<PAGE>

                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB/A


[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934
For the fiscal year ended              September 30, 1997
                          -----------------------------------------------------

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934
For the transition period from ________________  to ___________________________

Commission file number                         0-18921
                       --------------------------------------------------------


                               RINGER CORPORATION
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)

               Minnesota                                  41-0848688
-----------------------------------------   ------------------------------------
 (State of incorporation or organization)   (I.R.S. Employer Identification No.)

9555 James Avenue South, Suite 200, Bloomington, Minnesota             55431
--------------------------------------------------------------------------------
(Address of principal executive offices)                             (Zip Code)

Issuer's telephone number, including area code     (612) 703-3300
                                              ----------------------------------

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

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

                     Common Stock, $.01 par value per share
--------------------------------------------------------------------------------
                                (Title of class)

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months, and (2)
has been subject to such filing requirements for the past 90 days.
                                                          [X] Yes    [ ] No

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

Revenues for the fiscal year ended September 30, 1997 totaled $18,820,625.

As of December 15, 1997, the Company had 16,681,270 shares of Common Stock
outstanding. The aggregate market value of the 11,185,433 shares of Common Stock
held by non-affiliates of the Company was $16,778,150, based on the closing
share price on December 15, 1997 on the Nasdaq National Market.

Transitional small business disclosure format:            [ ] Yes    [X] No

 
<PAGE>
 
                                     PART I

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

GENERAL
-------

     Ringer Corporation is a developer and marketer of lawn, garden and turf
products for consumer, specialty commercial and professional markets.  The
Company's product lines include proprietary and non-proprietary pest control
products and lawn and garden fertilizers.

     The Company was founded by C. Judd Ringer and incorporated in 1961. Until
1986, the Company was operated as a regionally-based, closely-held provider of
lawn and garden products. In 1986, the Company was sold to new venture capital
investors who reorganized the Company under new management and expanded its
distribution channels into national lawn, garden and turf care markets.

     Since 1986, the Company has raised approximately $27 million in capital
through private equity offerings to venture capital organizations and
individuals, and through public offerings of common stock in 1990 and 1992.  The
capital raised was used by the Company to acquire pest control product lines, to
fund programs for advertising, promotion, product development and product
package redesign and to increase working capital. The Company's current pest
control product lines were acquired in 1991 through the acquisition of Safer,
Inc., a wholly-owned subsidiary of the Company, and in 1997 through the purchase
of substantially all of the assets of Dexol Industries, Inc. (See "Dexol
Industries, Inc." below.)

     The Company's products are sold primarily in the consumer lawn and garden
and the commercial golf course turf management markets. Product lines are
composed of environmentally-oriented pest control products, traditional
pesticides, granular fertilizers and water soluble fertilizers.

     The Company's environmentally-oriented pest control products, sold under
the Safer(R) brand name, use microbial, botanical and mechanical technologies to
effectively control insects, weeds and fungal diseases. These products are
designed to work on targeted pests without harming beneficial insect populations
or leaving harmful residues on turf and garden plants and are developed to
provide premium performance using available technologies with the lowest
environment impact.

     The Company's traditional pesticides, sold under the Dexol(R) brand name
and various private label brand names, use synthetic chemical pesticide
compounds commonly used in the lawn and garden industry for the control of
insects, rodents, weeds and fungal diseases. The Company's line of traditional
pesticides was acquired in March 1997 with the acquisition of the assets of
Dexol Industries, Inc. (See "Dexol Industries, Inc." below.)

     The Company's granular fertilizer products use proprietary microbially-
based delivery systems that control release of nutrients for extended uniform
plant feeding and are marketed under the Restore(R), Supreme Garden Fertilizers
and Safer(R) Lawn Fertilizer brand names.

     The Company's water soluble fertilizer products use proprietary oxygen
releasing compounds that enhance root growth and function to promote more
vigorous and healthy plants. Water soluble fertilizers were added to the
Company's product lines in December 1994 through the acquisition of the assets
of Plant Research Laboratories (See "Plant Research Laboratories" below). These
products were marketed by the Company under the Oxygen Plus(R) brand name in
fiscal 1995 and under the Safer(R) brand name beginning in fiscal 1996.

     The Company's products are directed toward wholesale fertilizer and
pesticide markets which exceed $1 billion in annual sales according to the 1991
Kline & Company industry survey report. The Company anticipates that future
growth in its share of these markets will be derived from increased sales of its
existing 

                                      -2-
<PAGE>
 
products, from sales of future products developed by the Company or licensed
from others, and from the acquisition of additional product lines or companies
with additional product lines.

DEXOL INDUSTRIES, INC.
----------------------

     In March 1997, the Company acquired substantially all of the assets of
Dexol Industries, Inc. (the "Dexol acquisition"), a California based
manufacturer and marketer of pesticides to the retail consumer with annual sales
of approximately $10 million. The pesticide products acquired use non-
proprietary traditional chemical technology commonly available in the lawn and
garden industry. (See "Acquisitions" in Note 2 to the Company's consolidated
financial statements included herein.)

PLANT RESEARCH LABORATORIES
---------------------------

     In December 1994, the Company acquired substantially all of the assets of
Plant Research Laboratories ("PRL"), a California based developer and marketer
of water soluble fertilizers for the indoor houseplant and outdoor lawn and
garden markets with annual sales of less than $1 million generated principally
in the western United States. The water soluble fertilizer products acquired
utilize oxygen releasing compounds which are patented technologies under
exclusive license to the Company for use in the lawn, garden, turf management
and agricultural industries.

SUBSEQUENT EVENT - SOUTHERN RESOURCES, INC.
-------------------------------------------

     On December 9, 1997, the Company completed a merger with Southern
Resources, Inc. ("SRI"), a previously privately-owned Georgia-based holding
company, with annual consolidated sales of approximately $25 million. SRI
manufactures and markets traditional pesticides, through its subsidiary, SureCo,
Inc., under a variety of proprietary and private label brand names to
commercial and consumer markets throughout North America. The merger will be
accounted for using the pooling-of-interest method. (See Note 12 to the
Company's consolidated financial statements included herein.)

SALES AND MARKETING
-------------------

     The Company's products are marketed in the United States through both
retail and commercial distribution channels. Retail channels consist principally
of mass merchants, specialty lawn and garden stores and hardware cooperatives.
Commercial channels consist of specialty distributors who sell products to turf
management professionals primarily in the golf course industry. In fiscal 1997,
U.S. retail and commercial markets accounted for 87% and 3%, respectively, of
the Company's sales.  The remaining 10% is attributable to foreign retail and
commercial market sales, primarily in Canada.

     Retail sales in the United States are conducted through a variety of retail
outlets in all fifty states. These outlets consist of mass merchandisers and
several lawn and garden wholesale distributors who, in turn, resell to retail
garden centers, nurseries and hardware and home center stores. National
retailers selling the Company's products include The Home Depot, Menards,
Target, Tru-Serve and Frank's Nursery & Crafts, although some of these retailers
currently carry only limited selections of the Company's products or only carry
them in certain regions of the country.

     The Company's retail sales efforts in the United States are managed by a
vice president of sales located in the Company's main office, and by six
regional sales managers located in Maryland, Georgia, Illinois, Indiana,
Washington and California. The Company uses a combination of direct sales
personnel and independent manufacturers' representatives to market its products.
The direct sales personnel and independent representatives, who report to the
regional managers, are assigned territories that cover all 50 states. In
addition, Ringer uses its wholesalers' sales and merchandising personnel and
other merchandising service organizations to contact and service some of the
larger retail outlets who sell the Company's products.

                                      -3-
<PAGE>
 
     Most of the Company's distribution and marketing activities are
concentrated in the United States and Canada, however, a level of international
over-seas business has been maintained for a number of years.  The Company
currently sells certain pest control products to foreign manufacturers and
distributors and has sold products to customers in Germany, Switzerland and
other European markets for over ten years.  International sales are currently
managed by Safer, Ltd., the Company's subsidiary in Toronto, Ontario, Canada.
Safer, Ltd. maintains its own sales and marketing organization, its own product
development operation and most of its own sources of supply and manufacturing.
Although management believes there are significant future international market
opportunities, management expects to concentrate the Company's marketing efforts
in the United States and Canada for the foreseeable future while the Company
focuses on establishing profitable operations in these primary market areas.

     The Company's commercial sales are supervised by a manager of commercial
sales. Approximately 30 professional turf distributors, with several locations
throughout the U.S. and Canada, buy products from the Company for sale primarily
to golf courses with some sales going to lawn service operators, specialty
landscapers and government landscape services.  The commercial product line
includes several microbial fertilizer formulations specifically designed for the
needs of professional turf managers.

     In recent years, the Company has used various forms of advertising and
promotion to market its products. These forms primarily consist of  cooperative
advertising programs, point-of-purchase marketing materials and radio and print
advertising,.

     In fiscal 1997, 1996 and 1995, the Company spent approximately $3.8
million,  $3.3 million and $4.8 million, respectively, on sales and marketing
expenses.

DISTRIBUTION AND TRANSPORTATION
-------------------------------

     The Company relies primarily on common carrier transportation, leased
warehouse facilities and public warehouse services to distribute its products
nationwide. The Company's distribution and freight costs tend to be significant
as a percentage of sales. This is due to the relatively heavy weight and bulky
nature of the Company's products and the substantial shipping distances from
distribution locations to some of the Company's major market areas.

     Freight costs are particularly significant for granular fertilizer
products. Some fertilizer competitors located in closer proximity to some of the
Company's major market areas incur lower freight costs which can be an advantage
when competing against the Company's fertilizer products. Consequently, the
Company's relatively high distribution and freight costs can hinder fertilizer
sales growth in some markets.

     In fiscal years 1997, 1996 and 1995, the Company spent approximately $2.2
million, $1.6 million and $1.9 million, respectively, on product transportation
and warehousing costs.

COMPANY TECHNOLOGIES
--------------------

     The Company applies four major areas of technology to its products. First,
biological and botanical pest control technologies which focus on a broad
spectrum of plant pests including insects, weeds and fungal diseases. Second,
synthetic chemical technologies common to the lawn and garden industry which are
used for the control of various insects, rodents, weeds and fungal diseases.
Third, granular microbially-activated fertilizer systems which have been
developed for specific lawn, garden and commercial turf uses. Fourth, oxygen-
releasing water soluble fertilizer technology which is used in the Company's
water soluble fertilizer products for use on indoor plants, outdoor container
plants, and other lawn and garden uses.

     The Company's biological and botanical pest control technology is based on
fatty-acid compounds, naturally occurring plant extracts and microorganisms, and
mechanical traps to control unwanted pests. The 

                                      -4-
<PAGE>
 
Company holds numerous patents for fatty-acid based pest control products and
products using fatty-acids as synergists in combination with both natural and
synthetic pesticides.

     The Company's synthetic chemical pesticide technologies are based on non-
proprietary synthetic chemical pesticides common to the lawn and garden
industry. These include various forms of chemical insecticides, herbicides,
fungicides and rodenticides which are obtained primarily from large national and
international chemical companies who supply the agricultural, horticultural and
lawn and garden markets.

     The Company's granular fertilizer technologies are based on the use of
naturally occurring soil microbes in combination with plant nutrients and high
energy carbohydrate sources to produce a superior controlled release fertilizer
system. These fertilizers promote natural soil microbial activity which helps
make nutrients available to plants and promotes plant health and vigor. Healthy
microbial activity also plays an important role in regulating some plant
diseases.

     The Company's water soluble fertilizer technologies use a patented oxygen
releasing compound ("ORC") in combination with high quality plant nutrients.
This fertilizer technology overcomes plant growth problems associated with
oxygen deficient soils caused by physical compaction, heavy clay content, over
watering and flooding. Through the use of ORC, the Company's water soluble
fertilizers help to reduce oxygen deficient conditions and promote a heathy
growing environment by providing a reliable supply of timed-release oxygen and
other beneficial plant nutrients directly to the plant root system.

     The Company performs extensive product performance tests through contract
research and development facilities.

     To assist the process of investigating new product opportunities, the
Company consults, from time to time, with knowledgeable scientists and other
experts regarding trends and technologies in fertilizers, pesticides and turf
management.

PRODUCTS
--------

     The Company's four major product categories are environmentally-oriented
pest control products, traditional pesticides, microbial fertilizers and water
soluble fertilizers.
 
     ENVIRONMENTALLY ORIENTED PEST CONTROLS

     The Company's environmentally oriented pest control products, sold under
the Safer(R) brand name, are based on naturally occurring microbial and
botanical derivatives and synthesized versions of naturally occurring botanical
derivatives. These active ingredients, used alone or in combinations, have been
developed to control specific insects, weeds and fungal diseases. The active
ingredients include fatty-acids, pyrethrum (a derivative of a certain
chrysanthemum flower), pyrethroids (synthetic variations of pyrethrum), neem (a
derivative of the tropical Neem tree), bacterium strains with toxicity specific
to certain insects, and elemental sulfur. The Company's environmentally-oriented
pest controls bio-degrade more rapidly and have a lower mammalian toxicity
rating than most traditional pesticides.

     The Company's environmentally-oriented pest control products accounted for
48%, 70% and 63% of sales in fiscal 1997, 1996 and 1995, respectively.

     TRADITIONAL PESTICIDES

     The Company acquired its line of traditional pesticide products in March
1997 with the purchase of substantially all of the assets of Dexol Industries,
Inc. (See "Dexol Industries, Inc." above.)

                                      -5-
<PAGE>
 
     The Company's traditional pesticide products, sold under the Dexol(R) brand
name and various private label brand names, use synthetic chemical pesticides
common to the lawn and garden industry and include insecticides based on
organophosphates (such as Diazinon and Malathion) and carbamates (such as
Carbaryl or Sevin), herbicides based on phenoxy-herbicides and dicamba
compounds, and fungicides based on sulfur or chlorthalonil.

     The Company's traditional pesticides accounted for 33% of sales in fiscal
1997 since the acquisition of these products in March 1997. There were no sales
of these products in prior years.

     MICROBIAL FERTILIZERS

     The Company offers three types of proprietary microbial fertilizer products
which use, in varying degrees, naturally occurring soil microorganisms to slowly
break down materials into nitrogen and other nutrients usable by the plant.
These include all-natural fertilizers marketed under the Restore(R) brand name,
natural and synthetic hybrid fertilizers marketed under the Supreme Garden
Fertilizers and Safer(R) brand names. Hybrid fertilizers, including garden
fertilizers and  low phosphate lawn fertilizers, using a natural nutrient
component with synthetic nutrients. These microbial fertilizers provide high
performance, non-burning, slow-release fertilization programs for improved plant
growth and extended feeding. Natural fertilizer components include commodity
feed-grade materials, including a high protein source (such as feather or
leather meal), high carbohydrate ingredients, and natural soil microorganisms.
Synthetic materials include synthetic nitrogen sources such as urea, coated urea
and dicyanodiamide. The Company's microbial fertilizer products accounted for
18%, 26% and 31% of sales in fiscal 1997, 1996 and 1995, respectively.

