EUROMED, INC.
                           8214 WESTCHESTER SUITE 500
                               DALLAS, TEXAS 75225
                                  214-692-3544
                                  214-987-2091



December 01, 1998


Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Attention:        John L. Krug
                  Mail Stop 7-6

Re:               EuroMed, Inc.

Dear Mr. Krug:

         On behalf of EuroMed,  Inc. (the  "Company"),  this letter  responds to
your comment  letter dated  October 10, 1997.  The responses set forth below are
numbered to correspond to the numbered comments in your letter.


         General

1. Current  Managment is not aware of any inquiry  being made by the Division of
Enforcement.

                                 Proxy Statement

         The  Preliminary  Proxy  Statement  on  Schedule  14A  filed  with  the
Commission  originally  filed on July 1997,  which is the subject of your August
20, 1997 and  October  10,  1997  comment  letters,  has been  abandoned  by the
Company.  At the  time it was  filed  the  Proxy  Statement  sought  stockholder
approval for a transaction,  not because stockholder approval was required under
Nevada law, but because the purchaser in the transaction required it in order to
release  certain  funds to the Company  from  escrow.  The  escrowed  funds were
subject to reduction  at certain  periods if  stockholder  approval had not been
obtained.   Management   of  the  Company  made  the  decision  to  abandon  the
solicitation  of proxies in light of the time and expense  necessary to complete
the process.
         This response letter,  therefore, does not respond to the comments that
relate solely to the Proxy Statement.


<PAGE>


                 Amendment No. 4 to Form 10-K for the Year Ended
                                December 31, 1996


Management's Discussion and Analysis

         Results of Operations

10.      The changes have been made as requested.

11. The changes have been made as requested.


         Liquidity

12. The changes have been made as requested.


         Nasdaq Delisting

13.  There is no way to know  what  effect  the  delisting  had on the  value or
marketability  of the Company's  stock.  Prior to the delisting the price of the
Common Stock had been declining.


Change in Registrant's Certifying Accountant

14. On  November  19,  1996,  KPMG  Accountants  N.V.  ("KPMG")  resigned as the
Company's auditors. As a result of this resignation, Killman, Murrell & Company,
P.C.  was asked to provide  audit  services  for the Company in  February  1997.
Michael  Killman,  managing  shareholder,  traveled to Amsterdam in mid-February
1997 to discuss the proposed audit with the Company's  management and with KPMG.
KPMG was contacted by Mr. Killman and the  resignation  was discussed in detail.
The explanation as outlined by KPMG is as follows:

         !        KPMG had audited the combined company since 1993.

         !        KPMG has issued an audit proposal and engagement letter for 
the 1996 year end.

         !        Deloitte & Touche ("Deloitte") were the auditors for 
Mutarestes B.V. which was acquired by the
                  Company in July, 1996.

         !        Deloitte requested an opportunity to propose on the 1996 
consolidated audit and Mr. Francois Hinnen (CEO of the Company) allowed 
Deloitte to propose without telling KPMG.

     ! KPMG  found out  about the  competing  proposal.  As a result,  KPMG sent
written  notice to the  Company  that their  proposal  had to be  accepted  by a
certain date.

     ! Mr.  Hinnen did not respond to the notice given by KPMG on a timely basis
because he was waiting on a dollar estimate of fees by Deloitte. KPMG terminated
their proposal and resigned as the Company's auditors.

KPMG did not respond to the Company's  request for information  since Mr. Hinnen
was fully aware of the cause of their resignation.


Financial Statements

15. - 23.  Comments  15 through  43 are being  addressed  in a  separate  letter
enclosed herewith by the Company's  independent auditors,  Killman,  Murrell and
Company.

24.      See the responses to the Comments above.

Part I
Tuesday
Item 1 Business


Wholesale Pharmaceutical Market and Competition in the European Union

25. In refrence to the Company's estimates of the European pharmaceutical market
data, please refer to the 424(b) filed on March 19, 1996.

Item 3. Legal Proceedings

26. Mr.  Jansonius did not communicate his reasons for resigning his position as
a member of the Board of  Directors  of the Company to the current  officers and
directors of the Company.

Part III

Item 10. Directors and Executive Officers of EuroMed, Inc.

27.      Mr.  Shelmire  served as  Director  of  Corporate  Finance  at  LaJolla
         Securities  Corporation  from January 1994 to March of 1995.  Mr. Shuey
         served  as  Director  of  Corporate   Finance  at  LaJolla   Securities
         Corporation  from March of 1995 to  October of 1996.  Prior to that Mr.
         Shuey  served  as  Director  of  Corporate   Finance  with  Dillon-Gage
         Securities Corporation from January 1994 to March of 1995.


Part IV

Signatures

The Form  10-K/A No. 4 has been  signed by the  Company's  principal  accounting
officer and principal financial
officer.





        Forms 10-Q for the Periods Ended March 31, 1997 and June 30, 1997



29.      The changes have been made as requested.

30. Comment 30 is being addressed in a separate letter enclosed  herewith by the
Company's independent auditors, Killman, Murrell and Company.




                          Form 8-K/A Filed July 5, 1996




31. The changes have been made as requested.

32. Comment 30 is being addressed in a separate letter enclosed  herewith by the
Company's independent auditors, Killman, Murrell and Company.

         If I can be of assistance, please call me at 214.692.3544

                                                              Sincerely,
                                                            Elbert G. Tindell
                                                          Chairman of the Board

cc:RES~1.Robert A. Shuey, III
         Jesse Shelmire, IV
         Mike Killman
         Richard F. Dahlson

<PAGE>


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                                        

                                   Form 10-K/A
   
                                (Amendment No. 4)
    
(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: December 31, 1996

                                       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 No. 0-27720

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

                                  EUROMED, INC.
             (Exact name of registrant as specified in its charter)

                         Nevada                           88-031770
                   (State or other               (IRS Employer  Identification
                  jurisdiction                       No.)
              of incorporation or organization)

                       Wilhelminakanaal Noord 6, NL 4902VR
                           Oosterhout, The Netherlands
                    (Address of principal executive offices)

                               011-31-16-242-4424
               Registrant's telephone number, including area code

           Securities registered pursuant to Section 12(b) of the Act

          Title of each class Name of each exchange on which registered
                                                          None
                                   None

     Securities  registered  pursuant to Section 12(g) of the Act: Common Stock,
par value $.01 per share (Title of Class)

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

    Indicate by check mark if disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-K 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.

    The aggregate market value of the voting stock held by non-affiliates of the
registrant  as computed by reference to the average of the closing bid and asked
prices of such  stock,  as  reported by the  Bulletin  Board,  on April 10, 1997
($1.3125)  was  $1,664,250.  Shares of voting  stock  held by each  officer  and
director  and by each person who owns 10% or more of the  Company's  outstanding
voting  stock  have  been  excluded  in that  such  persons  may be deemed to be
affiliates.  This  determination  of  affiliate  status  is  not  necessarily  a
conclusive determination for other purposes.

   
     The  number  shares  outstanding  of the  registrant's  common  stock as of
December  01, 1998 was:  1,407,000  shares of common  stock,  par value $.01 per
share.
    
================================================================================


<PAGE>



                                  EUROMED, INC.

                      For the Year Ended December 31, 1996

                                Table of Contents
<TABLE>
<CAPTION>

                                                                                                         Page
                                  Part I
<S>                              <C>                                                                     <C>

                        Item      Business
   
                        :1                                                                                 3
                        Item 2:   Properties                                                              12
                        Item 3:   Legal Proceedings                                                       12
                        Item 4:   Submission of Matters to a Vote of Security Holders                     13
    

                                  Part II

                        Item 5:   Market for the  Registrant's  Common Equity and Related  Stockholder    13
                                  Matters
                        Item 6:   Selected Financial Data                                                 14
                        Item 7:   Management's  Discussion  and  Analysis of Financial  Condition  and
                                  Results
                                  of Operations                                                           14
                        Item 8:   Financial Statements and Supplementary Data                             18
                        Item 9:   Changes in and Disagreements with Accountants on Accounting and
   
                                  Financial Disclosure                                                    36
    

                                  Part III

   
                        Item 10:  Directors and Executive Officers of EuroMed, Inc                        36
                        Item 11:  Executive Compensation                                                  38
                        Item 12:  Security Ownership of Certain Beneficial Owners and Management          40
                        Item 13:  Certain Relationships and Related Transactions                          40
    

                                  Part IV

   
                        Item 14:  Exhibits, Financial Statement Schedules, and Reports on Form 8-K        42
    
</TABLE>


<PAGE>



                                     PART I

    This Report Form contains certain forward-looking statements and information
relating  to the  Company  that  are  based  on  the  beliefs  of the  Company's
management as well as assumptions made by and information currently available to
the Company's  management.  When used in this document,  the words "anticipate,"
"believe," "estimate" and "expect" and similar expressions as they relate to the
Company or  management  of the Company are intended to identify  forward-looking
statements.  Such  statements  reflect  the current  views of the  Company  with
respect to future  events and are subject to certain  risks,  uncertainties  and
assumptions,  including the risk factors  described in this Report Form.  Should
one or more of these risks or uncertainties  materialize,  or should  underlying
assumptions  prove  incorrect,  actual  results may vary  materially  from those
described herein as anticipated,  believed,  estimated or expected.  The Company
does not intend to update these forward-looking statements.

Item 1. Business

Overview

    EuroMed was incorporated as Swiss Nassau  Corporation on May 17, 1994, under
the laws of the State of Nevada.  The Company amended its name to EuroMed,  Inc.
on  October  20,  1995.   The  Company's   principal   offices  are  located  at
Wilhelminakanaal  Noord  6, NL  4902 VR  Oosterhout,  The  Netherlands;  and the
telephone  number is  011-31-16-242-4424.  The  Company  was formed as a holding
company  for the  purpose of  acquiring  companies  operating  in the health and
medical services industry. Effective November 17, 1995, the Company acquired all
of the issued and outstanding  capital stock of EuroMed Europe,  B.V.  ("EuroMed
Europe") which company owns all of the issued and  outstanding  capital stock of
Galenica and Confedera.  EuroMed  Europe is a holding  company for Confedera and
Galenica and does not have any operations. In July 1996, EuroMed acquired all of
the capital stock of Mutarestes B.V., a Netherlands  limited liability  company,
and its  wholly-owned  operating  company,  Pluripharm  International,  B.V.,  a
Netherlands limited liability company  ("Pluripharm").  EuroMed has entered into
an agreement to sell Pluripharm. See "Item 7. Management Discussion and Analysis
of Financial  Condition and Results of Operation -- Subsidiary  Divestiture  and
Capital Stock Restructuring" below.

    EuroMed,  Inc.  ("EuroMed"  or  the  "Company")  is  engaged,   through  its
wholly-owned Netherlands subsidiaries,  Galenica B.V. ("Galenica") and Confedera
B.V. ("Confedera"),  in (i) the parallel import of "EuroSpecialties",  which are
prescription  ("ethical")  branded  pharmaceuticals,   registered  and  marketed
throughout  Europe under  international  patent and a European  brand;  (ii) the
wholesale  distribution  of  EuroSpecialties  and  generic   pharmaceuticals  to
pharmacies  and  other  wholesalers  in The  Netherlands;  (iii)  the  wholesale
distribution  of  DutchSpecialties,  which are ethical  branded  pharmaceuticals
under  international  patent,  registered  and marketed as a brand  specifically
within The  Netherlands;  (iv) the wholesale  distribution  of  over-the-counter
("non-ethical")  pharmaceuticals  to  pharmacies  and other  wholesalers  in The
Netherlands;  and (v) the sale of  EuroSpecialties  to other  wholesalers in The
Netherlands. The Company is licensed through The Netherlands Ministry of Health,
Welfare and Sports ("Ministry of Health") to import and trade in pharmaceuticals
and  controlled  substances.  The  Company  is  further  subject  to  the  Royal
Netherlands  Pharmaceutical  Inspection  ("Pharmaceutical  Inspection"),   which
authority controls the exercise of the Company's pharmaceutical licenses and its
rights  to  import,   purchase,   sell,   market,   manufacture  and  distribute
pharmaceuticals  in The  Netherlands.  Although  the  Company is licensed in The
Netherlands to manufacture pharmaceuticals,  at present it is not engaged in any
manufacturing.

