<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                              REPORT ON FORM 10-KSB

                  [X]      Annual Report pursuant to Section 13 or 15(d) of the
                           Securities Exchange Act of 1934


         For the fiscal year ended March 31, 1998


Commission File No. 0-27804

                             COMPARE GENERIKS, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

Delaware                                                    11-3289396
-------------------------------                ---------------------------------
(State of or other jurisdiction                (IRS Employer Identification No.)
of incorporation or organization)

60 Davids Drive
Hauppauge, New York                                           11788
---------------------                                       ----------
(Address of Principal                                       (Zip Code)
 Executive Offices)

Registrant's telephone number, including area code: (800) 342-6555
                                                    ---------------

Securities registered pursuant to Section 12(b) of the Act: None.
                                                            -----

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

                    Common Stock, par value $.0001 per share
                    ----------------------------------------
                                (Title of Class)

 Units consisting of two (2) shares of common stock, par value $.0001 per share
          and one (1) Class A Redeemable Common Stock Purchase Warrant
          ------------------------------------------------------------
                                (Title of Class)

                Class A Redeemable Common Stock Purchase Warrant
                ------------------------------------------------
                                (Title of Class)

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 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 the Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

         Issuer's revenues for its most recent fiscal year were $9,151,000.

         The aggregate market value of the voting stock held by non-affiliates
of the Registrant, computed by reference to the closing price of such stock as
of June 22, 1998, was approximately $6,341,000.

         Number of shares outstanding of the issuer's common stock, as of June
22, 1998 was 3,890,000.

                            See Page 23 for Exhibits

                                       

<PAGE>

                                     PART 1

Item 1. BUSINESS
        --------

General
-------

         Compare Generiks, Inc., a Delaware corporation (the "Company" or
"CGI"), is engaged in the distribution, marketing and sale of dietary
supplements and OTC non-prescription pharmaceuticals ("OTCs"). The Company
distributes its products under Company owned trademarks through direct sales to
major wholesalers, particularly those that service convenience stores, drug
stores, discount department stores, wholesale clubs, petroleum marketers,
hospital gift shops and airport gift shops supported by a sophisticated broker
network.

Products and Development
------------------------

         The Company develops and sells products for its own Energex Plus and
Compare Generiks lines and distributes products in the Max Brand and HeadsUp
lines. Its products include dietary supplements and OTCs. Each product category
contains numerous different dosage sizes and various and unique combinations of
ingredients. These product groups include Extra Strength Pain Reliever, Aspirin,
Sinus Relief, Pseudo Relief, Antacid Relief, Advanced Pain Relief, Ex-Pain,
Complete Allergy Relief, Stay Alert, Travel Ease, Multrum and Cough & Cold
Relief.

         The Company markets its non-prescription products under its Compare
Generiks, Max Brand and HeadsUp brand names. These products contain active
ingredients which are identical to those contained in non-prescription products
sold under national and regional brand names, private label brands, local and
regional products sold by other national and regional direct mail markets. For
instance, the Company's tablets and capsules are similar to Actifed(R), Tylenol
Extra Strength(R), Advil(R), Tylenol Regular Strength(R), Bayer (325 mg)(R),
Anacin(R), Tylenol Sinus Formula(R), Sudafed (30 mg)(R), Nyquil(R), Dayquil(R),
Comtrex(R), Excedrin(R) and Benadryl(R).

         The Company only sells OTC products which have been proven to be
generally recognized to be safe and effective for the intended uses. Proposed
rules issued by the Food and Drug Administration have established, after an
expanded review of all OTC products, those OTC drugs that will be generally
recognized as safe and effective and not misbranded.

         For its sales of vitamins and nutritional supplements to retailers, the
Company employs a multi-brand strategy and associated marketing efforts designed
to access several different classes of trade. The Company's marketing strategy
with respect to each of its brands is directed at the ultimate retail consumer,
with an emphasis on the educated consumer. The Company provides a wide product
selection for the consumer, attractive price points, clear and informative
labeling, safety-conscious packaging and thoughtful shelf organization for
easier product selection. The Company works closely with retailers to help them
optimize the performance of their dietary supplement products and OTC
pharmaceutical departments, including providing retailers with various types of
merchandising assistance to maintain the 


                                       2
<PAGE>

inventory and appearance of the dietary supplement products and OTC
pharmaceutical sections of their stores, sophisticated plan-o-grams which map
out the shelf displays and shelf marketing strategies, point-of-sale displays
and topical informational materials.

         The Company has expanded its vitamin and nutritional supplement line of
products. The products introduced during fiscal year end March 31, 1998 include
Joint Support, Pressur-Lo and Bright Eyes.

         The Company introduces new products in response to anticipated consumer
trends. Product concepts are generally developed by the Company's management,
key employees and consultants. Since the Company acquired the Energex Assets and
the Compare Generiks Assets, the Company has not incurred any expenses which
have been allocated to such research and development.

Manufacturing and Suppliers
---------------------------

         The Company has purchased essentially all of its products from PDK Labs
Inc., a New York Corporation ("PDK"), pursuant to a Supply Agreement dated
October 31, 1995, as amended, pursuant to an amendment dated as of December 13,
1996 (the "Supply Agreement'), and an Exclusive Supply and Licensing Agreement
dated March 24, 1997, as amended, pursuant to an amendment dated as of April 1,
1998 (the "Licensing Agreement"). The Company purchases certain products in the
Energex Plus and Compare Generiks product lines from PDK pursuant to the Supply
Agreement at prices based on PDK's material cost plus a specified mark-up. The
Company was granted an exclusive license to use the trademarks "Max Brand" and
"HeadsUp" brands of OTCs and the exclusive right to distribute products bearing
such names pursuant to the Licensing Agreement. The Company agreed to pay PDK an
annual license fee for such rights, payable, at the option of the Company,
either in cash or in shares of the Company's common stock. The Company intends
to satisfy the license fee due for the most recently completed fiscal year in
shares of common stock. PDK supplies the Company with certain products pursuant
to the Licensing Agreement at prices specified in the Amendment to the Licensing
Agreement dated April 1, 1998. In addition, in May 1996 the Company entered into
an Exclusive Supply Agreement with a formerly affiliated third party pursuant to
which the third party agreed to supply the Company with all of the Company's
requirements for certain vitamin and nutritional supplements. Although the
Company believes that other sources are available for such products, there can
be no assurance that the Company would be able to replace these products, or
obtain new suppliers, in the event the Company was no longer able to obtain
products from PDK. Even if the Company is able to develop alternative product
sources, there can be no assurance that it can do so without material delay or
on a cost effective basis at prices similar to those paid to PDK. As a result,
any interruption or discontinuance of supplies from PDK could result in
considerable expense, delay the Company's operations and ability to deliver
products, and have a material adverse effect on the Company.

Marketing and Advertising
-------------------------

         The Company markets its products to retail and wholesale customers
through in-store demonstrations, point of purchase displays, promotional
literature, direct salespersons, sales agents and manufacturer's
representatives. Advertising is through trade magazines,


                                       3
<PAGE>

newspapers, in-store flyers, radio and distributors catalogs. The Company offers
placement allowances and quarterly rebates which insure continued placement and
reorders.

         On May 5, 1997, the Company entered into a marketing agreement with a
pharmaceutical distributor (the "Distributor"), pursuant to which the
Distributor agreed to market the Company's "Max Brand" and "HeadsUp" products
for a period of two years, renewable for successive periods of one year.

         On March 30, 1998, the Company terminated the marketing agreement with
effect from April 30, 1998. See "Item 3 - Legal Proceedings."

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

         The market for dietary supplements and OTC pharmaceutical products is
highly competitive in each of the Company's existing and anticipated product
lines and methods of distribution. Numerous manufacturers and distributors
compete with the Company for customers throughout the United States and
internationally in the packaged dietary supplement and OTC pharmaceutical
industry selling products to retailers, such as mass merchandisers, drug store
chains, independent drug stores and health food stores. Many of the Company's
competitors are substantially larger and more experienced than the Company, have
longer operating histories and have materially greater financial and other
resources than the Company (although no implication is intended hereby regarding
the Company's industry ranking in comparison to such competitors). Many of these
competitors are private companies, and therefore, the Company cannot compare its
revenues with respect to the sales volume of each competitor. The Company's
significant competitors include Perrigo Company and Rexall Sundown, Inc. both of
whom have longer operating histories and materially greater financial and other
resources than the Company.

         Although certain of the Company's competitors are substantially larger
than the Company and have greater financial resources, the Company believes that
it competes favorably with other vitamin and nutritional supplement companies
because of its access to products, competitive pricing, quality of products,
sales support and diverse product line.

Trademarks and Service Marks
----------------------------

         The trademarks Energex Plus and Compare Generiks and an application for
a mechanical patent for the Compare Generiks tablet display and dispenser are
the property of the Company and have been assigned to the Company by PDK. The
trademarks have been registered and a patent application filed with the United
States Patent and Trademark Office ("PTO"). The trademarks Max Brand and HeadsUp
have been licensed to the Company by PDK under an exclusive supply and licensing
agreement (the "Licensing Agreement"). In consideration for this Licensing
Agreement, the Company agreed to pay an annual license fee of $500,000 to PDK.
This fee is payable, at the option of the Company, either in cash or in shares
of the Company's common stock and the Company intends to satisfy the license fee
due during the 1998 fiscal year in shares. To the Company's knowledge, the
Company has the common law right to use such trademarks on, and the mechanical
patent with, its products and in the marketing of its services. The Company has
retained trademark counsel and a patent agent and 


                                       4
<PAGE>

presently intends to make all appropriate filings and registrations and take all
other actions necessary, to protect all of its intellectual property rights.

Management and Employees
------------------------

         As of June 18, 1998, the Company employed a total of four (4) employees
on a full time basis (two (2) employees in sales and marketing and two (2)
people in administration and finances).

