canada
(Address of principal executive offices)

Issuer's telephone number, including area code:  604-941-3413                   

Check  whether the issuer (1) filed all reports  required to filed by Section 13
or 15(d) of the  Exchange  Act during  the past 12 months  (or for such  shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.                       

  Yes   X                   No

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
Common Stock, as of the latest practical date.                                  

Common Stock, par value $0.0025 per share                                       
Class                                                         

7,906,603                                                                 
Number of shares outstanding                                                    

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 J.A. INDUSTRIES, INC.

 TABLE OF CONTENTS

PART I:                    FINANCIAL INFORMATION                                

Consolidated Condensed                                        
                  Balance Sheet September 30, 1995  (unaudited) with comparative
figures September 30, 1994 (unaudited)      

         Consolidated  Condensed  Statement of  Operations  for the three months
                  ended September 30, 1995 (unaudited) with comparative  figures
September 30, 1994 (unaudited)              

Consolidated Condensed                                        
                  Statement of Change in Financial Position for the three months
                  ended September 30, 1995 (unaudited) with comparative  figures
September 30, 1994 (unaudited)              

         Consolidated Condensed Statement of Changes in Shareholder's Equity for
                  the three months ended  September  30, 1995  (unaudited)  with
       comparative figures June 30, 1994 yearend (audited)

Notes to Condensed Financial Statements                       

Management's Discussion and Analysis of                       
Financial Condition and Results of Operations                 

Signatures                                                    

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 J.A. Industries, Inc.

 Consolidated Financial Statements
 (unaudited)

 First Quarter

September 30, 1995

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J.A. Industries, Inc.                                                           

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

                September 30
               1995         1994
              -----------   ----------
Assets                                                                          

Current                                                                         
Cash                            $    3,260   $    7,153                 
Accounts receivable                                                     
Trade                            250,444      702,634               
Other                             62,826         --                 
Inventory (note 2)                 250,293      428,605                 
Prepaid expenses and deposits       22,100       34,209                 
               ----------   ----------

                  588,923    1,172,601

Real estate held for resale            474,778      875,000                     

Property and equipment (note 3)         46,910      565,877                     

Investments                               --         22,075                     

Intangible assets (note 4)               2,050      124,566                     
               ----------   ----------

               $1,112,661   $2,760,119
               ----------   ----------

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J.A. Industries, Inc.                                                           

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

                                                        [Enlarge/Download Table]

                                                                              September 30        
                                                                           1995          1994     
                                                                       -----------    ----------- 
Liabilities                                                                                       

                                                                                                  
Current                                                                                           
    Bank indebtedness                                                  $      --      $   145,000 
    Accounts payable                                                       630,613        970,777 
    Equipment loans                                                        546,125        119,048 
    Current portion of long-term debt (note 6)                              31,373        170,950 
                                                                       -----------    ----------- 

                                                                         1,208,111      1,405,775 

Loans from shareholders (note 5)                                            40,767        138,146 

Long-term debt (note 6)                                                     12,258        561,842 
                                                                       -----------    ----------- 

                                                                         1,261,136      2,105,763 
                                                                       -----------    ----------- 

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 - 6,717,034)                                     19,792         16,792 

Additional paid-in capital                                               5,445,253      3,948,594 

Accumulated deficit                                                     (5,609,016)    (3,295,158)

Cumulative translation adjustment                                           (4,504)       (15,872)

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

                                                                          (148,476)       654,356 
                                                                       -----------    ----------- 

                                                                       $ 1,112,661    $ 2,760,119 
                                                                       -----------    ----------- 

                                      -2-                                                         

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J.A. Industries, Inc.                                                                             

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

                                      For the three months ended                                  
                                              September 30                                        
                                          1995           1994                                     
                                      -----------    -----------                                  

Sales                                 $   532,310    $ 1,179,629                                  

Cost  of sales                            455,030      1,013,768                                  
                                      -----------    -----------                                  

Gross profit                               77,280        165,861                                  

Selling and marketing expenses                183         25,434                                  

General and administrative expenses       781,384        239,620                                  
                                      -----------    -----------                                  

Loss from operations                     (704,287)       (99,193)                                 

Other income (expense)                         64         (5,698)                                 
                                      -----------    -----------                                  