   
    EuroSpecialties,  DutchSpecialties  and  generics  are  registered  with The
Netherlands  government  in The Hague  through the  Medicines  Evaluation  Board
("MEB"), a Dutch governmental  institution  comparable to the U.S. Food and Drug
Administration   which   authority   controls   the   registration   of  ethical
pharmaceuticals  in The Netherlands.  Registering  pharmaceuticals  with the MEB
affords   the  Company  the  right  to  sell   pharmaceuticals.   Generics   are
therapeutically  equivalent  ethical  pharmaceuticals   manufactured  after  the
expiration of any patents, and marketed as more competitively priced substitutes
for  branded  ethical  pharmaceuticals.  Parallel  imports  are  EuroSpecialties
purchased within Europe's supranational free market, the fifteen member European
Union  ("EU"),  imported  into The  Netherlands,  often  repackaged in the Dutch
language,  and  resold  wholesale  to  pharmacies  and other  wholesalers  at an
arbitrage  profit.  Arbitrage  is primarily  the result of pricing  practices of
multinational  pharmaceutical  companies,  differing  national health and social
policies among EU member  states,  and currency  fluctuations  within the EU. In
summary,  the price  differences for identical  EuroSpecialties  in different EU
member states make parallel  trade,  or the trade of registered  pharmaceuticals
from a low-price market into a high-price market,  particularly attractive.  The
fifteen member states of the EU are Austria,  Belgium, Denmark, Finland, France,
Germany,  Greece, Great Britain,  Ireland, Italy,  Luxembourg,  The Netherlands,
Portugal,  Spain and Sweden. The Company currently purchases  EuroSpecialties in
Belgium, France, Germany, Great Britain, Greece, Italy and Spain.
    

    The  International  Pharmacy  Journal  reported  in  1995  that  33%  of all
prescriptions in The Netherlands  were  substituted with less expensive  generic
and  EuroSpecialty  pharmaceuticals.  This  was  encouraged,  according  to  the
International  Pharmacy  Journal,  by measures of The Netherlands  government to
economize  in the state  subsidized  health  care  sector on some of the highest
pharmaceutical prices in Europe. On June 1, 1994, The Netherlands pharmaceutical
industry reduced retail  pharmaceutical  prices by 5% in a voluntary response to
pressures from The Netherlands government for a 7% reduction in the retail price
for  pharmaceuticals.  In 1995,  the  Ministry of Health  proposed a decrease in
pharmaceutical  prices to the level of neighboring EU member states and in April
1996, The  Netherlands  Senate  approved  legislation  which would reduce prices
significantly  to  approximately  the  average  prices  for  pharmaceuticals  in
Belgium,  France,  Germany and Great  Britain.  The  Netherlands  pharmaceutical
market averaged very little growth in 1996, with total revenue of $2.3 billion.

    The  Company's  primary  business   strategies   include  the  expansion  of
Galenica's  wholesale  pharmaceutical  business in EuroSpecialties  and generics
with pharmacies and other wholesalers throughout The Netherlands and the EU, the
expansion of  Confedera's  niche market within the EU in the parallel  import of
EuroSpecialties,  and the expansion of Confedera's generic pharmaceutical export
business  worldwide.  Further,  the  Company  will  continue  to  seek  business
operations outside The Netherlands through the acquisition of healthcare related
companies or assets.

    The Company's sales have increased from $6,780,000 in 1992 to $35,471,000 in
1996.

Galenica

    Galenica,  founded in 1988, is a wholesale  pharmaceutical  distributor,  to
pharmacies   within   The   Netherlands,   of  the   following   products:   (i)
EuroSpecialties;    (ii)    DutchSpecialties;    (iii)   generics;    and   (iv)
non-prescription pharmaceuticals.  Galenica maintains an inventory of over 6,000
pharmaceutical  products,  including  controlled  substances,  and the  licenses
required  from  the  Ministry  of  Health  for  the  wholesale  distribution  of
pharmaceuticals  and controlled  substances.  Galenica is further subject to The
Netherlands  Pharmaceutical Inspection which oversees Good Distribution Practice
("GDP") quality control norms for the distribution of pharmaceuticals.

    In 1994,  Galenica  expanded  its  range  of  wholesale  pharmaceuticals  in
response to the demands from client pharmacies for a more comprehensive  variety
of pharmaceuticals.  In prior years, Galenica focused its wholesale distribution
resources  within  a more  limited,  but  profitable,  range  of  pharmaceutical
products. As a result of this change in its marketing philosophy, the assortment
of   pharmaceuticals   in   Galenica's   inventory   increased   to  over  6,000
pharmaceutical products.

   
    Greater specialization on the part of the pharmacist also demands specialist
wholesale  services.  Galenica,  therefore,  sells  nothing  but  pharmaceutical
products registered with the MEB. Galenica's  pharmaceutical  inventory consists
of many of the registered pharmaceuticals available in The Netherlands used in a
pharmacy. No peripheral items are included in Galenica's product range, only the
pharmaceuticals   which  form  the  basis  of  pharmaceutical   practice.   This
orientation   to   the   pharmacy    excludes   most   hospital   products   and
para-pharmaceuticals  (medical  consumer  goods  such as  bandages  and  medical
devices) with the exception of some very common products.  Special  attention is
paid to the product mix and the  possibilities  for substitution of a variety of
the more expensive DutchSpecialties with generic or EuroSpecialty products.

    On  February  16,  1996,  Galenica  entered  into an  agreement  with twelve
pharmacists located in The Netherlands  pursuant to which Galenica agreed to pay
the  settlement   payments  owed  by  such   pharmacists   to  Pragmacare   B.V.
("Pragmacare")  for  terminating  their  pharmaceutical  supply  agreements with
Pragmacare,  which payments aggregated  $523,212.  In return for Galenica paying
these  settlement  payments to Pragmacare,  the  pharmacists  agreed to purchase
their  pharmaceuticals from Galenica rather than Pragmacare.  Thus, Galenica was
able  to  establish  a  supply   relationship  with  these  pharmacists.   These
pharmacists  have agreed to repay these  settlement  amounts to Galenica without
interest  over a 24 month period  ending  February 16, 1998,  through  foregoing
pharmaceutical  purchase  discounts  which  would  otherwise  be  paid  to  such
pharmacists by Galenica;  provided,  however,  if any pharmacist  terminates its
supply  relationship  with Galenica before its indebtedness to Galenica has been
paid in full,  it shall owe Galenica  interest on the  original  balance of such
indebtedness at the rate of 8% per annum from inception.

    In February 1997,  EuroMed Europe closed the transactions  contemplated by a
purchase agreement with Pantapharma B.V.  ("Pantapharma") whereby EuroMed Europe
purchased  from  Pantapharma,  a company  owned by Mr. A. Francois  Hinnen,  the
Chairman of the Board of the  Company,  all of the  outstanding  common stock of
Galenica Belgium, S.A. ("Galenica  Belgium").  Although this agreement closed in
February 1997 the transfer of shares is treated as having occurred on January 1,
1996 due to the process of share  transfers  under Dutch law,  which  requires a
valuation statement from a certified accountant. The purchase price was $60,000.
The purchase  price gave rise to the  recognition  of $14,790 of goodwill.  This
goodwill  was  recognized  as  expense  in the  1996  statement  of  operations.
Management  believes that the acquisition of Galenica Belgium will allow EuroMed
to expand into the Belgium  wholesale  pharmaceutical,  OTC  products and active
pharmaceutical ingredients markets.
    

Confedera

    Confedera,   founded  in  1977,   is  a  wholesale   parallel   importer  of
EuroSpecialties, and since 1994 an exporter of generic pharmaceuticals purchased
from throughout the world.  Confedera holds approximately 180 registrations from
the MEB for the parallel  import of  EuroSpecialties.  Confedera  also holds six
registrations  for EuroMed generic  pharmaceuticals.  EuroSpecialties  are often
relabeled and repackaged with inserts in the Dutch  language,  before being sold
to Galenica and other pharmaceutical wholesalers in The Netherlands. Repackaging
is often  necessary for parallel  imports from EU nations such as Italy or Spain
because of the language. When repackaging, normally the original package is only
relabeled  and the product  information  inserts  changed.  Confedera is further
subject  to  The  Netherlands  Pharmaceutical  Inspection  which  oversees  Good
Manufacturing   Practice   ("GMP")  and  GDP  quality   control  norms  for  the
manufacture,  inventory and distribution of  pharmaceuticals.  These regulations
set  quality  control   standards  for  every   pharmaceutical   repackaged  and
distributed  by  Confedera.  Confedera  is licensed by the Ministry of Health to
trade in pharmaceuticals and controlled  substances.  Confedera maintains all of
the  required   registrations   from  the  MEB  for  the   parallel   import  of
EuroSpecialties,  and  though  not  involved  in  the  direct  manufacturing  of
pharmaceuticals,  Confedera  is  licensed  to  manufacture  pharmaceuticals  and
acquire pharmaceuticals from GMP manufacturers.

   
    Confedera entered into a cooperation agreement (the "Cooperation Agreement")
on  July  10,  1995  with  International  Procurement  Agency  B.V.  ("IPA"),  a
Netherlands   based   development   agency   procurer,   for   the   export   of
pharmaceuticals.  Mr.  Hinnen owns 100% of the stock of  Pantapharma  which owns
100% of the stock of Wisteria which owns 33% of the stock of Gentrade which owns
100% of the stock of IPA. The Cooperation Agreement with IPA was the culmination
of a  business  relationship  begun in July  1994,  and  relates  to the sale of
pharmaceutical  products and medical consumer goods (collectively,  the "Goods")
to  foreign  clients.  Under  the  Cooperation   Agreement,   IPA  is  primarily
responsible  for  the  financial,   administrative  and  logistical   activities
concerning  the Goods,  and Confedera is  responsible  for purchasing the Goods,
quality control and the legal documentation  pertaining thereto. The Cooperation
Agreement  further  provides that (i) the parties will equally split the profits
and losses of their activities,  except that Confedera will receive 66.6% of the
profits (and assume the same percentage of the losses) for customers  located by
Confedera; and (ii) as long as Confedera's prices for Goods are competitive, IPA
will purchase Goods  exclusively  from  Confedera,  although  Confedera shall be
entitled to sell Goods to IPA on a nonexclusive basis. The Cooperation Agreement
expires on July 10, 1997,  subject to annual  renewal by the parties;  provided,
however,  that the  Cooperation  Agreement is  automatically  terminated if L.D.
Bruinsma ceases to be a director if IPA or if Mr. Hinnen ceases to be a director
of Confedera.
    

    IPA's  expertise  in  working  with  international   development   agencies,
charities and relief organizations have provided the Company with an entree into
new  international  markets.  As a  consequence  of the  relationship  with IPA,
Confedera has exported  pharmaceuticals  for Catholic Relief Services to Bosnian
war refugees in Croatia, for World Vision USA to Ethiopia and for the World Bank
to Belarus, Kyrgyzstan,  Moldova, Ghana, Niger, Mali, and for the United Nations
in  Vietnam.  Confedera  has  pending  export  orders for the nations of Angola,
Surinam, Cambodia and Mongolia.

Business Strategy

    Product  Focus.  The  Company's  product  strategy  has  been to  focus  its
resources on: (i) the expansion of Galenica's wholesale  pharmaceutical business
in  EuroSpecialties,  DutchSpecialties  and generics with  pharmacies  and other
wholesalers  in The  Netherlands  and the EU; (ii) the expansion of  Confedera's
dossier  of  parallel  import   registrations  for   EuroSpecialties  and  as  a
consequence   its  niche  market  within  the  EU  in  the  parallel  import  of
EuroSpecialties;   (iii)  the  expansion  of  Confedera's   dossier  of  generic
pharmaceutical  products  registration;  and (iv) the  expansion of  Confedera's
generic  pharmaceutical export business worldwide.  The Company is undertaking a
change to its business  strategy (See  "Management's  Discussion and Analysis of
Financial  Condition  and Results of Operation  --  Subsidiary  Divestiture  and
Capital Stock Restructuring").

    Growth Strategy.  The Company continues to seek  opportunities to expand its
operations  geographically  through the development of new distribution  centers
along with  undertaking a strategy to acquire  healthcare  related  companies or
assets outside of the Netherlands,  including  possible  purchases of healthcare
companies  or assets in the  United  States.  Although  the  Company  may pursue
international  mergers,  acquisitions  or  strategic  alliances,  the Company is
currently not a party to any agreements with respect to such transactions.

    Galenica will continue to focus on the development of new pharmacy  clients,
joint ventures and alliances with pharmacy groups in The Netherlands and the EU.
Confedera  will  continue to focus on the  exploitation  of the parallel  import
market for  EuroSpecialties  and generics in The  Netherlands and the EU, and on
the  development  of the  pharmaceutical  export  market  through  international
charitable, development and non-profit organizations.