         The Company has experienced no work stoppages and considers its
employee relations to be satisfactory. The Company's employees are not
represented by a labor union.

Government Regulation
---------------------

         The Company's products and/or its business operations are subject to
regulation by one or more federal agencies, including the Federal Trade
Commission ("FTC"), the United States Food and Drug Administration ("FDA"), the
Consumer Product Safety Commission and the Environmental Protection Agency.
These activities are also regulated by various agencies of the states and
localities in which the Company's products are sold.

         In October 1994, the Dietary Supplement Health and Education Law was
signed into law. This new law, which amends the Federal Food, Drug and Cosmetic
Act, defines dietary supplements as a separate and distinct entity, and not as
food additives. Vitamins, minerals, amino acids, herbs and other nutritional
substances are included in the definition. It expressly provides for the use of
third party scientific literature which shall not be regulated as labeling by
the FDA, provided it is not false or misleading. The new law also delayed the
FDA's requirements for extensive product label changes which were to be applied
to products manufactured after July 1, 1995. It provides a set of different
label requirements for ingredient content information, and directs the FDA to
publish new label regulations for supplements with a mandatory effective date,
as extended, of March 23, 1999. It makes no modifications on the requirements
and proscriptions regarding health claims for dietary supplements. The new law
also introduced the concept of good manufacturing practices to the manufacture
of dietary supplements. At this time, it would be premature to predict its
overall impact on the dietary supplement industry.

         Several of the raw materials contained in products marketed by the
Company are categorized as List I Chemicals by the Chemical Diversion Act of
1988. As such, the importation of these chemicals requires the filing of
importation documents with the Federal Drug Enforcement Agency. In addition,
certain foreign countries require a "letter of non-objection" for the export of
List I Chemicals.

         The FDA proposed regulations which remain pending but, if adopted,
would remove ephedrine-containing over-the-counter drug products which are
marketed and sold by the Company from the over-the-counter market. During this
past year several states have already taken action on an individual state by
state basis, to restrict, in some fashion, the sale of ephedrine,
pseudoephedrine, and/or phenylpropanolamine ("PPA") containing products.

         The Drug Enforcement Administration (the "DEA") has been given the
statutory authority to regulate all ephedrine, pseudoephedrine, and PPA
over-the-counter drug products. Previously, the 


                                       5
<PAGE>

restrictions were limited to certain ephedrine products. The restrictions on
pseudoephedrine and PPA became effective in October 1997 and DEA registration
requirements are now effective. Registration with the DEA is required for all
companies engaged in the distribution of any products containing ephedrine,
pseudoephedrine, or PPA. There are certain registration exemptions in place for
retail stores. The Company has applied for its own registration with the DEA.
That registration remains pending and the Company continues to operate under an
exemption. Should the DEA ultimately deny the Company's registration, it would
no longer be permitted to distribute these products. The Company's customers who
have not applied for such registration or have been rejected, can no longer
market the Company's products containing the three ingredients in question.

         On March 10, 1998, the Company was notified by PDK Labs Inc. ("PDK"),
which company supplies the Company with certain products containing a List 1
Chemical, that the Drug Enforcement Administration ("DEA") advised counsel to
PDK that the DEA will not sign at this time a letter of non-objection requested
by PDK relating to the intended importation by PDK of a List 1 Chemical. The
Company has been advised that PDK's counsel has had a meeting with the DEA and
PDK is attempting to take such steps as are necessary to obtain the letter of
non-objection. Without the non-objection letter, PDK will be unable to import
the List 1 Chemical. PDK has advised the Company that it is continuing to obtain
products domestically and that PDK currently maintains approximately nine months
worth of inventory at the current sales levels. In the event that PDK is unable
to continue to supply the Company with its product needs, the Company will seek
to obtain such products from other suppliers. Sales of products containing this
List 1 Chemical were approximately $5,852,000 (representing 64% of the Company's
net sales) for the year ended March 31, 1998.

Conflict of Interests
---------------------

         At present, PDK supplies essentially all of the Company's products as
well as certain management and administrative facilities and personnel. It is
anticipated that PDK will continue to supply a significant percentage of the
Company's products, at or near present levels. The Company will continue to
operate its executive offices, distribution and packaging at facilities leased
and managed by PDK. In addition, a member of PDK's Board of Directors, Thomas A.
Keith, is also the President, Chief Executive Officer, Chief Financial Officer
and a Director of the Company. Because of PDK's role as a significant supplier
to the Company and as a holder of 5.3% of the Company's voting securities,
certain conflicts of interest may occur between the Company and PDK. In such
instances, members of the Board of Directors who are also members of the PDK
Board of Directors may be precluded from participating in corporate decisions.
Although the Board of Directors of the Company has not adopted any written
policy on this matter, the Delaware Corporation Law contains specific provisions
governing such conflicts.

Liability Insurance
-------------------

         The Company, like other manufacturers of products that are ingested,
faces inherent risk of exposure to product liability claims if, among other
things, the use of its products results in an injury. With respect to product
liability coverage, the Company through its main supplier, currently has
coverage under a product liability insurance policy. There is no assurance that
any judgment against the Company will not exceed liability coverage. A judgment
significantly in excess of the amount of insurance coverage would have a
material adverse effect on the Company.



                                       6
<PAGE>

Item 2. PROPERTIES.
        -----------

         The Company leases its 10,000 square foot executive offices,
distribution center and warehouse space at 60 Davids Drive, Hauppauge, NY 11788
from PDK on a month-to-month basis at a monthly rent of $5,000. In the judgment
of management, the lease with PDK reflects a rent at current fair market value.

Item 3. LEGAL PROCEEDINGS
        -----------------
  
         Except as set forth below, there is no material litigation pending or
threatened against the Company nor are there any such proceedings to which the
Company is a party.

         On or about April 22, 1998, Body Dynamics, Inc. ("BDI") instituted a
litigation entitled Body Dynamics, Inc. v. PDK Labs Inc. and Compare Generiks,
Inc., U.S.D.C. E.D. NY. against the Company, alleging, among other things, that
the  Company breached a contract under which BDI was to market, for a fee,
certain of the Company's products. The complaint is somewhat imprecise with
respect to the damages BDI seeks from the Company; the only specific demands
against the Company are in the aggregate amount of $490,000. The Company has
answered the complaint, and the Company believes it has adequate defenses and 
substantive counterclaims and it intendsto vigorously defend against the claims.
There has been no discovery taken in this action.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
        ----------------------------------------------------

         There have been no matters which have been submitted to a vote of the
Company's securityholders.




                                       7
<PAGE>

                                     PART II
                                     -------

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

         The Company's securities commenced trading in the over-the-counter
market on the effectiveness of the Company's Initial Public Offering on March 6,
1996 in the form of Units each consisting of two (2) shares of Common Stock and
one (1) Class A Warrant. The Common Stock and Class A Warrants are regularly
quoted and traded on the NASDAQ SmallCap Market under the symbols COGE and
COGEW. The Units were regularly quoted and traded on the NASDAQ SmallCap Market
under the symbol COGEU through September 1997.

         The following table indicates the high and low bid prices for the
Company's Units, Common Stock and Class A Warrants for the period up to March
31, 1998 based upon information supplied by the NASDAQ SmallCap Market. Prices
represent quotations between dealers without adjustments for retail markups,
markdowns or commissions, and may not represent actual transactions.

Units
-----
                  1997 Fiscal Year                            Quoted Bid Price
                  ----------------                            ----------------
                                                              High         Low
                                                              ----         ---
                  First Quarter                               23           18
                  Second Quarter                              12           12
                  Third Quarter                               DID NOT TRADE
                  Fourth Quarter                              DID NOT TRADE

                  1998 Fiscal Year                            Quoted Bid Price
                  ----------------                            ----------------
                                                              High         Low
                                                              ----         ---
                  First Quarter                               DID NOT TRADE
                  Second Quarter                              DID NOT TRADE
                  Third Quarter                               DID NOT TRADE
                  Fourth Quarter                              DID NOT TRADE


Common
Stock
-----

                  1997 Fiscal Year                            Quoted Bid Price
                  ----------------                            ----------------
                                                              High       Low
                                                              ----       ---
                  First Quarter                               10         6
                  Second Quarter                              8 1/8      4
                  Third Quarter                               7 3/4      5
                  Fourth Quarter                              6 3/8      4 1/8




                                       8
<PAGE>

                  1998 Fiscal Year                            Quoted Bid Price
                  ----------------                            ----------------
                                                              High       Low
                                                              ----       ---
                  First Quarter                               4 1/2      2 9/16
                  Second Quarter                              5 1/4      3 3/8
                  Third Quarter                               4 9/16     3 1/4
                  Fourth Quarter                              3 11/16    1 7/8

Class A
Warrants
--------

                  1997 Fiscal Year                            Quoted Bid Price
                  ----------------                            ----------------
                                                              High       Low
                                                              ----       ---
                  First Quarter                               6 1/4      3 1/2
                  Second Quarter                              4 3/4      1 15/16
                  Third Quarter                               3 11/16    1 3/4
                  Fourth Quarter                              2 13/16    1 1/2

                  1998 Fiscal Year                            Quoted Bid Price
                  ----------------                            ----------------
                                                              High       Low
                                                              ----       ---
                  First Quarter                               1 7/8      15/16
                  Second Quarter                              1 7/16     3/4
                  Third Quarter                               3 13/16    3/8
                  Fourth Quarter                              3/4        1/8

         On June 22, 1998 the closing price of the Common Stock as reported on
  NASDAQ SmallCap Market was $1.63. On June 22, 1998 the closing price for the
  Class A Warrants reported on the NASDAQ SmallCap Market was $0.19. The Units
  did not trade. On June 22, 1998 there were 71 holders of record of Common
  Stock.