Consolidated net loss                 $  (704,223)   $  (104,891)                                 
                                      -----------    -----------                                  

Loss per share                        $      0.08    $      0.02                                  
                                      -----------    -----------                                  

                                      -3-                                                         

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J.A. Industries, Inc.                                                                             

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

                                      For the three months ended                                  
                                              September 30                                        
                                          1995          1994                                      
                                      -----------   ------------                                  

Sales                                 $(1,885,275)   $   (58,730)                                 

Cost  of sales                         (1,522,428)       (84,083)                                 
                                      -----------    -----------                                  

Gross profit                             (362,847)        25,353                                  

Selling and marketing expenses            (97,071)       (64,354)                                 

General and administrative expenses       301,887       (217,210)                                 
                                      -----------    -----------                                  

Loss from operations                     (567,663)       306,917                                  

Other income (expense)                     54,438         (5,698)                                 
                                      -----------    -----------                                  

Consolidated net loss                 $  (513,225)   $   301,219                                  
                                      -----------    -----------                                  

Loss per share                        $      0.04    $      0.03                                  
                                      -----------    -----------                                  

                                      -4-                                                         

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J.A. Industries, Inc.                                                                             

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

                                           For the three months ended                             
                                                   September 30                                   
                                                 1995        1994                                 
                                             -----------  ----------                              
Cash provided by (used in)                                                                        
Operating activities                                                                              
    Net loss for the period                   $(704,223)   $(104,891)                             
    Items not affecting cash:                                                                     
      Amortization                               20,392       26,581                              
      Issuance of stock for services            476,251         --                                

    Changes in non-cash working capital          10,587       24,472                              
                                              ---------    ---------                              

                                               (196,993)     (53,838)                             
                                              ---------    ---------                              

Financing activities                                                                              
    Issue of common shares                      120,000      100,000                              
    Loan from shareholders                       40,767        5,782                              
    Long-term debt                               (5,788)     (15,338)                             
                                              ---------    ---------                              

                                                154,979       90,444                              
                                              ---------    ---------                              
                                                           ---------                              

Increase (decrease) in cash position            (42,014)      36,606                              

Effect of currency translation on cash flow        --         (8,311)                             

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

Cash position end of period                   $   3,260    $(137,847)                             
                                              ---------    ---------                              

Represented by:                                                                                   
    Cash                                      $   3,260    $   7,153                              
    Bank indebtedness                              --       (145,000)                             
                                              ---------    ---------                              

                                              $   3,260    $(137,847)                             
                                              ---------    ---------                              

      Accounts receivable                      (313,197)    (347,502)                             

      Inventory                                (559,787)                                          
      Prepaid expenses                          (37,535)                                          
      Accounts payable                          531,829      792,082                              
      Income taxes payable                         --                                             
      Purchase agreement                           --       (133,287)                             

                                      -5-                                                         

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J.A. Industries, Inc.                                                                             

Notes to Consolidated Financial Statements                                                        
(unaudited)                                                                                       
September 30, 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., Hutronix, Inc., and QDS, de Mexico, de                  
          C.V.,  were disposed of during the year ended June 30, 1995 subject to                  
          shareholder approval (note 13).                                                         

      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.    Inventory                                                                                   

      Inventory consists of:             1995       1994                                          

      Raw materials                    $163,725   $501,462                                        
      Less: Reserve for obsolescence       --      190,000                                        
                                       --------   --------                                        

                                        163,725    311,462                                        
      Work-in-process                    75,420     95,473                                        
      Finished goods                     11,148     21,670                                        
                                       --------   --------                                        

                                       $250,293   $428,605                                        
                                       --------   --------                                        

                                       -6-                                                        

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J.A. Industries, Inc.                                                                             

Notes to Consolidated Financial Statements                                                        
(unaudited)                                                                                       
September 30, 1995 and 1994                                                                       
--------------------------------------------------------------------------------                  

3.    Property and equipment                                                                      

                                                        [Enlarge/Download Table]

