SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended: June 30, 2001

[ ] 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: 000-25423

EAGLE SUPPLY GROUP, INC.
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(Exact Name of Registrant as Specified in Its Charter)

Delaware 13-3889248
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

122 East 42nd Street, Suite 1116, New York, New York 10168
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(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: (212) 986-6190

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

Title of Each Class Name of Each Exchange on
Which Registered
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Common Stock Boston Stock Exchange

Redeemable Common Stock Purchase Warrants Boston Stock Exchange

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

None
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(Title of Class)

Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the

registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

Yes [ X ] No [__]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.

[X]

(APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:)

Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.

Yes [__] No [__]

The aggregate market value of the common equity of the Registrant held by
non-affiliates on September 21, 2001, was approximately $2,959,000 based upon
the closing price ($1.10 per share) as reported by NASDAQ on that date. The
number of shares outstanding of the Registrant's common stock, as of
September 21, 2001, was 8,510,000 shares.

DOCUMENTS INCORPORATED BY REFERENCE

TABLE OF CONTENTS

SAFE HARBOR.............................................................. 4

PART I .............................................................. 4
ITEM 1. BUSINESS...................................................... 4
ITEM 2. PROPERTIES.................................................... 21
ITEM 3. LEGAL PROCEEDINGS............................................. 23
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 23

PART II .............................................................. 24
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS............................. 24
ITEM 6. SELECTED FINANCIAL DATA....................................... 26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 28
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK..... 36
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................... 36
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.................................... 36

PART III .............................................................. 37
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT................ 37
ITEM 11. EXECUTIVE COMPENSATION........................................ 40
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................. 51
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................ 52

PART IV .............................................................. 56
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.................................................... 56

SIGNATURES .............................................................. 57

EAGLE SUPPLY GROUP, INC. CONSOLIDATED FINANCIAL
STATEMENTS FOR THE YEARS ENDED JUNE 30, 2001, 2000
AND 1999, AND INDEPENDENT AUDITORS' REPORT

SAFE HARBOR
-----------

This document includes statements that may constitute forward-
looking statements made pursuant to the Safe Harbor provisions of the
Private Securities Litigation Reform Act of 1995. The Company would
like to caution readers regarding certain forward-looking statements
in this document and in all of its communications to shareholders and
others, press releases, securities filings, and all other documents
and communications. Statements that are based on management's
projections, estimates and assumptions are forward-looking statements.
The words "believe," "expect," "anticipate," "intend," and similar
expressions generally identify forward-looking statements. While the
Company believes in the veracity of all statements made herein,
forward-looking statements are necessarily based upon a number of
estimates and assumptions that, while considered reasonable by the
Company, are inherently subject to significant business, economic and
competitive uncertainties and contingencies and known and unknown
risks. Many of the uncertainties and contingencies can affect events
and the Company's actual results and could cause its actual results to
differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Company. Some of the factors
that could cause actual results or future events to differ materially
include the Company's inability to find suitable acquisition
candidates or financing on terms commercially reasonable to the
Company, inability to find suitable facilities or personnel to open or
maintain new branch locations, interruptions or loss of existing
sources of supply, the cost, pricing of and demand for distributed
products, the actions of competitors with greater financial resources,
economic and market factors, and other factors. Please see the "Risk
Factors" for a description of some, but not all, risks, uncertainties
and contingencies.

PART I
------

ITEM 1. BUSINESS
Background
----------

Eagle Supply Group, Inc. ("us," "our," "we" or the "Company"),
with corporate offices in New York City and operations headquarters in
Mansfield, Texas, believes that it is one of the largest wholesale
distributors of residential roofing and masonry supplies and related
products in the United States. We sell primarily to contractors and
subcontractors engaged in roofing repair and construction of new
residences and commercial property through our own distribution
facilities and direct sales force. We currently operate a network of
34 distribution centers in 10 states, including locations in Florida
(10), Texas (11), Colorado (5), Alabama (2), and one each in Illinois,
Indiana, Minnesota, Mississippi, Missouri and Nebraska.

We are majority-owned by TDA Industries, Inc. ("TDA" or our
"Parent"), and we were organized to acquire, integrate and operate
seasoned, privately-held companies which distribute products to or
manufacture products for the building supplies/construction industry.

On March 17, 1999, we completed the sale of 2,500,000 shares of
Common Stock at $5.00 per share and 2,875,000 Redeemable Common Stock
Purchase Warrants (the "Warrants") at $.125 per Warrant in connection

with our initial public offering (the "Offering"). We received net
proceeds aggregating approximately $10,206,000 from the Offering.

Upon consummation of the Offering, the Company acquired all of
the issued and outstanding common shares of Eagle Supply, Inc.
("Eagle"), JEH/Eagle Supply, Inc. ("JEH Eagle") and MSI/Eagle Supply,
Inc. ("MSI Eagle") (the "Acquisitions") from TDA for consideration
consisting of 3,000,000 shares of the Company's common stock, among
other considerations.

Upon the consummation of the Acquisitions, Eagle, JEH Eagle and
MSI Eagle became wholly-owned subsidiaries of the Company.

Effective May 31, 2000, MSI Eagle was merged with and into JEH
Eagle. As of July 1, 2000, the Texas operations of JEH Eagle were
transferred to a newly formed limited partnership entirely owned
directly and indirectly by JEH Eagle. Accordingly, the Company's
business operations are presently conducted through two wholly-owned
subsidiaries and a limited partnership.

General
-------

We are wholesale distributors of a complete line of roofing
supplies and related products through our own sales force to roofing
supply and related products contractors and subcontractors in the
geographic areas where we have distribution centers. Such contractors
and subcontractors are engaged in commercial and residential roofing
repair and the construction of new residential and commercial
properties.

We also distribute sheet metal products used in the roofing
repair and construction industries. Furthermore, we distribute
drywall, plywood and related products and, solely in Colorado, vinyl
siding to the construction industry. Products distributed by us
generally include equipment, tools and accessory products for the
removal of old roofing, re-roofing and roof construction, and related
materials such as shingles, tiles, insulation, liquid roofing
materials, fasteners, ventilation materials, sheet metal of the type
used in the roofing industry, drywall and plywood.

We also distribute a complete line of cements and masonry
supplies and related products through our own direct sales force to
building and masonry contractors and sub-contractors in certain of the
geographic areas where we have distribution centers, and principally
in the Dallas/Fort Worth metropolitan areas. In general, products
distributed by us include cement, cement mixtures and similar "bag"
products (lime, sand, etc.), angle iron, cinder blocks, cultured
stones and bricks, fireplace and pool construction materials, and
equipment, tools and accessory products for use in residential and
commercial construction.

The following chart indicates the approximate percentage of the
indicated product categories sold by us for the periods indicated:

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Drywall Bagged/
Residential Commercial And Bulk All Other
Roofing Roofing Sheet Metal Plywood Products Products
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Fiscal Year
Ended June 30,
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1999 67 13 6 9 4 1
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2000 63 14 5 11 5 2
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2001 61 18 5 10 4 2
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Potential Expansion By Acquisition
----------------------------------

We are seeking acquisition candidates primarily in the roofing
supplies and related products industry throughout the United States,
with greater emphasis on the Southeastern, Midwestern and Western
regions and less emphasis on the Northeastern region of the United
States. However, we may consider acquisition candidates in any of the
foregoing regions of the United States if an exceptional opportunity
arises.

We intend to seek out prospective acquisition candidates in
businesses that complement or are otherwise related to our current
businesses. We anticipate that we will finance future acquisitions, if
any, through a combination of cash, issuances of shares of our capital
stock, and additional equity or debt financing.

Expansion By Internal Growth
----------------------------

Management intends to continue to pursue expansion of our
operations by adding new distribution centers. During the fiscal year
ended June 30, 2001, we opened 5 new distribution centers and closed 4
distribution centers. Occasionally, we establish temporary
distribution centers in response to storms which have created
temporary markets. After opening a new distribution center, our
initial focus is to develop a customer base, to develop and improve
the distribution center's market position and operational efficiency
and then to expand its customer base.

Our Business
------------

Principal Products
------------------

We distribute a variety of roofing supplies and related products
and accessories for use in the commercial and residential roofing
repair and construction industries.

RESIDENTIAL ROOFING PRODUCTS. Shingles (asphalt, ceramic, slate,
concrete, fiberglass and fiberglass combined with asphalt), tiles,
felt, insulation, waterproof underlaying, ventilation systems and
skylights.

COMMERCIAL ROOFING PRODUCTS. Asphalt, cements, tar, other
coatings, modified bitumen and roll roofing products.

SHEET METAL PRODUCTS. Aluminum, copper, galvanized and stainless
sheet metal.

DRYWALL/PLYWOOD PRODUCTS. Sheetrock and plywood.

We also sell accessory products related to each of the foregoing,
including, but not limited to, roofing equipment, power and hand tools
and fasteners.

Principally in the Dallas/Fort Worth metropolitan areas, we
distribute a variety of cement and masonry supplies and related
products and accessories for use in the residential and commercial
building and masonry industries. Such product lines include the
following:

CONCRETE AND MASONRY PRODUCTS. Portland cement is for use in
housing foundations, laying pavements, walkways and other similar
uses. Masonry cement is for use in brick and stone masonry. Cement is
principally sold by bags of varying weight (approximately 10 pounds to
95 pounds) and is sold in a variety of mixtures such as concrete mixes
(portland cement, sand and gravel), sand mixes (portland cement and
sand), mortar mixes (masonry mortar cement and masonry sand) and grout
(cement and sand). Also sold are sand, gravel, underwater cement,
concrete and asphalt "patching" compounds.

ANGLE IRON. Iron forged at a ninety-degree angle which is cut to
customer's specification for use as support above windows and
doorways.

BRICKS AND STONES. Bricks, used bricks, firewall bricks,
"cultured" (man-made) stones in a variety of colors and shapes, cinder
blocks and glass blocks.

FIREPLACE PRODUCTS. Fireboxes, dampers, flues, facings,
insulations, fireplace tools and accessories.

SWIMMING POOL PRODUCTS. Cements and molds used in pool
construction.

We also sell in that same metropolitan area a variety of products
related to the foregoing, including cement mixers, rulers, levels,
trowels, and other tools, cleaning solvents, patching compounds,
supports and fasteners.

Vendors
-------

We distribute products manufactured by a number of major vendors.

During the fiscal years ended June 30, 1999, 2000 and 2001,
approximately 17%, 18% and 18%, respectively, of our product lines
were purchased from GAF Corporation. During the fiscal year ended June
30, 2001, approximately 13% of our product lines were purchased from
TAMKO Roofing Products, Inc. No other supplier accounted for more than
ten percent (10%) of our product lines in each of our last three
fiscal years.

We have no written long-term supply agreements with any vendors.
We believe that, in the event of any interruption of product
deliveries from any suppliers, we will be able to secure suitable
replacement suppliers on acceptable terms.

Customers, Sales and Marketing
------------------------------

Practically all customers purchase products pursuant to
short-term credit arrangements. Sales efforts are directed primarily
through our salespersons including "inside" counter persons who serve
walk-in and call-in customers and "outside" salespersons calling upon
past, current and potential customers.

We have no written long-term sales agreements with any customers.
None of our customers accounted for 5% or greater of sales during our
fiscal year ended June 30, 2001.

Competition
-----------

We face substantial competition in the wholesale distribution of
roofing, cement and masonry supplies and related products from
relatively smaller distributors, retail distribution centers and from
a number of regional, multi-regional and national wholesale
distributors of building products, including suppliers of roofing
products and masonry products which have greater financial resources
and are larger than we are, some of which include:

* American Builders & Contractors Supply Co., Inc.,
* Cameron Ashley Building Products, Inc. (owned by Guardian
Industries, Inc. since June 2000 and now part of Guardian
Building Products),
* Allied Building Products (a division of a subsidiary of
CRH, plc since 1997), and
* Bradco Supply Corporation.

We currently compete on the basis of:

* pricing,
* breadth of product line,
* prompt delivery,
* customer service,
* providing discounts for prompt payment,
* credit extension, and
* the abilities of personnel.

To a substantially lesser degree, we also compete with larger
high volume discount general building supply stores selling
standardized products, sometimes at lower prices than ours, but not
carrying the breadth of product lines or offering the same service as
provided by full service wholesale distributors such as we are.

We anticipate that we may experience competition from entities
and individuals (including venture capital partnerships and
corporations, equity funds, blind pool companies, operations of

competing wholesale roofing supply distribution centers, large
industrial and financial institutions, small business investment
companies and wealthy individuals) which are well-established and have
greater financial resources and more extensive experience than we have
in connection with identifying and effecting acquisitions of the type
sought by us. Our financial resources are limited in comparison to
those of many of such competitors.

Backlog
-------

Our business is conducted on the basis of short-term orders and
prompt delivery schedules precluding any substantial backlog.

Employees
---------

At June 30, 2001, we employed approximately 544 full-time
employees, including 6 executives, 35 managerial employees, 101
salespersons (including 39 "inside" salespersons), 307 warehouse
persons, drivers and helpers, and 95 clerical and administrative
persons. Difficulties have been experienced in retaining drivers and
helpers because of the tight job market in our market areas and the
need for drivers to be certified by the departments of motor vehicles
and to pass other testing standards, but suitable replacements and new
hirees have been found without material adverse economic impact. We
are not subject to any collective bargaining agreement, and we believe
that our relationship with our employees is good.

Risk Factors
------------

Risk factors may affect our business, future operating results,
financial condition and the market price of our securities. In
addition to the other information in this report, the following risk
factors should be considered in evaluating our business and prospects
and our securities.

Risks Relating To Our Business
------------------------------

Weather Impacts Our
Revenues and Income.............Our revenues and operating income are
impacted by weather phenomena, such as
hailstorms and hurricanes, which have the
result of increasing business at the time
of the event of the weather phenomena and
shortly thereafter but have the effect
frequently of resulting in a slowdown of
business thereafter. Similarly, weather
phenomena can also have a negative impact
on our customers which can cause certain of
such customers to become delinquent in
their payments of their accounts.

How Unforeseen Factors
May Adversely Affect Us.........There can be no assurance that, in the
future, unforeseen developments, increased
competition, losses incurred by new
businesses that may be acquired or branches
that may be opened, losses incurred in the
expansion of product lines from certain

distribution centers to other distribution
centers, weather phenomena and other
circumstances may not have a material
adverse affect on our operations in current
market areas or areas into which we may
expand by acquisition or otherwise.

We Acquired Operations in
Non-Arms' Length Transactions
with Affiliates and without
Independent Appraisal...........Upon completion of the Offering, we
simultaneously acquired our operations from
TDA, and TDA received 3,000,000 shares of
our common stock in connection with said
acquisitions. The foregoing number of
shares was negotiated and evaluated based
upon the assessments made by the parties to
the negotiations without independent
appraisal and on a non-arms' length basis.

We are controlled by TDA. Messrs. Douglas
P. Fields and Frederick M. Friedman are the
principal officers, directors and the
principal stockholders of TDA and are also
our Chief Executive Officer and Chairman of
our Board and our Executive Vice President,
Secretary, Treasurer and a Director,
respectively. Messrs. Fields and Friedman
may be deemed to be in control of TDA and,
in turn, us. As a result, their interests
in us may conflict with their interests in
TDA.

Although we believe that the terms and
conditions of the above acquisition was
fair and reasonable to us, that belief must
be assessed in light of the lack of an
independent appraisal and the conflicted
positions of Messrs. Fields and Friedman.
There can be no assurance as to the
correctness of our foregoing belief.

We May Make Acquisitions and
Open New Distribution Centers
Currently Unknown to Us
Without Your Approval...........Although, we will endeavor to evaluate the
risks inherent in any particular
acquisition or the establishment of new
distribution centers, there can be no
assurance that we will properly or
accurately ascertain all such risks. We
will have virtually unrestricted
flexibility in identifying and selecting
prospective acquisition candidates and
establishing new distribution centers and
in deciding if they should be acquired for
cash, equity or debt, and in what
combination of cash, equity and/or debt.
Locations selected for expansion efforts

will be made at the discretion of
management and will not be subject to
stockholder approval.

We will not seek stockholder approval for
any acquisitions or the opening of new
distribution centers unless required by
applicable law and regulations. Our
stockholders will not have an opportunity
to review financial and other information
on an acquisition candidate or the opening
of new distribution centers prior to
consummation of an acquisition or the
opening of a new distribution center under
most circumstances.

Investors will be relying upon our
management, upon whose judgment the
investor must depend, with only limited
information concerning management's
specific intentions. There can be no
assurance that any acquisitions will be
consummated or new distribution centers
opened.

The Wholesale Distribution
of Roofing Supplies Business
is Subject to Economic
and Other Changes...............The wholesale distribution of roofing
supplies industry is cyclical and is
affected by weather and changes in general
economic conditions. An economic downturn
in one or more of the markets currently
served or to be served (as a result of
acquisitions or expansion efforts) could
have a material adverse effect on our
operations.

The Wholesale Distribution
of Cement and Masonry
Supplies Business is
Subject to Economic
and Other Changes...............As we sell cement and masonry supplies
principally to contractors, subcontractors
and masons serving the residential building
market in the Dallas/Fort Worth
metropolitan area, an economic downturn in
that market or markets into which we may
expand this product line could have a
material adverse effect on our operations.

We Depend upon Certain
Vendors but We Lack
Written Long-Term Supply
Agreements with Them............We distribute products manufactured by a
number of major vendors. During the fiscal
years ended June 30, 1999, 2000 and 2001,
approximately 17%, 18% and 18%,

respectively, of our product lines were
purchased from one supplier. During the
fiscal year ended June 30, 2001, 13% of our
product lines were purchased from a second
supplier.

We do not have written long-term supply
agreements with any vendors. We believe
that, in the event of any interruption of
product deliveries from any of our vendors,
we will be able to secure suitable
replacement supplies on acceptable terms.
However, there can be no assurance of the
continued availability of supplies of
residential and commercial roofing supply
and masonry materials at acceptable prices
or at all.

We May Need Additional
Future Financing That May
Result In Dilution to Investors
and Restrictions on Us..........We may require additional equity or debt
financing in order to consummate an
acquisition or for additional working
capital if we suffer losses or complete the
acquisition of a business that subsequently
suffers losses.

Any additional equity financing that may be
obtained may dilute investor voting power
and equity interests.

Any additional debt financing that may be
obtained may impair or restrict our ability
to declare dividends or may impose
financial restrictions on our ability to
make acquisitions or implement expansion
efforts.

There can be no assurance that we will be
able to obtain additional financing on
terms acceptable or at all. In the event
additional financing is unavailable, we may
be materially adversely affected.

Our Business Strategy
is Unproven.....................A significant element of our business
strategy is to acquire additional companies
engaged in the wholesale distribution of
roofing supplies and related products
industries and companies which manufacture
products for or supply products to such
industry. Our strategy is unproven and
based on unpredictable and changing events.
We believe that suitable candidates for
potential acquisition exist. There can be
no assurance that any acquisitions, if
successfully completed:

* Will be successfully integrated into our
operations;

* Will perform as expected;

* Will not result in significant
unexpected liabilities; or

* Will ever contribute significant
revenues or profits to the Company.

If we are unable to manage growth
effectively, our operating results could be
materially adversely affected.

Risks Relating To Our Management And Affiliates

Our Executive Officers'
and Directors' Potential
Conflicts of Interest...........Certain of our principal executive officers
and directors are also principal officers,
directors and/or principal stockholders of
TDA and its affiliates and, consequently,
may be able, through TDA and its
affiliates, to direct the election of our
directors, effect significant corporate
events and generally direct our affairs.
TDA provides us with certain administrative
services.