    Maximum  Price Law. In 1995,  the Ministry of Health  proposed a decrease in
pharmaceutical  prices to the level of  neighboring  EU member  state.  In April
1996, The  Netherlands  Senate approved  legislation  that reduced the prices of
pharmaceuticals significantly (an average of 17.5%) to approximately the average
prices  for  pharmaceuticals  in  Belgium,  France,  Germany  and Great  Britain
("Maximum Price Law"). This legislation determines by decree a maximum price for
any  registered  pharmaceutical.  Therefore the maximum price may not exceed the
arithmetic average of the pharmacy purchase prices of comparable pharmaceuticals
in such  countries.  The  legislation  establishes a prohibition  on the sale of
pharmaceuticals  to  pharmacies at a higher price than the maximum price decree.
The basis for prices in the  reference  EU member  states will be the  generally
accepted  price lists issued less than six months  before the date of the decree
establishing  the  maximum  price.  No  maximum  price  will be  established  if
comparable pharmaceuticals are quoted on the list of only one reference country.
The scope of the Maximum Price Law and the  discretionary  power for the Minster
to set a maximum price by decree is restricted to pharmaceuticals,  which in the
opinion of the Minister should be available to any person at a reasonable price.
The  maximum  prices will be  reviewed  every six months.  EuroMed has pursued a
complaint  procedure against the Maximum Price Law and the method of setting the
maximum price for pharmaceuticals.
(See Item 3 "Legal Proceedings").

   
    This Maximum Price Law took effect June 1, 1996. Prior to the effective date
of the Maximum Price Law, the expenditure for pharmaceuticals in the Netherlands
for 1996  increased  by 5.6%,  compared  with the same period of 1995.  However,
after  the   implementation  of  the  Maximum  Price  Law,  the  expenditure  on
pharmaceuticals in The Netherlands decreased by 8.1% compared to the same period
in 1995. The overall effect on EuroMed was a 15.1% decrease in its reimbursement
on products  sold.  Further,  as a result of The  Maximum  Price Law the Company
experienced  the  following  decreases in  reimbursements:  DutchSpecialties,  a
decrease  of 13.6%;  EuroSpecialties,  a  decrease  of 17.7%;  and  generics,  a
decrease of 20.7%.  Based upon the volume of  pharmaceuticals  dispensed  by the
Netherlands  pharmaceutical  market in the first nine months of 1996,  growth is
expected  to be  0.1%  to  nil.  The  number  of  prescriptions  written  in The
Netherlands increased in 1996 by 2.2%.
    

    Trends in Demand. The Netherlands  pharmaceutical market as a whole averaged
very little  growth in 1996,  with total  revenue of $2.3 billion  dollars.  The
Netherlands  pharmaceutical  market as a whole averaged 3.5% growth in 1995. Due
to the effect of the Maximum Price Law on DutchSpecialties  and price difference
with   EuroSpecialties   and  generic  products  payor   reimbursement   EuroMed
experienced  a  decreased  margin.  As a  consequence,  the  margin  created  by
DutchSpecialty,  EuroSpecialty and substitution decreased by over 40%. It is the
objective of the Ministry of Health to increase prescribing by generic name (for
1996 this was the case in 29.4% of all prescriptions).

Wholesale Pharmaceutical Market and Competition in the European Union

    General.  In the European  pharmaceutical  market,  supply and demand do not
currently  play  the  traditional  free  market  role of  setting  prices.  Most
pharmaceutical sales within the EU are made through a doctor's prescription.  As
most doctors see the well being of the patient as most important and as the cost
of  pharmaceuticals  is  paid in  whole  or in part  by the  state  or  national
insurance  companies,  price  considerations  are not usually  paramount  in the
doctor's choice of pharmaceuticals.  This is one very important reason why price
competition in the European pharmaceutical market is limited.  Compared with the
United  States,  the  relatively low degree of  substitution  of  pharmaceutical
products in Europe with generic or parallel imported  EuroSpecialties is another
element  which  further  reduces  the  scope of real  price  competition  in the
European  pharmaceutical  market.  As a  result,  pharmaceutical  marketing  and
promotion  are more directed to the  qualifications  of the products than to the
price.

    Due to  the  absence  of  substantial  price  competition  in  the  European
pharmaceutical market, some EU member states have imposed some form of direct or
indirect price control. Countries which have historically exercised more control
over individual  pharmaceutical prices are Belgium, France, Greece,  Luxembourg,
Italy,  Portugal and Spain.  In Denmark,  manufacturers  and  importers  are not
restrained  in setting and changing  their  prices.  In the  remaining EU member
states,  varying  methods of price control exist,  including the  application of
reimbursement  systems.  Germany and The Netherlands  have a system of reference
pricing,  pursuant to which  pharmaceuticals  have been grouped  together on the
basis of identical active ingredients (Germany),  or in terms of the therapeutic
effect of the pharmaceutical (The Netherlands).  If the pharmaceutical is priced
above the reference, the patient must pay the difference.  Prices have therefore
converged at the reference price. In Great Britain,  however,  the Department of
Health  controls  individual  companies'  profits on sales made to the  national
health service.  Prices in EU member states such as Portugal,  France, Spain and
Greece are  sometimes up to 50% less,  in the estimate of the Company,  than the
prices for the same products in Denmark, Germany and The Netherlands.

    The European  Market.  The  pharmaceutical  industry  stands to benefit from
substantial  savings in the creation of a single  European  market.  Fundamental
aspects of current  pharmaceutical  marketing  lead to  increased  costs  within
Europe.  The system of  registrations of  pharmaceutical  products is nationally
based.  This  results  in  additional  costs  for  manufacturers  and  wholesale
importers and exporters who must apply for separate registrations throughout the
EU.  Increased  costs also result from the differing  national price control and
reimbursement  systems.  Although the creation of a common  European  market for
pharmaceuticals has been a long standing EU objective, legislation in this field
has gradually  developed in the past few years.  The legislation is aimed at the
gradual  elimination  of various  obstacles to  pharmaceutical  trade in Europe,
while at the same time assuring a high standard of protection of health and life
of humans. With respect to the pricing of pharmaceuticals, progress is much less
advanced.  The considerable  price differences for identical branded products in
different  EU  member   states  make   parallel   trade  (i.e.,   the  trade  of
pharmaceuticals   from  a  low-priced   country  into  a  high-priced   country)
particularly attractive.

    Management  of the  Company  estimates  that  Europe has  approximately  500
pharmaceutical  wholesalers  with  combined  1994  revenues of over $64 billion,
1,200  wholesale  distribution  centers and more than 100,000  pharmacists.  The
Company further  estimates that the majority of the individual  national markets
within the EU are supplied by between  three and five major  companies  with the
exception of Belgium,  Greece, Italy, Spain and Portugal,  where there are still
several dozen or even hundreds of small  cooperatives or family businesses which
supply relatively local clientele.  Within the EU, more strategic  consortia are
being formed between major  multinational  pharmaceutical  companies in order to
share costs and protect market share.  Multinationals  are  strengthening  their
position in the field of generic pharmaceuticals by purchasing competitors.  The
strategy  is to  preclude  the  loss  of  market  share  due  to  the  increased
substitution  of  pharmaceuticals  by generics  and the  expiration  of patents.
Manufacturers  are  expressing  a new  interest  in  direct  sales  in  order to
strengthen  the  preference  for  their  proprietary  products.  There is also a
tendency toward  industrial  restructuring  as a result of the legislation of EU
import and export regulations and controls.

    The Netherlands  Market.  The Netherlands  pharmaceutical  market as a whole
averaged  very little  growth in 1996 with total  revenue of $2.3  billion.  The
Netherlands has approximately 1,530 pharmacies, according to statistics compiled
by  the  Royal   Netherlands   Association  for  the  Advancement  of  Pharmacy.
Pharmacies, clinical hospitals and specialist drugstores comprised 82.9%, 12.3%,
and  4.8%,  respectively,  of The  Netherlands  pharmaceutical  market  in 1994,
according to the Royal Netherlands Association for the Advancement of Pharmacy.

    Market  Share  and  Competition.  Management  estimates  that the  Company's
wholesale   pharmaceutical   market  share  in  The   Netherlands  in  1996  was
approximately  1.5%,  based  upon  an  extrapolation  of the  Company's  revenue
compared with the total revenue of The Netherlands pharmaceutical market. With a
wholesale   pharmaceutical   market  share  of  approximately  40%,   Apothekers
Cooperatie  OPG U.A.  ("OPG") is the largest  pharmaceutical  distributor in The
Netherlands,  followed by ACF Brocacef and  Interpharm  with each  approximately
20%, according to management estimates. The Company's primary competitors in the
pharmaceutical parallel import market in The Netherlands are, in the estimate of
the Company's management, Polyfarma, an OPG subsidiary, with 3.8% of the market,
and Magnafarma, an ACF Brocacef subsidiary, with 3.7%.

    The Price of Pharmaceuticals.  The retail price of pharmaceuticals reflects,
among other things,  direct  production and distribution  costs and research and
development  costs.  These  costs vary  significantly  from  country to country.
Fluctuations  in  exchange   rates,   differential   pricing  by   multinational
pharmaceutical  companies,  and varying levels of pressure exerted by the system
and  social  security  services  in  different  EU  member  states  explain  the
difference in prices within Europe.

    The Incentive Measures.  The incentive measures that were implemented by The
Netherlands  government  in 1988  aim to  substitute  generic  preparations  and
parallel  imports for the  predominantly  more expensive  proprietary  medicinal
products.  The  Netherlands  Central  Health  Care Fees  Organization  has set a
reference price for pharmaceuticals  that allows pharmacies to keep one-third of
the difference between the price of the substitution and the reference price.

    Demographics.  The population of The Netherlands  (approximately 16,000,000)
is  relatively  young  compared  to that  of  other  EU  nations;  however,  The
Netherlands  population  is  maturing  in average  age.  This aging  presents an
opportunity  for growth in  pharmaceuticals.  According  to the  Foundation  for
Pharmaceutical  Statistics  based in The  Netherlands,  persons  of 65 years and
older on average consume 3.5 times as many  pharmaceuticals as persons under 65.
The aging  population  in The  Netherlands  is leading  to a growing  demand for
pharmaceuticals and to strongly rising health care costs.

    Parallel  Trade in  Pharmaceuticals.  The European Court of Justice has held
that  parallel  trade  in  pharmaceuticals  is  legal  because  any  restrictive
agreement or practice which tends to  compartmentalize  the EU and which impedes
or prevents  parallel trade,  and thus  competition,  is not compatible with the
completion of the single market.  Parallel trade began in the 1970s; however, it
has  remained   relatively  small  in  relation  to  the  total  EU  market  for
prescription  pharmaceuticals.  Management  believes  that the  total  volume of
parallel  trade  in  the  EU  is  approximately  2%  of  the  total  market  for
prescription pharmaceuticals.

Government Regulation

    General. Galenica's and Confedera's businesses and operations are subject to
comprehensive  government  regulation in The Netherlands.  Government regulation
includes the detailed inspection of and controls over the distribution,  import,
export,  repackaging  and  relabeling  practices  and  analysis  procedures  for
pharmaceuticals.  In  addition,  the  Ministry  of Health may from  time-to-time
establish  maximum prices for certain  products.  (See "-- Business  Strategy --
Maximum Price Law" above) As the wholesale pharmaceutical  distribution industry
is highly regulated and dependent on national and EU  supranational  health care
and social policies,  there can be no assurance that the regulatory  environment
in which the Company operates will not change  significantly in the future.  The
Company  believes that  regulations  and policies will continue to change,  and,
therefore, intends to regularly monitor developments in this area of the law.

    Pharmaceutical  Registrations and Licenses.  The Company is licensed through
the  Ministry of Health to import and trade in  pharmaceuticals  and  controlled
substances.   The   Company  is  further   subject  to  the  Royal   Netherlands
Pharmaceutical  Inspection   ("Pharmaceutical   Inspection"),   which  authority
controls the exercise of the Company's pharmaceutical licenses and its rights to
import,   purchase.   sell,  inventory,   market,   manufacture  and  distribute
pharmaceuticals in The Netherlands.  The Company's licenses run for an unlimited
period as long as the  business  operations,  buildings  and  procedures  are in
compliance  with GMP and GDP  quality  control  norms.  Although  the Company is
licensed in The Netherlands to manufacture pharmaceuticals, at present it is not
engaged in any manufacturing.

    EuroSpecialties,  DutchSpecialties  and  generics  are  registered  with The
Netherlands  government  in The Hague  through the  Medicines  Evaluation  Board
("MEB"), which authority controls the registration of ethical pharmaceuticals in
The Netherlands. Before it can trade in pharmaceuticals.  the Company must first
apply to the Ministry of Health for a license, and afterwards may apply with the
MEB for registrations of specific  pharmaceuticals it wishes to import and trade
on The  Netherlands  market.  EuroSpecialties  are registered with the MEB after
preparation of an application and dossier specifying the specific pharmaceutical
and the specific country of origin within the EU for importation,  including the
qualifications  of the Company for dealing in the  pharmaceutical.  Registration
fees are approximately  $3,000 per  pharmaceutical  per country of origin,  plus
approximately  $1,000 per year for renewal.  The Company holds 180 registrations
for the import of EuroSpecialties and 6 registrations for generic pharmaceutical
products.