                                       9
<PAGE>

Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        ---------------------------------------------------------------
        RESULTS OF OPERATIONS.
        ----------------------

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

         Fiscal Year 1998 compared to Fiscal Year 1997

         Net sales for the fiscal year ended 1998 were approximately $9,151,000
as compared to net sales in 1997 of $2,290,000. The increase in sales is
principally attributable to the Company entering into an Exclusive Supply and
Licensing Agreement (the "Exclusive Agreement") with PDK Labs Inc. ("PDK"),
whereby PDK granted the Company an exclusive license to use the trademarks 'Max
Brand" and "Heads UP" and the exclusive right to distribute products bearing
such names. Gross profit amounted to $4,794,000 (52% of sales) in 1998 as
compared to $815,000 (36% of sales) in 1997. The increase in gross profit is
attributable to sales of "Max Brand" and "Heads Up" products which yield higher
gross profits.

         Selling, general and administrative expenses were $4,564,000 in 1998
and $2,077,000 in 1997. As a percentage of sales, selling, general and
administrative expenses were 50% in 1998 and 91% in 1997. The overall decrease
as a percentage of sales is attributable to sales growth exceeding increases in
marketing costs incurred in connection with the Company entering into a
marketing agreement with a non-affiliated pharmaceutical distributor (the
"distributor") dated May 5, 1997. Pursuant to this agreement, the distributor
marketed the Company's "Max Brand" and "Heads Up" products. The distributor 
earned a marketing fee equal to the difference between (i) the sales price of 
the products sold and (ii) an amount equal to 200% of the material cost of the
products, as defined. Effective April 30, 1998, the Company terminated its
agreement with this distributor.

         During the fiscal year ended 1998, the Company recorded a charge to
operations of $734,000 for a loss on impairment of marketable securities. This
represents a decline in the value of an investment in marketable securities
that, in the opinion of the Company's management, was considered to be other
than temporary.

         Net loss for the fiscal year ended 1998 was $410,000, as compared to
net loss in 1997 of $1,165,000. The decrease in the loss reflects the increased
sales and gross profit, offset by the loss or impairment on marketable
securities.

         On March 24, 1997, the Company entered into the Exclusive Agreement
with PDK. In consideration for this agreement, the Company agreed to pay an
annual license fee of $500,000 to PDK payable, at the option of the Company,
either in cash or in shares of the Company's common stock. Included in selling,
general, and administrative expenses is $500,000 for the fiscal year ended 1998.
The Company intends to satisfy the $500,000 license fee obligation for the
fiscal year ended March 31, 1998 with the issuance of approximately 311,000
shares of its common stock.

         In April 1998, the Company amended its exclusive supply agreement with
PDK covering the purchases in the "Max Brand" and "Heads Up" product ranges. The
amendment contains changes to the payment provision on these products.



                                       10
<PAGE>

         The Company recognizes the need to ensure its operations will not be
adversely impacted by Year 2000 software failures. Software failures due to
processing errors potentially arising from calculations using the Year 2000 date
are a known risk. The Company is addressing this risk to the availability and
integrity of financial systems and the reliability of operational systems. The
Company has engaged computer consultants and is establishing processes for
evaluating and managing the risks and costs associated with this problem. In the
opinion of management, the costs of addressing this problem will not materially
affect the financial position of the Company.

         Management believes that inflation did not have a material effect on
operations or financial condition in 1998 and 1997. Management also believes
that its business is not seasonal; however, significant promotional activities
have a direct impact on sales volume in any given quarter.

         Fiscal Year 1997 compared to Fiscal Year 1996

         Net sales for the fiscal year ended 1997, derived primarily from
convenience stores and drug store chains, were approximately $2,290,000. Net
sales for the period April 25, 1995 (inception) to March 31, 1996 (the
"Development Stage") approximated $546,000. The gross profit on these sales was
approximately $815,000 (36% of sales) and $291,000 (53% of sales), respectively.
The changes in gross profit is primarily attributable to the mix of sales. Sales
for the Energex product line approximated 42% of total sales during the
Development Stage as compared to 19% of total sales for the year ended March 31,
1997.

         Selling, general and administrative expenses approximated $2,077,000
(91% of sales) for fiscal year 1997. For the period April 25, 1995 (inception)
to March 31, 1996, selling, general and administrative expenses were
approximately $491,000 (90% of sales). The Company increased attendance at trade
shows, placed radio advertisements and trade publications throughout the nation,
and has implemented marketing campaigns targeting convenience store chains for
the placement of product displays.

         The Company realized losses of approximately ($1,165,000) and
($214,000) for the fiscal year ended 1997 and 1996, respectively. The losses are
principally attributable to the amortization of intangible assets on a straight
line basis, the implementation of marketing campaigns geared toward product
placement and advertising costs.

         On May 31, 1996, the Company entered into a three year supply agreement
with Superior Supplements, Inc. ("SSI"), which provides for SSI to supply the
Company with vitamins in bulk tablet form (other than any vitamins sold under
the 'Energex" trademark or as part of the "Energex" product line) at a price
equal to SSI's cost plus 15 percent.

In December 1996, the Company amended its Supply Agreement ("Amended Agreement")
with PDK Labs, Inc. ("PDK"). The Amended Agreement provides for PDK to supply
the Company with certain products at prices based on PDK's material cost, plus a
specified mark-up.



                                       11
<PAGE>

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

         As of March 31, 1998, the Company had working capital of approximately
$2,198,000.

         The Company's statement of cash flows reflects cash used in operating
activities of approximately , primarily due to a net loss of approximately
($410,000) and increases in operating assets such as accounts receivable
($501,000), inventories ($1,171,000) and an adjustment for deferred income tax
benefit ($94,000) offset by a decrease in accounts payable and accrued expenses
($102,000), a decrease in other assets ($64,000), a loss on impairment of
marketable securities ($734,000), a non-cash license fee ($500,000), and an
adjustment for amortization and depreciation expenses of ($324,000).

         The statement also reflects cash used in investing activities of
approximately $23,000 which reflects the acquisition of property and equipment.

         Net cash used in financing activities approximated $85,000 representing
payments of cash dividends.

         The Company expects to meet its cash requirements from operations and
current cash reserves.

Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         See financial statements following Item 13 of this Annual Report on
Form 10-KSB.

Item 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS
        --------------------------------------------
        ON ACCOUNTING AND FINANCIAL DISCLOSURE.
        ---------------------------------------

         None.




                                       12
<PAGE>

                                    PART III
                                    --------

Item 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         -------------------------------------------------------------
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT OF THE REGISTRANT
         -------------------------------------------------------------------


Name                      Age          Position(s) with the Company

Thomas A. Keith            37            President, Chief Executive Officer,
                                         Chief Financial Officer and Director

Dr. Daniel Durchslag       53            Director

Theresa Giove              40            Director

Background of Executive Officers and Directors

Thomas A. Keith has been a Director of the Company since May 21, 1997 and the
President of the Company since October 31, 1995. Prior to joining the Company,
from December 1990 to October 1995, Mr. Keith was Vice President of Sales &
Marketing of PDK Labs Inc., a company which is engaged in the manufacture and
distribution of nutritional supplements, vitamins and OTCs. Mr. Keith will
continue to devote substantially all of his business time to the Company. In
addition, Mr. Keith has been a Director of Futurebiotics, Inc., a majority-owned
subsidiary of PDK Labs Inc. since December 2, 1997 and he has been a Director of
PDK Labs Inc. since March 11, 1998.

Dr. Daniel Durchslag, DDS. has been a Director of the Company since October 2,
1995 and has practiced General Cosmetic and Sports Dentistry in Beverly Hills,
California since 1980. From 1973 until 1979, he was an Associate Professor and
Director of Clinics at the University of Southern California School of
Dentistry. He is a graduate of the University of Wisconsin and Loyola
University/Chicago College of Dental Surgery. In addition, he has been a
director of Futurebiotics, Inc. since December 2, 1997.

Theresa Giove has been a Director of the Company since December 1, 1997 and has
been engaged in the practice of psychotherapy since 1990. From 1989 to 1991, she
was a Director of the Adolescent Wellness Center at North Shore University
Hospital. She is on the faculty at Adelphi University where she is a professor
in the Graduate Social Work Department. Ms. Giove has a B.S. degree from New
York Institute of Technology and a M.B.A. degree in Professional Studies,
Clinical Counseling from New York Institute of Technology. She also received a
M.B.A. degree in Social Work from Adelphi University. She is currently working
toward her Ph.D. in Social Psychology from Union Institute.

There are no family relationships between the officers and directors of the
Company.



                                       13
<PAGE>

Compliance with Section 16(a) of the Securities Exchange Act of 1934
--------------------------------------------------------------------

         Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent (10%) of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of common stock and other equity securities of
the Company. Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.

         To the Company's knowledge, based solely upon its review of the copies
of such reports furnished to the Company during the year ended March 31, 1998,
all Section 16(a) filing requirements applicable to its officers and directors
and greater than ten percent beneficial owners were satisfied.




