<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-K

                Annual Report Pursuant to Section 13 or 15 (d) of
                       The Securities Exchange Act of 1934


                   For the fiscal year ended December 31, 1997

                         Commission file number 0-15464

                                RADVA CORPORATION
                                -----------------
             (Exact name of registrant as specified in its charter)


             Virginia                                   54-0715892
             --------                                   ----------
  (State or other jurisdiction of                    (I.R.S. Employer 
  incorporation or organization)                    Identification No.)

                        Drawer 2900 First Street Station
                             Radford, Virginia 24143
                                 (540) 639-2458
                                 --------------
          Address, including zip code, and telephone number, including
             area code, of registrant's principal executive offices

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

                     Common Stock, par value $.01 per share
                     --------------------------------------
                                (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 (par. 229.405 of this chapter) 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.       [  ]

Aggregate market value of voting stock held by non-affiliates of the registrant
as of April 6, 1998 (see ITEM 5 for explanation of calculation): $ 1,045,000
                                                                 ------------

Number of shares of common stock outstanding as of April 6, 1998:  4,095,727


                                       1

<PAGE>   2



                       DOCUMENTS INCORPORATED BY REFERENCE


Part III incorporates information by reference to the registrant's proxy
statement for its annual meeting of stockholders scheduled for May 20, 1998.


DESCRIPTION OF BUSINESS

General Development of Business

RADVA Corporation (the "Company") was organized in 1962 as a Virginia
corporation to engage in the production of molded and fabricated products from
expandable polystyrene. Historically, the Company has specialized in the
production of customized expanded polystyrene packaging materials used to
protect products during shipment; however, the Company has developed a composite
building panel produced from expanded polystyrene and steel which it sells under
the trademark THERMASTRUCTURE. In November, 1995, The Company sold 80% interest
in its subsidiary, THERMASTRUCTURE Ltd., which manufactures the building panels
and has rights to market licensing rights to territories in the United States
not previously licensed. During 1997, the Company acquired an additional 70% of
common stock of Thermastructure, Ltd increasing ownership to 90% of common
stock. Company acquired the additional stock by giving up certain assets making
this entire transaction a noncash transaction. Company and minority interest of
Thermastructure, Ltd transferred all of the assets and liabilities into a new
company, Thermastructure XT Corp, while maintaining the same ownership
percentages (90% for Company and 10% for minority interest). Thermastructure XT
Corp is consolidated into Company's financial statements. The Company continues
to market manufacturing rights to its patented building panel system in
territories outside of the United States. The Company also operates a Custom
Mold Division which produces aluminum molds to supply the tools and dies used in
its protective packaging business and manufactures specialized machinery used in
the production of THERMASTRUCTURE building panels.


Industry Segments

The Company's continuing operations includes three principal industry segments:
the manufacture of protective packaging and similar materials, the manufacture
of THERMASTRUCTURE building panels, and licensing and related machinery sales.
Each of these segments is discussed in note 15 to the financial statements.


Principal Classes of Products

The following table sets forth the approximate relative percentages of total net
revenues (after intersegment eliminations) generated by the principal classes of
products produced by the Company in each of its principal industry segments for
each of the past three fiscal years.


<TABLE>
<CAPTION>
      Class of Product                             1997                1996               1995
      ----------------                             ----                ----               ----
<S>                                                <C>                 <C>                <C>  
PROTECTIVE PACKAGING AND
SIMILAR MATERIALS
   Protective Packaging                            86.0%               92.9%              73.6%

THERMASTRUCTURE Building Panels
   License fees & machinery sales                   6.3%                2.9%              14.0%
   Panel sales & related revenue                    7.7%                4.2%              12.4%
                                                   -----              -----               ----
                                                  100.0%              100.0%             100.0%
</TABLE>


                                       2
<PAGE>   3



Protective Packaging Products

The Company's protective packaging products include inserts and containers used
in shipping products such as electronic equipment and medical supplies. The
products are designed to reduce vibration, absorb shock, and provide insulation
against temperature extremes in accordance with customer specifications. The
products are manufactured at plants in Portsmouth and Radford, Virginia. In
general, the Company's protective packaging products are molded or fabricated
from expandable polystyrene-a thermoplastic which can be expanded to a
pre-selected density and, when injected into a mold and subjected to controlled
heat and pressure, can be formed to practically any shape. The Company also has
the capability to produce protective packaging products from other cellular
plastic materials such as polyethylene and polypropylene and in July 1985,
entered into an agreement with the Atlantic Richfield Company ("ARCO") to
purchase a copolymer resin marketed by ARCO under the trademark ARCEL. The
copolymer resin is substantially more expensive than polystyrene resin but
produces a product which can meet customer requirements for reusable handling
units and higher customer specifications for durability. In addition to custom
molded protective packaging products, the Company produces proprietary packaging
products for which the Company owns the molds.

The Company generally sells its protective packaging products to customers
located within 200 miles of its manufacturing plants. The products are shipped
to customers in trucks owned by the Company or by common carrier.

THERMASTRUCTURE  Building Panels

The Company's THERMASTRUCTURE building panels are designed for use in the
construction of residential housing and commercial products. The panels are
manufactured from a composite of expanded polystyrene and steel and offer a
lightweight and durable alternative to traditional building materials such as
timber or metal. The panels can be used in the construction of load bearing
walls or interior partitions and in the manufacture of structural systems for
floors or roofs. The panels also offer substantial design flexibility as they
can be molded into conventional configurations or nonconventional shapes. In
order to promote acceptance of the panels and to demonstrate the reliability of
the panels in various climatic conditions, the Company has constructed buildings
using the THERMASTRUCTURE system in various locations throughout the United
States.

During 1992, the Company began shipping equipment to RADOSLAV, a Joint Venture
in which the Company owns a 31% interest, located at Pereslavl-Zalessky, Russia,
approximately 75 miles north of Moscow. RADOSLAV produces THERMASTRUCTURE panels
for sale in Russia and other European countries. The Company and three Russian
entities, Pereslavlstroy Trust, Slavich Corporation and Argamak Corporation are
the primary joint venture participants. The Joint Venture agreement called for
the Company to contribute technology, the right for RADOSLAV to produce
THERMASTRUCTURE panels under the Company's trademarks and U.S. currency that is
included in the investment account. The Russian principals contributed a
manufacturing facility of approximately 24,000 square feet, and a sum of Russian
currency.

Raw Materials and Suppliers

         The principal raw material used by the Company in the production of
protective packaging products is expandable polystyrene resin. This material may
be obtained from several major suppliers. In addition, the Company uses several
copolymer resins in the manufacture of engineered expanded foam protective
packaging. Although the copolymer resins currently used by the Company are only
available under an agreement with ARCO, similar copolymer resins may be obtained
from other suppliers.

         The principal raw materials used by the Company in the production of
THERMASTRUCTURE building panels are expandable polystyrene resin, adhesives, and
coil steel. These materials are available from numerous suppliers in the United
States and elsewhere.

Patents and Trademarks

         The Company holds three United States patents relating to the
THERMASTRUCTURE system and certain corresponding patents in Canada, Mexico, and
Great Britain. These patents cover the THERMASTRUCTURE building panels, the
manufacture of THERMASTRUCTURE building panels and a method of combining
THERMASTRUCTURE building panels to construct a house. The Company pursues a
policy of filing for patents on any product development that it considers to be
significant. The Company has registered the trademark THERMASTRUCTURE and
WALLFRAMETM in the United States and has applied for registration in Great
Britain.



                                       3
<PAGE>   4

Seasonality

         The Company ordinarily experiences a reduction in the manufacture and
sale of protective packaging products during the winter months after filling
holiday season orders. The demand for THERMASTRUCTURE building panels is
affected by the level of activity in the construction industry and housing
market and can be expected to decrease during the fall and winter seasons when
there has historically been a decrease in construction activity and housing
sales.


Customers

         The Company's protective packaging business has a broad base of
customers; however, one customer accounted for approximately 14.5% of protective
packaging revenues in 1997.

Backlog

         The Company had approximately $1,162,000 in backlog orders for
protective packaging products as of December 31, 1997, compared to backlog
orders of approximately $828,000 as of December 31, 1996. Although the Company
believes that such backlog orders are firm, the purchase orders for protective
packaging products generally may be cancelled without cause by the customer. The
Company expects to fill all of these orders during 1998.

Competition

         The protective packaging business is highly competitive, and some of
the Company's competitors are large and have greater financial and other
resources than the Company. The Company's competition in protective packaging
products is primarily from four local and regional manufacturers with plants
within or close to the Company's market area. The principal elements of
competition in the sale of protective packaging products are price and the
ability to service customers. Because of shipping costs and other factors, the
Company has found it difficult to compete for protective packaging business
beyond a 200 mile radius of the point of manufacture. The Company believes that
its custom mold division and technical design facility give it an advantage over
competitors within its market area who do not have the capacity to design and
produce their own molds for their protective packaging customers.

Research and Development

         The Company maintains two laboratory and testing facilities within its
manufacturing plant in Radford, Virginia. The laboratory and testing facilities,
which consist of 2,000 square feet and 1,800 square feet, respectively, are used
for product testing, development of new products, and quality control
evaluations.

Regulation

         The Company is subject to state and federal laws and regulations
affecting its business, including those promulgated under the Occupational
Safety and Health Act ("OSHA") and by the Environmental Protection Agency. The
Company's manufacturing facilities are subject to compliance with comprehensive
OSHA standards. The Company believes that its manufacturing facilities and
processes are currently in compliance with OSHA and does not anticipate capital
expenditures for environmental control facilities or for compliance with OSHA
standards during 1998. The Company does not believe that its compliance with
federal and state environmental regulations has had or will have a material
effect on its capital expenditures, earnings, or competitive position.

Employees

         The Company employs approximately 150 persons. None of the Company's
employees is represented by a labor union, and the Company believes that its
employee relations are good.





                                       4
<PAGE>   5

Executive Officers

         The following table identifies and sets forth certain information about
the executive officers of the Company.