     WATER SOLUBLE FERTILIZERS

     The Company offered water soluble fertilizers for the first time in fiscal
1995 which were acquired from Plant Research Laboratories in December 1994. (See
"Plant Research Laboratories" above.) The Company's water soluble fertilizers
are marketed in both liquid and powdered formulas under the Safer(R) brand name.
Safer(R) water soluble fertilizers use macro nutrients in combination with a
patented oxygen releasing compound ("ORC"). ORC was developed to overcome plant
growth problems caused by oxygen deficient soil due to heavy clay content,
physical compaction, over watering or flooding.  ORC utilizes the plant's own
soil as an organic catalyst to provide the plant time-released oxygen, activated
by water, for an optimal balance of soil, water, air and nutrients. The
Company's water soluble fertilizer products accounted for 2%, 3% and 4% of sales
in fiscal 1997, 1996 and 1995, respectively

PRODUCT DEVELOPMENT
-------------------

     The Company conducts ongoing product development efforts to enhance
existing products and develop new products.  Current efforts include product
development using the Company's patented pesticide and herbicide technology
which uses fatty-acids as a synergist in combination with traditional synthetic
chemicals. Management believes that the technology will enable the Company to
develop effective pesticides and herbicides that use much less chemical active
ingredient, thus making traditional chemical herbicides and pesticides more
environmentally friendly. Most of the Company's product development, research
and testing is conducted by university and government researchers unaffiliated
with the Company.

     In fiscal 1997, 1996 and 1995, the Company spent $972,360, $748,932 and
$981,495, respectively, on research and development expenditures.

MANUFACTURING
-------------

     The Company has a leased manufacturing facility in Torrance, California
where it manufactures much of its traditional pesticide products. The
manufacturing facility was acquired with the Dexol acquisition in 

                                      -6-
<PAGE>
 
March 1997. (See "Dexol Industries, Inc." above.) The Company also uses
outside subcontract manufacturers to produce the remainder of its products.

     The Company's microbial fertilizers and water soluble fertilizers are
produced pursuant to short-term manufacturing agreements with two
subcontractors.  The Company's environmentally oriented pest control products
and certain traditional pesticides fertilizers are manufactured by one or both
of two subcontract companies located in Minnesota and Missouri.

     The Company believes that its manufacturing facilities and its
subcontractors have sufficient available manufacturing capacity to satisfy the
Company's needs for the foreseeable future.  Products for Canada and overseas
markets are manufactured by subcontractors in Canada, Europe and the United
States. The Company believes that adequate alternative subcontractors are
available, if needed.

     The Company believes that its fertilizers and composting products and its
pest control products are manufactured using generally available raw materials
and processes common to the industry. The Company does not anticipate any
shortages of such raw materials or manufacturing capacity which would materially
affect the supply of finished goods, although price fluctuations may affect
total product costs.

GOVERNMENT REGULATION AND PRODUCT REGISTRATION
----------------------------------------------

     Government regulation in the United States and other countries is a
significant factor in the research, development, production and marketing of
pesticides and, to a lesser extent, fertilizers.  To develop and sell a
pesticide product, federal and state product registration must be obtained for
each pest and plant for which the product is used.  In the United States,
pesticides are regulated by the Environmental Protection Agency ("EPA") under
the Federal Insecticide, Fungicide and Rodenticide Act, as amended ("FIFRA"),
which requires extensive efficacy, toxicology and environmental testing to
substantiate product performance and safety prior to registration.  In addition,
many states have additional registration requirements that go beyond FIFRA.

     Under FIFRA, field efficacy testing may be conducted on a small scale in
certain instances.  To conduct large-scale field tests, a company must obtain an
experimental use permit ("EUP"), which generally requires satisfactory
completion of certain toxicology and environmental studies.  Initial EPA
registration for a new pesticide may therefore be a lengthy and expensive
process. In addition, the U.S. Congress has mandated that the EPA require that
all pesticide products registered prior to 1984 be re-registered by 1997 using
today's stricter testing protocols.  Registration applicants also must submit
their proposed labeling for EPA approval. FIFRA creates a complex and detailed
scheme for pesticide labeling. After a pesticide is registered, it must be sold
with labeling and claims exactly as approved by the EPA.
 
     To regulate the development and use of biological pest controls, including
those based on naturally occurring microorganisms, the EPA established special
guidelines for their registration which are set forth in Subdivision M of the
EPA's Pesticide Assessment Guidelines.  Biological pest controls currently are
subject to a three-tier toxicology testing procedure and a four-tier
environmental testing procedure.  A biological pest control product that
satisfactorily completes both the toxicology and environmental Tier I tests is
not required to go through the tests specified in subsequent tiers.  Should
questions arise during any tier of testing, additional tests may be required.
The cost of registering biological pest control products is generally
substantially lower than that for chemical pesticides.  Most of the Company's
products have only required Tier I testing. Stricter registration requirements
apply to products based on genetically engineered organisms.  The Company does
not currently use any genetically modified organisms. Based on current EPA
regulations, management believes that biological pest control product
registrations can be obtained at a reasonable cost to the Company.

     The fertilizer products produced and marketed by the Company are currently
regulated by individual state departments of agriculture. Requirements for
obtaining registrations to sell fertilizers vary from state to 

                                      -7-
<PAGE>
 
state. Every fertilizer product must be registered and licensed in each state
where it is sold, and a registration or license fee to maintain this
registration must be paid on an annual basis.

     The Company's product performance claims for its fertilizers are more
extensive than those typical of traditional fertilizers, and include claims that
the products improve soil and minimize conditions that promote certain diseases.
As part of the registration process, research data in support of these claims
must be submitted to the appropriate state agencies.  This research must be
independently generated, preferably at the university level.  The Company's
fertilizer products have been tested at several state universities across the
country, as well as in a leading independent turf research facility in Europe.

     The Company's fertilizer products are currently registered in most states
under a national label which makes certain performance claims. Several states
object to certain claims made on the packaging or require claims specific to a
state. The Company, where possible, has designed special packaging, citing
limited claims, to permit as wide of registration and sale as possible. The
Company continues to work with all states to improve registration status
nationwide, and to substantiate the performance claims through studies conducted
at universities.

     The Company's products will also be subject to regulation by agencies of
foreign countries in which the products are tested, sold or used.  The Company's
activities may be subject to regulation under various other federal and
international laws, regulations and guidelines, and state and local regulatory
requirements, including approvals prior to shipping the products into a country,
state or locality for either experimental or commercial purposes. The Company
currently maintains product registrations in 11 foreign countries and has
registrations pending in three additional foreign countries. The Company cannot
predict the effect of future legislation and regulation on the Company's
operations.

     There can be no assurance that any testing approvals or registrations will
be granted on a timely basis, if at all, or that the Company's resources will be
adequate to meet the costs of regulatory compliance.  Any or all of those
approvals may be the subject of disputes that could postpone or prevent
research, development, production and/or marketing of the Company's products.

     Some states have laws imposing liability on certain parties for the release
of pesticides and/or fertilizers into the environment in a manner or in
concentrations not permitted by law.  Such liability could include, among other
things, responsibility for cleaning up the damage resulting from such a release.
In addition, the Comprehensive Environment Response, Compensation and Liability
Act, commonly known as the federal Superfund law, imposes liability on certain
parties for the release into the environment of hazardous substances, which
might include fertilizers and pesticides under certain circumstances.  The
federal Superfund law has been interpreted to impose liability on a producer of
pesticides for cleaning up environmental damage resulting from the release of
its products into the environment during their manufacture.  The Company has not
been subject to any claims for responsibility relating to impermissible releases
of pesticides under such federal or state statutes.  However, there can be no
assurance that the Company will not be subject to claims under such statutes at
some time in the future.  The Company believes that it does not need, and it
does not maintain, insurance for any environmental claims which might result
from the release of its products into the environment in a manner or in
concentrations not permitted by law.

COMPETITION
-----------

     The Company faces significant competition in the fertilizer and pesticide
industries from numerous manufacturers and suppliers, several of which
significantly dominate their respective markets and many of which have
substantially greater financial, technical, marketing and other resources than
the Company.  The principal competitive factors in the Company's markets are
efficacy, ease of application, price, health and environmental compatibility and
name recognition.  Many of the Company's products generally cost more than 

                                      -8-
<PAGE>
 
those of their conventional chemical counterparts, and therefore the Company
is generally not able to compete on pricing alone.

     The Company believes that it has three categories of competitors in the
pesticides market:  large chemical pesticide companies, companies with existing
bio-pesticide product lines, and companies developing new bio-pesticide
products.  The pesticide industry is dominated by large chemical companies
located in the United States and Europe.  These companies generally operate
throughout the world and have the capability to manufacture chemical pesticides
very efficiently.

     The Company's principal competitors in the consumer chemical pesticide
market are Solaris (Ortho) and Spectracide. There are several companies which
manufacture and market bio-pesticides for agricultural use, including Abbott
Laboratories and Novartis. Many of the large chemical pesticide companies are
currently conducting research on biological pest control technology.  In
addition, the Company is aware that at least one dominant chemical pesticide
manufacturer has introduced a limited line of alternative pest control products.
There are also small biotechnology companies which are conducting research in
the biological pest control area. These companies may represent significant
competition in the future.

     The Company's principal competitor in the consumer fertilizer market is The
Scotts-Miracle Grow Company.  Other significant competitors include Lebanon
(Greenview), Milwaukee Sewer Improvement District (Milorganite) and Estech
(Vigoro). Freight cost involved in shipping bulk fertilizer products across the
country are a significant factor in national competition. In addition to
national competitors, the Company has many regional and local competitors who
incur lower freight costs and are therefore more price competitive in regional
and local markets. The Company estimates that approximately 35% of the market
share is held by smaller regional and local fertilizer manufacturers.

     Products developed by the Company may also be subject to competition from
products developed by companies using other technologies.  One potential source
of competition in the future may come from plant science technology, including
development of pest-resistant plants by genetic engineering and other methods.

SEASONALITY
-----------

     Sales of the Company's products are highly seasonal, with Company shipments
of fertilizers and pest controls being heavily concentrated in the winter
(second fiscal quarter) and spring (third fiscal quarter).  See Item 6,
Management's Discussion and Analysis - Quarterly Performance.

PATENTS AND PROPRIETARY TECHNOLOGIES
------------------------------------

     The Company uses proprietary and non-proprietary technologies in its
products. Non-proprietary technologies are use in the Company's traditional
pesticide products sold under the Dexol(R) brand name and various private label
brand names. Proprietary technologies are used in many of the Company's
environmentally-oriented pest control products, microbial fertilizers and water
soluble fertilizers.

     The Company seeks to protect its proprietary product technologies through a
variety of means including patents, licences, trade secrets, proprietary know-
how, technological innovation and customer education.

     The Company relies on the use of proprietary processes in the formulation
of its microbial fertilizer products to protect them against duplication by
competitors. The Company acknowledges that there can be no assurance that such
proprietary processes will provide sufficient protection.

     The Company owns patents covering the herbicidal soap and the soap
synergized pyrethrum (SAP) technology.  These patents expire in the years 2008
and 2007, respectively. Also, in connection with the 

                                      -9-
<PAGE>
 
December 1994 acquisition from Plant Research Laboratories (see "Plant
Resource Laboratories" above) of a water soluble fertilizer product line,
marketed under the Oxygen Plus(R) brand name, the Company acquired an
exclusive worldwide license to practice patents relating to oxygen releasing
technology in the horticultural, agricultural and lawn and garden markets. The
license covers currently existing patents and any further patents on the
technology that may be issued in the future. The current patents on oxygen
releasing technology expire in the year 2011.

     As of December 1997, the Company owned 39 patents, including 20 U.S.
patents, and licensed two additional U.S. patents, which expire at various times
during the year from 2006 through 2012. The Company acknowledges that there can
be no assurances that its owned or licensed patents will provide sufficient
protection for its products or be of commercial benefit to the Company.

     The Company obtains confidentiality agreements from current Company
employees, scientific consultants and potential strategic corporate partners
prior to disclosing Company trade secrets and know-how. There can be no
assurance that these confidentiality agreements will be honored or that such
proprietary know-how or trade secrets will not be independently created by third
parties.

EMPLOYEES
---------

     As of December 6, 1997, the Company had 57 employees, all of whom are full-
time, located in the U.S. and Canada. Of these employees, 2 were engaged in
product development, 15  in sales and marketing, 27 in distribution and material
control and 13 in general administration. The Company plans to hire additional
personnel as required by the needs of its business. The Company does not
currently anticipate difficulties in attracting sufficient numbers of qualified
employees.  None of the employees are covered by collective bargaining
agreements, and the Company has experienced no work stoppages.  The Company
believes that its employee relations are good.

     The acquisition of SRI will add approximately 75 additional employees to
the Company. (See "Subsequent Event - Southern Resources,  Inc." above.)

Item 2.   DESCRIPTION OF PROPERTY.
          ----------------------- 

     The Company leases approximately 6,000 square feet of office facilities
located in Bloomington, Minnesota. In addition, the Company leases approximately
26,000 square feet of warehouse and office space in Eagan, Minnesota and
approximately 32,500 square feet of office, warehouse and production facilities
in Torrance, California. The Company's corporate office lease and its warehouse
lease expire in September 1999 and December 2001, respectively. Its California
facility lease is month to month with a six month notice requirement. A
subsidiary of the Company leases approximately 13,600 square feet of office and
warehouse space in a suburb of Toronto, Canada.  The lease for the subsidiary's
office and warehouse space expires in fiscal 2000.  The Company anticipates that
it will be able to renew such leases or enter into new leases on substantially
similar terms. See Note 6 of Notes to Consolidated Financial Statements for
annual rental commitments. The Company believes that the properties are
adequately covered by insurance.

Item 3.   LEGAL PROCEEDINGS.
          ----------------- 

     The Company is not a party to any legal proceedings.

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

     No matters were submitted to a vote of stockholders during the quarter
ended September 30, 1997.

                                      -10-
<PAGE>
 
                                    Part II


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

     The Company's Common Stock trades on the Nasdaq National Market tier of The
Nasdaq Stock Market under the symbol: RING. The following table sets forth the
high and low sales prices of the Company's common stock for the last two fiscal
years as reported by Nasdaq.

                 QUARTERLY STOCK PRICES - FISCAL 1996 AND 1997
 
                         Sale Prices
                    ---------------------
                      High        Low
                    --------  -----------

Quarter of 1996:
     First........   $2 1/8      $1 3/8
     Second.......   $2          $1 5/8
     Third........   $2 3/4      $1 3/8
     Fourth.......   $2 3/8      $1 3/8

Quarter of 1997:
     First........   $2 1/8      $1 1/4
     Second.......   $1 7/16     $1 1/32
     Third........   $1 3/4      $1
     Fourth.......   $1 25/32    $1 1/16


HOLDERS.

     As of December 15, 1997, there were 238 holders of record of the Company's
common stock, and the Company estimates there were approximately 2,200
beneficial holders at such date.

DIVIDENDS.

     The Company has not paid or declared any cash dividends in the past five
years and has no intention of issuing dividends in the foreseeable future.