    Confedera  maintains all of the required  licenses for the parallel  import,
packaging,   repackaging,   labelling,   wholesale  deliverance  and  export  of
pharmaceuticals in order for Confedera to conduct its current business. Although
Confedera is not presently  involved in the direct or indirect  manufacturing of
pharmaceuticals,  it holds licenses for these  purposes.  Each country in the EU
imposes licensing requirements on pharmaceutical  importers and exporters and on
wholesale  pharmaceutical  distributors.  In  connection  with the  expansion of
existing  operations and the entry into new markets,  Confedera may therefore be
subject to the compliance standards of other nations.

    Galenica is licensed  through the Ministry of Health to  distribute  ethical
pharmaceuticals  and certain controlled  substances  (opiates)  purchased from a
manufacturer,  wholesale  distributor,  importer or parallel importer.  Galenica
must comply with regulations  regarding operating and security standards for its
distribution facility,  including the storage, sale, delivery and transportation
of   pharmaceuticals.   Galenica  is  further  subject  to  the   Pharmaceutical
Inspection,  which oversees GDP. The Company  believes it is in compliance  with
all  material   regulations   applicable  to  the  wholesale   distribution   of
pharmaceuticals and controlled substances.

    The Netherlands  Political Economy. The Netherlands  government  administers
one of  Europe's  most  comprehensive  welfare  states,  with  taxes and  social
security  premiums  placing the  government  in command of nearly  one-half  the
national  income.  Participation in the health system is compulsory for everyone
earning less than a certain wage,  which includes roughly 70% of the population.
The Netherlands social security covers medical and hospital costs, and insures a
minimum  income  for  people  unable to earn a living  as a result  of  illness,
injury,   unemployment  or  retirement.   As  in  many  nations  of  the  world,
expenditures on health comprise a major part of The Netherlands'  cross domestic
production,  and are  increasing  faster than the cost of living.  This trend is
mainly the result of the  continued  increase  in life  expectancy,  but also in
particular it is due to the progress made by medical and pharmaceutical science,
which in turn gives rise to hopes and demands  that social  security and medical
insurance  will soon not be able to finance.  National  measures  advocated  for
slowing  down this trend affect  everyone  involved in the field of health care,
but  especially  the  pharmaceutical  industry  and  pharmaceuticals,   even  if
pharmaceuticals  constitute an  increasingly  small part of the  expenditure  on
health.

    Reimbursement and Pricing Policies.  The Netherlands  government has decreed
that new  pharmaceuticals  introduced  on the  market  should  only  qualify  in
exceptional  cases for  reimbursement  under the state medical insurance scheme.
This follows the incentive  measure that was  implemented  in 1988 to substitute
generic  preparations and parallel imports for the predominately  more expensive
proprietary  medicinal  products.  Under the incentive  measure,  pharmacies are
allowed to keep  one-third of the  difference  between the price of the parallel
import and the price of the  substituted  pharmaceutical.  The  savings  for the
health insurer is thus twice as high as the incentive for the pharmacy.

    The  Netherlands  government  announced that it intends to remove as many as
possible of the constraints imposed by public and private sector regulations and
market practices. In particular, The Netherlands Ministry of Economic Affairs is
seeking  to make  pharmaceutical  distribution  cheaper  and more  efficient  by
allowing market forces to operate more freely.

Customers and Discounts

    The Company distributes pharmaceuticals to pharmacies and wholesalers in The
Netherlands,  and  exports  pharmaceuticals  to  developing  nations for various
international charitable,  relief and development  organizations.  Export orders
are usually large bulk purchases of pharmaceuticals  destined for redistribution
within the benefit country.  Pharmacy  customers,  however,  generally  purchase
pharmaceuticals  in less than full case lots on a daily  basis as  products  are
needed at the retail level.  Although  sales to  pharmacies  involve small order
quantities,  they typically  generate  relatively  high gross margins.  Galenica
offers its customers  standard industry practice discounts for volume purchases,
timely payment of invoices,  and in special cases,  product discounts for use of
parallel imports.  Galenica operates on a just-in-time  basis to keep costs to a
minimum.  Pharmaceuticals  purchased by 6:00 p.m. are  delivered the next day to
client pharmacies via overnight  courier.  A fully  computerized order and stock
control system ensures smooth and reliable  processing of customer orders,  with
direct electronic ordering via computer modem, or by telephone and fax.

    The Company has from time to time entered into  written  understandings  and
agreements  with  certain  of its  customers  setting  forth  various  terms and
conditions of sale.  Galenica has contracts with three client  pharmacies  which
require the client to purchase a specified volume of  pharmaceuticals  in return
for favorable  discount terms from  Galenica.  The loss of a key customer of the
Company  could have a  material  adverse  effect on the  Company.  Although  the
Company believes that such effect could be minimized through increasing sales to
existing customers,  securing additional  customers within current  distribution
areas and by expanding into new markets, there can be no assurance thereof.

Suppliers

    The  Company  maintains  many  competing  products in  inventory  and is not
dependent upon any single supplier,  although the loss of a major supplier could
adversely  affect the  business  of the  Company.  The Company  distributes  the
products  of  over   seventy   suppliers,   including   the  products  of  major
international  pharmaceutical   manufacturers.   Management  believes  that  the
Company's relationships with its suppliers are generally excellent.

Employees

    As of December  31,  1996,  the Company  employed a working  staff of twenty
five,  including  three  pharmacists,   four  pharmacist  technicians  and  five
part-time employees. The Company also uses the services of ten standby employees
from time-to-time for the repackaging of parallel imports.  The Company does not
have any  collective  bargaining  agreements  and has not  experienced  any work
stoppages  as a result of labor  disputes.  The Company  considers  its employee
relations to be good.

Insurance

   
    The  repackaging and relabeling of  pharmaceutical  products may subject the
Company to product liability or professional  liability as a result of errors in
repackaging  or relabeling  or failure to provide  appropriate  drug  literature
warnings or directions with its  pharmaceutical  products.  The Company could be
liable  for  product  liability  claims  for  defective  products  by  its  mere
participation  in the distribution of  pharmaceuticals,  even though it does not
manufacture or compound such products. The Company presently maintains in effect
the types of  insurance  customary  in the  pharmaceutical  industry,  including
inventory,   transportation,   professional   liability  and  product  liability
insurance.  Galenica  maintains  approximately  $32,500  per event in  transport
coverage  and  approximately  $1,00,000  per event  and  twice  that per year in
liability coverage,  while Confedera maintains  approximately $150,000 per event
in transport coverage and approximately  $1,250,000 per event and twice that per
year in liability  coverage.  Galenica  and  Confedera  have joint  coverage for
inventory/goods in the amount of approximately  $3,650,000 per year. The Company
believes  that its  insurance  protection  is adequate for its present  business
operations,  but  there can be no  assurance  that the  Company  will be able to
maintain its insurance coverage in the future, that such insurance coverage will
be  available on  acceptable  terms,  or that this  insurance  coverage  will be
adequate to cover any and all potential or professional liability claims.
    

Tax Issues

    United States Foreign  Income.  As a United States  corporation,  EuroMed is
taxed on its worldwide income,  including  foreign branch income as earned,  and
foreign  dividends when received.  Double taxation,  under the provisions of The
Netherlands -- United States tax treaty,  effective  January 1, 1994, is avoided
by means of foreign tax credits, subject to certain limitations.
Alternatively, a deduction may be claimed for actual foreign taxes.

    The  Netherlands  Corporate  Income  Tax.  Corporate  income is taxed in The
Netherlands at a rate of 37% on the first 100,000 Dutch Guilders of income,  and
at a rate of 35% on income above 100,000 Dutch Guilders.  Commencing  January 1,
1997, the above 37% was reduced to 36%. As of January 1, 1998, the rate over the
entire  amount of the  corporate  income will be 35%. A  Netherlands  company is
subject to  corporate  tax on its total  foreign  and  domestic  income.  Double
taxation of certain foreign source income,  including  foreign branch income, is
avoided by reducing The  Netherlands tax by the ratio of foreign income to total
income; provided, that the foreign income is subjected to or is considered to be
subjected  to a tax  according  to the  income  that is levied on account of the
other foreign state. A Netherlands  company can claim a deduction for management
service fees and interest paid to foreign  affiliates,  provided such amounts do
not exceed  what would  reasonably  be paid to an  unrelated  entity in an arm's
length  transaction,  and provided the payment of such amounts is not  dependent
upon the profit gained by The Netherlands  company.  Interest and royalties paid
by a Netherlands  company to its foreign parent generally are not subject to The
Netherlands  withholding  tax,  provided  such  amounts do not exceed what would
reasonably be paid to an unrelated entity on an arm's length basis.  Service and
management  fees are not subject to a withholding  tax, unless they constitute a
hidden dividend attracting dividend  withholding tax. There are no provincial or
municipal income taxes in The Netherlands.

    The Netherlands Corporate Capital Gains. Capital gains are taxed as ordinary
income. Capital gains realized by a foreign corporation on the sale of shares of
a Netherlands company in general are not subject to Netherlands taxation, unless
the shares are treated as a passive  investment which is very unlikely where, as
in this case, the seller owns all of the shares of the subsidiary being sold.

    The Netherlands Tax of Capital.  The Netherlands capital tax is payable once
only on each  contribution to the capital of a Netherlands  company.  The tax is
levied at the rate of 1% on the par value of shares  issued or the actual  value
of the contribution, whichever is higher.

    Dividends. Any dividend policy must take into consideration the need, before
distribution of a dividend to  stockholders,  for remittances from the Company's
operating  subsidiaries  in The  Netherlands.  Any dividends  from the Company's
subsidiaries  in The  Netherlands  will be subject to a  withholding  tax in The
Netherlands  of 25%.  Dividends  received  by the Company  from its  Netherlands
subsidiaries  are  taxable  in the  United  States  as  ordinary  income.  These
dividends  are not  eligible  for the  dividends  received  deduction  otherwise
allowed to United States corporate  stockholders on dividends from United States
domestic  corporations.  In the event of a dividend from its  subsidiaries,  the
Company may elect  annually to either  deduct The  Netherlands  withholding  tax
against its income or take the withholding  taxes as a credit against its United
States tax  liability,  subject to United States  foreign tax credit  limitation
rules.

Other Items

    The Company is a Nevada  corporation;  however, a substantial portion of the
Company's  assets are located  outside the United States.  In addition,  certain
members of the management and Board of Directors of the Company named herein are
residents of countries other than the United States.  As a result, it may not be
possible for  investors to effect  service of process  within the United  States
upon such persons or to enforce against such persons or the Company judgments of
courts of the United States  predicated upon civil  liabilities under the United
States  federal  securities  laws.  Since there is no treaty  between the United
States  and  The  Netherlands  providing  for  the  reciprocal  recognition  and
enforcement of judgements,  U.S. judgments are not automatically  enforceable in
The  Netherlands.  However a final judgement for the payment money obtained in a
U.S.  court and not  rendered by default,  which is not subject to appeal or any
other means of  contestation  and is enforceable in the United States,  would on
principle  be  upheld  and be  regarded  by a  Netherlands  court  of  competent
jurisdiction  as  conclusive  evidence  when  asked  to  render  a  judgment  in
accordance  with  such  final  judgment  by a U.S.  court,  without  substantive
re-examination  or  relitigation  on the merits of the subject  matter  thereof,
provided  that  such  judgment  has  been  rendered  by  a  court  of  competent
jurisdiction, in accordance with rules of proper procedure, that it has not been
rendered in  proceedings  of a penal or revenue  nature and that its content and
possible  enforcement  are not contrary to public  policy or public order of The
Netherlands.  Notwithstanding  the  foregoing,  there can be no  assurance  that
United States investors will be able to enforce against the Company,  or members
of the management or Board of Directors or certain  experts named herein who are
residents of The  Netherlands  or countries  other than the United  States,  any
judgments  in civil  and  commercial  matters,  including  judgements  under the
federal securities laws. In addition, there is doubt as to whether a Netherlands
court  would  impose  civil  liability  on the  Company or on the members of the
management or Board of Directors of the Company in an original action predicated
solely upon the federal  securities laws of the United States brought in a court
of  competent  jurisdiction  in The  Netherlands  against  the  Company  or such
members.

Item 2. Properties

    The  Company  leases  its  corporate  executive  offices  and an office  and
warehouse distribution facility in Oosterhout,  The Netherlands of approximately
19,000 square feet, which lease expires upon the earlier of six-months notice or
December  31,  1998,  subject to a  five-year  renewal  among the  parties.  The
Oosterhout facility has been adapted to the Company's specifications for climate
control,  alarm and  security  systems and special  secured  access  storage for
controlled  substances.  The Company  uses  modern  warehousing  techniques  and
equipment.