              Name               Age        Position and Year of Election
              ----               ---        -----------------------------
       Luther I. Dickens          65           President (1965)

       James M. Hylton            64           Secretary and Treasurer (1969)

ITEM 2.  PROPERTIES

Real Estate

         The real estate owned or leased by the Company and used in the
Company's primary business operations is described below.

         (1) The Company owns approximately 10 acres of land in Radford,
Virginia, and a 71,000 square foot building located on the Radford property. The
building includes approximately 5,000 square feet of office space and
approximately 66,000 square feet of manufacturing space. The Radford property is
subject to deeds of trust which had outstanding balances as of December 31,
1997, aggregating approximately $2,535,491.

         (2) The Company owns approximately 7 acres of land in Portsmouth,
Virginia, and a 44,000 square foot building located on the Portsmouth property.
The building includes approximately 2,000 square feet of office space and
approximately 42,000 square feet of manufacturing space. The Portsmouth property
is subject to a deed of trust which had an outstanding balance as of December
31, 1997 of approximately $2,535,491.

         (3) The Company leases approximately 12,000 square feet of
manufacturing space in Radford, Virginia, under a month-to-month lease which
requires monthly rental payments of $1,500. The property is used by the
Company's Custom Mold Division and is leased to the Company by a partnership in
which Mr. Dickens and Dr. Hylton are general partners.

         (4) The Company rents approximately 6,000 square feet of office space
in Radford, Virginia, under a lease which requires monthly rental payments of
$3,700. The property is rented to the Company by a partnership in which Mr.
Dickens and Dr. Hylton have an interest.

Personal Property and Equipment

         The personal property and equipment at the main Radford plant and the
Portsmouth plant consist principally of machinery and equipment used to produce
expanded polystyrene products. The personal property and equipment at the Custom
Mold Division in Radford consists of machine shop tools and pattern shop tools
and related aluminum foundry equipment. The personal property and equipment at
the THERMASTRUCTURE Machine Division in Radford consist of machine shop tools
and welding and electronic test equipment used primarily in the construction of
THERMASTRUCTURE panel molding machines.

         The Company owns 3 trucks and 12 trailers and leases 3 tractors which
it uses to ship products to customers. The Company owns 1 van and 8 cars which
it uses principally for sales and sales service functions. The Company believes
that its present equipment is adequate, well maintained, and in good operating
condition.

ITEM 3.  LEGAL PROCEEDINGS
         None.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         None.



                                       5
<PAGE>   6

                                     PART II


                                STOCK INFORMATION

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

Market and Price Information

The Company's common stock, par value $.01 per share (the "Common Stock"), has
been traded in the over-the-counter market since June 1986. The following table
provides the high and low bid quotations with respect to shares of the Common
Stock for the periods indicated as reported by the Dow Jones Historical Stock
Quote Reporter Service.


                        1997                  1996                  1995
                        ----                  ----                  ----
                    High     Low         High      Low         High      Low
                    ----     ---         ----      ---         ----      ---
First
Quarter             5/8      7/16        3/4       7/16          9/16     7/16

Second
Quarter             7/16     7/16        9/16      7/16          7/8      3/4

Third
Quarter             5/8      1/2         5/8       9/16        1 1/8      3/4

Fourth
Quarter             9/16     9/16        7/16      7/16        1 1/8     1


The foregoing quotations of high and low bid prices represent prices between
dealers and do not include retail mark-up, mark-down, or commissions. They do
not necessarily represent actual transactions. There was no established public
trading market for the Common Stock before June 1986.


The aggregate market value of the voting stock held by non-affiliates of the
Company as of April 6, 1998 shown on the facing page of this report was
calculated as follows: the number of shares beneficially owned by the officers
and directors of the Company as a group as of April 6, 1998 was subtracted from
4,095,727, the total number of shares outstanding on that date, and the
resulting figure was multiplied by $.59375, the average of the bid and asked
prices of the Company's stock in the over-the-counter market on April 6, 1998.
The foregoing calculation should not be deemed an admission that any of the
officers or directors of the Company is an "affiliate" of the Company.

Number of Stockholders

As of March 23, 1998, there were 316 record holders of the Common Stock.

Dividends

The Company has not declared cash dividends on the Common Stock during its three
most recent fiscal years. The declaration and payment of dividends is entirely
within the discretion of the Board of Directors of the Company and will depend
upon the earnings, capital requirements, and financial condition of the Company.
The Company anticipates that it will retain earnings for the next several years
to finance the development of its business.



                                       6
<PAGE>   7

ITEM 6.  SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
SELECTED STATEMENTS OF
INCOME (LOSS) DATA:                                                  Years Ended December 31,
                                             --------------------------------------------------------------------
                                                1997          1996           1995          1994            1993
                                                ----          ----           ----          ----            ----
                                                                   (Dollar amounts in thousands
                                                                     except per share data)
<S>                                          <C>            <C>            <C>           <C>            <C>     
Net Revenues                                 $ 10,955       $  9,720       $ 10,777      $ 11,641       $ 10,405
Income (loss) from
  continuing operations
  before income taxes and
  extraordinary items                             209              -            492           534             93
Income (loss) before
  extraordinary items                             209              -            482           524             93
Net income (loss)                                 209              -            482           524             93
Income (loss) per common
  share before-
  extraordinary items                             .05              -            .13           .14            .02
Net income (loss) per
  common share                                    .05              -            .13           .14            .02



SELECTED BALANCE SHEET DATA:                                         Years Ended December 31,
                                             --------------------------------------------------------------------
                                               1997           1996            1995         1994           1993
                                               ----           ----            ----         ----           ----
                                                                   (Dollar amounts in thousands)

Working capital                              $   (679)      $  1,871       $  2,151      $   (865)      $ (1,805)
Net property, plant,
  and equipment                                 4,688          2,497          2,308         3,567          2,900
Total assets                                   11,192          7,774          7,998         8,318          7,206
Long-term debt (including
  current maturities)                           4,371          2,971          3,075         2,383          1,515
Stockholders' equity (A)                        3,388          3,180          3,179         2,357          1,833

</TABLE>





(A) The Company has not declared or paid cash dividends on the Common Stock
    since 1982.

                                       7
<PAGE>   8

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

Results of Operation

The following table sets forth the percentage relationship that certain items in
the statements of operations bear to the net revenues of the Company for each
year during the five-year period ended December 31, 1997. Additional financial
information as to the Company's three industry segments is set forth in note 15
to the financial statements.

<TABLE>
<CAPTION>
                                                       Year Ended December 31
                                                       ----------------------
                                        1997         1996        1995       1994         1993
                                        ----         ----        ----       ----         ----
<S>                                      <C>         <C>         <C>         <C>         <C>  
Manufacturing net revenues               93.7%       97.1%       86.0%       89.5%       91.7%
Licensing & related
   machinery sales                        6.3         2.9        14.0        10.5         8.3
                                        -----       -----       -----       -----       -----
   Net revenues                         100.0%      100.0%      100.0%      100.0%      100.0%
                                        -----       -----       -----       -----       -----
Cost and expense:
Cost of sales                            74.1        75.1        69.4        70.2        74.1
Shipping and sales                        7.7         8.2         9.0         9.9        12.7
General and administrative               12.7        12.9        13.5        13.2        10.2
Research and development                   .9          .5         0.3         0.0         0.0
                                        -----       -----       -----       -----       -----
                                         95.4        96.7        92.2        93.3        97.0
                                        -----       -----       -----       -----       -----

    Operating income                      4.6         3.3         7.8         6.7         3.0
                                        -----       -----       -----       -----       -----

Other income (deductions)
   Interest expense                      (3.9)       (3.3)       (2.7)       (2.5)       (2.5)
   Interest income                         .3          .0          .1          .1          .3
   Other                                   .0          .0         (.0)         .3          .1
                                        -----       -----       -----       -----       -----

                                         (3.6)       (3.3)       (2.6)       (2.1)       (2.1)
                                        -----       -----       -----       -----       -----

Income from continuing
   operations before income taxes
   and minority interest in net
   loss of subsidiary                     1.6          .0         4.6         4.6          .9
Income tax expense                         .0          .0         (.1)         .1         (.0)
                                        -----       -----       -----       -----       -----

Income before minority
   interest in net loss of
   subsidiary                             1.6          .0         4.5         4.5          .9

Minority interest in net
   loss of subsidiary                      .3          .0          .0          .0          .0
                                        -----       -----       -----       -----       -----

Net income                                1.9%         .0%        4.5%        4.5%         .9%
                                        =====       =====       =====       =====       =====

</TABLE>




                                       8
<PAGE>   9





1997 Compared to 1996


The Company's 1997 revenues were greater than 1996 revenues by $1,235,000, a
12.7% increase. These increased revenues were primarily the result of: increased
shape molding revenues of $383,000; increased license and machinery sales of
$416,000; and increased panels sales of $813,000; all partly offset by reduced
shipments of building materials to Russia of $402,000.

The increased panel sales were the result of the Company's having reacquired 70%
of the rights to domestic panel sales on April 1, 1997. These rights, as well as
reacquired equipment, were added to the 20% rights to domestic panel sales
already owned by the Company and transferred to a newly formed company,
Thermastructure XT Corp., 90% owned by Radva Corporation. Thermastructure XT
Corp. had sales of $813,000 in 1997 and the Company recorded no panel sales in
1996, since the Company's 20% interest in panel sales were recorded on a cost
basis.

Operating income increased $192,000 in 1997 as compared to 1996. This increased
operating income was primarily the result of an increased Shape Molding Division
operating profit of $81,000 and of increased license and machinery sale income
of $484,000, partly offset by losses of Thermastructure XT of $281,000.

The Company's cost of sales as a percent of manufacturing net revenues increased
1.7%, from 77.4% in 1996 to 79.1% in 1997, primarily as a result of the
repurchase and inclusion of panel sales in 1997. The panel sales operation had a
higher cost of sales percentage due to operating at a low rate of manufacturing
capacity.

The Company's shipping and selling expenses decreased .3%, and the company's
general and administrative expenses increased by an almost identical .3%, both
as a percent of manufacturing net revenues. Research and development expenses
increased $47,000, from $51,000 in 1996 to $98,000 in 1997 due to work toward
the development of a new building material.