Furthermore, a subsidiary of TDA, and James
E. Helzer, our President, lease
approximately one-half of our facilities to
us, and Gary L. Howard, one of our Senior
Vice Presidents, leases a distribution
facility, showroom and executive offices to
us.

We do not intend to enter into any material
transaction with any of our affiliates in
the future unless we believe that such
transaction is fair and reasonable to us
and is approved by a majority of the
independent members of our Board of
Directors. Notwithstanding the foregoing,
there can be no assurance that future
transactions, if any, will not result in
conflicts of interest which will be
resolved in a manner favorable to us.

We Depend Upon
Key Personnel...................Our success may depend upon the continued
contributions of our officers. Our business
could be adversely affected by the loss of
the services of Douglas P. Fields, our
Chief Executive Officer and Chairman of our
Board of Directors, Frederick M. Friedman,
our Executive Vice President, Secretary and
Treasurer, James E. Helzer, our President,

E.G. Helzer, a Senior Vice President, and
Gary L. Howard, a Senior Vice President.

Although we have "key person" life
insurance on each of the lives of James E.
Helzer and Gary L. Howard in the amount of
$2,000,000 and on each of the lives of
Messrs. Fields and Friedman in the amount
of $1,000,000, there can be no assurance
that the foregoing amounts will be adequate
to compensate us in the event of the loss
of any of their lives.

Conflicts of Interest May
Arise in the Allocation of
Management's Time...............The employment agreements with
Messrs. Fields and Friedman do not require
either of them to devote a specified amount
of time to our affairs. Each of
Messrs. Fields, Friedman and Helzer have
significant outside business interests,
including but not limited to TDA and its
subsidiaries (as to Messrs. Fields and
Friedman). Accordingly, Messrs. Fields,
Friedman and Helzer may have conflicts of
interest in allocating time among various
business activities. There can be no
assurance that any such conflicts will be
resolved in a manner favorable to us.

We Have Had Transactions
with Affiliates That Have
Benefited Them..................Messrs. Fields and Friedman, two of our
principal executive officers and directors
are also principal executive officers,
directors and principal stockholders of TDA
and have and will or may be deemed to
benefit, directly or indirectly, from our
transactions with TDA. James E. Helzer, our
President, previously owned one of our
acquisitions and has and will or may be
deemed to have benefited or to benefit
directly from his transactions with us.
Gary L. Howard, one of our Senior Vice
Presidents, previously owned another one of
our acquisitions and has and will or may be
deemed to have benefited or to benefit from
his transactions with us.

During our fiscal year ended June 30, 1999,
we made dividend payments to TDA of
approximately $790,000.

Also, after the Offering, and in connection
with the Acquisitions, we cancelled in the
form of a non-cash dividend all
indebtedness of TDA to us at that date,
approximately $3,067,000. To the extent

TDA's indebtedness to us was cancelled, TDA
directly, and Messrs. Fields and Friedman
indirectly, derived a benefit.

For $3,000 per month, TDA provides us with
office space and administrative services in
New York City pursuant to a month-to-month
administrative services agreement.

TDA also provides certain other services to
us pursuant to a five-year agreement
requiring monthly payments to TDA of
$3,000.

See Item 7. "Management's Discussion and
Analysis of Financial Condition and Results
of Operations -- Acquisitions," Item 10.
"Directors and Executive Officers of
Registrant," Item 11. "Executive
Compensation," Item 12. "Security Ownership
of Certain Beneficial Owners and
Management," and Item 13. "Certain
Relationships and Related Transactions."

We Are Controlled by
TDA And Lease Several Of
Our Facilities From TDA.........TDA owns approximately 60% of our issued
and outstanding shares of common stock.
Douglas P. Fields, our Chief Executive
Officer and Chairman of our Board of
Directors, is also Chairman of the Board of
Directors, President and the Chief
Executive Officer of TDA as well as a
principal stockholder of TDA. Frederick M.
Friedman, our Executive Vice President,
Treasurer, Secretary and one of our
Directors is also the Executive Vice
President, Chief Financial Officer,
Treasurer and a Director of TDA as well as
a principal stockholder of TDA. John E.
Smircina is one of our Directors and a
director of TDA.

Messrs. Fields, Friedman and Smircina
control approximately 60% of our issued and
outstanding shares of common stock and, as
a result, are in a position to control the
composition of our Board of Directors, and,
therefore our business, policies and
affairs and the outcome of issues which may
be subject to a vote of our stockholders.

A TDA subsidiary has rented to us the
premises for several distribution
facilities pursuant to ten year leases at
an approximate annual base rental of
$836,000 which we believe is fair and
reasonable to us.

See Item 2. "Properties," Item 7.
"Management's Discussion and Analysis of
Financial Condition and Results of
Operations-Acquisitions," Item 10.
"Directors and Executive Officers of
Registrant," Item 12. "Security Ownership
of Certain Beneficial Owners and
Management," and Item 13. "Certain
Relationships and Related Transactions."

Substantial Potential Future
Financial Benefits to Prior
Owners of Subsidiaries..........JEH Eagle. In July 1997, JEH Eagle acquired
the business and substantially all of the
assets of JEH Company ("JEH Co."), a Texas
corporation, wholly owned by James E.
Helzer, now our President. The purchase
price, as adjusted, including transaction
expenses, was approximately $14,768,000,
consisting of a cash payment and a note.
Certain, potentially substantial,
contingent payments, as additional future
consideration to JEH Co. or its designee,
are to be paid by us that may result in
substantial financial benefits to JEH Co.
or its designee and may materially and
adversely affect our financial condition
and income. Upon completion of the
Offering, we issued 300,000 shares of our
common stock to James E. Helzer in
fulfillment of certain of such future
consideration. Additionally, for the fiscal
years ended June 30, 1999, 2000 and 2001,
approximately $1,773,000, $1,947,000 and
$315,000, respectively, of such additional
consideration was paid to JEH Co. or its
designee. James E. Helzer has rented to us
the premises for several distribution
facilities pursuant to five-year leases at
an approximate annual base rental of
$789,000 which we believe to be fair and
reasonable to us.

MSI Eagle. In October 1998, MSI Eagle
acquired substantially all of the assets
and the business of Masonry Supply, Inc.
("MSI Co."), a Texas corporation,
wholly-owned by Gary L. Howard, now one of
our Senior Vice Presidents. The purchase
price, as adjusted, including transaction
expenses, was approximately $8,538,000
subject to further adjustments under
certain conditions. Certain, potentially
substantial, contingent payments, as
additional future consideration to MSI Co.
or its designee, are to be paid by us that
may result in substantial financial
benefits to MSI Co. or its designee and may
materially and adversely effect our
financial condition and income. After
completion of the Offering, we issued
260,000 shares of our common stock to Gary
L. Howard in fulfillment of certain of such

future consideration. Additionally, for the
fiscal years ended June 30, 2000 and June
30, 2001, approximately $216,000 and
$270,000, respectively, of such additional
consideration, was paid to MSI Co. or its
designee. Gary L. Howard rents to us the
premises for certain offices and a
distribution center pursuant to a
three-year lease at an approximate annual
base rental of $107,000 which we believe to
be fair and reasonable to us.

See Item 2. "Properties," Item 7.
"Management's Discussion and Analysis of
Financial Condition and Results of
Operations -- Acquisitions," Item 10.
"Directors and Executive Officers of
Registrant," Item 11. "Executive
Compensation," Item 12. "Security Ownership
of Certain Beneficial Owners and
Management," and Item 13. "Certain
Relationships and Related Transactions."

Risks Relating Our Securities

Our Securities Must
Continue to Meet Listing
Maintenance Criteria for
the NASDAQ SmallCap
Market and the Boston
Stock Exchange..................Our securities are quoted and traded on the
NASDAQ SmallCap Market and are listed on
the Boston Stock Exchange ("BSE"). There
can be no assurance that we will continue
to meet the criteria for continued
quotation and trading of our securities on
the NASDAQ SmallCap Market. That criteria,
which undergoes constant NASDAQ review,
includes, among other things, at least:

* $35,000,000 in market capitalization,
$2,500,000 in stockholders' equity or
$500,000 in net income in an issuer's
last fiscal year or two of its last
three fiscal years;

* a $1.00 minimum bid price;

* two market makers;

* 300 round lot shareholders; and

* 500,000 shares publicly held
(excluding officers, directors and
persons owning 10% or more of the
Company's issued and outstanding
shares) with $1,000,000 in market
value.

The BSE also has similar continued
quotation criteria. If we are unable to
meet the continued quotation criteria of
the NASDAQ SmallCap Market and the BSE and
are suspended therefrom, trading, if any,
in our securities could thereafter be
conducted in the over-the-counter market in
the so-called "pink sheets" or, if then
available, the OTC Bulletin Board. In such
an event, an investor would likely find it
more difficult to dispose of, or even
obtain accurate quotations of, our
securities.

The Market Price of our
Securities has Declined
Substantially Since
the Offering....................The initial offering prices of the shares
of our Common Stock and our Warrants were
$5.00 and $.125 per share and warrant,
respectively. On September 21, 2001, the
closing prices for the shares and warrants
were $1.10 and $0.10, respectively, as
reported by NASDAQ on that date. In
addition to the diminution of market value,
continued market price declines could
result in the delisting of our securities
from the NASDAQ SmallCap Market and the
BSE.

There Are Risks in
Purchasing Low-Priced
Securities......................If our securities were to be suspended or
delisted from the NASDAQ SmallCap Market,
they could be subject to rules under the
Securities Exchange Act of 1934 ("Exchange
Act") which impose additional sales
practice requirements on broker-dealers who
sell such securities to persons other than
established clients and "accredited
investors" (for example, individuals with a
net worth in excess of $1,000,000 or an
annual income exceeding $200,000 or
$300,000 together with their spouses). For
transactions covered by such rules, a
broker-dealer must make a special
suitability determination of the purchaser
and have received the purchaser's written
consent to the transaction prior to the
sale. Consequently, such rules may affect
the ability of broker-dealers to sell our
securities and the ability to sell any of
our securities in any secondary market that
may develop for such securities.

The Securities and Exchange Commission (the
"Commission") has enacted rules that define
a "penny stock" to be any equity security
that has a price (as therein defined) of
less than $5.00 per share or an exercise
price of less than $5.00 per share, subject
to certain exceptions, including securities
listed on the NASDAQ SmallCap Market or on
designated exchanges. For any transaction
involving a penny stock, unless exempt, the
rules require the delivery, prior to any
transaction in a penny stock, of a
disclosure statement prepared by the
Commission relating to the penny stock
market. Disclosure also has to be made
about the risks of investing in penny
stocks in both public offerings and in
secondary trading. In the event our
securities are no longer listed on the
NASDAQ SmallCap Market or are not otherwise
exempt from the provisions of the
Commission's "penny stock" rules, such
rules may also affect the ability of
broker-dealers to sell our securities and
an investor's ability to sell them.

There Is No Assurance of a
Continued Public Market
For Our Securities..............There can be no assurance that a trading
market for any of our securities will be
sustained.

Investors should be aware that sales of our
securities may have a depressive effect on
the price of our securities in any market
in which our securities are traded or which
may develop for such securities.

We Have Outstanding
Options, Warrants and
Registration Rights that
May Limit Our Ability
to Obtain Equity Financing
and Could Cause Us to
Incur Expenses..................For the respective terms of warrants and
any options granted and that may be granted
under our stock option plan, the holders
are given an opportunity to profit from a
rise in the market price of our common
stock, with a resulting dilution in the
interests of the other stockholders. The
terms on which we may obtain additional
financing during the exercise periods of
said warrants and options may be adversely
effected by the existence of such warrants,
options and plan. The holders of options or
warrants to purchase shares of our common

stock may exercise such options or warrants
at a time when we might be able to obtain
additional capital through offerings of
securities on terms more favorable than
those provided by such options or warrants.
In addition, the holders of the
underwriter's warrants issued in connection
with the Offering have demand and
"piggyback" registration rights with
respect to their securities. Exercise of
such registration rights may involve
substantial expense.

We Have No Plans to
Pay Cash Dividends..............We have not paid any dividends to date. Our
Board of Directors does not presently
intend to declare any dividends in the
foreseeable future but instead intends to
retain all earnings, if any, for use in our
business operations. Additionally, our
credit facility restricts the payment of
dividends.

We Have Anti-Takeover
Provisions That Authorizes
Our Directors to Issue and
Determine the Rights of
Shares of Preferred Stock
in Our Certificate
of Incorporation................Our Certificate of Incorporation permits
our directors to designate the terms of and
issue shares of preferred stock. The
issuance of shares of preferred stock by
the Board of Directors could adversely
effect the rights of holders of common
stock by, among other matters, establishing
preferential dividends, liquidation rights
and voting power. Although we have no
present intention to issue shares of
preferred stock, their issuance might
render it more difficult, and therefore
discourage, an unsolicited takeover
proposal such as a tender offer, proxy
contest or the removal of incumbent
management, even if such actions would be
in the best interest of our stockholders.
We have agreed not to issue any shares of
preferred stock until March 12, 2002
without the written consent of the
underwriter of the securities that we sold
in the Offering.

Our Certificate of
Incorporation Limits
Directors' Liability............Our Certificate of Incorporation provides
that our directors will not be held liable
to us or our stockholders for monetary
damages upon breach of a director's
fiduciary duty with certain exceptions. The
exceptions include a breach of the
director's duty of loyalty, acts or

omissions not in good faith or which
involve intentional misconduct or knowing
violation of law, improper declarations of
dividends, and transactions from which the
directors derived an improper personal
benefit.

ITEM 2. PROPERTIES

Locations Owned By and Leased From TDA
--------------------------------------

We lease approximately 15,000 square feet of executive office
space located at 1451 Channelside Drive, Tampa, Florida 33605 from a
wholly-owned subsidiary of TDA, at an approximate annual rental of
$120,000. Approximately 8,700 square feet of such space is subleased
by us to an unrelated third party tenant.

TDA provides office space and administrative services to us at
its offices in New York City pursuant to a month-to-month, $3,000 per
month, administrative services agreement.

We lease nine (9) locations from a TDA subsidiary, two (2) in
Alabama (Birmingham and Mobile) and six (6) in Florida (Fort Myers,
Holiday, Lakeland, Pensacola, St. Petersburg and Tampa). We also lease
one (1) location in Littleton, Colorado, from an entity owned one-half
by the TDA subsidiary and one-half by James E. Helzer and his spouse.

The aggregate approximate square footage and aggregate
approximate base annual rental for the locations leased from the TDA
subsidiary are 257,500 square feet and $836,000, respectively.

In March 1999, we entered into written ten-year leases with the
TDA subsidiary providing for base annual rentals as set forth above
for the first five years of such leases with provisions for increases
in rent based upon the consumer price index at the beginning of the
sixth year of such ten-year leases and with provisions for five-year
renewal options, increases in rent based upon the consumer price
index, and lease terms, additional rental and other charges
customarily included in such leases, including provisions requiring us
to insure and maintain and pay real estate taxes on the premises. We
believe that the rent and other terms of our lease agreements with the
TDA subsidiary are on at least as favorable terms as we would expect
to negotiate with unaffiliated third parties. Neither party is
permitted to terminate the leases before the end of their term without
a breach or default by the other party.

As part of the foregoing leasing arrangements, additional
undeveloped land is leased to us from the TDA subsidiary. That
undeveloped land is used for storage or reserved for future use. The
locations and approximate acreage of the undeveloped land are as
follows: Birmingham (one), Littleton (three), Ft. Myers (one and a
third), Holiday (three), Pensacola (two and a half), St. Petersburg
(two) and Tampa (one).

See Item 13. "Certain Relationships and Related Transactions."

Locations Owned By and Leased From James E. Helzer
--------------------------------------------------

We lease approximately 8,000 and 10,000 square feet of executive
office and showroom space located at 2500 U.S. Highway 287, Mansfield,
Texas 76063 and 8221 E. 96th Avenue, Henderson, Colorado 80640,
respectively, from James E. Helzer, our President.

We also lease seven (7) other locations from James E. Helzer (two
(2) in Colorado (Colorado Springs and Henderson) and five (5) in Texas
(Colleyville, North Fort Worth, Frisco, Mansfield and Mesquite)). One
(1) additional location in Littleton, Colorado, is leased from an
entity owned one-half by James E. Helzer and his spouse and one-half
by the TDA subsidiary.

The aggregate approximate square footage and aggregate
approximate base annual rental for the locations leased from James E.
Helzer are 262,200 square feet and $789,000, respectively.

The foregoing premises are leased to us from James E. Helzer
pursuant to five-year leases expiring in June 2002 providing the
indicated base annual rentals with provisions for five percent
increases that took effect in July 2000. Except for the Frisco, Texas,
premises, said leases grant us two five-year renewal options providing
for five (5%) percent increases in the base annual rent during certain
renewal years. Additional rental and other charges for the foregoing
leases include provision for us to insure and maintain and pay all
taxes on the premises. We also have a right of first refusal to
purchase the foregoing premises. We believe that such leases are on
terms no less favorable than we could have obtained from unaffiliated
third parties.

As part of the foregoing leases, additional undeveloped land is
leased to us from James E. Helzer. That undeveloped land is used for
storage or reserved for future use. The locations and approximate
acreage of the undeveloped land is as follows: Colorado Springs
(three), Henderson (six), Littleton (three), Colleyville (one and a
half), Frisco (two and a half), Mansfield (twelve and a half) and
Mesquite (two).

See Item 13. "Certain Relationships and Related Transactions."

Location Owned By and Leased From Gary L. Howard
------------------------------------------------

We lease approximately 30,000 square feet of office, showroom and
warehouse space, and approximately four acres of outdoor storage space
in Mansfield, Texas, from Gary L. Howard, one of our Senior Vice
Presidents, at an annual base rental of approximately $107,000
pursuant to a lease expiring in October 2001. We have the right to
two, three-year renewals at a base annual rental of five (5%) percent
over the prior term. Additional rental and other charges for the
foregoing lease include provisions for us to insure and maintain and
pay taxes on the premises. We have a right of first refusal to
purchase the foregoing premises. We believe that the foregoing lease
is on terms no less favorable than we could have obtained from an
unaffiliated third party.

See Item 13. "Certain Relationships and Related Transactions."

Locations Leased From Third Parties
-----------------------------------

We lease nineteen (19) locations (including a parcel of land and
property subleased to a third party) from third parties (two (2) in
Colorado (Eagle and Fort Collins), five (5) in Florida (Brooksville,
Clearwater, Orlando, Panama City and Tallahassee), one (1) each in
Illinois (Lake Zurich), Indiana (Indianapolis), Minnesota (Eagan),
Mississippi (Gulfport), Missouri (Hazelwood) and Nebraska (Omaha), and
seven (7) in Texas (Addison, Austin, Denton, Houston, North Fort
Worth, Lubbock and Southlake)). The aggregate approximate square
footage and base annual rentals for the locations leased from third
parties are 526,900 square feet and $2,048,000, respectively.

As part of the foregoing leases, additional undeveloped land is
leased from third parties. That undeveloped land is used for storage or
reserved for future use. The location and approximate acreage of the
undeveloped land is as follows: Austin (six), Denton (six), Eagle
(two), Fort Collins (one and a half), Hazelwood (three), Houston (four)
and Indianapolis (two).

