SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

          [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 1999

          [ ] 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: 2-41015

                                    LBU, Inc.

        (Exact Name of Small Business Issuer as Specified in its Charter)


Nevada                                                                62-1203301

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


310 Paterson Plank Road, Carlstadt, N.J.                                   07072
(Address of Principal Executive Offices)                              (Zip code)

Issuer's Telephone Number, Including Area Code:                   (201) 933-2800

Former  Name,  Former  Address and Former  Fiscal  Year,  if Changed  Since Last
Report:

Check  whether the issuer (1) filed all reports  required to be filed by section
13 or 15 (d) of the  Securities  Exchange  Act of 1934 during the past 12 months
(or for such  shorter  period  that the  registrant  was  required  to file such
reports)  and (2) has been subject to such filing  requirements  for the past 90
days. Yes [ ] No [X]

As of December 31, 1999,  the Issuer had 1,414,370  shares of Common Stock,  par
value $.001, outstanding.

Transitional Small Business Disclosure Format (check one):    YES___   NO_X_



<PAGE>


                                    LBU, Inc.

                                      INDEX

                                                                         Page No

Part I - Financial Information:

Item 1.  Condensed Balance Sheets March 31, 1999 and December 31, 1998       3

         Condensed Statements of Operations for the Three Months Ended

         March 31, 1999 and 1998                                             5

         Condensed Statements of Cash Flows for the Three Months Ended
         March 31, 1999 and 1998                                             6

         Notes to Condensed Financial Statements (Unaudited)                 7



Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                10

Part II - Other Information:

Item 1.  Legal Proceedings                                                  15

Item 2.  Default upon Senior Securities and Creditors                       15

Item 6.  Exhibits and Reports on Form 8-K                                   16


Signatures                                                                  18


                                       2
<PAGE>


PART I

Item 1. Financial Statements

                                    LBU, Inc.
                                 Balance Sheets


                                                         March 31,  December 31,
                                                           1999         1998

                    ASSETS
Current assets:

  Cash and cash equivalents                            $    9,636     $   51,330
  Restricted cash                                          63,805         94,124
  Accounts receivable (net of allowance for
     bad debts of $25,000)                                 98,207         47,189
  Inventory                                               506,886        675,959
  Other current assets                                     46,785        126,999
                                                       ----------     ----------
    Total current assets                                  725,319        995,601

Noncurrent assets:
  Fixed assets, net                                       249,658        262,967
  Other assets                                             44,428         44,720
                                                       ----------     ----------

       Total assets                                    $1,019,405     $1,303,288
                                                       ==========     ==========


         LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
  Accounts payable                                     $        0     $1,037,968
  Accrued expenses                                         49,540        198,565
  Customer advances                                        62,369         11,484
  Taxes payable                                                 0         15,613
  Note payable - current                                        0        960,677
                                                       ----------     ----------
     Total current liabilities                            111,909      2,224,307

Pre-bankruptcy and long term liabilities:
  Accounts payable                                        818,934              0
  Accrued expenses                                        144,133              0
  Notes payable                                           824,603         51,462
  Taxes payable                                            15,613              0
                                                       ----------     ----------
   Pre-bankruptcy liabilities                           1,803,283
                                                       ----------
   Total long-term liabilities                                            51,462
                                                                      ----------

         Total liabilities                              1,915,192      2,275,769
                                                       ----------     ----------


          See accompanying notes to the condensed financial statements


                                       3
<PAGE>


                                    LBU, Inc.
                            Balance Sheets, continued

<TABLE>
<CAPTION>
                                                              March 31,          December 31,
                                                                1999                 1998
                                                            -----------          ------------
<S>                                                         <C>                  <C>
Stockholders' equity:
  Common stock ($.001 stated value)
50,000,000 shares authorized,
1,543,977 issued
and outstanding                                                   1,544                 1,544
Additional paid in capital                                    1,148,378             1,148,379
Accumulated deficit                                          (2,045,709)           (2,122,404)
                                                            -----------           -----------
  Total stockholders' equity                                   (895,787)             (972,481)
                                                            -----------           -----------

    Total liabilities and stockholder's equity              $ 1,019,405           $ 1,303,288
                                                            ===========           ===========
</TABLE>


