<PAGE>   1
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-K

(Mark One)

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

For the fiscal year ended     April 30, 1997
                         ------------------------------------------------------
                                       or

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from                        to
                              ------------------------  -----------------------
Commission file number   0-19487
                      ---------------------------------------------------------

                            NSA INTERNATIONAL, INC.
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

       Tennessee                                            62-1387102
-----------------------------                        --------------------------
State or other jurisdiction                          (I.R.S. Employer
incorporation or organization                                Identification No.)

4260 East Raines Road, Memphis, Tennessee                               38118
-------------------------------------------------------------------------------
(Address of principal executive offices)                             (Zip Code)

Registrant's telephone number, including area code (901) 541-1223
                                                  -----------------
Securities registered pursuant to Section 12(b) of the Act:  None.

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

                          Common Stock, $.05 par value
                     ------------------------------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes   X    No
                                              -----    ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
[  ]

         State the aggregate market value of the voting stock held by
non-affiliates of the registrant: $2,705,720 computed by reference to a price
of $1.5625 per share, the last reported sales price of the registrant's Common
Stock on July 21, 1997.

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                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.

             Class                                 Outstanding at July 21, 1997
--------------------------------                   ----------------------------
  Common Stock, $.05 par value                               4,858,156

                      DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the
Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: None.

                                     PART I

Item 1.  Business.

General

         NSA International, Inc. (the "Company") sells consumer products
domestically and internationally through subsidiaries and third parties
primarily utilizing multi-level and/or direct selling marketing systems. In a
limited number of international markets, the Company does sell its proprietary
consumer products to third-party distributors for traditional retail
distribution. The Company's products include nutritional products, air and
water filtration systems, security products, and a sparkling water system, all
of which were designed principally for individual use. The Company's products
are proprietary and most were developed by or for the Company or its affiliated
entities. In the United States, the Company sells its products to National
Safety Associates, Inc. ("NSA"), an affiliated Tennessee corporation, for
resale to NSA's dealers and distributors. Outside the United States, the Company
sells its products to third party distributors for retail distribution through
local representative agents, dealers, and distributors in the United Kingdom,
Ireland, Germany, Switzerland, the Netherlands, Belgium, Austria, Spain,
Portugal, Andorra, the Russian Federation, Canada and certain parts of Asia.
Additionally, the Company has entered into distribution agreements with third
party distributors in Australia, New Zealand, Fiji, Pakistan, Peru, Israel and
Turkey, although product sales to such distributors have not yet begun. In
France and Italy, the Company does continue to sell its products through its
wholly-owned subsidiaries to dealers and distributors residing in those
countries.

Operations

         Since organization, the Company's philosophy has been to pursue
increased revenues through new product lines and product line and market
expansion. In order to reduce the costs associated with product line expansion,
the Company has shifted the manufacturing of all of its products to
unaffiliated manufacturing organizations. The Company has adopted a similar
approach with regard to market expansion and support through its Master
Distributor program. The Master Distributor program enhances the Company's
ability to expand into additional markets more quickly and efficiently and to
transfer from the Company to a third party distributor the costs and other
burdens associated with creating the corporate infrastructure required to open
and support new markets. The Company intends to continue to enter into
distribution agreements with third party distributors ("Master Distributors")
pursuant to which the Company grants to the Master Distributor the exclusive
right to purchase and resell the Company's products in a defined geographic
area. The Company may, depending on the final terms of the particular
distribution agreements, provide a Master Distributor with computer support and
management consulting services in addition to products for resale.

         Following the development of the Master Distributor program in Asia,
the Company entered into distribution agreements with unrelated third parties
for the distribution of the Company's products in the countries of Israel and
Peru,

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<PAGE>   3



both new markets for the Company's products. The first conversion of an
existing market, however, occurred in April 1996, when the Company's
subsidiary, National Safety Associates, Ltd., an Ontario corporation ("NSA
Canada"), sold substantially all of its assets to a third party purchaser, the
owners of which included members of NSA Canada's senior management, an employee
of the Company and consultants to the Company. As a condition to the sale, the
Company entered into a distribution agreement with the purchaser, pursuant to
which the purchaser became the Company's Canadian Master Distributor.

         Since that time, the Company has succeeded in converting most of its
European operations into Master Distributorships. In September 1996, the
Company sold certain of the assets of its German and Swiss subsidiaries, NSA
International GmbH ("NSA Germany") and NSA AG ("NSA Switzerland"), to a third
party purchaser (the "German Master Distributor"), a principal of which was the
former Director of Sales and Marketing of NSA Germany and a Director of NSA
Switzerland. The sale included the transfer of the Company's Austrian
subsidiary, NSA Oko Filter Systems Vertriebs GmbH.  In November 1996, the
Company completed negotiations for the sale of certain of the assets of three
more of its European subsidiaries, National Safety Associates of America (U.K)
Limited, a limited liability company registered in England ("NSA UK"), NSA
B.V., a Dutch corporation, and NSA S.A., a Belgium corporation, to a third
party purchaser (the "U.K. Master Distributor"), an entity controlled by three
of the Company's European independent distributors. As in the transaction with
the German Master Distributor, the Company entered into a distribution contract
with the U.K. Master Distributor for the resale of the Company's products in
the territory composed of the United Kingdom, the Republic of Ireland, Belgium
and The Netherlands. Currently, the Company does continue to maintain its own
direct selling operations in Italy ("NSA Italy") and France  ("NSA France") (NSA
Italy and NSA France collectively the "Direct Selling Subsidiaries"). The
Company originally anticipated that the disposition of these operations would
be completed during the 1997 fourth quarter or the 1998 first quarter. However,
as yet the Company has not reached a satisfactory arrangement with third
parties for the conversion of its remaining operations in Italy and France.

         In addition to converting most of its existing European operations
to Master Distributorship, the Company has continued to expand into new
markets. In November 1996, the Company entered into a limited distribution
agreement with a third party distributor for the Russian Federation. Likewise,
during the month of December, 1996, the Company entered into a distribution     
contract for selected Company products in Turkey and Pakistan. In January 1997,
the Company entered into a distribution agreement and transferred ownership of
its name holding subsidiary NSA S.R.L., a Spanish corporation, to its new
Master Distributor for Spain, Portugal and Andorra. Finally, on May 2, 1997,
the Company entered into a distribution contract with an unrelated third party
distributor for Australia, New Zealand, and Fiji. Pursuant to the agreements
with the Master Distributors in Spain, Portugal, Andorra, Australia, New
Zealand and Fiji, the Company will provide computer support and management      
consulting services in addition to products.

Principal Products

         Nutritional Products.

         The Company sells a line of nutritional products under its Juice
Plus+(R) trademarks which includes an encapsulated, concentrated nutritional
supplement product, a chewable version of the encapsulated product, a snack and
energy bar called Juice Plus+(R) Snack Bars, a low calorie powdered drink mix
called Juice Plus+(TM) Lite, and a dietary food supplement called Juice
Plus+(TM) Thins. The principal ingredients of the Juice Plus+(R) product line
are vegetable and fruit juices, fibers, plant enzymes, and food actives which
are reduced to powder through a proprietary process by an unrelated
manufacturer. A second manufacturer encapsulates the powder into Juice Plus+(TM)
capsules and prepares the chewable form of the capsules and the Juice Plus+(TM)
Thins. Another manufacturer utilizes the powder to produce the Juice Plus+(TM)
Snack Bars and Juice Plus+(TM) Lite on a purchase order basis for the Company.
Recently, the Company introduced a new nutritional product for pets, Juice Plus
+(TM) for Dogs and Juice Plus +(TM) for Cats. Each of these products is
produced by unrelated manufacturers. In the event that any of the
aforementioned manufacturers terminate their relationship with the Company for
any reason, the Company will be forced to seek out alternative suppliers which
the Company believes will be available.

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         The Company obtained the rights to manufacture and distribute the
Juice Plus+(R) product line pursuant to a manufacturing and licensing agreement
with an unrelated third party. This agreement provides that the Company will
pay a royalty fee from .5% to 1% of net sales revenues from the Juice Plus+(R)
products, depending upon the volume of such sales. Sales of the Juice Plus+(R)
product line constituted approximately 56% of the Company's revenues for the
fiscal year ended April 30, 1997, compared with 52% of the Company's revenues
for the fiscal year ended April 30, 1996, and 40% of the Company's revenues for
the fiscal year ended April 30, 1995.

         Air Filtration Systems.

         The Company sells five different types of air filtration systems which
systems are designed to remove a variety of airborne contaminants including
smoke, pollen and dust. The Company sells three basic models which are suitable
for general home or office use: the portable Models 1200 Personal Air Filter,
the 692 AH Personal Air Filter with Heat, and the Model 7100 A/B Stationary Air
Filter. The Company's Auto 600 Environmental Air System is designed for
automobile use. The Model 1200 CS Personal Air Filter is designed for use in
any area where hospital grade appliances are required. Sales of these air
filtration systems constituted approximately 11% of the Company's revenues for
the fiscal year ended April 30, 1997, compared with 13% of the Company's
revenues for the fiscal year ended April 30, 1996 and 17% of the Company's
revenues for fiscal year ended April 30, 1995. The Company's air filtration
systems, as well as the water filtration systems and the Sparkling Water System
described below, are manufactured for the Company by a third party pursuant to
a five year manufacturing agreement which has approximately two and one-half
years remaining. In the event that the aforementioned manufacturer terminates
its relationship with the Company for any reason, the Company will be forced to
seek out alternative suppliers which the Company believes will be available.

         Water Filtration Products.

         The Company's water filtration product line includes eight water
filtration systems which are designed to remove chlorine from, and improve the
taste, odor and clarity of, drinking water. Although the most recently designed
water unit, the CT-2000, utilizes replacable cartridges, generally, the units
utilize silver impregnated granular activated carbon to remove chlorine.
Although most of these models are designed for use on treated drinking water,
each model is designed for a specific application or water filtration problem.
From May 1, 1993 through February 1, 1995, the Company manufactured a majority
of its own water filtration products, although certain water filtration
products continued to be purchased from NSA. The cost of water filtration
products sold by the Direct Selling Subsidiaries' operators (prior to being
converted to Master Distributorships) which were purchased from NSA was
approximately $46,000 for the fiscal year ended April 30, 1997. See "Certain
Relationships and Related Transactions." Sales of the water filtration products
constituted approximately 21% of the Company's revenues for the fiscal year
ended April 30, 1997, compared to 14% of the Company's revenues for the fiscal
year ended April 30, 1996, and 18% of the Company's revenues for the fiscal
year ended April 30, 1994.

         Sparkling Water System.

         The Company sells an in-home counter top carbonation appliance (the
"Sparkling Water System") which discharges carbon dioxide contained in a
refillable tank into liquids such as water. Sales of the Sparkling Water System
constituted approximately 7% of the Company's revenues for the fiscal year
ended April 30, 1997, compared to 5% of the Company's revenues for the fiscal
year ended April 30, 1996, and 8% of the Company's revenues for the fiscal year
ended April 30, 1995.

         Security Products.

         During fiscal 1994, the Company began marketing and selling its
security product line in the European market.  The Company's security product 
line includes a personal alarm, a bicycle alarm, a door viewer, and the
NSA Surestop. The personal security alarm sounds a siren when activated. The
bicycle alarm attaches to the handlebars of a bicycle and once activated, emits
a siren if the bicycle is moved before the alarm is deactivated.

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The door viewer is designed to be inserted in almost any door and provides
field of vision of 180(degrees) on the other side of the door. The NSA Surestop
is attached to the bottom of any door and is designed to prevent forced entry
through the door. Sales of the Company's security products were expanded to all
of the Company's operating European direct selling subsidiary organizations
during fiscal 1995. The Company continues to sell its security products to
certain, but not all, of its independent Master Distributors. Sales of the
Company's security products constituted approximately 2% of the Company's
revenues for the fiscal year ended April 30, 1997, compared to 5% of the
Company's revenues for the fiscal year ended April 30, 1996, and 8% of Company
revenues for the fiscal year ended April 30, 1995. The security products are
manufactured exclusively for the Company by unrelated manufacturers located in
the Asia on a purchase order basis.

         Marketing Plans.

         Since the origination of the Master Distributor program, the Company
has transferred the operations of most of its European direct selling
subsidiary organizations to independent Master Distributors. Likewise, the
Company has expanded its product lines into new markets. Except for the two
remaining Direct Selling Subsidiaries, resale and retail distribution of the
Company's products will be accomplished by independent Master Distributors
pursuant to contract. The marketing plans utilized by the various Master
Distributors differ slightly by country for each Master Distributor. Some
Master Distributors, for example, utilize a multi-level marketing system, while
other Master Distributors simply sell the Company's products to retail
locations in the applicable territory.