                                      -11-
<PAGE>
 
ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         -----------------------------------------------------------
         AND RESULTS OF OPERATIONS
         -------------------------


ACQUISITION ACTIVITIES
----------------------

In March 1997, the Company acquired substantially all of the assets of Dexol
Industries, Inc. ( the "Dexol acquisition"), a California based manufacturer and
marketer of pesticides to the retail consumer market with annual sales of
approximately $10 million. The pesticide products acquired use non-proprietary
traditional chemical technology commonly availably in the lawn and garden
industry. Since the acquisition, the Company has continued the business acquired
as its Dexol division, which has been included in the operations of Ringer
Corporation beginning on March 1, 1997, the effective date of the acquisition
for accounting and reporting purposes.

On May 30, 1996, the Company entered into a letter of intent to acquire all
outstanding stock of The Chas. H. Lilly Company ("Lilly"), a regional provider
of lawn and garden fertilizers, pesticides and packet seeds headquartered in
Portland, Oregon. On December 12, 1996, the Company announced that it elected to
discontinue efforts to acquire Lilly. Accordingly, the costs associated with
this acquisition attempt, which amounted to $312,771, have been charged to
expense in the accompanying fiscal 1996 Consolidated Statement of Operations.

In December 1994, the Company acquired substantially all of the assets of Plant
Research Laboratories ("PRL"), a California based developer and marketer of
water soluble fertilizers for the indoor houseplant and outdoor lawn and garden
care markets with annual sales of less than $1 million. The water soluble
fertilizer products acquired use a proprietary oxygen releasing technology.
These products were sold by PRL prior to the acquisition and have been sold by
the Company thereafter, primarily in the western United States, under the Oxygen
Plus(R) brand name. The Company introduced these products into national markets
in fiscal 1996 and plans to utilize the acquired technology in the development
of future products.

Management believes that new product introductions are essential to the future
growth and profitability of the Company. The Company is actively seeking
additional new product opportunities through a number of internal and external
means including the possibility of licensing arrangements with other companies
and further acquisitions. It should be noted, however, that the successful
culmination of these efforts or the profitable introduction of new products
cannot be assured.

SUBSEQUENT EVENT
----------------

On December 9, 1997, the Company completed a merger with Southern Resources,
Inc. ("SRI"), a previously privately-owned Georgia-based holding company, with
annual consolidated sales of approximately $25 million. SRI manufactures and
markets pesticides through its subsidiary SureCo, Inc., under a variety of
proprietary and private label brands names to commercial and consumer markets
throughout North America. The merger will be accounted for using the pooling-of-
interest method. (See Note 12 to the Company's consolidated financial statements
included herein.)

RESULTS OF OPERATIONS
---------------------

The following table sets forth selected information derived from the Company's
Consolidated Statements of Operations:

                                      -12-
<PAGE>
 
                                           Percentage of Net Sales
                                        For Years Ended September 30,
                                        -----------------------------
                                          1997      1996      1995
                                          -----     -----     -----
  Net sales...........................    100.0%    100.0%    100.0%
  Cost of sales.......................     54.5      52.1      49.2
                                          -----     -----     -----
  Gross margin........................     45.5      47.9      50.8
                                        
  Operating expenses:                   
   Distribution and warehousing.......     11.7      10.6      13.3
   Sales and marketing................     20.2      22.7      33.9
   General and administrative.........      8.8       9.1      10.2
   Research and development...........      5.2       5.1       6.9
   Amortization of intangibles........      2.4       2.7       2.7
                                          -----     -----     -----
           Total operating expenses...     48.3      50.2      67.0
                                          -----     -----     -----
  Loss before other (expense) income..     (2.8)     (2.3)    (16.2)
     Other (expense) income...........      (.1)     (1.6)       .9
                                          -----     -----     -----
  Net loss............................    (2.9)%     (3.9)%   (15.3)%
                                          =====     =====     =====

The following table sets forth the percentage of net sales represented by each
of the Company's major product categories:

                              Year Ended September 30,
                              ------------------------
                                1997   1996   1995
                                ----   ----   ----
  Pest control..............     80%    70%    63%
  Fertilizer................     20     30     37
 

FISCAL YEAR ENDED SEPTEMBER 30, 1997 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1996

Net Sales
---------

Net sales for the fiscal year ended September 30, 1997 increased by $4,147,841
or 28.3% to $18,820,625 from $14,672,784 for the previous fiscal year ended
September 30, 1996.  The sales increase for fiscal 1997 was primarily due to the
Dexol acquisition and the inclusion of sales from the new Dexol division
beginning March 1, 1997. (See "Dexol Industries, Inc" and "Acquisition
Activities" above.)

Gross Margin
------------

Gross margins as a percent of sales decreased to 45.5% in fiscal 1997 compared
to 47.9% in fiscal 1996. The decline in gross margin as a percent of sales was
caused by the 1997 addition of Dexol products which carry a lower average gross
margin compared to the Company's other products.

Operating Expenses
------------------

Distribution and warehousing expenses increased $643,689, or 41.4%, to
$2,199,586 in fiscal 1997 compared to $1,555,897 in fiscal 1996 and increased as
a percentage of sales in fiscal 1997 to 11.7% compared to 10.6% in fiscal 1996.
The increase was due to the addition of the Dexol division warehousing function
and additional direct distribution costs associated with increased sales. Sales
and marketing expenses increased $481,462 or 14.4%, to $3,813,795 in fiscal 1997
compared to $3,332,333 in fiscal 1996. The increase in sales expenses was due
primarily to the addition of the Dexol sales organization and increased direct
selling costs associated with Dexol sales. In addition, sales and marketing
expenses were favorably impacted by the reversal in fiscal 1997 of approximately
$227,000 in estimated co-operative advertising expenses, which were accrued in
fiscal 1996, resulting from a change in estimate based on actual 

                                      -13-
<PAGE>
 
utilization of co-op advertising allowances. Fiscal 1996 sales and marketing
expenses were favorably impacted by the reversal of approximately $198,000 in
estimated co-operative advertising expenses, which were accrued in fiscal
1995.

General and administrative expenses increased $325,730 or 24.5% to $1,656,996 in
fiscal 1997 compared to $1,331,266 in fiscal 1996. The increase was due largely
to the addition of Dexol division offices and administrative functions. Research
and development expenses increased $223,428 or 29.8% to $972,360 in fiscal 1997
from $748,932 in fiscal 1996 primarily as a result of increased product
registration and development activity related to the Dexol acquisition.

Amortization of intangible assets increased to $447,498 in fiscal 1997 compared
to $402,778 in fiscal 1996. The increase was due primarily to the amortization
of the additional goodwill associated with the Dexol acquisition.

Other income and expense
------------------------

Interest income decreased slightly to $72,247 in fiscal 1997 from  $73,866 in
fiscal 1996 due primarily to a small decline in the amount of average excess
cash investments. Interest expense increased to $152,729 in fiscal 1997 from
$68,250 in fiscal 1996. The increase in interest expense was due primarily to
additional interest expense incurred on a long-term note payable added in 1997
in connection with the Dexol acquisition. Net royalty income decreased to
$50,885 in fiscal 1997 from $87,136 in fiscal 1996 due largely to decreased
royalty income on sales to foreign licensees.


FISCAL YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1995

Net Sales
---------

Net sales for the fiscal year ended September 30, 1996 increased by $478,886, or
3.4%, to $14,672,784 from $14,193,898 for the previous fiscal year ended
September 30, 1995.  The sales increase for fiscal 1996 was primarily due to
increased sales of Safer(R) brand pesticide products which were partially offset
by lower sales of fertilizer products. Increased pesticide sales was partially
due to increased retail distribution and to new product sales. Decreased
fertilizer sales were largely due to microbial fertilizer sales.

Gross Margin
------------

Gross margins as a percent of sales decreased to 47.9% in fiscal 1996 compared
to 50.8% in fiscal 1995. The decline in gross margin as a percent of sales was
caused primarily by a continuing change in product mix to a higher proportion of
newer products and new promotional combination packs which carry lower average
gross margins.

Operating Expenses
------------------

Distribution and warehousing expenses decreased $330,873, or 17.5%, to
$1,555,897 in fiscal 1996 compared to $1,886,770 in fiscal 1995 and decreased as
a percentage of sales in fiscal 1996 to 10.6% compared to 13.3% in fiscal 1995.
The decrease as a percentage of sales in fiscal 1996 compared to fiscal 1995 was
primarily due to lower freight and outside distribution costs resulting from
consolidation of distribution processes and reduced freight rates. Sales and
marketing expenses decreased $1,478,315, or 30.7%, to $3,332,333 in fiscal 1996
compared to $4,810,648 in fiscal 1995 and decreased as a percentage of sales to
22.7% in fiscal 1996 from 33.9% in fiscal 1995. The decrease in sales expenses
was due largely to staffing reductions, offset in part by increased commissions
incurred from expanded utilization of 

                                      -14-
<PAGE>
 
manufacturer representative organizations and to lower advertising expenses.
In addition, sales and marketing expenses were favorably impacted by the
reversal in fiscal 1996 of approximately $198,000 in estimated co-operative
advertising expenses, which were accrued in fiscal 1995, resulting from a
change in estimate based on actual utilization of co-op advertising
allowances. General and administrative expenses decreased $113,844, or 7.9%,
to $1,331,266 in fiscal 1996 compared to $1,445,110 in fiscal 1995 and
decreased as a percentage of sales to 9.1% in fiscal 1996 from 10.2% in fiscal
1995. The decrease was due largely to reduced facility rental costs resulting
from the sublease of approximately half of the Company's former office
facility. Research and development expenses decreased $232,563, or 23.7% to
$748,932 in fiscal 1996 from $981,495 in fiscal 1995. The decrease was largely
due to lower product registration costs resulting from discontinued
registrations on certain products no longer being sold. Amortization of
intangible assets increased to $402,778 in fiscal 1996 compared to $379,358 in
fiscal 1995. The increase was due primarily to multi-year foreign product
registrations obtained in fiscal 1996 which are being amortized over the life
of the registrations.

Other income and expense
------------------------

Other income and expense includes a fourth quarter charge of $312,771 for
expenses associated with an election not to proceed with a previously announced
acquisition. (See "Merger and Acquisition Activities" above.)  Interest income
decreased $9,164, or 11.0%, to $73,866 in fiscal 1996 compared to $83,030 in
fiscal 1995. The decrease in interest income was largely due to declining
interest rates on investments. Interest expense increased to $68,250 in fiscal
1996 from $66,690 in fiscal 1995. The increase in interest expense was due
primarily to increased average borrowings in fiscal 1996 compared to fiscal
1995. Net royalty income decreased to $87,136 in fiscal 1996 from $106,352 in
fiscal 1995. The decrease in net royalty income was primarily caused by
additional royalty expenses incurred by the Company in fiscal 1996 in connection
with licensed technology used in the Company's water soluble fertilizer line.

INCOME TAXES
------------

Income tax benefits of net deferred tax assets have been offset by valuation
allowances for the years ended September 30, 1997, 1996 and 1995 because it is
more likely than not that the tax benefits, which can not be carried back, could
not be realized in future periods.

At September 30, 1997, the Company has approximately $23.2 million in combined
U.S. net operating loss carry forwards for federal income tax purposes. These
loss carry forwards expire between 1998 and 2013. Of the total, approximately
$4.1 million are U.S. net operating loss carryforwards of Safer, Inc., the
Company's wholly owned subsidiary. The use of the unexpired net operating loss
carryforwards of Ringer which were generated prior to September 1990, totaling
approximately $10.2 million, are restricted to $2,025,000 in any one year under
Internal Revenue Code Section 382 because of a significant ownership change
resulting from the Company's initial public offering. The use of net operating
loss carryforwards of Ringer generated after the ownership change are not
restricted. The use of the net operating losses of Safer, Inc. are limited to
approximately $700,000 in any one year under Internal Revenue Code Section 382
because of a significant ownership change resulting from the Company's
acquisition of Safer, Inc. in January 1991. At September 30, 1997, the Company
has approximately $565,000 of net operating loss carryforwards in Canada which
expire between 1999 and 2002.

QUARTERLY PERFORMANCE
---------------------

The following table sets forth a summary of quarterly results for the past two
fiscal years in order to show the highly seasonal pattern of the Company's
business and quarterly fluctuations in sales and earnings or losses.   This
information is unaudited but contains all adjustments, consisting of normal
recurring accruals, which the Company believes are necessary for a fair
presentation.

                                      -15-
<PAGE>
 
<TABLE>
<CAPTION>
 
                                    Fiscal 1996                           Fiscal 1997
                                 Three months ended                    Three months ended
                        -----------------------------------   --------------------------------------
                                     (In thousands, except income (loss) per share data)
                         Dec 31   Mar 31   June 30  Sept 30   Dec 31    Mar 31     June 30   Sept 30
                        --------  -------  -------  --------  -------  ---------  ---------  --------
<S>                     <C>       <C>      <C>      <C>       <C>      <C>        <C>        <C>
 
Net sales.............  $ 3,636   $ 5,613  $ 4,005  $ 1,419   $ 3,481   $ 4,839    $ 7,358   $ 3,143
Gross profit..........    1,850     2,878    1,709      588     1,774     2,243      3,443     1,105
Operating expenses....    1,921     2,383    1,619    1,448     1,748      2283      3,205     1,854
Income (loss) before
  other income
  (expense)...........      (71)      495       90     (860)       26       (40)       238      (749)
 
Other income
  (expense)...........       19        12       14     (267)       34       (14)       (54)       13
Net income (loss).....  $   (52)  $   507  $   104  $(1,127)  $    60       (54)   $   184   $  (736)
 
Income (loss)
per share.............    $(.00)     $.05     $.01    $(.10)     $.01     $(.00)      $.02     $(.06)
 
Average common and
  common equivalent
  shares outstanding..   10,922    10,923   10,931   10,922    10,922    10,934     12,175    12,182
</TABLE>

SEASONAL FACTORS AFFECTING OPERATIONS

The Company's operations and cash needs are highly seasonal. During the first
quarter of each year, the Company solicits early orders and plans production,
typically building its inventory of products through January of each year for
shipment during the spring selling season. Most of the shipments for the peak
retail season, and therefore most of the billings that result in revenue
recognition and in receivables, occur in February through May of each year.
Accordingly, the Company typically consumes significant cash in operating
activities during the first and second quarters of each year as it finances
increases in inventory, primarily during the first quarter, and increases in
receivables, primarily during the second and early third quarters.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

Historically the Company's cash and working capital needs have been provided
through public and private equity offerings as well as seasonal bank lines of
credit. The Company relies on a bank line of credit to finance its seasonal
working capital needs resulting from the build up of inventory and receivables
during the second and third quarters of each year. Consistent with the Company's
seasonal operations, the Company's outstanding borrowings under its bank line is
the greatest during the third quarter of each year.

On May 2, 1997, the Company secured a three-year, $25 million revolving credit
facility from GE Capital Services, which replaced a $5,000,000 bank line of
credit from a previous lender. (See Note 5 to consolidated financial statements
herein.) Borrowings under the facility are limited to a borrowing base of 85% of
eligible receivables and 50% of eligible inventory, as defined in the credit
agreement. Management believes that this line of credit will meet the Company's
seasonal working capital requirements for fiscal 1998. In 1997, the Company's
maximum borrowings from its bank line of credit were $2,436,527 compared to
maximum borrowings of $3,405,417 in fiscal 1996. There are no outstanding
borrowings under the line of credit as of September 30, 1997.