          See accompanying notes to the condensed financial statements


                                       4
<PAGE>


                                    LBU, Inc.
                            Statements of Operations


                                                    Three            Three
                                                 months ended     months ended
                                                 March 31, 1999   March 31, 1998
                                                 --------------   --------------

Net sales                                          $ 1,010,225      $ 1,313,057
Costs of sales                                         616,460          886,938
                                                   -----------      -----------

    Gross profit                                       393,765          426,119
                                                   -----------      -----------

    Operating expenses:
Shipping and selling                                    68,284          180,331
General and administrative                             186,385          289,174
Factor fees and interest                                42,257           49,319
                                                   -----------      -----------
  Total operating expenses                             296,926          518,824
                                                   -----------      -----------

     Operating income (loss)                            96,839          (92,705)

  Other income (expense):
Interest income                                            156              584
Insurance loss adjustment fee                           (8,965)
State income tax                                          (825)               0
Chapter 11 legal expense                               (10,511)               0
                                                   -----------      -----------

  Total other income (expense)                         (20,145)             584
                                                   -----------      -----------

Income (loss) before income taxes                       76,694          (92,121)

Income taxes                                                 0          (21,188)
                                                   -----------      -----------

Net income (loss)                                  $    76,694      $   (70,933)
                                                   ===========      ===========

Net income per share-Basic (loss)                  $      0.08      $     (0.05)
                                                   ===========      ===========

Net income per share-Fully diluted (loss)          $      0.08      $     (0.05)
                                                   ===========      ===========


          See accompanying notes to the condensed financial statements


                                       5
<PAGE>


                                    LBU, Inc.
                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                               Three                 Three
                                                            months ended          months ended
                                                            March 31, 1999        March 31, 1998
                                                            --------------        --------------
<S>                                                          <C>                     <C>
  Cash flow from operating activities:
Net income (loss)                                            $  76,694               $ (70,933)
                                                             ---------               ---------
  Adjustments to reconcile net income to net
  cash provided (used) by operating activities
Depreciation and amortization                                   13,601                  10,690
Non-cash compensation                                           10,687
  (Increase) decrease in

Accounts receivable                                            (51,018)                 59,191
Inventories                                                    169,072                 (87,001)
Current assets                                                  80,214                 (21,163)
  Increase (decrease) in

Accounts payable                                              (219,034)               (211,369)
Accrued expenses                                                (4,892)                (42,591)
Customer Advances                                               50,885                  28,867
                                                             ---------               ---------
  Total adjustments                                             38,828                (252,689)
                                                             ---------               ---------
   Net cash provided by (used in) operating activities         115,522                (323,622)
                                                             ---------               ---------

   Cash flow from investing activities:
Capital expenditures                                                --                 (25,081)
                                                                                     ---------
  Net cash used by investing activities                             --                 (25,081)
                                                                                     ---------

   Cash flow from financing activities:

Repayment of loans                                            (207,535)                 (9,051)
Proceeds from borrowings                                        20,000                 223,000
                                                             ---------               ---------
  Net cash provided by  (used in) financing activities        (187,535)                213,949
                                                             ---------               ---------

  Net (decrease) increase in cash                              (72,013)               (134,754)
Cash at beginning of period                                    145,454                 202,204
                                                             ---------               ---------
Cash at end of period                                        $  73,441               $  67,450
                                                             =========               =========

Supplemental disclosures:
  Cash paid during the period for
   Interest and factor fees                                  $  45,575               $  49,319

Non-cash financing transactions:
   Issuance of  Common Stock for consulting                  $      --               $  21,375

</TABLE>

          See accompanying notes to the condensed financial statements


                                       6
<PAGE>


                                    LBU, Inc.
                     Notes to Condensed Financial Statements
                                   (unaudited)

The  accompanying  unaudited  financial  statements  have been  prepared  by the
Company  pursuant to the rules and  regulations  of the  Securities and Exchange
Commission  regarding  interim  financial  reporting.  Accordingly,  they do not
include all of the  information  and  footnotes  in  accordance  with  generally
accepted accounting  principals for complete financial  statements and should be
read in  conjunction  with the  audited  financial  statements  included  in the
Company's  Annual Report on Form 10-KSB for the year ended December 31, 1998. In
the opinion of  management,  the  accompanying  unaudited  financial  statements
contain all adjustments,  consisting only of those of a normal recurring nature,
necessary for a fair presentation of the Company's financial  position,  results
of operations and cash flows at the dates and for the periods presented.