1996 Compared to 1995


The Company's 1996 revenues of $9,720,000 were less than 1995 revenues by
$1,057,000. The major component of this reduction was the result of a $1,062,000
net gain on the sale of 80% interest in the Company's Thermastructure Panel
Division included in 1995 revenues and, of course, not repeated in 1996. Revenue
reductions from the panel and door core operations which were sold in the last
quarter of 1995 were $420,000 and $315,000, respectively. However the Shape
Molding Division had increased revenues of $901,000, representing an 11.4%
increase over 1995. Both the Shape Molding and Thermastructure Licensing and
Machine Divisions are expected to report significant revenue increases in 1997.

After eliminating the cost of license and machinery sales of $234,000 and
$60,000 in 1996 and 1995, respectively, cost of sales as a percentage of
manufacturing revenues decreased 5.1%, to 74.9% in 1996 from 80.0% in 1995. A
large factor in this reduction was the 1995 sale of the panel and door core
manufacturing divisions, which carried higher than Company average cost of sales
percentages.

Shipping and selling expenses, as a percentage of manufacturing net revenues,
decreased 2.0%, to 8.5% in 1996 from 10.5% in 1995. The primary factor in this
reduction occurred within shipping expenses at the Radford, Virginia plant where
costs were down $95,000. Even though sales were down at the Radford plant by
5.5%, shipping cost were down 23.6%. Driver wages and warehouse labor were both
down $28,000 and $30,000, respectively, accounting for a large portion of the
reduced costs.

General and administrative expenses, as a percentage of manufacturing net
revenues, decreased 2.4%, to 13.3% in 1996 from 15.7% in 1995. Within corporate
services, wages were down $22,000, primarily as a result of the retirement of
one individual. Also within corporate services, travel and bank charges were
down $32,000 and $39,000, respectively. The almost elimination of bank charges,
other than interest, was a result of bank refinancing achieved in December of
1995.




                                       9
<PAGE>   10


1995 Compared to 1994


The Company experienced some very positive developments in 1995. The long sought
bank refinancing was achieved in December. The new financing, along with profits
and some additional equity investment, was responsible for a shift in working
capital from a negative $865,000 at December 31, 1994 to a positive $2,151,000
at December 31, 1995. This is a dramatic swing in working capital and is
expected to enable the Company to operate more efficiently in 1996.

Another development, although not substantially reflected in 1995 operations,
was the signing of a supply contract with one of the Company's largest shape
molding/packaging customer. As a result, sales are expected to increase
significantly in 1996.

Our Portsmouth, Virginia plant had an outstanding year in product improvement in
1995. As evidence of this good work, we were recently notified by Canon of
Virginia that RADVA was the winner of one of their Outstanding Supplier awards
for which the Company is justly proud. RADVA Corporation was one of only 15
organizations of 110 major suppliers so selected!

The last major development that needs to be discussed before comparing 1995
revenues and expenses to 1994 revenues and expenses is the sale of 80% interest
in the previously wholly owned subsidiary, THERMASTRUCTURE Ltd. The Company has
been somewhat over extended in the past, making it difficult to effectively
promote and market its THERMASTRUCTURE panel. Therefore, in November, 1995, the
Company negotiated the sale of a license for all areas in the United States not
previously licensed to an organization with a strong marketing background and
the financial strength and commitment to effectively market the panel. The sale
also included THERMASTRUCTURE molding equipment and a plant, net of the mortgage
liability. What was not included was the Company's machine manufacturing
division and international rights. Since management felt that it was important
for RADVA Corporation to maintain an equity position in the newly organized
company, the sale was accomplished through the sale of 80% of the stock of
THERMASTRUCTURE, Ltd., after taking steps to include only the agreed upon assets
and license rights.

The Company's 1995 revenues of $10,777,000 were lower than 1994 revenues by
$864,000 representing a 7% decrease. This decrease consisted of the following
increases or (decreases) in 1995 as compared to 1994:


               Shape Molding Division                          $   207,000
               Miscellaneous:
                    Gain on discounted note payoff                (229,000)
                    Other miscellaneous                             (4,000)
               THERMASTRUCTURE Division:
                    Panel sales                                 (1,252,000)
                    Door Core sales                               (438,000)
                    RADVA RU supply sales                          566,000
                    License and machinery sales                    286,000
                                                                 ---------
                                                               $  (864,000)


Increased sales by the Shape Molding Division were primarily a result of price
increases however more dramatic increases in sales are expected in 1996. An
unusual decrease resulted from a Company negotiated discount payoff of a note in
1994. This payoff resulted in a $229,000 gain not repeated in 1995. The
reduction in panel sales was primarily due to unusually large sales of panels
shipped to Mexico in 1994, not matched by similar sales in 1995. The reduction
of these sales was partly a result of the licensee to whom the sales were made
having purchased panel manufacturing equipment from the Company in 1995. The
reduced door core sales reflects the Company's decision to discontinue that
product line. The Company began a new project in 1995, identified above as RADVA
RU supply sales. These are building materials purchased in the United States and
shipped to Russia to contractors using THERMASTRUCTURE panels manufactured by
the Company's Russian joint venture.



                                       10
<PAGE>   11








1995 Compared to 1994, continued

After eliminating the cost of license and machinery sales from cost of sales of
$60,000 and $152,000 in 1995 and 1994, respectively, and after eliminating
miscellaneous revenues of $8,000 and $239,000 in 1995 and 1994, respectively,
cost of sales, as a percentage of manufacturing revenues increased to 80.1% in
1995 from 78.8% in 1994. The $239,000 miscellaneous revenues in 1994, eliminated
above, consisted primarily of $229,000 from a discounted payoff of a note
payable. This increase in the cost of sales percentage was primarily caused by
increases in cost of sales percentages in panels and door cores. The cost of
sales percentage for the largest component of manufacturing net revenues, shape
molding/packaging, went down to 73.4% in 1995 from 76.0% in 1994. The components
of manufacturing net revenues largely responsible for the overall increase will
not be a factor in 1996. Panel manufacturing has been transferred to the
purchasers of THERMASTRUCTURE, Ltd. and the door core manufacturing operation
has been discontinued. The cost of panel manufacturing had increased primarily
due to the non repeat of the large sales to Mexico in 1994. It is expected that
the new marketing efforts of THERMASTRUCTURE, Ltd. will result in increased
sales and, therefore, a reduced cost of sales percentage in 1996.

Shipping and selling expenses decreased, as a percentage of adjusted
manufacturing net revenues, to 10.5% in 1995 from 11.3% in 1994. This reduction
was primarily due to reduced expenses in the Shape Molding Division. General and
administrative expenses decreased $76,000, to $1,456,000 in 1995 from $1,532,000
in 1994. This favorable shift was largely a result of reductions in travel,
wages, and phone expenses.

Impact of Inflation

The Company's standard purchase order form allows it to increase the price of
its protective packaging products on 30 days' notice and, therefore, to pass on
increases in the cost of raw materials. A significant increase in the rate of
inflation and a concomitant increase in interest rates could adversely affect
the Company since a large portion of the Company's indebtedness is linked to the
prime interest rate.

Liquidity and Capital Resources

The Company has been profitable in each of the past seven years. The working
capital position at December 31, 1997, was a negative $679,000. However,
management is in the process of concluding a major refinancing package expected
to close in April, 1998 and to have a significant favorable impact on working
capital. Management is also conducting negotiations for the sale of other assets
not included in working capital which, if concluded, will also have a
significant favorable impact on working capital. The current financing package
of the Company includes both a term loan with a balance of $2,535,000 and a
$500,000 credit line with an available balance of $6,000 on December 31, 1997.



                                       11
<PAGE>   12




ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


Index to Financial Statements

                                                                   Page
                                                                   ----
Independent Auditors' Reports...................................    13

Balance Sheets as of December 31, 1997 and 1996.................   14-15

Statements of Operations for the Years Ended
   December 31, 1997, 1996, and 1995............................     16

Statements of Stockholders' Equity for the Years
   Ended December 31, 1997, 1996, and 1995......................     17

Statements of Cash Flows for the Years
   Ended December 31, 1997, 1996, and 1995......................   18-19

Notes to Financial Statements as of December 31,
   1997, 1996, and 1995.........................................   20-29



Index to Financial Statement Schedules


Schedule V  - Property, Plant and Equipment.....................     30

Schedule VI - Accumulated Depreciation and
   Amortization of Property, Plant, and Equipment...............     31

Schedule VIII - Valuation and Qualifying Accounts...............     32




                                       12
<PAGE>   13






PERSINGER & COMPANY, L.L.C.
CERTIFIED PUBLIC ACCOUNTANTS
203 W. GRAYSON STREET
GALAX, VIRGINIA 24333

TELEPHONE:  540-236-8135
         FAX:  540-236-0797


                          INDEPENDENT AUDITOR'S REPORT



The Board of Directors and Stockholders
RADVA Corporation

We have audited the consolidated financial statements and the consolidated
financial statement schedules of RADVA Corporation and subsidiaries as of and
for the years ended December 31, 1997 and 1996, as listed in the accompanying
index. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of RADVA Corporation
and subsidiary as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles. In addition, in our opinion, the 1997
and 1996 financial statement schedules referred to above, when considered in
relation to the basic financial statements taken as a whole, present fairly, in
all material respects, the information required to be included therein.


PERSINGER & COMPANY L.L.C.