                                       14
<PAGE>

Executive Compensation
----------------------

SUMMARY COMPENSATION TABLE
--------------------------


                           SUMMARY COMPENSATION TABLE

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

<TABLE>
<CAPTION>
                                                                                                       Long Term Compensation
                                                                                                -----------------------------------
                                                               Annual Compensation                Awards                Payouts
                                                         --------------------------------------------------------------------------

      (a)                           (b)        (c)            (d)        (e)           (f)        (g)           (h)        (i)
                                                                                    Restricted                 LTIP     All Other
    Name and                                                         Other Annual     Stock     Options/      Payouts  Compensation
Principal Position                 Year      Salary($)     Bonus($) Compensation($)   Award($)   SARS(#)        ($)        ($)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                <C>       <C>           <C>      <C>             <C>         <C>           <C>      <C> 
Thomas A. Keith, CEO               1998      $155,000      $75,000        $-0-          -0-        -0-          -0-       $-0-
                                   1997      $135,000      $57,000        $-0-          -0-        -0-          -0-       $-0-
                                   1996      $ 57,000      $-0-           $-0-          -0-      100,000        -0-       $-0-
</TABLE>

                        Aggregated Option/SAR Exercises -
                        ---------------------------------
                          and FY-End Option/SAR Values
                          ----------------------------



<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
       (a)                (b)             (c)                       (d)                                 (e)
                        Shares                             Number of Securities          Value of Unexercised in the Money
                      Acquired on        Value            Underlying Unexercised                Options/SARs at the
       Name          Exercise (#)       Realized $      Options/SARS at FY-End (#)                     FY-End ($)
       ----          ------------       ----------      --------------------------                     ----------

                                                       Exercisable     Unexercisable      Exercisable       Unexercisable
                                                       -----------     -------------      -----------       -------------

<S>                 <C>              <C>             <C>               <C>              <C>                 <C>
Thomas A. Keith            0               0             100,000          100,000             $-0-               -0-
</TABLE>



                                       15
<PAGE>

Employment Agreements
---------------------

         In October, 1995, the Company entered into a one (1) year employment
agreement with Thomas A. Keith, pursuant to which Mr. Keith serves as the
Company's President. The agreement provides for Mr. Keith to receive a salary of
$135,000 per annum. In addition, Mr. Keith has been granted an option to
purchase 100,000 shares of the outstanding Common Stock of the Company
exercisable (i) at an exercise price equal to the public offering price of the
shares of Common Stock of the Company , and (ii) only at a time when Mr. Keith
is employed by the Company. The agreement can be terminated by the Company, with
or without cause, upon ninety (90) days' notice and contains prohibitions on the
disclosure of confidential information and covenants not to compete with the
Company which survive any such termination. In October, 1996, the Company
entered into an amended agreement to Mr. Keith's employment agreement, pursuant
to which Mr. Keith's term of employment was extended for a further year. The
Company does not currently have an employment agreement with Mr. Keith.

Stock Option Plans
------------------

1995 Stock Plan

         In December 1995, the Board of Directors of the Company adopted the
1995 Stock Plan (hereinafter called the "1995 Plan"). The 1995 Plan was approved
by the Stockholders of the Company in December 1995. The purpose of the 1995
Plan is to provide an incentive and reward for those executive officers and
other key employees in a position to contribute substantially to the progress
and success of the Company, to closely align the interests of such employees
with the interests of stockholders of the Company by linking benefits to stock
performance and to retain the services of such employees, as well as to attract
new key employees. In furtherance of that purpose, the 1995 Plan authorizes the
grant to executives and other key employees of the Company and its subsidiaries
of stock options, restricted stock, deferred stock, bonus shares, performance
awards, dividend equivalent rights, limited stock appreciation rights and other
stock-based awards, or any combination thereof. The 1995 Plan is expected to
provide flexibility to the Company's compensation methods, after giving due
consideration to competitive conditions and the impact of federal tax laws.

         The maximum number of shares of Common Stock with respect to which
awards may be granted pursuant to the 1995 Plan is initially 2,000,000 shares,
of which 100,000 shares have been granted as an option to the Company's Chief
Executive Officer. Shares issuable under the 1995 Plan may be either treasury
shares or authorized but unissued shares. The number of shares available for
issuance will be subject to adjustment to prevent dilution in the event of stock
splits, stock dividends or other changes in the capitalization of the Company.

         The 1995 Plan is administered by a committee consisting of not less
than two (2) members of the Board of Directors who are "disinterested" within
the meaning of Rule 16b-3 promulgated under the Exchange Act and "outside
directors" within the meaning of Section 162(m) of the Code (including persons
who may be deemed outside directors by virtue of any transitional rule which may
be adopted by the Internal Revenue Service implementing such Section). The Board
will determine the persons to whom awards will be granted, the type of award
and, if applicable, the number of shares to be covered by the award. During any
calendar year, no person may be granted under the 1995 Plan awards aggregating
more than 100,000 shares (which number shall be subject 


                                       16
<PAGE>

to adjustment to prevent dilution in the event of stock splits, stock dividends
or other changes in capitalization of the Company).

Types of Awards

         Stock Options. Options granted under the 1995 Plan may be "incentive
stock options" ("Incentive Options") within the meaning of Section 422 of the
Code or stock options which are not incentive stock options ("Non-Incentive
Options" and, collectively with Incentive Options, hereinafter referred to as
"Options"). The persons to whom Options will be granted, the number of shares
subject to each Option granted, the prices at which Options may be exercised
(which shall not be less than the fair market value of shares of Common Stock on
the date of grant), whether an Option will be an Incentive Option or a
Non-Incentive Option, the time or times and the extent to which Options may be
exercised and all other terms and conditions of Options will be determined by
the Committee.

         Each Incentive Option shall terminate no later than ten (10) years from
the date of grant, except as provided below with respect to Incentive Options
granted to 10% Stockholders (as hereinafter defined). No Incentive Option may be
granted at any time after October 2005. Each Non-Incentive Option shall
terminate not later than fifteen (15) years from the date of grant. The exercise
price at which the shares may be purchased may not be less than the Fair Market
Value of shares of Common Stock at the time the Option is granted, except as
provided below with respect to Incentive Options granted to 10% Stockholders.
Options granted to executive officers may not be exercised at any time prior to
six (6) months after the date of grant.

         The exercise price of an Incentive Option granted to a person
possessing more than 10% of the total combined voting power of all shares of
stock of the Company or a parent or subsidiary of the Company ("10%
Stockholder") shall in no event be less than 110% of the Fair Market Value of
the shares of the Common Stock at the time the Incentive Option is granted. The
term of an Incentive Option granted to a 10% Stockholder shall not exceed five
(5) years from the date of grant.

         The exercise price of the shares to be purchased pursuant to each
Option shall be paid (i) in full in cash, (ii) by delivery (i.e., surrender) of
shares of the Company's Common Stock owned by the optionee at the time of the
exercise of the Option, (iii) in installments, payable in cash, if permitted by
the Committee or (iv) any combination of the foregoing. The stock-for-stock
payment method permits an optionee to deliver one (1) or more shares of
previously owned Common Stock of the Company in satisfaction of the exercise
price of subsequent Options. The optionee may use the shares obtained on each
exercise to purchase a larger number of shares on the next exercise. (The
foregoing assumes an appreciation in value of previously acquired shares). The
result of the stock-for-stock payment method is that the optionee can generally
avoid immediate tax liability with respect to any appreciation in the value of
the stock utilized to exercise the Option.

         Shares received by an optionee upon exercise of a Non-Incentive Option
may not be sold or otherwise disposed of for a period determined by the Board
upon grant of the Option, which period shall be not less than six (6) months nor
more than three (3) years from the date of acquisition of the shares (the
"Restricted Period"), except that, during the Restricted Period (i) the optionee
may offer the shares to the Company and the Company may, in its discretion,
purchase up to all the shares offered at the exercise price and (ii) if the
optionee's employment terminates during the Restricted 


                                       17
<PAGE>

Period (except in limited instances), the optionee, upon written request of the
Company, must offer to sell the shares to the Company at the exercise price
within seven (7) business days. The Restricted Period shall terminate in the
event of a Change in Control of the Company (as defined), or at the discretion
of the Board. After the Restricted Period, an optionee wishing to sell must
first offer such shares to the Company at the Fair Market Value.

         Limited Stock Appreciation Rights. The Committee is authorized, in
connection with any Option granted under the 1995 Plan, to grant the holder of
such Option a limited stock appreciation right ("LSAR"), entitling the holder to
receive, within sixty (60) days following a Change in Control, an amount in cash
equal to the difference between the exercise price of the Option and the market
value of the Common Stock on the effective date of the Change in Control. The
LSAR may be granted in tandem with an Option or subsequent to grant of the
Option. The LSAR will only be exercisable to the extent the related Option is
exercisable and will terminate if and when the Option is exercised.

         Restricted and Deferred Stock. An award of restricted stock or deferred
stock may be granted under the 1995 Plan. Restricted stock is subject to
restrictions on transferability and other restrictions as may be imposed by the
Committee at the time of grant. In the event that the holder of restricted stock
ceases to be employed by the Company during the applicable restrictive period,
restricted stock that is at the time subject to restrictions shall be forfeited
and reacquired by the Company. Except as otherwise provided by the Committee at
the time of grant, a holder of restricted stock shall have all the rights of a
stockholder including, without limitation, the right to vote restricted stock
and the right to recover dividends thereon. An award of deferred stock is an
award that provides for the issuance of stock upon expiration of a deferral
period established by the Committee. Except as otherwise determined by the
Committee, upon termination of employment of the recipient of the award during
the applicable deferral period, all stock that is at the time subject to
deferral shall be forfeited. Until such time as the stock which is the subject
of the award is issued, the recipient of the award has no rights as a
stockholder.

         Dividend Equivalent Awards. A dividend equivalent gives the recipient
the right to receive cash or other property equal in value to the dividends that
would be paid if the recipient held a specified number of shares of Common
Stock. A dividend equivalent right may be granted as a component of another
award or as a free standing award.

         Bonus Shares and other Share Based Awards. The 1995 Plan authorizes the
Committee to grant shares as a bonus, or to grant shares or other awards in lieu
of obligations of the Company to pay cash under other plans or compensatory
arrangements, upon such terms as shall be determined by the Committee. The 1995
Plan also authorizes the Committee to grant other forms of awards based upon,
payable in, or otherwise related in whole or in part to, Common Stock,
including, without limitation, convertible or exchangeable debentures or other
debt securities, other rights convertible or exchangeable into shares, purchase
rights for shares, awards contingent upon performance of the Company, and awards
valued by reference to the book value of shares of Common Stock or awards
determined by reference to the value of securities of, or the performance of,
specified subsidiaries.