Item 3. Legal Proceedings

    Confedera is a defendant in a loan dispute with Beheer Maatschappij  Apohold
Slikkerveer B.V. ("Apohold"). The dispute was filed with the District Commercial
Court of Breda,  The  Netherlands  on October 3, 1995.  On  February  12,  1989,
Apohold loaned Confedera approximately $313,000,  which loan was not documented.
The  controlling  shareholder  of Apohold is a 50% equity owner of Hybrida B.V.,
which at one time owned all the capital  stock of  Confedera.  In this  lawsuit,
Apohold is claiming that Confedera owes Apohold not only the principal  balance,
but interest of approximately $147,000.  Under Netherlands law, interest is only
due on a loan of capital if the interest  rate is agreed to by the parties,  and
if agreed  but not  stated,  the  interest  rate is equal to the legal  interest
(currently  5%).  Confedera  acknowledges  that it owes  Apohold  the  principal
balance  of the loan,  but denies  that it ever  agreed to pay any  interest  to
Apohold.  Confedera intends to vigorously defend this lawsuit in its first court
hearing on May 29, 1997.

    As a result of the  implementation  of the Maximum Price Law, EuroMed Europe
has filed a formal complaint with the Ministry of Health.  This complaint argues
the validity of the provisions of this Maximum Price Law and the method of price
fixing for the individual products.  Also, in March 1997, EuroMed Europe filed a
lawsuit with the Federal Court of the Netherlands against the Ministry of Health
(V.W.S.),   demanding  timely  adoptions  of  currency  rates  that  effect  the
subsequent  setting of prices related to these adapted rates.  Further,  EuroMed
Europe has claimed damages as a result of the non-timely  action by the Ministry
of Health in this regard.

    EuroMed,  Inc. has filed two separate lawsuits against one of its directors,
Gregory Alan Gaylor.  The first, Case No. A366523,  was filed against Mr. Gaylor
and Mr. Robert  Jansonius,  a former director of EuroMed,  in the State District
Court of Clark  County,  Nevada on November 15, 1996.  In the suit,  the Company
alleges that Mr. Gaylor acted improperly by diverting  Company funds to improper
uses,  representing himself as having managerial authority over Company affairs,
and making  untrue  statements  regarding  Company  business.  The Company seeks
temporary and permanent  injunctive  relief  prohibiting  Mr. Gaylor from taking
certain actions, and the Court has granted a temporary restraining order and has
signed an order granting a preliminary  injunction in the Company's  favor.  The
Company  is in the  process  of  negotiating  a  settlement  agreement  with Mr.
Jansonius.

    The second lawsuit  against Mr. Gaylor was initiated on February 18, 1997 in
Dallas,  Texas in the United States District Court for the Northern  District of
Texas,  and bears Civil Action No.  3-97CV0322-H.  The lawsuit  alleges that Mr.
Gaylor  violated  Section  13(d) of the  Securities  Exchange  Act of  1934,  as
amended,  by failing to make necessary  federal  securities law filings upon his
acquisition of more than a 5% beneficial interest in the Company's common stock,
par value $0.01 per share (the "Common  Stock").  In  addition,  the Company has
requested  injunctive  relief and damages  resulting from Mr.  Gaylor's  alleged
disparagement  of the Company and Mr.  Gaylor's  alleged  interference  with the
Company's   operations  arising  from  his  communications  with  the  Company's
investors, customers, stockholders and accountants.

    Discovery  has not  commenced  in  either  of  these  matters  and it is not
possible to predict the outcome of these cases.

Item 4: Submission of Matters to a Vote of Security Holders

   
     On November  13,  1996,  by written  consent,  the holders of a majority in
interest of the issued and outstanding  Common Stock,  elected C.D.J. Evers as a
director  of the  Company,  to fill a vacancy on the Board of  Directors  of the
Company created by the resignation of Mr. Jan Bowman.  1,990,627 votes were cast
for  Mr.  Evers.  Because  this  vote  was by  written  consent  rather  than by
solicitation of proxies there were no abstentions or broker non-votes.
    


                                     PART II

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

    The Common  Stock has been  included for  quotation  on the  Bulletin  Board
National  Market under the symbol "EMED" since December 30, 1996. From March 19,
1996 to  December  11, 1996 the stock was listed on the Nasdaq  National  Market
under the symbol "EMED".

    The  following  table sets forth the high and low sales prices on the Nasdaq
National Market for the Common Stock for fiscal year 1996.

                                                        1996
                                                        ------
                                                   High      Low
                                     Quarter    
                                First Quarter.   $ 7.875  $ 6.625
                                Second Quarter     7.250    5.750
                                Third Quarter.     6.875    4.500
                                Fourth Quarter     4.500    0.625

   
    At January  17,  1997,  the Company  had 517  stockholders  of record of its
Common Stock and 3,977,000 shares outstanding.
    

Dividend Policy

    The Company has never paid cash  dividends on its Common Stock.  The Company
presently  intends to retain all cash for use in the  operation and expansion of
the Company's  business and does not anticipate paying any cash dividends in the
near future. In addition, the Company's existing bank credit agreement prohibits
the declaration or payment of cash dividends on its Common Stock.


<PAGE>



Item 6: Selected Financial Data

    The  following  selected  consolidated  financial  data for each of the five
years in the period ended December 31, 1996,  have been derived from the audited
consolidated  financial  statements of the Company included herein. The selected
consolidated  financial data set forth below should be read in conjunction  with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and the consolidated financial statements and notes thereto included
elsewhere in this report.

   
<TABLE>
<CAPTION>

                                                                  (In Thousands of U.S. Dollars)
                                                                       Except for Per Share Data
<S>                                               <C>           <C>           <C>          <C>            <C>
                                               
                                                      1992        1993          1994          1995          1996
                                                  ----------- ------------  ------------  ------------  --------
                INCOME STATEMENT DATA
                  SALES.........................  $    6,780   $   12,470    $   20,271    $   32,978    $   35,471
                  GROSS PROFIT..................         659        1,362         2,027         3,356         3,045
                  OPERATING PROFIT (LOSS).......         179          590           915         1,256          (297)
                  NET INCOME (LOSS).............         118          444           637           836        (7,708)
                  EARNINGS (LOSS) PER SHARE.....          .06          .22           .34          .42   $     (2.35)
                  WEIGHTED Average Number of
                     Shares Outstanding.........   2,000,000     2,000,000      2,000,000      2,000,000     3,276,923
    
</TABLE>
<TABLE>
<CAPTION>

                                                                 1992       1993      1994       1995       1996
                                                              ---------  --------- ---------  ---------  -------
                                                                       (In Thousands of U.S. Dollars)(QC)
<S>                                                            <C>        <C>       <C>         <C>         <C>
                  
                BALANCE SHEET DATA AT YEAR END
   
                   INVENTORY................................   $   668    $ 1,460   $ 2,497    $ 4,719    $  4,526
                   TOTAL CURRENT ASSETS.....................       972      2,093     3,837      8,013      12,186
                   TOTAL ASSETS.............................     1,131      2,342     4,375      8,845      13,374
                   CURRENT LIABILITIES......................     1,182      2,149     3,433      6,653       8,057
                   LONG-TERM DEBT...........................       672        611       685      1,075          90
                   STOCKHOLDERS' EQUITY (DEFICIT)...........      (723)      (418)      257      1,117       5,227
    
</TABLE>

Item 7: Management's Discussion and Analysis of Financial Condition and 
Results of Operations

Results of Operations

  Year ended December 31, 1996 Compared to Year ended December 31, 1995

   
    Sales. Sales of pharmaceuticals by the Company increased 7.5% to $35,471,000
in 1996 (Confedera  represented 23% of total sales,  while Galenica  represented
the remaining 77%), compared with $32,978,000 in 1995. The increase in sales was
primarily  the  result of the  growth in the  wholesale  distribution  volume of
pharmaceuticals   within  The  Netherlands,   especially  in  parallel  imported
EuroSpecialties,  and in DutchSpecialties  and generics which was spread equally
among  these  categories.  The market as a whole  only grew by 0.1% or nil.  The
Company anticipates that this market would not continue to grow.
    

    The growth in the sales volume of parallel imported EuroSpecialties,  and in
DutchSpecialties  and generics,  within The Netherlands was primarily the result
of the  increasing  acceptance  and success of the Company's  sales strategy and
marketing  efforts with  pharmacies  and other  wholesale  distributors  without
pharmaceutical   registrations.   The  Company   diversified  and  expanded  its
pharmaceutical inventory in order to improve its position within the market, and
equally  important,  the Company  strengthened its relationship  with individual
pharmacies through its expertise as a parallel importer. As a result, the use of
less  expensive,  higher  margin  parallel  imported  pharmaceuticals,  such  as
EuroSpecialties,  and also generics, increased as a variable substitute for more
expensive  branded  pharmaceuticals.  Sales of  parallel  imports  were  largely
dependent upon the number of registered pharmaceuticals in the Company's dossier
file.

    Cost of Goods Sold. Cost of  pharmaceuticals  sold by the Company  increased
9.4% to 32,426,000  (91.4%) in 1996,  compared with $29,622,000 (89.8% of sales)
in 1995.  The  increase  in the cost of goods sold was  primarily  the result of
greater sales volume. The 1.6% increase in the cost of goods sold percentage was
primarily due to the Maximum Price Law which took effect June 1, 1996, (See Item
1 "Business -- Business Strategy,  Maximum Price Law") and the currency exchange
rates experienced between the Dutch Guilder and all other foreign currencies.

    Gross Profit.  Gross profit declined 9.2% to 3,045,000  (8.6% of sales),  in
1996,  compared  with  $3,356,000  (10.2%  of sales) in 1995.  The  decline  was
primarily the result of the  implementation of the Maximum Price Law, which took
effect on June 1, 1996 (See Item 1 "Business -- Business Strategy, Maximum Price
Law").

   
    Selling,   General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses  increased 59.1% to $3,342,000 (9.4% of sales) in 1996,
compared  with  $2,100,000  (6.4% of sales) in 1995.  The  increase  in selling,
general and  administrative  expense was  primarily a result of the  increase in
sales and the  increase  in costs  associated  with the  expansion  of  business
operations.  The increase in selling,  general and administrative  expenses as a
percent of sales was primarily a result of higher cost associated with the newly
created  publicly  traded company  ($600,000 in  professional  fees),  which are
variable and subject to the  Company's  ongoing  litigation  and the increase in
wages and salaries  associated with employees who were initially hired in mid to
late  1995  ($600,000),  which  are  fixed  expenses.   Professional  fees  were
materially  higher as a result of the Company's initial public offering in March
1996 (the "IPO") and larger than  anticipated  professional  and  administrative
costs of the acquisition and operation of Pluripharm.
    

    Interest  Expense.  Interest  expense  increased 199.1% to $359,000 in 1996,
compared with $120,000 in 1995.  The increase in interest  expense was primarily
the result of an increase in use of the Company's  line of credit to finance its
pharmaceutical  inventory and a result of the  Pluripharm  acquisition  (See "--
Subsidiary Divestiture and Capital Stock Restructuring").

   
     Loss on Investment. The Company purchased Mutarestes, B.V. in July 1996 for
$5,992,000.  Due to disputes with the management and prior owners of Mutarestes,
B.V.,  the Company made the decision  that its  investment in  Mutarestes,  B.V.
should be  liquidated.  The estimated  realizable  value of the  investment  was
$4,502,000,  therefore,  a valuation provision of $7,227,000 was charged against
operations in December 1996.

    Income (Loss) from  Operations  Excluding  Investment  Valuation  Provision.
Income  (loss)  from  operations  decreased  157.5% to a $481,000  loss (1.3% of
sales),  in 1996,  compared  with $836,000  income (2.5% of sales) in 1995.  The
decline in income for operations  declined as a result of lower margin on sales,
higher operating costs,  higher  professional  fees, and an increase in interest
costs.
    

Year ended December 31, 1995 Compared to Year ended December 31, 1994

    Sales.  Sales  of  pharmaceuticals  increased  63% to  $32,978,000  in 1995,
compared  with  $20,271,000  in 1994.  The increase in sales was  primarily  the
result of the growth in the  wholesale  distribution  volume of  pharmaceuticals
within The Netherlands, especially in parallel imported EuroSpecialties,  and in
DutchSpecialties  and  generics,  and of the  growth in the  export  of  generic
pharmaceuticals to developing nations.