         Pursuant to the Company's existing multi-level marketing plans, the
Company's two remaining Direct Selling Subsidiaries continue to distribute the
Company's products to consumers through a network of distributors and dealers
in much the same manner as the Master Distributors that utilize the multi-level
marketing system. Distributors and dealers in a multi-level marketing system
are independent contractors, not employees of the Direct Selling Subsidiaries
or the Master Distributors. Distributors and dealers sell products directly to
consumers primarily through individual in-home demonstrations and trial use.
Generally, an individual becomes a dealer by the execution of an application
and the payment of a small processing fee. As a dealer, the individual is
authorized to retail the products purchased from the Company. An individual
becomes a distributor by attaining a set level of sales activity over a
specific time period. Dealers and Distributors may purchase products, at
wholesale, directly from the Direct Selling Subsidiaries for resale to dealers
or directly to consumers. The Direct Selling Subsidiaries, Master Distributors
and certain local distributors hold training and orientation seminars in the
respective countries. The Direct Selling Subsidiaries and Master Distributors
depend on their existing distributors and dealers to identify, sponsor and
train new dealers. Specifically, new dealers are brought into the multi-level
distribution networks by existing distributors and dealers. In turn, these new
dealers are encouraged to identify other new dealers. The existing distributors
benefit from the sponsorship of new dealers in that the sponsoring distributor
receives a percentage commission on the products purchased for resale by those
individuals sponsored directly by the distributor, as well as commissions on
the products purchased by those distributors or dealers sponsored by such
individuals. The commissions vary depending upon the level of sales activity
attained by a distributor and the individuals such distributor has sponsored.

Inventory and Backlog.

         The Company maintains significant inventory volumes and has no backlog
due to the fact that it attempts to fill dealer, distributor, Direct Selling
Subsidiary or Master Distributor orders within two (2) business days of the
date on which the order was placed. The Company's sales return policy varies as
a result of country-specific governmental regulations. Provision for estimated
sales returns is recorded based on historical return rates and current business
conditions. The Company provides limited warranties for all of its products.
Costs related to warranties have been insignificant.

Management Agreement with NSA.

         Pursuant to a written management agreement, NSA provides management,
consulting and advisory services to the Company relating to accounting, data
processing, legal and regulatory compliance, general management,

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administration of benefits, contract and lease negotiations, and other such     
matters for which the Company requests assistance. In consideration for these
services, the Company pays to NSA any and all amounts collected by the Company
from the Company's Master Distributors in exchange for data processing services
offered to such Master Distributors by the Company. The total amount paid by
the Company to NSA for management fees in fiscal 1997 was approximately
$500,873. The management agreement is renewable annually and may be terminated
by either party thereto by giving written notice to the other party.

Reliance Upon a Single Customer

          Sales to NSA constituted approximately 26% of the Company's revenues
for the fiscal year ended April 30, 1997. The loss of NSA as a customer would
have a material adverse effect on the Company. See "Certain Relationships and
Related Transactions."

Competition.

         The products distributed by the Company are sold in highly competitive
markets. Competitive products are sold by both retail sellers and other
multi-level and direct selling organizations. In addition to competition
relating to the products, the Direct Selling Subsidiaries as well as certain of
the Master Distributors are subject to intense competition in the
identification, sponsorship, and training of distributors and dealers from
other multi-level direct selling organizations, whose specific product lines
may or may not compete with the products distributed by the Company.

Patents and Trademarks.

         The Company owns five domestic patents which relate to the production
of the Sparkling Water System.  The Company owns domestic trademark
registrations for the trademark "Juice Plus+(R)", and has filed several
additional domestic applications for these trademarks for various goods.  The
Company has also registered "Juice Plus+(R) in a number of foreign
jurisdictions, and currently has applications pending in various other foreign
jurisdictions.  To improve efficiency in obtaining foreign tradermark
registrations subsequent to the fiscal year ended April 30, 1997, the Company
acquired through assignment the domestic and foreign trademark applications and
registrations for "NSA(R)" owned by NSA.  

Regulation.

         The Direct Selling Subsidiaries and Master Distributors are subject to
the laws and regulations in their respective countries relating to the
marketing, content, labeling and packaging of their products; the operation of
their sales programs, and the sales, advertising, and recruiting practices of
their distributors and dealers. Numerous foreign governmental authorities
regulate selling activities of the Direct Selling Subsidiaries and Master
Distributors in their respective jurisdictions through complex regulatory
schemes which are subject to constant change. Regulatory agencies previously
have requested information regarding the products distributed by or the
respective sales plans of the Company's remaining Direct Selling Subsidiaries
(and the Company's other European direct selling operations prior to Master     
Distributorships).  Although Company management believes that its products,
sales materials, and sales plans are in substantial compliance with applicable
laws and regulations, these laws and regulations are subject to change and
interpretation which could adversely affect the Direct Selling Subsidiaries'
operations or the Master Distributors' operations, which in turn could
adversely affect the Company.

Environmental.

         In connection with its past manufacturing operations, the Company was
subject to various federal, state, and local regulations regarding the
discharge of materials into the environment. Management believes that the
Company operated in substantial compliance with such provisions, and the
Company's compliance with these provisions did not have a material impact upon
the capital expenditures, earnings or competitive position of the Company.

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Employees.

         At April 30, 1997, the Company had approximately 31 employees. None of
the Company's employees is represented by a labor union or collective
bargaining unit. The Company considers relations with its employees to be
satisfactory. Distributors and dealers participating in the marketing plans of
the Direct Selling Subsidiaries are independent contractors of the Direct
Selling Subsidiaries and are not employees of the Direct Selling Subsidiaries
or the Company.

Financial Information About Foreign and Domestic Operations and Export Sales.

         For Geographic Segment Financial Information as to the Company's
operations see Note 8 in the Notes to Consolidated Financial Statements
included in Item 8.

Item 2.  Properties.

         NSA UK leases approximately 12,800 square feet of office space in
Maidenhead, Berkshire, England pursuant to noncancellable leases. The
NSA UK leases are guaranteed by NSA. See "Certain Relationships and Related
Transactions." NSA UK has licensed the UK Master Distributor to occupy
approximately 4,000 square feet of the leased premises in Maidenhead,
Berkshire, England. NSA UK has subleased the remaining 8,800 square feet of the
leased premises in Maidenhead, Berkshire, England to an independent third
party. NSA Germany leases approximately 663 square meters of office space in
Didenberg-Hoffheim, Germany. NSA Switzerland leases approximately 160 square
meters of office space in Basel, Switzerland, which premises have been
subleased to the German Master Distributor. NSA France leases approximately
504 square meters of office space in Nanterre, France. NSA Italy leases
approximately 530 square meters of office space in Milan, Italy. The Company
leases approximately 1,500 square feet of office space in Camberly, England.
NSA Polymers, Inc. leases approximately 52,000 square feet of warehouse space
in Lake Mary, Florida. In the event any of these leases are terminated, the
Company anticipates that it will be able to locate and lease other premises, if
needed, without a material adverse effect to the operations of the Company.
Neither the Company nor any of its subsidiaries own any real estate. The
Company believes that its properties are suitable and adequate for the
Company's present and future needs.

Item 3.  Legal Proceedings.

         The Company is party to various claims and matters of litigation that
arise in the normal course of its business. Management of the Company believes
the resolution of these matters will not have a material adverse effect on the
results of operations or the financial condition of the Company.

         On February 12, 1993, a complaint for injunctive relief and damages
was filed against the Company's affiliate, NSA, and Messrs. A. Jay Martin, L.F.
Swords and George R. Poteet, individually, in the United States District Court
for the Northern District of California. The named plaintiffs sought relief on
behalf of themselves and for an alleged class of persons who participated in
NSA's multi-level marketing plan from February 13, 1989 to the present. The
complaint alleges that the NSA multi-level marketing plan constitutes an
unlawful pyramid scheme and the unlawful sale of unregistered securities made
through the use of allegedly untrue and misleading statements of material
facts. It further alleges that the NSA marketing plan was promoted by utilizing
fraudulent activities, unfair business practices and false advertising. NSA and
the individual defendants answered denying the allegations. On April 5, 1994,
the case was moved to the United States District Court for the Western District
of Tennessee. The magistrate judge assigned to the case recommended
certification of the class and NSA filed exceptions to the report. On August
20, 1996, the Court rendered an Order Granting Plaintiff's Motion for Class
Certification as Modified. The Court's Order certified a class only as to two
of plaintiff's claims, and only as to persons in NSA's multi-level marketing
plan who participated in the plan from June 5, 1990 to the present and who
incurred a loss because of such participation. Subsequently, the Court ordered
plaintiffs to include four additional named plaintiffs for the action. At
present, the exact parameters of the class are unresolved, and therefore, the
members of the class have not been fully determined. Further, the District
Court Judge who issued the August 1996 order on certification has since
retired, and the case has been reassigned to

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a new District Court Judge. It is uncertain whether the new District Court
Judge will review and/or modify any prior decisions, including, the order on
class certification.

         In April 1997, Safety Technologies, Inc., a wholly-owned subsidiary of
Safetec International, Inc., filed a complaint in the United States District
Court for the Middle District of Florida, Orlando Division, for injunctive
relief and damages against NSA Polymers, Inc., a wholly-owned subsidiary of the
Company, as well as Polymers, Inc., Futuro, Inc., Tubmaster, L.C., Eckerd
Corporation, Berger Brunswig Corp., American Stores Company, McKesson
Corporation, and Mr. Rushton Bailey, individually. Claims alleged by the
plaintiff in the complaint include breach of contract, trademark infringement,
unfair competition and deceptive trade policies. The complaint alleges that the
named defendants manufactured and/or distributed products developed by the
plaintiff and containing the plaintiff's registered trademark in various
wholesale and retail markets without the knowledge or consent of the plaintiff.
The Company believes that insurance coverage may be available for certain of
these claims. The Company is evaluating its options and intends to vigorously
defend this suit.

Item 4.  Submission of Matters to Vote of Security Holders.

         None.

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<PAGE>   9



                                    PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

                Price Range of Common Stock and Dividend Policy

         The Company's Common Stock is quoted and traded on The Nasdaq Stock
Market under the symbol "NSAI." The following table sets out the high and low
bid information for the Common Stock as reported on The Nasdaq Stock Market for
the periods indicated.

<TABLE>
<CAPTION>
                                                                                      HIGH        LOW

<S>                                                                                  <C>          <C> 
FISCAL 1997

First Quarter     ...............................................................    4 1/4        2 1/2

Second Quarter    ...............................................................    3 3/4        2

Third Quarter     ...............................................................    2 1/4        1 1/2

Fourth Quarter    ...............................................................    2 1/8          5/8



FISCAL 1996

First Quarter     ...............................................................    4 5/8        3 5/8

Second Quarter    ...............................................................    4 1/8        3

Third Quarter     ...............................................................    3 3/4        1 1/2

Fourth Quarter    ...............................................................    3 7/8        2 1/8
</TABLE>


         On July 21, 1996 the last reported sales price of the Common Stock on
The Nasdaq Stock Market was $1.5625 per share. As of July 21, 1997, the Company
had approximately 950 shareholders of record.

         The Company's dividend policy will depend on its earnings, financial
condition, and other factors deemed relevant by the Board of Directors. The
Board of Directors has never declared dividends on the Common Stock and does
not anticipate declaring cash dividends on the Common Stock in the foreseeable
future. The Board of Directors presently intends to retain future earnings, if
any, to finance the growth of the Company's business.

                                       8


<PAGE>   10

Item 6.  Selected Financial Data.

         The selected historical consolidated financial data set forth below
for the fiscal years ended April 30, 1997, 1996, 1995, 1994, and 1993 have been
derived from the consolidated financial statements of the Company for those
years. The selected consolidated financial data should be read in conjunction
with the consolidated financial statements and related notes and other financial
data included elsewhere herein. The selected consolidated financial data also
should be read in conjunction with the discussion set forth above in Part I,
Item 1, under the heading "Operations."

Income Statement Data:

<TABLE>
<CAPTION>
(In thousands, except for per share data)                          For the Years Ended April
                                           --------------------------------------------------------------------------
                                               1997           1996          1995           1994             1993
                                           (Historical)   (Historical)   (Historical)   (Historical)     (Historical)
<S>                                          <C>            <C>         <C>              <C>              <C>           
Net revenues                                 $36,107        $ 73,150    $  108,689       $ 112,531        $  95,702     
Costs and expenses                            45,939          83,963       114,191         115,837           98,635     
                                             -------        ---------   ----------       ---------        ---------     
Income (loss) before taxes and                                                                                          
  minority interest and cumulative                                                                                      
  effect of change in accounting                                                                                        
  principle                                   (9,832)        (10,813)       (5,502)         (3,306)          (2,933)    
Provision (benefit) for income taxes             (22)           (103)         (761)           (892)            (744)    
                                             -------        --------    ----------       ---------        ---------     
Net income (loss) before minority                                                                                       
  interest and cumulative effect of                                                                                     
  change in accounting principle              (9,810)        (10,709)       (4,741)         (2,414)          (2,189)    
Minority interest in (income) loss of                                                                                   
  consolidated subsidiaries                                                                                      21     
                                                                                                                        
Cumulative effect of change                                                                                             
  in accounting principles                                                                     264                      
                                             -------        --------    ----------       ---------        ---------             
Net income (loss)                            $(9,810)       $(10,709)   $   (4,741)      $ (2,150)        $  (2,168)    
                                             =======        ========    ==========       =========        =========     
Earnings (loss) per common share:                                                                                       
  Before cumulative effect of change in                                                                                 
    accounting principle                     $ (2.02)       $  (2.20)   $     (.98)      $   (.49)        $     (65)    
  Cumulative effect of change in                                                                                        
     accounting principle                                                                      .05                      
                                             -------        --------    ----------       ---------        ---------              
Net Income (loss) per common share           $ (2.02)          (2.20)   $     (.98)      $    (.44)       $    (.65)    
                                             =======        ========    ==========       =========        =========     
Weighted average number of common                                                                                       
  shares outstanding                           4,858           4,858         4,858           4,858           13,338     
                                                                                                                        
Balance Sheet Data (at period end):                                                                                     
                                                                                                                        
(In thousands)                                                                                                          
                                                                                                                        
Total assets                                 $22,365        $ 31,274    $   44,643       $  55,138        $  63,688     
Note payable to bank                             -0-             -0-           -0-             -0-              -0-     
Current maturities of long term debt             -0-             -0-           -0-           1,006              -0-     
Amounts due to NSA, Inc.                       7,793           7,900         9,310          12,512           14,626     
Long-term debt less current maturities           -0-             -0-           -0-             -0-              -0-     
Total Shareholders' equity (deficit)           8,307          10,206        20,917          25,660           27,815     
</TABLE>



                                       9


<PAGE>   11



Item 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operation.