Galax, Virginia
March 2, 1998





                                       13
<PAGE>   14


                       RADVA CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>

                                                                          1997                   1996
                                                                          ----                   ----
                 ASSETS
<S>                                                                    <C>                     <C>
Current assets:
  Cash and cash equivalents (Notes 2 and 3)                            $    78,963             $   23,625
                                                                       -----------             ----------

  Accounts and notes receivable (Notes 8 and 9)                          1,426,107              1,665,234
  Receivable - other (Notes 3 and 16)                                      329,420              1,197,308
  Less allowance for doubtful accounts                                     106,423                172,560
                                                                       -----------             ----------
          Net receivables                                                1,649,104              2,689,982
                                                                       -----------             ----------

  Inventories (Notes 8 and 9):
     Finished goods                                                        592,117                397,404
     Work-in-process                                                        23,015                 28,521
     Raw materials and supplies                                            395,101                243,416
     Machinery inventory                                                   274,676                239,627
                                                                       -----------             ----------
          Total inventories                                              1,284,909                908,968
                                                                       -----------             ----------

  Prepaid expenses                                                         106,107                133,819
  Other current assets                                                      30,238                 30,238
                                                                       -----------             ----------

          Total current assets                                           3,149,321              3,786,632
                                                                       -----------             ----------

Property, plant and equipment, at cost (Notes 5, 8 and 9)                8,083,518              5,564,578
Less accumulated depreciation and amortization                           3,395,645              3,067,206
                                                                       -----------             ----------
          Net property, plant and equipment                              4,687,873              2,497,372
                                                                       -----------             ----------

Other assets, at cost, less accumulated amortization:
  Investment in Radoslav Joint Venture (Note 6)                            336,103                336,103
  Investment in Thermastructure, LTD (Note 16)                                   -                210,224
  Trademark, marketing and manufacturing rights                          1,354,128                223,062
  Note receivable - long-term                                              321,913                414,131
  Other (Note 17)                                                        1,342,834                306,254
                                                                       -----------             ----------
                                                                         3,354,978              1,489,774
                                                                       -----------             ----------
                                                                       $11,192,172             $7,773,778
                                                                       ===========             ==========

</TABLE>





                                                                     (continued)


                                       14
<PAGE>   15



                       RADVA CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)



<TABLE>
<CAPTION>

                                                                  1997              1996
                                                                  ----              ----
    LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                                         <C>               <C>
Current liabilities:
  Current installments of long-term debt (Notes 3 and 9)     $    527,793      $   292,534
  Notes payable (Note 8)                                          569,112          300,000
  Accounts payable                                              2,151,188        1,124,142
  Accrued expenses (Note 7)                                       579,853          199,215
  Income taxes payable (Note 10)                                       --               --
                                                             ------------      -----------

          Total current liabilities                             3,827,946        1,915,891
                                                             ------------      -----------

Long-term debt, excluding current installments
  (Notes 3 and 9)                                               3,843,432        2,678,127
                                                             ------------      -----------

Minority interest in subsidiary                                   132,390               --
                                                             ------------      -----------

          Total liabilities                                     7,803,768        4,594,018
                                                             ------------      -----------

Commitments, contingencies and other matters
  (Notes 9, 13, 16 and 17)

Stockholders' equity:
  Common stock, par value $.01 per share; authorized
    10,000,000 shares; issued 4,104,727 shares                     41,047           41,047
  Additional paid-in capital                                    4,511,939        4,511,939
  Retained earnings (deficit)                                  (1,164,582)      (1,373,226)
                                                             ------------      -----------

          Total stockholders' equity                            3,388,404        3,179,760
                                                             ------------      -----------



                                                             $ 11,192,172      $ 7,773,778
                                                             ============      ===========
</TABLE>




See notes to consolidated financial statements.

                                       15
<PAGE>   16



                       RADVA CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>

                                                          1997              1996               1995
                                                          ----              ----               ----
<S>                                                   <C>               <C>               <C>
Net revenues:
  Manufacturing net revenues                          $ 10,267,053      $  9,432,869      $  9,266,527
  Licensing and related machinery sales (Note 16)          687,807           287,239         1,510,684
                                                      ------------      ------------      ------------
                                                        10,954,860         9,720,108        10,777,211
                                                      ------------      ------------      ------------

Costs and expenses:
  Cost of sales                                          8,116,636         7,302,820         7,475,498
  Shipping and selling expenses                            840,549           798,641           972,200
  General and administrative expenses                    1,392,295         1,252,295         1,456,474
  Research and development expenses                         97,867            50,531            29,834
                                                      ------------      ------------      ------------
                                                        10,447,347         9,404,287         9,934,006
                                                      ------------      ------------      ------------

          Operating income                                 507,513           315,821           843,205
                                                      ------------      ------------      ------------

Other income (expense):
  Interest expense                                        (425,947)         (322,275)         (297,833)
  Interest income                                           30,681                --            11,159
  Other                                                      4,200             4,281             4,635
                                                      ------------      ------------      ------------
                                                          (391,066)         (317,994)         (282,039)
                                                      ------------      ------------      ------------

                                                           116,447            (2,173)          561,166
                                                      ------------      ------------      ------------

Gain (loss) on sale of assets:
  Equipment                                                 12,141             2,566             2,794
  Real estate                                               47,874                --           (44,015)
                                                      ------------      ------------      ------------
                                                            60,015             2,566           (41,221)
                                                      ------------      ------------      ------------

Equity in net income (loss) of
  investee                                                      --                --           (27,583)
                                                      ------------      ------------      ------------

Minority interest in net loss of subsidiary                 32,182                --                --
                                                      ------------      ------------      ------------

Income before income taxes                                 208,644               393           492,362

Provision for income taxes (Note 10)                            --                --            10,385
                                                      ------------      ------------      ------------

          Net income                                  $    208,644      $        393      $    481,977
                                                      ============      ============      ============

Income per common share:
          Net income                                  $        .05      $         --      $        .13
                                                      ============      ============      ============


</TABLE>

See notes to consolidated financial statements.


                                       16
<PAGE>   17



                       RADVA CORPORATION AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>

                                             ADDITIONAL      RETAINED           TOTAL
                                  COMMON      PAID-IN        EARNINGS        STOCKHOLDERS'
                                  STOCK       CAPITAL        (DEFICIT)         EQUITY
                                  -----       -------        ---------         ------

<S>                              <C>         <C>            <C>              <C>
Balance at December 31, 1994     $37,421     $4,175,565     $(1,855,596)     $2,357,390
Stock issued                       3,626        336,374              --         340,000
Net income                            --             --         481,977         481,977
                                 -------     ----------     -----------      ----------

Balance at December 31, 1995      41,047      4,511,939      (1,373,619)      3,179,367

Net income                            --             --             393             393
                                 -------     ----------     -----------      ----------

Balance at December 31, 1996      41,047      4,511,939      (1,373,226)      3,179,760

Net income                            --             --         208,644         208,644
                                 -------     ----------     -----------      ----------

Balance at December 31, 1997     $41,047     $4,511,939     $ 1,164,582      $3,388,404
                                 =======     ==========     ===========      ==========

</TABLE>




See notes to consolidated financial statements.


                                       17
<PAGE>   18



                       RADVA CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>

                                                                          1997           1996            1995
                                                                          ----           ----            ----
<S>                                                                   <C>              <C>            <C>
Cash flows from operating activities:
  Net income                                                          $   208,644      $     393      $   481,977

  Adjustments to reconcile net income to net cash
    provided by (used in)
    operating activities:
      Depreciation                                                        409,191        285,830          371,938
      Amortization                                                        169,402        118,601          129,927
      Allowance for doubtful accounts                                     (66,137)       (30,691)          (1,419)
      (Gain) on sale of investment                                             --             --       (1,061,558)
      Proceeds from sale of investment,
        net of cash and cash equivalents sold                                  --             --          687,386
      (Gain) loss on sale of assets                                       (60,015)        (2,566)          41,221
      Equity loss in investee                                                  --             --           27,583
      Minority interest in net income (loss) of
        consolidated subsidiaries                                         (32,182)            --               --
      Changes in assets and liabilities, net of effects of
        acquisition of Thermastructure XT Corp.:
        Increase in accounts and notes
          receivable ($239,127 - $754,857)                               (515,730)       (34,458)        (165,231)
        Decrease (increase) in receivable
           - other ($867,888 - $1,197,308)                               (329,420)        75,000          500,000
        Increase in inventories ($375,941 - $116,714)                    (259,227)      (101,046)              --
        Decrease (increase) in prepaid expenses                            27,712        (43,581)           2,349
        Decrease (increase) in other current assets                            --          1,605           (1,605)
        Decrease in note receivable -
           noncurrent ($92,218 - $92,218)                                      --             --           73,499
        Decrease in account receivable-noncurrent                              --             --           58,267
        Increase (decrease) in investment in Thermastructure, LTD
           ($210,224 - $210,224)                                               --             --               --
        Increase in trademark ($1,131,066 - $1,113,912)                   (17,154)            --               --
        Increase in other assets ($1,036,580 - $674,501)                 (362,079)       (54,062)         (52,422)
        Increase (decrease) in accounts
           payable ($1,027,046 - $213,773)                                813,273       (143,100)        (522,873)
        Increase (decrease) in accrued
           expenses ($380,638 - $7,392)                                   373,246       (266,578)        (134,212)
        Increase (decrease) in income taxes payable                            --        (10,385)             697
                                                                      -----------      ---------      -----------

          Net cash provided by (used in) operating activities             359,524        (49,381)         334,478
                                                                      -----------      ---------      -----------

Cash flows from investing activities:
  Proceeds from sale of assets                                            139,050          6,400           39,579
  Company manufactured equipment and buildings                           (220,491)       (15,699)        (413,804)
  Capital expenditures on equipment                                    (1,027,955)      (463,558)        (402,851)
                                                                      -----------      ---------      -----------
          Net cash used in investing activities                        (1,109,396)      (472,857)        (777,076)
                                                                      -----------      ---------      -----------

</TABLE>


                                       18
                                                                     (continued)
<PAGE>   19

                       RADVA CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>

                                                            1997            1996            1995
                                                            ----            ----            ----

<S>                                                     <C>             <C>            <C>
Cash flows from financing activities:
  Net proceeds (payments) on notes
     payable ($269,112 - $75,000)                           194,112        300,000       (1,293,787)
  Proceeds from issuance of long-term
     debt ($1,909,296 - $789,466)                         1,119,830        172,433        3,011,287
  Principal payments under long-term debt                  (508,732)      (276,516)      (1,454,078)
  Proceeds from sale of common stock                             --             --          340,000
                                                        -----------      ---------      -----------