Management believes that working capital of $5.1 million at September 30, 1997,
together with seasonal bank lines of credit, will be sufficient to fund its
operations through at least fiscal 1998.

                                      -16-
<PAGE>
 
In fiscal 1997, cash and cash equivalents decreased $24,487 to $3,264,294 from
$3,288,781 at September 30, 1996. The decrease resulted primarily from cash used
in investing activities of $255,863 which was largely offset by cash provided
from operating activities of $116,605 and cash provided from financing
activities of $111,905. Cash used in investing activities was primarily used to
purchase property and equipment of $140,008, to  pay expenses relating the Dexol
acquisition of $82,343 and to invest in patent and trademark applications and
other intangible assets of $42,401, partially offset by proceeds from the sale
of fixed assets of $8,889. The $116,605 provided by operating activities was
primarily the result of reductions to receivables and inventory of $1,605,348
and $873,900, respectively, offset in part by reductions in accounts payable and
accrued expenses of $2,150,758 and 195,638, respectively. The cash provided by
financing activities was primarily the result of cash received in the Dexol
acquisition of $124,073 partially offset by payments of $12,168 on long-term
debt.

In fiscal 1996, cash and cash equivalents increased $532,404 to $3,288,781 at
September 30, 1996. The increase resulted primarily from cash provided by
operating activities of $699,044, partially offset by cash used in investing
activities of $158,506. The $699,044 provided by operating activities was
primarily the result of decreased inventory and receivables of $502,224 and
$205,861, respectively, and increased accrued expenses of $249,746, which was
partially offset by cash used to fund the net operating loss of $568,119, less
net non-cash expenses of $511,896, and a reduction in accounts payable of
$194,464. Cash used in investing activities was primarily used to purchase
property and equipment of $60,861 and to invest in patent and trademark
applications and other intangible assets of $118,674, partially offset by
proceeds from the sale of fixed assets of $20,849.

In fiscal 1995, cash and cash equivalents decreased $2,091,246 to $2,756,377 at
September 30, 1995. The decline resulted primarily from cash used in operating
activities of $1,640,482, cash used in investing activities of $440,526 and cash
used in financing activities of $2,063. The $1,640,482 used in operating
activities was used primarily to fund the net loss of $2,173,104 and increases
in inventory of $748,040, which was partially offset by decreases in accounts
receivable and prepaid expenses of $313,494 and $90,174, respectively, and
increases in accounts payable of $331,887. Cash used in investing activities was
primarily used to acquire substantially all the assets of Plant Research
Laboratories (see Item 1. Business, "Plant Research Laboratories"), to purchase
property and equipment of $101,536 and to invest in patent and trademark
applications and other intangible assets of $106,288. Cash used in financing
activities resulted from final payments on capital lease obligations of $3,667
partially offset by cash of $1,604 received from the exercise of employee
incentive stock options.

There are no commitments for capital expenditures in fiscal 1998. The Company's
bank line of credit agreement limits the Company to capital asset purchases to
not more than $300,000 per year during the term of the credit agreement ending
May 2, 2000.

EFFECTS OF INFLATION
--------------------

The Company believes that, during the periods discussed above, inflation has not
had a material impact on the Company's business.

ACCOUNTING PRONOUNCEMENTS
-------------------------

In fiscal 1997, the Company adopted Statement of Financial Accounting Standards
No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation." As permitted by
SFAS 123, the Company has elected to continue using the "intrinsic value method"
of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" for the measurement and recognition of stock-based transactions with
employees. Accordingly, no compensation costs have been recognized for stock
options issued under the Company's stock option plans because the exercise price
of options granted was equal to the fair value of 

                                      -17-
<PAGE>
 
the Company's common stock on the date of grant. See "Stock Based Compensation"
under Note 7 to the consolidated financial statements included herein.

NEW ACCOUNTING PRONOUNCEMENTS
-----------------------------

In February 1997, Statement on Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share" was issued which is required to be adopted for the quarter
ending December 31, 1997. At that time, the Company will be required to change
the method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating basic earnings per share,
the dilutive effect of stock options, stock warrants and convertible securities
will be excluded from basic earnings per share. The calculation of diluted
earnings per share will remain similar to the current method. The impact of SFAS
No. 128 on the calculation of primary and fully diluted earnings per share is
not expected to be material.

YEAR 2000 CONCERNS
------------------

The Company has reviewed its computer systems for year 2000 compliance issues
and has determined that implementations of new software and computer equipment
are required in certain areas. The Company is in the process of implementing
these computer systems changes to be year 2000 compliant. Management believes
that the implementation of new hardware and software required to be year 2000
compliant will not have a material adverse impact on the Company's future
operating results.

FORWARD LOOKING INFORMATION
---------------------------

The information contained in this Annual Report includes forward-looking
statements as defined in Section 21E of the Securities Exchange Act of 1934, as
amended.  These forward-looking statements involve a number of risks and
uncertainties, including demand from major customers, competition, changes in
product or customer mix or revenues, and changes in product costs and operating
expenses, and other factors disclosed throughout this Annual Report and the
Company's other filings with the Securities and Exchange Commission.  The actual
results that the Company achieves may differ materially from any forward-looking
statements due to such risks and uncertainties.  The Company undertakes no
obligation to revise any forward-looking statements in order to reflect events
or circumstances that may arise after the date of this report.  Readers are
urged to carefully review and consider the various disclosures made by the
Company in this report and in the Company's other reports filed with the
Securities and Exchange Commission that attempt to advise interested parties of
the risks and uncertainties that may affect the Company's financial condition
and results of operations.

                                      -18-
<PAGE>
 
Item 7.     FINANCIAL STATEMENTS.
            -------------------- 

The following consolidated financial statements are included as a separate
section following the signature page to this Form 10-KSB:

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                           Page
                                                                           ----
Independent Auditors' Report.........................................        32

Consolidated Balance Sheets as of
  September 30, 1997 and 1996........................................        33

Consolidated Statements of Operations for the years ended
  September 30, 1997, 1996 and 1995..................................        34

Consolidated Statements of Stockholders' Equity for the years ended
  September 30, 1997, 1996 and 1995..................................        35

Consolidated Statements of Cash Flows for the years ended
  September 30, 1997, 1996 and 1995..................................        36

Notes to Consolidated Financial Statements...........................  37 to 46
 

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

         None.

                                      -19-
<PAGE>
 
                                   PART III

Item 9.  SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
         ------------------------------------------------------- 

(a)      ELECTION OF DIRECTORS

         The Board of Directors has set the number of directors to be elected
for the ensuing year at eight and will be recommending in its Proxy Statement
the election of Messrs. Goldberg, Stofer, Fischer, Lovness, Pass, Yanni,
Hetterick and Vansant (the "Nominees") to hold office until the next annual
meeting of shareholders and until their successors are elected and qualified.
Each Nominee, other than David K. Vansant, is presently a director of the
Company.

         The following information is given as of December 31, 1997 and has been
furnished to the Company by the respective individuals listed below.
<TABLE>
<CAPTION>
 
                                              Principal Occupation and
  Name and Age                        Business Experience for Past Five Years                       Director Since
  ------------                        ---------------------------------------                       --------------
<S>                          <C>                                                                    <C>
Stanley Goldberg             Chairman of the Board of Directors of the Company since 1997;          September 1992
Age 51                       Chief Executive Officer of the Company since 1993; President 
                             of the Company since September 1992. Vice President and 
                             General Manager of Thomson, S.A., World Wide Audio Division, 
                             a defense and electronics company from 1990 to 1992; General
                             Manager of Thomson S.A., Audio Americas Operations from 1988 
                             to 1990; Manager of Product Development for General Electric 
                             Company, a consumer and industrial products and defense 
                             company, from 1986 to 1988. Director of Destrib-Fearing 
                             Corporation.
 
Gordon F. Stofer +*          President of Cherry Tree Investments, Inc. and Managing                December 1985
Age 50                       General Partner of Cherry Tree Ventures venture capital 
                             partnerships since 1980. Chairman of the Board of 
                             Directors of the Company from 1986 to 1997. Director of 
                             Coda Music Technology, Inc., Insignia Systems 
                             Incorporated and Harmony Brook, Inc.
 
Robert W. Fischer +*         President of R.W. Fischer & Company, Inc., a corporate                 June 1981
Age 79                       development and investment banking services company, 
                             since 1979. Director of Apertus Technologies 
                             Incorporated.
 
Donald E. Lovness            Former Senior Scientist of the Company until his                       June 1965
Age 73                       retirement in December 1988.


Franklin Pass, M.D.          Chairman and Chief Executive Officer of Medi-Ject                      June 1990
Age 61                       Corporation, a manufacturer of needle-free injection
                             devices, since 1992; President of International 
                             Agricultural Investments, Ltd., an agricultural and
                             consulting partnership from 1990 to 1993; Chairman 
                             and Chief Executive Officer of Bioseeds International, 
                             Inc., an agricultural seed company, from 1987 to 1990.

Frederick F. Yanni,          President and Chief Executive Officer of Health Services               June 1993
Jr.+                         Medical Corporation of Central New York, Inc., a network 
Age 55                       health maintenance organization, since 1976; President 
                             and Chief Executive Officer of Health Services Association, 
                             a provider of ambulatory care, since 1972.
                              
</TABLE> 
                                     -20-
<PAGE>
 
<TABLE> 

<S>                          <C>    
John F.  Hetterick*          Independent consultant in the consumer products                        June 1993
Age 52                       industry since 1997; President and Chief Executive                     
                             Officer of Rollerblade, Inc., a manufacturer of in-
                             line skates, from 1992 to 1997; President of Tonka
                             International, a division of Tonka, Corporation, a
                             toy manufacturer, from 1989 to 1991; Vice President-
                             Marketing of Pepsi-Cola International, a
                             manufacturer and distributor of soft drinks from
                             1986 to 1989.
 
David K.  Vansant            Executive Vice President -Corporate Development of the                 Nominee
Age 53                       Company since 1997. Chairman and Chief Executive Officer 
                             of Southern Resources, Inc. from 1986 until Southern 
                             Resources, Inc. was acquired by the Company in 1997.
</TABLE> 
                             
-----------------------------
+   Member of Audit Committee
 .   Member of Stock Option Committee
*   Member of Compensation Committee
 

(b) EXECUTIVE OFFICERS

<TABLE> 
<CAPTION> 
 
    Name                              Age                         Position
    ----                              ---                         --------  
    <S>                               <C>               <C>   
    Stanley Goldberg                  51                Chairman, Chief Executive Officer
                                                        and President
 
    Mark G. Eisenschenk               40                Executive Vice President,
                                                        Chief Financial Officer, Treasurer 
                                                        and Secretary
 
    Patrick J. McGinnity, Ph.D.       43                Vice President and
                                                        General Manager - Safer and
                                                        Ringer Products
 
    Michael R. Goblet                 51                Vice President - Sales
</TABLE>

    See the biographical information on Mr. Goldberg under "Election of
    Directors."

    Mark G. Eisenschenk joined the Company in January 1994 as Chief Financial
Officer, Vice President of Finance, Treasurer and Secretary.  From 1991 to 1994,
Mr. Eisenschenk was the Vice President and Chief Financial Officer of ECM
Publishers, Inc.  From 1986 to 1991, Mr. Eisenschenk was Director of Treasury,
Taxation and Accounting of Sinclair and Valentine, formerly a unit of Allied-
Signal, Inc.

    Patrick J. McGinnity, Ph.D. joined the Company in September 1987 as Vice
President-Research and Development.  From December 1983 to September 1987, Dr.
McGinnity was Senior Field Research and Development Specialist and Regional
Field Research and Development Manager at PPG Industries, Inc.

    Michael R. Goblet joined the Company in March 1993 as Vice President -
Sales.  From 1982 to 1993, Mr. Goblet was a Regional Manager at the O. M. Scotts
Company.

(c) SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE

    Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors, persons who beneficially own more than ten percent (10%)
of the Company's Common Stock to file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission ("SEC").
Executive officers, directors and greater than ten percent (10%) beneficial
owners are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.

                                     -21-
<PAGE>
 
     Based solely on a review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements applicable to
its executive officers and directors were complied with.

Item 10.  EXECUTIVE COMPENSATION.
          ---------------------- 

     The following table sets forth the compensation awarded to or earned in
fiscal years 1997, 1996 and 1995 by the Company's Chief Executive Officer and
each other executive officer who earned salary and bonus in excess of $100,000
during the fiscal year ended September 30, 1997.

                           Summary Compensation Table
                           --------------------------
<TABLE>
<CAPTION>
 
                                                         Long-Term
                                                      Compensation (1)
                                                    ----------------------
                               Annual Compensation  Restricted  Securities              
     Name and                  -------------------    Stock     Underlying     All Other
Principal Position       Year    Salary     Bonus     Awards     Options     Compensation
-----------------------  ----  ----------  -------  ----------  ----------  ---------------
<S>                      <C>   <C>         <C>      <C>         <C>         <C>
 
Stanley Goldberg,        1997    $185,250       --          --      90,000       $21,584(2)
Chairman, President      1996    $178,500  $20,000          --          --       $22,227(2)
  and Chief Executive    1995    $171,133       --          --     225,000       $20,548(2)
  Officer
 
Patrick J. McGinnity,    1997    $105,000       --          --       5,000            --
  Vice President and     1996    $104,167  $ 1,500          --          --            --
  General Manager,       1995    $ 94,875       --          --      35,000            --
  Safer and Ringer
  Products
 
Michael R. Goblet,       1997    $104,375       --          --       5,000            --
  Vice President of      1996    $102,083  $ 1,000          --          --            --
  Sales                  1995    $102,417       --          --      17,000            --
 
Mark G. Eisenschenk,     1997    $103,542       --          --      50,000            --
  Executive Vice         1996    $ 90,938  $ 7,500          --          --            --
  President, Chief       1995    $ 81,333  $ 4,000          --      50,000            --
  Financial Officer,
  Treasurer and Secretary
</TABLE> 
----------------------------------------
(1) Mr. Goldberg held 15,000 shares of restricted stock valued at $27,188 as of
    September 30, 1997.

(2) Includes compensation of $7,343 in 1997, $7,087 in 1996 and $7,417 in 1995
    relating to the purchase of disability insurance for Mr. Goldberg.

                         Fiscal Year-End Option Values
                         -----------------------------
<TABLE>
<CAPTION>
 
                       Number of Unexercised                    Value of Unexercised
                         Options at End of                      In-the-Money Options
                            Fiscal 1997                        at End of Fiscal 1997
                    ---------------------------          -----------------------------------
Name                Exercisable   Unexercisable          Exercisable           Unexercisable
----                -----------   -------------          -----------           -------------
<S>                 <C>           <C>                    <C>                   <C>
 
Mr. Goldberg           136,190        178,810               $68,095                $89,405
Dr. McGinnity           59,628         30,372                29,814                 10,186
Mr. Goblet              42,442         11,558                21,221                  5,779
Mr. Eisenschenk         48,000          2,000                24,000                  1,000
</TABLE>
                                     -22-
<PAGE>
 
Director Compensation

     The Company does not provide cash compensation to its outside directors,
but reimburses them for travel expenses for Board of Directors and committee
meetings attended.  In 1993 the Board of Directors adopted the Stock Option Plan
for Non-Employee Directors (the "Director Plan"), which was approved by the
shareholders of the Company at the 1994 Annual Meeting.  Such plan provides that
each non-employee director shall receive an option to purchase 10,000 shares of
Common Stock upon initial election as a director and an option to purchase an
additional 5,000 shares of Common Stock on the first business day of each fiscal
year in which he or she remains a director, commencing October 1, 1993.  The
exercise price of all options under the Director Plan is equal to the fair
market value on the date of grant.  Options granted under the Director Plan (i)
are exercisable in monthly increments of one-sixtieth of the number of shares
subject to such grant until the day following the fifth anniversary of such
grant, at which time the options granted are all fully exercisable and (ii)
expire 10 years from the date of the grant.  In the event any dividend,
distribution, recapitalization, stock split, merger, consolidation, or other
event occurs that affects the Company's Common Stock such that an adjustment is
deemed appropriate to prevent dilution or enlargement of benefits under the
Director Plan, such adjustments may be made to preserve the benefits intended
under the Director Plan and such awards.  Awards granted under the Director Plan
are not transferable.