                                       18
<PAGE>

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
         ----------------------------------------
         OWNERS AND MANAGEMENT
         ---------------------

         The following table sets forth information, as of June 22, 1998 with
respect to the beneficial ownership of the outstanding shares of the Company's
Common Stock and Preferred stock by (i) any holder of more than five percent
(5%) of the outstanding shares; (ii) the Company's officers and directors; and
(iii) the directors and officers of the Company as a group:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                 Shares of Common    Percentage (%) of                        Percentage (%)
Name and Address of Beneficial   Stock Owned         Common Stock        Shares of            of Total
Owner (1)                                                                Preferred Stock      Combined Vote
---------------------------------------------------------------------------------------------------------------
<S>                              <C>                 <C>                 <C>                  <C>
Walpac, Inc.(2) (3)                     0.0                 0.0               5,000,000            53.2
---------------------------------------------------------------------------------------------------------------
Delsin Investments, Ltd.(3)             0.0                 0.0               5,000,000            53.2
---------------------------------------------------------------------------------------------------------------
PDK Labs Inc.(4)                        0.0                 0.0                500,000              5.3
---------------------------------------------------------------------------------------------------------------
Daniel Durchslag(5)                     0.0                 0.0                  0.0                0.0
---------------------------------------------------------------------------------------------------------------
Theresa Giove(5)                        0.0                 0.0                  0.0                0.0
---------------------------------------------------------------------------------------------------------------
Thomas A. Keith(5)                    100,000(6)            2.5                  0.0                1.1
---------------------------------------------------------------------------------------------------------------
All officers and  directors as
a group (three (3) persons)           100,000               2.5                  0.0                1.1
---------------------------------------------------------------------------------------------------------------
</TABLE>


(1)      Beneficial ownership as reported in the table above has been determined
         in accordance with Instruction (b1) to Item 403 of Regulation S-B of
         The Securities Exchange Act.

(2)      The address of Walpac, Inc. is P.O. Box 743, Suites 41/42, Victoria 
         House, 26 Main Street, Gibraltar.

(3)      The Company has been advised that Delsin Investments, Ltd. is the sole
         shareholder of Walpac, Inc. The address of Delsin Investments, Ltd. is
         P.O. Box 743, Suites 41/42, Victoria House, 26 Main Street, Gibraltar.

(4)      The address of PDK Labs Inc., is 145 Ricefield Lane, Hauppauge, NY
         11788.

(5)      The address of each stockholder shown above is c/o Compare Generiks,
         Inc., 60 Davids Drive, Hauppauge, NY 11788.

(6)      Includes 100,000 shares of Common Stock underlying an option to
         purchase 100,000 shares of Common Stock of the Company issued pursuant
         to Mr. Keith's employment agreement. Does not include 500,000 shares of
         Preferred Stock owned by PDK Labs Inc. Mr. Keith is a director of PDK
         Labs Inc. and disclaims beneficial ownership of shares owned by PDK
         Labs Inc.


                                       19
<PAGE>

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
         ----------------------------------------------

         On April 3, 1995, PDK entered into a binding agreement with
International Sales Association, Inc. ("ISA") appointing ISA as the exclusive
sales agent for sales of Energex Plus to grocery, drug, discount department
stores, department stores, variety stores, and U.S. government/military sales
(the "ISA Agreement"). PDK agreed to pay ISA (i) a commission of ten percent
(10%) of the net amount of goods shipped pursuant to the ISA Agreement, and (ii)
an additional two percent (2%) for marketing services through February 28, 1997.
PDK agreed not to hire any of ISA's employees or sales associates for the term
of the ISA Agreement and for a further two (2) year period thereafter. ISA and
ISA's founder and controlling shareholder, Patrick Higgins, agreed not to
represent any competing product for the term of the ISA Agreement and for a
further one (1) year period thereafter.

         On April 28, 1995, Walpac, Inc. acquired 2,500,000 shares of Common
Stock of the Company, par value $.0001 per share, for a cash consideration of
$50,000.

         On October 31, 1995, all of the Energex Assets and the Compare Generiks
Assets were transferred from PDK to the Company for a purchase price of
approximately $1,700,000. In exchange (i) PDK was issued 500,000 shares of
Common Stock of the Company representing $1,200,000 of the purchase price ($2.40
per share), (ii) the Company delivered to PDK a promissory note in the aggregate
principal amount of $500,000 together with interest at the rate of eight percent
(8%) per annum, payable to PDK on October 31, 1996, and (iii) the Company agreed
to purchase PDK's Energex Plus inventory at the cost specified in the Supply
Agreement (defined and referred to below). The Company agreed to assume certain
liabilities associated with the Energex Assets, including PDK's obligations to
(a) Nu-Tek Laboratories, Inc. ("Nu-Tek") pursuant to a promissory note in the
aggregate principal amount of $100,000, of which $50,000 remained outstanding,
delivered by PDK to Nu-Tek as part consideration for PDK's acquisition of the
Energex Assets and (b) ISA, pursuant to the ISA Agreement. In addition, the
Company agreed to pay to Nu-Tek a thirteen percent (13%) royalty on all "net
sales" (as defined in the agreement between Nu-Tek and PDK) for the period from
March 1, 1995 through February 28, 1997.

         Since October 31, 1995, the Company has purchased essentially all of
its products and materials from PDK, pursuant to a supply agreement between PDK
and the Company (the "Supply Agreement"). On December 13, 1996, the Company
amended its Supply Agreement with PDK, which amendment provided for PDK to
supply the Company with certain products at prices based on PDK's material cost
plus a specified mark-up. In addition, the Company has paid the royalty
described above to Nu-Tek. The term of the Supply Agreement is for a period of
five (5) years, automatically renewable for successive one (1) year terms.

         On December 14, 1995, Walpac, Inc. acquired 5,000,000 shares of Series
A Preferred Stock of the Company, for a cash consideration of $5,000. The Series
A Preferred Stock has no dividend rights and has a liquidation right of $.02 per
share. Each share of Series A Preferred Stock shall be entitled to one (1) vote
per share on all matters presented to stockholders of the Company.

         On January 30, 1996, the $500,000 promissory note payable to PDK in
connection with the business acquisition was converted into 500,000 shares of
Series B Preferred Stock. The


                                       20
<PAGE>

Series B Preferred Stock earns cumulative annual dividends of 12% or $.12 per
share and is redeemable by the Company after one year from the date of issuance.
The Series B Preferred Stock has a liquidation right of $1 per share. Each of
the Series B Preferred Stock shall be entitled to one (1) vote per share on all
matters presented to the stockholders of the Company.

         On March 24, 1997, the Company entered into an exclusive supply and
licensing agreement with PDK, pursuant to which PDK granted the Company an
exclusive license to use the trade marks "Max Brand" and "HeadsUp" brands of
OTCs and the exclusive right to distribute products bearing such names. In
consideration for this Agreement, the Company agreed to pay an annual license
fee to PDK payable, at the option of the Company, either in cash or in shares of
the Company's common stock. The license fee due during the most recently
completed fiscal year will be paid in shares. On April 1, 1998, the Company
amended its exclusive supply and licensing agreement with PDK, which amendment
provided for PDK to supply the Company with products at prices specified in the
amendment and prohibited the Company from supplying certain products to
convenience stores.

         Since November 1997, the Company has leased 10,000 square feet of
executive offices, a distribution center and warehouse space at 60 Davids Drive,
Hauppauge, NY 11788 from PDK on a month-to-month basis at a monthly rent of
$5,000.



                                       21
<PAGE>

                                     PART IV
                                     -------

Item 13. EXHIBITS AND REPORTS ON FORM 8-K
         --------------------------------

(a)(1) Financial Statements.

         The following financial statements are included in Part II, Item 7:


Report of Independent Certified Public Accountants                    F-1

Balance sheet as of March 31, 1998                                    F-2

Statements of operations for the years ended March 31, 1998
and March 31, 1997                                                    F-3

Statements of stockholders' equity for the years ended
March 31, 1998 and March 31, 1997                                     F-4

Statements of cash flows for the years ended March 31, 1998
and March 31, 1997                                                    F-5

Notes to financial statements                                         F-6 - F-13



                                       22
<PAGE>

                         INDEX TO FINANCIAL STATEMENTS



                                                                        Page
                                                                        ----
Compare Generiks, Inc.

     Report of independent certified public accountants                  F-1

     Balance sheet as of March 31, 1998                                  F-2

     Statements of operations for the years
       ended March 31, 1998 and 1997                                     F-3

     Statement of stockholders' equity for the
       years ended March 31, 1998 and 1997                               F-4

     Statements of cash flows for the years
       ended March 31, 1998 and 1997                                     F-5

     Notes to financial statements                                   F-6 - F-13


<PAGE>


                          Independent Auditors' Report


Board of Directors and Stockholders
Compare Generiks, Inc.
Hauppauge, New York

We have audited the balance sheet of Compare Generiks, Inc. as of March 31,
1998, and the related statements of operations, stockholders' equity and cash
flows for each of the two years in the period ended March 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with 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 financial statements referred to above present fairly, in
all material respects, the financial position of Compare Generiks, Inc. as of
March 31, 1998 and the results of its operations and its cash flows for each of
the two years in the period ended March 31, 1998, in conformity with generally
accepted accounting principles.






                                         HOLTZ RUBENSTEIN & CO., LLP

Melville, New York
May 5, 1998









                                      F-1


<PAGE>


                             COMPARE GENERIKS, INC.