          Net cash provided by financing activities         805,210        195,917          603,422
                                                        -----------      ---------      -----------

Net increase (decrease) in cash                         $    55,338      $(326,321)     $   160,824

Cash and cash equivalents at beginning of year               23,625        349,946          189,122
                                                        -----------      ---------      -----------

Cash and cash equivalents at end of year                $    78,963         23,625      $   349,946
                                                        ===========      =========      ===========

Supplemental disclosure of cash flow information:
  Cash paid during the year for interest                $   411,043      $ 327,760      $   329,700
                                                        ===========      =========      ===========

  Cash paid during the year for income taxes            $        --      $  10,385      $     9,688
                                                        ===========      =========      ===========

</TABLE>

Supplemental disclosure of noncash investing activities:

During 1997 Radva acquired ninety (90) percent of Thermastructure XT Corp. for
$1,481,141 which resulted in the transfer of the following assets:

             Assets transferred:
                Investment in Thermastructure, Ltd             $  210,224
                Notes receivable                                1,197,308
                Accounts receivable                                42,928
                Interest receivable                                30,681
                                                               ----------
                                                               $1,481,141
                                                               ==========

   During 1996 the sale of eighty (80) percent of the investment in
   Thermastructure, Ltd for $2,022,308 resulted in the transfer of the following
   assets and liabilities:

              Assets and liabilities transferred:
               Cash and cash equivalents (escrows)             $   53,092
               Property, plant and equipment                    1,657,849
               Prepaid expenses                                    26,397
               Inventory                                          122,945
               Other assets                                       109,536
               Debt assumed                                      (780,784)
             Expense of sale                                        9,522
             Investment retained (20%)                           (237,807)
                                                               ----------
                                                               $  960,750
                                                               ==========
See notes to consolidated financial statements.


                                       19
<PAGE>   20

                       RADVA CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1997, 1996 AND 1995

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Operations

RADVA Corporation and subsidiaries (the Company) produce and sell molded and
fabricated expanded polystyrene foam products such as packaging materials and
containers. The Company has also developed and patented housing construction
panels utilizing expanded polystyrene foam reinforced with steel. In addition,
they build and sell machinery used to manufacture the panels along with the
licensing rights to market the panels. The Company operates facilities in
Radford and Portsmouth, Virginia.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its subsidiaries, RADVA RU, Inc. and Thermastructure XT Corp. All significant
inter-company accounts and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

Cash and cash equivalents consist primarily of demand deposits. For purposes of
the statements of cash flows, the Company considers all highly liquid
investments with an original maturity of less than three months to be cash
equivalents. The Company includes cash meeting this criteria whose use is
limited by restrictions contained in loan covenants.

Accounts Receivable

Accounts receivable are stated at cost less allowance for doubtful accounts. The
allowance for doubtful accounts is maintained at a level considered adequate to
provide for losses that can be reasonably anticipated.

Inventories

Inventories are stated at the lower of cost or market. Cost of raw materials,
supplies, work-in process and finished goods is determined by the first-in,
first-out method.

Investment in Radoslav Joint Venture

The Company is accounting for its investment in Radoslav, a 31% owned affiliate,
by the equity method of accounting under which the Company's proportionate
results of the affiliate's operations are recognized in the Company's statement
of operations and added to or taken from the investment account. Distributions
received from the affiliate are treated as a reduction of the investment
account.

Other assets

Included in other assets are patents, loan costs and marketing and manufacturing
rights, which are amortized over their respective estimated lives, and trademark
rights, which are amortized over 12 years. Accumulated amortization was
$1,156,136 and $986,734 as of December 31, 1997 and 1996, respectively.




                                       20
<PAGE>   21




                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Property, Plant and Equipment

Depreciation of plant and equipment is provided on the straight-line basis over
the estimated useful lives of the respective assets as follows:

                        Buildings and improvements          5 to 30 years
                        Machinery and equipment             5 to 15 years
                        Automotive equipment                3 to 5 years
                        Office equipment                    3 to 10 years

Leasehold improvements are amortized on a straight-line basis over the terms of
the respective leases.

Additions to property, plant and equipment are recorded at cost. All
expenditures for repairs, renewals and replacements which do not materially
extend the useful life of the property are charged to expense. Other
improvements and betterments are capitalized. With respect to dispositions, the
asset and accumulated depreciation accounts are relieved of cost and accumulated
depreciation with any resulting gain or loss credited or charged to earnings.

Revenue Recognition

Net revenues represent sales of fabricated foam products, machines and fees from
licensing agreements. Revenues from sales and the licensing agreements are
recognized upon completion of the transaction.

Income Taxes

Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.

Investment tax credits are accounted for by the flow-through method whereby they
reduce income taxes currently payable and the provision for income taxes in the
period the assets giving rise to such credits are placed in service. To the
extent such credits are not currently utilized on the Company's tax return,
deferred tax assets, subject to considerations about the need for a valuation
allowance, are recognized for the carryforward amount.

Fair value of financial instruments

Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires disclosure about the fair value of
certain instruments. Cash, receivables, accounts payable and accrued liabilities
are reflected in the financial instruments at fair value because of the
short-term maturity of these instruments. The estimated fair values of the
company's financial instruments are disclosed in Note 3.




                                       21
<PAGE>   22


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Receivables and accounting change

On January 1, 1995, the Company adopted Statement of Financial Accounting
Standard 114, Accounting by Creditors for Impairment of a Loan. Statement No.
114 has been amended by Statement of Financial Accounting Standard No. 118,
Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures. Statement 114, as amended, requires that the impairment of
receivables that have been separately identified for evaluation is to be
measured based on the present value of expected future cash flows or,
alternatively, the observable market price of the receivables or the fair value
of the collateral. However, for those receivables that are collateral dependent
(that is, if repayment of those receivables is expected to be provided solely by
the underlying collateral) and for which management has determined foreclosure
is probable, the measure of the impairment of those receivables is to be based
on the fair value of the collateral. Statement 114, as amended, also requires
certain disclosures about investments in impaired receivables and the allowance
for possible bad debts and interest income recognized. The adoption of Statement
114 had no effect on the consolidated financial statements.

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 vary from the estimates that were used.

Per Share Information

Earnings per share are based on the average number of common shares of the
Company outstanding. The number of shares used in computing per share
information was 4,104,727 in 1997, 4,104,727 in 1996 and 3,772,282 in 1995.

Reclassification

Certain reclassifications have been made to prior years' financial statements to
place them on a comparable basis with the current year.

NOTE 2.  CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of the following:

<TABLE>
<CAPTION>
                                                             1997             1996              1995
                                                             ----             ----              ----
<S>                                                         <C>              <C>               <C>
Petty cash and non-interest bearing accounts                $57,484          $23,625          $349,946
Restricted by IDA bonds, series 1995                         21,479                -                 -
                                                            -------          -------          --------
                                                            $78,963          $23,625          $349,946
                                                            =======          =======          ========
</TABLE>


                                       22
<PAGE>   23



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3.  FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

Cash and cash equivalents:

The carrying amount approximates fair value because of the short maturity of
those instruments.

Receivable - other:

The carrying amount is a reasonable estimate of fair value since entire amount
is due within one year.

Long-term debt:

The fair value of the Company's long-term debt is estimated based on the quoted
market prices for the same or similar issues or on the current rates offered to
the Company for debt of the same remaining maturities with similar collateral
requirements.

The estimated fair values of the Company's financial instruments as of December
31, 1997 are as follows:

<TABLE>
<CAPTION>
                                                    1997
                                    ----------------------------------
                                    Carrying Amount         Fair Value
                                    ---------------         ----------
<S>                                  <C>                    <C>
Cash and cash equivalents            $   78,963             $   78,963
Receivable - other                      329,420                329,420
Long-term debt                        4,371,225              4,371,225
</TABLE>

NOTE 4.  RECEIVABLES

Information about impaired receivables as of and for the years ended December
31, 1997 and 1996 is as follows:

<TABLE>
<CAPTION>
                                                       1997         1996
                                                       ----         ----

<S>                                                  <C>          <C>
Receivables for which there is a related
  allowance for bad debts                            $ 70,000     $451,005
Receivables for which there is no related
  allowance for bad debts                              50,000      438,131
                                                     --------     --------
      Total impaired receivables                     $120,000     $889,136
                                                     ========     ========
Related allowance for possible bad debts             $ 17,500     $168,210
                                                     ========     ========
Average balance (based on beginning and
  ending of year)                                    $504,569     $883,606
                                                     ========     ========
</TABLE>



                                       23
<PAGE>   24



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5.  PROPERTY, PLANT AND EQUIPMENT

A summary of property, plant and equipment follows:

<TABLE>
<CAPTION>
                                                    1997            1996
                                                    ----            ----
<S>                                              <C>            <C>
          Land and improvements                  $  312,737     $  225,984
          Buildings and improvements              2,830,910      2,102,263
          Machinery and equipment                 4,411,300      2,702,842
          Transportation equipment                  278,793        333,289
          Office equipment                          249,778        200,200
                                                 ----------     ----------
                                                 $8,083,518     $5,564,578
                                                 ==========     ==========
</TABLE>

NOTE 6. INVESTMENT IN RADOSLAV JOINT VENTURE

The Company owns a 31% interest in Radoslav, a Joint Venture located at
Pereslavl - Zalessky, approximately 75 miles north of Moscow. Radoslav produces
THERMASTRUCTURE panels for sale in Russia and other European countries. The
Company and three Russian entities, Pereslavlstroy Trust, Slavich Corporation
and Argamak Corporation are the primary joint venture participants. The Joint
Venture agreement called for the Company to contribute technology, the right for
Radoslav to produce THERMASTRUCTURE panels under the Company's trademarks and
U.S. currency that is included in the investment account. The Russian principals
contributed a manufacturing facility of approximately 24,000 square feet and a
sum of Russian currency. The results of operations of Radoslav for the years
ended December 31, 1997, 1996 and 1995 are not material to the financial
statements of RADVA Corporation and are not included in the statement of
operations or the investment account.