On March 23, 1999,  the company  filed  petitions for relief under chapter 11 of
the federal bankruptcy laws. The action was precipitated by the decline in sales
and gross margin and an increase in expenses  during the year ended December 31,
1998,  resulting  in the  inability  to pay  approximately  $725,000 due John P.
Holmes  Co.,  Inc.  that was due January 1, 1999 and other  liabilities  as they
became due.

A Trustee  has been  appointed  and a plan for recover  has been  prepared.  The
factor has revised  their  factoring and lending  agreement  and such  financing
continues.  A consultant  with  industry  experience  has been retained and cost
cutting has been affected.

LBU has continued to operate,  and has continued to factor its receivables  with
CIT  pursuant  to an  order of the  Bankruptcy  Court.  LBU has  filed a plan of
reorganization  that provides for: (a) an extension and  modification of the CIT
agreement,  (b) payment to unsecured creditors of either: (i) one share of stock
for  every  $2.00  of  debt,  or (ii) 20  monthly  payments  equal  to  22.5% of
creditor's  claims,  and (c)  retention  of stock by  existing  shareholders.  A
confirmation hearing was held on January 13, 2000 in which the Company's Plan of
reorganization was approved.

The  operating  results  for the  three  months  ended  March  31,  1999 are not
necessarily indicative of the results to be expected for the full year.

Note 1 - Accounts Receivable And Factoring Arrangements

The Company entered into a factoring arrangement whereby a factor makes advances
to the  Company  based  upon a  percentage  of  certain  eligible  invoices.  In
addition,  the factor  makes  advances  to the Company  based upon its  eligible
inventory  levels.  Interest  of 2% per annum above the prime rate is charged on
outstanding advances.  The advances are collateralized by the Company's accounts
receivable,  inventories  and certain other assets.  In addition,  the Company's
President and principal  shareholder  has personally  guaranteed  advances under
these  agreements.  The factor also charges a commission  of 1 1/8% on the gross
face amount of all amounts factored, subject to a minimum commission per invoice
and other service fees.


                                       7
<PAGE>


                                    LBU, Inc.
               Notes to Condensed Financial Statements, continued
                                   (unaudited)

Note 1 - Accounts Receivable And Factoring Arrangements (Continued)

Prior to the bankruptcy filing date, the Company and CIT revised their factoring
agreement whereby the Company repaid the $200,000 advanced during early 1999.

Note 2 - Notes and Capital Lease Payable

Notes and capital  lease  payable  consist of the following as of March 31, 1999
and December 31, 1998:

                                                         1999           1998
                                                     ----------       ----------

Credit advance, CIT Financial (a)                    $        0       $  200,000
Note payable to a bank (b)                               85,464           73,001
Promissory notes payable (c)                            200,000          200,000
Promissory note payable(d)                               30,000           30,000
Convertible notes payable (e)                           500,000          500,000
Capital lease (f)                                         9,138            9,138
                                                     ----------       ----------

Total                                                   824,602        1,012,139
Less, current installments                                    0          960,677
                                                     ----------       ----------
Notes and capital lease payable,
    Less current installments                        $  824,602       $   51,462
                                                     ==========       ==========

(a)  CIT extended the Company $200,000 credit,  collateralized  by inventory and
     equipment.  This line of credit was repaid prior to the Company  filing for
     bankruptcy.
(b)  Principal of $33,333 matures in 1999; $52,131 in 2000.  Interest accrues at
     prime plus 1.5%. This loan was repaid in full in November 1999.
(c)  $200,000 of principal matured on January 1, 1999 and has become part of the
     bankruptcy proceedings.
(d)  Principal  was due to mature on June 22, 2000.  Interest  accrues at 9.12%.
     This note has become part of the bankruptcy proceedings.
(e)  Principal  of $500,000  matured on January 1, 1999.  Notes are  convertible
     into Common Stock of the Company at a fixed  conversion  price of $5.00 per
     share. This note has become part of the bankruptcy proceedings.
(f)  Lease payments are $3,812 for each year through December 31, 2000. Interest
     accrues at 12% per annum.  This  lease has  become  part of the  bankruptcy
     proceedings.