                                 BALANCE SHEET

                                 MARCH 31, 1998
<TABLE>
<S>                                                                                               <C>           
           ASSETS
           ------

CURRENT ASSETS:
   Cash and cash equivalents                                                                      $      107,334
   Accounts receivable, net of $10,000 allowance for doubtful accounts                                 1,107,760
   Inventories                                                                                         1,813,506
   Prepaid expenses and other current assets                                                             185,339
   Deferred income tax asset (Note 6)                                                                     94,000
                                                                                                  --------------
       Total current assets                                                                            3,307,939

INVESTMENT IN AVAILABLE-FOR-SALE SECURITIES (Note 3)                                                     459,000

PROPERTY AND EQUIPMENT (Note 4)                                                                           65,144

INTANGIBLE ASSETS, net (Note 5)                                                                          912,068

OTHER ASSETS                                                                                             226,000
                                                                                                  --------------
                                                                                                  $    4,970,151
                                                                                                  ==============
   LIABILITIES AND STOCKHOLDERS' EQUITY
   ------------------------------------

CURRENT LIABILITIES:
   Accounts payable and accrued expenses                                                          $    1,074,497
   Dividends payable (Note 7)                                                                             35,000
                                                                                                  --------------
       Total current liabilities                                                                       1,109,497
                                                                                                  --------------
LICENSE FEE PAYABLE (Note 11)                                                                            500,000

COMMITMENTS AND CONTINGENCIES (Notes 11 and 12)

STOCKHOLDERS' EQUITY: (Note 7)
   Common stock, $.0001 par value; authorized 25,000,000
     shares; 3,890,000 issued and outstanding                                                                389
   Preferred stock - Class A - $.0001 par value; liquidation
     preference of $100,000; authorized 10,000,000 shares;
     5,000,000 issued and outstanding                                                                        500
   Preferred stock - Class B - $.0001 par value; liquidation
     preference of $500,000; authorized 10,000,000 shares;
     500,000 issued and outstanding                                                                           50
   Additional paid-in capital                                                                          5,273,344
   Deficit                                                                                            (1,908,629)
                                                                                                  --------------
                                                                                                       3,365,654
   Less stock subscription receivable                                                                     (5,000)
                                                                                                  --------------
                                                                                                       3,360,654
                                                                                                  --------------
                                                                                                  $    4,970,151
                                                                                                  ==============
</TABLE>


                       See notes to financial statements

                                      F-2


<PAGE>


                             COMPARE GENERIKS, INC.

                            STATEMENTS OF OPERATIONS




<TABLE>
<CAPTION>



                                                                                          Years Ended
                                                                                           March 31,
                                                                            ------------------------------------
                                                                                 1998                   1997
                                                                                 ----                   ----

<S>                                                                         <C>                   <C>           
REVENUE (Note 12)                                                           $    9,150,739        $    2,289,629
                                                                            --------------        --------------

COSTS AND EXPENSES:  (Notes 4, 5, 9 and 11)
   Cost of sales                                                                 4,357,209             1,474,609
   Selling, general and administrative                                           4,564,277             2,077,219
                                                                            --------------        --------------

                                                                                 8,921,386             3,551,828
                                                                            --------------        --------------

OPERATING INCOME (LOSS)                                                            229,353            (1,262,199)
                                                                            --------------        --------------

OTHER INCOME (EXPENSE):
   Loss on impairment of marketable securities (Note 3)                           (734,000)                   -
   Interest expense                                                                 (1,577)               (1,628)
   Interest income                                                                   9,382                56,217
                                                                            --------------        --------------

                                                                                  (726,195)               54,589
                                                                            --------------        --------------

LOSS BEFORE INCOME TAX BENEFIT                                                    (496,842)           (1,207,610)

INCOME TAX BENEFIT (Note 6)                                                         87,000                43,000
                                                                            --------------        --------------

NET LOSS                                                                        $ (409,842)       $   (1,164,610)
                                                                                ==========        ==============

NET LOSS PER SHARE (Note 7)                                                       $(.12)                $(.32) 
                                                                                  =====                 =====

WEIGHTED AVERAGE NUMBER
   OF SHARES OF COMMON
   STOCK OUTSTANDING (Note 7)                                                    3,890,000             3,856,667
                                                                              ============             =========
</TABLE>





                       See notes to financial statements

                                      F-3


<PAGE>


                             COMPARE GENERIKS, INC.

                       STATEMENT OF STOCKHOLDERS' EQUITY

                      YEARS ENDED MARCH 31, 1998 AND 1997
                                (Notes 3 and 7)


<TABLE>
<CAPTION>




                                                              Preferred Stock      Preferred Stock                                
                                          Common Stock            Class A              Class B                                    
                                        25,000,000 Shares    10,000,000 Shares    10,000,000 Shares                               
                                        $.0001 Par Value     $.0001 Par Value     $.0001 Par Value             
                                      --------------------   ------------------  ------------------       Additional
                                                     Par                    Par                 Par        Paid-in                
                                        Shares      Value     Shares      Value   Shares      Value        Capital         Deficit
                                        ------      -----     ------      -----   ------      -----        -------         -------
Total

<S>                                    <C>         <C>       <C>         <C>      <C>         <C>    <C>             <C>          
Balance, March 31, 1996                3,690,000   $ 369     5,000,000   $500     500,000     $50    $ 4,223,364     $   (214,177)

Issuance of stock in connection
   with Subscription Agreement           200,000      20            -      -           -       -       1,049,980               -  
Dividends                                     -       -             -      -           -       -              -           (60,000)
Unrealized gain on investment
   available-for-sale                         -       -             -      -           -       -              -                -  
Net loss                                      -       -             -      -           -       -              -        (1,164,610)
                                      ----------   -----    ----------   ----     -------     ---    -----------     ------------ 

Balance, March 31, 1997                3,890,000     389     5,000,000    500     500,000      50      5,273,344       (1,438,787)

Dividends                                     -       -             -      -           -       -              -           (60,000)
Realized loss on investment
   available-for-sale securities              -       -             -      -           -       -              -                -  
Net loss                                      -       -             -      -           -       -              -          (409,842)
                                      ----------   -----    ----------   ----     -------     ---    -----------     ------------ 

Balance, March 31, 1998                3,890,000   $ 389     5,000,000   $500     500,000     $50    $ 5,273,344     $ (1,908,629)
                                      ==========   =====    ==========   ====     =======     ===    ===========     ============ 

</TABLE>

                      YEARS ENDED MARCH 31, 1998 AND 1997
                                (Notes 3 and 7)


<TABLE>
<CAPTION>

                                      Unrealized
                                       Holding
                                       Gain on
                                      Available-
                                       for-Sale    Subscription
                                       Securities   Receivable       Total
                                       ----------   ------------ --------------
Total

<S>                                   <C>            <C>         <C>         
Balance, March 31, 1996               $     -        $(5,000)    $  4,005,106

Issuance of stock in connection
   with Subscription Agreement              -             -         1,050,000
Dividends                                   -             -           (60,000)
Unrealized gain on investment
   available-for-sale                   63,000            -            63,000
Net loss                                    -             -        (1,164,610)
                                      --------       -------     ------------

Balance, March 31, 1997                 63,000        (5,000)       3,893,496
                                    

Dividends                                   -             -           (60,000)
Realized loss on investment
   available-for-sale securities       (63,000)           -           (63,000)
Net loss                                    -             -          (409,842)
                                      --------       -------     ------------

Balance, March 31, 1998               $     -        $(5,000)    $  3,360,654
                                      ========       =======     ============

</TABLE>



                       See notes to financial statements

                                      F-4


<PAGE>


                             COMPARE GENERIKS, INC.

                            STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>

                                                                                          Years Ended
                                                                                           March 31,
                                                                            ------------------------------------
                                                                                  1998                  1997
                                                                                  ----                  ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                         <C>                   <C>            
   Net loss                                                                 $     (409,842)       $   (1,164,610)
                                                                            --------------        --------------
   Adjustments to reconcile net loss to net cash
     used in operating activities:
       Depreciation and amortization                                               324,357               388,085
       Non-cash license fee                                                        500,000                    -
       Loss on impairment of marketable securities                                 734,000                    -
       Deferred tax benefit                                                        (94,000)              (43,000)
       Changes in operating assets and liabilities:
         Increase in assets:
           Accounts receivable                                                    (500,811)             (371,653)
           Inventories                                                          (1,171,084)             (480,019)
           Prepaid expenses and other current assets                               (19,699)               (7,685)
           Other assets                                                             63,706              (144,500)
         (Decrease) increase in liabilities:
           Accounts payable and accrued expenses                                  (102,088)              856,216
                                                                            --------------        --------------
       Total adjustments                                                          (265,619)              197,444
                                                                            --------------        --------------
       Net cash used in operating activities                                      (675,461)             (967,166)
                                                                            --------------        --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisition of investment in available-for-sale securities                           -               (100,000)
   Acquisition of property and equipment                                           (22,690)              (52,769)
   Acquisition of intangible assets                                                     -                (37,053)
                                                                            --------------        --------------
       Net cash used in investing activities                                       (22,690)             (189,822)
                                                                            --------------        --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Dividends paid                                                                  (85,000)                    -
                                                                            --------------        --------------
     Net cash used in financing activities                                         (85,000)                    -
                                                                            --------------        --------------

Net decrease in cash and cash equivalents                                         (783,151)           (1,156,988)

CASH AND CASH EQUIVALENTS, beginning of year                                       890,485             2,047,473
                                                                            --------------        --------------

CASH AND CASH EQUIVALENTS, end of year                                      $      107,334        $      890,485
                                                                            ==============        ==============
</TABLE>




                       See notes to financial statements

                                      F-5


<PAGE>


                             COMPARE GENERIKS, INC.

                         NOTES TO FINANCIAL STATEMENTS

                      YEARS ENDED MARCH 31, 1998 AND 1997




1.     Organization and Nature of Operations:

       Compare Generiks, Inc., a Delaware Corporation (the "Company") is
engaged in the distribution, marketing and sale of dietary supplements and
over-the-counter nonprescription pharmaceuticals.