        Management's discussion should be read in conjunction with the
Consolidated Financial Statements and the discussion of the Company's business
and other detailed information appearing elsewhere herein. All information is
based on the Company's fiscal years ended April 30.

Results of Operations

Net Revenues

<TABLE>
<CAPTION>
                                                  Fiscal Year
                              -------------------------------------------------------
                                1997      Change      1996      Change      1995
                                        (Dollars in thousands)

<S>                           <C>       <C>         <C>        <C>        <C>     
Net Revenues                  $36,107   (50.64)%    $ 73,150   (32.70)%   $ 108,689
Cost and expenses             $45,939   (45.29)%    $ 83,963   (26.47)%   $ 114,191
Percentage of net revenues     127.23%                114.78%                105.06%
Net loss                      $(9,810)              $(10,709)             $  (4,741)
Loss per share                 $(2.02)              $  (2.20)             $    (.98)
</TABLE>


         On April 30, 1996, the Company sold its Canadian direct selling
operation. During the 1997 second quarter, the Company sold its direct selling
operations in Germany, Switzerland, Holland, Belgium, Ireland, and the United   
Kingdom. The above direct selling operations were purchased by Master
Distributors who have continued to purchase product from the Company. In
addition to product purchases, the Company receives royalties, management
consulting, and computer support fees for certain administrative and computer
services from these Master Distributors.   As a result of these dispositions,
the Company's only remaining direct selling operations are in Italy and France. 

         The Company's reorganization and change in its method of selling and
distributing its products caused the 1997 decline in its net revenues. As
opposed to prior years, the 1997 net revenues of the transferred direct selling
operations no longer include dealer/distributor commissions and allowances as
those expenses are now paid by the Master Distributor. Accordingly, the 1997
decline in the Company's direct selling operations net revenues of
approximately $40,719,000 was offset by increased sales to Master Distributors
of approximately $5,640,000.

         The decline in 1996 net revenues primarily resulted from decreases in
product sales of the Company's direct selling subsidiary organizations.         
Declines in revenue from the direct selling operations are attributed to a
number of factors, including (i) adverse publicity in certain of the European
markets aimed at multilevel sales organizations in general and/or in certain
instances the Company or its products and (ii) continued adverse reaction to
the Vitacron settlement and to certain changes made in the NSA Germany
Marketing Plan in connection with the settlement.

Cost and Expenses

<TABLE>
<CAPTION>
                                                           Fiscal Year
                                        --------------------------------------------------
                                         1997      Change      1996      Change       1995
                                        -----      ------      ----      ------     ------
                                                     (Dollars in thousands)
<S>                                     <C>       <C>         <C>       <C>         <C>    
Dealer/Distributor commissions          
       and allowances                   $ 7,473   (73.39)%    $28,082   (38.35)%    $45,554
Percentage of net revenues                20.69%                38.39%                41.91%
Cost of products sold                   $19,211   (32.32)%    $28,385   (24.77)%    $37,732
Percentage of net revenues                53.21%                38.80%                34.72%
</TABLE>



                                       10


<PAGE>   12



         The decrease in dealer/distributor commissions and allowances, as a
percentage of net revenues for 1997 resulted primarily from the sale of most of
the Company's direct selling operations and resulting restructuring of the
Company's sales method, and the fact that dealer/distributor commissions which
would have been paid on such product sales are now paid by the Master   
Distributor.

         The 1996 decrease in dealer/distributor commissions and allowances
resulted primarily from the decrease in revenues from the direct selling 
operations.

         The 1997 increase in the cost of products sold as a percentage of net
revenues resulted from the Company's operational changes. The product sales to
Master Distributors have lower margins than sales made from the Company's
direct selling operations.

         The 1996 cost of products sold, as a percentage of net revenues,
increased as a result of the continued change in the Company's sales mix.
Additionally, the Company's costs of goods sold reflected increased inventory
reserves in 1996 of $1 million.

<TABLE>
<CAPTION>
                                                                  Fiscal Year
                                             ------------------------------------------------  
                                             1997      Change      1996      Change      1995
                                             ----      ------      ----      ------      ----
                                                            (Dollars in thousands)
<S>                                        <C>       <C>         <C>       <C>         <C>    
Operating Expenses                         $16,537   (37.98)%    $26,664   (11.86)%    $30,252
Percentage of net revenues                   45.80%                36.45%                27.83%
</TABLE>

         The 1997 decline in the Company's operating expenses is the result of
expense reductions caused from the 1997 second quarter sale of several of its
European direct selling operations and the April 30, 1996 sale of the Canadian
operations. This reduction was partially offset by a $2,000,000 reserve 
allowance the Company's notes receivable.

         The decrease in the 1996 operating expenses resulted from the
institution of cost and expense controls and the 1995 fourth quarter sale of
the Company's manufacturing subsidiary. This decrease was partially offset by a
$1,000,000 charge representing the present value of excess future rent expense
over subleased income from premises located in the United Kingdom leased by NSA
UK.  

<TABLE>
<CAPTION>
                                                              Fiscal Year
                                            ------------------------------------------  
                                            1997     Change     1996   Change     1995
                                            ----     ------     ----   ------     ----
                                                              (Dollars in thousands)
<S>                                         <C>      <C>        <C>    <C>        <C> 
Interest income, net                        $695     (7.95%)    $755   82.81%     $413
</TABLE>

         The decrease in the 1997 net interest income reflects lower average
balances of cash and cash equivalents. The 1996 increase in net interest income
primarily reflects interest earned on notes receivable from the sale of the
manufacturing operations.

<TABLE>
<CAPTION>
                                                                  Fiscal Year
                                               ------------------------------------------------
                                               1997      Change      1996      Change      1995
                                               ----      ------      ----      ------      ----
                                                            (Dollars in thousands)
<S>                                              <C>    <C>          <C>      <C>          <C>   
Licensing and management fees                    
       to NSA, Inc.                              $501   (68.65)%     $1,598   (35.40)%     $2,472
Percentage of net revenues                       1.39%                 2.18%                 2.28%
</TABLE>

                                       11


<PAGE>   13



         The decrease in the 1997 management fees is due to the sale of several
of the Company's direct selling operations. The 1996 management fee decrease
resulted from the sale of the Company's manufacturing subsidiary and the
closing of the Company's Mexican subsidiary which reduced the administrative 
costs paid to NSA.

<TABLE>
<CAPTION>

                                                                  Fiscal Year
                                               ------------------------------------------------
                                               1997                  1996                  1995
                                               ----                  ----                  ----
                                                            (Dollars in thousands)

<S>                                             <C>                   <C>                <C>   
Other income (expense), net                     $89                   $12                $2,405
Percentage of net revenues                      .25%                  .02%                 2.21%
</TABLE>


         The 1997 increase in other income primarily resulted from gains in
foreign currency translation.

         The decrease in the other income (expense) for 1996 resulted from a
reduced foreign currency translation gain of approximately $1,050,000. The 1995
foreign currency translation gain was approximately $1,220,000. The remaining
amount of the 1996 decrease is attributed to an approximate $300,000 loss in
the Company's hedging program verses an approximate gain of $1,090,000 in the
1995 hedging program.

Restructuring Costs

<TABLE>
<CAPTION>

                                                                  Fiscal Year
                                               ------------------------------------------------
                                               1997                  1996                  1995
                                               ----                  ----                  ----
                                                            (Dollars in thousands)
<S>                                           <C>                     <C>                 <C>
Restructuring costs                           $3,000                  $-0-                $1,000
Percentage of net revenues                      8.31%                  N/A.                   92%
</TABLE>


         The Company took a 1997 first quarter charge of $3,000,000 for
expenses to be incurred with the restructuring of its direct selling operations
and the closing of its European central office in Amsterdam.

         In 1995, the Company charged $1,000,000 for expenses to be incurred in
the closing of the Company's Mexican direct selling subsidiary.

Benefit (Provision) for income taxes

<TABLE>
<CAPTION>
                                                                    Fiscal Year
                                                     ---------------------------------------
                                                     1997              1996            1995
                                                     ----              ----            -----
                                                                (Dollars in thousands)
<S>                                                  <C>               <C>            <C> 
Benefit (provision) for income taxes                 $22               $103           $  761
Effective tax rate                                   .22%               .95%           13.83%
</TABLE>


         The 1997 and 1996 effective tax rates reflect the inability to utilize
operating losses of certain subsidiaries. The effective tax rate for fiscal
1995 was due to initial losses incurred by the Company's market expansions into
France and Italy, on which the Company was not able to recognize a tax benefit.

                                       12


<PAGE>   14


Net Loss
--------
<TABLE>
<CAPTION>

                                                                  Fiscal Year
                                               ------------------------------------------------
                                               1997                  1996                  1995
                                               ----                  ----                  ----
                                                            (Dollars in thousands)
<S>                                          <C>                  <C>                    <C>     
Net loss                                     $(9,810)             $(10,709)              $(4,741)
Loss per share                               $ (2.02)             $  (2.20)              $  (.98)
</TABLE>


         The 1997 net loss consists of a $3,000,000 ($.62 per share)
restructuring charge, a note receivable allowance, totaling $2,000,000 ($.48
per share), and approximately $2,674,000 ($.55 per share) of operating losses
during the 1997 first and second quarters generated by the European direct
selling operations which were sold during the 1997 second quarter.

         The 1996 net loss primarily reflects the Company's fixed direct
selling operating costs and expenses which exceeded its gross margin as a result
of decreased revenues.

         The 1995 net loss primarily reflects the $2.4 million loss by the
Company's Mexican direct selling subsidiary, which includes the $1 million in
restructuring costs, and the $1.3 million loss in the Company's m anufacturing
subsidiary.

Future Outlook

         The Company has successfully replaced most of its direct selling and
distribution operations with Master Distributors. The Company is continuing to
search for qualified new Master Distributors to acquire its remaining two
direct selling operations in Italy and France.

         During 1997, the Company made several new product introductions
including a new water filter, which has interchangeable replaceable filters,
Juice Plus Thins (TM), a dietary food supplement, and Juice Plus+(TM) for Dogs
and Juice Plus+(TM) for Cats, a food supplement for dogs and cats.

         Through the Master Distributor program, the Company is expanding
geographically into new markets. In the 1998 first quarter, a new Master        
Distributor began operations in Spain, Portugal and Andorra. The Company
expects a new Master Distributor to begin operations in Australia, New 
Zealand and Fiji during the fall of calendar 1997.

         The Company's management believes that the conversion of its sales and
distributorship operations to the Master Distributor program and new product
introductions will provide the Company with long term favorable effects on its
operating results. Although the ultimate effect of these changes cannot be
determined, there could be continued adverse short-term results in operations
caused by these changes.

Liquidity and Capital Resources

<TABLE>
<CAPTION>
                                                                Fiscal Year Ended April 30
                                                      ------------------------------------------
                                                       1997              1996             1995
                                                      ------            -----             ------
                                                                  (Dollars in thousands)
<S>                                                   <C>               <C>              <C>    
Cash and cash equivalents                             $  5,772          $ 8,755          $15,603
Short-term investments                                      11               13              521
Working capital                                          4,301           11,323           13,126
Cash provided (used) by operating activities           (10,609)          (6,855)          (4,004)
Cash provided (used) by investing activities               745              495           (1,119)
Cash provided (used) by financing activities             6,881             (489)             645
</TABLE>


                                       13


<PAGE>   15



         On March 19, 1997, the Company's Board of Directors authorized the
repurchase up to $1 million in shares of its common stock, $.05 par value, from
time to time on the open market or in privately negotiated purchases. During
the year ended April 30, 1997, the Company repurchased approximately 4,940
shares of common stock pursuant to this repurchase plan. These shares have yet
to be retired and upon retirement the total outstanding shares will be
adjusted.

         The Company has sufficient cash on-hand to finance current operations,
and does not anticipate requiring additional funding in excess of the current
cash balances and cash flow generated from operations. If required, management
believes additional funding will be available from financial institutions or
NSA on satisfactory terms.

Item 8.  Financial Statements and Supplementary Data.

         NSA International, Inc. and Subsidiaries:

         Report of Independent Certified Public Accountants

         Consolidated Balance Sheets as of April 30, 1997 and 1996

         Consolidated Statements of Operations for the Years Ended April 30,
         1997, 1996, and 1995

         Consolidated Statements of Shareholders' Equity for the Years Ended
         April 30, 1997, 1996, and 1995

         Consolidated Statements of Cash Flows for the Years Ended April 30,
         1997, 1996, and 1995

         Notes to Consolidated Financial Statements

         Schedule II Valuation and Qualifying Accounts Year Ended April 30, 
         1997, 1996, and 1995


                                       14


<PAGE>   16
NSA INTERNATIONAL, INC. AND SUBSIDIARIES

TABLE OF CONTENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                                             Page

<S>                                                                                                          <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                                                             1

CONSOLIDATED FINANCIAL STATEMENTS:

   Consolidated Balance Sheets as of April 30, 1997 and 1996                                                   2

   Consolidated Statements of Operations for the Years Ended April 30, 1997, 1996, and 1995                    3

   Consolidated Statements of Shareholders' Equity for the Years Ended April 30, 1997,
     1996, and 1995                                                                                            4

   Consolidated Statements of Cash Flows for the Years Ended April 30, 1997, 1996, and 1995                    5

   Notes to Consolidated Financial Statements                                                               6-17
</TABLE>

<PAGE>   17

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders
 of NSA International, Inc.