    The growth in the sales volume of parallel imported EuroSpecialties,  and in
DutchSpecialties  and generics,  within The Netherlands was primarily the result
of the  increasing  acceptance  and success of the Company's  sales strategy and
marketing  efforts with  pharmacies  and other  wholesale  distributors  without
pharmaceutical   registrations.   The  Company   diversified  and  expanded  its
pharmaceutical inventory in order to improve its position within the market, and
equally  important,  the Company  strengthened its relationship  with individual
pharmacies through its expertise as a parallel importer. As a result, the use of
less  expensive,  higher  margin  parallel  imported  pharmaceuticals,  such  as
EuroSpecialties,  and also generics,  increased as a viable  substitute for more
expensive  branded  pharmaceuticals.  Sales of  parallel  imports  were  largely
dependent upon the number of registered pharmaceuticals in the Company's dossier
file. During 1995, registered pharmaceuticals increased from 136 to 180.

    The growth in the export of generic pharmaceuticals was primarily the result
of the rapid development of the pharmaceutical  export market as a result of the
Company's  business  relationship with IPA (See Item 1 "Business -- Confedera").
IPA's expertise in working with international  development  agencies,  charities
and relief  organizations  provided  the  Company  with an entree  into this new
market.

    Cost of  Goods  Sold.  Cost  of  pharmaceuticals  sold  increased  62.4%  to
$29,622,000 (89.8% of sales) in 1995, compared with $18,244,000 (90.2% of sales)
in 1994.  The  increase  in the cost of goods sold was  primarily  the result of
greater sales volume.

    Gross Profit. Gross profit increased 65.6% to $3,356,000 (10.2% of sales) in
1995,  compared with  $2,027,000  (10% of sales) in 1994.  The increase in gross
profit was primarily the result of the growth in sales volume.

    Selling,   General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses increased 88.8% to $2,100,000 (6.4% of sales), in 1995,
compared  with  $1,112,000  (5.5% of sales) in 1994.  The  increase  in selling,
general and  administrative  expenses was  primarily a result of the increase in
sales and the  increase  in costs  associated  with the  expansion  of  business
operations,  while the increase in selling,  general and administrative expenses
as a percent of sales was  primarily a result of a  reclassification  of expense
related accounts.

    Interest  Expense.  Interest  expense  increased  100% to  $120,000 in 1995,
compared  with $60,000 in 1994.  The increase in interest  expense was primarily
the result of an increase in use of the Company's  line of credit to finance the
growth in its pharmaceutical inventory.

    Net Income.  Net income  increased 22% to $836,000  (2.5% of sales) in 1995,
compared with $687,000  (3.4% of sales) in 1994.  The increase in net income was
primarily the result of the increase in sales volume,  while the decrease in net
income as a percent of sales was  primarily  the result of an increase in taxes.
See "Note 7 to the Notes to the  Consolidated  Financial  Statements"  contained
elsewhere in this Report.

Year Ended December 31, 1994 Compared to Year Ended December 31, 1993

    Sales. Sales of pharmaceuticals increased 62.6% to $20,271,000 in 1994, from
$12,470,000  in 1993.  The  increase  in sales was  primarily  the result of the
growth in the  wholesale  distribution  volume  of  pharmaceuticals  within  The
Netherlands,   especially   in  parallel   imported   EuroSpecialties,   and  in
DutchSpecialties  and  generics,  and of the  growth in the  export  of  generic
pharmaceuticals to developing nations.

    The growth in the sales volume of parallel imported EuroSpecialties,  and in
DutchSpecialties and generics, within The Netherlands,  was primarily the result
of the  increasing  acceptance  and success of the Company's  sales strategy and
marketing  efforts with  pharmacies.  The Company  diversified  and expanded its
pharmaceutical inventory in order to improve its position within the market, and
equally  important,  the Company  strengthened its relationship  with individual
pharmacies through its expertise as a parallel importer. As a result, the use of
less  expensive,  higher  margin  parallel  imported  pharmaceuticals,  such  as
EuroSpecialties,  and also generics,  increased as a viable  substitute for more
expensive  branded  pharmaceuticals.  Sales of  parallel  imports  were  largely
dependent upon the number of registered pharmaceuticals in the Company's dossier
file. During 1994, registered pharmaceuticals increased from 62 to 136.

    The growth in the export of generic pharmaceuticals was primarily the result
of the rapid development of the pharmaceutical export market as a consequence of
the  Company's  business   relationship  with  IPA  (See  "Item  1  Business  --
Confedera"). IPA's expertise in working with international development agencies,
charities and relief organizations provided the Company with an entree into this
new  market.  As a  consequence  of the IPA  relationship,  in 1994 the  Company
exported pharmaceuticals for Catholic Relief Services to Bosnian war refugees in
Croatia, and for World Vision USA to Ethiopia.

    Cost of  Goods  Sold.  Cost  of  pharmaceuticals  sold  increased  64.2%  to
$18,244,000 (90% of sales) in 1994, from $11,108,000 (89% of sales) in 1993. The
increase  in the cost of goods sold was  primarily  the result of greater  sales
volume.

     Gross Profit.  Gross profit increased 48.8% to $2,027,000 (10% of sales) in
1994, from $1,362,000 (10.9% of sales) in 1993. The increase in gross profit was
primarily the result of the growth in sales volume.
    Selling,   General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses  increased 44% to  $1,112,000  (5.5% of sales) in 1994,
from  $772,000  (6.2% of sales) in 1993.  The  increase in selling,  general and
administrative  expenses was primarily a result of the increase in sales and the
increase in costs  associated with the expansion of business  operations,  while
the  decrease in selling,  general and  administrative  expenses as a percent of
sales was primarily a result of increased operating efficiencies,  the spread of
costs over  increasing  sales  volume,  and the  addition  of a  fully-automated
ordering system.

    Interest  Expense.  Interest expense increased 9.1% to $60,000 in 1994, from
$55,000 in 1993. The increase in interest  expense was primarily the result of a
minimal increase in use of the Company's line of credit to finance the growth in
its pharmaceutical inventory.

    Net Income.  Net income  increased 55% to $687,000  (3.2% of sales) in 1994,
from $444,000  (3.6% of sales) in 1993. The increase in net income was primarily
a result of the increase in sales  volume and the  reduction in taxes due to the
utilization of a tax loss carryforward.

Liquidity and Capital Resources

    Historically, the Company has financed its growth principally with cash flow
from  operations,  borrowings  under  inventory and accounts  receivable  credit
facilities and other indebtedness.

   
    Cash provided by (used in) operations was $756,000 in 1994,  ($2,343,000) in
1995,  ($1,009,000)  in 1996. An increase in bank financing was the  significant
source of cash in 1996, along with the sale of common stock.

    Working  capital at December 31, 1996 was $4,129,000  compared to $1,360,000
at December 31, 1995.  This  increase was primarily a result of the inclusion of
$4,502,000 of net assets to be realized on the  divestiture of Pluripharm.  (See
"--  Subsidiary  Divestiture  and Capital  Stock  Restructuring").  Without this
current asset,  the actual working capital of the Company would have declined by
$1,733,000  due to reduction in accounts  receivable  ($946,000) and increase in
bank overdraft of ($895,000).  The Company used its available working capital in
1996 to acquire  $418,000  of  licenses,  vehicles  and  equipment  and to repay
$985,000 of long-term debt.

    At December  31,  1996,  the  Company's  cash and cash  equivalents  totaled
$411,000.  Management is of the opinion that these resources,  together with the
Company's  existing  borrowing  capacity,  should be  sufficient  to finance and
sustain  operations at the present  growth rate through  December 31, 1997.  The
long-term liquidity  requirements will be met from operating sources in 1998 and
beyond,  assuming a significant  reduction in the litigation  expenses currently
incurred by the Company.  Otherwise, the Company intends to divest itself of its
European  operating  subsidiaries  in  order  to meet  its  long-term  liquidity
requirements. See "Item 3 -- Legal Proceedings."
    

    Galenica and Confedera  jointly  entered into a finance  agreement with Bank
MeesPierson N.V. ("MeesPierson"), as of February 7, 1995, as amended on November
9, 1995,  pursuant to which  MeesPierson  has made  available a total  amount of
approximately  $4,300,000,  of which  approximately  $2,600,000 is available for
Confedera,  and approximately $1,700,000 is available for Galenica. The facility
is for  working  capital.  The  interest  rate is equal to the  promissory  note
interest rate of The  Netherlands  Central  Bank,  plus 2.5%. As of December 31,
1996,  the interest  rate was 5.5%.  MeesPierson  has been provided with a first
priority  lien on the accounts  receivable  of Galenica and  Confedera,  a first
priority lien on the  pharmaceutical  registrations  of  Confedera,  and a first
priority lien on all present and future pharmaceutical inventory of Galenica and
Confedera. Pantapharma has agreed to subordinate its indebtedness to MeesPierson
and has further  agreed to guarantee  this credit  facility  (See "Note 5 to the
Notes to Consolidated Financial Statements" contained elsewhere in this Report).
The Company's bank credit  facility  restricts the Company's  ability to declare
and pay  dividends.  In February  1997,  this credit  facility was  increased to
$4,870,000.

Inflation

    Management  believes  that  inflation  has had no  impact  on the  Company's
operations.

Nasdaq National Market Delisting

    On November 22, 1996,  EuroMed received written notice from The Nasdaq Stock
Market,  Inc.  ("Nasdaq")  that Nasdaq had determined to delist the Common Stock
from trading on the Nasdaq  National  Market  effective  November 27, 1997.  The
stated  basis for this  action  was the  failure by the  Company to comply  with
certain  Nasdaq  rules and  Nasdaq  concerns  with the  nature of the  Company's
corporate  governance  and  control  in view of recent  actions  by the  Company
(including the filing by the Company of a lawsuit  against  Gregory A. Gaylor in
the State District Court of Clark County, Nevada) and Mr. Gaylor and allegations
made by the Company and Mr.  Gaylor  against  each  other.  Thereafter,  EuroMed
appealed  the  delisting  and trading in the Common  Stock was halted  until the
decision on the appeal was rendered.

    On December 2, 1996,  EuroMed  submitted a formal written response to Nasdaq
addressing  Nasdaq's  specific  areas of  concern.  On that same  date,  EuroMed
received a letter from Nasdaq  requesting  responses  as to numerous  additional
questions and comments.  EuroMed  attended the delisting  hearing on December 5,
1996,  and  presented its arguments  against  delisting of the Common Stock.  On
December 10, 1996,  EuroMed was informed  that its appeal had been  unsuccessful
and that Nasdaq was  delisting  the Common  Stock  effective  December 11, 1996.
Subsequently,  the Common Stock has been  included for quotation on the Bulletin
Board National Market.

Subsidiary Divestiture and Capital Stock Restructuring

   
    On  March  25,  1997,   the  Board  of   Directors   approved  a  five-point
restructuring plan. First, the Company has entered into an agreement to sell its
Pluripharm  subsidiary,  which it acquired in July 1996, to a pharmacy wholesale
management  group located in The  Netherlands.  This  transaction  is subject to
certain  conditions  precedent,  including receipt of a fairness  opinion.  This
transaction will result in the Company receiving  approximately  6,100,000 Dutch
Guilders (approximately  $3,104,000).  In connection therewith, the Company will
have an estimated loss of approximately $7,227,000.
    

    Second,  the Company has entered  into a Settlement  Agreement  with the two
former owners of  Pluripharm,  A. Doets and N.T.P.  Roozekrans,  whereby,  among
other things, the Company and Messrs. Doets and Roozekrans have agreed to mutual
releases and the Company has agreed to indemnify  Messrs.  Doets and  Roozekrans
from certain third parties claims. In consideration  for such releases,  Messrs.
Doets and Roozekrans  have delivered to the Company the 850,000 shares of Common
Stock which they received in the Pluripharm acquisition.  Third, the Company and
Mr. Francois Hinnen, the Chairman of the Board of the Company, have agreed that,
at the closing of the sale of its Pluripharm  division,  Mr. Hinnen shall return
to the Company 850,000 shares of Common Stock owned by B.V. Wisteria,  a company
owned by Mr.  Hinnen.  Fourth,  the Board of  Directors  has  authorized a share
buy-back  program  whereby the Company may attempt to  repurchase  up to 300,000
shares of Common  Stock  from time to time.  The  shares of Common  Stock  being
repurchased  and  returned  to the  Company as  described  above will reduce the
outstanding  Common  Stock  from  4,000,000  shares to  approximately  2,000,000
shares.

    Finally,  the  Company  announced  that  it will  undertake  a  strategy  of
acquiring  healthcare  related  companies or assets outside of The  Netherlands,
including  possible  purchases of health care  companies or assets in the United
States.

    The above  transactions are being  undertaken by the Company  primarily as a
result of the changing pharmaceutical wholesale market in The Netherlands, which
has resulted in  significantly  lowered  prices and decreased  margins,  and the
Company's inability to consolidate the Pluripharm  operations into the Company's
operations in The Netherlands.  Management believes that the cash to be received
in the  Pluripharm  transaction  will  allow  the  Company  to  pursue  its  new
acquisition  strategy,  with the  intention  of  bringing  greater  value to the
stockholders of the Company.