Other than one lease, which is on a month-to-month basis, the
leases with third parties expire at varying times through February
2008, and several leases contain renewal options. These leases
generally contain provisions requiring us, among other things, to pay
various occupancy costs.

ITEM 3. LEGAL PROCEEDINGS

We are not subject to any material legal proceedings.

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

During the fourth quarter of the fiscal year covered by this
Report, no matters were submitted to a vote of security holders.

PART II
-------

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

(a) Market Information
------------------

We have two classes of securities presently registered: Common
Stock and Warrants. These securities are presently traded on the
NASDAQ SmallCap Market under the trading symbols "EEGL" and "EEGLW,"
respectively, and on the Boston Stock Exchange under the trading
symbols "EGL" and "EGLW," respectively, and have been since the
Offering in March 1999.

The high and low bid price quotations for our Common Stock, as
reported by NASDAQ, are as follows for the periods indicated:

High Low
------ -------

From July 1 through September 30, 1999 ................. $4.75 $3.50
From October 1 through December 31, 1999 ............... $4.438 $3.75
From January 1 through March 31, 2000 .................. $4.625 $3.875
From April 1 through June 30, 2000 ..................... $4.438 $2.25
From July 1 through September 30, 2000 ................. $4.063 $1.938
From October 1 through December 31, 2000 ............... $3.906 $0.125
From January 1 through March 31, 2001 .................. $1.719 $0.250
From April 1 through June 30, 2001 ..................... $1.410 $1.188

The Common Stock was held by approximately 15 holders of record
as of September 21, 2001.

The high and low bid price quotations for the Warrants, as
reported by NASDAQ, are as follows for the periods indicated:

High Low
------ -------

From July 1 through September 30, 1999 ................. $1.625 $0.875
From October 1 through December 31, 1999 ............... $1.125 $0.781
From January 1 through March 31, 2000 .................. $1.25 $0.906
From April 1 through June 30, 2000 ..................... $1.094 $0.625
From July 1 through September 30, 2000 ................. $0.813 $0.406
From October 1 through December 31, 2000 ............... $0.563 $0.063
From January 1 through March 31, 2001 .................. $0.219 $0.063
From April 1 through June 30, 2001 ..................... $0.160 $0.050

The Warrants were held by approximately 6 holders of record as of
September 21, 2001.

Such over-the-counter market quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions.

We believe that the NASDAQ SmallCap Market is the principal
market for our Common Stock and Warrants.

We have not paid dividends to date. The payment of dividends, if
any, in the future is within the discretion of the Board of Directors
and subject to restrictions under the terms and provisions of our
credit facility. The payment of dividends, if any, in the future will
depend upon our earnings, capital requirements, financial condition
and other relevant factors. Our Board of Directors does not presently
intend to declare any dividends in the foreseeable future but instead
intends to retain all earnings, if any, for use in our business
operations.

(b) Use of Proceeds
---------------

On March 12, 1999, our Registration Statement filed with the SEC
became effective under the Securities Act of 1933 for an offering of
2,500,000 shares of Common Stock and 2,500,000 Warrants exclusive of
an additional 375,000 shares of Common Stock and 375,000 Warrants
registered to cover an overallotment option granted to Barron Chase
Securities, Inc. ("Barron"), the underwriter of our Offering. The
Offering was commenced by Barron on the date of the effectiveness and
a closing of the Offering of 2,500,000 shares of Common Stock and
2,875,000 Warrants was held on March 17, 1999. The initial offering
price was $5.00 per share of Common Stock and $.125 per Warrant,
resulting in gross proceeds of approximately $12,859,000. Barron
received a 9% commission and a 3% non-accountable expense allowance of
the gross proceeds, or an aggregate of approximately $1,543,000.
Additional offering expenses were approximately $1,110,000 resulting
in net proceeds of approximately $10,206,000. The following
expenditures have been made from the net proceeds.

* $534,907 to repay principal and interest on borrowings of
$500,000 we made pursuant to promissory notes issued to certain
stockholders, including $369,755 to TDA.

* $1,474,478 in principal and interest to Gary L. Howard, designee
and owner of MSI Co. and one of our Senior Vice Presidents,
pursuant to a five-year promissory note issued in connection with
the acquisition of the business and substantially all of the
assets of MSI Co.

* $3,624,000 to reduce outstanding balances of our credit
facilities.

* The balance has been invested in high grade, short-term interest
bearing investments.

Except for the foregoing payments to TDA and Gary L. Howard, no
part of the offering expenses or net proceeds was directly paid to (a)
our directors or officers, or their associates; (b) persons owning 10%
or more of our shares; or (c) any of our affiliates.

ITEM 6. SELECTED FINANCIAL DATA

Prior to the initial public offering and the acquisitions
described in Note 2 of the consolidated financial statements, the
Company had limited operations. The historical selected financial
information included in the statement of operations has been prepared
on a basis which combines the Company (organized on May 1, 1996),
Eagle, JEH Eagle (acquired on July 1, 1997) and MSI Eagle (acquired on
October 22, 1998) as four entities controlled by TDA. Information with
respect to the Company is included from May 1, 1996 (inception),
information for Eagle is included for all periods presented,
information with respect to JEH Eagle is included from July 1, 1997
(including the operations of MSI Eagle from June 1, 2000), and
information with respect to MSI Eagle is included from October 22,
1998 through May 31, 2000, the effective date of its merger with and
into JEH Eagle.

The selected financial information presented below should be read
in conjunction with the consolidated financial statements and the
notes thereto.

Selected Financial Information
Year Ended June 30, Combined (1)
--------------------------------

Statement of
Operations Data: 1997 1998 1999 2000 2001
---------------- ------------ ------------ ------------ ------------ ------------

Revenues $ 57,575,712 $129,502,812 $159,844,520 $187,714,736 $196,240,714

Gross Profit 11,471,124 27,975,391 37,706,722 45,292,922 49,364,915

Income From
Operations 907,970 3,016,155 6,743,995 5,760,988 4,139,640

Net Income (Loss) (179,252)(3) 756,884 2,703,352 2,010,746 848,842

Other Financial Data:
---------------------

EBITDA (2) $ 1,133,554 $ 4,171,186 $ 8,195,013 $ 8,248,961 $ 6,845,102

Net Cash Provided
by (Used In)
Operating Activities (766,978) (258,827) 938,846 (3,019,242) (4,186,473)

Net Cash
Provided By Financ-
ing Activities 1,575,357 4,614,314 9,326,486 3,913,744 5,424,224

Net Cash Used In
Investing Activities (215,640) (3,704,624) (3,431,929) (2,248,030) (2,723,738)

Balance Sheet Data: 1997 1998 1999 2000 2001
------------------- ------------ ------------ ------------ ------------ ------------

Working Capital $ 6,232,891 $ 17,081,190 $ 26,593,105 $ 31,886,555 $ 39,464,538

Total Assets 15,853,837 49,471,412 75,692,955 84,509,141 93,275,175

Long Term Debt 7,195,163 25,294,523 30,139,072 33,089,454 38,336,642

Total Liabilities 15,832,712 49,611,968 60,305,160 66,323,395 74,240,587

Shareholders' Equity
(Deficiency) 21,125 (140,556) 15,387,795 18,185,746 19,034,588
______________________

(1) The historical financial data included in the statement of
operations data has been prepared on a basis which combines the
Company (organized May 1, 1996), Eagle, JEH Eagle (acquired on July 1,
1997), and MSI Eagle (acquired on October 22, 1998) as four entities
controlled by TDA, because the separate financial data of the Company
would not be meaningful. Information with respect to the Company is
included from May 1, 1996 (inception), information for Eagle in
included for all periods presented, information with respect to JEH
Eagle is included from July 1, 1997 (including the operations of MSI
Eagle from June 1, 2000), and information for MSI Eagle is included
from October 22, 1998 through May 31, 2000, the effective date of its
merger with and into JEH Eagle.

(2) As used herein, EBITDA reflects net income (loss) increased by
the effects of interest expense, federal income tax provisions,
depreciation and amortization expense. EBITDA is used by management,
along with other measures of performance, to assess the Company's
financial performance. EBITDA should not be considered in isolation
or as an alternative to measures of operating performance or cash
flows pursuant to generally accepted accounting principles. In
addition, the measure of EBITDA may not be comparable to similar
measures reported by other companies.

(3) The loss for the year ended June 30, 1997 includes a write-off of
registration costs of $370,353 for an offering which was not
consummated.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

This document includes statements that may constitute
forward-looking statements made pursuant to the Safe Harbor provisions
of the Private Securities Litigation Reform Act of 1995. The Company
would like to caution readers regarding certain forward-looking
statements in this document and in all of its communications to
shareholders and others, press releases, securities filings, and all
other documents and communications. Statements that are based on
management's projections, estimates and assumptions are
forward-looking statements. The words "believe," "expect,"
"anticipate," "intend," and similar expressions generally identify
forward-looking statements. While the Company believes in the veracity
of all statements made herein, forward-looking statements are
necessarily based upon a number of estimates and assumptions that,
while considered reasonable by the Company, are inherently subject to
significant business, economic and competitive uncertainties and
contingencies and known and unknown risks. Many of the uncertainties
and contingencies can affect events and the Company's actual results
and could cause its actual results to differ materially from those
expressed in any forward-looking statements made by, or on behalf of,
the Company. Some of the factors that could cause actual results or
future events to differ materially include the Company's inability to
find suitable acquisition candidates or financing on terms
commercially reasonable to the Company, inability to find suitable
facilities or personnel to open or maintain new branch locations,
interruptions or cancellation of sources of supply, the cost, pricing
of and demand for distributed products, inability to collect
outstanding accounts and notes receivable when due or within a
reasonable time thereafter, the actions of competitors with greater
financial resources, economic and market factors, and other factors.
Please see the "Risk Factors" under Item 1. "Business" for a
description of some, but not all, risks, uncertainties and
contingencies.

The following discussion and analysis should be read in
conjunction with the financial statements and related notes thereto
which are included elsewhere herein.

Results of Operations
---------------------

Fiscal Year Ended June 30, 2001 Compared to the Fiscal Year
Ended June 30, 2000
-----------------------------------------------------------

Revenues of the Company during the fiscal year ended June 30,
2001 increased by approximately $8,526,000 (4.5%) compared to the 2000
fiscal year. This increase may be attributed to the revenues generated
from new distribution centers opened in fiscal 2001 and during the
last quarter of fiscal 2000 (approximately $20,480,000), offset by the
loss of revenues that had been generated from distribution centers
closed (approximately $10,267,000). Revenue growth during the twelve-
month period ended June 30, 2001 was negatively impacted by the loss
of revenues during the three-month periods ended December 31, 2000 and
March 31, 2001, which was caused by adverse weather conditions in the
Company's Texas, Colorado and Midwest market areas.

Cost of sales increased between the 2001 and 2000 fiscal years at
a lesser rate than the increase in revenues between these fiscal
years. Accordingly, cost of sales as a percentage of revenues
decreased to 74.8% in the fiscal year ended June 30, 2001 from 75.9%

in the fiscal year ended June 30, 2000, and gross profit as a
percentage of revenues increased to 25.2% in the fiscal year ended
June 30, 2001 from 24.1% in the fiscal year ended June 30, 2000. This
increase may be attributed primarily to an increase in out-of-
warehouse sales, which carry higher gross profit margins than direct
sales. Also, included in cost of sales for the fiscal year ended
June 30, 2000 is a charge of approximately $190,000 ($1,000 credit in
fiscal 2001) resulting from valuing a portion of the year-end
inventories using the last-in, first-out ("LIFO") method. See Notes to
the Consolidated Financial Statements.

Operating expenses of the Company (including non-cash charges for
depreciation and amortization) increased by approximately $5,693,000
(14.4%) between the 2001 and 2000 fiscal years. Approximately
$3,539,000 of this increase may be attributed to the operating
expenses of new distribution centers opened in fiscal 2001 and during
the last quarter of fiscal 2000, approximately $363,000 consists of
corporate operating expenses, approximately $2,042,000 is attributable
to an increase in payroll costs and delivery expenses due primarily to
the need to service the increased sales revenues, an increase in bad
debt expense of $602,000, offset by decreases in expenses of closed
distribution centers of approximately $1,043,000 and decreases in
other expense areas. Depreciation and amortization, and amortization
of excess cost of investments over net assets acquired (goodwill) and
deferred financing costs increased by an aggregate of approximately
$220,000 between the 2001 and 2000 fiscal years. Approximately $23,000
of this increase is additional depreciation, approximately $13,000 is
additional amortization of deferred financing costs and approximately
$184,000 is additional amortization of goodwill. The increase in
amortization of goodwill may be attributed primarily to the increase
in goodwill arising from the additional consideration paid for the
purchases of the businesses and substantially all of the assets of JEH
Co. and MSI Co. by JEH Eagle and MSI Eagle, respectively. Operating
expenses as a percentage of revenues were 23% in the 2001 fiscal year
compared to 21.1% in the 2000 fiscal year.

Interest expense increased by approximately $132,000 (4.3%)
between the 2001 and 2000 fiscal years. This increase is due primarily
to the interest expense incurred on increased borrowings under
revolving credit loans.

Net income and EBITDA (earnings before interest, taxes,
depreciation and amortization) for the fiscal year ended June 30, 2001
were approximately $849,000 and $6,845,000, respectively, compared to
net income and EBITDA of approximately $2,011,000 and $8,249,000,
respectively, for fiscal 2000.

Earnings per share for the fiscal year ended June 30, 2001 were
$.10 compared to $.24 for fiscal 2000. EBITDA per share for the fiscal
year ended June 30, 2001 was $.80 compared to $.97 for fiscal 2000.

Fiscal Year Ended June 30, 2000 Compared to the Fiscal Year
Ended June 30, 1999
-----------------------------------------------------------

Revenues of the Company during the fiscal year ended June 30, 2000
increased by approximately $27,870,000 (17.4%) compared to the 1999
fiscal year. Approximately $4,194,000 of this increase was as a result
of the acquisition in fiscal 1999 (on October 22, 1998) of MSI Co. by
MSI Eagle, which operations were included in fiscal 2000 for the full
year. The remaining increase may be attributed to revenues generated

from new distribution centers opened in fiscal 2000 or during the last
quarter of fiscal 1999 and a general improvement in market conditions,
offset by revenues that had been generated from distribution centers
closed or consolidated.

Cost of sales increased between the 2000 and 1999 fiscal years at
a lesser rate than the increase in revenues between these fiscal years.
Accordingly, cost of sales as a percentage of revenues decreased to
75.9% in the fiscal year ended June 30, 2000 from 76.4% in the fiscal
year ended June 30, 1999, and gross profit as a percentage of revenues
increased to 24.1% in the fiscal year ended June 30, 2000 from 23.6% in
the fiscal year ended June 30, 1999. This increase may be attributed
primarily to the increased revenues generated from sales of masonry
supplies and related products many of which generally carry higher
gross profit margins than sales of roofing products. Included in cost
of sales for the fiscal year ended June 30, 2000 is a charge of
approximately $190,000 ($10,000 in fiscal 1999) resulting from valuing
a portion of the year-end inventories using the last-in, first-out
("LIFO") method. See Notes to the Consolidated Financial Statements.

Operating expenses of the Company (including non-cash charges for
depreciation and amortization) increased by approximately $8,569,000
(27.7%) between the 2000 and 1999 fiscal years. Approximately $677,000
of this increase was as a result of the acquisition of MSI Co. by MSI
Eagle, which operations were included in fiscal 2000 for the full
year. Approximately $3,677,000 of this increase may be attributed to
the operating expenses of new distribution centers opened in fiscal
2000 or during the last quarter of fiscal 1999, approximately
$1,181,000 consists of corporate operating expenses incurred
subsequent to the Offering, approximately $3,103,000 is attributable
to an increase in payroll costs and delivery expenses due primarily to
the need to service the increased sales revenues, an increase in
advertising costs of $330,000 and smaller increases in other expense
areas, offset by a decrease in bad debt expense of approximately
$616,000. Depreciation and amortization, and amortization of excess
cost of investments over net assets acquired (goodwill) and deferred
financing costs increased by an aggregate of approximately $467,000
between the 2000 and 1999 fiscal years. Approximately $176,000 of this
increase is additional depreciation and approximately $284,000 is
additional amortization of goodwill. The increase in amortization of
goodwill may be attributed primarily to the increase in goodwill
arising from the additional consideration in the amount of
approximately $1,908,000 paid for the purchase of the business and
substantially all of the assets of JEH Co. by JEH Eagle. Operating
expenses as a percentage of revenues were 21.1% in the 2000 fiscal
year compared to 19.4% in the 1999 fiscal year.

Interest expense increased by approximately $569,000 (22.7%)
between the 2000 and 1999 fiscal years. This increase was due primarily
to the interest expense incurred on borrowings under revolving credit
loans ($427,000) and the interest expense for a full fiscal year on the
debt incurred to finance the acquisition of MSI Co. by MSI Eagle
($115,000).

Net income and EBITDA (earnings before interest, federal income
taxes, depreciation and amortization) for the fiscal year ended June
30, 2000 were approximately $2,011,000 and $8,249,000, respectively,
compared to net income and EBITDA of approximately $2,703,000 and
$8,195,000, respectively, for fiscal 1999.

Earnings per share for the fiscal year ended June 30, 2000 were
$.24 compared to $.43 for fiscal 1999. EBITDA per share for the fiscal
year ended June 30, 2000 was $.97 compared to $1.30 for fiscal 1999.

Fiscal Year Ended June 30, 1999 Compared to the Fiscal Year
Ended June 30, 1998
-----------------------------------------------------------

Revenues of the Company during the fiscal year ended June 30,
1999 increased by approximately $30,342,000 (23.4%) compared to the
1998 fiscal year. Approximately $9,018,000 of this increase was due to
the acquisition on October 22, 1998 of MSI Co. by MSI Eagle. The
remaining increase may be attributed to additional revenues generated
from new distribution centers ($16,077,000) and a general improvement
in market conditions.

Cost of sales increased between the 1999 and 1998 fiscal years at
a lesser rate than the increase in revenues between these fiscal
years. Accordingly, cost of sales as a percentage of revenues
decreased to 77.6% in the fiscal year ended June 30, 1999 from 78.4%
in the fiscal year ended June 30, 1998, and gross profit as a
percentage of revenues increased to 22.4% in the fiscal year ended
June 30, 1999 from 21.6% in the fiscal year ended June 30, 1998. The
cost of sales and gross profit of MSI Eagle have not been included in
calculating the percentages for the 1999 fiscal year. If MSI Eagle's
cost of sales and gross profit were included, cost of sales as a
percentage of revenues would have been 76.4% and gross profit as a
percentage of revenues would have been 23.6%.

Operating expenses of the Company (including non-cash charges for
depreciation and amortization) increased by approximately $6,004,000
(24.1%) between the 1999 and 1998 fiscal years. Approximately
$2,506,000 of this increase may be attributed to the acquisition of
MSI Co. by MSI Eagle and includes approximately $113,000 of
amortization of excess cost of investments over net assets acquired
(goodwill) and approximately $15,000 of amortization of deferred
financing costs attributable to the acquisition. Excluding the
operating expenses of MSI Eagle, operating expenses of the Company
would have increased by approximately $3,498,000 (14%) between the
1999 and 1998 fiscal years. This increase may be attributed to new
distribution center operating expenses of approximately $2,040,000, an
increase in the allowance for doubtful accounts of approximately
$135,000, an increase in payroll costs of approximately $829,000, an
increase in depreciation of $170,000, an increase in warehouse and
delivery expenses of approximately $125,000, an increase in office
expenses of approximately $146,000 primarily related to the
implementation and relocation of the administrative functions of the
Company to Texas and an increase in amortization of goodwill of
approximately $53,000, offset by reductions in other expense areas.
Operating expenses as a percentage of revenues were 18.9% in the 1999
fiscal year compared to 19.3% in the 1998 fiscal year. If MSI Eagle's
operating expenses were included, operating expenses as a percentage
of revenues would have changed only minimally in the 1999 fiscal year.