                                       8
<PAGE>


                                    LBU, Inc.
               Notes to Condensed Financial Statements, continued
                                   (unaudited)

Note 3 - Commitments and Contingencies

During  March,  1996,  Glennyre  Capital   Corporation,   Poimandres   Financial
Corporation  and HJS Financial  Services,  Inc. (the  "Plaintiff's")  filed suit
against the Company in the State of Nevada.  The lawsuit  stems from a financial
service  agreement  dated July 24, 1995, by and between the Plaintiff's and LBU.
As part of the financial service  agreement,  300,000 shares of LBU Common Stock
("the  Shares") were issued to the  Plaintiffs in return for financial and other
consulting  services,  which were to include  raising  capital.  LBU claims such
services were not rendered and that the Shares were  improperly  registered and,
accordingly,  on  November  19,  1995,  the Company  invalidated  the Shares and
subsequently  269,000  shares were returned and canceled by LBU's stock transfer
agent.

In  a  related  claim  on  September  12,  1997,   Wolverton   Securities   Ltd.
("Wolverton") filed an action against the Company in U.S. District Court for the
District of Nevada. Wolverton Securities, Ltd. seeks to have the Company reissue
170,000  shares of the Common  Stock  referred to in the  preceding  paragraphs.
Wolverton also seeks  specific  damages in the amount  $405,000 and  unspecified
punitive damages. The Company filed an answer and third-party  complaint against
the Plaintiff's and certain of their affiliates in the same court during October
1997.

Wolverton has indicated that it supports the bankruptcy  reorganization  plan as
proposed by the Company.  Accordingly, the Wolverton litigation will be resolved
by the plan.


                                       9
<PAGE>


Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations.

Forward Looking Statements and Associated Risks

The discussion and analysis which follows in this Quarterly  Report and in other
reports and documents of the Company and oral  statements  made on behalf of the
Company by its  management  and  others may  contain  trend  analysis  and other
forward-looking  statements  within the meaning of Section 21E of the Securities
Exchange Act of 1934 which reflect the  Company's  current views with respect to
future events and financial  results.  These  include  statements  regarding the
Company's  earnings,  projected growth and forecasts,  and similar matters which
are not historical facts. The Company reminds  stockholders that forward-looking
statements  are merely  predictions  and  therefore  are  inherently  subject to
uncertainties  and other  factors  which could cause the actual future events or
results  to  differ  materially  from  those  described  in the  forward-looking
statements.  These  forward-looking  statements  involve risks and uncertainties
including the emerging of the Company from bankruptcy proceedings,  availability
and terms of additional  financing;  changes which could affect customer payment
practices or customer spending; industry trends; the loss of major customers and
changes in demand for the Company's products; the timing of orders received from
customers;  cost and availability of raw materials;  increases in costs relating
to manufacturing and  transportation  of products;  the outcome of litigation to
which the Company is a party and the seasonal nature of the Company's business.

The  forward-looking  statements  contained  in this  Quarterly  Report and made
elsewhere by or on behalf of the Company  should be considered in light of these
factors.

The Company has attempted to identify additional  significant  uncertainties and
other factors affecting forward-looking statements in Exhibit 99 incorporated by
reference to this Quarterly Report  ("Additional  Information  Regarding Forward
Looking  Statements").  The  Company  will  provide  copies  of  Exhibit  99  to
stockholders  free of charge upon receipt of a written request  submitted to the
Company's Secretary at LBU, Inc., 310 Paterson Plank Road, Carlstadt, New Jersey
07072.  Stockholders  may also obtain copies of Exhibit 99 for a nominal  charge
from the Public Reference  Section of the Securities and Exchange  Commission at
450 Fifth Street,  N.W.,  Washington D.C. 20549 or at the Commission's  website:
http://www.sec.gov.