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

                                                                                                   
Land                     $         ---      $         ---      $         ---      $         ---    
Building                           ---                ---                ---                ---    
Forklift                           ---                ---                ---                 7,787 
Vehicles                           13,121             13,121             ---                    84 
Office equipment                   46,382             46,382             ---                 4,118 
Computer equipment                152,361            139,361             13,000             18,972 
Manufacturing equipment           277,320            243,410             33,910            302,396 
Leasehold improvements             ---                ---                ---                ---    
Assets not-in-service              ---                ---                ---               232,520 
                         -----------------  -----------------  -----------------  -----------------

                         $        489,184   $        442,274   $         46,910   $        565,877 
                         -----------------  -----------------  -----------------  -----------------

4.    Intangible assets                                                         

Intangible assets comprise the following:          1995        1994 

Goodwill                                               $128,767   $128,767      
Incorporation costs                                       3,000      3,000      
Patent costs                                               --        8,895      
                                                 --------   --------
                                                  131,767    140,662
Amortization                                            129,717     16,096      
                                                 --------   --------

                                                 $  2,050   $124,566
                                                 --------   --------

5.    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                                                20,767              --  

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

                                                                        $ 40,767  $        138,146
                                                                        --------  ----------------

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J.A. Industries, Inc.                                                                             

Notes to Consolidated Financial Statements                                                        
(unaudited)                                                                                       
September 30, 1995 and 1994                                                                       
--------------------------------------------------------------------------------                  

6.    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.                                         $  546,125       $   576,908    

Note payable to a supplier due in quarterly instalments of                                                
$8,361 plus interest at 6% unsecured, due March 15, 1995                        ---             16,447    

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.                             ---             49,039    

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.                                                            ---             90,398    
                                                                          -------------  -----------------

                                                                               546,125         732,792    

Less: Current portion                                                           ---            170,950    
                                                                      -----------------  -----------------

                                                                      $        546,125   $     561,842    
                                                                      -----------------  -----------------

7.    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)                                                                     
September 30, 1995 and 1994                                                     
--------------------------------------------------------------------------------

8.    Commitments and Contigencies                                              

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

9.    Subsequent event                                                          

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

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Management's Discussion and Analysis                                            

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

Overview                                                                        

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

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

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

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

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

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

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

         On March 30, 1994 Granite Marketing  Corporation.  ("Granite"),  then a
wholly  owned  subsidiary  of  the  Company,  entered  into  an  agreement  with
Queensland  Industries,  Inc.  ("Queensland")  whereby Queensland purchased from
Granite an exclusive license to manufacture,                                    

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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 (the "Merger") with Kenmar  Business  Groups,  Inc.
("Kenmar")  of  Raleigh,  NC.  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. The agreement is subject to shareholder's approval
of both companies as well, J.A.  Industries,  Inc. must finalized its settlement
agreement 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").            

         Kenmar Business Groups,  Inc. ("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.                                      

         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.  Upon
completion of the Merger, current management of Kenmar will assume management of
the Company.                                                                    

         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                                         

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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 in place and will be released to the Company  subject to
Shareholder's  approval of the Merger. If Shareholder's approval is not obtained
to complete  the Merger,  then the funds in escrow  would not be released to the
Company.                                                                        

         The  Company  will  continue  to  focus  its  expansion  plans  on  the
acquisition of other contract manufacturing operations.                         

Seasonal factors do not influence the Company's sales.        

Liquidity and Capital Resources                                                 

         Subsequent  to the 3 months  ended  September  30,  1995,  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.  The Company has no cash flow and
its ability to maintain  operations is severely impaired.  If the Company cannot
raise additional capital it is unlikely the Company would be able to operate and
it may be forced to seek protection under Chapter 11 of the Bankruptcy Act.     

         It is the  Company's  goal in the fiscal  year  ending June 30, 1996 to
find a suitable acquisition  candidate.  Management anticipated 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 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  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  Compnay  upon
shareholder's  approval of the Merger.  In the event the Company did not receive
shaeholder's  approval,  the funds  would not be  release  from  escrow  and the
Company wold not be able to meet its financial  requirements.  If the Merger was
not completed, then the Company could be forced to seek protection under Chapter
11 of the Bankruptcy Act.                                                       

         In the  event  that the  Company  does  raise  the  necessary  funds to
complete the Merger,  and all other  conditions  of the Merger are satisfied and
the Merger is completed it is anticipated that                                  