Employment Agreements

     The Company and Stanley Goldberg entered into an Employment Agreement under
which Mr. Goldberg agreed to serve as the President of the Company.  The
agreement, as amended, provides for a minimum annual base compensation payable
to Mr. Goldberg of $200,000.  In addition, Mr. Goldberg is eligible for an
annual bonus of up to 40% of his base salary based on personal and company
performance objectives established by the Company's Board of Directors.  The
agreement further provides that Mr. Goldberg may be entitled to severance pay in
the event Mr. Goldberg's employment with the Company is terminated under certain
circumstances.  Such severance pay is equal to (i) his base monthly salary at
the time of such termination, is payable for a period of three years following
such termination, and offset by any compensation received by Mr. Goldberg after
the date eighteen months following such termination from other employment and
(ii) a lump-sum payment equal to the average bonus received by Mr. Goldberg
during the preceding three years.  The Agreement further provides that if the
Company sells substantially all of its assets or a transaction occurs such that
the members of the Board of Directors at the time of the transaction do not
remain on the Board of Directors after such transaction, the Company shall pay
Mr. Goldberg a sale bonus equal to (i) 300% of his annual base salary and (ii)
the average bonus paid to Mr. Goldberg for the three years immediately preceding
such transaction.

     The Company and Mark G. Eisenschenk also entered into an Employment
Agreement under which Mr. Eisenschenk agreed to serve as the Executive Vice
President and Chief Financial Officer of the Company.  The agreement provides
for a minimum annual base compensation payable to Mr. Eisenschenk of $125,000.
In addition, Mr. Eisenschenk is eligible for an annual bonus of up to 30% of his
base salary  based on personal and company performance objectives established by
the Company's Board of Directors.  The agreement further provides that Mr.
Eisenschenk may be entitled to severance pay in the event Mr. Eisenschenk's
employment with the Company is terminated under certain circumstances.  Such
severance pay is equal to (i) his base monthly salary at the time of such
termination, is payable for a period of twelve months following such
termination, and offset by any compensation received by Mr. Eisenschenk after
the date six months following such termination from other employment and (ii) a
lump sum payment equal to the average bonus received by Mr. Eisenschenk during
the preceding three years.  The agreement further provides that if the Company
sells substantially all of its assets or a transaction occurs such that the
members of the Board of Directors at the time of the transaction do not remain
on the Board of Directors after such transaction, the Company shall pay Mr.
Eisenschenk a sale bonus equal to (i) 100% of his annual base salary and (ii)
the average bonus paid to Mr. Eisenschenk for the three years immediately
preceding such transaction.

                                     -23-
<PAGE>
 
Stock Option Plans

     In 1986, the Board of Directors and the shareholders of the Company
approved the 1986 Employee Incentive Stock Option Plan (the "1986 Plan") which
expired on September 17, 1996.  As of such date, 833,068 shares of Common Stock
were subject to outstanding options at a weighted average exercise price of
$1.3125 per share, of which options to purchase 465,875 shares were exercisable
as of such date.  As of September 30, 1997, a total of 22 employees held options
under the 1986 Plan.

     In 1996, the Board of Directors adopted, and in 1997 the shareholders
approved, the Ringer Corporation 1996 Incentive and Stock Option Plan (the "1996
Plan").  As of September 30, 1997, 40,500 shares of Common Stock were subject to
outstanding options at a weighted exercise price of $1.3125 per share, of which
options to purchase 12,938 shares were exercisable as of such date.  As of
September 30, 1997, a total of 24 employees held options under the 1996 Plan.
 
Stock Option Repricing

     The Company's Compensation Committee and Board of Directors repriced all
outstanding stock options to purchase Company Common Stock held by employees and
directors on April 29, 1997.  The Compensation Committee and Board of Directors
believed that the market price of the Company's common stock had been negatively
affected by several factors, including general investment market disfavor for
small-cap common stocks, the Company's earnings performance and absence of
investment analyst coverage.  As a result, the outstanding stock options, which
had been granted at exercise prices ranging from $1.50 to $2.70 per share, no
longer represented an effective incentive for employees and directors.  The
options were reissued at an exercise price equal to the fair market value of the
Common Stock on the date of repricing ($1.3125 per share). The number of shares
subject to the repriced options and the average option exercise price for each
of the named executive officers is as follows:  Mr. Goldberg - 90,000 shares at
$2.50 per share; Mr. Eisenschenk -50,000 shares at an average exercise price of
$1.98 per share; Dr. McGinnity - 75,000 shares at an average exercise price of
$2.02 per share; and Mr. Goblet - 49,000 shares at an average exercise price of
$1.96 per share.

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

The following table sets forth certain information as of December 31, 1997, with
respect to the beneficial ownership of the Company's Common Stock by all persons
known by the Company to be the beneficial owners of more than 5% of its
outstanding shares, by all directors, nominees for election as directors, by the
executive officers named in the executive compensation table and by all officers
and directors as a group. Unless noted below, the address of each of the
following shareholders is the same as the Company.

<TABLE>
<CAPTION>
 
                                  Amount and Nature
    Name and Address               of Beneficial
   of Beneficial Owner              Ownership(1)          Percent of Class
   -------------------            -----------------       ----------------
<S>                               <C>                     <C>
Gordon F. Stofer and                  680,811                  4.1%
Cherry Tree Ventures III (2)
1400 Northland Plaza
3800 West 80th Street
Minneapolis, MN 55431
 
Parsnip River Company               1,005,388                  6.0
4422 IDS Center
80 South 8th Street
Minneapolis, MN 55402
</TABLE> 
 
                                     -24-
<PAGE>
 
<TABLE> 
<S>                                 <C>                        <C>     
William J. DeMare                   1,125,000                  6.7
14702 Claredon Drive
Tampa, FL 33624
 
Benjamin F. Law                     1,125,000                  6.7
2755 Arden Rd, N.W.
Atlanta, GA 30327
 
D. David Bailey                     1,125,000                  6.7
2504 Gardener Court
Tampa, FL 33611
 
David K. Vansant                    1,125,000                  6.7
132 Princeton Drive
Macon, GA 31220
 
Dexol Industries, Inc.              1,059,340                  6.4
1450 West 228th St.
Torrance, CA 90501
 
Stanley Goldberg                      332,705                  2.0
 
Robert W. Fischer                     112,001                   *
 
Donald E. Lovness                      35,550                   *
 
Franklin Pass, M.D.                    25,000                   *
 
Frederick F. Yanni, Jr.                38,300                   *
 
John F. Hetterick                      35,000                   *
 
Richard Mayo                           25,000                   *
 
Mark G. Eisenschenk                   102,000                   *
 
Michael R. Goblet                      53,659                   *
 
Patrick J. McGinnity, Ph.D.            64,477                   *
 
Officers and directors as           1,524,386                  8.9%
a group (12 persons) (1)
</TABLE>
-----------------------------
*  Less than one percent

(1) Includes for Stanley Goldberg, options to purchase 158,690 shares of Common
    Stock which are exercisable within 60 days; for Robert W. Fischer, options
    to purchase 25,000 shares of Common Stock which are exercisable within 60
    days; for Donald E. Lovness, options to purchase 25,000 shares of Common
    Stock which are exercisable within 60 days; for Franklin Pass, M.D., options
    to purchase 25,000 shares of Common Stock which are exercisable within 60
    days; for Frederick F. Yanni, Jr., options to purchase 35,000 shares of
    Common Stock which are exercisable within 60 days; for John F. Hetterick,
    options to purchase 35,000 shares of Common Stock which are exercisable
    within 60 days; 

                                     -25-
<PAGE>
 
    for Mark G. Eisenschenk, options to purchase 50,000 shares of Common Stock
    which are exercisable within 60 days; for Michael R. Goblet, options to
    purchase 46,249 shares of Common Stock which are exercisable in 60 days; for
    Patrick J. McGinnity, Ph.D., options to purchase 64,477 shares of Common
    Stock which are exercisable within 60 days; and for all officers and
    directors as a group, options to purchase 519,299 shares of Common Stock
    which are exercisable within 60 days.

(2) Includes 648,163 shares held by Cherry Tree Ventures III, of which Mr.
    Stofer, the Chairman of the Board of the Company, is a general partner.  Mr.
    Stofer disclaims beneficial ownership of shares held by Cherry Tree Ventures
    III.  Also includes options to purchase 20,000 shares of Common Stock which
    are exercisable within 60 days.


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

    On April 29, 1997, the Board of Directors of the Company approved the sale
of 150,000 shares of unregistered and restricted Common Stock to Mr. Goldberg
and 50,000 shares of unregistered and restricted stock to Mr. Eisenschenk, at a
price of $1.3125 per share (the fair market value on the date of the
transaction). Mr. Goldberg is a director, shareholder and executive officer and
Mr. Eisenschenk is a shareholder and executive officer of the Company.

    The purchase price for the shares was paid by each of Mr. Goldberg and Mr.
Eisenschenk by delivering to the Company a full recourse promissory note.  The
promissory note of Mr. Goldberg is payable in three annual installments of
principal and interest due on the first three anniversaries of the date of the
promissory note.  The promissory note of Mr. Eisenschenk is due in five annual
installments of principal and interest due on the first five anniversaries of
the date of the promissory note.

    The agreements pursuant to which each of Messrs. Goldberg and Eisenschenk
purchased stock provide that, if the executive officer is employed by the
Company on each anniversary on which payments are due under the promissory note,
the Company will make a cash bonus payment to the executive officer in an amount
equal to the annual debt service payments on such note plus an amount equal to
the federal and state income taxes payable on such cash bonus.

    The agreement with Mr. Goldberg provides that, in the event Mr. Goldberg is
terminated for cause or voluntarily terminates his employment with the Company
prior to April 29, 2000, the Company will have the option to repurchase shares
of Company Common Stock purchased by him on April 29, 1997.  The number of
shares subject to repurchase decreases by one-third on each anniversary of the
date of purchase, from an initial option to repurchase all of the shares
purchased prior to the first such anniversary.

    Similarly, in the event Mr. Eisenschenk is terminated for cause or
voluntarily terminates his employment with the Company prior to April 29, 2002,
the Company will have the option to repurchase shares of Company Common Stock
purchased by him on April 29, 1997.  The number of shares subject to repurchase
decreases by one-fifth from an initial option to repurchase all of the shares
purchased prior to the first such anniversary.

    The agreements also provide that if (i) Mr. Goldberg or Mr. Eisenschenk is
terminated without cause, (ii) the Company is sold, or (iii) a controlling
interest in the Company is acquired by a third party prior to April 29, 2000,
the Company will make cash payments equal to one-third of the then outstanding
balance of principal and interest on their respective promissory notes for each
anniversary of such promissory notes that has passed as of the date of the above
described events.

                                     -26-
<PAGE>
 
    In connection with such purchases, Mr. Goldberg agreed to the cancellation
of options to purchase 135,000 shares of the Company's Common Stock owned by him
and Mr. Eisenschenk agreed to the cancellation of options to purchase 50,000
shares of Common Stock owned by him.

                                     -27-
<PAGE>
 
Item 13.  EXHIBITS AND REPORTS ON FORM 8-K.
          -------------------------------- 

a.   Listing of Exhibits
     -------------------

<TABLE> 
<CAPTION> 

  Exhibit
  Number                              Description
  ------                              -----------
  <S>     <C>  
   2.1    Agreement for Purchase and Sale of Assets by and between Dexol
          Industries, Inc. and Ringer Corporation (incorporated by reference to
          Exhibit 2.1 of the Company's Current Report on Form 8-K filed April
          15, 1997, SEC File No. 33-36205-C).

   2.2    Amended and Restated Agreement and Plan of Merger between Southern
          Resources, Inc. Inc. and Ringer Corporation (incorporated by reference
          to Exhibit 2.1 of the Company's Current Report on Form 8-K filed on or
          about December 23, 1997, SEC File No. 33-36205-C).

   3.1    Restated Articles of Incorporation of the Company, as amended to date
          (incorporated by reference to Exhibit 3.2 of the Company's
          Registration Statement on Form S-18, SEC File No. 33-36205-C).

   3.2    Bylaws of the Company, as amended to date (incorporated by reference
          to Exhibit 3.3 of the Company's Registration Statement on Form S-18,
          SEC File No. 33-36205-C).

   4.1    Specimen certificate of Common Stock, $.01 par value (incorporated by
          reference to Exhibit 4.1 of the Company's Registration Statement on
          Form S-18, SEC File No. 33-36205-C).

* 10.1    1986 Employee Incentive Stock Option Plan (incorporated by reference
          to Exhibit 4.4 of the Company's Registration Statement on Form S-8,
          SEC File No. 33-37806).

* 10.2    Stock Option Plan for Non-Employee Directors (incorporated by
          reference to Exhibit 10.2 of the Company's Annual Report on Form 10-
          KSB for the fiscal year ended September 30, 1993, SEC File No. 0-
          18921).

  10.3    Lease Agreement between the Company and 94th Street Associates, a
          Minnesota Partnership, dated August 15, 1996 (incorporated by
          reference to Exhibit 10.3 of the Company's Annual Report on Form 10-
          KSB for the fiscal year ended September 30, 1996, SEC File No. 0-
          18921.)

  10.4    Lease Agreement between the Company and MEPC American Properties,
          Inc., a Delaware corporation, dated August 16, 1996 (incorporated by
          reference to Exhibit 10.4 of the Company's Annual Report on Form 10-
          KSB for the fiscal year ended September 30, 1996.)

* 10.5    Employment Agreement between the Company and Stanley Goldberg dated
          September 13, 1992 (incorporated by reference to Exhibit 10.6 of the
          Company's Annual Report on Form 10-K for the fiscal year ended
          September 30, 1992, SEC File No. 0-18921).

* 10.6    Amendment of Employment Agreement between the Company and Stanley
          Goldberg, dated December 5, 1997.

</TABLE> 

                                     -28-
<PAGE>
 
<TABLE> 

<S>       <C> 
* 10.7    Employment Agreement between the Company and Mark G. Eisenschenk,
          dated December 5, 1997.

* 10.8    Stock purchase agreement, and related documents, between the Company
          and Stanley Goldberg, dated April 29, 1997.

* 10.9    Stock purchase agreement, and related documents, between the Company
          and Mark G. Eisenschenk, dated April 29, 1997.