Bankruptcy Proceedings

On March 22, 1999,  the Company  filed for  protection  under  Chapter 11 of the
bankruptcy  laws. The action was  precipitated by the decline in sales and gross
margin and an increase  in expenses  during the year ended  December  31,  1998,
resulting in the inability to pay approximately $725,000 due John P. Holmes Co.,
Inc. that was due January 1, 1999 and other  liabilities as they became due. The
company  has  continued  to  operate  and  factor its  receivables  utilizing  a
financing company, the CIT Group ("CIT"), pursuant to an order of the Bankruptcy
Court. The Company filed with the Bankruptcy Court a plan of reorganization (the
"Reorganization Plan") that provides for: (a) an extension and


                                       10
<PAGE>


modification of the CIT agreement, (b) payment to unsecured creditors of either:
(I) one share of stock  for every  $2.00 of debt,  or (ii) 20  monthly  payments
equal to 22.5% of  creditor's  claims,  and (c)  retention  of stock by existing
shareholders.  A confirmation  hearing was held on January 13, 2000 in which the
Company's Plan of reorganization was approved.

Wolverton Securities Ltd. ("Wolverton"), which filed a suit against the Company,
also  indicated  that it supports  the  Reorganization  Plan.  Accordingly,  the
Company  expects  that  the  Wolverton   litigation  will  be  resolved  by  the
Reorganization  Plan.  The Company  believes that a hearing in the matter of the
Reorganization Plan will be held by the end of January,  2000. However, there is
no assurance  that the  Bankruptcy  Court will grant the  Company's  request for
approval of the Reorganization Plan.

Results of Operations

Three months ended March 31, 1999 versus three months ended March 31, 1998

The  Company's  net sales  decreased by $ 302,833 or 23% to $ 1,010,225  for the
three  months  ended March 31, 1999 from $ 1,313,058  for the three months ended
March 31, 1998.  This decrease was due primarily to the loss of one large retail
customer  and the  decrease  in the  Company's  sales  effort as a result of the
departure of two sales representatives in the first quarter of 1999.

Costs of sales decreased by $ 270,478 to $ 616,460 (or 61% of net sales) for the
three  months  ended March 31, 1999 from $ 886,938 (or 68% of net sales) for the
three months ended March 31, 1998.  This decrease is primarily  attributable  to
the  decrease  in sales in the 1999  three-month  period and  better  pricing of
orders shipped.

As a result of the foregoing, gross profit decreased by $32,354 to $ 393,765 for
the three  months ended March 31, 1999 from $ 426,119 for the three months ended
March 31, 1998.

Shipping  and selling  costs  decreased  by $ 112,047 to $ 68,284 (or 7 % of net
sales) for the three months  ended March 31, 1999 from  $180,331 (or 14 % of net
sales) for the three months ended March 31, 1998. This decrease is primarily due
to an increase in sales of promotional  products and decrease in sales of retail
products.

General and administrative expenses decreased by $ 102,789 to $ 186,385 (or 18 %
of sales) for the three  months  ended  March 31, 1999 from $ 289,174 (or 22% of
sales) for the three months ended March 31, 1998. This decrease primarily is due
to a reduction in legal fees, salaries and overhead expenses.

Factor fees and  interest  decreased by $ 7,062 to $ 42,257 (or 4% of sales) for
the three  months  ended  March 31,  1999 from $ 49,319 (or 4% of sales) for the
three  months  ended  March 31,  1998.  This  decrease  is a direct  result of a
decrease in sales.


                                       11
<PAGE>


As a result of the foregoing, total operating expenses decreased by $ 221,898 to
$ 296,926  (or 29% of sales)  for the three  months  ended  March 31,  1999 from
$518,824 (or 40% of sales) for the three months ended March 31, 1998.

As a result of the foregoing,  the Company  incurred a net income of $76,694 for
the three months ended March 31, 1999 as compared to net loss of $70,933 for the
three months ended March 31, 1998.