NOTE 7.  ACCRUED EXPENSES

Accrued expenses are composed of the following:

<TABLE>
<CAPTION>
                                                                    1997              1996
                                                                    ----              ----
<S>                                                               <C>               <C>     
          Payroll and employee benefits                           $117,536          $ 97,829
          Interest                                                  26,170            11,266
          Customer deposits                                         38,993             4,382
          Insurance                                                 85,160                --
          Licenses                                                 206,544                --
          Other                                                    105,450            85,738
                                                                  --------          --------
                                                                  $579,853          $199,215
                                                                  ========          ========
</TABLE>

NOTE 8.  NOTES PAYABLE

A summary of notes payable follows:

<TABLE>
<CAPTION>
                                                                    1997              1996
                                                                    ----              ----
<S>                                                               <C>               <C>     
          Line of credit with commercial bank, $500,000
          limit, interest at prime plus 2%                        $494,112          $300,000

          Short-term note with commercial bank, interest
          at 10.75%, due November 24, 1997                          75,000                --
                                                                  --------          --------

                    Total notes payable                           $569,112          $300,000
                                                                  ========          ========

</TABLE>

                                       24
<PAGE>   25


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 9.  LONG-TERM DEBT

<TABLE>
<CAPTION>
     A summary of long-term debt follows:

                                                                                            1997                1996
                                                                                            ----                ----
<S>                                                                                     <C>                 <C>
     Installment notes payable due in aggregate monthly installments of $2,070,
     including interest, with various maturities until February, 2001;
     collateralized by equipment.  Interest rates ranging from 7.5% to 12.5%            $   45,812          $   50,304

     Financing obligation recorded under capital lease, due in monthly installments
     of $3,256, including interest at 8.3%; collateralized by equipment                     98,237             113,169

     Installment note payable to bank, due in monthly installments of $43,467,
     including interest at prime plus 2% with a final balloon payment in
     December 2000                                                                       2,535,491           2,774,567


     Installment note payable to bank, due in monthly installments of
     $3,148 including interest at 12%; collateralized by equipment                      $  128,771          $       --

     Industrial Development Authority of the City of Radford, Virginia, due in
     monthly installments of $8,592, including interest at 7.75%, collateralized
     by a deed of trust on real estate at 609 Rock Road,
     Radford, Virginia                                                                     645,000                  --

     Industrial Development Authority of the City of Radford, Virginia, due in
     monthly installments of $674, including interest at 7%, collateralized by a
     second deed of trust on real estate at 609 Rock
     Road, Radford, Virginia                                                                64,804                  --

     Installment notes payable with financing company, due in monthly
     installments of $16,404, including interest at 8.8%; collateralized
     by equipment                                                                          823,172                  --

     Installment note payable, due in monthly installments of $500, including
     interest at 8.125% with a final balloon payment in August 1998,
     collateralized by a deed of trust on certain real estate                               29,938              32,621
                                                                                        ----------          ----------

          Total long-term debt                                                           4,371,225           2,970,661

     Less current installments of long-term debt                                           527,793             292,534
                                                                                        ----------          ----------

          Long-term debt, excluding current installments                                $3,843,432          $2,678,127
                                                                                        ==========          ==========

</TABLE>


Substantially all real property, equipment, accounts receivable and inventory
are pledged as collateral on various debt instruments.




                                       25
<PAGE>   26


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9.  LONG-TERM DEBT, CONTINUED

The aggregate principal maturities of long-term debt during each of the five
years subsequent to December 31, 1997 follows:

<TABLE>
<CAPTION>
          Years Ended December 31,
          ------------------------
<S>                 <C>                                   <C>
                    1998                                   $  527,793
                    1999                                      567,380
                    2000                                      533,195
                    2001                                      548,443
                    2002                                      468,898
                    Thereafter                              1,725,516
                                                           ----------
                                                           $4,371,225
                                                           ==========
</TABLE>

NOTE 10. INCOME TAX MATTERS

Net deferred tax assets and liabilities consist of the following components as
of December 31, 1997 and 1996:

<TABLE>
<CAPTION>
                                                    1997                1996
                                                    ----                ----
<S>                                              <C>                 <C>
      Deferred tax assets:
           Bad debt allowance                    $   40,440          $   92,209
           Accrued expenses                          30,513              25,835
           Inventory allowance                       10,260               8,648
           Contributions carryover                    1,545                 977
           Loss carryforward                        672,872             724,231
           Investment tax credit carryforward       177,659             177,659
           Minimum tax credit carryforward           20,073              20,073
                                                 ----------          ----------
                                                    953,362           1,049,632
           Less valuation allowance                 726,222             889,366
                                                 ----------          ----------
                                                 $  227,140          $  160,266
                                                 ==========          ==========
      Deferred tax liabilities:
           Property and equipment                $  227,140          $  160,266
                                                 ==========          ==========
                                                 $       --          $       --
                                                 ==========          ==========

</TABLE>

As noted, the deferred tax assets equal the deferred tax liabilities resulting
in no effect on the income statement or stockholders' equity for the year.

Loss carryforwards for tax purposes as of December 31, 1997 have the following
expiration dates:

    Expiration Date                                     Amount
    ---------------                                     ------
         2005                                        $ 1,770,717
                                                     ===========

Investment tax credit carryforwards for tax purposes as of December 31, 1997
have the following expiration dates:

    Expiration Date                                     Amount
    ---------------                                     ------
        1998                                          $   88,599
        1999                                              40,976
        2000                                              48,084
                                                      ----------
                                                      $  177,659
                                                      ==========


                                       26
<PAGE>   27

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. INCOME TAX MATTERS, CONTINUED

The income tax provision differs from the amount of income tax determined by
applying the U.S. Federal income tax rate to pretax income for the years ended
December 31, 1997, 1996 and 1995 due to the following:

<TABLE>
<CAPTION>
                                                                 1997               1996               1995
                                                                 ----               ----               ----

<S>                                                            <C>                <C>                <C>      
Computed "expected" tax benefit                                $ 64,621           $     59           $ 167,403
Non-deductible expenses                                           4,801              2,179             171,808
State income taxes, net of federal income tax benefit             8,087                761              39,508
Benefit of operating loss carryforward                          (77,509)            (2,999)           (378,719)
Other                                                                --                 --              10,385
                                                               --------           --------           ---------
                                                               $     --           $     --           $  10,385
                                                               ========           ========           =========
</TABLE>


NOTE 11.  RETIREMENT PLANS

The Company has a profit sharing plan (the Plan) which covers all full-time
officers and employees who have at least one year of service and attained the
age of 21. For the years ended December 31, 1996 and 1995, contributions to the
Plan were made at the rate of 5% of earnings before profit sharing and income
taxes, or the maximum deduction allowed for federal income tax purposes,
whichever is lower and was funded as incurred. During 1996, the Company modified
its profit sharing plan to make contributions at Company's discretion. The Plan
is a qualified plan under applicable sections of the Internal Revenue Code.
Profit sharing expense for the period ended December 31, 1997, 1996 and 1995 was
$ -0-, $ -0-, and $25,914, respectively.

The Company adopted a 401K retirement plan which covers all full-time officers
and employees who have at least one year of service and attained the age of 21.
Contributions to the plan are made at a rate of 25% of each employees
contribution up to a maximum of 4% of each employees earnings for the year. The
plan is a qualified plan under applicable sections of the Internal Revenue Code.
Company contributions for the year ended December 31, 1997 was $19,750.

NOTE 12.  RELATED PARTY TRANSACTIONS

The Company has a month-to-month lease on certain operating and warehouse space
with Jalu, a partnership in which the Company's president is a partner. The
space is currently rented for $1,000 per month. The Company also rents on a
month-to-month basis certain office space from Chuckatuck, a partnership in
which the Company's president is a partner.
The present rental payment is $3,700 per month.

NOTE 13.  OPERATING LEASES

The Company leases certain of its manufacturing and office facilities and
equipment. Rental expense for the years ended December 31, 1997, 1996 and 1995
was $173,763, $136,850, and $123,481, respectively. All leases have expired;
however, the Company continues to lease these facilities under the previous
lease schedules for $4,685 per month.

NOTE 14.  MAJOR CUSTOMER AND SUPPLIER

The percentage of net revenue attributable to the Company's major customers
(exceeding 10% of total revenues) is 12.5% for 1997, 23.4% for 1996, and 10.5%
for 1995.

The percentage of cost of sales attributable to the Company's major suppliers
(exceeding 10% of total cost of sales) is 18.8% for 1997.


                                       27
<PAGE>   28




                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 15. INDUSTRY SEGMENTS

The Company considers its operations to include principally three industry
segments; (1) manufacture of protective packaging and similar materials, (2)
manufacture of THERMASTRUCTURE building products, and (3) licensing and related
machinery sales. Summary data for 1997, 1996, and 1995 is as follows:

<TABLE>
<CAPTION>
                                                              1997                1996                 1995
                                                              ----                ----                 ----
<S>                                                       <C>                  <C>                 <C>
Net revenues:
  Protective packaging and similar material               $ 9,421,180          $9,026,547          $  7,937,220
  THERMASTRUCTURE products and similar materials              845,873             406,322             1,329,307
  Licensing and related machinery sales                       687,807             287,239             1,510,684
                                                          -----------          ----------          ------------

  Revenue                                                 $10,954,860          $9,720,108          $ 10,777,211
                                                          ===========          ==========          ============


Operating income (loss):
  Protective packaging and similar materials              $ 2,477,830          $2,259,699          $  2,179,442
  THERMASTRUCTURE products and similar materials               60,437              68,943              (339,936)
  Licensing and related machinery sales                       299,957              88,646             1,462,207
                                                          -----------          ----------          ------------
          Segment operating income                          2,838,224           2,417,288             3,301,713

          General corporate expense                         2,330,711           2,101,467             2,458,508
                                                          -----------          ----------          ------------
          Operating profit                                $   507,513          $  315,821          $    843,205
                                                          ===========          ==========          ============