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

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

Notes Payable and Long term debt                                                

         Hutronix,  Inc.  a former  subsidiary  has a note  payable  to Bank One
executed through the Industrial Development Authority of the City of Douglas due
in quarterly  instalments of $12,821, plus interest at 65% of prime (7.25% as of
June 30, 1994), due may 2005; secured by a deed of trust on the real estate held
for sale and an  irrevocable  letter of credit  from a bank in the amount of the
outstanding note payable balance guaranteed by the Company. At June 30, 1995 the
amount  outstanding was $576,908.  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.  On March 4,
1996 the liability  under the guarantee to Bank One was satisfied.  Furthermore,
on  November  21,  1996 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 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
transaction  are  part of the  funding  needed  for the  closing  of the  Merger
agreement.  If the funds were not raised or the Merger was 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                                                              

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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 funds were not raised and the Merger was not completed, then
this liability would still be outstanding with the creditor.                    

         In March,  1996, the Company came to a final  agreement with the former
owners of Capital City Plastics  whereby Capital City Plastic and John Szaniszlo
will provide the Company with a release from all  liabilities and deliver to the
Company  600,000  shares of common  stock  issued to Capital  City  Plastics  in
exchange for the Company's release from liabilities, $10,000 and the issuance of
50,000 restricted  common stock of the Company.  The funds necessary to complete
this  transaction are part of the funding needs of the Merger.  If the necessary
funds were not raised or the Merger was not  completed,  the Company's  position
would be that there are no liabilities  outstanding with Capital City Plastic or
John Szaniszlo as they had breached the original agreement between the parties. 

         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

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.                       

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Long-term Debt:  Long term debt of Kenmar consists of the following:            

                                                        [Enlarge/Download Table]

                                                        1995      1994          1993      
                                                        ----      ----          ----      
                                                                                          
Subordinated promissory notes payable monthly         $524,855  $646,674      $700,675    
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.                                               

Uncollateralized note payable to stockholder          $ 39,482  $ 43,486      $ 47,149    
repayable with interest at 8% in 59 monthly                                               
instalments 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 instalments of $2,435 including                                                
interest at 16.85% through April 1996.                                                    
(Subsequently, this note was satisfied)                                                   

Note payable to stockholder in monthly                     -              -       $ 22,069
instalments of $2,535 including interest                                                  
at 8% through April, 1994, collateralized                                                 
by certain equipment.                                                                     
                                                      $582,380      $950,276      $769,893
Less current maturities                               $ 22,359      $293,242      $ 79,750
                                                      --------      --------      --------
                                                      $560,021      $657,034      $690,143
                                                      =======       ========      ========

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                   
                ========

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Obligations Under Capital Leases of Kenmar:                                     

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

                                                                [Download Table]

                            1995    1994        1993  
                            ----    ----        ----  
                                                      
Machinery and equipment  $200,066  $200,066   $ 62,735
Vehicles                       -   $ 27,871   $ 27,871
                         --------   --------  --------
Total                    $200,006  $227,937   $ 90,606

         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                                                           
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:                             

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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.                                                             

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.                        

         For the 3 month period ended September 30, 1995 compared to the 3 month
period ended  September 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 raises substantial doubt about the Company's ability to continue 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. In August 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.                                                   

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         Subsequent  to the period  ending  September  30,  1995 the Company has
entered  into a plan of merger with Kenmar  Business  Groups Inc. A condition of
the agreement 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. 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.  Prior to this  period,  the  auditors of the
Company had treated this item as a  non-balance  sheet item.  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                         

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in 1994.  The net loss from  operations  for the six month                      
period  ending  December  31, 1995 was  $746,960  compared  to $190,989  for the
corresponding   period  in  1994.   The  loss  in  1995  is  attributed  to  the
reorganization  and elimination of ongoing contracts and liabilities the Company
needed to satisfy to proceed  with its merger  agreement  with  Kenmar  Business
Groups, Inc. 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.  The disposition of Hutronix  relieved the Company of its long term
liability with a guarantee on a building in Douglas,  Arizona.  Therefore,  long
term debt was  reduce 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 $220,276
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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SIGNATURES                                                                      

Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized                                           

J.A. INDUSTRIES, INC.                                                           

per:/s/Robert Knight/                                               
Robert Knight, Chief Executive Officer                        May 27, 1996      

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 Form 10-QSB/A

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

For the Quarterly period ended December 31, 1995

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from to

 Commission file number: 0-23528

 J.A. INDUSTRIES, INC.
 (Exact name of small business issuer as specified on its charter)

Delaware                                                     13-3421337 
(State or other jurisdiction of                              (I.R.S. Employer   
incorporation or organization)                               Identification No.)