 10.10    Credit Agreement between the Company and General Electric Capital
          Corporation dated May 2, 1997 (incorporated by reference to Exhibit
          10.6 of the Company's Quarterly Report on Form 10-QSB for the third
          fiscal quarter ended June 30, 1997, SEC File No. 0-18921).

 10.11    Stock Subscription Warrant between the Company and Robert W. Fischer
          Co., Inc. dated July 18, 1990 (incorporated by reference to Exhibit
          10.16 of the Company's Registration Statement on Form S-18, SEC File
          No. 33-36205-C).

 10.12    Cross-Licensing and Joint Licensing/Sale Agreement between Ringer
          Corporation and Mycogen Corporation, dated May 31, 1994 (incorporated
          by reference to Exhibit 10.1 of the Company's Quarterly Report on Form
          10-QSB for the fiscal quarter ended June 30, 1994, SEC File No. 0-
          18921).

 10.13    Patent License Agreement between Ringer Corporation, Mycogen
          Corporation and Monsanto Company, dated June 29, 1994 (incorporated by
          reference to Exhibit 10.2 of the Company's Quarterly Report on Form 
          10-QSB for the fiscal quarter ended June 30, 1994, SEC File No. 0-
          18921).

*10.14    Ringer Corporation 1996 Employee Stock Option Plan (incorporated by
          reference to Exhibit 10.15 of the Company's Annual Report on Form 10-
          KSB for the fiscal year ended September 30, 1996.)

  21.1    Subsidiaries of the Registrant (filed with Form 10-KSB dated September
          30, 1997)

  23.1    Consent of Deloitte & Touche LLP (filed with Form 10-KSB dated
          September 30, 1997).

  24.1    Power of Attorney (filed with Form 10-KSB dated September 30, 1997).

  27.1    Financial Data Schedule (filed with Form 10-KSB dated September 30,
          1997)

</TABLE> 

       *  Management contract or compensation plan or arrangement.

     See Exhibit Index and Exhibits attached as a separate section of this
     report.

b.        Reports on Form 8-K
          -------------------

          No reports on Form 8-K were filed for the quarter ended September 30,
          1997.


                                     -29-
<PAGE>
                                   SIGNATURES

                  In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                            RINGER CORPORATION

                                            By /s/ Stanley Goldberg
                                              -------------------------------
                                               Stanley Goldberg
                                               President & CEO



Dated:   February 17, 1998

                  In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.

<TABLE> 
<CAPTION> 

      Name                                           Title                                      Date
      ----                                           -----                                      ----
<S>                                    <C>                                                <C>  
/s/ Stanley Goldberg          -        Chairman, President, CEO and Director              February 17, 1998
------------------------               (principal executive officer)
Stanley Goldberg                        

/s/ Mark G. Eisenschenk       -        Chief Financial Officer                            February 17, 1998
------------------------               (principal financial officer)
Mark G. Eisenschenk                     

/s/ Joseph R. Price           -        Vice President, Finance                            February 17, 1998
------------------------               (principal accounting officer)
Joseph R. Price                         


Gordon F. Stofer *                     Chairman of the Board and Director

Robert W. Fischer *                    Director

Donald E. Lovness *                    Director

Dr. Franklin Pass *                    Director

John F. Hetterick *                    Director

Frederick F. Yanni, Jr. *              Director

Richard Mayo *                         Director

* /s/ Stanley Goldberg                 Attorney-in-fact                                   February 17, 1998
 -----------------------
 Stanley Goldberg

</TABLE> 

                                     -30-

<PAGE>

                       RINGER CORPORATION AND SUBSIDIARY
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
                                                                        Page
                                                                        ----
Independent Auditors' Report.........................................     32
 
Consolidated Balance Sheets as of
  September 30, 1997 and 1996........................................     33
 
Consolidated Statements of Operations for the years ended
  September 30, 1997, 1996 and 1995..................................     34
 
Consolidated Statements of Stockholders' Equity for the years ended
  September 30, 1997, 1996 and 1995..................................     35
 
Consolidated Statements of Cash Flows for the years ended
  September 30, 1997, 1996 and 1995..................................     36
 
Notes to Consolidated Financial Statements...........................  37 to 46

                                      -31-
<PAGE>
 
INDEPENDENT AUDITORS' REPORT
----------------------------


Board of Directors and Stockholders
Ringer Corporation
Bloomington, Minnesota

We have audited the accompanying consolidated balance sheets of Ringer
Corporation and subsidiary as of September 30, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended September 30, 1997. These
consolidated financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these consolidated
financial statements based on our 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 consolidated financial statements are
free of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements.  An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Ringer
Corporation and subsidiary as of September 30, 1997 and 1996 and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1997 in conformity with generally accepted accounting
principles.



DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
December 5, 1997 (December 9, 1997 as to Note 12)

                                      -32-
<PAGE>
 
RINGER CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------

<TABLE>
<CAPTION>
                                                                                 September 30
                                                                          ---------------------------
                                                                              1997          1996
                                                                          ------------  -------------
<S>                                                                       <C>           <C>
ASSETS
------
 
CURRENT ASSETS:
 Cash and cash equivalents                                                $ 3,264,294   $  3,288,781
 Trade accounts receivable, less allowance for doubtful
   accounts of $134,000 and $126,000, respectively                          1,153,271        992,198
 Inventories (Note 3)                                                       2,805,661      1,519,692
 Prepaid expenses                                                             221,186        133,746
                                                                          -----------   ------------
    Total current assets                                                    7,444,412      5,934,417
 
PROPERTY AND EQUIPMENT, net (Note 4)                                          430,138        238,297
 
INTANGIBLE ASSETS, at cost, less accumulated amortization
 of $2,713,002 and $2,264,349, respectively (Note 1)                        6,653,501      5,297,329
OTHER ASSETS                                                                   87,044
                                                                          -----------    -----------
                                                                          $14,615,095    $11,470,043
                                                                          ===========    ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
 
CURRENT LIABILITIES:
  Accounts payable                                                        $ 1,273,570    $   651,546
  Accrued expenses:
    Co-op advertising                                                         280,475        319,691
    Other accrued expenses                                                    807,449        559,908
    Current portion of long-term debt                                          23,207
                                                                          -----------   ------------
      Total current liabilities                                             2,384,701      1,531,145
 
LONG-TERM DEBT (Note 6)                                                     1,458,799
 
COMMITMENTS AND CONTINGENCIES (Note 6)
 
STOCKHOLDERS' EQUITY (Note 7):
  Preferred stock, undesignated, par value $.01
    per share, authorized 5,000,000 shares,
    no shares issued and outstanding
  Common stock, par value $.01 per share, authorized
    25,000,000 shares, issued and outstanding
    12,181,270 and 10,921,930 shares, respectively                           121,813         109,219
  Additional paid-in capital                                              33,683,587      32,036,675
  Notes receivable from sale of common stock to officers (Note 10)          (262,500)
  Accumulated deficit                                                    (22,613,212)    (22,067,276)
  Cumulative translation adjustment                                         (158,093)       (139,720)
                                                                          -----------   ------------
                                                                           10,771,595      9,938,898
                                                                          -----------   ------------
                                                                          $14,615,095   $ 11,470,043
                                                                          ===========    ===========
</TABLE>
See notes to consolidated financial statements.

                                      -33-
<PAGE>
 
RINGER CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------

<TABLE>
<CAPTION>
                                                      Year Ended September 30
                                             ----------------------------------------
                                                 1997          1996          1995
                                             ------------  ------------  ------------
<S>                                          <C>           <C>           <C> 
NET SALES                                     $18,820,625   $14,672,784   $14,193,898
                                       
COST OF GOODS SOLD                             10,255,353     7,647,293     6,990,175
                                             ------------  ------------  ------------
  Gross profit                                  8,565,272     7,025,491     7,203,723
                                       
OPERATING EXPENSES:                    
  Distribution and warehousing                  2,199,586     1,555,897     1,886,770
  Sales and marketing                           3,813,795     3,332,333     4,810,648
  General and administrative                    1,656,996     1,331,266     1,445,110
  Research and development                        972,360       748,932       981,495
  Amortization of intangibles                     447,498       402,778       379,358
                                             ------------  ------------  ------------
                                                9,090,235     7,371,206     9,503,381
                                             ------------  ------------  ------------
    Loss before other                  
      (expense) income                           (524,963)     (345,715)   (2,299,658)
                                       
OTHER  (EXPENSE) INCOME:               
  Interest income                                  72,247        73,866        83,030
  Interest expense                               (152,729)      (68,250)      (66,690)
  Royalties, net (Note 6)                          50,885        87,136       106,352
  Other income (expense), net                       8,624        (2,385)        3,862
  Abandoned acquisition expenses (Note 2)                      (312,771)
                                             ------------  ------------  ------------
                                                  (20,973)     (222,404)      126,554
                                             ------------  ------------  ------------

NET LOSS                                      $  (545,936)  $  (568,119)  $(2,173,104)
                                             ============  ============  ============
NET LOSS PER WEIGHTED                  
  AVERAGE COMMON SHARE                              ($.05)        ($.05)        ($.20)
                                             ============  ============  ============
WEIGHTED AVERAGE COMMON                
 SHARES OUTSTANDING                            11,540,885    10,921,930    10,897,704
                                             ============  ============  ============
</TABLE>

See notes to consolidated financial statements.

                                      -34-
<PAGE>
 
RINGER CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
------------------------------------------------

<TABLE>
<CAPTION>
                                           Common Stock           
                                      --------------------  Additional    Receivables                  Cumulative
                                      Number of               paid-in      from sale     Accumulated   translation
                                        shares     Amount     capital      of stock        deficit      adjustment      Total
                                      ----------  --------  -----------  ------------  -------------  ------------  -----------
<S>                                   <C>         <C>       <C>           <C>          <C>             <C>          <C>
BALANCE AT SEPTEMBER 30, 1994         10,786,013  $107,860  $31,835,805                $(19,326,053)  $  (131,619)  $12,485,993
 
  Issuance of common stock in
    connection with the 
    purchase of Oxygen Plus              125,000     1,250      186,250                                                 187,500
  Issuance of common stock upon
    exercise of stock options                917         9        1,595                                                   1,604
  Issuance of common stock as
    non-cash compensation to officer      10,000       100       13,025                                                  13,125
  Foreign currency translation
    adjustments                                                                                             5,188         5,188
  Net loss                                                                               (2,173,104)                 (2,173,104)
                                      ----------  --------  -----------  ------------  ------------   -----------   -----------
 
BALANCE AT SEPTEMBER 30, 1995         10,921,930   109,219   32,036,675                 (21,499,157)     (126,431)   10,520,306
 
  Foreign currency translation
    adjustments                                                                                           (13,289)      (13,289)
  Net loss                                                                                 (568,119)                   (568,119)
                                      ----------  --------  -----------  ------------  ------------   -----------   -----------

BALANCE AT SEPTEMBER 30, 1996         10,921,930   109,219   32,036,675                 (22,067,276)     (139,720)    9,938,898
 
  Issuance of common stock in
    connection with the purchase 
    of Dexol                           1,059,340    10,594    1,386,412                                               1,397,006
  Issuance of common stock upon
    sale of stock to officers            200,000     2,000      260,500  $   (262,500)                                       --
  Foreign currency translation
    adjustments                                                                                           (18,373)      (18,373)
  Net loss                                                                                 (545,936)                   (545,936)
                                      ----------  --------  -----------  ------------  ------------   -----------   -----------
BALANCE AT SEPTEMBER 30, 1997         12,181,270  $121,813  $33,683,587  $   (262,500) $(22,613,212)  $  (158,093)  $10,771,595
                                      ==========  ========  ===========  ============  ============   ===========   ===========
</TABLE>
See notes to consolidated financial statements.

                                     -35-

<PAGE>
 
RINGER CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 10)
-----------------------------------------------

<TABLE>
<CAPTION>
                                                         Year ended September 30
                                                 ---------------------------------------
                                                     1997         1996          1995
                                                 ------------  -----------  ------------
<S>                                              <C>           <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                        $  (545,936)  $ (568,119)  $(2,173,104)
 Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
    Depreciation and amortization                    616,079      514,940       519,928
    Write-off of intangible assets                    76,085        1,312        42,564
    Stock issued as compensation for services                      13,125
    Income from investment in joint venture          (10,078)      (4,356) 
    (Gain) loss on sale of property
      and equipment                                       29      (11,449)       (5,786)
    (Increase) decrease in assets:
       Trade accounts receivable                   1,605,348      205,861       313,494
       Inventories                                   873,900      502,224      (748,040)
       Prepaid expenses                             (152,426)       3,349        90,174
    Increase (decrease) in liabilities:
       Accounts payable                           (2,150,758)    (194,464)      331,887
       Accrued expenses                             (195,638)     249,746       (24,724)
                                                 -----------   ----------   -----------
         Net cash provided by (used in) 
           operating activities                      116,605      699,044    (1,640,482)
 
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                (140,008)     (60,681)     (101,536)
  Purchase of intangible assets                      (42,401)    (118,674)      106,288)
  Proceeds from sale of property and equipment         8,889       20,849        24,958
  Net cash paid relating to acquisition of Dexol     (82,343)
  Net cash paid relating to acquisition of
    Oxygen Plus                                     (257,660)
                                                 -----------   ----------   -----------
      Net cash used in investing activities         (255,863)    (158,506)     (440,526)
 
CASH FLOWS FROM FINANCING ACTIVITIES:
  Cash received in Dexol acquisition                 124,073
  Proceeds from issuance of common stock               1,604
  Principal payments on long-term debt               (12,168)                    (3,667)
                                                 -----------   ----------   -----------
      Net cash provided by (used in) 
        financing activities                         111,905                     (2,063)
 
Effect of exchange rate changes on cash                2,866       (8,134)       (8,175)
                                                 -----------   ----------   -----------
(Decrease) increase in cash and cash
  equivalents                                        (24,487)     532,404    (2,091,246)
 
CASH AND CASH EQUIVALENTS:
  BEGINNING OF YEAR                                3,288,781    2,756,377     4,847,623
                                                 -----------   ----------   -----------
  END OF YEAR                                    $ 3,264,294   $3,288,781   $ 2,756,377
                                                 ===========   ==========   ===========
</TABLE>
See notes to consolidated financial statements.

                                     -36-
<PAGE>
 
RINGER CORPORATION AND SUBSIDIARY
---------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
------------------------------------------------------  -

1.   BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Business - The Company develops, manufactures and markets pesticide and
     fertilizer products for the retail and commercial lawn, garden and turf
     management markets. Products are sold under several nationally recognized
     brand names and a variety private labels.

     Principles of consolidation - The consolidated financial statements include
     the accounts of Ringer Corporation and Safer, Inc., its wholly owned
     subsidiary. All material intercompany accounts and transactions have been
     eliminated.

     Revenue recognition - The Company recognizes revenue on the date of
     shipment for sales other than "bill and hold" sales. Revenue on infrequent
     "bill and hold" sales is recognized at the time that title and risk of
     ownership passes to purchaser.