We have audited the accompanying consolidated balance sheets of NSA
International, Inc. and Subsidiaries (the "Company") as of April 30, 1997 and
1996 and the related consolidated statements of operations, shareholders'
equity, and cash flows for each of the three years in the period ended April 30,
1997. Our audits also included the financial statement schedule listed in the
Index at Item 14. These financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and the financial
statement schedule based on our audits.

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

As discussed in Note 7 to the financial statements, the Company is party to a
significant number of transactions with National Safety Associates, Inc. ("NSA,
Inc."), the shareholders of which own a majority of the Company's common stock.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of NSA International, Inc. and
Subsidiaries as of April 30, 1997 and 1996 and the results of their operations
and their cash flows for each of the three years in the period ended April 30,
1997 in conformity with generally accepted accounting principles. Also, in our
opinion, the financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

Deloitte & Touche LLP

Memphis, Tennessee
July 17, 1997

<PAGE>   18

NSA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
APRIL 30, 1997 AND 1996

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

ASSETS                                                                          1997              1996
<S>                                                                        <C>             <C>         
CURRENT ASSETS:

  Cash and cash equivalents                                                $  5,771,563    $  8,754,770
  Short-term investments                                                         10,754          13,047
  Receivables, net                                                            2,972,636       1,839,493
  Refundable income taxes                                                       690,000         729,545
  Inventories, net                                                            7,104,869      10,233,158
  Deferred income taxes                                                          32,000         322,000
  Notes receivable - short-term                                                 550,000         125,000
  Other current assets                                                          265,078       1,093,442
                                                                           ------------    ------------
          Total current assets                                               17,396,900      23,110,455

PROPERTY AND EQUIPMENT, At cost:
  Leasehold improvements                                                        195,862         579,618
  Manufacturing equipment                                                       455,850         678,800
  Office furniture and equipment                                              1,043,222       2,693,847
  Transportation equipment                                                      124,765
  Data processing equipment                                                     558,148       2,148,027
                                                                           ------------    ------------
          Total                                                               2,253,082       6,225,057
  Less accumulated depreciation and amortization                             (1,326,684)     (3,347,843)
                                                                           ------------    ------------

          Property and equipment, net                                           926,398       2,877,214

NOTES RECEIVABLE - LONG-TERM                                                  2,945,007       4,615,495

OTHER ASSETS                                                                  1,096,200         670,827
                                                                           ------------    ------------
TOTAL ASSETS                                                               $ 22,364,505    $ 31,273,991
                                                                           ============    ============


LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Amounts due to NSA, Inc.                                                 $  7,793,387    $    923,150
  Accounts payable, trade                                                       913,452       2,556,531
  Accrued sales commissions and allowances                                      246,603         771,868
  Accrued compensation and expenses                                           2,834,976       4,724,392
  Accrued sales returns                                                         368,611       1,196,142
  Advance payments by dealers/distributors                                       95,714         105,079
  Income taxes payable                                                          656,000       1,068,596
  Other current liabilities                                                     186,981         441,300
                                                                           ------------    ------------

          Total current liabilities                                          13,095,724      11,787,058

AMOUNTS DUE TO NSA, INC                                                                       7,900,000

DEFERRED INCOME TAXES                                                            32,000         322,000

OTHER LIABILITIES                                                               929,518       1,058,662

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
  Common stock, $.05 par value, 100,000,000 shares authorized, 4,858,156
    shares issued and outstanding                                               242,908         242,908
  Additional paid-in capital                                                 29,106,950      21,196,430
  Deficit                                                                   (21,042,595)    (11,233,067)
                                                                           ------------    ------------

          Total shareholders' equity                                          8,307,263      10,206,271
                                                                           ------------    ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                 $ 22,364,505    $ 31,273,991
                                                                           ============    ============
</TABLE>

See notes to consolidated financial statements.




                                     -2-
<PAGE>   19

NSA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED APRIL 30, 1997, 1996, AND 1995
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                            1997             1996             1995

<S>                                                    <C>              <C>              <C>           
NET REVENUES:
  Net sales                                            $  35,424,937    $  70,831,868    $ 105,977,808
  Dealer/distributor fee income                              682,374        2,318,464        2,710,854
                                                       -------------    -------------    -------------
 
          Total                                           36,107,311       73,150,332      108,688,662

COSTS AND EXPENSES:
  Dealer/distributor commissions and allowances           (7,472,932)     (28,082,083)     (45,553,564)
  Cost of products sold                                  (19,211,498)     (28,385,494)     (37,732,481)
  Operating expenses                                     (16,536,955)     (26,663,852)     (30,251,635)
  Licensing and management fees to NSA, Inc.                (500,873)      (1,597,737)      (2,471,986)
  Restructuring costs                                     (3,000,000)      (1,000,000)
  Interest income, net                                       694,506          754,835          413,073
  Other income (expense), net                                 88,913           11,514        2,405,466
                                                       -------------    -------------    -------------
 
          Total                                          (45,938,839)     (83,962,817)    (114,191,127)
                                                       -------------    -------------    -------------
 
LOSS BEFORE INCOME TAX BENEFIT                            (9,831,528)     (10,812,485)      (5,502,465)

INCOME TAX BENEFIT                                            22,000          103,000          761,000
                                                       -------------    -------------    -------------
NET LOSS                                               $  (9,809,528)   $ (10,709,485)   $  (4,741,465)
                                                       =============    =============    ============= 
 
LOSS PER COMMON SHARE                                  $       (2.02)   $       (2.20)   $       (0.98)
                                                       =============    =============    ============= 

WEIGHTED AVERAGE NUMBER OF COMMON
  SHARES OUTSTANDING                                       4,858,156        4,858,156        4,858,270
                                                       =============    =============    ============= 

TRANSACTIONS WITH NSA, INC. INCLUDED
  IN THE ABOVE:
    Net sales to NSA, Inc.                             $   9,361,000    $  11,588,030    $   9,301,000
    Cost of products sold (purchased from NSA, Inc.)          45,596        1,162,501        3,180,102
</TABLE>



See notes to consolidated financial statements.                        





                                     -3-
<PAGE>   20


NSA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED APRIL 30, 1997, 1996, AND 1995
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                            
                                                        COMMON STOCK
                                                 -------------------------     ADDITIONAL        RETAINED  
                                                   NUMBER                        PAID-IN         EARNINGS
                                                 OF SHARES          AMOUNT       CAPITAL         (DEFICIT)         TOTAL

<S>                                              <C>          <C>             <C>             <C>             <C>         
BALANCES AT APRIL 30, 1994                       4,858,456    $    242,923    $ 21,199,751    $  4,217,883    $ 25,660,557
  Repurchase of common stock warrants                                               (1,750)                         (1,750)
  Repurchase and retirement of common stock           (300)            (15)           (385)                           (400)
  Net loss                                                                                      (4,741,465)     (4,741,465)
                                                 ---------    ------------    ------------    ------------    ------------

BALANCES AT APRIL 30, 1995                       4,858,156         242,908      21,197,616        (523,582)     20,916,942
  Repurchase of common stock warrants                                               (1,186)                         (1,186)
  Net loss                                                                                     (10,709,485)    (10,709,485)
                                                 ---------    ------------    ------------    ------------    ------------

BALANCES AT APRIL 30, 1996                       4,858,156         242,908      21,196,430     (11,233,067)     10,206,271
  Net loss                                                                                      (9,809,528)     (9,809,528)
  Forgiveness of debt by NSA, Inc.                                               7,910,520                       7,910,520
                                                 ---------    ------------    ------------    ------------    ------------

BALANCES AT APRIL 30, 1997                       4,858,156    $    242,908    $ 29,106,950    $(21,042,595)   $  8,307,263
                                                 =========    ============    ============    ============    ============
</TABLE>


See notes to consolidated financial statements.





                                     -4-
<PAGE>   21

NSA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 30, 1997, 1996, AND 1995
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                  1997            1996             1995
<S>                                                                          <C>             <C>             <C>         

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                                   $ (9,809,528)   $(10,709,485)   $ (4,741,465)
  Adjustments to reconcile net loss to net cash used by operations:
    Non cash restructuring charges                                                475,000                       1,000,000
    Depreciation and amortization                                                 562,441         977,014       1,582,632
    Provision for uncollectible notes receivable                                2,000,000                                
    Loss on sale of property and equipment                                        214,473         132,401         134,813
    (Gain) loss on sale of short-term investments                                   2,293          (6,902)         16,215
    Change in deferred income taxes                                                              (197,000)        903,000
  Changes in assets and liabilities, net of the effects of the sale of
    significant assets of the Company, as discussed in Note 3:
      Receivables, net                                                         (1,133,143)        187,528        (638,816)
      Inventories                                                               3,128,289       2,005,948       1,203,176
      Other assets                                                                367,669         579,316        (794,919)
      Accounts payable, trade                                                  (1,643,079)        191,515         (48,218)
      Accrued sales returns                                                      (827,531)       (589,466)     (1,792,864)
      Advance payments by dealers/distributors                                     (9,365)       (274,317)       (177,875)
      Accrued expenses, other                                                  (3,180,169)     (2,368,413)        254,451
      Income taxes payable and refundable                                        (373,051)      2,137,400        (878,349)
      Other current liabilities                                                  (254,319)         79,427         (25,656)
      Other liabilities                                                          (129,144)       1,000,00                
                                                                             ------------    ------------    ------------

            Net cash used by operating activities                             (10,609,164)     (6,855,034)     (4,003,875)

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of short-term investments                                                                           (3,050,545)
  Proceeds from sale of short-term investments                                                    515,200       3,004,200
  Purchase of property and equipment                                              (39,831)       (532,941)     (1,611,935)
  Proceeds from sale of property and equipment                                     29,119          12,732          39,600
  Proceeds from principal payments on notes receivable                            755,912         500,000                
  Proceeds from the sale of substantially all assets of NSA Polymers, Inc.                                        500,000
                                                                             ------------    ------------    ------------

            Net cash provided (used) by investing activities                      745,200         494,991      (1,118,680)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Repurchase of common stock and warrants                                                          (1,186)         (2,150)
  Advances from (to) NSA, Inc.                                                  6,880,757        (487,317)        894,522
  Principal payments on long-term debt                                                                           (247,864)
                                                                             ------------    ------------    ------------

            Net cash provided (used) by financing activities                    6,880,757        (488,503)        644,508
                                                                             ------------    ------------    ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS                                      (2,983,207)     (6,848,546)     (4,478,047)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                    8,754,770      15,603,316      20,081,363
                                                                             ------------    ------------    ------------

CASH AND CASH EQUIVALENTS, END OF YEAR                                       $  5,771,563    $  8,754,770    $ 15,603,316
                                                                             ============    ============    ============


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Interest paid                                                              $        Nil    $      3,381    $     55,000
  Income taxes refunded (paid), net                                                   Nil       2,045,400         340,000
</TABLE>


SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES:
  See discussion of non cash financing activities at Notes 3 and 7.

See notes to consolidated financial statements.





                                     -5-
<PAGE>   22

NSA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1997, 1996, AND 1995
--------------------------------------------------------------------------------

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      BUSINESS - NSA International, Inc. and Subsidiaries (the "Company") sells
      products which include air and water filtration products, an in-home
      carbonation appliance, and a line of nutritional supplement products. The
      products are distributed through the Company's third-party licensees and
      its direct multi-level marketing network outside the United States and
      through NSA, Inc.'s United States direct multi-level marketing network.
      Also see Note 3.

      BASIS OF CONSOLIDATION - The accompanying consolidated financial
      statements include the accounts of the Company and all subsidiaries. All
      significant intercompany accounts and transactions have been eliminated.

      CASH AND CASH EQUIVALENTS - Certificates of deposit and other debt
      instruments with a maturity of three months or less from the date of
      purchase are considered to be cash equivalents.

      SHORT-TERM INVESTMENTS - Short-term investments consist of certificates of
      deposit, municipal bonds, and corporate bonds which are classified as
      trading securities. The investments are stated at market.

      CONCENTRATION OF CREDIT RISK - Financial instruments which potentially
      subject the Company to concentrations of credit risk consist of cash
      equivalents, short-term investments, foreign exchange forward contracts,
      and receivables, including notes receivable. Substantially all of cash and
      cash equivalents were deposited with major banks covered with only a
      nominal amount of government provided insurance. Short-term investments
      are limited to investment grade bonds or to certificates of deposit with
      major banks. The counterparties to foreign exchange forward contracts are
      limited to major commodity exchanges. The Company continually evaluates
      the financial viability and reputation of each financial institution and
      exchange. Regarding receivables, management believes credit risk beyond
      that already provided for is limited due to geographic dispersion and, for
      notes receivable, collateral backing.