Interest expense increased by approximately $639,000 (34.3%)
between the 1999 and 1998 fiscal years. This increase was due to the
interest expense incurred by MSI Eagle (approximately $322,000) on its
credit facility and other indebtedness used primarily to fund its
acquisition of MSI Co., the increase in interest expense on borrowings
under revolving credit loans (approximately $300,000), and short-term

borrowings by the Company (approximately $17,000).

Net income and EBITDA for the fiscal year ended June 30, 1999
were approximately $2,703,000 and $8,195,000, respectively, compared
to net income and EBITDA of approximately $757,000 and $4,171,000,
respectively, for fiscal 1998.

Earnings per share for the fiscal year ended June 30, 1999 were
$.43 compared to $.14 for fiscal 1998, an increase of 207.1%. EBITDA
per share for the fiscal year ended June 30, 1999 was $1.30 compared
to $.77 for fiscal 1998.

Liquidity and Capital Resources
-------------------------------

The Company's working capital was approximately $39,465,000 at
June 30, 2001 compared to approximately $31,887,000 at June 30, 2000.
At June 30, 2001, the Company's current ratio was 2.13 to 1 compared
to 1.97 to 1 at June 30, 2000.

Cash used in operating activities for the fiscal year ended June
30, 2001 was approximately $4,186,000. Such amount consisted primarily
of increased levels of accounts and notes receivable of $7,126,000,
inventories of $4,460,000, deferred income taxes of $29,000 and
decreased levels of income taxes due to TDA of $1,144,000 and federal
and state income taxes of $869,000, offset by net income of $849,000,
depreciation and amortization of $2,308,000, decreased levels of other
current assets of $265,000 and increased levels of accounts payable of
$4,166,000, accrued expenses and other current liabilities of
$960,000, allowance for doubtful accounts of $856,000 and due to
related parties of $52,000.

Cash used in investing activities for the fiscal year ended June
30, 2001 was approximately $2,724,000. Such amount consisted primarily
of payments of additional consideration for the purchase of the
business and substantially all of the net assets of JEH Co. by JEH
Eagle of $2,141,000, payments of additional consideration for the
purchase of the business and substantially all of the net assets of
MSI Co. by MSI Eagle of $216,000 and capital expenditures of $592,000,
offset by proceeds from the sale of equipment of $225,000.

Capital expenditures were approximately $592,000 for the fiscal
year ended June 30, 2001. Management of the Company presently
anticipates such expenditures in the next twelve months of not less
than $810,000, of which approximately $410,000 will be financed and
used primarily for the purchase of trucks and forklifts for the
Company's currently existing operations in anticipation of increased
business and to upgrade its vehicles to compete better in its market
areas. Management's anticipation of increased business is based on
sales to be generated by the opening of new distribution centers, the
locations of some of which have not yet been decided.

Cash provided by financing activities for the fiscal year ended
June 30, 2001 was approximately $5,424,000. Such amount consisted
primarily of principal borrowings on long-term debt of $217,424,000,
offset by principal reductions on long-term debt of $211,937,000 and
an increase in deferred financing costs of approximately $63,000.

Acquisitions
------------

In July 1997, JEH Eagle acquired the business and substantially
all of the assets of JEH Co., a Texas corporation, wholly-owned by
James E. Helzer, now the President of the Company. The purchase price,
as adjusted, including transaction expenses, was approximately
$14,768,000, consisting of $13,878,000 in cash, net of $250,000 due
from JEH Co., and a five-year note bearing interest at the rate of 6%
per annum in the principal amount of $864,852. The purchase price and
the note are subject to further adjustments under certain conditions.
Certain, potentially substantial, contingent payments, as additional
future consideration to JEH Co. or its designee, are to be paid by JEH
Eagle. Upon consummation of the Offering, the Company issued 300,000
shares of its common stock to James E. Helzer, the designee of JEH
Co., in fulfillment of certain of such future consideration. For the
fiscal years ended June 30, 1999, 2000 and 2001, approximately
$1,773,000, $1,947,000 and $315,000, respectively, of such additional
consideration was paid to JEH Co. or its designee. All of such
additional consideration increased goodwill and, through the fiscal
year 2001, was amortized over the remaining life of the goodwill.
Beginning with the fiscal year 2002, goodwill will be written off only
when the Company determines that there has been an impairment in the
value.

In October 1998, MSI Eagle acquired the business and
substantially all of the assets of MSI Co., a Texas corporation,
wholly-owned by Gary L. Howard, now a Senior Vice President of the
Company. The purchase price, as adjusted, including transaction
expenses, was approximately $8,538,000, consisting of $6,492,000 in
cash and a five-year note bearing interest at the rate of 8% per annum
in the principal amount of $2,045,972. The purchase price is subject
to further adjustment under certain conditions. Upon consummation of
the Offering, the Company issued 50,000 shares of its common stock to
Gary L. Howard, the designee of MSI Co., in payment of $250,000 shares
principal amount of the note. The balance of the note was paid in full
in March 1999 out of the proceeds of the Offering. Certain,
potentially substantial, contingent payments, as additional future
consideration to MSI Co. or its designee, are to be paid by JEH Eagle.
(Effective May 31, 2000, MSI Eagle was merged with and into JEH
Eagle.) Upon consummation of the Offering, the Company issued 200,000
shares of its common stock, and, as of July 1, 1999, the Company
issued 60,000 shares of its common stock, to Gary L. Howard in
fulfillment of certain of such future consideration. For the fiscal
years ended June 30, 2000 and 2001, approximately $216,000 and
$270,000, respectively, of such additional consideration was paid to
MSI Co. or its designee. All of such additional consideration
increased goodwill and, through the fiscal year 2001, was amortized
over the remaining life of the goodwill. Beginning with the fiscal
year 2002, goodwill will be written off only when the Company
determines that there has been an impairment in the value.

Credit Facilities
-----------------

Prior to June 2000, Eagle was a party to a loan agreement which
provided for a credit facility in the aggregate amount of $10,900,000.

In order to finance the purchase of substantially all of the
assets and business of JEH Co. and to provide for working capital
needs, in July 1997 JEH Eagle had entered into a loan agreement for a
credit facility in the aggregate amount of $20 million.

In order to finance the purchase of substantially all of the
assets and business of MSI Co. and to provide for working capital
needs, in October 1998 MSI Eagle had entered into a loan agreement for
a credit facility in the aggregate amount of $9,075,000.

In June 2000, the Company's credit facilities were consolidated
into an amended, restated and consolidated loan agreement with JEH
Eagle and Eagle as borrowers. In October 2000, JEH/Eagle, L.P., the
Company's limited partnership, was added to the credit facility as a
borrower. The amended loan agreement increased our credit facility by
$5 million, to $44,975,000, and lowered the average interest rate by
approximately one-half of one (1/2%) percent. Furthermore, up to $8
million in borrowing (subject to the available borrowing base) was
made available for acquisitions. This credit facility currently bears
interest as follows (with the alternatives at our election):

* Equipment Term Note -Libor (as defined), plus two and one-
half (2.5%) percent, or the lender's Prime Rate (as
defined), plus one-half of one (1/2%) percent.

* Acquisition Term Note - Libor, plus two and three-fourths
(2.75%) percent, or the lender's Prime Rate, plus three-
fourths of one (3/4%) percent.

* Revolving Credit Loans - Libor, plus two (2%) percent or
the lender's Prime Rate.

In February 2001, the credit facility was amended to change
certain definitions, the cash flow covenants, to provide for limited
overadvances, and to increase the annual interest rate by twenty-five
(25) points under certain conditions.

The credit facility was amended in July 2001 to provide for a
$5,000,000 overline for a period of ninety days ending on November 15,
2001.

The credit facility is collateralized by substantially all of our
tangible and intangible assets and is guaranteed by the Company.

In October 1998, in connection with the purchase of substantially
all of the assets and business of MSI Co. by MSI Eagle, TDA lent MSI
Eagle $1,000,000 pursuant to a six (6%) percent two-year note. The
note was payable in full in October 2000, and TDA had agreed to defer
the interest payable on the note until its maturity. In October 2000,
interest on the note was paid in full, and TDA and JEH Eagle (as
successor by merger to MSI Eagle) agreed to finance the $1,000,000
principal amount of the note pursuant to a new eight and three-fourths
(8.75%) percent per annum demand promissory note payable to TDA.

Impact of Inflation
-------------------

General inflation in the economy has driven the operating
expenses of many businesses higher, and, accordingly, we have
experienced increased salaries and higher prices for supplies, goods
and services. We continuously seek methods of reducing costs and
streamlining operations while maximizing efficiency through improved

internal operating procedures and controls. While we are subject to
inflation as described above, our management believes that inflation
currently does not have a material effect on our operating results,
but there can be no assurance that this will continue to be so in the
future.

Impact of Recently Issued Accounting Pronouncements
---------------------------------------------------

In June 1998, the Financial Accounting Standards ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133,
Accounting for Derivative Instruments and Hedging Activities. This
Statement establishes accounting and reporting standards for
derivative instruments and hedging activities. It requires the
recognition of all derivatives as either assets or liabilities in the
statement of financial position and measurement of those instruments
at fair value. The accounting for changes in the fair value of a
derivative is dependent upon the intended use of the derivative. SFAS
No. 133 became effective in the Company's first quarter of the current
fiscal year. The adoption of this Statement did not have a significant
impact on the Company's financial condition, results of operations or
cash flows.

In December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue
Recognition in Financial Statements. SAB 101 summarizes certain of
the SEC's views in applying generally accepted accounting principles
to revenue recognition in financial statements. The Company was
required to adopt SAB 101 in the first quarter of the current fiscal
year. The adoption of SAB 101 did not have a material effect on the
Company's financial condition, results of operations or cash flows.

On June 29, 2001, the FASB approved for issuance SFAS 141,
Business Combinations, and SFAS 142, Goodwill and Intangible Assets.
Major provisions of these Statements are as follows: all business
combinations initiated after June 30, 2001 must use the purchase
method of accounting; the pooling of interest method of accounting is
prohibited, except for transactions initiated before July 1, 2001;
intangible assets acquired in a business combination must be recorded
separately from goodwill if they arise from contractual or other legal
rights or are separable from the acquired entity and can be sold,
transferred, licensed, rented or exchanged, either individually or as
part of a related contract, asset or liability; goodwill and
intangible assets with indefinite lives are not amortized but are
tested for impairment annually, except in certain circumstances and
whenever there is an impairment; all acquired goodwill must be
assigned to reporting units for purposes of impairment testing; and,
effective January 1, 2002, goodwill will no longer be subject to
amortization. The Company is permitted to early adopt effective July
1, 2001, and management has elected to do so. Management believes that
these Statements will not have a material impact on the Company's
financial condition, results of operations or cash flows, other than
from the cessation of the amortization of goodwill. During the fiscal
year ended June 30, 2001, goodwill amortization totaled approximately
$806,000 ($.09 per share).

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The estimated fair value of financial instruments have been
determined by the Company using available market information and
appropriate valuation and methodologies. However, considerable
judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented here
are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect
on the estimated fair value amounts.

The following methods and assumptions were used to estimate the
fair value of the financial instruments:

CASH AND CASH EQUIVALENTS, ACCOUNTS AND NOTES RECEIVABLE, ACCOUNTS
PAYABLE AND ACCRUED EXPENSES - The carrying amounts of these items are
a reasonable estimate of their fair value.

LONG-TERM DEBT - Interest rates that are currently available to the
Company for issuance of debt with similar terms and remaining
maturities are used to estimate fair value for bank debt. The carrying
amounts comprising this item are reasonable estimates of fair value,
except for a 6% note due in June 2002. Such note has a carrying value
of $864,852 and an estimated fair market value of $845,000.

The fair value estimates are based on pertinent information
available to management as of June 30, 2001. Although management is
not aware of any factors that would significantly affect the estimated
fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since June 30,
2001 and current estimates of fair value may differ significantly from
the amounts presented. The Company has not entered into, and does not
expect to enter into, financial instruments for trading or hedging
purposes.

The Company is currently exposed to material future earnings or
cash flow exposures from changes in interest rates on long-term debt
obligations since the majority of the Company's long-term debt
obligations are at variable rates. The Company does not currently
anticipate entering into interest rate swaps and/or similar
instruments. Based on the amount outstanding as of June 30, 2001, a
100 basis point change in interest rates would result in an
approximate $390,000 change in the Company's annual interest expense.
For fixed rate interest rate obligations, changes in market interest
rates affect the fair market value of such debt, but do not impact the
Company's earnings or cash flows.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the financial statements annexed to this Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

Not Applicable

PART III
--------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

Our directors and executive officers are as follows:

Name Age Position
---- --- --------

Douglas P. Fields(1) 59 Chairman of the Board and Chief
Executive Officer
James E. Helzer(1) 61 President, Vice Chairman of the
Board of Directors
Frederick M. Friedman(1) 61 Executive Vice President,
Treasurer, Secretary and a Director
E.G. Helzer 50 Senior Vice President-Operations
Gary L. Howard 46 Senior Vice President-Operations
Steven R. Andrews(2) 46 Director
Paul D. Finkelstein(2)(3) 59 Director
George Skakel III(2)(3) 51 Director
John E. Smircina(1)(3) 70 Director

Management believes that Messrs. Andrews, Finkelstein, Smircina
and Skakel are independent directors.

(1) Members of the Executive Committee of our Board of Directors.
(2) Members of the Audit Committee of our Board of Directors. Mr.
Finkelstein is Chairman of the Audit Committee.
(3) Members of the Compensation Committee of our Board of Directors.

Set forth below is a brief background of the foregoing executive
officers and directors, based on information supplied by them.

Douglas P. Fields has been our Chairman of the Board of
Directors, Chief Executive Officer and a Director since our inception.
From our inception until July 1996, Mr. Fields also served as our
President. For more than the past five years, Mr. Fields has been the
Chairman of the Board of Directors, President and Chief Executive
Officer of TDA and Chief Executive Officer and a Director of each of
its subsidiaries. TDA is a holding company that is our majority
stockholder and whose operating subsidiaries are engaged in the
operation of an indoor tennis facility and the management of real
estate. Mr. Fields devotes no less time to our affairs than he deems
reasonably necessary to discharge his duties to us. Mr. Fields
received a Masters degree in Business Administration from the Harvard
University Graduate School of Business Administration in 1966 and a
B.S. degree from Fordham University in 1964.

Frederick M. Friedman has been our Executive Vice President,
Chief Financial Officer, Treasurer, Secretary and a Director since
inception. For more than the past five years, Mr. Friedman has been
Executive Vice President, Chief Financial Officer, Treasurer,
Secretary and a Director of TDA and Vice President, Chief Financial
Officer, Treasurer, Secretary and a Director of each of its
subsidiaries. Mr. Friedman devotes no less time to our affairs than he

deems reasonably necessary to discharge his duties to us. Mr. Friedman
received a B.S. degree in Economics from The Wharton School of the
University of Pennsylvania in 1962.

James E. Helzer has been our President since December 1997 and
Vice Chairman of our Board of Directors since March 1999. He has been
President of JEH Eagle since July 1997 and President of Eagle since
December 1997. From 1982 until July 1997, Mr. James E. Helzer was the
owner and Chief Executive Officer of JEH Co.

E.G. Helzer has been Senior Vice President-Operations since
December 1997. He has been Senior Vice President-Operations of JEH
Eagle since July 1997 and Senior Vice President-Operations of Eagle
since December 1997. From 1994 until July 1997, Mr. E.G. Helzer was
the Vice President-Operations and Colorado Manager of JEH Co. From
1982 until 1994, he was JEH Co.'s Manager-Production and Service.
E.G. Helzer is the brother of James E. Helzer.

Gary L. Howard has been Senior Vice President-Operations since
July 1999, had been our Vice President-Masonry Products from
December 1998 to July 1999 and had been President of MSI Eagle from
October 1998 through May 31, 2000. From at least 1994 until October
1998, Gary L. Howard was the owner and chief executive officer of MSI
Co.

Messrs. Fields, Friedman, Helzers and Howard have been and are
executive officers and directors of our operational subsidiaries.

Steven R. Andrews, Esq. has been a Director since May 1996. For
more than the past five years, Mr. Andrews has been engaged in the
private practice of law. Mr. Andrews received a Juris Doctor degree
and an L.L.M. degree in 1977 and 1978 from Stetson University and New
York University, respectively. From March 1999 he has also served as
our vice president-legal. Mr. Andrews has entered into an agreement
with us requiring him to review our and our officers' and directors'
compliance with their obligations under federal and state securities
laws. Mr. Andrews is required to report his findings to the Audit
Committee of our Board of Directors.

Paul D. Finkelstein has been the President and Director of the
Regis Corporation, an operator of beauty salons and a cosmetic sales
company, for more than the past five years and that corporation's
Chief Executive Officer since July 1996. Mr. Finkelstein became a
member of our Board of Directors in February 1999. Mr. Finkelstein
received a Masters degree in Business Administration from the Harvard
University Graduate School of Business Administration in 1966 and a
B.S. degree in Economics from The Wharton School of the University of
Pennsylvania in 1964.

George Skakel has been a private investor for more than the past
five years. Mr. Skakel became a member of our Board of Directors in
February 1999. Mr. Skakel received a B.S. degree in Economics from the
University of Delaware in 1973 and a Masters degree in Business
Administration from the Harvard University Graduate School of Business
Administration in 1978.

John E. Smircina, Esq. had been a partner in the law firm of
Wade, Hughes and Smircina, P.C. from April 1993 until July 1996. Since
July 1996, Mr. Smircina has been a sole practitioner. For more than

the past five years, Mr. Smircina has been a Director of TDA. Mr.
Smircina became a member of our Board of Directors in March 1999.
Mr. Smircina received a Masters degree in Industrial Management from
Ohio University in 1954 and a B.A. degree in Political Science from
Ohio University in 1953.

Our Directors serve until the next annual meeting of stockholders
and until their successors are elected and duly qualified. Our
officers are elected annually by the Board of Directors and serve at
the discretion of the Board of Directors. Our independent directors
are responsible for reviewing and approving all material related party
transactions, including potential conflicts of interest, and ensuring
stockholder approval is obtained when they believe it is warranted.

The Board of Directors has established an Executive Committee
which is composed of Douglas P. Fields, Frederick M. Friedman, James
E. Helzer and John E. Smircina, Esq. Our Board of Directors can
delegate to the Executive Committee all of the powers and authority
(other than those reserved by statute to the full Board of Directors)
of the full Board of Directors in the management of our business and
affairs.