 34A-2755 Lougheed Highway, Suite 522, Port Coquitlam, B.C. V3B 5Y9 Canada
(Address of principal executive offices)

Issuer's telephone number, including area code:  604-941-3413                   

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.                       

  Yes   X                   No

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
Common Stock, as of the latest practical date.                                  

Common Stock, par value $0.0025 per share                                       
Class                                                         

7,906,603                                                                   
Number of shares outstanding                                                    

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 J.A. INDUSTRIES, INC.

 TABLE OF CONTENTS

PART I:           FINANCIAL INFORMATION                                         

Consolidated Condensed                                        
                  Balance Sheet December 31, 1995  (unaudited)  with comparative
figures December 31, 1994 (unaudited)       

         Consolidated Condensed Statement of Operations for the six months ended
                  December  31,  1995  (unaudited)   with  comparative   figures
December 31, 1994 (unaudited)               

         Consolidated  Condensed  Statement of  Operations  for the three months
                  ended December 31, 1995 (unaudited)  with comparative  figures
December 31, 1994 (unaudited)               

Consolidated Condensed                                        
                  Statement of Change in  Financial  Position for the six months
                  ended December 31, 1995 (unaudited)  with comparative  figures
December 31, 1994 (unaudited)               

         Consolidated Condensed Statement of Changes in Shareholder's Equity for
                  the six  months  ended  December  31,  1995  (unaudited)  with
comparative figures June 30, 1994 (audited) 

Notes to Condensed Financial Statements                       

Management's Discussion and Analysis of                       
Financial Condition and Results of Operations                 

Signatures                                                    

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 J.A. Industries, Inc.

Consolidated Financial Statements 
(unaudited) 

  Second Quarter

 December 31, 1995

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

                                      -1-                                                                     

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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                                                           138,167                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 
                                                                       ----------------       ----------------

                                                                               261,619              1,359,102 

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

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

                                                                               282,683              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                                                   5,445,253              3,948,343 

Accumulated deficit                                                         (5,611,973)            (3,381,265)

Cumulative translation adjustment                                               (4,504)                11,144 

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

                                                                              (282,683)               595,265 
                                                                       ----------------       ----------------

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

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J.A. Industries, Inc.                                                                                         

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

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

                                                                                                              

Sales                                                                  $        ---           $     2,417,585 

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

Gross profit                                                                    ---                   440,127 

Selling and marketing expenses                                                  ---                    97,254 

General and administrative expenses                                            745,565                479,497 
                                                                       ----------------       ----------------

Loss from operations                                                          (745,565)              (136,624)

Other income (expense)                                                         (74,591)               (54,374)
                                                                       ----------------       ----------------

Consolidated net loss                                                  $      (820,156)       $      (190,998)
                                                                       ----------------       ----------------

Loss per share                                                         $          0.09        $          0.03 
                                                                       ----------------       ----------------

                                      -3-                                                                     

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J.A. Industries, Inc.                                                                                         

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

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

                                                                                                              

Sales                                                                  $        ---           $     1,237,956 

Cost  of sales                                                                  ---                   963,690 
                                                                       ----------------       ----------------

Gross profit                                                                    ---                   274,266 

Selling and marketing expenses                                                  ---                    71,820 

General and administrative expenses                                             81,921                239,877 
                                                                       ----------------       ----------------

Loss from operations                                                           (81,921)               (37,431)

Other income (expense)                                                         (74,591)               (48,676)
                                                                       ----------------       ----------------

Consolidated net loss                                                  $      (156,512)       $       (86,107)
                                                                       ----------------       ----------------

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

                                      -4-                                                                     

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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                                            $      (820,156)       $      (190,998)
    Items not affecting cash:                                                                                 
      Amortization                                                              ---                    80,543 
      Issuance of stock for services                                           476,251                 ---    
      Loss on sale of subsidiary                                                74,591                 ---    

    Changes in non-cash working capital                                        163,395                 85,991 
                                                                       ----------------       ----------------