      INVENTORIES - Inventories are stated at the lower of cost (first-in,
      first-out basis) or market and consisted of the following at April 30,
      1997 and 1996:

<TABLE>
<CAPTION>
                                                   1997            1996

<S>                                           <C>             <C>         
Raw materials                                 $  1,784,662    $  5,850,158
Finished goods                                   5,615,235       6,733,874
Accessories                                        806,704       1,933,995
                                              ------------    ------------
      Total at cost                              8,206,601      14,518,027
Reserve for excess and obsolete inventories     (1,101,732)     (4,284,869)
                                              ------------    ------------
      Inventories, net                        $  7,104,869    $ 10,233,158
                                              ============    ============
</TABLE>




                                     -6-
<PAGE>   23


      PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost.
      Depreciation of property and equipment is principally computed by the
      straight-line method over the estimated useful lives of the assets, which
      range as follows:

<TABLE>
        <S>                                               <C>   
        Office furniture and equipment                    2 to 7 years
        Leasehold improvements                            3 to 10 years
        Manufacturing equipment                           3 to 7 years
        Transportation equipment                          3 to 5 years
        Data processing equipment                         5 years
</TABLE>

      Maintenance and repairs are charged to expense as incurred; major renewals
      are capitalized. Gains or losses on retirement or disposition are charged
      to income and respective costs and accumulated depreciation are
      eliminated.

      FOREIGN CURRENCY TRANSLATION AND FOREIGN EXCHANGE FORWARD CONTRACTS - The
      Company's functional currency is the U.S. dollar; therefore, the foreign
      subsidiaries remeasure monetary assets and liabilities at year-end
      exchange rates and inventory, property, equipment, and non-monetary assets
      and liabilities at historical rates. Income and expense accounts are
      translated at the exchange rates in effect on the day of the transaction,
      except for depreciation, which is translated at historical rates. Gains
      and losses resulting from foreign currency transactions (transactions
      denominated in a currency other than the U.S. dollar) are included in net
      income in the period incurred.

      In fiscal 1994, the Company adopted a policy to reduce the effects of
      fluctuations in foreign currency exchange rates associated with certain
      aspects of these investments, principally the monetary assets and
      liabilities of the Company's foreign subsidiaries, by buying or selling
      foreign exchange forward contracts in manners which will generally
      replicate the effects which would occur if related options had been
      purchased. The size of positions held vary based principally on the
      Company's net position of monetary assets and liabilities and on the
      duration and magnitude of the current foreign exchange trend in effect.
      Management believes this practice will partially hedge the effects of
      foreign currency fluctuations on the Company's financial statements, but
      of course cannot assure that this objective will be met. Fair values of
      the foreign exchange forward contracts are estimated using quoted market
      prices of these or comparable instruments; related gains and losses on
      these contracts, as well as the foreign exchange gains and losses
      resulting from translation of the financial statements of the Company's
      foreign subsidiaries, are recognized in other income or expense. Within
      the definitions contained in Statement of Financial Accounting Standards
      No. 119, management considers these contracts to be held for purposes
      other than trading.

      As discussed in Note 3, in fiscal 1997 the Company sold its remaining
      significant foreign operations to certain investor groups. Due to these
      sales, the Company's foreign subsidiaries now have substantially lower
      monetary asset and liability positions. Accordingly, the Company's
      positions taken with respect to foreign exchange forward contracts have
      been substantially reduced as well.

      At April 30, 1997, the Company was not a party to any foreign exchange
      forward contracts and therefore had no unrealized gains or losses or
      margin deposits related thereto as of this date. At April 30, 1996, the
      Company had foreign currency contracts to sell forward the dollar
      equivalent of $800,000 of pound sterling, Swiss franc, and deutsche mark,
      and to buy forward the dollar equivalent of $150,000 Canadian dollars.
      These contracts generally mature within one year and had aggregate
      unrealized gains of approximately $18,000, which were included in net
      income. Margin deposits made for these contracts totalled $618,000 at
      April 30, 1996 and were included in other current assets.





                                     -7-
<PAGE>   24


      The foreign currency translation gains (losses), net of the effects of
      foreign exchange forward transactions, for the years ended April 30, 1997,
      1996, and 1995 totalled approximately $140,000, $460,000, and $2,310,000,
      respectively.

      REVENUE RECOGNITION - Revenues from product sales are recognized upon
      shipment of product. Provision for estimated sales returns is recorded
      based on historical returns rates and current business conditions.

      INCOME TAXES - Deferred income taxes are recorded to reflect the tax
      consequences on future years of differences between the tax bases of
      assets and liabilities and their financial reporting amounts.

      LOSS PER SHARE - Loss per share has been computed by dividing net loss by
      the weighted average number of common shares outstanding. No effect has
      been given to common stock equivalents as they have no dilutive effects.

      EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS - In February 1997, the
      Financial Accounting Standards Board issued Statement No. 128, "Earnings
      Per Share," which is required to be adopted during the Company's fiscal
      year 1998. At that time, the Company will be required to change the method
      currently used to compute its earnings per share and, if necessary, to
      restate all prior periods. Under the new requirements for calculating
      primary earnings per share, the dilutive effects of any outstanding stock
      options will be excluded. As the Company currently has no dilutive
      securities outstanding, Statement No. 128 is not expected to have an
      impact on the calculation of the Company's loss per share for the years
      ended April 30, 1997 and 1996.

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

      RECLASSIFICATIONS - Certain amounts in the 1996 and 1995 financial
      statements have been reclassified to be consistent with the presentation
      of the 1997 financial statements.

2.    RECEIVABLES

      Accounts receivable, trade represents amounts due from the Company's
      third-party licensees and from customers of the Company's domestic
      subsidiaries. Receivables consisted of the following at April 30, 1997 and
      1996:

<TABLE>
<CAPTION>
                                                    1997           1996

<S>                                             <C>            <C>        
Accounts receivable, trade                      $ 2,779,995    $ 1,292,726
Other accounts receivable                           155,136        340,041
Amounts due under revolving credit agreements        82,767        467,214
Less amounts due to dealer/distributors             (45,262)      (164,608)
                                                -----------    -----------
          Total                                   2,972,636      1,935,373
Less allowance for doubtful accounts                               (95,880)
                                                -----------    -----------

          Receivables, net                      $ 2,972,636    $ 1,839,493
                                                ===========    ===========
</TABLE>





                                     -8-
<PAGE>   25


3.    DISPOSALS, NOTES RECEIVABLE, AND PRO FORMA INFORMATION

      During the second quarter of 1997, the Company completed two dispositions
      in which it sold its operating rights and certain fixed assets in Germany,
      Switzerland, and Austria to an unrelated group of investors and sold
      similar assets of Belgium, Holland, and the United Kingdom to a separate
      unrelated group of investors (collectively, the "Buyers"). Consideration
      was received in the form of notes receivable which provide for annual
      payments of principal and interest over the next six and seven years. As
      the rates on the notes are substantially less than current market rates,
      these notes were discounted to a present value of $1,510,000 using the
      then-current U.S. Prime rate of 8.25%. The gain on the sales of $630,000
      is being deferred, as the Buyers did not make any payments to the Company
      as of the closing dates; this deferred gain is offset against the related
      notes receivable on the accompanying balance sheet and will be ratably
      recognized by the Company as the notes are collected. The notes receivable
      are secured by liens on substantially all fixed assets, inventories, and
      accounts receivable of the Buyers. These dispositions obligate the Buyers
      to assume responsibilities for future multi-level direct selling
      operations in these countries.

      As of the close of business on April 30, 1996, the Company sold certain
      inventories, fixed assets, and prepaid expenses of National Safety
      Associates, Ltd. (NSA Canada or the "Seller") to a group of investors (the
      "Buyer"), which included certain members of the Seller's management. In
      conjunction with the acquisition, the Buyer has assumed responsibility for
      future multi-level direct selling operations in Canada, with the Company
      continuing to sell certain goods at market prices and provide certain
      administrative and marketing support for a monthly fee. Consideration was
      received in the form of a note receivable totalling $740,495, which
      approximated the net book value of the assets sold. The note receivable
      bears interest at 8.25% per annum and is secured by liens on substantially
      all fixed assets, inventories, and accounts receivable of the Buyer.

      SUPPLEMENTAL PRO FORMA FINANCIAL INFORMATION (UNAUDITED) - As a result of
      the aforementioned disposals, the Company believes that the following pro
      forma financial information is important to enable the reader to obtain a
      meaningful understanding of the Company's results of operations. The pro
      forma financial statements are for informational purposes only to
      illustrate the estimated effects of the disposal of certain assets and
      operating responsibilities of operations in Canada, Germany, Switzerland,
      Belgium, Holland, Austria, and the United Kingdom on NSA International had
      they occurred as of May 1, 1995. Such pro forma financial statements may
      not necessarily reflect the future results of operations of NSA
      International or what the losses or results of operations of NSA
      International would have been had it disposed of these assets and
      operating responsibilities as of May 1, 1995.


Pro Forma Condensed Consolidated Statement of Operations
Years Ended April 30, 1997 and 1996 (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

1997                         HISTORICAL     ADJUSTMENTS     PRO FORMA

<S>                         <C>            <C>             <C>        
Net revenues                $36,107,311    $7,005,720(a)   $29,101,591
                            ===========    ==========      ===========

Loss before income taxes    $(9,831,528)   $7,111,136(a)   $(2,720,392)
Income tax benefit               22,000           Nil(b)        22,000
                            -----------    ----------      -----------

          Net loss          $(9,809,528)   $7,111,136      $(2,698,392)
                            ===========    ==========      ===========

Loss per common share (c)   $     (2.02)                   $     (0.55)
                            ===========                    ===========
</TABLE>





                                     -9-
<PAGE>   26

<TABLE>
<CAPTION>
1996                          HISTORICAL      ADJUSTMENTS      PRO FORMA

<S>                         <C>             <C>              <C>        
Net revenues                $ 73,150,332    $37,766,199(a)   $35,384,133
                            ============    ===========      ===========

Loss before income taxes    $(10,812,485)   $ 5,888,404(a)   $(4,924,081)
Income tax benefit               103,000            Nil(b)       103,000
                            ------------    -----------      -----------

          Net loss          $(10,709,485)   $ 5,888,404      $(4,821,081)
                            ------------    -----------      -----------

Loss per common share (c)   $      (2.20)                    $     (0.99)
                            ============                     ===========

</TABLE>

      The April 30, 1997 balance sheet presented in the accompanying financial
      statements reflects the disposal of these assets and operating rights for
      the above-mentioned countries, as these were disposed of prior to this
      date.

      INTRODUCTION TO NOTES TO SUPPLEMENTAL PRO FORMA FINANCIAL INFORMATION - 
      The following is a summary of adjustments reflected in the pro forma 
      condensed consolidated statement of operations.

      NOTES TO SUPPLEMENTAL PRO FORMA FINANCIAL INFORMATION -

      (a)   To eliminate the gross sales, cost of revenues, and commissions
            expense related to these disposals and to reinstate the sales and
            cost of sales from NSA International to these units, and to
            eliminate costs and expenses directly attributable to these
            disposals which management does not believe would have been incurred
            by NSA International had the disposals taken place prior to the 1996
            fiscal year. Sales are estimated based on contractual prices and the
            actual quantities sold in 1997 and 1996.

      (b)   The estimated income tax effects for the pro forma adjustments
            described in note (a) above are expected to be nil, as the Company
            has sufficient net operating losses available in each relevant
            country.

      (c)   Historical and pro forma loss per common share are computed based on
            net loss divided by the weighted average number of common shares
            outstanding.

      On February 1, 1995, the Company sold substantially all assets of its
      manufacturing subsidiary, NSA Polymers, Inc. The assets were purchased by
      a group of investors (the "Buyer"), including certain members of NSA
      Polymers, Inc.'s management, for $5,000,000. This consideration was
      composed of $500,000 cash paid at closing and notes receivable totalling
      $4,500,000. The first note, totalling $500,000, was collected during
      fiscal 1996. The remaining note, totalled $4,000,000 at inception, bears
      interest at 8.5% per annum, and is secured by liens on all assets except
      certain accounts receivable of the Buyer. The net book value of the assets
      related to the transaction approximated consideration received, therefore
      no significant gain or loss resulted therefrom.

      In conjunction with the sale, the Company agreed to minimum purchases at
      prevailing market prices from the Buyer totalling $7,000,000 in the first
      twelve months following the date of the sale, $6,000,000 in the next
      twelve month period, and $5,500,000 in the following twelve months. Actual
      purchases for the twelve months ended January 31, 1997 and 1996 totalled
      approximately $5,521,846 and $5,050,000, resulting in the Company paying
      penalties of approximately $0 and $722,000, respectively, to the Buyer. In
      the event future purchase levels are not met, the Company must pay
      additional penalties of up to 36% of the difference between them and the
      actual purchases made. The remaining purchase commitment as of April 30,
      1997 is $4,125,000.





                                     -10-
<PAGE>   27

      Principal payments on notes receivable relating to the above dispositions
      are scheduled to be received as follows:

<TABLE>
<S>                                                                 <C>        
1998                                                                $   550,000
1999                                                                    860,328
2000                                                                    897,296
2001                                                                  1,026,406
2002                                                                  1,221,225
Thereafter                                                            1,569,752
                                                                    -----------
          Total                                                       6,125,007
Less:
  Allowance for uncollectible notes                                  (2,000,000)
  Deferred gain                                                        (630,000)
  Notes receivable - short-term                                        (550,000)
                                                                    -----------

          Notes receivable - long-term                              $ 2,945,007
                                                                    ===========
</TABLE>



      Based on their rates of interest, security, and other characteristics, 
      and after consideration of the recorded allowance for uncollectible notes,
      management believes the recorded values of the notes receivable
      approximate their fair values.