Liquidity and Capital Resources

The  Company's  cash  position  as of March 31, 1999 and  December  31, 1998 was
$73,441  and  $145,454,  respectively,  of  which  $  63,805  and $  94,124  was
restricted and not available for general corporate  purposes.  Net cash provided
by (used in) operating  activities  for the three months ended March 31,1999 and
1998 was $ 115,522 and $ (323,622),  respectively,  representing  an increase of
$439,144 in the 1999 period.

During the three months ended March 31, 1998, cash used in investing  activities
totaled  $25,081,   which  consists   primarily  of  capital   expenditures  for
manufacturing  equipment in the Company's Carlstadt  facility.  No cash was used
for investing activities during the three months ended March 31, 1999.

During the three months ended March 31,  1998,  net cash  generated by financing
activities  totaled $213,949 which includes $210,000 of proceeds from borrowings
during the quarter.  During the three months ended March 31, 1999, net cash used
in financing activities was $187,535 which includes a repayment of the loan from
the  company's  factor,  CIT, in the amount of  $207,535  and the  borrowing  of
$20,000 from its bank credit line prior to the filing of bankruptcy.

Currently,  LBU's primary  source of financing is the CIT Group  ("CIT"),  which
provides factoring and accounts receivable financing.  The Company pays a 1.125%
factor  charge  on its  invoices  for  the  guarantee  of  payment  on  eligible
receivables  which CIT then collects from the Company's  customers.  The Company
pays 2% above  the  prime-lending  rate on  borrowings  up to 85% of an  invoice
amount.

During  April 1998,  CIT agreed to make  advances  to the  Company  based upon a
percentage  of its levels of  eligible  inventories.  As of December  31,  1998,
$200,000 had been  advanced to the Company under this  arrangement.  As of March
31, 1999,  the $200,000  advanced by CIT was repaid by the company from accounts
receivable  payments  as part of the  agreement  with CIT to  continue  with its
factoring arrangement during the bankruptcy proceedings.

During 1997, the Company received an equity investment in the amount of $375,000
from the sale of 250,000  shares of its Common Stock to John P. Holmes Co., Inc.
(JPHC) and $500,000 in debt  financing,  $300,000 of which is  convertible  into
Common Stock of the Company,  from JPHC.  During the first quarter of 1998, JPHC
provided the Company with

an additional $200,000 of debt financing.  The proceeds of these financings were
used by the Company  primarily to fund its working capital needs during 1997 and
1998.


                                       12
<PAGE>


The  Notes  were due on April 1,  1998,  however,  JPHC  agreed  not to  require
repayment  before January 1, 1999.  Due to the Company's  inability to repay the
notes upon demand in January 1999, a total of $700,000 was included in the debts
listed in the Company's  bankruptcy  proceedings.  The Creditors  Committee,  of
which JPHC is a member, supports the Plan of Reorganization.

The Company  generated an operating loss in 1998 of  approximately  $1.7 million
and has  experienced  a decline in its gross  margins  in each year since  1994.
These  events had a  significant  negative  impact on the  Company's  liquidity.
Management  of the  Company  believes  that a  significant  portion  of the 1998
operating  loss was due to the loss of a large retail  customer in 1998, and the
loss of two key sales  people in the fourth  quarter of 1998 which  resulted  in
decreased sales. The Company further believes that the declines in gross margins
since 1994 relate  primarily to (i) costs  associated  with the expansion of the
Company's  business and product  lines and (ii)  competition,  which impacts the
Company's ability to maintain its gross margins on its products. While there can
be no assurances  that the Company will be able to operate  profitably,  improve
gross  margins or cash  flows or  increase  liquidity  during  1999 the  Company
believes that the filing of protection  under the  bankruptcy  laws in the first
quarter of 1999  together  with the  reduction of costs and shipping only orders
that have a profitable gross margin would result in better operating results and
improved financial  condition.  In the event that the Company is unsuccessful in
its efforts to emerge from bankruptcy procedures or cannot operate profitably on
a sustained  basis, it may be required to  significantly  alter its strategy and
implement cost reduction or other cash flow enhancement programs.

Year 2000 Issue

The Company  recognizes the need to ensure its operations  will not be adversely
impacted by the inability of the Company's  systems to process data having dates
on or after  January 1, 2000 ("Year  2000").  Processing  errors due to software
failure  arising  from  calculations  using the Year 2000 date are a  recognized
risk.  The company is in the process of changing its main operating to system to
one that is recognized as full compliant with year 2000 issues.