                                                                              (105,918)               (24,464)
                                                                       ----------------       ----------------

Financing activities                                                                                          
    Issue of common shares                                                     120,000                100,000 
    Loan from shareholders                                                     (14,703)                 4,327 
    Long-term debt                                                              ---                   (41,596)
                                                                       ----------------       ----------------

                                                                               105,297                 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                                              (521)                33,689 

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

Cash position beginning of period                                                  453               (166,142)
                                                                       ----------------       ----------------

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

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

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

                                      -5-                                                                     

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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 $ (3,255,919)$     (7,561)$    ---    $      ---    

Issued for cash                             581,383      1,453          494,797       ---          ---         ---           ---    

Issued for consulting fees                  582,292      1,456          524,642       ---          ---        (30,000)       ---    

Issued and unpaid                           500,000      1,250          428,750       ---          ---       (430,000)       ---    

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

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

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                                 ---        ---              ---      (2,155,220)      ---         ---           ---   
                                      ----------------------------------------------------------------------------------------------

Balance June 30, 1995                     7,551,603     18,879        5,309,915   (5,411,139)      (4,504)   (460,000)     (131,250)

Issued for cash                             300,000        750          119,250       ---          ---         ---           ---    

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

Services rendered as consideration                                                                                                  
for shares                                   ---        ---              ---          ---          ---        460,000        ---    

Net loss for the six months ended                                                                                                   
December 31, 1995                            ---        ---              ---        (820,156)      ---         ---           ---    
                                      ----------------------------------------------------------------------------------------------

Balance December 31, 1995                 7,906,603 $   19,792 $      5,445,253 $ (6,231,295)$     (4,504)$    ---    $    (131,250)
                                      ----------------------------------------------------------------------------------------------

                                      -6-                                                                                           

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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.                                                                                         

                                      -7-                                                                                           

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

                                   -8-                                                                          

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

                                      -9-                                                                       

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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 Contigencies                                          

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

10 Subsequent event                                                       

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

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Management's Discussion and Analysis                                            

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

Overview                                                                        

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

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

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

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

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

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

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

        On March 30, 1994 Granite  Marketing  Corporation.  ("Granite"),  then a
wholly  owned  subsidiary  of  the  Company,  entered  into  an  agreement  with
Queensland  Industries,  Inc.  ("Queensland")  whereby Queensland purchased from
Granite an exclusive license to manufacture,                                    

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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 (the "Merger") with Kenmar  Business  Groups,  Inc.
("Kenmar")  of  Raleigh,  NC.  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. The agreement is subject to shareholder's approval
of both companies as well, J.A.  Industries,  Inc. must finalized its settlement
agreement 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").            

         Kenmar Business Groups,  Inc. ("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.                                      

         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.  Upon
completion of the Merger, current management of Kenmar will assume management of
the Company.                                                                    

        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                                         

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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 in place and will be released to the Company  subject to
Shareholder's  approval of the Merger. If Shareholder's approval is not obtained
to complete  the Merger,  then the funds in escrow  would not be released to the
Company.                                                                        

         The  Company  will  continue  to  focus  its  expansion  plans  on  the
acquisition of other contract manufacturing operations.                         

Seasonal factors do not influence the Company's sales.        

Liquidity and Capital Resources                                                 

         Subsequent  to the 3 months  ended  September  30,  1995,  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.  The Company has no cash flow and
its ability to maintain  operations is severely impaired.  If the Company cannot
raise additional capital it is unlikely the Company would be able to operate and
it may be forced to seek protection under Chapter 11 of the Bankruptcy Act.     

         It is the  Company's  goal in the fiscal  year  ending June 30, 1996 to
find a suitable acquisition  candidate.  Management anticipated 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 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  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  Compnay  upon
shareholder's  approval of the Merger.  In the event the Company did not receive
shaeholder's  approval,  the funds  would not be  release  from  escrow  and the
Company wold not be able to meet its financial  requirements.  If the Merger was
not completed, then the Company could be forced to seek protection under Chapter
11 of the Bankruptcy Act.                                                       

         In the  event  that the  Company  does  raise  the  necessary  funds to
complete the Merger,  and all other  conditions  of the Merger are satisfied and
the Merger is completed it is anticipated that                                  