Messrs. Fields, Friedman, Helzers, Howard and Andrews hold the
positions set forth opposite their names for the Company and our
operating subsidiaries as indicated below:

Name The Company Eagle JEH Eagle
---- ----------- ----- ---------

Douglas P. Fields Company Chairman Chairman of the Chariman of the
of the Board and Board and Chief Board and Chief
Chief Executive Officer Executive Officer Executive Officer

James E. Helzer President and Vice President and President and
Chairman of the Director Director
Board of Directors

Frederick M. Friedman Executive Vice Executive Vice Executive Vice
President, Treasurer, President, Treasurer President, Treasurer
Secretary and Secretary and Secretary and
Director Director Director

E.G. Helzer Senior Vice Senior Vice Senior Vice
President-Operations President-Operations President-Operations

Gary L. Howard Senior Vice Senior Vice
President-Operations President-Operations

Steven R. Andrews Director

In connection with certain transactions which occurred in 1971
and 1973, Messrs. Fields and Friedman and TDA, then a public company,
without admitting or denying the allegations set forth in a civil
action commenced by the Commission in 1976, consented to a final

judgment of permanent injunction which, in summary, provided that
Messrs. Fields and Friedman and TDA were permanently enjoined from
violating the registration, reporting, proxy and the anti-fraud
provisions of the federal securities laws and rules. Additionally,
Messrs. Fields and Friedman agreed to certain ancillary relief which
included their agreements, for a period of two years, to resign as
directors of TDA and a publicly held subsidiary of TDA and not to vote
any securities of TDA and the subsidiary owned or controlled by them.
The Commission's complaint alleged, among other things, that in 1973
TDA and Messrs. Fields and Friedman, in connection with TDA's
acquisition of Eagle, caused an improper finder's fee to be paid to
Messrs. Fields' and Friedman's designee with a portion of such
finder's fee being paid back to Mr. Friedman. Based upon facts related
to the injunctive action, in 1979, Messrs. Fields and Friedman were
found guilty of conspiring to violate the federal securities laws and
making false statements in filings made with the Commission.
Messrs. Fields and Friedman were sentenced to six and three months
incarceration, respectively, and both were fined. Also, on facts
related to the injunctive action, Mr. Friedman was found guilty of
mail and wire frauds. Mr. Friedman was sentenced to one month
incarceration on each of three counts.

Section 16(a) Beneficial Ownership Reporting Compliance.

Section 16(a) of the Securities Exchange Act of 1934 requires our
executive officers, directors and persons who beneficially own more
than 10% of a registered class of our equity securities to file with
the Commission initial reports of ownership and reports of ownership
and reports of changes in ownership of our equity securities.

Based on our review of copies of such reports filed with the
Commission and information we received from our executive officers,
directors and TDA, we believe that all Section 16(a) filing
requirements applicable to our executive officers and directors and
TDA were complied with during our fiscal year ended June 31, 2001. One
person, Barry Segal, has reported in filings made with the Commission
that he beneficially owns greater than 10% of our common stock. Based
solely upon our review of Mr. Segal's filings with the Commission,
without inquiry or investigation, it appears that Mr. Segal complied
with his Section 16(a) filing requirements during our fiscal year
ended June 30, 2001.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth certain summary information with
respect to the compensation paid by us (including our subsidiaries)
for services rendered in all capacities during each of the last two
fiscal years by those persons indicated (the Company's four most
highly compensated executive officers and its Chief Executive
Officer). Neither the Company nor any of the subsidiaries have had any
other executive officer whose total annual salary and bonus exceeded
$100,000 for either of said fiscal years.

Summary Compensation Table (1)
--------------------------

Name and Principal Position Fiscal Year
Ended
June 30, Salary Bonus
----------- -------- --------

Douglas P. Fields
Chief Executive Officer 2001 $260,000 $100,000
2000 $260,000 $100,000

Frederick M. Friedman
Executive Vice President
and Treasurer 2001 $260,000 $100,000
2000 $260,000 $100,000

James E. Helzer
President 2001 $300,000 $100,000
2000 $300,000 $100,000

Gary L. Howard
Senior Vice President
-Operations 2001 $260,000 $ 31,200
2000 $260,000 0

E.G. Helzer
Senior Vice President
-Operations 2001 $175,000 $45,000
2000 $162,500 0

(1) Each of the foregoing persons received such benefits as are
available to all of our employees. The value of perquisites or other
personal benefits received was less than ten (10%) percent of the
total annual salary and bonus reported for each of the above
identified persons. See "- Other Compensation."

Employment Agreements and Arrangements
--------------------------------------

The Company and Eagle have entered into employment agreements
with Messrs. Fields and Friedman pursuant to which they act as
Chairman of the Board and Chief Executive Officer, and Executive Vice
President, Chief Financial Officer, Treasurer, Secretary and a
Director of the Company and Eagle, respectively, at annual salaries of
$200,000 each, subject to annual increases or bonuses as may be
determined by the Board of Directors.

JEH Eagle has entered into employment agreements with Messrs.
Fields and Friedman pursuant to which they act as Chairman of the
Board of Directors and Chief Executive Officer, and Executive Vice
President, Chief Financial Officer, Treasurer, Secretary and a
Director of JEH Eagle, respectively, at annual salaries of $60,000
each, subject to annual increases and bonuses as may be determined by
JEH Eagle's Board of Directors. The compensation payable to
Messrs. Fields and Friedman under these employment agreements
commenced in March 1999.

The foregoing employment agreements expire on June 30, 2004.

Pursuant to the foregoing employment agreements, Messrs. Fields'
and Friedman's written consent is required if they are to be employed
other than in proximity to their residences. Messrs. Fields and
Friedman reside in Connecticut and New York, respectively. The

agreements require the Company, Eagle and JEH Eagle to provide their
beneficiaries and each of them, respectively, with twelve months
salary in the event of death or disability and indemnify
Messrs. Fields and Friedman to the full extent permitted under the
Delaware General Corporation Law. Their agreements do not require
either Messrs. Fields or Friedman to commit a specific amount of their
time to the affairs of the Company, Eagle or JEH Eagle. Messrs. Fields
and Friedman will devote no less time than they deem reasonably
necessary to carry out their duties to the Company, Eagle and JEH
Eagle.

The Company's, Eagle's and JEH Eagle's agreements with
Messrs. Fields and Friedman contain provisions for payments of salary
and benefits following a change of control (as defined) of the
Company, Eagle or JEH Eagle, the failure to reappoint either of them
to his position, a salary reduction or the Company's, Eagle's or JEH
Eagle's failure to perform its obligations under their respective
agreements. In general, under such circumstances, each of
Messrs. Fields and Friedman would be entitled to a cash payment
equivalent to his salary for the remaining term of his agreement, and
continued life, health and disability insurance benefits for a period
of two years.

JEH Eagle has also entered into employment agreements with Messrs.
James E. Helzer and E.G. Helzer pursuant to which they serve as
President and Senior Vice President-Operations, respectively, of JEH
Eagle for terms of five and three years, respectively, which commenced
in July 1997, at compensation rates of $250,000 and $125,000 per year,
respectively, subject to annual review by JEH Eagle's Board of
Directors. Additionally, in December 1997, James E. Helzer accepted the
positions of President of the Company and Eagle, and E.G. Helzer
accepted the positions of Senior Vice President-Operations of the
Company and Eagle. As a result, James E. Helzer's rate of compensation
was increased by $50,000 to $300,000 per year, and he is required to
devote approximately 80% of his working time to us, Eagle and JEH
Eagle; and E.G. Helzer's rate of compensation was increased by $25,000
to $150,000 per year, and, in 1999, his compensation was further
increased by $25,000 to $175,000 per year. Additionally, James E.
Helzer and E.G. Helzer are entitled to receive 20% and 6%,
respectively, of Eagle's earnings before taxes in excess of $600,000
per year. James E. Helzer and E.G. Helzer are employed as President and
Senior Vice President-Operations, respectively, of the Company and
Eagle pursuant to oral agreements that can be terminated by either
party without notice or penalty. The employment agreement with E. G.
Helzer expired on June 30, 2000, but he continues to perform all of his
duties under the same compensation arrangements, but without a written
agreement.

MSI Eagle had entered into an employment agreement with Gary L.
Howard for a term ending on June 30, 2003, at an annual salary of
$260,000, subject to annual review. Pursuant to the agreement, Gary L.
Howard served as the President of MSI Eagle until its merger into and
with JEH Eagle effective May 31, 2000. Additionally, as of November
1998, Gary L. Howard accepted the position of Vice President-Masonry
Products and, as of July 1999, as Senior Vice President-Operations of
the Company and JEH Eagle.

Steven R. Andrews, Esq. serves as our vice president-legal, a
compliance position, and he was compensated at the rate of $1,000 per
month until October 2000. As this position was created as a result of
our agreement with NASDAQ in connection with our listing on NASDAQ, we

believe that he is not one of our employees, and he is now compensated
at the same rate as other non-employee Directors.

We have granted to each of Messrs. James E. Helzer, E.G. Helzer,
Steven R. Andrews and Gary L. Howard options exercisable to purchase
120,000, 60,000, 100,000, and 100,000 shares of Common Stock,
respectively. Such options have a term of ten years and are
exercisable at $5.00 per share. Such options vest as to 20% of the
underlying shares of Common Stock on each successive anniversary of
the date of grant commencing one year from March 17, 1999, provided
that they continue in our service on such dates.

Compensation of Directors
-------------------------

Effective October 2000, non-employee Directors (Messrs. Andrews,
Finkelstein, Skakel and Smircina) are each compensated at the rate of
$1,000 per month. Prior to that date, non-employee Directors did not
receive compensation for their services as directors. Directors are
reimbursed for their reasonable out-of-pocket expenses incurred in
connection with their duties.

Limitation on Liability of Directors
------------------------------------

The Delaware General Corporation Law permits a corporation,
through its Certificate of Incorporation, to exonerate its directors
from personal liability to the corporation or to its stockholders for
monetary damages for breach of fiduciary duty of care as a director,
with certain exceptions. The exceptions include a breach of the
director's duty of loyalty, acts or omissions not in good faith or
which involve intentional misconduct or knowing violation of law,
improper declarations of dividends, and transactions from which the
directors derived an improper personal benefit. Our Certificate of
Incorporation exonerates its directors from monetary liability to the
extent permitted by this statutory provision. We have been advised
that it is the position of the Commission that, insofar as the
foregoing provision may be invoked to disclaim liability for damages
arising under the Securities Act of 1933, as amended (the "Securities
Act"), that provision is against public policy as expressed in the
Securities Act and is therefore unenforceable.

Stock Option Plan
-----------------

In December 1998, the Board of Directors and the stockholders
adopted and approved, as the case may be, our 1998 Stock Option Plan
(the "Stock Option Plan"). The Stock Option Plan provides for the
grant of (i) options that are intended to qualify as incentive stock
options ("Incentive Stock Options") within the meaning of Section 422A
of the Internal Revenue Code, as amended (the "Code"), to certain
employees, directors and consultants, and (ii) options not intended to
so qualify ("Non-Qualified Stock Options") to employees (including
directors and officers who are employees of the Company), directors
and consultants. The total number of shares of the Company's Common
Stock for which options may be granted under the Stock Option Plan is
1,200,000 shares. Options exercisable into 745,760 shares of Common
Stock to various of our employees, including options to purchase an
aggregate of 380,000 shares issued to Messrs. James E. Helzer, E.G.
Helzer, Gary L. Howard and Steven R. Andrews, Esq. have been granted
at a $5.00 per share exercise price. Options exercisable into 15,000
shares of Common Stock to various of our employees have been granted
at a $4.00 per share exercise price.

Weighted
Average
Number Exercise Exercise
of Price Price
Shares Per Share Per Share
------ --------- ---------

Outstanding, July 1, 1999 878,300 $5.00 $5.00
Granted - - -
Exercised - - -
Forfeited (35,760) 5.00 5.00
Expired - - -
------- -----
Outstanding, June 30, 2000 842,540 5.00
Granted 15,000 4.00 4.00
Exercised - - -
Forfeited (96,780) 5.00 5.00
Expired - - -
------- -----
Outstanding, June 30, 2001 760,760 $4.98
======= =====

At June 30, 2001, 321,720 options were exercisable at $5.00 per
share.

Messrs. Finkelstein and Skakel have each been granted options to
purchase 10,000 shares of Common Stock pursuant to our Stock Option
Plan. Such options have a term of ten years, are exercisable at $5.00
per share and have vested.

The Stock Option Plan is administered by the Board of Directors
and can be administered by a committee appointed by the Board of
Directors which will determine the terms of options granted, including
the exercise price, the number of shares subject to the option and the
terms and conditions of exercise. No option granted under the Stock
Option Plan is transferable by the optionee other than by will or the
laws of descent and distribution, and each option is exercisable
during the lifetime of the optionee only by such optionee.

The exercise price of all stock options granted under the Stock
Option Plan must be at least equal to the fair market value of such
shares on the date of grant. With respect to any participant who owns
stock possessing more than 10% of the voting rights of all classes of
our outstanding capital stock, the exercise price of any Incentive
Stock Option must be not less than 110% of the fair market value on
the date of grant. The term of each option granted pursuant to the
Stock Option Plan may be established by the Board of Directors or a
committee of the Board of Directors, in its sole discretion; provided,
however, that the maximum term of each Incentive Stock Option granted
pursuant to the Stock Option Plan is ten years. With respect to any
Incentive Stock Option granted to a participant who owns stock
possessing more than 10% of the voting rights of all classes of our
outstanding capital stock, the maximum term is five years. Options
shall become exercisable at such times and in such installments as the
Board of Directors or a committee of the Board of Directors shall
provide in the terms of each individual option.

Options Granted Pursuant to the Stock Option Plan to Our Executive
Officers and Directors

The table below shows, as to each of our executive officers and
directors and as to all of our executive officers and directors as a
group, the aggregate amounts of shares of Common Stock subject to
options granted. All such options have a per share exercise price of
$5.00. No options have been exercised to date.

Names of Executive Shares Subject Number of
Officers and Directors To Options Vested Options
---------------------- -------------- --------------

James E. Helzer(1) 120,000 40,000
E.G. Helzer(1) 60,000 24,000
Gary L. Howard (1) 100,000 40,000
Steven R. Andrews(1) 100,000 40,000
Paul D. Finkelstein 10,000 10,000
George Skakel III 10,000 10,000
--------- ---------
Total (All Executive Officers
and Directors) 400,000 164,000
========= =========

--------------------------
(1) All of the options granted to Messrs. James E. Helzer, E.G.
Helzer, Gary L. Howard and Steven R. Andrews vest at a rate of 20% per
year from March 17, 1999, limited, however, such that the total amount
of all options granted to each of them and vesting in any single year
does not exceed $100,000 at the exercise price.

Other Compensation
------------------

We provide basic health, major medical and life insurance for our
employees, including executive officers. Eagle and JEH Eagle have also
adopted 401(k) Retirement Savings Plans for eligible employees, as
described below. No other retirement, pension or similar program has
been adopted. These and other benefits may be adopted by us for our
employees or the employees of our subsidiaries in the future.

In July 1992 and January 1998, Eagle and JEH Eagle adopted 401(k)
Retirement Savings Plans for employees of Eagle and JEH Eagle,
respectively (the "401(k) Plan"). Eligible employees include all
employees of Eagle and JEH Eagle (including those formerly employed by
MSI Eagle until its merger into and with JEH Eagle) who have completed
one year of employment and have attained the age of 21. The 401(k)
Plan permits employees to make voluntary contributions to the 401(k)
Plan up to a dollar limit set by law. Eagle and JEH Eagle may
contribute discretionary matching contributions equal to a determined
percentage of the employees' contributions. Benefits under the 401(k)
Plan are distributable upon retirement, disability, termination of
employment or certain financial hardship, subject to regulatory
requirements. Each participant's share of Eagle's and JEH Eagle's
contributions vests at the rate of 20% per year until after six years
of service, at which time the participant becomes fully vested.

No contributions were made to the 401(k) Plan during the fiscal
year ended June 30, 2000. A contribution in the amount of
approximately $102,000 was made to the 401 (K) Plan for the fiscal
year ended June 30, 2001. Amounts to be contributed in the future are
discretionary. Accordingly, it is not possible to estimate the amount
of benefits that will be payable to participants in the 401(k) Plan
upon their retirement.

Board and Committee Meetings
----------------------------

During its fiscal year ended June 30, 2001, our Board of Directors
held three (3 ) meetings.

The Committees of our Board if Directors met on the number of
occasions set forth below:

Audit -- 2 occasions.

Compensation -- 2 occasions.

Executive -- No occasion.

A brief description of the functions of these Committees of our
Board of Directors follows:

Audit - The Audit Committee reviews the performance and independence
of our auditors, makes an annual recommendation to the Board of
Directors with respect to the appointment of auditors, approves the
general nature of the services to be performed and solicits and
reviews the recommendations of the auditors. The Audit Committee also
consults with our financial officers and internal auditors. During our
fiscal year ended June 30, 2000, we adopted a charter for the Audit
Committee.

Executive - The Executive Committee can be delegated all of the powers
and authority (other than those reserved by statute) of the full Board
of Directors in the management of our business and affairs.

Compensation - The Compensation Committee reviews our compensation
policies and executive compensation changes and makes recommendations
on compensation plans.

Executive Compensation-Policy and Components of Compensation
------------------------------------------------------------

The Compensation Committee's fundamental executive compensation
philosophy is to enable us to attract and retain key executive personnel
and to motivate those executives to achieve our objectives which include
obtaining satisfactory sales and income levels and maintaining a sound
financial condition in light of the business environment in which we
operate. The method of evaluating executive performance includes
reviewing our sales, income levels and financial condition, and
assessing each executive's performance in connection with attaining such
sales, income levels and financial condition.

Each executive officer's compensation package is reviewed annually
and is comprised of three components: base salary, bonus, incentive
compensation and stock option grants. In addition, our executive
officers are eligible to participate in all benefit programs generally
available to other employees as well as certain additional life
insurance and other benefits.

Mr. Fields' compensation for fiscal year 2001 consisted of his
base salary compensation ($260,000) and his share ($100,000) of base
bonus compensation of $300,000 authorized by our Board of Directors
for our three most senior executive officers. No additional bonus,
short term or long term incentive compensation, or stock options were
awarded to Mr. Fields during fiscal year 2001. Mr. Fields' duties and
responsibilities include, among others, managing the long term
financial and economic resources of our Company, assuring the
continuity of our strong management, assuring that our Company remains
in a strong strategic position both financially and within our
industry so that we can take advantage of financial and market
opportunities, and striving to accomplish these duties and
responsibilities in spite of the fact that we operate in a cyclical
business with cyclical markets which frequently are subject to and
dependent upon unpredictable weather, difficult competitive markets
and other challenging conditions. The levels of our annual revenues,
net income and EBITDA (earnings before interest expense, federal
income taxes, depreciation and amortization) are among the factors
considered and to be considered in the future by our Compensation
Committee and Board of Directors in determining compensation for Mr.
Fields (or other executive officers). Other relevant factors include
competitive market conditions in each of our market areas, economic
conditions and weather related factors affecting business in each of
our market areas, availability of product and product lines in each of
our market areas, availability of personnel at acceptable wage levels
in each of our market areas, levels of compensation of other executive
officers in the building products industry, success in managing the
opening and closing of new and old distribution centers to maximize
and balance our short term and long term business operations and
financial returns, experience, management of banking relationships and
financial resources especially in light of both general and building
industry related conditions in the financial markets, ability both to
take advantage of market and financial opportunities that may arise
and to avoid potential problem areas that may appear attractive but,
in fact, are not (such as last year's "e-commerce" bubble), ability to
foster and maintain a corporate culture that maintains a high degree
of employee morale and relatively low level of employee turnover in
light of local market conditions, ability to maintain close contacts
within the industry to take advantage of potential acquisitions or
consolidation situations that may become available to the Company on
terms that may be attractive to us, effectiveness in managing the
purchasing function to achieve favorable prices and terms from our
most important vendors and to maximize our gross profit margins in
light of industry conditions, implementation of long term business,
financial and acquisition strategies, as well as other factors.
Although our net income and EBITDA declined in fiscal year 2001, and
revenues increased, Mr. Fields met the basic objectives of the
Company, satisfactorily fulfilled his duties and responsibilities in
light of relevant competitive market and economic conditions affecting
the Company, as determined by our Compensation Committee, and has
received his base level of compensation as stated above. The
Compensation Committee reviews compensation and incentive plans for
the most senior executive officers and makes recommendations to our
Board of Directors. In performing its reviews, the Compensation
Committee may engage the services of an independent, outside
consultant to render an opinion on proposed compensation for our most
senior executive officers.