Capital expenditures:
   Protective packaging and similar materials             $ 1,026,830          $  440,631          $    792,338
   THERMASTRUCTURE products - U.S. operations                 206,892                  --                10,187
   General corporate                                           14,724              38,626                14,130
                                                          -----------          ----------          ------------

          Capital expenditures                            $ 1,248,446          $  479,257          $    816,655
                                                          ===========          ==========          ============

Depreciation and amortization:
   Protective packaging and similar materials             $   468,762          $  380,585          $    278,395
   THERMASTRUCTURE products                                    82,257                  --               191,117
   General corporate                                           27,574              23,846                32,353
                                                          -----------          ----------          ------------

          Depreciation and amortization                   $   578,593          $  404,431          $    501,865
                                                          ===========          ==========          ============

Identifiable assets at December 31:
   Protective packaging and similar materials             $ 3,970,025          $3,023,930          $  2,726,629
   THERMASTRUCTURE products                                 2,938,691             433,286               505,352
   Licensing and related machinery sales                    1,745,769           1,058,447             1,057,322
   General corporate                                        2,537,687           3,258,115             3,708,228
                                                          -----------          ----------          ------------
          Assets                                          $11,192,172          $7,773,778          $  7,997,531
                                                          ===========          ==========          ============

</TABLE>


                                       28
<PAGE>   29



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16.  OTHER MATTERS

The Company reached an agreement on February 15, 1994 whereby the Company was to
promptly spin off the THERMASTRUCTURE division into a new wholly owned
corporation. The party to the agreement immediately loaned $500,000 to the
Company with interest payable quarterly at 8% per annum. The terms of the
agreement granted the option to convert the loan into one-sixth (16.67%) of the
common stock of the new corporation and also the right and option to acquire up
to an additional one-third (33.33%) of the new corporation for $1,000,000 or any
portion thereof on a prorata basis. This option was terminated and the note was
repaid in November, 1995.

Company entered into an agreement dated November 3, 1995 for sale of 80% of
common stock of THERMASTRUCTURE, Ltd. Company received $750,000 down with the
balance to be paid on or before expiration of six months with a minimum of
$750,000 cash. This transaction resulted in a gain of $1,061,558 and is
reflected in net revenues from licensing and related machinery sales. Balance
due from sale at December 31, 1997 and 1996 amounted to $ -0- and $1,197,308,
respectively.

During 1997, the Company acquired an additional 70% of common stock of
Thermastructure, Ltd increasing ownership to 90% of common stock. Company
acquired the additional stock by giving up certain assets making this entire
transaction a noncash transaction. Company and minority interest of
Thermastructure, Ltd transferred all of the assets and liabilities into a new
company Thermastructure XT Corp while maintaining the same ownership percentages
(90% for Company and 10% for minority interest). Thermastructure XT Corp is
consolidated into Company's financial statements.

NOTE 17.  OTHER ASSETS - OTHER

Other assets - other consist of the following:

<TABLE>
<CAPTION>
                                   1997               1996              1995
                                   ----               ----              ----
<S>                             <C>                 <C>               <C>     
Deposits                        $   15,600          $ 15,600          $ 15,600
Loan costs                          31,938            35,930            39,922
Patent costs                        51,134            34,456            41,999
Mexican investment                  70,096            70,096            70,096
Investment in Radva RU                  --            35,000            70,000
Investment in Pereslav              55,000            55,000            55,000
Investment in licenses           1,105,135                --                --
Material rights                     13,931                --                --
Other                                   --            60,172             6,110
                                ----------          --------          --------
                                $1,342,834          $306,254          $298,727
                                ==========          ========          ========
</TABLE>

NOTE 18.  CONTINGENCIES

Debt assumption:

As part of the agreement dated November 3, 1995 in which Radva sold 80% of
common stock of THERMASTRUCTURE, Ltd., the acquiring company assumed obligations
owed to the Industrial Development Authority (IDA) amounting to $780,784.

On April 1, 1997 Company reacquired certain real estate of Thermastructure, Ltd
by assuming obligations owed to the Industrial Development Authority (IDA)
amounting to $775,818.

Legal matters:

In the normal course of business, the Company is involved in various legal
proceedings. In the opinion of management, any liability resulting from such
proceedings would not have a material adverse effect on the Company's
consolidated financial statements.




                                       29
<PAGE>   30



                        RADVA CORPORATION AND SUBSIDIARY

                   SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
                                                                                                    OTHER
                                         BALANCE                                                   CHANGES
                                           AT                                                         ADD               BALANCE
                                        BEGINNING           ADDITIONS                              (DEDUCT)              AT END
     CLASSIFICATION                      OF YEAR             AT COST          RETIREMENTS           (A) (B)             OF YEAR
     --------------                     ---------           ---------         -----------          --------             -------
<S>                                    <C>                 <C>                 <C>                 <C>                 <C>
Year ended December 31, 1995:

  Land and improvements                $  295,904          $       --          $   91,754          $       --          $  204,150
  Buildings and improvements            2,776,465             101,015           1,211,264             363,728           2,029,944
  Machinery and equipment               4,239,999             272,419           1,182,910              50,076           3,379,584
  Transportation equipment                425,551              15,287              30,698                  --             410,140
  Office equipment                        422,116              14,130               8,852                  --             427,394
                                       ----------          ----------          ----------          ----------          ----------

                                       $8,160,035          $  402,851          $2,525,478          $  413,804          $6,451,212
                                       ==========          ==========          ==========          ==========          ==========


Year ended December 31, 1996:

  Land and improvements                $  204,150          $   21,834          $       --          $       --          $  225,984
  Buildings and improvements            2,029,944              87,747              15,428                  --           2,102,263
  Machinery and equipment               3,379,584             264,133             956,574              15,699           2,702,842
  Transportation equipment                410,140              53,368             130,219                  --             333,289
  Office equipment                        427,394              36,476             263,670                  --             200,200
                                       ----------          ----------          ----------          ----------          ----------

                                       $6,451,212          $  463,558          $1,365,891          $   15,699          $5,564,578
                                       ==========          ==========          ==========          ==========          ==========


Year ended December 31, 1997:

  Land and improvements                $  225,984          $       --          $    5,000          $   91,753          $  312,737
  Buildings and improvements            2,102,263             115,835              82,298             695,110           2,830,910
  Machinery and equipment               2,702,842             837,480              38,630             909,608           4,411,300
  Transportation equipment                333,289              23,579              78,075                  --             278,793
  Office equipment                        200,200              51,061               1,483                  --             249,778
                                       ----------          ----------          ----------          ----------          ----------

                                       $5,564,578          $1,027,955          $  205,486          $1,696,471          $8,083,518
                                       ==========          ==========          ==========          ==========          ==========
</TABLE>

(A) During 1997, 1996 and 1995, the Company placed in service certain property
    which has previously been classified as inventory.

(B) During 1997 the Company acquired ninety (90) percent of Thermastructure XT
    Corp. in a noncash transaction.



                                       30
<PAGE>   31




                        RADVA CORPORATION AND SUBSIDIARY

                   SCHEDULE VI - ACCUMULATED DEPRECIATION AND
                  AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
                                                                                                    OTHER
                                         BALANCE                                                   CHANGES
                                           AT                                                         ADD               BALANCE
                                        BEGINNING           ADDITIONS                              (DEDUCT)              AT END
     CLASSIFICATION                      OF YEAR             AT COST          RETIREMENTS           (A) (B)             OF YEAR
     --------------                     ---------           ---------         -----------          --------             -------
<S>                                    <C>                 <C>                 <C>                 <C>                 <C>
Year ended December 31, 1995:

  Land and improvements                $   24,331          $       --          $       --          $       --          $   24,331
  Buildings and improvements              978,160              88,847              57,653                  --           1,009,354
  Machinery and equipment               2,927,884             235,656             725,166                  --           2,438,374
  Transportation equipment                291,289              32,136              30,698                  --             292,727
  Office equipment                        371,062              15,299               7,714                  --             378,647
                                       ----------          ----------          ----------          ----------          ----------

                                       $4,592,726          $  371,938          $  821,231          $       --          $4,143,433
                                       ==========          ==========          ==========          ==========          ==========


Year ended December 31, 1996:

  Land and improvements                $   24,331          $       --          $       --          $       --          $   24,331
  Buildings and improvements            1,009,354              81,689              15,428                  --           1,075,615
  Machinery and equipment               2,438,374             160,616             956,573                  --           1,642,417
  Transportation equipment                292,727              27,476             126,386                  --             193,817
  Office equipment                        378,647              16,049             263,670                  --             131,026
                                       ----------          ----------          ----------          ----------          ----------

                                       $4,143,433          $  285,830          $1,362,057          $       --          $3,067,206
                                       ==========          ==========          ==========          ==========          ==========


Year ended December 31, 1997:

  Land and improvements                $   24,331          $       --          $       --          $       --          $   24,331
  Buildings and improvements            1,075,615             102,282               1,556                  --           1,176,341
  Machinery and equipment               1,642,417             248,549               1,121                  --           1,889,845
  Transportation equipment                193,817              35,466              78,075                  --             151,208
  Office equipment                        131,026              22,894                  --                  --             153,920
                                       ----------          ----------          ----------          ----------          ----------

                                       $3,067,206          $  409,191          $   80,752          $       --          $3,395,645
                                       ==========          ==========          ==========          ==========          ==========
</TABLE>

(A) During 1997, 1996 and 1995, the Company placed in service certain property
    which has previously been classified as inventory.



                                       31
<PAGE>   32

                        RADVA CORPORATION AND SUBSIDIARY

                SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


<TABLE>
<CAPTION>
                                                                   ADDITIONS
                                                         ------------------------------
                                         BALANCE          CHARGED              CHARGED
                                           AT                TO                   TO                                    BALANCE
                                        BEGINNING        COSTS AND              OTHER             DEDUCTIONS             AT END
     CLASSIFICATION                      OF YEAR          EXPENSES             ACCOUNTS               (A)               OF YEAR
     --------------                     ---------        ---------             --------           ----------            -------
<S>                                    <C>                 <C>                 <C>                 <C>                 <C>
Year ended December 31, 1995:
  Allowance for doubtful
   accounts                            $204,670          $ (1,419)              $    --             $   --             $203,251
                                       ========          ========               =======             ======             ========

Year ended December 31, 1996:
  Allowance for doubtful
   accounts                            $203,251          $(30,691)              $    --             $   --             $172,560
                                       ========          ========               =======             ======             ========

Year ended December 31, 1997:
  Allowance for doubtful
   accounts                            $172,560          $(66,137)              $    --             $   --             $106,423
                                       ========          ========               =======             ======             ========
</TABLE>







(A) Represents uncollectible amounts written off, net of recoveries.