2.     Summary of Significant Accounting Policies:

       a. Inventories

          Inventories, consisting of finished goods, are valued at lower of
cost (first-in, first-out method) or market.

       b. Depreciation and amortization

          Depreciation is computed using the straight-line method over the
estimated useful lives of the related assets. Maintenance and repairs of
property and equipment are charged to operations and major improvements are
capitalized. Upon retirement, sale or other disposition of property and
equipment, the cost and accumulated depreciation are eliminated from the
accounts and gain or loss is included in operations.

          Intangible assets are amortized using the straight-line method over
the following periods:

                 Customer list                           5 years
                 Covenant not to compete                 4 years
                 Patents and trademarks                  7 years
                 Goodwill                               10 years
                 Other                                 3-5 years

       c. Income taxes

          Deferred tax assets and liabilities are determined based on the
differences between financial reporting and tax basis of assets and
liabilities, and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.

       d. Statement of cash flows

          For purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.

       e. Marketable securities

          Available-for-sale securities are carried at fair value with the
unrealized holding gain (loss), net of deferred income taxes, included in
stockholders' equity. A decline in the market value of any available-for-sale
security below cost that is deemed other than temporary is charged to
operations resulting in the establishment of a new cost basis for the security.


                                      F-6


<PAGE>


2.     Summary of Significant Accounting Policies:  (Cont'd)

       f. Estimates

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

       g. Concentration of credit risk

          Financial instruments which potentially expose the Company to credit
risk, as defined by Statement of Financial Accounting Standard No. 105 ("FAS
105"), consists primarily of trade accounts receivable. Wholesale distributors
of dietary supplements and over-the-counter pharmaceuticals account for a
substantial portion of trade receivables. The risk associated with this
concentration is limited due to the large number of distributors and their
geographic dispersion.

       h. Advertising

          The Company charges advertising costs to expense as incurred.
Advertising costs approximated $171,000 and $202,000 for the years ended March
31, 1998 and 1997, respectively.

       i. Stock-based compensation

          The Company applies APB Opinion No. 25 and related interpretations in
accounting for stock-based compensation to employees. Stock compensation to
non-employees is accounted for at fair value in accordance with FASB Statement
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123").

       j. New standards

          In June 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 130, "Reporting Comprehensive Income," which establishes
standards for reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all changes in
equity except those resulting from investments by owners and distribution to
owners. Among other disclosures, SFAS No. 130 requires that all items that are
required to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements.

          In addition, in June 1997, the FASB issued SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information," which establishes
standards for reporting information about operating segments. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers.

          Both of these new standards are effective for periods beginning after
December 15, 1997 and require comparative information for earlier years to be
restated. The implementation of these new standards will not affect the
Company's results of operations and financial position, but may have an impact
on future financial statement disclosures.


                                      F-7


<PAGE>


2.     Summary of Significant Accounting Policies:  (Cont'd)

       k. Reclassifications

          Certain reclassifications have been made to the prior year's
financial statements to conform with the classifications used in 1998.

3.     Investment in Available-For-Sale Securities:

       At March 31, 1998, investment in available-for-sale securities consisted
of 500,000 shares of common stock of Superior Supplements, Inc. ("Superior").
The shares were acquired in 1996 for $100,000 cash and the issuance of 200,000
shares of common stock (valued at $1,050,000).

       During the fourth quarter of fiscal 1998, there was a decline in the
market value of the common stock of Superior which, in the opinion of the
Company's management, is considered to be other than temporary. Accordingly,
the investment was written down to its estimated realizable value. The Company
recorded a charge to operations of $734,000 for this impairment.

4.     Property and Equipment:

       Property and equipment, at cost, consist of the following at March 31,
1998:

       Machinery and equipment                             $  37,797
       Furniture and fixtures                                 24,229
       Leasehold improvements                                 17,456
                                                           ---------
                                                              79,482
       Less accumulated depreciation and amortization         14,338
                                                           ---------
                                                           $  65,144
                                                           =========
       Depreciation expense for the years ended March 31, 1998 and 1997
approximated $9,700 and $4,600, respectively.

5.     Intangible Assets:

       Intangible assets consist of the following at March 31, 1998:

       Customer lists                                   $   1,350,000
       Covenant not to compete                                 41,667
       Patents and trademarks                                  74,320
       Goodwill                                               176,242
       Other                                                   30,000
                                                       --------------
                                                            1,672,229
       Less accumulated amortization                          751,161
                                                       --------------
                                                        $     921,068
                                                       ==============
       Amortization expense for the years ended March 31, 1998 and 1997
approximated $314,700 and $383,700.




                                      F-8


<PAGE>


6.     Income Taxes:

       The provision (benefit) for income taxes consists of the following:
                                                      Years Ended
                                                       March 31,
                                           ------------------------------
                                              1998                  1997
       Current:
         Federal                           $      -               $     -
         State                                 7,000                    -
                                           ---------              -------
                                               7,000                    -
                                           ---------              -------
       Deferred:
         Federal                              (9,000)                   -
         State                               (85,000)                   -
                                           ---------              -------
                                             (94,000)                   -
                                           =========              =======

                                           $ (87,000)             $     -
                                           =========              =======

          At March 31, 1998, the Company had net operating loss carryforwards
("NOLs") of approximately $680,000 available to offset against future Federal
income tax liabilities.

       Net deferred income tax asset (liability) is composed of the following
at March 31, 1998:

       Net operating loss carryforward                        $    247,000
       Investment in available-for sale securities                 251,000
       Intangible assets                                           178,000
       Other                                                       (20,000)
       Valuation allowance                                        (562,000)
                                                              ------------

                                                              $     94,000

       The valuation allowance increased by $12,000 during the year ended March
31, 1998.

          The Company's effective tax rate for the years ended 1998 and 1997
differs from the Federal Statutory regular tax rate, principally as a result of
adjustments to the valuation allowance for the net deferred tax asset.

7.     Stockholders' Equity:

       a. Capitalization

          Pursuant to an amendment of the Company's certificate of
incorporation, the Company has authorized shares of common stock of 25,000,000,
Series A Preferred Shares to 10,000,000 and authorized 10,000,000 shares of
Series B Preferred Shares. All stock has a $.0001 par value. Each share of
common and preferred has one vote in all matters.

          The Series A Preferred Shares rank senior to all common stock, do not
have any right to the payment of any dividend, and in the event of any
voluntary or involuntary liquidation of the Company each share shall have a
liquidation preference of $.02.

          The Series B Preferred Stock earns cumulative annual dividends of 12%
or $.12 per share and is callable by the Company after one year from the date
of issuance. The Series B Preferred Stock ranks senior to all series of
preferred and common stock. In the event of any voluntary or involuntary
liquidation of the Company each share shall have a liquidation preference of
$1.00. The Series B Preferred Stock is held by PDK Labs Inc. ("PDK"), which is
a major supplier of product to the Company and shares certain common management
with the Company.

                                      F-9


<PAGE>


7.     Stockholders' Equity:  (Cont'd)

       b. Stock option plan

          The Company has adopted, subject to shareholder approval, a Stock
Option Plan (the "Plan") covering 2,000,000 shares of common stock of the
Company. Options under the Plan are granted at terms set by the Board of
Directors at the time of issuance. To date, no options have been granted under
the Plan.

       c. Warrants/Options

          (i)   Class A Warrants

          In March 1996, the Company completed a public offering of 345,000
units. Each unit included two shares of common stock and one Class A Warrant,
entitling the holder to purchase one share of common stock at $4.00 per share.
The warrants are exercisable at any time during the four year period commencing
one year from the date of offering. The Class A Warrants are redeemable by the
Company, for $.05 per warrant, if the average price of the common stock equal
or exceeds $10.00 per share for any twenty trading days within a period of
thirty consecutive trading days ending five days prior to the date of the
notice of redemption.

          (ii)  Underwriter's warrants

          Pursuant to the Company's public offering, the Company issued to the
underwriter warrants to purchase an additional 30,000 units at an exercise
price of $12.00 per unit. These warrants are exercisable for a period of four
years, commencing one year from the date of the public offering.

          (iii) Bridge lender warrants

          In March 1996, the Company issued 3,000,000 Class A Warrants in
connection with the conversion of $30,000 of convertible bridge notes. The
value of these notes has been recorded as additional-paid-in capital.

          (iv)  Employee options

                 In November 1995, the Company granted employees options to
purchase 200,000 shares of common stock at an exercise price equal to the price
of the common shares in the initial public offering ($5.00 per share). The
options are exercisable during the term of employment.

       d. Net loss per share

          In 1997, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" (SFAS No. 128). This Statement
establishes standards for computing and presenting earnings (loss) per share
(EPS). SFAS No. 128 requires dual presentation of basic and diluted EPS. Basic
EPS excludes dilution and is computed by dividing net income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
stock options or convertible securities were exercised or converted into common
stock. The Company's adoption of SFAS No. 128 did not materially change current
and prior years' EPS.

          Basic and diluted loss per share amounts were equivalent for the
years ended March 31, 1998 and 1997.




                                      F-10


<PAGE>


7.     Stockholders' Equity:  (Cont'd)

       d. Net loss per share  (Cont'd)

          Net loss per share attributable to common shareholders was computed
as follows:
<TABLE>
<CAPTION>

                                                                                           Years Ended
                                                                                            March 31,
                                                                               ---------------------------------
                                                                                   1998                 1997

<S>                                                                             <C>                <C>          
          Net loss                                                              $  409,842         $   1,164,610
          Dividends on preferred shares                                             60,000                60,000
                                                                                ----------         -------------

          Net loss attributable to common shareholders                          $  469,842         $   1,224,610
                                                                                ==========         =============
</TABLE>

       e. Reserved shares

          At March 31, 1998, the Company has 5,535,000 shares of common stock
reserved for future issuances.