Base Salary
-----------

In setting the base salary levels of each executive officer, the
Committee may consider making recommendations to the Board of Directors
regarding the base salaries of our executive officers based on the base
salaries and other elements of compensation paid to executive officers
in comparable positions in other similarly situated companies which are
known to the Committee to the extent permitted by our executive
officers' respective employment agreements. The Committee considers the
individual experience level and actual performance of each executive
officer in view of our needs and objectives.

Bonuses and Incentive Compensation
----------------------------------

Annual bonus and incentive bonus compensation may be earned by
each executive officer based upon our achievement of certain goals or
levels of performance including sales and income levels and financial
condition. Levels of base bonus compensation have been established by
our Board of Directors which, for fiscal year 2001, was an aggregate of
$300,000 for our three principal executive officers. Such goals or
levels of performance are developed by management and reviewed and
approved by the Compensation Committee and the Board of Directors.
Bonuses and incentive bonus compensation are awarded to executives based
upon efforts, experience, degree of success of the operations, financial
performance of the Company, the attainment of both financial and non-
financial goals, and levels of performance, all in light of the economic
and competitive business environment in which we operate.

Compensation Committee Members
------------------------------

Paul D. Finkelstein George Skakel III John E. Smircina, Esq.

Performance Table and Graph
---------------------------

The following table and graph, based on data provided by the
Center for Research in Securities Prices ("CSRP"), shows changes in the
value of $100 invested on March 12, 1999, when the trading in shares of
our common stock commenced following the Offering, of: (a) shares of our
common stock; (b) the Nasdaq Stock Market Index (U.S. companies); and
(c) a company determined peer group. The values of each investment at
the end of each period are derived from compounded daily returns that
include all dividends. Total stockholder returns from each investment
can be calculated from the period-end investment values shown in the
table and graph provided below.

The Company's Self-Determined Peer Group which is used in the
accompanying Performance Table and Performance Graph is comprised of a
sampling of publicly traded companies that the Company is aware
participate in the building, construction and industrial materials and
supplies distribution industry and companies which manufacture certain
construction materials. The Company is unaware of any publicly traded
companies whose primary business is the wholesale distribution of

residential roofing, masonry supplies and related products. Many of
the companies that participate in the wholesale distribution of
residential roofing, masonry supplies and related products industry
are not publicly owned. The names, stock market symbols and exchanges
or marketplaces on which the companies in the Self-Determined Peer
Group are traded are listed below. The index level for all three
series that are shown in the Performance Graph below was set to $100
on March 12, 1999, the day that the Company consummated its Offering.
The indexes are re-weighted daily using the market capitalizations on
the previous trading day.

Self-Determined Peer Group
--------------------------

Statistical Information and Graph Prepared by the Center for Research
in Security Prices on July 19, 2001.

Exchange/
Company Name Trading Symbol Market Place
------------ -------------- ------------

Berger Holdings Inc. BGRH NASDAQ-SCM(4)
Building Materials Holding Corp. BMHC NASDAQ-NMS(5)
C R H PLC (1) CRHCY NASDAQ-NMS(5)
Elcor Corp. ELK NYSE(6)
Fastenal Company FAST NASDAQ-NMS(5)
W W Grainger Inc. GWW NYSE(6)
Hughes Supply Inc. HUG NYSE(6)
M S C Industrial Direct Co. (2) MSM NYSE(6)
Owens Corning OWC NYSE(6)
U S G Corp. USG NYSE(6)
Watsco Inc. (3) WSO/B AMEX(7)
Watsco Inc. (2) WSO NYSE(6)
Wesco International Inc. WCC NYSE(6)
Wickes Inc. WIKS NASDAQ-NMS(5)

-------------------------------
(1) American Depository Receipt
(2) Class A equity.
(3) Class B equity.
(4) NASDAQ Small Cap Market.
(5) NASDAQ National Market System.
(6) New York Stock Exchange.
(7) American Stock Exchange.

Comparison of Five - Year Cumulative Total Returns
Performance Graph for
EAGLE SUPPLY GROUP, INC.

Produced on 07/19/2001 including date to 06/29/01

[GRAPH - DETAILS REFLECTED BELOW]

Legend

Symbol CRSP Total Returns Index for: 03/1999 06/1999 12/1999 06/2000 12/2000 06/2001
------ ----------------------------- ------- ------- ------- ------- ------- -------

_____ [] EAGLE SUPPLY GROUP, INC. 100.0 93.6 82.1 82.1 27.6 26.7
-- -- * Nasdaq Stock Market (US Companies) 100.0 113.3 171.6 167.5 103.2 90.8
- - - X Self-Determined Peer Groups 100.0 118.6 96.5 75.8 72.6 76.2

Notes:
A. The lines represent monthly index levels derived from compounded
daily returns that include all dividends.
B. The indexes are reweighted daily using the market capitalization on
the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a
trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 03/12/1999.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The following table sets forth, as of August 31, 2001, except as
noted in the next sentence, based upon our records and information
obtained from the persons named below, certain information concerning
beneficial ownership of our shares of Common Stock with respect to
(i) each person known to own 5% or more of our outstanding shares of
Common Stock, (ii) each of our executive officers and directors, and
(iii) all of our officers and directors as a group. The information
set forth below as to Bradco Supply Corporation and Barry Segal is
based solely upon filings made by such entity and person with the
Commission.

Amount Approximate
and Nature Percentage
of Beneficial of Common
Identity(1) Ownership Stock Owned
----------- ------------- -----------

TDA Industries, Inc. 5,100,000(2) 59.9%
Douglas P. Fields 5,100,000(2) 59.9%
Frederick M. Friedman 5,100,000(2) 59.9%
James E. Helzer 340,000(3) 3.9%
Gary L. Howard 350,000(3) 4.1%
E.G. Helzer 24,000(3) *
Steven R. Andrews, Esq. 150,000(3) 1.8%
Paul D. Finkelstein 10,000(3) *
John E. Smircina, Esq. 5,100,000(2) 59.9%
George Skakel III 10,000(3) *
All Executive Officers and
Directors as a group
(9 persons) 5,964,000(2)(3) 68.9%
Barry Segal(4) 1,016,280 11.9%
_______________________________
* Denotes less than 1%.

(1) The addresses for the foregoing entities and persons are:
- TDA Industries, Inc., 122 East 42nd Street, New York, New York
10168.
- Messrs. Fields and Friedman, c/o Eagle Supply Group, Inc., 122
East 42nd Street, New York, New York 10168
- Mr. James E. Helzer, 2500 U.S. Highway 287, Mansfield, Texas
76063.
- Mr. Howard, 2090 Highway 157 N., Mansfield, Texas 76063.
- Mr. Andrews, 822 North Monroe Street, Tallahassee, Florida 32303.
- Mr. E.G. Helzer, 2500 U.S. Highway 287, Mansfield, Texas 76063.
- Mr. Finkelstein, c/o Regis Corp., 7201 Metro Blvd., Minneapolis,
MN 55439-2130.
- Mr. Smircina, 221S Alfred Street, Alexandria, Virginia 22314.
- Mr. Skakel, 115 Maple Avenue, Greenwich, Connecticut 06830.
- Mr. Segal, c/o Bradco Supply Corporation, 13 Production Way,
Avenel, NJ 07001.

(2) Messrs. Fields and Friedman are officers and directors and
principal stockholders of TDA. Mr. Smircina is a director of TDA. Each
of Messrs. Fields, Friedman and Smircina may be deemed to exercise
voting control over our securities owned by TDA. See Item 10.
"Directors and Executive Officers of Registrant" and Item 13. "Certain
Relationships and Related Transactions."

(3) Does not include options granted under Group's Stock Option Plan
which have not vested but includes such options which have vested. See
Item 10. "Directors and Executive Officers of Registrant."

(4) According to filings made with the Commission, Mr. Segal directly
owns 989,580 shares of our Common Stock with an additional 26,700
shares owned by Bradco Supply Corporation, a corporation of which Mr.
Segal is the majority shareholder and Chief Executive Officer.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

JEH Eagle
---------

In 1997, JEH Eagle acquired the business and substantially all of
the assets of JEH Co., which is wholly-owned by James E. Helzer, now
our President. Certain potentially substantial, contingent payments,
as additional future consideration to JEH Co. or its designee are to
be paid by JEH Eagle. For the fiscal year ended June 30, 2001,
approximately $315,000 of additional consideration was paid to JEH Co.
or its designee. See Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Acquisitions."

James E. Helzer had rented to JEH Co. and continues to rent to
JEH Eagle, pursuant to five-year written leases, the premises for
several of JEH Eagle's distribution centers and JEH Eagle's executive
offices. Base rental payments to Mr. Helzer for the several
distribution facilities he leases to JEH Eagle aggregated
approximately $743,000 during fiscal 2001. See Item 2. "Properties."

During its fiscal year ended June 30, 2001, JEH Eagle made sales
aggregating approximately $853,000 to entities owned by Jay James
Helzer, the son of James E. Helzer, and other family members.

Pursuant to an agreement, TDA provides JEH Eagle with certain
services including: (i) managerial, (ii) strategic planning, (iii)
banking negotiation, (iv) investor relations, and (v) advisory
services relating to acquisitions for a five-year term which commenced
in July 1997. A $3,000 monthly fee commenced in March 1999.

Gary L. Howard had rented to MSI Co. and continues to rent to JEH
Eagle (successor by merger to MSI Eagle), pursuant to a three-year
written lease, certain office, showroom, warehouse and outdoor storage
space for one of JEH Eagle's distribution centers. Base rental
payments to Gary L. Howard for the distribution facility he leases to
JEH Eagle aggregated approximately $107,000 during fiscal 2001. See
Item 2. "Properties."

JEH Eagle rents a distribution center, pursuant to a five-year
written lease ending in June 2004, from a limited liability company
fifty (50%) percent owned by James E. Helzer and his spouse and fifty
(50%) percent owned by a subsidiary of TDA. Base rental payments to
this limited liability company for the distribution facility it leases
to JEH Eagle aggregated approximately $46,000 during fiscal 2001. See
Item 2. "Properties." The limited liability company acquired these
premises from JEH Eagle as of July 1, 1999, which had itself acquired
the premises from one of its customers.

MSI Eagle
---------

In October 1998, MSI Eagle acquired the business and
substantially all of the assets of MSI Co., which is wholly-owned by
Gary L. Howard, now one of our Senior Vice Presidents. Certain,
potentially substantial, contingent payments, as additional future
consideration to MSI Co. or its designee, are to be paid by JEH Eagle.
For the fiscal year ended June 30, 2001, approximately $270,000 of
additional consideration was paid to MSI Co. or its designee. See Item
7. "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Acquisitions."

TDA-Eagle
---------

TDA is a holding company which operated several business
enterprises that included Eagle, JEH Eagle and MSI Eagle until our
acquisition of them in March 1999.

A wholly-owned subsidiary of TDA had rented to Eagle and
continues to rent to Eagle, pursuant to ten-year written leases, the
premises for several of Eagle's distribution centers. Base rental
payments to the TDA subsidiary for the several distribution centers it
leases to Eagle aggregated approximately $790,000 during fiscal 2001.
See Item 2. "Properties."

JEH Eagle rents a distribution center, pursuant to a five-year
written lease ending in June 2004, from a limited liability company
fifty (50%) percent owned by James E. Helzer and his spouse and fifty
(50%) percent owned by a TDA subsidiary. Base rental payments to this
limited liability company for the distribution facility it leases to
JEH Eagle aggregated approximately $46,000 during fiscal 2001. See
Item 2. "Properties." The limited liability company acquired these
premises from JEH Eagle as of July 1, 1999, which had itself acquired
the premises from one of its customers.

TDA provides office space and administrative services to the
Company in New York City pursuant to a month-to-month administrative
services agreement requiring a $3,000 monthly payment to TDA.

The foregoing transactions that Eagle, JEH Eagle and MSI Eagle
have engaged in with TDA have benefited or may be deemed to have
benefited TDA, directly or indirectly. Messrs. Fields and Friedman,
our Chief Executive Officer and Chairman of our Board of Directors and
our Executive Vice President, Chief Financial Officer, Treasurer,
Secretary, and Director, respectively, are also executive officers,
directors and principal stockholders of TDA and have benefited or may
be deemed to have benefited, directly or indirectly, from the

foregoing transactions with TDA. TDA and/or certain of its
subsidiaries derive funds from the operation of an indoor tennis
facility, commercial lease payments from us and others and income from
investments. These sources help to defray TDA's operating expenses,
including the payment of salaries and benefits to Messrs. Fields and
Friedman. See Item 10. "Directors and Executive Officers of
Registrant."

Messrs. Fields and Friedman are officers, directors and principal
stockholders of TDA, and Mr. Smircina is a director of TDA, and,
consequently, they are able, through TDA, to direct the election of
our directors, effect significant corporate events and generally
direct our affairs. We do not intend to enter into any material
transactions, loans or forgiveness of loans with any affiliates,
except as contemplated or otherwise disclosed in our filings with the
Commission, unless we believe that such transaction is fair and
reasonable to us and we believe that it is on terms no less favorable
than we could obtain from unaffiliated third parties. Additionally,
any such event must be approved by a majority of our directors who do
not have an interest in such a transaction and who have had access, at
our expense, to independent legal counsel.

The foregoing transactions that we have engaged in with James E.
Helzer have benefited or may be deemed to have benefited Mr. Helzer,
directly or indirectly. James E. Helzer is our President.

The foregoing transactions that we have engaged in with Gary L.
Howard have benefited or may be deemed to have benefited Mr. Howard.
Mr. Howard is one of our Senior Vice Presidents.

For certain details concerning our 1999 acquisition of Eagle, JEH
Eagle, and MSI Eagle, the 1997 acquisition of JEH Co. by JEH Eagle and
the 1998 acquisition of MSI Co. by MSI Eagle, see Item 7.
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Acquisitions" and the Financial Statements and
Notes thereto.

Fairness
--------

Our management believes that the foregoing transactions were and
are fair and reasonable to us and were made on terms no less favorable
to us than terms and conditions that could have been entered into with
independent third parties.

Each of TDA and Messrs. Fields and Friedman may be deemed to be a
"promoter" of our enterprise as such term is defined under the federal
securities laws.

General
-------

As a result of the Offering, 300,000 and 200,000 shares of our
Common Stock were issued to Messrs. Helzers and Howard, respectively,
as additional consideration in connection with JEH Eagle's acquisition
of JEH Co. and MSI Eagle's acquisition of MSI Co.

Other Related Party Transactions
--------------------------------

For details concerning the employment agreements and arrangements
with Messrs. Fields, Friedman, Helzers and Howard, see Item 10.
"Directors and Executive Officers of Registrant," and Item 11.
"Executive Compensation."

PART IV
-------

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

(a) Exhibits

None

(b) All schedules are omitted, as the required information is either
inapplicable or presented in the financial statements or related
notes.

SIGNATURES
----------

Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
New York, State of New York, on the 28th day of September, 2001.

EAGLE SUPPLY GROUP, INC.

By:______/s/ Douglas P. Fields_________
Douglas P. Fields,
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed by the following persons in the
capacities and on the dates indicated:

Signature Title Date
--------- ----- -----

/s/___Douglas P. Fields____ Chairman of the Board of September 28, 2001
Douglas P. Fields Directors and Chief
Executive Officer
(Principal Executive Officer)

/s/__Frederick M. Friedman__ Executive Vice President, September 28, 2001
Frederick M. Friedman Treasurer, Secretary and
Director (Principal Financial
and Accounting Officer)

/s/___James E. Helzer_______ Vice Chairman of the Board September 28, 2001
James E. Helzer of Director

/s/___Paul D. Finkelstein___ Director September 28, 2001
Paul D. Finkelstein

/s/___George Skakel III_____ Director September 28, 2001
George Skakel III

/s/___John E. Smircina______ Director September 28, 2001
John E. Smircina

/s/___Steven R. Andrews_____ Director September 28, 2001
Steven R. Andrews

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Eagle Supply Group, Inc.

We have audited the accompanying consolidated balance sheets of Eagle
Supply Group, Inc. (the "Company") and subsidiaries as of June 30,
2001 and 2000, and the related consolidated statements of operations,
shareholders' equity and cash flows for the three years ended June 30,
2001. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audits 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, such consolidated financial statements present fairly,
in all material respects, the financial position of Eagle Supply
Group, Inc. and subsidiaries as of June 30, 2001 and 2000, and the
results of their operations and their cash flows for the three years
ended June 30, 2001 in conformity with accounting principles generally
accepted in the United States of America.

/s/Deloitte & Touche LLP

Deloitte & Touche LLP

Fort Worth, Texas
September 21, 2001

F-1

EAGLE SUPPLY GROUP, INC.

CONSOLIDATED BALANCE SHEETS
JUNE 30, 2001 AND 2000
-----------------------------------------------------------------------------

ASSETS 2001 2000

CURRENT ASSETS:
Cash and cash equivalents $ 5,679,891 $ 7,165,878
Accounts and notes receivable - trade
(net of allowance for doubtful accounts
of $2,352,491 and $1,496,000,
respectively) 35,714,565 29,444,868
Inventories 30,781,359 26,321,681
Deferred tax asset 1,028,649 601,426
Federal and state income taxes receivable 444,516 -
Other current assets 856,951 1,122,431
------------ ------------
Total current assets 74,505,931 64,656,284

PROPERTY AND EQUIPMENT, Net 4,514,225 5,542,722

EXCESS COST OF INVESTMENTS OVER NET ASSETS
ACQUIRED (net of accumulated amortization
of $1,936,216, and $1,130,522,
respectively) 14,097,292 14,123,363
DEFERRED FINANCING COSTS 157,727 186,772
------------ ------------
$ 93,275,175 $ 84,509,141
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 3,240,000 $ 3,000,000
Accounts payable 26,670,560 22,504,893
Due to related parties 636,884 2,162,474
Accrued expenses and other current
liabilities 4,493,949 3,534,110
Income taxes due to TDA Industries, Inc. - 1,143,537
Federal and state income taxes payable - 424,715
------------ ------------
Total current liabilities 35,041,393 32,769,729

LONG-TERM DEBT 38,336,642 33,089,454
DEFERRED TAX LIABILITY 862,552 464,212
------------ ------------
Total liabilities 74,240,587 66,323,395
------------ ------------

COMMITMENTS AND CONTINGENCIES (Notes 6, 7 and 8)
SHAREHOLDERS' EQUITY:
Preferred shares, $.0001 par value per share
2,500,000 shares authorized - none issued
and outstanding - -
Common shares, $.0001 par value per share
25,000,000 shares authorized - issued and
outstanding - 8,510,000 851 851
Additional paid-in capital 16,958,141 16,958,141
Retained earnings 2,075,596 1,226,754
------------ ------------
Total shareholders' equity 19,034,588 18,185,746
------------ ------------
$ 93,275,175 $ 84,509,141
============ ============

See notes to consolidated financial statements.