                                       32
<PAGE>   33





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

       None.
                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

               Information as to the Company's directors is incorporated by
reference to material contained under the heading "Election of Directors" in the
Company's proxy statement for its annual meeting of stockholders scheduled for
May 20, 1998.

               Information as to the Company's executive officers is set forth
under the heading "Executive Officers" in ITEM 1 of this report.

ITEM 11.  EXECUTIVE COMPENSATION

             Information as to executive compensation is incorporated by
reference to material contained under the headings "Cash Compensation" and
"Compensation Plans" in the Company's proxy statement for its annual meeting of
stockholders scheduled for May 20, 1998.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

            Information as to the security ownership of certain beneficial
owners and management is incorporated by reference to material contained under
the heading "Principal Stockholders" in the Company's proxy statement for its
annual meeting of stockholders scheduled for May 20, 1998.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

             Information as to certain relationships and related transactions is
incorporated by reference to material contained under the heading "Certain
Relationships and Related Transactions" in the Company's proxy statement for its
annual meeting of stockholders scheduled for May 20, 1998.

                                     PART IV

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

(a)  (1)  Financial Statements (Included in PART II)

          See ITEM 8 in PART II

(a)  (2)  Financial Statement Schedules (Included in PART II)

          See ITEM 8 in PART II

(a)  (3)  Exhibits

     The exhibits filed with this report and the documents incorporated by
reference as exhibits to this report are described below.

                  (3)(a) Articles of Incorporation of the Company (Incorporated
by reference to Exhibit B to Registration Statement No. 0-15464 filed with the
Securities and Exchange Commission on March 9, 1987).

                  (3)(b) Bylaws of the Company (Incorporated by reference to
Exhibit C to Registration Statement No. 0-15464 filed with the Securities and
Exchange Commission on March 9, 1987).




                                       33
<PAGE>   34



                  (4)(a) Bond Purchase Agreement dated as of October 1, 1981
among the Industrial Development Authority of the City of Portsmouth, First &
Merchants National Bank, and the Company; Agreement of Sale dated as of October
1, 1981 between the Industrial Development Authority of the City of Portsmouth
and the Company; Assignment Agreement dated as of October 1, 1981 between the
Industrial Development Authority of the City of Portsmouth and First & Merchants
National Bank; $550,000 promissory note of the Company; Deed of Trust dated as
of October 1, 1981 between the Industrial Development Authority of the City of
Portsmouth and Joseph S. Lovering, Jr. and William H. West, as trustees
(Incorporated by reference to Exhibit 4(a) to Registration Statement No. 33-5319
filed with the Securities and Exchange Commission on June 25, 1986).

                  (4)(b) Letter of Commitment dated October 9, 1984 between the
Company and Sovran Bank, N.A.; $1,000,000 promissory note of the Company; Deed
of Trust dated as of October 10, 1984 between the Company and Joel S. Rhew and
H. Gregory Kilduff, as trustees; Security Agreement dated as of October 10, 1984
between the Company and Sovran Bank, N.A. (Incorporated by reference to Exhibit
4(b) to Registration Statement No. 33-5319 filed with the Securities and
Exchange Commission on June 25, 1986).

                  (4)(c) Letter of Commitment dated August 25, 1984 between the
Company and Sovran Bank, N.A. and related promissory note of the Company;
Security Agreement dated August 30, 1983 between the Company and First &
Merchants National Bank (*the predecessor to Sovran Bank, N.A.); Accounts
Receivable and Inventory Reporting Service Instructions dated March 18, 1986;
Collateral Services Rate Agreement dated August 17, 1983 between the Company and
First & Merchants National Bank (Incorporated by reference to Exhibit 4(c) to
Registration Statement No. 33-5319 filed with the Securities and Exchange
Commission on June 25, 1986).

                  (4)(d) Letter of Commitment dated September 16, 1987 between
the Company and Sovran Bank, N.A. relating to a $1,000,000 line of credit.
(Incorporated by reference to Exhibit 4(d) of Registrant's 1987 Form 10-K).

                  (4)(e) In addition to the matters reported in Exhibits (4)(a)
through (4)(d) above, the long-term debt as shown on the consolidated balance
sheet of the Company at December 31, 1989 included additional obligations each
of which is less than 10% of the total assets of the Company. The documents
evidencing these obligations are omitted pursuant to Item 601(b)(4)(iii) of
Regulation S-K and will be furnished to the Securities and Exchange Commission
upon request.

                  (4)(f) See Article III, Section 4 of Exhibit 3(a).

                  (4)(g) See Articles II, III, VI, VIII and IX of Exhibit
(3)(b).

                  (4)(h) Form of Stock Purchase Warrant (Incorporated by
reference to Exhibit 4(g) to Registration Statement No. 33-5319 filed with the
Securities and Exchange Commission on June 25, 1986).

                  (10)(a) Lease Amendment #1 dated August 26, 19897 between the
Company and Gil Gillis, Gwenda Gillis, and Gayla Gillis relating to premises
located at 2500 South Main Street, Highway 293, Kennesaw, Georgia (Incorporated
by reference to Exhibit 10(a) of Registrant's 1987 Form 10-K).

                  (10)(b) Lease dated February 20, 1986 between Guam Capital
Investment Corporation and the Company relating to premises located at Lot No.
236, Agat, Guam (Incorporated by reference to Exhibit 10(c to Registration
Statement No. 33-5319 filed with the Securities and Exchange Commission on June
25, 1986).

                  (10)(c) Lease dated April 29, 1986 between Chuckatuck
Partnership and the Company relating to the Company's principal executive office
space in Radford, Virginia (Incorporated by reference to Exhibit 10(d) to
Registration Statement No. 33-5319 filed with the Securities and Exchange
Commission on June 25, 1986).


                                       34
<PAGE>   35



                  (10)(d) Lease dated July 1, 1987 between the Atlantic
Richfield Company and James M. Chamberlain and Patsy L. Chamberlain, as trustees
of the Chamberlain Family Trust, relating to premises located at 3802 East
Broadway, Phoenix, Arizona.

                  (10)(e) Agreement dated March 31, between the Department of
the Army and the Company relating to the construction of U.S. military housing
in Edgewood, Maryland. (Incorporated by reference to Exhibit 10(e) of
Registrant's 1987 Form 10-K).

                  (10)(f) Agreement dated September 1, 1987 between Zublin
Delaware, Inc. and the Company relating to the construction of U.S. military
housing in Vilseck, West Germany. (Incorporated by reference to Exhibit 10(f) of
Registrant's 1987 Form 10-K.)

                  (10)(g) Agreement dated as of July 1, 1985 between ARCO
Chemical Company and the Company relating to the sale of various copolymer
resins (Incorporated by reference to Exhibit 10(g) to Registration Statement No.
33-5319 filed with the Securities and Exchange Commission on June 25, 1986.)

                  (10)(h) Agreement dated as of April 11, 1986 between ARCO
Technology, Inc. and the Company relating to a license of certain manufacturing
rights (Incorporated by reference to Exhibit 10(h) to Registration Statement No.
33-5319 filed with the Securities and Exchange Commission on June 5, 1986.)

                  (10(i) Bank of Virginia Trust Company Prototype Plan and Trust
Agreement and accompanying Joinder Agreement (Incorporated by reference to
Exhibit 10(i) to Registration Statement No. 33-5319 filed with the Securities
and Exchange Commission on June 24, 1986.)

                  (10)(j) 1986 Stock Option Plan for employees of the Company
(Incorporated by reference to Exhibit 10(j) to Registration Statement No.
33-5319 filed with the Securities and Exchange Commission on June 24, 1986.)

                  (10)(k) Settlement Agreement dated June 19, 1986 among the
Company, Luther I. Dickens, and Great Northern Corporation (Incorporated by
reference to Exhibit 10(k) to Registration Statement No. 33-5319 filed with the
Securities and Exchange Commission on June 24, 1986.)

                  (10)(l) Purchase Agreement dated December 31, 1987 between the
Company and the Atlantic Richfield Company (Incorporated by reference to Exhibit
10 to the Company's current report on Form 8-K filed with the Securities and
Exchange Commission on January 13, 1988.

                  (11) Statement recomputation of per share earnings.

(b)     Reports on Form 8-K

                    None

(c)     Exhibits

        See ITEM 14(a)(3) above.

(d)     Financial Statement Schedules

        See ITEM 14(a)(2) above.




                                       35
<PAGE>   36





                                   SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.


                                                  RADVA Corporation



Dated:                           March 25, 1998   By /s/ Luther I. Dickens
                                                     --------------------------
                                                     Luther I. Dickens
                                                     President


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


Dated:                           March 25, 1998   By /s/ Luther I. Dickens
                                                     --------------------------
                                                     Luther I. Dickens
                                                     President and Director


Dated:                           March 25, 1998   By /s/ James M. Hylton
                                                     --------------------------
                                                     James M. Hylton
                                                     Director


Dated:                           March 25, 1998   By /s/ Rush G. Allen
                                                     --------------------------
                                                     Rush G. Allen
                                                     Director


Dated:                           March 25, 1998   By /s/ J. Granger Macfarlane
                                                     --------------------------
                                                     J. Granger Macfarlane
                                                     Director


Dated:                           March 25, 1998   By /s/ William H. Wilson
                                                     --------------------------
                                                     William H. Wilson
                                                     Director


Dated:                           March 25, 1998   By /s/ David B. Kinney
                                                     --------------------------
                                                     David B. Kinney
                                                     Director

                                       36