Item 8: Financial Statements and Supplementary Data

     The response to this item is  submitted as a separate  section of this Form
10-K. See "Item 14, Exhibits,  Financial Statement Schedules and Reports in Form
8-K."


<PAGE>




                         EUROMED, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENT

                           DECEMBER 31, 1996 AND 1995



<PAGE>

<TABLE>
<S>                                                                                                              <C>  


                                TABLE OF CONTENTS

             Auditor's Report.............................................................                         21
             Consolidated Balance Sheets as of December 31, 1995 and 1996.................                         23
             Consolidated Statements of Operations for the years ended December 31, 1994, 1995 and
   
               1996.......................................................................                         24
             Consolidated Statements of Stockholders' Equity for the years ended December 31, 1994,
               1995 and 1996..............................................................                         25
             Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and
    
               1996.......................................................................                         26
             Notes to the Consolidated Financial Statements...............................                         27
</TABLE>


<PAGE>



                                AUDITOR'S REPORT

Board of Directors and Stockholders
EuroMed, Inc. and Subsidiaries

    We have  audited  the  consolidated  balance  sheets of  EuroMed,  Inc.  and
Subsidiaries as of December 31, 1996, and the related consolidated statements of
operations,  shareholders' equity, and cash flows for the year then ended. These
consolidated  financial  statements are the responsibility of EuroMed,  Inc. and
Subsidiaries'  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

    We  conducted  our audit in  accordance  with  generally  accepted  auditing
standards in the United States of America.  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  audit  provides  a
reasonable basis for our opinion.

    In our opinion,  the  consolidated  financial  statements  referred to above
present fairly,  in all material  respects,  the financial  position of EuroMed,
Inc.  and  Subsidiaries  as of  December  31,  1996,  and the  results  of their
operations and cash flows for the year then ended,  in conformity with generally
accepted accounting principles in the United States of America.

/s/ KILLMAN, MURRELL & COMPANY, P.C.
KILLMAN, MURRELL & COMPANY, P.C.
Date: March 21, 1997
Dallas, Texas


<PAGE>


                                AUDITORS' REPORT

To the Board of Directors of
EuroMed, Inc. and subsidiaries

    We have  audited  the  consolidated  balance  sheets of EuroMed,  Inc.,  and
subsidiaries  as of  December  31,  1994  and  1995,  the  related  consolidated
statements of income, shareholders' equity, and cash flows for each of the years
in the three-year period ended December 31, 1995. These  consolidated  financial
statements are the responsibility of EuroMed, Inc. and subsidiaries  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

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

    In our opinion,  the  consolidated  financial  statements  referred to above
present fairly,  in all material  respects,  the financial  position of EuroMed,
Inc. and subsidiaries as of December 31, 1994 and 1995, and the results of their
operations and cash flows for each of the years in the  three-year  period ended
December 31, 1995, in conformity with generally accepted  accounting  principles
in the United States of America.

/s/  KPMG ACCOUNTANTS N.V.
KPMG Accountants N.V.

Amstelveen, The Netherlands
February 15, 1996.


<PAGE>



                         EUROMED, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                         (In Thousands of U.S. Dollars)
                           December 31, 1996 and 1995
<TABLE>
<CAPTION>

                                     ASSETS

                                                                                                Year Ended
                                                                                               December 31,
                                                                                              1995       1996
                     Current Assets
   
<S>                                                                                         <C>        <C>

                       Cash and cash equivalents.........................................    $   64    $    411
                       Trade accounts receivable.........................................     2,101       1,155
                       Loan receivable...................................................       304         548
                       Due from affiliated companies and other related parties-- Note 3..       703         695
                       Inventory.........................................................     4,719       4,526
                       Other receivables and prepaid expenses............................       122         349
                       Investment in Mutarestes B.V. and Subsidiary, net of valuation
                          allowance of $7,227                                                    --       4,502
                                                                                             ------    --------
                               TOTAL CURRENT ASSETS......................................     8,013      12,186
                                                                                             ------    --------
    
                     Vehicles, Furniture and Equipment, at cost..........................       591         815
                       Less: Accumulated depreciation and amortization...................      (266)       (406)
                                                                                             ------    --------
                               NET VEHICLES, FURNITURE AND EQUIPMENT.....................       325         409
                                                                                             ------    --------
   
                     Other Assets
                       Intangible assets less accumulated amortization of $181 and $256
                          in 1995 and 1996, respectively.................................       507         607
                       Other.............................................................        --         172
                                                                                             ------    --------
                               TOTAL OTHER ASSETS........................................       507         779
                                                                                             ------    --------
                               TOTAL ASSETS..............................................    $8,845    $ 13,374
                                                                                             ======    ========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
                     Current liabilities
                       Loan payable......................................................    $  311    $    311
                       Bank overdraft-- Note 4...........................................     2,645       3,540
                       Trade accounts payable............................................     3,002       3,076
                       Due to  affiliated  companies,  controlling  interests  and  other
    
                     related                                                                     10          69
                          parties-- Note 5...............................................
                       Taxes payable and other Accrued Expenses-- Note 12................       685       1,061
                                                                                             ------    --------
                               TOTAL CURRENT LIABILITIES.................................     6,653       8,057
                     Long-term debts -- Note 6
                       Unsecured loan from B.V. Wisteria.................................       423          --
                       Unsecured loan from Hybrida B.V...................................       496          --
                       Unsecured loan from Pantapharma B.V...............................       125          90
                       Other long-term debt..............................................        31          --
                                                                                             ------    --------
                               TOTAL LIABILITIES.........................................     7,728       8,147
                                                                                             ------    --------
                     Commitments and contingencies-- Note 8..............................        --          --
                     Stockholders' Equity
                       Preferred  Stock,  par  value  $.01 per  share;  5,000,000  shares
                     authorized;                                                                 --          --
                          no shares issued and outstanding;..............................

   
                       Common  Stock,  par  value  $.01  per  share;   20,000,000  shares        20          40
                     authorized;
                          2,000,000 and 4,000,000  shares issued and  outstanding in 1995
                     and 1996, respectively..............................................
                       Additional paid-in capital........................................        48      12,013
                       Retained earnings (deficit).......................................     1,047      (6,661)
                       Cumulative currency translation adjustment........................         2         (33)
                                                                                             ------    --------
                                                                                              1,117       5,359
                          Less: 23,000 Treasury Shares, at cost..........................        --        (132)
                                                                                             ------    -------- 
                               TOTAL STOCKHOLDERS' EQUITY................................     1,117       5,227
                                                                                             ------    --------
                               TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................    $8,845    $ 13,374
                                                                                             ======    ========
    
</TABLE>


                      The  accompanying  notes  are an  integral  part of  these
consolidated financial statements.


<PAGE>



                         EUROMED, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
              (In Thousands of U.S. Dollars, Except Per Share Data)

   
<TABLE>
<CAPTION>

                                                                                   Year Ended
                                                                                  December 31,
    
                                                                         1994         1995         1996
                                                                     -----------  -----------  --------
<S>                 q                                                  <C>          <C>         <C>        

   
                          Sales..................................... $    20,271  $    32,978  $    35,471
                          Cost of goods sold........................      18,244       29,622       32,426
                                                                     -----------  -----------  -----------
                                    Gross profit....................       2,027        3,356        3,045
                          Selling,   general   and   administrative        1,112        2,100        3,342
                                                                     -----------  -----------  -----------
                          expenses..................................
                                    Operating income (loss).........         915        1,256         (297)
                          Other Income (Expense)
                            Interest income.........................          17           72          187
                            Interest (expense)......................         (60)        (120)        (359)
                            Loss on investment in Mutarestes B.V.
                          and
                               Subsidiary--                                   --           --       (7,227)
                                                                     -----------  -----------  ----------- 
                               Note 13..............................
                            Income loss before income taxes.........         872        1,208       (7,696)
                          Income taxes-- Note 7.....................         185          372           12
                                                                     -----------  -----------  -----------
                                    Net income (loss)............... $       687  $       836  $    (7,708)
                                                                     ===========  ===========  =========== 
                          Earnings (loss) per share................. $      0.34  $      0.42  $     (2.35)
                                                                     ===========  ===========  =========== 
                          Weighted   average   number   of   shares    2,000,000    2,000,000    3,276,923
                                                                     ===========  ===========  ===========
                          outstanding...............................
    
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.


<PAGE>



                         EUROMED, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                         (In Thousands of U.S. Dollars)
              For the Years Ended December 31, 1994, 1995 and 1996

   
<TABLE>
<CAPTION>

                                                                                        Cumulative
                                          Common       Common                Retained    currency
                                           Stock        Stock    Additional  Earnings/  translation    Treasury        Total
                                          EuroMed    Galenica &    Paid-in   (Deficit)  adjustment       Share     Shareholders'
                                           Inc.       Confedera    Capital   (QC) ----  (QC) -----     Purchase       Equity
                                        ---------   ----------------------- ------------------------------------------------
<S>                                         <C>       <C>        <C>          <C>        <C>         <C>             <C>
         
         Balance as of December 31,
            1993........................               $  56       $    7    $  (476)     $  (5)      $  --      $  (418)
            Net income..................        --        --           --        687         --          --          687
            Currency translation
              adjustment................        --        --           --         --        (17)         --          (17)
            Formation of EuroMed,
              Inc.......................        --        --            5         --         --          --            5
                                           -------     -----       ------    -------      -----       -----      -------
          Balance as of December 31,
            1994........................        --        56           12        211        (22)         --          257
            Formation of the operating
              group:
              Change in par value and
                150 for 1 stock split...         2        --           (2)        --         --          --           --
              Acquisition of Galenica
                B.V. and Confedera B.V.
                by EuroMed, Inc. through
                the issuance of
                1,850,000 shares of
                common stock............        18       (56)          38         --         --          --           --
              Net income................        --        --           --        836         --          --          836
              Currency translation
                adjustment..............        --        --           --         --         24          --           24
                                           -------     -----       ------    -------      -----       -----      -------
          Balance as of December 31,
            1995........................        20        --           48      1,047          2          --        1,117
              Sale of Common Stock March
                1996, net of issuing
                cost of $1,228..........        12        --        6,236         --         --          --        6,248
              Acquisition of Subsidiary
                July 1996-- Note........         8        --        5,729         --         --          --        5,737
              Treasury Stock Purchase...        --        --           --         --         --        (132)        (132)
              Net Loss..................        --        --           --     (7,708)        --          --       (7,708)
              Currency Translation
                Adjustment..............        --        --           --         --        (35)         --          (35)
                                           -------     -----       ------    -------      -----       -----      ------- 
          Balance as of December 31,
            1996........................   $    40     $  --       $12,013   $(6,661)     $ (33)      $(132)     $ 5,227
                                           =======     =====       =======   =======      =====       =====      =======
    
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


<PAGE>



                         EUROMED, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
   
                         (in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>

                                                                                          Year Ended
                                                                                         December 31,
    
                                                                                   1994      1995       1996
<S>                                                                               <C>         <C>       <C>
                                                                                --------- ---------  -------
                      
                   Cash flows from operating activities:
   
                         Net income (Loss)...................................    $   687   $   836    $(7,708)
                         Adjustments  to reconcile  net income  (loss) to cash
    
                       flow from
                            operations:
                            Amortization of intangible assets................         40        75         75
                            Depreciation expense.............................         62       106        151
   
                       Increase in Investment Valuation Allowance                     -                 7,226
                       Changes in operating assets and liabilities:
    
                         Trade accounts receivable...........................       (106)   (1,531)       946
                         Due  from  affiliated  companies  and  other  related       (88)     (596)         8
                       parties...............................................
                         Inventory...........................................       (826)   (1,981)       193
                         Other receivables and prepaid expenses..............        (35)      (64)      (391)
                         Trade accounts payable..............................      1,165     1,013         74
                         Taxes payable and other accrued expenses............        (61)      253        376
                         Due to affiliated  companies,  controlling  interests
                       and other                                                     (82)     (454)        59
                                                                                 -------   -------    -------
                            related parties..................................
   
                                 Net  cash  provided  by (used  in)  operating       756    (2,343)     1,009
                                                                                 -------   -------    -------
                       activities............................................
    
                       Cash flows from investing activities:
   
                         Acquisition of intangible assets....................       (222)     (200)      (174)
                         Borrowings by and repayments from a customer........       (354)       52       (244)
                         Purchase of vehicles,  furniture  and  equipment,  at      (129)     (231)      (243)
    
                       cost..................................................
   