4.    INCOME TAXES

      The Company and its domestic subsidiaries file a consolidated federal
      income tax return. The Company's foreign subsidiaries file separate
      returns in the respective countries of domicile.

      The components by region of loss before income taxes are as follows:

<TABLE>
<CAPTION>
                       1997            1996            1995

<S>               <C>             <C>             <C>          
U.S.              $ (2,226,036)   $   (208,892)   $ (3,574,205)
Foreign             (7,605,492)    (10,603,593)     (1,928,260)
                  ------------    ------------    ------------ 

          Total   $ (9,831,528)   $(10,812,485)   $ (5,502,465)
                  ============    ============    ============
</TABLE>



The components of the income tax benefit are as follows:

<TABLE>
<CAPTION>
                       1997          1996          1995
<S>               <C>           <C>            <C>        

Current:
  Federal         $    22,000   $   (62,000)   $ 1,580,000
  Foreign                           (32,000)        84,000
                  -----------   -----------    -----------

          Total        22,000       (94,000)     1,664,000
Deferred:
  State
  Federal                                         (584,000)
  Foreign                           197,000       (319,000)
                                -----------    -----------
          Total                     197,000       (903,000)
                  -----------   -----------    -----------
          Total   $    22,000   $   103,000    $   761,000
                  ===========   ===========    ===========
</TABLE>





                                     -11-
<PAGE>   28

      A reconciliation of the Company's actual income taxes for the years ended
      April 30, 1997, 1996, and 1995 to that obtained by applying the U.S.
      federal statutory income tax rate against pre-tax income is as follows:

<TABLE>
<CAPTION>
                                                1997           1996           1995

<S>                                        <C>            <C>            <C>        
Federal income tax benefit, at U.S. 
  federal statutory rate                   $ 3,342,720    $ 3,676,000    $ 1,870,000
Effect of different rates applied to the
  operations of the foreign subsidiaries                                      50,000
Effect of unused net operating losses       (3,265,867)    (3,579,000)      (986,000)
Foreign sales corporation                                                    (63,000)
Other differences                              (54,853)         6,000       (110,000)
                                           -----------    -----------    -----------

          Income tax benefit               $    22,000    $   103,000    $   761,000
                                           ===========    ===========    ===========
</TABLE>

      Deferred income taxes reflect the net tax effects of (a) temporary
      differences between the carrying amounts of assets and liabilities for
      financial reporting purposes and (b) operating loss and tax credit
      carryforwards. The tax effects of significant items comprising the
      Company's deferred taxes as of April 30, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>


                                                            1997            1996

<S>                                                    <C>            <C>        
Deferred tax assets:
  Reserves not currently deductible                    $ 1,280,000    $   502,000
  Intercompany profit-in-inventory elimination              24,000
  Uniform capitalization of inventory                       69,000         93,000
  Operating loss carryforwards                             884,000      6,729,000
                                                       -----------    -----------
          Total                                          2,233,000      7,348,000
Valuation allowance                                     (2,201,000)    (7,026,000)
                                                       -----------    -----------
          Total deferred tax asset                          32,000        322,000
Deferred tax liabilities:
  Differences between book and tax basis of property                       47,000
  Net foreign currency translation gain                     32,000        275,000
                                                       -----------    -----------
          Total deferred tax liability                      32,000        322,000
                                                       -----------    -----------

          Net deferred tax asset (liability)           $       NIL    $       NIL
                                                       ===========    ===========
</TABLE>



      The Company has net operating loss carryforwards totalling approximately
      $2,600,000 which are available for future reductions of income taxes in
      the United States and which expire in 2011. The Company also has
      substantial net operating loss carryforwards available in various other
      countries. However, due to the sale of certain operating assets and
      operating rights as discussed in Note 3, management does not expect to be
      able to utilize the remaining foreign net operating loss carryforwards.
      Giving effect to this expectation, the Company now considers only
      operating loss carryforwards of the United States to qualify for deferred
      tax asset recognition. This change had the effect of reducing each of the
      deferred tax asset and the related offsetting valuation allowance by
      approximately $5,750,000 as of April 30, 1997.

      The valuation allowance of $2,201,000 and $7,026,000 in 1997 and 1996,
      respectively, has been provided because it is more likely than not that a
      substantial portion of the deferred tax assets will not be realized. The
      valuation allowance decreased by $4,825,000 in 1997 and increased by
      $4,389,000 in 1996.





                                     -12-
<PAGE>   29

5.    LEASES

      The Company leases office space in the U.K. under a noncancellable
      operating lease expiring in 2016. In October 1995, the Company abandoned
      the location and signed a sublease agreement with an unrelated party. A
      loss of $1,000,000, representing the excess of future rent expense over
      sublease income discounted at 8%, was recognized in the second quarter of
      fiscal 1996.

      The Company is currently leasing warehouse and office space under numerous
      other non-cancelable operating leases. Lease terms generally range from
      one to twenty-five years with options to renew at varying terms. Rent
      expense under operating leases totalled approximately $1,770,351,
      $1,684,153, and $2,015,000 for the years ended April 30, 1997, 1996, and
      1995, respectively. In 1997 and 1996, the Company received sublease
      rentals of $64,980 and $40,000, respectively.

      The future minimum lease payments and related sublease payments receivable
      under these agreements are as follows:

<TABLE>
<CAPTION>
                                                                                    MINIMUM        SUBLEASE
                                                                                     LEASE         PAYMENTS
YEAR ENDING APRIL 30                                                               PAYMENTS       RECEIVABLE

<C>                                                                              <C>             <C>       
1998                                                                             $ 1,653,838     $  636,369
1999                                                                               1,581,935        651,819
2000                                                                               1,237,537        507,475
2001                                                                                 514,967        194,940
2002                                                                                 514,967        194,940
Thereafter                                                                         8,103,006      4,646,070
                                                                                 -----------     ----------

          Total                                                                  $13,606,250     $6,831,613
                                                                                 ===========     ==========

</TABLE>

6.    EMPLOYEE BENEFITS PLAN

      The Company's domestic subsidiaries participate in NSA, Inc.'s defined
      contribution plan to provide full-time employees, with a minimum of 1,000
      hours of service and who are employed at year-end, with additional income
      upon retirement or termination. The Company may elect to make annual
      contributions to the plan equal to a discretionary percentage of the
      participant's annual salary, to the extent the participant's salary does
      not exceed $150,000, as defined. The Company made no contributions to the
      plan during 1997, 1996, and 1995.

7.    TRANSACTIONS WITH NSA, INC.

      At April 30, 1997 NSA, Inc. owns 2,336,180 shares of the Company. Four of
      the shareholders of NSA, Inc. also serve as directors of the Company.





                                     -13-
<PAGE>   30

      The Company sells nutritional supplement products, air treatment systems,
      in-home beverage appliances, and certain water filtration product
      components to NSA, Inc. The Company purchases certain water filtration
      products and certain related accessory products from NSA, Inc. Certain of
      the Company's subsidiaries and its third-party licensees are parties to
      licensing and/or management agreements with NSA, Inc. that provide for
      fees payable to NSA, Inc. equal to a percentage of sales and/or allocation
      of certain costs incurred by NSA, Inc. in providing management and
      administrative services. Costs incurred by NSA, Inc. in providing
      management and administrative services include general management,
      financial reporting, benefits administration, insurance,
      information-systems, and other miscellaneous services. These allocations
      are based primarily on the percentage of sales of each company to total
      sales of both. Management believes that these allocations were made on a
      reasonable basis. However, the allocations are not necessarily indicative
      of the level of expenses that might have been incurred had the Company
      operated on a stand-alone basis. Management has not made a study or any
      attempt to obtain quotes from third parties to determine what the cost of
      obtaining such services from third parties would have been.

      NSA, Inc. has also provided funding on a payable upon demand and
      non-interest bearing basis for equipment purchases and working capital.

      NSA, Inc. also guarantees the terms and obligations of NSA U.K.'s two
      twenty-five year operating lease agreements, one location of which has
      been subleased to an unrelated party, through November 28, 2013 and June
      23, 2016, respectively, for office and warehouse space. The annual rental
      payments total approximately $500,000, excluding the sublease rentals.
      Also see Note 5.

      On July 21, 1994, the Company completed the sale of its exclusive rights
      and inventory in Wings, an educational product, and The Knowledge Network,
      an educational catalog product, to NSA, Inc. The total purchase price of
      $5,500,000 approximated the book value of the related assets and was
      determined based upon an independent valuation. NSA, Inc. assumed a $1.1
      million note payable and the remainder of the purchase price was settled
      as a reduction of the amounts due to NSA, Inc.

      On July 9, 1996, the Board of Directors of NSA, Inc. made a $7,910,520
      capital contribution to the Company in the form of forgiveness of amounts
      due from certain direct selling subsidiaries of NSA International.





                                     -14-
<PAGE>   31
8.  GEOGRAPHIC SEGMENT DATA AND MAJOR CUSTOMERS

    Financial information, summarized by geographic area, is as follows:

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30, 1997               UNITED STATES   CANADA/MEXICO       EUROPE     ELIMINATIONS     CONSOLIDATED
<S>                                     <C>             <C>                            <C>                         
Total revenues:
  Unaffiliated customers                $  5,406,373                   $ 21,339,226                    $ 26,745,599                
  Sales to NSA, Inc.                       9,361,712                                      9,361,712                
  Interarea sales                          2,126,976                                   $ (2,126,976)           
                                        ------------                   ------------    ------------        
          Total                         $ 16,895,061                   $ 21,339,226    $ (2,126,976)   $ 36,107,311
                                        ============                   ============    ============    ============

Loss before income taxes                $ (2,226,036)   $    105,165   $ (7,710,657)                   $ (9,831,528)
                                        ============    ============   ============                                

Identifiable assets                     $ 24,846,365    $  2,746,729   $  9,295,773    $(14,809,078)   $ 22,079,789
                                        ============    ============   ============    ============    ============

Corporate assets
                                                                                                            284,716
                                                                                                       ------------
          Total assets                                                                                 $ 22,364,505
                                                                                                       ============

Depreciation and amortization expense   $     91,241                   $    471,200                    $    562,441
                                        ============                   ============                    ============
 
Capital expenditures                    $      2,169                   $     37,662                    $     39,831
                                        ============                   ============                    ============                
</TABLE>
                                        




                                     -15-
<PAGE>   32

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30, 1996               UNITED STATES   CANADA/MEXICO      EUROPE      ELIMINATIONS     CONSOLIDATED
                                        
<S>                                     <C>             <C>            <C>             <C>             <C>         
Total revenues:
  Unaffiliated customers                $  3,459,376    $  4,805,151   $ 53,297,775                    $ 61,562,302
  Sales to NSA, Inc.                      11,588,030                                                     11,588,030
  Interarea sales                          3,455,008                                   $ (3,455,008)                
                                        ------------    ------------   ------------    ------------    ------------

          Total                         $ 18,502,414    $  4,805,151   $ 53,297,775    $ (3,455,008)   $ 73,150,332
                                        ============    ============   ============    ============    ============

Loss before income taxes                $   (208,892)   $     14,902   $(10,618,495)                   $(10,812,485)
                                        ============    ============   ============                    ============

Identifiable assets                     $ 21,238,400    $  2,174,434   $ 17,442,971    $ (9,807,542)   $ 31,048,263
                                        ============    ============   ============    ============                

Corporate assets                                                                                            225,728
                                                                                                       ============

          Total assets                                                                                 $ 31,273,991
                                                                                                       ============

Depreciation and amortization expense   $    134,714    $     56,981   $    785,319                    $    977,014
                                        ============    ============   ============                    ============

Capital expenditures                    $          0    $     27,815   $    505,126                    $    532,941
                                        ============    ============   ============                    ============
</TABLE>


<TABLE>
<CAPTION>
YEAR ENDED APRIL 30, 1995                UNITED STATES   CANADA/MEXICO        EUROPE         ELIMINATIONS    CONSOLIDATED

<S>                                     <C>              <C>              <C>              <C>              <C>          
Total revenues:
  Unaffiliated customers                $   4,504,565    $   5,360,501    $  89,522,596                     $  99,387,662
  Sales to NSA, Inc.                        9,301,000                                                           9,301,000
  Interarea sales                           4,990,675                                      $  (4,990,675)
                                        -------------    -------------    -------------    -------------    -------------

          Total                         $  18,796,240    $   5,360,501    $  89,522,596    $  (4,990,675)   $ 108,688,662
                                        =============    =============    =============    =============    =============

Loss before income taxes                $  (3,574,205)   $    (218,750)   $  (1,709,510)                    $  (5,502,465)
                                        =============    =============    =============                     =============

Identifiable assets                     $  24,590,248    $   2,992,989    $  25,589,851    $  (8,696,861)   $  44,476,227
                                        =============    =============    =============    =============                 

Corporate assets                                                                                                  167,545
                                                                                                            =============

          Total assets                                                                                      $  44,643,772
                                                                                                            =============

Depreciation and amortization expense   $     553,747    $     324,412    $     704,473                     $   1,582,632
                                        =============    =============    =============                     =============

Capital expenditures                    $     118,506    $      45,264    $   1,448,165                     $   1,611,935
                                        =============    =============    =============                     =============

</TABLE>


      In addition to NSA, Inc., the Company had one major customer in 1997,
      accounting for 10% of the Company's total revenue. There were no major
      customers other than NSA, Inc. in 1996 and 1995.