The Company  initiated  communications  with  third-party  suppliers  of all its
production machines and equipment and raw materials used, operated or maintained
by the  Company to  identify  and,  to the extent  possible,  to resolve  issues
involving  the Year 2000 problem.  The Company was notified by such  third-party
suppliers  that they are Year 2000  compliant.  The Company also ran tests using
special  software to ensure that its production  machines and equipment are Year
2000 compliant.

In  addition,  the  operation  of the office  and  facilities  equipment  of the
Company,  such  as fax  machines,  photocopiers,  telephone  switches,  security
systems and other common devices,  may be affected by the Year 2000 problem. The
Company  completed  upgrading and replacing these internal  systems and believes
that they are Year 2000 compliant and will not have a material adverse effect on
its business or results of  operations  but it cannot  provide any  assurance to
this effect.


                                       13
<PAGE>


Income taxes

As of December  31, 1998 the  Company had federal and state net  operating  loss
carryforwards of  approximately  $1,750,000 and $1,930,000,  respectively  which
will begin to expire in 2018 and 2005, respectively.

New Financial Standards

In June 1997,  the  Financial  Accounting  Standards  Board  (the  FASB)  issued
Statement of Financial  Accounting Standards ("SFAS") No. 131, "Disclosure about
Segments  of an  Enterprise  and Related  Information"  ("SFAS  131").  SFAS 131
establishes standards for the way public business enterprises report information
about operating segments in annual financial  statements and requires that those
enterprises  report selected  information about operating  segments in financial
reports issued to shareholders.  It also  establishes  standards for disclosures
about products and services,  geographic areas and major customers.  SFAS 131 is
effective for financial statements for fiscal years beginning after December 15,
1997.  Financial  statement  disclosures  for prior  periods are  required to be
restated.

The  adoption  of  SFAS  131 has  had no  impact  on the  Company's  results  of
operations,  financial position or cash flows.  Management does not receive, nor
does the Company generate,  discrete financial operating results for any portion
of the business other than for product sales.


                                       14
<PAGE>


                           PART II. Other Information

Item 1.  Legal Proceedings

During  March,  1996,  Glenneyre  Capital   Corporation,   Poimandres  Financial
Corporation and HJS Financial Services,  Inc. (the  "Plaintiff's")  filed a suit
against the Company in the State of Nevada.  The lawsuit  stems from a financial
service agreement dated July 24, 1995, by and between the Plaintiff's and LBU.

As part of the financial service  agreement,  300,000 shares of LBU Common Stock
("the Shares") were issued to the  Plaintiff's in return for financial and other
consulting  services,  which were to include  raising  capital.  LBU claims such
services were not rendered and that the Shares were  improperly  registered and,
accordingly,  on  November  19,  1995,  the Company  invalidated  the Shares and
subsequently  269,000  shares were returned and canceled by LBU's stock transfer
agent.

The  Company,  based  on legal  advice,  believes  the  action  it has  taken by
invalidating  and  canceling  the Shares is  appropriate.  The Company has since
initiated a counter-suit  against the  Plaintiffs for breach of contract,  fraud
and other causes of action. Discovery in this case is proceeding.

In  a  related  claim  on  September  12,  1997,   Wolverton   Securities   Ltd.
("Wolverton") filed an action against the Company in U.S. District Court for the
District of Nevada. Wolverton Securities, Ltd. seeks to have the Company reissue
170,000  shares of the Common  Stock  referred to in the  preceding  paragraphs.
Wolverton also seeks  specific  damages in the amount  $405,000 and  unspecified
punitive  damages.  The  Company  filed an answer  and a  third-party  complaint
against the Plaintiffs and certain of their  affiliates in the same court during
October 1997.

Wolverton has indicated  that it supports the Chapter 11 Plan of  Reorganization
currently being proposed.  Accordingly,  if the Reorganization Plan is approved,
the  Wolverton  litigation  will  be  resolved  pursuant  to  the  terms  of the
Reorganization Plan.

The Company is involved in  litigation  from time to time which is incidental to
the conduct of its business.