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

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

Notes Payable and Long term debt                                                

         Hutronix,  Inc.  a former  subsidiary  has a note  payable  to Bank One
executed through the Industrial Development Authority of the City of Douglas due
in quarterly  instalments of $12,821, plus interest at 65% of prime (7.25% as of
June 30, 1994), due may 2005; secured by a deed of trust on the real estate held
for sale and an  irrevocable  letter of credit  from a bank in the amount of the
outstanding note payable balance guaranteed by the Company. At June 30, 1995 the
amount  outstanding was $576,908.  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.  On March 4,
1996 the liability  under the guarantee to Bank One was satisfied.  Furthermore,
on  November  21,  1996 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 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
transaction  are  part of the  funding  needed  for the  closing  of the  Merger
agreement.  If the funds were not raised or the Merger was 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                                                              

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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 funds were not raised and the Merger was not completed, then
this liability would still be outstanding with the creditor.                    

         In March,  1996, the Company came to a final  agreement with the former
owners of Capital City Plastics  whereby Capital City Plastic and John Szaniszlo
will provide the Company with a release from all  liabilities and deliver to the
Company  600,000  shares of common  stock  issued to Capital  City  Plastics  in
exchange for the Company's release from liabilities, $10,000 and the issuance of
50,000 restricted  common stock of the Company.  The funds necessary to complete
this  transaction are part of the funding needs of the Merger.  If the necessary
funds were not raised or the Merger was not  completed,  the Company's  position
would be that there are no liabilities  outstanding with Capital City Plastic or
John Szaniszlo as they had breached the original agreement between the parties. 

         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 

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.                       

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Long-term Debt:  Long term debt of Kenmar consists of the following:            

                                                                [Download Table]


                                                       1995       1994    1993   
                                                       ----       ----    ----   
                                                                                 
Subordinated promissory notes payable monthly        $524,855  $646,674  $700,675
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.                                      

Uncollateralized note payable to stockholder         $ 39,482  $ 43,486  $ 47,149
repayable with interest at 8% in 59 monthly                                      
instalments 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 instalments of $2,435 including                                       
interest at 16.85% through April 1996.                                           
(Subsequently, this note was satisfied)                                          

Note payable to stockholder in monthly                    -          -   $ 22,069
instalments of $2,535 including interest                                         
at 8% through April, 1994, collateralized                                        
by certain equipment.                                                            
                                                     $582,380  $950,276  $769,893
Less current maturities                              $ 22,359  $293,242  $ 79,750
                                                     --------  --------  --------
                                                     $560,021  $657,034  $690,143
                                                     =======   ========  ========

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                   
               =======

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Obligations Under Capital Leases of Kenmar:                                     

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

                                  1995        1994        1993
                                  ----        ----        ----
   Machinery and equipment        $200,066     $200,066     $ 62,735
   Vehicles                             -      $ 27,871     $ 27,871
                                  --------     --------     --------
   Total                          $200,006     $227,937     $ 90,606

         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                                                           
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:                             

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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.                                                             

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.                        

         For the 6 month period ended  December 31, 1995 compared to the 6 month
period ended December 31, 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 raises substantial doubt about the Company's ability to continue a
going  concern.  The  consolidated  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.             

         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 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.                                

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         Subsequent  to the period  ending  December  31,  1995 the  Company has
entered  into a plan of merger with Kenmar  Business  Groups Inc. A condition of
the agreement 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.                                                                    

         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.  Prior to this
period, the auditors of the Company had treated this item as a non-balance sheet
item.                                                                           

         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  $745,565
compared to $190,989 for the  corresponding  period in 1994. The loss in 1995 is
attributed  to the  reorganization  and  elimination  of ongoing  contracts  and
liabilities  the Company needed to satisfy to proceed with its merger  agreement
with Kenmar Business  Groups,  Inc. 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.  The disposition of Hutronix  relieved
the  Company  of its long term  liability  with a  guarantee  on a  building  in
Douglas, Arizona.  Therefore, long term debt was reduce 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                           

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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 $220,276 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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SIGNATURES                                                                      

Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized                                           

J.A. INDUSTRIES, INC.                                                           

per:/s/Robert Knight                                      
Robert Knight, Chief Executive Officer                        May 27, 1996      

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