9.    LITIGATION, COMMITMENTS, AND OTHER CONTINGENCIES

      During fiscal 1997, a former employee of a wholly-owned subsidiary of the
      Company has filed a workers' compensation complaint against the subsidiary
      in the State of Florida. Claims alleged by the plaintiff include injuries
      resulting from alleged toxic exposure during employment. The case is
      currently proceeding with mediation and is scheduled for trial in late
      September 1997.

      In April 1997 an unrelated company filed a complaint seeking injunctive
      relief and damages from a wholly-owned subsidiary of the Company and
      several other unrelated parties. Claims alleged by the plaintiff include
      breach of contract, trademark infringement, unfair competition and
      deceptive trade practices. The complaint alleges that the defendants
      manufactured and/or distributed products developed by the plaintiff and
      containing their registered trademark without their knowledge or consent.





                                     -16-
<PAGE>   33

      The Company believes that the above matters lack merit and intends to
      contest them vigorously; however, the outcomes cannot be predicted with
      certainty. The amount of any liability which might finally exist cannot be
      reasonably be estimated and no provision for loss has been made in the
      accompanying financial statements.

      The Company is party to various other claims and matters of litigation
      that arise in the normal course of business. Management believes the
      resolution of these matters will not have a material adverse effect on the
      results of operation or the financial condition of the Company.

      The Company has an employment contract with certain officers. Remaining
      minimum commitments under the agreements total $450,000 at April 30, 1997.

10.   RESTRUCTURING CHARGES

      During the first quarter of 1997, the Company announced its decision to
      close its European headquarters. Accordingly, a restructuring charge
      totalling $3,000,000 was reflected during the first quarter of fiscal
      1997. As of April 30, 1997, the restructuring reserve has been fully
      utilized as follows: $475,000 to writedown fixed assets to net realizable
      value; $1,125,000 to write-off certain sales materials which are obsolete
      as a result of the restructuring; $425,000 to recognize costs associated
      with early terminations of leases; $500,000 to recognize termination costs
      of certain employees; and $475,000 for salary and other shutdown expenses
      related to the restructuring.

      In the third and fourth quarters of 1995, the Company recorded a
      restructuring charge totalling $1,000,000 to reflect the closing of its
      Mexican operation. The charge included estimates to write-down inventory
      and fixed assets to net realizable value and to recognize employee
      termination costs.

11.   STOCK OPTION PLAN

      On February 18, 1997, the Board of Directors of the Company approved,
      subject to shareholder approval, the adoption of the NSA International,
      Inc. 1997 Incentive and Non-Qualified Stock Option Plan (the "Plan").
      Under the terms of the Plan, options on up to 500,000 shares of the
      Company's common stock may be issued to eligible officers, directors, and
      key employees of the Company and its subsidiaries, as well as advisors and
      consultants thereto. Vesting provisions, exercise price, and duration of
      the options shall be as determined by the Plan committee, which will
      consist of at least two directors of the Company; in no event, however,
      will the exercise price be below fair market value of the Company's common
      stock at the date of grant, nor will the duration of the options exceed
      ten years from date of grant. No stock options may be issued under the
      Plan after the expiration of ten years from the date the Plan becomes
      effective, and in no event after November 30, 2007. No options have been
      issued under the Plan as of April 30, 1997.





                                     -17-
<PAGE>   34

12.   QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
                                       1ST QUARTER        2ND QUARTER        3RD QUARTER         4TH QUARTER
<S>                                     <C>                <C>                <C>                <C>        
Year ended April 30, 1997:
  Total revenues                        $ 13,609,726       $ 9,441,997        $ 7,433,358        $ 5,622,230
  Gross margin                             7,645,498         4,400,138          2,523,467          2,326,710
  Net loss                                (4,507,001)         (854,312)        (1,440,409)        (3,007,806)
  Net loss per common share                    (0.93)            (0.17)             (0.30)             (0.62)
</TABLE>


<TABLE>
<CAPTION>
                                       1ST QUARTER        2ND QUARTER        3RD QUARTER         4TH QUARTER
<S>                                     <C>                <C>                <C>                <C>        
Year ended April 30, 1996:
  Total revenues                        $ 21,632,028       $ 18,421,847       $ 18,347,914       $14,748,543
  Gross margin                            13,618,413         11,666,489         11,758,154         7,721,782
  Net loss                                (2,428,233)        (3,019,606)        (2,734,673)       (2,526,973)
  Net loss per common share                    (0.50)             (0.62)             (0.56)            (0.52)
</TABLE>


      SIGNIFICANT FOURTH QUARTER ADJUSTMENTS - During the fourth quarter of
      fiscal 1997, the Company wrote down the value of certain notes receivable
      by $2,000,000 to reflect the estimated collectible amounts. This writedown
      was reflected as an operating expense in the accompanying financial
      statements.

                                     *******




                                     -18-
<PAGE>   35

                                                                     SCHEDULE II

NSA INTERNATIONAL, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED APRIL 30, 1997, 1996, AND 1995
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                               CHARGED TO           CHARGED
                                                 BALANCE AT     SALES OR            TO OTHER                            BALANCE
                                                 BEGINNING      EXPENSES            ACCOUNTS           DEDUCTIONS       AT END

<S>                                            <C>           <C>                                     <C>            <C>           
1997
Allowance for doubtful accounts                $    95,880   $   (11,770)                            $   (84,110)              
Allowance for uncollectible notes receivable                   2,000,000                                            $ 2,000,000
Accrued sales returns                            1,196,142       (10,454)                               (817,077)       368,611
                                                                                                                               
1996                                                                                                                       1996
Allowance for doubtful accounts                    745,145      (113,928)                               (535,337)        95,880
Accrued sales returns                            1,785,608        32,447                                (621,913)     1,196,142
                                                                                                                               
1995                                                                                                                       1995
Allowance for doubtful accounts                    797,296       245,601                                (297,752)       745,145
Accrued sales returns                            3,578,472      (188,193)                             (1,604,671)     1,785,608
</TABLE>
                                                                      
(1)  Accounts written off during the period.
(2)  Actual sales returns during the period consisted of:

<TABLE>
<CAPTION>
                                                     SALES                INVENTORY         COMMISSIONS           NET SALES
                                                    RETURNS               RETURNED         CHARGED BACK            RETURNS
                                               
<C>                                              <C>                      <C>               <C>                <C>         
1997                                             $(1,919,213)             $123,337          $  978,799         $  (817,077)
1996                                              (2,188,681)              450,541           1,116,227            (621,913)
1995                                              (4,829,540)              761,294           2,463,575          (1,604,671)
</TABLE>


<PAGE>   36



Item 9.   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure.

          None.

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.

          The following table sets forth certain information regarding the
directors and executive officers of the Company and its subsidiaries. Pursuant
to the Company's Charter and Bylaws, members of the Board of Directors are
elected for staggered two-year terms. Except for those executive officers with
employment agreements, the executive officers of the Company and its
subsidiaries serve at the discretion of the Company's Boards of Directors. See
"Employment Agreements."
                                                            Director     Term  
Name                     Age    Position(s)                  Since      Expires
----                     ---    -----------                  -----      -------
DIRECTORS:

A. Jay Martin(1)         55     President and Director        1989      1998

Charles R. Evans, Jr.    53     Chief Operating Officer 
                                and Executive 
                                Vice-President and Director   1992      1998

J. Neil Rood             64     Director                      1989      1998

George R. Poteet         49     Director                      1989      1997

L.F. Swords              56     Director                      1989      1997

William W. Deupree, Jr.  56     Director                      1992      1997

William L. Gurner        51     Director                      1996      1997

EXECUTIVE OFFICERS:
-------------------
                                                                       Officer
                                                                        Since
                                                                        -----
Stan C. Turk             45     Chief Financial Officer
                                and Secretary-Treasurer                 1989

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

(1)       Mr. Martin is also a director and executive officer of NSA. Mr.
          Martin devotes approximately 60% of his management time to the
          operations of the Company.



                                      20

<PAGE>   37



         A. Jay Martin has served as President and as a director of the Company
since its inception in March 1989. Mr. Martin founded National Safety
Associates, Inc., a Tennessee corporation ("NSA"), in 1969 and has served NSA
in various capacities since its inception. Presently, Mr. Martin is a
shareholder and serves as President and a director of NSA.

         Charles R. Evans, Jr. has served as a director as well as the
Executive Vice-President and the Chief Operating Officer of the Company since
August 1992. Mr. Evans joined NSA Polymers in March 1989 and served as Vice
President, Assistant Secretary and a director of NSA Polymers until August
1992. From 1984 until March 1989, he was Treasurer of Florida Polymers, Inc., a
Florida corporation, the assets of which were acquired by the Company in March
1989 and which was primarily engaged in the business of plastics injection
molding and tool and die manufacturing.

         J. Neil Rood has been a director of the Company since its inception.
In April 1992, Mr. Rood was elected President of NSA Holdings, Inc. and, in
December 1992, Mr. Rood was elected Vice President-International Operations for
the Company. In December 1993, Mr. Rood completed his tenure as Vice
President-International Operations. Mr. Rood is a shareholder of NSA. In April
1982, Mr. Rood organized and became President of Jonfor Systems, Inc. In June
1975, Mr. Rood organized and became President of Jonfor, Inc. Both entities are
privately-held Florida corporations which act as holding and operating
companies, respectively, for various retail businesses and real estate
properties. Mr. Rood is also active in various real estate ventures as a
developer and an owner.

         L.F. Swords has been a director of the Company since its inception.
Mr. Swords has been employed by NSA since 1971 in a variety of management
positions. From 1989 until March 1, 1994, Mr. Swords served as
Secretary-Treasurer and Chief Financial Officer of the Company and all of its
subsidiaries. Presently, Mr. Swords is a shareholder, and serves as Vice
President, Chief Financial Officer, Secretary-Treasurer, and a director of NSA.

         George R. Poteet has served as a director of the Company since its
inception. Since 1971, Mr. Poteet has been employed by NSA and he presently is
a shareholder and serves as Vice President-Manufacturing and a director of NSA.
From 1989 until February 1994, Mr. Poteet served as the Vice President -
Manufacturing of the Company.

          William W. Deupree, Jr., a director of the Company since October
1992, retired as President of Morgan Keegan & Company, Inc. and its parent
company, Morgan Keegan, Inc., a New York Stock Exchange listed company, in 1996
after 10 years in such positions. Mr. Deupree joined Morgan Keegan & Company,
Inc. in 1972. He is a past member of the Regional Firms Advisory Committee of
the New York Stock Exchange as well as a past member of the Board of Directors
for the Securities Industry Association. Mr. Deupree is a director of Morgan
Keegan & Company, Inc. and Equity Inns, Inc. Mr. Deupree is a graduate of the
University of the South.

          William L. Gurner, 51, has served as a director of the Company since
December 1996. Mr. Gurner founded Sector Capital Management, L.L.C. in January
1995. That entity offers an equity product to public and corporate pension
plans, Taft-Hartly plans and foundations. Prior to starting Sector Capital
Management, L.L.C., Mr. Gurner was the pension officer for Federal Express from
1987 through 1994.

         Stan C. Turk was appointed Chief Financial Officer and
Secretary-Treasurer of the Company on July 1, 1996. Mr. Turk was elected
Assistant Treasurer of the Company in May 1991. Since August 1989, Mr. Turk has
been employed as Assistant Treasurer of NSA. Prior to joining NSA in 1989, Mr.
Turk served as the Chief Financial Officer of Barton Equipment Company and
Barton Truck Center in Memphis, Tennessee and spent approximately 9 years
employed as a certified public accountant.

Board of Directors Committees.

          The Board of Directors has appointed two committees: the Compensation
Committee and the Audit Committee. The members of the Compensation and Audit
Committees are Messrs. Swords, Deupree and Gurner.

                                      21


<PAGE>   38



Section 16(a) Beneficial Ownership Reporting Compliance Rules.

         Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act")
requires the Company's officers and directors and persons who own more than 10%
of a registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC"). Such officers, directors and shareholders are required by SEC
regulations to furnish the Company with copies of all such reports that they
file.

         Based solely on a review of copies of reports furnished to the
Company, the Company believes that, during the fiscal year ended April 30,
1997, all persons subject to the reporting requirements of Section 16(a) filed
the required reports on a timely basis except as follows:

         On July 1, 1996, Mr. Stan C. Turk became an officer of the Company
subject to Section 16(a) of the Exchange Act. Although the Form 3 as
required by the Exchange Act was not timely filed, on January 20, 1997, a Form
5 was filed correcting this inadvertent failure.
         
Item 11.  Executive Compensation.