     Translation of foreign financial statements - The Company's foreign
     operations are translated from functional foreign currency to U.S. dollars.
     Assets and liabilities are translated at year end rates of exchange and the
     statements of operations are translated at the average rates of exchange
     for the applicable reporting years. Gains and losses resulting from
     translating foreign currency financial statements are not included in
     operations but are accumulated as a separate component of stockholders'
     equity.

     Inventories - Inventories are stated at the lower of cost (first-in, first-
     out method) or market.

     Property and equipment - Property and equipment are recorded at cost.
     Depreciation is computed using the straight-line method over the estimated
     useful lives of the assets of three to ten years.

     Intangible assets and evaluation of potential impairment - Intangible
     assets consist primarily of goodwill which represents the purchase price
     and related acquisition costs in excess of the fair value of identifiable
     assets acquired. Other intangible assets include patents and trademarks.
     Intangible assets are amortized on a straight-line basis over estimated
     lives of five to twenty years. The Company regularly evaluates its
     intangible assets for potential permanent impairment. Such evaluations take
     into consideration anticipated future operating results and cash flows on
     an undiscounted basis. Anticipated future operating results and cash flows
     are estimated based on current product sales trends, expected sales from
     related products in development, general market trends and other market and
     business circumstances.

     Concentration of credit risks - The percentage of consolidated net sales in
     fiscal 1997 to U.S. retail and commercial markets totaled 87.3% and 2.5%,
     respectively.  The percentage of consolidated net sales in fiscal 1996 to
     U.S. retail and commercial markets totaled 79.3% and 4.4%, respectively.
     The percentage of consolidated net sales in fiscal 1995 to U.S. retail and
     commercial markets totaled 81.0% and 5.1%, respectively. The remaining
     percentage of consolidated net sales in fiscal 1997, 1996 and 1995 of
     10.2%, 16.3% and 13.9%, respectively, represent foreign sales, primarily in
     Canada.  In fiscal 1997, 1996 and 1995, sales to one U.S. retail customer
     accounted for 12.8%, 15.3% and 14.5%, respectively, of consolidated net
     sales while sales during the same periods to one distributor that resells
     to retailers accounted for 8.0%, 14.8% and 12.4%, respectively, of
     consolidated net sales.

     Cash and cash equivalents - Cash and cash equivalents include cash on hand
     and in banks and money market funds with maturities of three months or less
     when acquired.

     Fair value of financial instruments - The estimated fair values of
     financial instruments approximate their carrying amounts in the
     consolidated balance sheets.

                                     -37-
<PAGE>
 
     Income taxes - The Company accounts for income taxes as required by
     Statement of Financial Accounting Standards No. 109, "Accounting for Income
     Taxes."  The Statement requires recognition of deferred assets and
     liabilities for the expected future tax consequences of events that have
     been included in the financial statements or tax returns.  Under this
     method, deferred tax assets and liabilities are determined based on the
     differences between the financial statements and the tax basis of assets
     and liabilities using enacted tax rates in effect for the years in which
     the differences are expected to reverse.

     Loss per share - Loss per common share is computed using the weighted
     average number of shares outstanding during each period.  Common stock
     equivalents, consisting of options and warrants, have been excluded from
     the computation  because their effect is antidilutive.

     Use of estimates - The preparation of financial statements in conformity
     with generally accepted accounting principles requires management to make
     estimates and assumptions that affect the reported amount of assets and
     liabilities and disclosures 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.

     Change in estimates - Fiscal 1997 and 1996 includes the reversal of
     approximately $227,000 and $198,000, respectively, in estimated co-op
     advertising expenses, which were accrued in the previous fiscal year,
     resulting from a change in estimate based on actual utilization of co-op
     advertising allowances.

2.   ACQUISITIONS

     Acquisition of the assets of Plant Research Laboratories - On December 1,
     1994, the Company issued 125,000 shares of its common stock with a fair
     market value of $187,500 at December 1, 1994 and paid cash of $257,660 to
     acquire substantially all of the assets of Plant Research Laboratories
     ("PRL"), a California based developer and marketer of water soluble
     fertilizers for the indoor houseplant and outdoor lawn and garden markets.
     The acquisition was accounted for using the purchase method using a
     combination of cash and the issuance of common stock. The products,
     marketed under the Oxygen Plus(R) brand name, were previously sold by PRL
     primarily in the western United States.  The historical annual sales of
     Oxygen Plus were less than one million dollars. The 1995 pro forma impact
     on net loss and net loss per share is immaterial.

     Abandoned Acquisition Expenses - On May 30, 1996, the Company entered into
     a letter of intent to acquire all outstanding stock of The Chas. H. Lilly
     Company ("Lilly"), a Portland based developer and marketer of lawn and
     garden fertilizers, pesticides and packet seeds. On December 12, 1996, the
     Company announced that it elected to discontinue efforts to acquire Lilly.
     Accordingly, the costs associated with this acquisition attempt, which
     amounted to $312,771, have been charged to expense in the accompanying
     fiscal 1996 Consolidated Statement of Operations and are included in other
     expense.

     Acquisition of the assets of Dexol - In March 1997, the Company completed
     the acquisition of substantially all of the assets of Dexol Industries,
     Inc., a California based manufacturer and marketer of home and garden
     pesticides sold under the Dexol(R) and various private label brand names,
     for an aggregate purchase price of $3,012,790 (the "Dexol acquisition").
     The purchase price was comprised of the issuance of 1,059,340 shares of the
     Company's restricted common stock valued at $1,397,006, the issuance of a
     promissory note to Dexol Industries, Inc. with a principal amount of
     $1,477,000 bearing simple interest at an annual rate of prime plus 3/4% and
     estimated transaction costs of $138,785 and a performance based earnout of
     up to $455,000 if certain contingencies are achieved.

     The Dexol acquisition was accounted for under the purchase method of
     accounting. Accordingly, the purchase price has been allocated to the
     assets acquired and liabilities assumed based on their estimated fair
     market values at the date of acquisition. The excess of purchase price over
     estimated fair market value of net assets acquired ("goodwill") of
     approximately $1,915,000 is being amortized on a straight-line basis over
     twenty years. Since the acquisition, the Company has operated the acquired
     business as its Dexol division and has continued marketing Dexol products.
     Dexol division operations are included in the Company's consolidated
     statements of operations from the effective date of the acquisition of
     March 1, 1997.

                                     -38-
<PAGE>
 
     The following unaudited pro forma condensed statement of operations
     combines the results of operations of Ringer Corporation and Dexol
     Industries, Inc. as if the acquisition had occurred on October 1, 1995. The
     pro forma financial information is provided for illustrative purposes only
     and are not necessarily indicative of future results of operations of the
     Company or of the results of operations that would actually have occurred
     had the  acquisition been in effect during the periods presented. A balance
     sheet in not presented because the acquisition has been reflected in the
     Company's balance sheet herein.

                                     Year Ended September 30,
                                           (unaudited) 
                                     ------------------------
                                       1997             1996
                                     -------          -------
            Net sales                $21,793          $27,392
            Net (loss)               $(1,128)         $(1,480)
                                     =======          =======
                                                      
            Net (loss) per share       $(.09)           $(.12)
                                     =======          =======
 
 
3.   INVENTORIES
 
     Inventories consist of the following:

                                               September 30
                                         ------------------------
                                            1997          1996
                                         ----------    ----------
            Raw materials                $1,697,454    $  726,099
            Finished goods                1,108,207       793,593
                                         ----------    ----------
                                         $2,805,661    $1,519,692
                                         ==========    ==========
 
4.   PROPERTY AND EQUIPMENT
 
     Property and equipment consists of the following:

                                                       September 30
                                                 -------------------------
                                                    1997           1996
                                                 ----------     ----------
            Office furniture and equipment       $  680,454     $  791,464
            Machinery and equipment                 801,974        786,442
            Leasehold improvements                   45,798          8,091
            Transportation equipment                  6,400          6,400
                                                 ----------     ----------
                                                  1,534,626      1,592,397
          Less accumulated depreciation          (1,104,488)    (1,354,100)
                                                 ----------     ----------
                                                 $  430,138     $  238,297
                                                 ==========     ==========

5.   LINE OF CREDIT

     On May 2, 1997, the Company secured a three-year, $25 million revolving
     credit facility from GE Capital Services, which replaced a $5,000,000 bank
     line of credit from a previous lender. The facility is intended to meet
     seasonal working capital needs of up to approximately $5,000,000 and to
     provide financing for future business acquisitions. The credit facility is
     secured by substantially all of the assets of the Company and its
     subsidiary. Borrowings under the facility are limited to a borrowing base
     of 85% of eligible receivables and 50% of eligible inventory, as defined in
     the credit agreement. Interest is at an Index Rate (published rate for 30-
     day dealer-placed high-graded unsecured commercial paper) plus 3 1/4
     percentage points (9.0% at September 30, 1997). The Company is required to
     pay a commitment fee of 3/8% on any unused portion of the line. Management
     believes that this line of credit will meet the Company's seasonal working
     capital requirements for fiscal 1998. There are no outstanding borrowings
     under the line of credit as of September 30, 1997.

     The Company's line of credit contains provisions which require the Company
     to maintain certain minimum levels of  Borrowing Base availability and
     tangible net worth. In addition, there are restrictions on the amount of
     fixed assets that may be purchased during a loan year.

                                     -39-
<PAGE>
 
6.   LONG-TERM DEBT, COMMITMENTS AND CONTINGENCIES

     Long-Term Debt - Long-term debt at September 30, 1997 consists of a note
     payable to Dexol Industries, Inc. and a capital lease obligation, less
     current maturities which are classified as currently liabilities. The note
     payable and capital lease obligation have carrying values equal to
     estimated fair values.

     The note payable has a principal amount of $1,465,800 at September 30, 1997
     and bears simple interest at prime plus 3/4% per annum (9.25% at September
     30, 1997). Current maturities total $19,200. The note requires payments of
     $1,600 per month plus accrued interest with a balloon payment of the
     remaining principal and interest in December 2000. Yearly principal
     maturities under the note for its term are $19,200, $19,200, 19,200 and
     $1,408,202 for the fiscal years of 1998, 1999, 2000 and 2001, respectively.

     The capital lease obligation totals $16, 206 at September 30, 1997 and
     bears implicit interest at an annual rate of 5.4%. Current maturities total
     $4,007. Future yearly principal payments under the capital lease obligation
     are $4,007, $4,228, $4,463 and $3,508 for the fiscal years of 1998, 1999,
     2000 and 2,001, respectively.
 
     Operating Leases - The Company leases office and warehouse space and
     various vehicles and equipment under noncancellable operating leases.  In
     addition to minimum lease payments, these leases require the Company to pay
     its proportionate share of real estate taxes, special assessments and
     maintenance costs. The lease on the Company's corporate offices expires in
     September  1999. The lease on the Company's warehouse facility expires in
     December 2001. The Company is also required to carry liability insurance on
     the premises.

     Costs incurred under operating leases are recorded as rent expense and
     totaled $344,587,  $220,176 and $290,343 for the years ended September 30,
     1997, 1996 and 1995, respectively.

     Future minimum operating lease payments - The future minimum lease payments
     due under non-cancellable operating leases are as follows:

                                        Operating
                                         Leases
                                        ---------
           Year ending September 30:
                1998                     $208,719
                1999                      184,644
                2000                      118,391
                2001                      112,623
                2002                       28,669
           Thereafter                          --
                                         --------
           Total minimum obligation      $653,046
                                         ========

     Royalty agreements - The Company has paid royalties for the use of
     technologies licensed under two agreements entered into in connection with
     the acquisition of a water soluble fertilizer product line on December 1,
     1994. The licenses calls for royalty payments of from 2% to 5% of the net
     selling price of applicable water soluble fertilizers. Payments under the
     agreements terminate in 1999 and 2011. Royalty expense incurred under these
     agreements totaled $34,411, $18,197 and $23,786 for the years ended
     September 30, 1997, 1996 and 1995, respectively.

     Royalty income of $85,296, $105,333 and $130,138 for the fiscal years ended
     September 30, 1997, 1996 and 1995, respectively, was generated by the
     Company through licensing pesticide technologies to certain foreign and
     commercial pesticide distributors for a royalty fee.

     Contingencies
     -------------

     The Company has a Contingency Retention Plan which provides for payment to
     certain key employees of the Company, including all of the officers, of a
     lump sum termination benefit plus continuation of life insurance, health
     insurance and dental benefits for a period of time in the event the
     employment of such employees is terminated within two years after a "change
     of control," as defined. The amount of the lump sum termination benefit
     varies from the equivalent of three months to two years of salary and bonus
     at the time of termination. 

                                      -40-
<PAGE>
 
     The period during which health and welfare benefits continue after
     termination varies from three months to two years, but is terminated if the
     employee obtains other employment with similar benefits. The Contingency
     Retention Plan continues in effect unless terminated, prior to a change in
     control, by a resolution approved by at least two-thirds of the Board of
     Directors.

7.   STOCKHOLDERS' EQUITY

     Preferred stock - The Board of Directors of the Company is authorized to
     issue preferred stock or other senior equity securities in one or more
     series, and with certain limitations, to determine preferences as to
     dividends, liquidation, conversion and redemption.

     Stock warrants - As of September 30, 1997, a total of 1,000 shares of
     common stock were reserved for currently exercisable outstanding warrants
     described below.

                                             Warrant
               Expiration                    Shares         Exercise Price
           ------------------               ---------       --------------
           September 20, 1998                 1,000              $2.00

     1996 Incentive and Stock Option Plan -  The 1996 Incentive and Stock Option
     Plan was adopted by the board of directors on November 25, 1996 and
     approved by shareholders at the Company's annual shareholder meeting on
     February 18, 1997. A total of 500,000 shares of the Company's common stock
     were initially reserved for issuance pursuant to the exercise of options
     granted under the plan.

     Under the terms of the 1996 Incentive and Stock Option plan, options to
     purchase shares of the Company's common stock are granted at a price not
     less than 100% of the fair market value of the stock at the date of grant.
     Options have a vesting period of from three to five years and expire ten
     years from the date of grant. Options become fully vested upon the
     occurrence of a change in control, as defined. The weighted average
     remaining contractual life of the outstanding options at September 30, 1997
     is 9.1 years. Activity under the plan is as follows:

                                                            Average
                                        Option           Exercise Price
                                        Shares             Per Share
                                      ----------         --------------
     Balance, September 30, 1996            -0-
          Granted                        61,600              $1.88
          Revalued (*)                                        (.57)
          Canceled                      (16,100)              1.31(*)
                                        -------            
                                                           
     Balance, September 30, 1997                           
       (at $1.31 per share)              45,500              $1.31(*)
                                        =======
 
     Exercisable, September 30, 1997     12,938              $1.31
                                        =======

     (*)    On April 29, 1997, the board of directors approved amendments to all
     outstanding stock options to reduce the exercise price of each option to
     $1.31 per share. Accordingly, options outstanding on that date which were
     previously issued under the 1996 Plan for the purchase of up to 61,600
     shares of the Company's common stock were amended to reduce the option
     exercise price from $1.88 per share to $1.31 per share.

     1986 Employee Incentive Stock Option Plan -  The 1986 Employee Incentive
     Stock Option Plan terminated according to its terms on September 17, 1996.
     After this date no further stock options may be granted under the Plan
     although previously granted options remain outstanding and exercisable
     under the terms of each option. At September 30, 1997, the Company had
     reserved a total of 654,843 shares of common stock for issuance upon the
     exercise of outstanding options previously granted under the Plan.