Item 2.  Default upon Senior Securities and Creditors

On March 22, 1999,  the Company filed for  protection  from its creditors to the
extent of  $1,803,283.  Included in this amount was  $824,603 of notes  payable;
$963,067  payable  to  various  vendors  and  suppliers;  and  $15,613  in state
franchise tax payable to New York and New Jersey.  The notes payable included an
amount of $700,000 of a note  payable to John P.  Holmes  Co.,  Inc.  (JPHC) due
January 1, 1999 plus accrued interest at 9.12%.


                                       15
<PAGE>


Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibit No.    Description

         2.1            Plan of  Reorganization  dated  February 17, 1995 by and
                        between New Century  Media,  Ltd. a Nevada  Corporation,
                        and LBU, Inc. a Delaware Corporation.(1)
         3.1            Certificate   of   Incorporation   of  LBU,  Inc.  dated
                        September 2, 1994. (2)
         3.2            By-laws of LBU, Inc. dated October 4, 1994. (2)
         3.3            Form of two-year stock purchase warrant.(3)
         3.4            Form of Three-year stock purchase warrant.(3)
         10.1           Factoring  Agreement  dated  October  25,  1993  by  and
                        between    LBU,    Inc.    (Delaware)    and   The   CIT
                        Group/Commercial Services Inc. (4)
         10.2           Guaranty  dated  October 25, 1993 by and between CIT and
                        Jeffrey  and Isel Mayer,  individually,  relating to the
                        above Factoring Agreement.(4)
         10.3           Inventory  Security  Agreement  dated January 4, 1995 by
                        and  between  LBU,  Inc.  and The  CIT  Group/Commercial
                        Services, Inc.(4)
         10.4           Lease  agreement  dated  April  1,  1995 by and  between
                        Albert Frassetto Enterprises, a sole proprietorship, and
                        Bags of Carlstadt, Inc. (4)
         10.5           Subscription  Agreement  dated  March  27,  1997  by and
                        between JPHC and the Registrant.(4)
         10.6           Promissory  note dated  August 21,  1997,  as amended on
                        February 21,  1998,  by and between the  Registrant  and
                        John P. Holmes & Company, Inc. (4)
         10.7           Promissory  note dated September 19, 1997, as amended on
                        November 21, 1997 and February 21, 1998,  by and between
                        the Registrant and JPHC.(4)
         10.8           Consulting  agreement  dated  February  19,  1998 by and
                        between JPO, LLC and the Registrant. (4)
         21.1           List of Subsidiaries
                        Subsidiary                      State of Incorporation
                        LBU, Inc.                       Delaware
                        Bags of Carlstadt, Inc.         New Jersey

         27.1           Financial Data Schedule (filed via EDGAR only).

         99             Additional   Information   Regarding   Forward   Looking
                        Statements

         (1)      Filed  as an  Exhibit  to  the  New  Century  Media,  Ltd.  (a
                  predecessor of the Registrant)  Form 10-K/A for the year ended
                  December 31, 1994 dated March 10, 1995 and incorporated herein
                  by reference thereto.


                                       16
<PAGE>


         (2)      Filed as an Exhibit to the New Century  Media,  Ltd. Form 10-Q
                  for the quarter  ended  September  30, 1994 dated  November 8,
                  1994 and incorporated herein by reference thereto.

         (3)      Filed as an exhibit to the  Registrant's  Form  10-QSB for the
                  quarter  ended  March  31,  1998 and  incorporated  herein  by
                  reference thereto.

         (4)      Filed as an Exhibit to the  Company's  Form  10-QSB/a  for the
                  year ended  December  31, 1997  (filed on April 22,  1998) and
                  incorporated herein by reference thereto.

(b)      Reports on Form 8K filed during the last quarter of the period  covered
         by this report:

         None.

<PAGE>

                                   SIGNATURES

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

Date: March 9, 2000


                                         LBU, INC.

                                         By: /s/ Jeffrey Mayer
                                         ---------------------------
                                            Jeffrey Mayer

                                         Chairman of the Board
                                         Chief Executive Officer, President
                                         (Principal executive and financial
                                         And accounting officer)
                                         Director