8.     Fair Value of Financial Instruments:

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

       Current Assets and Current Liabilities: The carrying amount of cash,
       current receivables and payables and certain other short-term financial
       instruments approximate their fair value.

9.     Retirement Plans:

       Qualified employees are eligible to participate in a salary reduction
plan under Section 401(k) of the Internal Revenue Code. Participation in the
Plan is voluntary, and any participant may elect to contribute up to 17% of
earnings. The Company may, at its discretion, contribute up to 3% of any
employee's earnings. The Company contributed approximately $8,800 and $5,700 to
the Plan for the years ended March 31, 1998 and 1997, respectively.

10.    Supplementary Information - Statement of Cash Flows:

       Cash paid was as follows:
<TABLE>
<CAPTION>
                                                                                            Years Ended
                                                                                             March 31,
                                                                               ---------------------------------
                                                                                    1998                  1997

<S>                                                                              <C>                    <C>     
       Interest                                                                  $   1,577              $  1,628
                                                                                 =========              ========

       Income taxes                                                              $  11,273              $  3,891
                                                                                 =========              ========
</TABLE>

11.    Commitments and Contingencies:

       a. Supply agreements

          Under a Supply Agreement (the "Agreement"), as amended, PDK is
providing the Company certain products at prices based upon PDK's material cost
plus a specified mark-up. The Agreement expires in 2001.


                                      F-11


<PAGE>


11.    Commitments and Contingencies:  (Cont'd)

       a. Supply agreements  (Cont'd)

          In March 1997, the Company entered into a second five year Supply
Agreement with PDK covering the purchase of products in the "Max Brand" and
"Heads Up" product ranges under terms similar to the December 1996 Agreement.
In April 1998, the payment terms of this agreement were amended wherein the
purchase price of the products were set at (i) a specified cost plus (ii) the
difference between 93% of the sales price to the Company's customers and the
specified cost. The amendment also prohibits the Company from supplying certain
products to convenience stores. In consideration for this agreement, the
Company agreed to pay an annual license fee of $500,000 to PDK. This fee is
payable, at the option of the Company, either in cash or in shares of the
Company's common stock. The Company intends to satisfy the $500,000 license fee
obligation outstanding at March 31, 1998 with the issuance of approximately
311,000 shares of its common stock. Accordingly, the obligation has been
classified as non-current as of March 31, 1998.

          Essentially all purchases during the years ended March 31, 1998 and
1997 were from PDK.

          In May 1996, the Company entered into a three year Supply Agreement
with Superior Supplements, Inc. which provides for Superior to supply the
Company with certain products at specified prices. Purchases under this
agreement approximated $6,000 for the year ended March 31, 1998.

       b. Lease

          The Company leases office and warehouse space from PDK on a
month-to-month basis. Rent expense approximated $61,000 and $64,000 for the
years ended March 31, 1998 and 1997, respectively.

       c. Marketing agreement/litigation

          On May 5, 1997, the Company entered into a marketing agreement with a
distributor (the "distributor"), under which the distributor marketed the
Company's "Max Brand" and "Heads Up" products. As consideration for its
services, the distributor earned a marketing fee equal to the difference
between (i) the sales price of the products sold and (ii) an amount equal to
200% of the material cost of the products, as defined. Marketing fees paid in
connection with this agreement approximated $1,825,000 for the year ended March
31, 1998. On March 30, 1998, the Company terminated its agreement with this
distributor.

          On or about April 22, 1998, the distributor instituted litigation
against the Company alleging, among other things, that the Company breached the
marketing agreement. The complaint is imprecise with respect to the damages the
distributor seeks from the Company. The only specific demands against the
Company are in the aggregated amount of $490,000. The Company has answered the 
complaint, and the Company believes it has adequate defenses and substantive 
counterclaims and it intends to vigorously defend against the claims.  There 
has been no discovery taken in this action. 



                                      F-12


<PAGE>


12.    Government Regulation:

       The Company's products and/or its business operations are subject to
regulation by one or more federal agencies. These activities are also regulated
by various agencies of the states and localities in which the Company's
products are sold. Several of the raw materials contained in products marketed
by the Company are categorized as List 1 Chemicals by the Chemical Diversion
Act of 1988. As such, the importation of these chemicals requires the filing of
importation documents with the Federal Drug Enforcement Agency. In addition,
certain foreign countries require a "letter of non-objection" for the export of
List 1 Chemicals.

       The FDA has proposed regulations which remain pending but, if adopted,
would remove ephedrine-containing over-the-counter drug products which are
marketed and sold by the Company from the over-the-counter market. During this
past year several states have taken action on an individual state by state
basis, to restrict, in some fashion, the sale of ephedrine, pseudoephedrine
and/or phenylpropanolamine ("PPA") containing products.

       Effective October 1997, the Drug Enforcement Administration (the "DEA")
was given statutory authority to regulate all ephedrine, pseudoephedrine and
phenylpropanolamine products. The DEA now requires all companies engaged in the
distribution of those products to obtain their approval (through registration)
to continue its distribution. On March 10, 1998, the Company was notified by
PDK Labs, Inc. ("PDK"), its major supplier of these related products, the DEA
would not at this time sign a non-objection letter requested by PDK relating to
the intended importation by PDK of products containing a List 1 Chemical. PDK
and counsel to PDK is requesting that the DEA reconsider its decision to refuse
to sign the letter of non-objection and has requested a meeting to discuss the
DEA's position. Without the non-objection letter, PDK will be unable to import
the List 1 Chemical and will be unable to fulfill its obligations to supply the
Company with products containing the List 1 Chemical. PDK has advised the
Company that it is continuing to obtain products domestically, and that it
currently maintains approximately a nine months supply of inventory at current
sales levels. In the event PDK is unable to continue to supply the Company with
its product needs, the Company will seek to obtain such products from other
suppliers.

       The Company has applied for its own registration with the DEA. That
registration remains pending, and the Company continues to operate under an
exemption. Should the DEA ultimately deny the Company's registration, it would
no longer be permitted to distribute these products.

       Sales of products containing List 1 Chemicals approximated 64% of
revenue for the year ended March 31, 1998.






                                      F-13


<PAGE>

(a)(2) Exhibits

1.01*      _    Form of Underwriting Agreement.
3.01*      _    Certificate of Incorporation of the Company dated April 25, 1995
3.02*      _    Certificate of Amendment of Certificate of Incorporation of the
                Company dated November 13, 1995.
3.03*      _    Certificate of Amendment of Certificate of Incorporation of the
                Company dated December 13, 1995.
3.04*      _    Certificate of Amendment of Certificate of Incorporation of the
                Company dated January 30, 1996.
3.05*      _    By-Laws of the Company.
3.06*      _    Form of Certificate of Designation of Series A Preferred Stock.
3.07*      _    Form of Certificate of Designation of Series B Preferred Stock.
4.01*      _    Specimen Certificate for shares of Common Stock.
4.02*      _    Specimen Certificate for shares of Series A Preferred Stock.
4.03*      _    Specimen Certificate for shares of Series B Preferred Stock.
4.04*      _    Specimen Certificate for Class A Redeemable Common Stock
                Purchase Warrant.
4.05*      _    Form of Warrant Agreement by and among the Company and American
                Stock Transfer & Trust Company.
4.06*      _    Form of Underwriters' Unit Purchase Option.
10.01*     _    Asset Purchase Agreement between the Company and PDK dated as of
                October 31, 1995
10.02*     _    Supply Agreement between the Company and PDK dated as of 
                October 31, 1995.
10.03*     _    Lease between the Company and PDK dated as of October 31, 1995.
10.04*     _    Promissory Note of the Company, issued to PDK, dated as of
                October 31, 1995.
10.05*     _    Employment Agreement between the Company and Thomas A. Keith
                dated as of October 31, 1995, as amended.
10.06*     _    Employment Agreement between the Company and Raymond A. Aiken
                dated as of October 31, 1995, as amended.
10.07*     _    Form of December, 1995 Bridge Loan Agreements.
10.08*     _    Form of Selected Dealers' Agreement.
10.09*     _    1995 Stock Plan.
10.10*     _    Sales Agency Agreement between PDK and International Sales
                Association, Inc. dated as of April 3, 1995, as amended.
10.11**    _    Exclusive Supply Agreement between the Company and Superior
                Supplements, Inc. dated as of May 31, 1996.
10.12** _       Amendment to Supply Agreement between the Company and PDK dated
                as of December 13, 1996.
10.13** _       Exclusive Supply and Licensing Agreement between the Company and
                PDK dated March 24, 1997.
10.14**   _     Marketing Agreement between the Company and Body Dynamics, Inc.
                dated May 5, 1997.
10.15    --     Amendment to Exclusive Supply and Licensing Agreement between
                the Company and PDK dated as of April 1, 1998

                                      23

<PAGE>


*        Incorporated by Reference to the Company's Registration Statement on
         Form SB-2, No. 33-80659.
**       Incorporated by Reference to the Company's Form 10-KSB for the year
         ended March 31, 1997.


(b)  Reports on Form 8-K.

         None.

                                      24
<PAGE>

                                   SIGNATURES


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


Dated: New York, New York
       June 24, 1998

                                      COMPARE GENERIKS, INC.



                                      By:/s/ Thomas A. Keith
                                         ------------------------------------
                                         Thomas A. Keith
                                         President, Chief Executive Officer,
                                         Chief Financial Officer and Director


         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
in the capacities and on the dates indicated.

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


/s/ Thomas A. Keith                        Director              June 24, 1998
------------------------------
Thomas A. Keith


/s/ Theresa Giove                          Director              June 24, 1998
------------------------------
Theresa Giove


                                           Director              
------------------------------
Daniel Durchslag