     Under the terms of the 1986 Employee Incentive Stock Option plan, options
     to purchase shares of the Company's common stock were granted at a price
     not less than 100% of the fair market value of the stock at the date of
     grant.  Options have a vesting period of from three to five years and
     expire ten years from the date of grant. The weighted average remaining
     contractual life of the outstanding options at September 30, 1997 is 

                                      -41-
<PAGE>
 
     6.5 years. Options become fully vested upon the occurrence of a change in
     control, as defined. Activity under the plan is as follows:

<TABLE>
<CAPTION>
                                                                                 Average
                                                                   Option    Exercise Price
                                                                   Shares       Per Share
                                                                  ---------  ---------------
<S>                                                               <C>        <C>
     Balance, September 30, 1994 (at $1.75 to $3.25 per share)     488,444            $2.32
          Granted                                                  512,050             1.98
          Canceled                                                (132,247)            2.34
          Exercised                                                   (917)            1.75
                                                                  --------
 
     Balance, September 30, 1995 (at $1.75 to $2.70 per share)     867,330             2.13
          Granted                                                   28,500             1.58
          Canceled                                                 (62,762)            1.98
                                                                  --------
 
     Balance, September 30, 1996 (at $1.50 to $2.70 per share)     833,068             2.11
          Revalued (*)                                                                 (.72)
          Canceled                                                (178,225)            2.39
                                                                  --------
 
     Balance, September 30, 1997 (at $1.31 per share)              654,843            $1.31(*)
                                                                  ========
 
     Exercisable, September 30, 1997                               409,202            $1.31
                                                                  ========
</TABLE>

     (*)    On April 29, 1997, the board of directors approved amendments to all
     outstanding stock options to reduce the exercise price of each option to
     $1.31 per share. Accordingly, options outstanding on that date which were
     previously issued under the 1986 Plan for the purchase of up to 660,201
     shares of the Company's common stock were amended to reduce the option
     exercise price from an average of $1.88 per share (ranging from $1.50 to
     $2.13 per share) to $1.31 per share.

     Stock Option Plan for Non-Employee Directors - The Company has reserved
     200,000 shares of the Company's common stock for issuance upon the exercise
     of stock options granted under the Stock Option Plan for Non-Employee
     Directors.

     Under provisions of the Plan, non-employee directors are granted, upon
     election or appointment as a director of the Company,  options for the
     purchase of 10,000 shares of the Company's common stock. In addition, non-
     employee directors receive, on the first day of each fiscal year while the
     director remains in office, options to purchase 5,000 shares of the
     Company's common stock. The exercise price of options granted under the
     Plan is 100% of the fair market value of the Company's common stock on the
     date of grant. Options are immediately exercisable in full and may be
     exercised within five years of the date of grant. The weighted average
     remaining contractual life of the outstanding options at September 30, 1997
     is 2.3 years. Activity under the plan is as follows:

                                                 Average
                                     Option   exercise price
                                     Shares     per share
                                    --------  --------------
     Balance, September 30, 1994      55,000      $2.01
     Granted                          30,000       2.13
 
     Balance, September 30, 1995      85,000       2.05
     Granted                          30,000       2.13
 
     Balance, September 30, 1996     115,000       2.07
     Granted                          40,000       1.88
     Revalued (*)                                  (.71)
 
     Balance, September 30, 1997     155,000      $1.31(*)
                                    ========

                                      -42-
<PAGE>
 
     (*)    On April 29, 1997, the board of directors approved amendments to all
     outstanding stock options to reduce the exercise price of each option to
     $1.31 per share. Accordingly, options outstanding on that date which were
     previously issued under the Plan for the purchase of up to 155,000 shares
     of the Company's common stock were amended to reduce the option exercise
     price from an average of $2.03 per share (ranging from $1.56 to $2.13 per
     share) to $1.31 per share.

     Sale of Common Stock to Officers  - In exchange for full-recourse
     promissory notes and the cancellation of certain incentive stock options,
     in April 1997 the company sold, subject to shareholder approval, 200,000
     shares of its unregistered, restricted common stock to two executive
     officers at a price of $1.3125 per share. The promissory notes are secured
     by the stock purchased. Under certain circumstances, the Company will
     provide bonuses to the two executives sufficient to pay the annual debt
     service requirements of the promissory notes, which have terms of three and
     five years. The Company has recognized compensation expense relative to
     this matter in the amount of $39,438 for the fiscal year ended September
     30, 1997.

     Stock Based Compensation  - In fiscal 1997, the Company adopted Statement
     of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for
     Stock-Based Compensation." As permitted by SFAS 123, the Company has
     elected to continue using the "intrinsic value method" of Accounting
     Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
     for the measurement and recognition of stock-based transactions with
     employees. Accordingly, no compensation costs have been recognized for
     stock options issued under the Company's stock option plans because the
     exercise price of options granted was equal to the fair value of the
     Company's common stock on the date of grant. If compensation cost for
     Company stock options plans had been determined and recognized based on the
     "fair value method" under SFAS 123, the Company's net loss and net loss per
     share would have been as follows:

 
                                        1997        1996
                                     ----------  ----------
            Net loss:
              As reported            $(545,936)  $(568,119)
              Pro forma              $(571,433)  $(593,619)
              Pro forma per share    $    (.05)  $    (.05)

     The fair value of options granted under the Company stock options plans
     during fiscal 1997 and 1996 was estimated on the date of grant using the
     Black-Scholes option-pricing model with the following weighted average
     assumptions and results:

                                            1997      1996
                                          --------  --------
          Dividend yield                        0         0
          Expected volatility               41.48%    41.48%
          Risk-free interest rate            6.55%     6.55%
          Expected life of options        4 years   4 years
          Average fair value per share
            on date of grant               $ 1.31    $ 1.84

8.   PROFIT SHARING PLAN

     The Company has a defined contribution plan which conforms to IRS
     provisions for 401(k) plans. Employees are eligible to participate in the
     plan providing they have attained the age of twenty-one and have completed
     thirty days of service. Participants may contribute up to 10% of their
     earnings. The Company can also make matching contributions, as determined
     by the Board of Directors. The Company may also make discretionary profit
     sharing contributions to the Plan as determined by the Board of Directors.
     The Company made employer 401(k) matching contributions of $44,996, $37,607
     and none for the years ended September 30, 1997, 1996 and 1995,
     respectively. There were no employer discretionary profit sharing
     contributions for the years ended September 30, 1997, 1996 and 1995.

9.   INCOME TAXES

     The Company accounts for income taxes as required by Statement of Financial
     Standards No. 109, "Accounting for Income Taxes".  The Statement requires
     recognition of deferred assets and liabilities for the 

                                      43
<PAGE>
 
     expected future tax consequences of events that have been included in the
     financial statements or tax returns. Under this method, deferred tax assets
     and liabilities are determined based on the differences between the
     financial statements and the tax basis of assets and liabilities using
     enacted tax rates in effect for the years in which the differences are
     expected to reverse. Net deferred tax assets have been offset by valuation
     allowances for the years ended September 30, 1997, 1996 and 1995 because it
     is more likely than not that the tax benefits, which can not be carried
     back, could not be realized in future years.

     Net deferred tax assets at September 30 are comprised of the following:

<TABLE>
<CAPTION>
 
     Current:                                                   1997         1996
                                                           ------------  ------------
<S>                                                        <C>           <C>
         Prepaid expenses                                  $   (29,000)  $    (9,000)
         Accrued expenses                                      184,000       185,000
         Reserves for doubtful accounts                         48,000        50,000
         Inventory valuation reserves                           63,000        55,000
         Expenses capitalized to inventory for tax
           purposes                                            512,000       274,000
         Sales returns and allowance reserves                   26,000        69,000
         Less valuation allowance                             (804,000)     (624,000)
                                                           -----------   -----------
                                                           $       -0-   $       -0-
                                                           ===========   ===========
     Noncurrent:
         Excess of tax over book depreciation              $   (20,000)  $   (11,000)
         Packaging design costs                                154,000       152,000
         U.S. net operating loss carry forwards              8,394,000     8,398,000
         Foreign net operating loss carry forwards             226,000       394,000
         U.S. and foreign tax credit carry forwards            490,000       704,000
         Less valuation allowances                          (9,284,000)   (9,637,000)
                                                           -----------   -----------
                                                           $       -0-   $       -0-
                                                           ===========   ===========
</TABLE>

     At September 30, 1997, the Company has approximately $23,200,000 in
     combined U.S. net operating loss carry forwards for federal income tax
     purposes. These loss carry forwards expire between 1998 and 2013. Of the
     total, approximately $4,100,000 are U.S. net operating loss carry forwards
     of Safer, Inc., the Company's wholly owned subsidiary.

     The use of the unexpired net operating loss carry forwards of Ringer which
     were generated prior to September 30, 1990, totaling approximately
     $10,200,000 as of September 30, 1997, are limited to $2,025,000 in any one
     year under Internal Revenue Code Section 382 because of a significant
     ownership change resulting from the Company's initial public offering. The
     use of net operating loss carry forwards of Ringer generated after the
     ownership change are not limited.

     The use of the net operating losses of Safer, Inc. are limited to
     approximately $700,000 in any one year under Internal Revenue Code Section
     382 because of a significant ownership change resulting from the Company's
     acquisition of Safer, Inc. in January 1991.

     At September 30, 1997, the Company has approximately $565,000 net operating
     loss carry forwards in Canada which expire between 1999 and 2002.

10.  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

     The Company (paid) and received cash for the following items:

                                             Year ended September 30
                                        --------------------------------
                                          1997        1996       1995
                                        ---------   ---------  ---------
     Interest paid                      $(152,727)  $(68,106)  $(66,690)
     Interest received                     71,687     69,908     82,064
 

                                      44
<PAGE>
 
     Investing and financing transactions not affecting cash during the years
     ended September 30, 1997, 1996 and 1995 are described below:

       -  In 1997, the Company issued 1,059,340 shares of its common stock and
          a promissory note in the amount of $1,477,000 as consideration paid
          for the acquisition of substantially all of the assets of Dexol
          Industries, Inc. In connection with this issuance of common stock, the
          Company recorded $1,397,006 to common stock and additional paid-in
          capital, which represented the fair market value of the common stock
          on the date of issuance.

       -  In 1997, the Company received full-recourse secured promissory notes
          in an aggregate amount of $262,500 as payment for the sale of common
          stock to two executive officers of the Company.

       -  In 1995, the Company issued 125,000 shares of its common stock as a
          portion of the total consideration paid for the acquisition of
          substantially all of the assets of Plant Research Laboratories. In
          connection with this issuance of common stock, the Company recorded
          $187,500 to common stock and additional paid-in capital, which
          represented the fair market value of the common stock on the date of
          issuance. Additional acquisition costs included $257,660 in cash
          consideration and direct acquisition expenses.

       -  In 1995, the Company issued 10,000 shares of restricted common stock
          to an officer in lieu of cash compensation and recorded a $13,125
          increase to compensation expense and to common stock and additional
          paid-in capital which was the fair market value of the restricted
          stock on the date of issuance.


11.  FOREIGN OPERATIONS

     International sales activity, consisting of sales outside the United
     States, primarily in Canada, accounted for approximately 10%, 16% and  14%
     of total sales for the years ended September 30, 1997, 1996 and 1995,
     respectively. A reconciliation of fiscal 1997, 1996 and 1995 domestic and
     foreign activity for net sales, net income (loss) and identifiable assets
     is as follows:

 
Fiscal 1997:                    Domestic      Foreign       Total
------------                  ------------  -----------  ------------
       Net Sales              $16,892,897   $1,927,728   $18,820,625
       Net Income (Loss)         (528,136)     (17,800)     (545,936)
       Identifiable Assets    $13,805,008   $1,072,587   $14,877,595
 
Fiscal 1996:                    Domestic      Foreign       Total
------------                  ------------  -----------  ------------
       Net Sales              $12,274,927   $2,397,857   $14,672,784
       Net Income (Loss)         (743,106)     174,987      (568,119)
       Identifiable Assets    $10,488,502   $  981,541   $11,470,043

Fiscal 1995:                    Domestic      Foreign       Total
------------                  ------------  -----------  ------------
       Net Sales              $12,223,014   $1,970,884   $14,193,898
       Net Income (Loss)       (2,231,595)      58,491    (2,173,104)
       Identifiable Assets    $10,621,910   $1,376,738   $11,998,648
 
12.  SUBSEQUENT EVENT

     On December 9, 1997, the Company completed a merger with Southern
     Resources, Inc. ("SRI"), a previously privately-owned Georgia-based holding
     company, with approximately $25 million in annual consolidated sales, which
     owns 100% of the common stock of Sureco, Inc. ("SureCo"), SRI's operating
     company, and Peach County Properties, Inc. ("PCP"), a real estate
     subsidiary, both of which are located in Georgia. SureCo manufactures and
     markets pesticides, which it sells under a variety of proprietary and
     private label brand names to commercial and consumer markets throughout
     North America. The merger will be accounted for using the pooling-of-
     interest method. The Company issued 4,500,000 shares of the Company's
     restricted common stock, valued at $6,679,688, in exchange for all of the
     outstanding common stock of SRI, which will be operated as a wholly-owned
     subsidiary of the Company.

                                      -45-
<PAGE>
 
     The following table sets forth unaudited combined net sales, net (loss) and
     (loss) per share as if the business combination had been consummated at the
     date of the financial statements presented herein. Amounts and in
     thousands, except loss per share. The 1997 and 1996 amounts include the pro
     forma impact of the Dexol acquisition (Note 2).

 
                                Year Ended September 30, (Unaudited)
                               ---------------------------------------
                                   1997          1996         1995
                               ------------  ------------  -----------
       Net sales                 $46,827       $53,400      $44,597
       Net (loss)                $(1,537)      $(1,383)     $(2,201)
                                 =======       =======      =======
 
       Net (loss) per share      $  (.09)      $  (.09)     $  (.14)
                                 =======       =======      =======

                                     -46-
<PAGE>
 
                               INDEX OF EXHIBITS

Exhibit Number             Description                                    Pages
-------------------------------------------------------------------------------

     * 10.6  Amendment of Employment Agreement between the Company and Stanley
             Goldberg, dated December 5, 1997.

     * 10.7  Employment Agreement between the Company and Mark G. Eisenschenk,
             dated December 5, 1997.

     * 10.8  Stock purchase agreement, and related documents, between the
             Company and Stanley Goldberg, dated April 29, 1997.

     * 10.9  Stock purchase agreement, and related documents, between the
             Company and Mark G. Eisenschenk, dated April 29, 1997.

       21.1  Subsidiaries of the Registrant (filed with Form 10-KSB dated
             September 30, 1997, File No. 000-18921.)

       23.1  Consent of Deloitte & Touche LLP (filed with Form 10-KSB dated
             September 30, 1997, File No. 000-18921.)

       24.1  Power of Attorney (filed with Form 10-KSB dated September 30, 1997,
             File No. 000-18921.)

       27.1  Financial Data Schedule (filed with Form 10-KSB dated September 30,
             1997, File No. 000-18921.)

             * Management contract or compensation plan or arrangement.