F-2

EAGLE SUPPLY GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 2001, 2000 AND 1999

2001 2000 1999

REVENUES $ 196,240,714 $ 187,714,736 $ 159,844,520

COST OF SALES 146,875,799 142,421,814 122,137,798
------------- ------------- -------------
49,364,915 45,292,922 37,706,722
------------- ------------- -------------
OPERATING EXPENSES (including a provision
for doubtful accounts of $1,464,418,
$732,890 and $1,348,860, respectively) 42,917,028 37,443,191 29,340,721

DEPRECIATION 1,410,544 1,387,761 1,212,046

AMORTIZATION OF EXCESS COST OF
INVESTMENTS OVER NET ASSETS ACQUIRED 805,694 621,565 337,128

AMORTIZATION OF DEFERRED FINANCING COSTS 92,009 79,417 72,832
------------- ------------- -------------
45,225,275 39,531,934 30,962,727
------------- ------------- -------------
INCOME FROM OPERATIONS 4,139,640 5,760,988 6,743,995
------------- ------------- -------------
OTHER INCOME (EXPENSE):
Investment and other income 490,215 489,230 125,012
Interest expense (3,201,013) (3,069,472) (2,500,655)
------------- ------------- -------------
(2,710,798) (2,580,242) (2,375,643)
------------- ------------- -------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 1,428,842 3,180,746 4,368,352

PROVISION FOR INCOME TAXES 580,000 1,170,000 1,665,000
------------- ------------- -------------
NET INCOME $ 848,842 $ 2,010,746 $ 2,703,352
============= ============= =============
BASIC AND DILUTED NET INCOME PER SHARE $ .10 $ .24 $ .43
============= ============= =============
COMMON SHARES USED IN BASIC AND
DILUTED NET INCOME PER SHARE 8,510,000 8,510,000 6,285,753
============= ============= =============

See notes to consolidated financial statments.

F-3

EAGLE SUPPLY GROUP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JUNE 30, 2001, 2000 AND 1999
-----------------------------------------------------------------------------

Additional Due from TDA
Preferred Shares Common Shares Paid-In Retained and Affiliated
Shares Amount Shares Amount Capital Earnings Companies Total
------ ------ --------- ------ ----------- ----------- -------------- ------------

BALANCE, JULY 1, 1998 - $ - 5,400,000 $ 540 $ 2,702,865 $ 779,658 $(3,623,619) $ (140,556)

Net income - - - - - 2,703,352 - 2,703,352

Proceeds from initial public
offering of Common Shares
and Warrants - net - - 2,500,000 250 10,205,337 - - 10,205,587

Shares issued in connection
with the acquisition of
JEH Co. - - 300,000 30 1,499,970 - - 1,500,000

Shares issued in connection
with the acquisition of
MSI Co. - - 200,000 20 999,980 - - 1,000,000

Shares issued as a principal
payment of a note payable - - 50,000 5 249,995 - - 250,000

Cash dividends paid to TDA
Industries, Inc. - - - - - (1,200,000) - (1,200,000)

Capital contribution from
TDA Industries, Inc. - - - - 1,000,000 - - 1,000,000

Net change in Due from TDA
Industries, Inc. and
affiliated companies - - - - - - 69,412 69,412

Non-cash dividend to TDA
Industries, Inc. - net - - - - - (3,067,002) 3,067,002 -
------ ------ --------- ------ ----------- ----------- ----------- ------------
BALANCE, JUNE 30, 1999 - - 8,450,000 845 16,658,147 (783,992) (487,205) 15,387,795

Net income - - - - - 2,010,746 - 2,010,746

Shares issued in connection
with the acquisition of
MSI Co. - - 60,000 6 299,994 - - 300,000

Net change in Due from TDA
Industries, Inc. and
affiliated companies - - - - - - 487,205 487,205
------ ------ --------- ------ ----------- ----------- ----------- ------------
BALANCE, JUNE 30, 2000 - - 8,510,000 851 16,958,141 1,226,754 - 18,185,746

Net income - - - - - 848,842 - 848,842
------ ------ --------- ------ ----------- ----------- ----------- ------------
BALANCE, JUNE 30, 2001 - $ - 8,510,000 $ 851 $16,958,141 $ 2,075,596 $ - $ 19,034,588
====== ====== ========= ====== =========== =========== =========== ============

See notes to consolidated financial statements.

F-4

EAGLE SUPPLY GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2001, 2000 AND 1999
-----------------------------------------------------------------------------

2001 2000 1999
------------ ------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 848,842 $ 2,010,746 $ 2,703,352

Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 2,308,247 2,088,743 1,622,006
Deferred income taxes (28,883) 419,748 (260,640)
Increase (decrease) in allowance for doubtful
accounts 856,491 (104,000) 622,595
(Gain) loss on sale of equipment (15,413) 26,966 (9,472)
Changes in operating assets and liabilities:
Increase in accounts and notes receivable (7,126,188) (2,168,442) (3,257,580)
Increase in inventories (4,459,678) (7,349,133) (2,393,992)
Decrease (increase) in other current assets 265,480 (29,604) (238,908)
Increase in accounts payable 4,165,667 2,366,747 929,926
Increase (decrease) in accrued expenses and
other current liabilities 959,839 (197,122) 488,231
Decrease in due from related party - 250,000 -
Increase (decrease) in due to related parties 51,891 (150,446) 7,249
(Decrease) increase in income taxes due to
TDA Industries, Inc. (1,143,537) - 117,919
(Decrease) increase in federal and state
income taxes (869,231) (183,445) 608,160
------------ ------------ ------------
Net cash (used in) provided by
operating activities (4,186,473) (3,019,242) 938,846
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (592,045) (967,462) (1,982,860)
Proceeds from sale of fixed assets 225,411 627,274 70,771
Payment of additional consideration for the
purchase of JEH Co. (2,141,454) (1,907,842) -
Payment of additional consideration for the
purchase of MSI Co. (215,650) - -
Payment for purchase of net assets of MSI Co. - - (1,519,840)
------------ ------------ ------------
Net cash used in investing activities (2,723,738) (2,248,030) (3,431,929)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial public offering, net of
related expenses - - 10,205,587
Principal borrowings on long-term debt 217,424,596 199,350,576 170,481,066
Principal reductions on long-term debt (211,937,408) (195,924,037) (170,930,422)
Increase in deferred financing costs (62,964) - -
Proceeds from issuance of notes payable
- shareholders - - 200,000
Repayments of notes payable - shareholders - - (500,000)
Capital contribution from TDA Industries, Inc. - - 1,000,000
Cash dividends paid to TDA Industries, Inc. - - (1,200,000)
Decrease in amounts due from TDA Industries, Inc.
and affiliated companies - 487,205 70,255
------------ ------------ ------------
Net cash provided by financing activities 5,424,224 3,913,744 9,326,486
------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (1,485,987) (1,353,528) 6,833,403

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 7,165,878 8,519,406 1,686,003
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 5,679,891 $ 7,165,878 $ 8,519,406
============ ============ ============

See notes to consolidated financial statements.

F-5

EAGLE SUPPLY GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2001, 2000 AND 1999
-----------------------------------------------------------------------------

2001 2000 1999
------------ ------------ ------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 3,201,013 $ 3,069,472 $ 2,500,655
============ ============ ============
Cash paid for income taxes $ 1,420,348 $ 933,697 $ 966,243
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Non-cash dividend to TDA Industries, Inc. - net $ - $ - $ 3,067,002
============ ============ ============
300,000 Common Shares issued in connection with the
acquisition of JEH Co. $ - $ - $ 1,500,000
============ ============ ============
200,000 Common Shares issued in connection with the
acquisition of MSI Co. $ - $ - $ 1,000,000
============ ============ ============
50,000 Common Shares issued as a principal payment
of a note payable $ - $ - $ 250,000
============ ============ ============
60,000 Common Shares issued in connection with the
acquisition of MSI Co. $ - $ 300,000 $ -
============ ============ ============
Additional consideration pursuant to the acquisition
of JEH Co. $ 314,864 $ 1,946,824 $ 1,773,212
============ ============ ============
Additional consideration pursuant to the acquisition
of MSI Co. $ 270,129 $ 215,650 $ -
============ ============ ============
Acquisitions of MSI Co.:
Fair value of assets acquired $ 9,284,007
Liabilities assumed (1,359,698)
Notes issued to sellers (2,045,972)
Due to related party (250,000)
Bank debt incurred (4,108,497)
------------
Cash paid $ 1,519,840
============

See notes to consolidated financial statements.

F-6

EAGLE SUPPLY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2001, 2000 AND 1999
-----------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

BUSINESS DESCRIPTION - Eagle Supply Group, Inc. (the "Company") is
a majority-owned subsidiary of TDA Industries, Inc. ("TDA" or the
"Parent") and was organized to acquire, integrate and operate
seasoned, privately-held companies which distribute products to or
manufacture products for the building supplies/construction
industry.

INITIAL PUBLIC OFFERING - On March 17, 1999, the Company completed
the sale of 2,500,000 shares of Common Stock at $5.00 per share and
2,875,000 Redeemable Common Stock Purchase Warrants at $.125 per
warrant in connection with its initial public offering (the
"Offering"). The net proceeds to the Company aggregated
approximately $10,206,000.

Acquisitions and Basis of Presentation - Upon consummation of the
Offering, the Company acquired all of the issued and outstanding
common shares of Eagle Supply, Inc. ("Eagle"), JEH/Eagle Supply,
Inc. ("JEH Eagle") and MSI/Eagle Supply, Inc. ("MSI Eagle") (the
"Acquisitions") from TDA for consideration consisting of 3,000,000
of the Company's common shares. The Acquisitions have been
accounted for as the combining of four entities under common
control, similar to a pooling of interests, with the net assets of
Eagle, JEH Eagle and MSI Eagle recorded at historical carryover
values. The 3,000,000 common shares of the Company issued to TDA
were recorded at Eagle's, JEH Eagle's and MSI Eagle's historical
net book values at the date of acquisition. Accordingly, this
transaction did not result in any revaluation of Eagle's, JEH
Eagle's or MSI Eagle's assets or the creation of any goodwill.
Upon the consummation of the Acquisitions, Eagle, JEH Eagle and MSI
Eagle became wholly-owned subsidiaries of the Company. Effective
May 31, 2000, MSI Eagle was merged with and into JEH Eagle. As of
July 1, 2000, the Texas operations of JEH Eagle were transferred to
a newly formed limited partnership owned directly and indirectly by
JEH Eagle. Accordingly, the Company's business operations are
presently conducted through two wholly-owned subsidiaries and a
limited partnership.

As a result of the Acquisitions, the consolidated financial
statements of the Company, Eagle, JEH Eagle and MSI Eagle have been
prepared as if all of the entities had operated as a single
consolidated group for all periods subsequent to each entity's
respective date of acquisition by TDA. Eagle is included in the
consolidated financial statements for all periods presented. JEH
Eagle is included in the consolidated financial statements from
July 1, 1997 and MSI Eagle is included in the consolidated
financial statements from October 22, 1998, the dates that the
business and substantially all of the assets of JEH Co. and MSI Co.
were acquired by JEH Eagle and MSI Eagle, respectively. Eagle, JEH
Eagle and MSI Eagle operate in a single industry segment and all of
their revenues are derived from sales to third party customers in
the United States.

INVENTORIES - Inventories are valued at the lower of cost or
market. Cost is determined by using the first-in, first-out
("FIFO"), last-in, first-out ("LIFO"), or average cost methods. If
LIFO inventories (approximately $7,665,000, $6,489,000 and
$6,033,000 at June 30, 2001, 2000 and 1999, respectively) had been
valued at the lower of FIFO cost or market, inventories would be
higher by approximately $719,000, $720,000 and $530,000 for fiscal
2001, 2000 and 1999, respectively, and income before provision for
income taxes would have decreased by approximately $1,000 in fiscal
2001 and increased by approximately $190,000 and $10,000 in fiscal
2000 and 1999, respectively.

DEPRECIATION AND AMORTIZATION - Depreciation and amortization of
property and equipment are provided principally by straight-line
methods at various rates calculated to extinguish the carrying
values of the respective assets over their estimated useful lives.

EXCESS COST OF INVESTMENTS OVER NET ASSETS ACQUIRED - Excess cost
of investments over net assets acquired ("goodwill") has been
amortized on a straight-line method over 15 to 40 years.

DEFERRED FINANCING COSTS - Deferred financing costs are related to
the acquisition financing obtained in connection with the
Acquisitions described in Note 2 and are being amortized on a
straight-line method over the term of the related debt obligations.

F-7

INCOME TAXES - Prior to the completion of the Offering, the Company
was included in the consolidated federal and state income tax
returns of its Parent. Income taxes were calculated on a separate
return filing basis. Subsequent to the Offering, the Company files
a consolidated federal income tax return with its subsidiaries.
The Company uses the liability method of computing deferred income
taxes on all material temporary differences. Temporary differences
are the differences between the reported amounts of assets and
liabilities and their tax bases.

NET INCOME PER SHARE - Basic net income per share was calculated by
dividing net income by the weighted average number of shares
outstanding during the periods presented and excluded any potential
dilution. Diluted net income per share was calculated similarly
and would generally include potential dilution from the exercise of
stock options and warrants (see Note 8). There were
no dilutive options or warrants for any of the periods presented.
Both basic and diluted net income per share includes, for all
periods presented, the 3,000,000 common shares of the Company
issued to TDA in connection with the Acquisitions.

LONG-LIVED ASSETS - Long-lived assets are stated at the lower of
the expected net realizable value or cost. The carrying value of
long-lived assets is periodically reviewed to determine whether
impairment exists. The review is based on comparing the carrying
amount of the asset to the undiscounted estimated cash flows over
the remaining useful lives. No impairment is indicated as of June
30, 2001.

FAIR VALUE OF FINANCIAL INSTRUMENTS - The estimated fair value of
financial instruments have been determined by the Company using
available market information and appropriate valuation
methodologies. However, considerable judgment is required in
interpreting market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions
and/or estimation methodologies may have a material effect on the
estimated fair value amounts.

Cash and Cash Equivalents, Accounts and Notes Receivable, Accounts
Payable and Accrued Expenses - The carrying amounts of these items
are a reasonable estimate of their fair value.

Long-Term Debt - Interest rates that are currently available to the
Company for issuance of debt with similar terms and remaining
maturities are used to estimate fair value for bank debt. The
carrying amounts comprising this item are reasonable estimates of
fair value, except for a 6% note due in July 2002. Such note has a
carrying value of $864,852 and an estimated fair market value of
$845,000 and $790,000 at June 30, 2001 and 2000, respectively.

The fair value estimates are based on pertinent information
available to management as of June 30, 2001. Although management
is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial statements
since that date and current estimates of fair value may differ
significantly from the amounts presented.

CONCENTRATION OF CREDIT RISK - The financial instruments, which
potentially subject the Company to concentration of credit risk,
consist principally of commercial paper which is included in cash
and cash equivalents and accounts receivable. The Company grants
credit to customers based on an evaluation of the customer's
financial condition and in certain instances obtains collateral in
the form of liens on both business and personal assets of its
customers. Exposure to losses on receivables is principally
dependent on each customer's financial condition. The Company
controls its exposure to credit risks through credit approvals,
credit limits and monitoring procedures and establishes allowances
for anticipated losses.

USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.

REVENUE RECOGNITION - The Company recognizes revenues from the sale
of inventory when title passes to the purchaser.

COMPREHENSIVE INCOME - The Company has no components of
comprehensive income except for net income.

SIGNIFICANT VENDORS - During the fiscal years ended June 30, 2001,
2000 and 1999, the Company purchased approximately 18%, 18% and
17%, respectively, of its product lines from one supplier and
approximately 13% of its product lines from a second supplier in
fiscal 2001. Since similar products are available from other
suppliers, the loss of these suppliers would not have a long-term
material adverse effect on the Company's business.

F-8

CASH AND CASH EQUIVALENTS - The Company considers any highly liquid
investments with an original maturity of three months or less at
date of acquisition to be cash equivalents. Cash equivalents
amounted to approximately $5,000,000 and $5,988,000 at June 30,
2001 and 2000, respectively.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - In June 1998, the
Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities. This Statement
establishes accounting and reporting standards for derivative
instruments and hedging activities. It requires the recognition of
all derivatives as either assets or liabilities in the statement of
financial position and measurement of those instruments at fair
value. The accounting for changes in the fair value of a derivative
is dependent upon the intended use of the derivative. SFAS No. 133
became effective in the Company's first quarter of the current
fiscal year. The adoption of this Statement did not have a
significant impact on the Company's financial condition, results of
operations or cash flows.

In December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue
Recognition in Financial Statements. SAB 101 summarizes certain of
the SEC's views in applying generally accepted accounting
principles to revenue recognition in financial statements. The
Company was required to adopt SAB 101 in the first quarter of the
current fiscal year. The adoption of SAB 101 did not have a
material effect on the Company's financial condition, results of
operations or cash flows.

On June 29, 2001, the FASB approved for issuance SFAS 141, Business
Combinations, and SFAS 142, Goodwill and Intangible Assets. Major
provisions of these Statements are as follows: all business
combinations initiated after June 30, 2001 must use the purchase
method of accounting; the pooling of interest method of accounting
is prohibited, except for transactions initiated before July 1,
2001; intangible assets acquired in a business combination must be
recorded separately from goodwill if they arise from contractual or
other legal rights or are separable from the acquired entity and
can be sold, transferred, licensed, rented or exchanged, either
individually or as part of a related contract, asset or liability;
goodwill and intangible assets with indefinite lives are not
amortized but are tested for impairment annually, except in certain
circumstances and whenever there is an impairment; all acquired
goodwill must be assigned to reporting units for purposes of
impairment testing; and, effective January 1, 2002, goodwill will
no longer be subject to amortization. The Company is permitted to
early adopt effective July 1, 2001, and management has elected to
do so. Management believes that these Statements will not have a
material impact on the Company's financial condition, results of
operations or cash flows, other than from the cessation of the
amortization of goodwill. During the fiscal year ended June 30,
2001, goodwill amortization totaled approximately $806,000 ($.09
per share).

2. ACQUISITIONS

On July 8, 1997, effective as of July 1, 1997, JEH Eagle acquired
the business and substantially all of the assets of JEH Company,
Inc. ("JEH Co."), engaged in the wholesale distribution of roofing
supplies and related products utilized primarily in the
construction industry. The purchase price, as adjusted, including
transaction expenses, was $14,767,852 consisting of $13,878,000 in
cash, net of $250,000 due from JEH Co., and a five-year, 6% per
annum note in the principal amount of $864,852. The purchase price
and the note are subject to further adjustment under certain
conditions. Further, JEH Eagle is obligated for potentially
substantial additional payments if, among other factors, the
business acquired attains certain levels of income, as defined,
during the five-year period ending June 30, 2002 (the "JEH
Applicable Period"). Additionally, with respect to certain Total
Accounts Receivable Reserves, as defined (the "JEH Reserves"),
which were established at date of acquisition, if JEH Eagle reduces
the amount of the JEH Reserves in any fiscal year during the JEH
Applicable Period, JEH Co. or its designee is to be paid a portion
of such reduction based on a formula as described in the
acquisition agreement. Additionally, if the Offering was
consummated prior to June 30, 2002 and in the event certain JEH
EBITDA levels, as defined, had been reached during the period July
1, 1997 through the date of consummation of the Offering, JEH Co.
or its designee would have been entitled to receive $1,000,000 or
$1,350,000 (either in cash or in common shares of the Company
valued at the public offering price) depending upon the JEH EBITDA
level. Upon consummation of the Offering, the Company issued
300,000 of its common shares to James E. Helzer the owner of JEH
Co. and President of the Company in fulfillment of the obligation
set forth in the immediately preceding sentence. For the fiscal
years ended June 30, 2000 and 1999, approximately $1,947,000 and
$1,773,000, respectively, of additional consideration was paid to
JEH Co. or its designee. For the fiscal year ended June 30, 2001,
approximately $315,000 of additional consideration is payable to
JEH Co. or its designee. All of such additional consideration
increased goodwill.