         The following table sets forth the aggregate compensation paid by the
Company and its subsidiaries to the President of the Company and the two most
highly compensated executive officers of the Company or its subsidiaries, for
services rendered in all capacities during the fiscal years ended April 30,
1997, 1996, and 1995.
<TABLE>
<CAPTION>
                                             SUMMARY COMPENSATION TABLE

                                                              Annual Compensation
                                               ------------------------------------------------  
                                                                                 Other Annual        All Other
Name and Principal Position           Year        Salary ($)      Bonus ($)    Compensation ($)    Compensation
---------------------------           ----        ----------      ---------    ----------------    ------------
<S>                                   <C>              <C>          <C>               <C>            <C>
A. Jay Martin                         1997             150,000      10,528            --                 --
President of the Company              1996             150,000       6,058            --                 --
                                      1995             150,000          -0-           --                 --
                                                                                                 
Charles R. Evans, Jr.                 1997             160,226      78,029            --              8,400(2)
Chief Operating Officer               1996             225,000       7,001            --                 --
of the Company                        1995(1)          135,000      56,250            --                 --
                                                                                                 
                                                                                                 
John Greenham                         1997             120,750      25,000            --             31,704(2)
Vice President - Europe               1996             139,844      26,128            --             49,757(2)
                                      1995              90,268      20,000            --             69,663(2)
</TABLE>
                                                                 
---------------------------                              
(1)       During the first quarter of 1995, the Company paid Mr. Evans $22,500
          pursuant to an oral employment agreement between the parties.
(2)       Represents housing, school fees, expenses and/or car allowance.

          The non-employee directors of the Company currently receive $1,000 for
each Board of Directors meeting. The directors of the Company's subsidiaries do
not receive any compensation for serving in such capacities.

                                      22


<PAGE>   39



         Employment Agreements.

         The Company has an employment agreement with Mr. A. Jay Martin. The
employment agreement is renewable annually and provides for an annual salary of
$150,000. The Company also has an employment agreement with Mr. Charles Evans 
which provides for annual compensation equal to $225,000.

         Compensation Committee Interlocks and Insider Participation.

         Mr. L.F. Swords serves as a member of the Compensation Committee of
the Company's Board of Directors. From 1989 until March 1, 1994, Mr. Swords
served as Secretary-Treasurer and Chief Financial Officer of the Company and
all of its subsidiaries. Mr. Swords has not served as an officer of the Company
since March 1, 1994.

Item 12.  Security Ownership of Certain Beneficial Owners and Management.

         The following table sets forth the number of shares beneficially owned
as of July 22, 1997, by (a) each person known by the Company to beneficially
own more than 5% of the outstanding shares of Common Stock, (b) each director
or executive officer of the Company, and (c) all directors and executive
officers of the Company as a group.

<TABLE>
<CAPTION>
                                                                  Amount and Name
        Name and Address of                                        of Beneficial                    Percent
         Beneficial Owner                                           Ownership(1)                  of Class(2)
        -------------------                                       ---------------                 -----------
<S>     <C>                                                         <C>                              <C> 
(a)     National Safety Associates, Inc.                            2,336,180(3)                     48.1
        4260 East Raines Road
        Memphis, Tennessee 38118

        A. Jay Martin                                               2,755,135(4)                     56.7
        4260 East Raines Road
        Memphis, Tennessee 38118

        L.F. Swords                                                 2,474,266(5)                     50.9
        4260 East Raines Road
        Memphis, Tennessee 38118

(b)     A. Jay Martin                                               2,755,135(4)                     56.7

        L.F. Swords                                                 2,474,266(5)                     50.9

        George R. Poteet                                              164,041                         3.4
        4180 Pilot
        Memphis, TN 38118

        J. Neil Rood                                                   40,733                          *
        12192 Mandarin Road
        Jacksonville, FL 32223

        William W. Deupree, Jr.                                        15,000                          *
        50 North Front Street, 21st Floor
        Memphis, TN 38103

        Charles R. Evans, Jr.                                           8,800                          *
        4260 East Raines Road
        Memphis, TN 38118
</TABLE>

                                      23


<PAGE>   40

<TABLE>
<CAPTION>
                                                                  Amount and Name
        Name and Address of                                        of Beneficial                    Percent
         Beneficial Owner                                           Ownership(1)                  of Class(2)
        -------------------                                       ---------------                 -----------                       
<S>                                                                 <C>                              <C>
        William L. Gurner                                               - 0 -                          *
        40 South Main Street
        Memphis, TN 38103

        Stan C. Turk                                                    4,700                          *
        4260 East Raines Road
        Memphis, TN 38118

(c)     Officers and directors                                      3,126,495(4)                     64.3
        as a group (8 persons)
</TABLE>

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

(1)      Includes shares of Common Stock as to which such person, directly or
         indirectly, through any contract, arrangement, understanding,
         relationship, or otherwise has or shares voting power and/or
         investment power. Unless otherwise indicated, each listed shareholder
         possesses sole voting and investment power with respect to all of the
         shares shown opposite his name.
(2)      Based upon 4,858,156 shares issued and outstanding.
(3)      Messrs. Martin and/or Swords, as the President and Secretary-Treasurer
         of NSA, respectively, acting separately or jointly, have the power to
         vote or to direct the vote, and to dispose of or to direct the
         disposition of, the shares owned by NSA, unless otherwise instructed
         by the Board of Directors of NSA.
(4)      Includes the 2,336,180 shares held by NSA for which Messrs. Martin
         and/or Swords have the power to vote or to direct the vote, and to
         dispose of or to direct the disposition of. Also includes the indirect
         beneficial ownership of 9,000 shares held by Mr. Martin's child for
         which Mr. Martin disclaims beneficial ownership.
(5)      Includes the 2,336,180 shares held by NSA for which Messrs. Martin
         and/or Swords have the power to vote or to direct the vote, and to
         dispose of or to direct the disposition of.

*        Indicates less than 1%.

Item 13.  Certain Relationships and Related Transactions.

         Sales of Juice Plus+(R) products to NSA totaled approximately
$9,300,000 or 26% of the Company's revenues for the fiscal year ended April 30,
1997.

         At April 30, 1996, the Company owed approximately $8,823,000 to NSA
for product purchases, management and licensing fees, and cash advances for
equipment purchases and working capital. Such borrowings were payable upon
demand and are non-interest bearing. On July 9, 1996, NSA made an approximate
$7.9 million capital contribution to the Company by forgiving $7.9 million of
the outstanding indebtedness owed to NSA by the Company's European
direct-selling subsidiary organizations. At April 30, 1997, the Company owed
approximately $7,793,000 to NSA for cash advances for working capital, product
purchases and management fees.

         Prior to May 1, 1993, the Company purchased from NSA the majority of
the water filtration and related accessory products which it sold in Canada,
the United Kingdom, Ireland, Germany, Mexico, Switzerland, the Netherlands and
Belgium. The Company still purchases certain water filtration and related
accessory products from NSA. The cost of such purchases was approximately
$46,000 for the fiscal year ended April 30, 1997.

         NSA provides certain management, consulting and advisory services to
the Company. In consideration for these services, the Company pays to NSA any
and all amounts collected by the Company from the Company's Master Distributors
in exchange for data processing services offered to such Master Distributors by
the Company. The amount paid by the Company to NSA was $500,873 for the fiscal
year ended April 30, 1997.

                                      24


<PAGE>   41



         In April 1991, the Company obtained a line of credit for $5,000,000
from National Bank of Commerce. Mr. Williams, a former director of the Company,
was at the time the Executive Vice President and Senior Commercial Loan Officer
of the Commercial Banking Group of National Bank of Commerce. Any amounts
advanced to the Company by National Bank of Commerce pursuant to this line of
credit were to bear interest at the Bank's prime rate. As of April 30, 1997, no
amounts were outstanding under the line of credit.

         NSA has guaranteed the obligations of National Safety Associates of
America (U.K.) Limited ("NSA UK") under the lease agreements pursuant to which
NSA UK leases approximately 12,800 square feet in Maidenhead, Berkshire,
England.

         Effective February 1, 1995, the Company sold substantially all of the
assets of NSA Polymers to its management for $5 million. In order to determine
an appropriate purchase price, the Company had an evaluation and fairness
opinion prepared by an unrelated third party which is in the business of
rendering such opinions. The fairness opinion provided that a purchase price of
$5 million was fair to the Company and its shareholders. The purchase price for
the NSA Polymers assets consisted of a $500,000 cash payment at the closing
from the Buyer to NSA Polymers, delivery of the buyer's promissory note in the
principal amount of $500,000 which is due and payable six months from the
closing date, and delivery of the buyer's promissory note in the principal
amount of $4 million which is due and payable over an eight year period. The
$500,000 and $4 million notes are secured by the fixed assets of the buyer. As
additional consideration for the purchase of the NSA Polymer's assets, the
Company entered into a 5 year manufacturing contract with the buyer which
requires that certain minimum purchase levels be maintained by the Company. The
Company satisfied such minimum purchase levels in fiscal 1997.

         There have not been, and it is the Company's current intention that
there will not be, loans or other financial transactions between the Company
and its officers, directors or significant employees. However, to the extent
such loans or financial transactions do occur in the future, they will be
approved by the Company's disinterested and independent directors and will be
on terms no less favorable to the Company than could be obtained from
unaffiliated parties.

                                    PART IV
<TABLE>
<CAPTION>
Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
<S>     <C>       <C>
(a)      (1)      Financial Statement Schedule

                  Schedule II Valuation and Qualifying Accounts Years Ended
                  April 30, 1977, 1996, and 1995
                
         (2)      Exhibits

*        3.1      Amended and Restated Charter of the Company

**       3.2      Bylaws of the Company

*        4.1      Form of Stock Certificate

+       10.3      Amended and Restated Manufacturing License and
                  Distribution Agreement between Smokey Santillo and the
                  Company dated March 31, 1994.
              
***     10.4      Manufacturing Agreement between the Company and Polymers, 
                  Inc. dated February 28, 1995.
              
+       10.5      Lease Agreement between the Company and Adobe Systems Europe,
                  B.V. dated July 1, 1993.
              
*       10.6      Lease Agreement between NSA U.K. and Crown Life Pensions
                  Limited dated November 28, 1988.
</TABLE>

                                      25


<PAGE>   42


<TABLE>
<S>      <C>      <C>    
         10.7     Management Agreement between NSA and the Company dated May 1,
                  1996

+        10.8     Distribution and License Agreement between NSA and the 
                  Company dated May 1, 1994.

+        10.9     Exclusive Manufacturing License Agreement between NSA and the
                  Company dated May 1, 1993.

+        10.10    Sales Agreement between NSA and the Company dated May 1, 1994.

+        10.11    Sales Agreement between NSA and NSA Polymers dated May 1, 1994.

+        10.12    Warehousing Agreement between the NSA Netherlands and
                  Expeditiebedrijf Frans Maas B.V. dated April 21, 1994.

+        10.13    Manufacturing Agreement between the Company and Natural
                  Alternatives International, Inc. dated April 1, 1993.

+        10.14    First Amendment to the Exclusive Manufacturing License
                  Agreement between the Company and NSA dated May 1, 1993.

****     10.15    Asset Purchase Agreement between National Safety Associates,
                  Ltd. and National Safety Associates of Canada, Inc.

+        10.16    Employment Agreement between A. Jay Martin and the Company
                  dated May 1, 1994. *****

+        10.17    Employment Agreement between Charles R. Evans and the
                  Company dated August 1, 1994. *****

         10.18    Registrant's 1997 Incentive and Non-Qualified Stock Option
                  Plan. *****

         21.1     List of Subsidiaries of the Company.

         *        Incorporated by reference to exhibits filed with the
                  Company's Registration Statement on Form 10, Commission File
                  No. 0-19487

         **       Incorporated by reference to exhibits filed with the 
                  Company's Registration Statement of Form S-18 Registration
                  No. 33-42158-A

         +        Incorporated by reference to exhibits filed with the
                  Company's Form 10-K for the year ended April 30, 1995.

         ***      Incorporated by reference to exhibits filed with the
                  Company's 8-K on March 7, 1995.

         ****     Incorporated by reference to exhibits filed with the
                  Company's 8-K on May 15, 1996.

         *****    Management Compensatory Plan

(b)      Reports on Form 8-K

         None.

(c)      Financial Data Schedule (for SEC purposes only)
</TABLE>

                                      26


<PAGE>   43



                                   SIGNATURES

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

                                                 NSA INTERNATIONAL, INC.

                                                 By: /s/ A. Jay Martin
                                                    ---------------------------
                                                    A. Jay Martin, President

                                                 Date: July 25, 1997
                                                      -------------------------


         Pursuant to the requirements of the Securities and 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.

<TABLE>
<CAPTION>
       SIGNATURE                          TITLE                         DATE
<S>                              <C>                               <C>
/s/ A. Jay Martin
---------------------------      President and Director            July 25, 1997
A. Jay Martin


/s/ Stan C. Turk                 Secretary-Treasurer and           July 25, 1997
---------------------------      Chief Financial Officer           
Stan C. Turk


/s/ George R. Poteet             Director                          July 25, 1997            
---------------------------                                                                 
George R. Poteet                                                                            
                                                                                            
                                                                                            
/s/ J. Neil Rood                 Director                          July 25, 1997            
---------------------------                                                                 
J. Neil Rood                                                                                
                                                                                            
                                                                                            
/s/ Charles R. Evans, Jr.        Executive Vice-President, Chief   July 25, 1997            
---------------------------      Operating Officer and Director                             
Charles R. Evans, Jr.                                                                       
                                                                                            
                                                                                            
/s/ William W. Deupree, Jr.      Director                          July 25, 1997            
---------------------------                                                                 
William W. Deupree, Jr.                                                                     
                                                                                            
                                                                                            
/s/ William L. Gurner            Director                          July 25, 1997            
---------------------------                                                                 
William L. Gurner                                                                           
                                                                                            
                                                                                            
/s/ L. F. Swords                 Director                          July 25, 1997            
---------------------------                                                                 
L. F. Swords                 
</TABLE>


                                       22