F-9

The foregoing transaction was accounted for as a purchase and,
accordingly, the results of the operations acquired from JEH Co.
have been included in the statements of operations from the
effective date of the acquisition.

On October 22, 1998, MSI Eagle acquired the business and
substantially all of the assets of Masonry Supply, Inc. ("MSI
Co."), engaged in the wholesale distribution of masonry supplies
and related products utilized primarily in the construction
industry. The purchase price, as adjusted, including transaction
expenses, was $8,537,972 consisting of $6,492,000 in cash and a
five-year, 8% per annum note in the principal amount of $2,045,972.
The purchase price and the note are subject to further adjustment
under certain conditions. The note was paid in full in March 1999
out of the proceeds of the Offering. Further, MSI Eagle is
obligated for potentially substantial additional payments if, among
other factors, the business acquired attains certain levels of
income, as defined, during the five-year period ending June 30,
2003. Additionally, if the Offering was consummated prior to
October 22, 2003 and certain MSI EBITA levels, as defined, had been
reached, MSI Co. or its designee would have been entitled to
receive (i) $1,000,000 or (ii) $750,000 (either in cash or in
common shares of the Company valued at the public offering price)
if the MSI EBITA level was (i) not less than $2,000,000 per year or
(ii) less than $2,000,000 but not less than $1,500,000 per year,
respectively. Upon the consummation of the Offering, the Company
issued 200,000 of its common shares, and, as of July 1, 1999, the
Company issued 60,000 of its common shares, to Gary L. Howard, the
designee and owner of MSI Co. and a senior vice president of the
Company, in fulfillment of the obligation set forth in the
immediately preceding sentence and in fulfillment of certain of
such future additional consideration. For the fiscal year ended
June 30, 2000, approximately $216,000 of additional consideration
was paid to MSI Co. or its designee. For the fiscal year ended
June 30, 2001, approximately $270,000 of additional consideration
is payable to MSI Co. or its designee. All of such additional
consideration increased goodwill. No additional consideration was
payable to MSI Co. for fiscal 1999.

The foregoing transaction was accounted for as a purchase and,
accordingly, the results of the operations acquired from MSI Co.
have been included in the statements of operations from the date of
the acquisition.

The following pro forma information represents the consolidated
results of operations of the Company as if the MSI Co. acquisition
had been consummated as of July 1, 1998:

Year Ended
June 30, 1999

Revenues $ 163,821,000
=============

Net income $ 2,949,000
=============

The pro forma information is not necessarily indicative of the
operating results that would have occurred if the MSI Co.
acquisition had been consummated as of July 1,1998, nor is it
necessarily indicative of future operating results. The actual
results of operations of MSI Co. are included in the Company's
consolidated financial statements only from the date of acquisition.

3. PROPERTY AND EQUIPMENT

The major classes of property and equipment are as follows:

June 30, Estimated
2001 2000 Useful Lives
------------ ------------

Furniture, fixtures and equipment $ 2,599,915 $ 2,973,393 5 years
Automotive equipment 4,575,651 4,641,059 5-7 years
Leasehold improvements 1,945,353 1,798,197 10 years
Assets acquired under capitalized leases 831,766 970,278 1-2 years
------------ ------------
9,952,685 10,382,927
Less: Accumulated depreciation and
amortization 5,438,460 4,840,205
------------ ------------
$ 4,514,225 $ 5,542,722
============ ============

F-10

4. INCOME TAXES

Components of the provision for income taxes are as follows:

Year Ended June 30,
2001 2000 1999
--------- ---------- ----------
Current:
Federal $ 458,117 $ 660,252 $1,629,640
State and local 93,000 90,000 296,000
Deferred 28,883 419,748 (260,640)
--------- ---------- ----------
$ 580,000 $1,170,000 $1,665,000
========= ========== ==========

A reconciliation of income taxes at the federal statutory rate and
the amounts provided, is as follows:

Year Ended June 30,
2001 2000 1999
----------- ----------- -----------

Tax using the statutory rate $ 486,000 $ 1,081,000 $ 1,485,000
State and local income taxes 61,000 59,000 195,000
Other 33,000 30,000 (15,000)
----------- ----------- -----------
$ 580,000 $ 1,170,000 $ 1,665,000
=========== =========== ===========

Temporary differences which give rise to a net deferred tax asset
are as follows:

June 30,
2001 2000
----------- -----------
Deferred tax assets:
Provision for doubtful accounts $ 893,947 $ 569,506
Inventory capitalization 134,702 31,920
----------- -----------
1,028,649 601,426
----------- -----------
Deferred tax liability:
Goodwill (292,640) -
Depreciation (569,912) (464,212)
----------- -----------
(862,552) (464,212)
----------- -----------
Net deferred tax asset $ 166,097 $ 137,214
=========== ===========

Management believes that no valuation allowance against the net
deferred tax asset is necessary.

F-11

5. LONG-TERM DEBT

Long-term debt consists of the following:

June 30,
2001 2000
------------- -------------

Variable rate collateralized revolving credit note (A) $ 35,631,826 $ 28,215,788

Variable rate collateralized equipment note (A) 1,328,218 1,826,641

Variable rate collateralized term note (A) 2,049,900 3,243,900

Note payable - TDA Industries, Inc. (B) 1,000,000 1,000,000

6% promissory note, due July 2002 (Note 2) 864,852 864,852

Capitalized equipment lease obligations, at
various rates, for various terms through 2003 (C) 280,499 541,528

8.50% equipment loan, payable in monthly
installments through February 13, 2003 86,613 136,415

8.50% equipment loan, payable in monthly
installments through April 23, 2003 33,386 49,646

8.50% equipment loan, payable in monthly
installments through April 27, 2003 16,408 24,363

9.25% equipment loan, payable in monthly
installments through March 20, 2005 128,041 155,255

9.25% equipment loan, payable in monthly
installments through May 5, 2005 24,103 28,969

9.5% equipment loan, payable in monthly
installments through July 31, 2005 12,472 -

9.5% equipment loan, payable in monthly
installments through July 24, 2005 10,536 -

9.25% equipment loan, payable in monthly
installments through November 6, 2004 11,456 -

9.25% equipment loan, payable in monthly
installments through September 4, 2004 16,348 -

11.5% equipment loan, payable in monthly
installments through November 14, 2001 43,952 -

11.5% equipment loan, payable in monthly
installments through December 31, 2001 17,193 -

11.5% equipment loan, payable in monthly
installments through February 28, 2002 20,839 -

7.99% equipment loan, paid in full in August 2000 - 2,097
------------- -------------
41,576,642 36,089,454
Less: Current portion of long-term debt 3,240,000 3,000,000
------------- -------------
$ 38,336,642 $ 33,089,454
============= =============

F-12

(A) In June 2000, the Eagle, MSI Eagle and JEH Eagle credit
facilities were combined into an amended, restated and
consolidated loan agreement, which matures in October 2003,
for an increased credit facility in the aggregate amount of
$44,975,000 with the same lender, with Eagle and JEH Eagle
as the borrowers. This credit facility consisted of a
$3,243,900 term loan, a $1,826,641 equipment loan and the
balance in the form of a revolving credit loan.

In July 2001, the credit facility was amended to provide for
a $5,000,000 overline for a period of ninety (90) days
ending on November 15, 2001.

The revolving credit loan bears interest at the lender's
prime rate or at the London interbank offered rate, plus two
(2%) percent, at the option of the borrowers.

The term loan is payable in equal monthly installments, each
in the amount of $99,500, with a balloon payment due on the
earlier of November 1, 2005 or the end of the loan
agreement's initial or renewal term. The term loan bears
interest at the lender's prime rate, plus three-fourths of
one (3/4%) percent, or at the London interbank offered rate,
plus two and three-fourths (2.75%) percent, at the option of
the borrowers.

The equipment loan is payable in equal monthly installments,
each in the amount of $37,000, with a balloon payment due on
the earlier of August 1, 2004 or the end of the loan
agreement's initial or renewal term. The equipment loan
bears interest at the lender's prime rate plus one-half of
one (1/2%) percent or at the London interbank offered rate,
plus two and one-half (2.50%) percent, at the option of the
borrowers.

Obligations under the credit facility are collateralized by
substantially all of the tangible and intangible assets of
Eagle and JEH Eagle, and the credit facility is guaranteed
by the Company.

(B) In October 1998, in connection with the purchase of
substantially all of the assets and business of MSI Co. by
MSI Eagle, TDA lent MSI Eagle $1,000,000 pursuant to a 6%
two-year note that was due in October 2000. In October
2000, the note was converted into a $1,000,000 8-3/4% demand
note. TDA had agreed to defer the interest payable on the
old note until its maturity. In October 2000, interest on
that note was paid in full. Interest on the demand note is
payable monthly.

Year Ending
June 30, Amount
----------- ------------
2002 $ 171,311
2003 130,903
------------
302,214
Less: Interest 21,715
------------
Present value of net minimum payments $ 280,499
============

The aggregate future maturities of long-term debt, excluding
capitalized equipment lease obligations, are as follows:

Year Ending
June 30, Amount
----------- ------------
2002 $ 3,085,500
2003 993,500
2004 36,575,000
2005 487,000
2006 155,143
------------
$ 41,296,143
============

F-13

6. COMMITMENTS AND CONTINGENCIES

a. The Company and its subsidiaries have entered into various
employment agreements which expire at various times through
June 2004. Pursuant to such agreements, the annual base
compensation payable aggregates approximately $1,080,000.

b. The Company's subsidiaries have a defined contribution
retirement plan covering eligible employees. The plan provides
for contributions at the discretion of the subsidiaries. A
contribution in the amount of approximately $102,000 was made
for fiscal 2001. No contributions were made to the plan in
fiscal 2000 or 1999.

c. At June 30, 2000, the Company and its subsidiaries were liable
under various long-term leases for property and automotive and
other equipment which expire on various dates through 2009.
Certain of the leases include options to renew. In addition,
real property leases generally provide for payment of taxes and
other occupancy costs. Rent expense charged to operations in
2001, 2000 and 1999 was approximately $5,099,000, $4,651,000
and $3,560,000, respectively, which includes taxes and various
occupancy costs, as well as rent for equipment under short-term
leases (less than one year).

The approximate future minimum rental commitments under all of
the above leases are as follows:

Year Ending
June 30, Amount
----------- ------------
2002 $ 4,462,000
2003 3,428,000
2004 2,836,000
2005 2,047,000
2006 1,231,000
Thereafter 2,647,000
------------
Total future minimum rental commitments $ 16,651,000
============

d. The Company is involved in certain litigation arising in the
ordinary course of business. Management believes that the
ultimate resolution of such litigation will not be significant.

7. TRANSACTIONS WITH THE COMPANY AND OTHER RELATED PARTIES

The Chief Executive Officer and Chairman of the Board of Directors
of the Company is an officer and a director of TDA; the Executive
Vice President, Secretary, Treasurer and a director of the Company
is also an officer and a director of TDA; and another director of
the Company is also a director of TDA.

The Company has entered into an agreement pursuant to which TDA
provides the Company with certain services including (i)
managerial, (ii) strategic planning, (iii) banking negotiations,
(iv) investor relations, and (v) advisory services relating to
acquisitions for a five-year term which commenced in July 1997.
The monthly fee, the payment of which commenced upon the
consummation of the Offering and the Acquisitions, for the
foregoing services is $3,000.

The Company also entered into an agreement pursuant to which TDA
provides the Company with office space and administrative services
on a month-to-month basis. The monthly fee, the payment of which
commenced upon the consummation of the Offering and the
Acquisitions, for the foregoing services is $3,000.

JEH Eagle leases several of its distribution center facilities and
its executive offices from the President of the Company pursuant to
five-year written leases at base annual rentals aggregating
approximately $743,000.

Eagle operates a substantial portion of its business from
facilities leased from a subsidiary of TDA pursuant to ten-year
written leases at base annual rentals aggregating approximately
$790,000.

F-14

JEH Eagle leases offices, showroom, warehouse and storage space in
Mansfield, Texas, from a senior vice president of the Company and
his spouse pursuant to a three-year written lease at a base annual
rental aggregating approximately $107,000.

JEH Eagle leases a distribution center from a limited liability
company fifty (50%) percent owned by a wholly-owned subsidiary of
TDA and fifty (50%) owned by the President of the Company and his
spouse pursuant to a five-year written lease at a base annual
rental aggregating approximately $46,000.

During the fiscal year ended June 30, 2001, JEH Eagle made sales
aggregating approximately $853,000 to entities owned by certain
members of the family of the President of the Company. Management
believes that such sales were made on terms no less favorable than
sales made to independent third parties.

8. SHAREHOLDERS' EQUITY

PREFERRED SHARES - The preferred shares may be issued in one or
more series, the terms of which may be determined at the time of
issuance by the Board of Directors of the Company, without further
action by shareholders, and may include voting rights (including
the right to vote as a series on particular matters), preferences
as to dividends and liquidation, conversion and redemption rights
and sinking fund provisions.

COMMON SHARES - Holders of common shares are entitled to one vote
for each share held of record on each matter submitted to a vote of
shareholders. There is no cumulative voting for election of
directors. Subject to the prior rights of any series of preferred
shares which may from time to time be outstanding and to
limitations imposed by any credit agreements to which the Company
is a party, holders of common shares are entitled to receive
dividends when and if declared by the Board of Directors out of
funds legally available therefor and, upon the liquidation,
dissolution or winding up of the Company, are entitled to share
ratably in all assets remaining after payment of liabilities and
payment of accrued dividends and liquidation preferences on the
preferred shares, if any. Holders of common shares have no pre-
emptive rights and have no rights to convert their common shares
into any other securities.

WARRANTS - The Company has outstanding 275,000 warrants which
entitle the registered holder to purchase one common share at an
exercise price of $5.00 per share (subject to adjustment) for three
years commencing on the date of the Offering, provided that during
such time a current prospectus relating to the common shares is
then in effect and the common shares are qualified for sale or
exempt from qualification under applicable state securities laws.

In addition, 2,950,000 warrants are outstanding which are
exercisable at $5.50 per share through March 12, 2004, provided
that during such time a current prospectus relating to the common
shares is then in effect and the common shares are qualified for
sale or exempt from qualification under applicable state securities
laws.

In connection with the Offering, the Company granted the
underwriters warrants entitling the holders thereof to purchase an
aggregate of 500,000 of the Company's common shares at an exercise
price of $8.25 per share for five years commencing on the date of
the Offering.

STOCK OPTION PLAN - In August 1996, last amended in 1999, the Board
of Directors adopted and shareholders approved the Company's Stock
Option Plan (the "Stock Option Plan"). The Stock Option Plan
provides for the grant of options that are intended to qualify as
incentive stock options ("Incentive Stock Options") within the
meaning of Section 422A of the Internal Revenue Code, as amended
(the "Code"), to certain employees, officers and directors. The
total number of common shares for which options may be granted
under the Stock Option Plan is 1,200,000 common shares. Options to
purchase 760,760 common shares have been granted to various
employees and certain officers and directors, 745,670 at a $5.00
per share exercise price and 15,000 at a $4.00 per share exercise
price. All of such options have a term of ten years. The options
granted to employees and officers (740,670) vest at a rate of 20%
per year commencing on the first anniversary of the date of grant,
and the options granted to two directors (20,000) fully vested one
year from the date of the grant.

F-15

Weighted Average
Number of Exercise Price Exercise Price
Shares Per Share Per Share
--------- -------------- ----------------

Outstanding, July 1, 1998 - $ - $ -
Granted 878,300 - 5.00
Exercised - - -
Forfeited - - -
Expired - - -
--------- ---------
Outstanding, June 30, 1999 878,300 5.00
Granted - - -
Exercised - - -
Forfeited (35,760) 5.00 5.00
Expired - - -
--------- ---------
Outstanding, June 30, 2000 842,540 5.00
Granted 15,000 4.00 4.00
Exercised - - -
Forfeited (96,780) 5.00 5.00
Expired - - -
--------- ---------
Outstanding, June 30, 2001 760,760 $ 4.98
========= =========

At June 30, 2001, 321,720 options were exercisable at $5.00 per
share.

The Company applies Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related
interpretations in accounting for its stock option plan.
Accordingly, no compensation expense has been recognized for the
Company's stock option plan, since the exercise price of the
Company's stock option grants was the fair market value of the
underlying stock on the date of the grant. Had compensation costs
for the stock option plan been determined based on the fair value
at the grant date consistent with SFAS No. 123, Accounting for
Stock Based Compensation, the Company's net income for fiscal 1999,
2000 and 2001 would not have been significantly affected. The
Company used the Black-Scholes model with the following
assumptions: risk-free interest rate of 5.5%, expected life of
three years and expected volatility and dividends of 0%.

9. ALLOWANCE FOR DOUBTFUL ACCOUNTS

Balance at
Year Ending Beginning Balance at
June 30, of Year Provision Writeoffs End of Year
----------- ---------- ---------- ----------- -----------

1999 $ 977,000 $1,348,860 $ (725,860) $1,600,000
========== ========== ========== ==========

2000 $1,600,000 $ 732,890 $ (836,890) $1,496,000
========== ========== ========== ==========

2001 $1,496,000 $1,464,418 $ (607,927) $2,352,491
========== ========== ========== ==========

F-16

10. QUARTERLY INFORMATION (UNAUDITED)

Selected unaudited quarterly financial data is as follows (in
thousands, except per share amounts):

Fiscal 2001 Quarter Ended
Sept. 30 Dec. 31 Mar. 31 June 30
--------- --------- --------- ---------

Revenues $ 54,491 $ 44,193 $ 41,916 $ 55,641
--------- --------- --------- ---------
Income from operations $ 2,388 $ 412 $ 17 $ 1,323
--------- --------- --------- ---------
Net income (loss) $ 1,163 $ (231) $ (415) $ 332
========= ========= ========= =========
Basic and diluted net income
(loss) per share $ .14 $ (0.03) $ (0.05) $ .04
========= ========= ========= =========
Common shares used in basic and
diluted net income (loss) per share 8,510 8,510 8,510 8,510
========= ========= ========= =========

Fiscal 2000 Quarter Ended
Sept. 30 Dec. 31 Mar. 31 June 30
--------- --------- --------- ---------
Revenues $ 48,558 $ 45,240 $ 40,971 $ 52,946
--------- --------- --------- ---------
Income from operations $ 2,192 $ 1,675 $ 397 $ 1,497
--------- --------- --------- ---------
Net income (loss) $ 982 $ 648 $ (125) $ 506
========= ========= ========= =========
Basic and diluted net income
(loss) per share $ .12 $ .08 $ (0.01) $ .06
========= ========= ========= =========
Common shares used in basic and
diluted net income (loss) per share 8,510 8,510 8,510 8,510
========= ========= ========= =========

* * * * * *

F-17