                         Investment in Mutarestes B.V. and Subsidiary........         --        --     (5,992)
                                                                                 -------   -------    ------- 
                                 Net cash used in investing activities.......       (705)     (379)    (6,653)
                                                                                 -------   -------    ------- 
    
                       Cash flows from financing activities:
                         Common stock issued.................................         --        --      6,248
                         Borrowing under bank overdraft facility.............         34     2,174        895
                         Repayment of long-term debt.........................        (27)      (24)      (985)
                         Long-term debt borrowings...........................          2       357         --
                         Purchase of Treasury Shares.........................         --        --       (132)
                                                                                 -------   -------    -------
                                 Net cash provided by financing activities...          9     2,507      6,026
                                                                                 -------   -------    -------
                       Effect of currency translation adjustment on cash.....          7       (34)       (35)
                                                                                 -------   -------    -------
                       Net increase (decrease) in cash and cash equivalents..         67      (249)       347
                       Cash and cash equivalents at the beginning of the year        246       313         64
                                                                                 -------   -------    -------
                       Cash and cash equivalents at the end of the year......    $   313   $    64    $   411
                                                                                 =======   =======    =======
                       Cash paid during the year:
                         Interest............................................    $    28   $    96    $   291
                                                                                 =======   =======    =======
                         Income taxes........................................    $    --   $    --    $   112
                                                                                 =======   =======    =======
   
                      Supplemental schedule of noncash investing and
                      financing activities:
                      Increase in assets                                       $    -    $     -   $    62
                      Assumption of liabilities                                     -          -       (33)
                      Reduction in due from affiliated companies in
                      connection with acquisition of Galenica Belgium S.A.          -          -       (29)
                      Investment in Mutarestes, B.V. and subsidiary                 -          -     5,737
                      Common stock                                                  -          -        (8)
                      Additional paid-in-capital                                    -          -    (5,729)
                                                                               ------   --------   ------- 
                                                                                   $    -    $     - $      -
                                                                                   ======    ======= ========
    
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


<PAGE>



                         EUROMED, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   
                        December 31, 1994, 1995 AND 1996
    

NOTE 1:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

   
    Swiss Nassau  Corporation  was  incorporated on May 17, 1994 in the state of
Nevada,  United States of America,  with  authorized and issued share capital of
1,000 shares of common stock with no par value (the "Common Stock"). On June 15,
1994,  computer  equipment  with  estimated  value of $4,998 was  contributed in
exchange for all of the shares of Swiss Nassau Corporation. On October 20, 1995,
Swiss Nassau Corporation changed its name into EuroMed,  Inc. ("Euro-Med" or the
"Company") and increased its authorized share capital to 20,000,000 Common Stock
with a new par value of $0.01 per share,  and 5,000,000  preferred  stock with a
par value of $0.01 per share. On October 20, 1995, EuroMed,  Inc. effected a 150
for 1 stock split of its Common Stock.

    On November 17, 1995,  all of the shares of Galenica B.V.  ("Galenica")  and
Confedera B.V. ("Confedera"),  both based in Oosterhout,  the Netherlands,  were
exchanged by the ultimate shareholder of both companies for all of the shares of
a newly-formed  company,  EuroMed Europe B.V. ("EuroMed Europe").  Prior to this
transaction Galenica and Confedera were owned by B.V. Wisteria  ("Wisteria"),  a
Netherlands limited liability company, which is owned by Pantapharma B.V., which
is owned by Mr. A.  Francois  Hinnen,  the CEO of EuroMed.  All of the shares of
EuroMed Europe were then exchanged for 1,850,000 shares of Common Stock. Neither
EuroMed Europe nor the Company had any operations,  and these  transactions were
completed in  contemplation  of an initial public offering of shares of EuroMed.
These transactions are considered as having no effect on the basis of accounting
for assets and  liabilities and are viewed as having occurred among members of a
commonly  controlled  group  in  connection  with  a  proposed   capital-raising
transaction after which the controlling shareholder will have retained control.
    

    The accompanying  consolidated  financial  statements reflect the historical
combined  financial position as of December 31, 1995 and the combined results of
operations  and cash  flows for each of the years in the two year  period  ended
December  31,  1995 of Galenica  and  Confedera.  The nominal  equity of EuroMed
between June 15, 1994 and November 17, 1995 has been included where appropriate.
The  consolidated  financial  statements  for the year ended  December  31, 1996
include the  accounts of  EuroMed,  EuroMed  Europe,  Galenica,  Confedera,  and
Galenica  Belgium S.A. All  intercompany  balances  and  transactions  have been
eliminated in consolidation.

Description of Business

    EuroMed and its operating companies,  Galenica and Confedera  (collectively,
the "Companies"), which are based in Oosterhout, The Netherlands, have a primary
business of the wholesale  distribution of medicines.  The Companies'  customers
are primarily  located in The Netherlands.  The Companies'  products are readily
available  and the  companies  are not  dependent on a single  supplier or a few
suppliers.

Use of Estimates

   
     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions that affect certain  reported amounts and disclosures.  Accordingly,
actual results could differ from those estimates.

Accounts Receivable

Accounts receivable  consists of amounts due from the wholesale  distribution of
medicine to  pharmacies.  Collections  of accounts  receivable  are made by wire
transfer (wire transfer is the customary payment method in the Netherlands). The
Company has not established an allowance for doubtful  accounts and does not use
the reserve method for recognizing  doubtful  accounts.  Uncollectible  accounts
receivable  are  treated  as direct  write-offs  when the  Company's  management
determines that  collection is not  profitable.  Bad debt exposure as determined
under this method would not vary  significantly for the reserve method since bad
debt losses are insignificant.


                         EUROMED, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1994, 1995 AND 1996
    


Inventory

    Inventory is stated at the lower of cost or net realizable value.

Vehicles, Furniture and Equipment

    Vehicles,  furniture  and  equipment  are  stated at cost.  Depreciation  is
calculated on the  straight-line  method over the estimated  useful lives of the
assets.

    The estimated useful lives are:

    -- Cars -- 5 years

    -- Furniture and equipment -- 3 up to 5 years

Intangible Assets

    Intangible  assets  consist of the  capitalized  cost for  licenses to trade
medicines in The  Netherlands.  Such licenses  which are valid for an indefinite
period of time are amortized on a  straight-line  basis over eight years,  being
the expected economic life of the licenses. Experience has indicated that such a
period is appropriate.

Taxation

    Income  taxes  are  accounted  for in  accordance  with  the  provisions  of
Statement of  Financial  Accounting  Standards  No. 109  "Accounting  for Income
Taxes."  Deferred tax assets and  liabilities  are recognized for the future tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
expected  to apply to  taxable  income  in the  years in which  those  temporary
differences  are expected to be recognized or settled.  The effect on tax assets
and  liabilities  of a change in tax rates is recognized in income in the period
that includes the enactment date.

Pension and Other Post-Retirement and Post-Employment Plans

    The Companies have no defined benefit pension plan nor other post-retirement
or post-employment plans.

Foreign Currencies Translation

    The functional currency of the Companies is the Dutch guilder. The reporting
currency herein is the US dollar. The translation of guilders into US dollars is
performed  for balance  sheet  accounts  using  exchange  rates in effect at the
balance sheet dates and for income  statement  amounts  using  average  exchange
rates during the period.  The gains and losses  resulting from  translations are
included in stockholders' equity.

Cash Equivalents

    All  highly  liquid  investments   purchased  with  original  maturities  of
approximately three months or less are considered to be cash equivalents.

Earnings Per Share

   
  Earnings per share for the year ended December 31, 1994 and 1995 is based upon
  net income divided by 2,000,000 shares of Common Stock  outstanding.  Earnings
  per share for the year ended  December  31,  1996 is based  upon the  weighted
  average number of EUROMED,
                              INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1994, 1995 AND 1996


    common shares of common stock outstanding during the year.
    

NOTE 2: LONG-TERM INCENTIVE PLAN

    The  Company  adopted  its 1995  Long-Term  Incentive  Plan  ("Plan")  as of
November  18,  1995.  An  aggregate  of 300,000  shares of Common Stock has been
authorized  and reserved for issuance under the plan pursuant to the exercise of
options or the grant of restricted stock awards. The Plan provides for the grant
of incentive stock options, non-qualified stock options, restricted stock awards
and  stock  appreciation  rights.  All of the  Company's  and its  subsidiaries'
employees,  independent  directors  and advisors are eligible to receive  awards
under the plan, but only employees of EuroMed and its  subsidiaries are eligible
to receive  incentive  stock  options.  The exercise  price for incentive  stock
options  granted under the Plan may be no less than the fair market value of the
Common Stock on the day of the grant.

    As of December  31, 1996 and 1995,  no grants have been  awarded  under this
plan.

NOTE 3: DUE FROM AFFILIATED COMPANIES AND OTHER RELATED PARTIES
<TABLE>
<CAPTION>

                                                                     December 31,      December 31,
                                                                         1995              1996
                                                                   ----------------  ----------
   
<S>                                                                    <C>                 <C>

                                                                    (in thousands of US dollars) (QC)
    
                                Topaas B.V........................       $  --             $ 262
                                B.V. Wisteria.....................         561               410
                                International  Procurement Agency           65                10
                                B.V...............................
                                Dr. A. Francois Hinnen............          19                13
                                Galenica Belgium S.A..............          29                --
                                Other.............................          29                --
                                                                         -----             -----
                                                                         $ 703             $ 695
                                                                         =====             =====
</TABLE>

    See Note 5 for description of related party transactions.

    All amounts due from  affiliated  companies and the related  parties are due
upon demand and  non-interest  bearing,  except for the loan to  Wisteria  which
bears  interest at 7% as from  January 1, 1996.  Confedera  sold  medicines  for
$29,000 to Galenica Belgium S.A.
in 1995, prior to the acquisition of Galenica Belgium S.A. by EuroMed.

NOTE 4: BANK OVERDRAFT

    On November 9, 1995,  EuroMed  concluded a $4,300,000  bank credit  facility
with a maximum of $1,700,000 for Galenica.  The facility is secured by pledge of
intangible  assets,  inventory and accounts  receivable.  The unused position of
this  facility as of December 31, 1996,  was $760,000.  The long-term  loan from
Pantapharma is subordinated to the credit facility. In February 1997, the credit
facility was increased to  $4,870,000.  The interest rate is equal to promissory
note interest rate of The Netherlands Central Bank, plus 2.5% (5.5% and 6.25% at
December 31, 1996 and 1995, respectively).

    According to the November 9, 1995,  bank credit facility  retained  earnings
may not be  distributed  by  Galenica  and  Confedera  as long as the  liability
capital,  which is defined as the shareholders'  equity plus subordinated  loans
minus  intercompany  receivables  from EuroMed  Europe of Galenica and Confedera
minus 50% of the net book value of the  intangible  assets,  is less than 25% of
the balance sheet total. At December 31, 1996 and 1995, no retained  earning may
be distributed.

    No commitment fee is due for the bank credit facility.

     NOTE 5:  DUE TO  AFFILIATED  COMPANIES,  CONTROLLING  INTERESTS  AND  OTHER
RELATED PARTIES

     At December 31, 1995 and 1996,  EuroMed was indebted to  Pantapharma in the
amount of $10,000  and  $69,000,  respectively,  and is  reflected  as a current
liability.

    The ultimate shareholder of Pantapharma charged either directly or through a
controlled  company  $120,000  in  1996  (1995:  $125,000,  1994:  $224,000)  as
management  fees,  which is shown  under  selling,  general  and  administrative
expenses in the statements of operation.

    The amounts  due to  Pantapharma  primarily  arose from the  accounting  for
corporate taxes due within the fiscal unity with the (ultimate) parent company.

    Galenica sells  medicines to two  pharmacies  owned by the ultimate owner of
Galenica and a relative of his.  These two  pharmacies  buy products and receive
discounts  and  quarterly  bonuses  comparable  to the prices and  discounts and
bonuses received by the other pharmacies to which Galenica is selling.

    During the three years ended December 31, the following amounts were sold:

                                                       1994      1995      1996
                                                   --------- --------- -------
                                                        (in thousands of US
                                                            dollars)(QC)
   
        Sales by  Galenica to two  pharmacies
        owned by the                                 $ 1,799   $ 2,486   $ 2,846
        ultimate owner and a relative of his......

     In July 1994, Confedera began a business  relationship which was formalized
in July 1995 by the Cooperation Agreement with International  Procurement Agency
B.V.  ("I.P.A.").  The  purpose  of  the  cooperation  relationship  is to  sell
medicines and other goods to third world countries.  Mr. Hinnen, CEO of EuroMed,
owns 100% of the stock of Pantapharma  B.V. which owns 100% of the stock of B.V.
Westeria  which owns 33% of the stock of  Gentrade  B.V.  which owns 100% of the
stock of I.P.A.  B.V.  Westeria has an option to purchase the  remaining  67% of
Gentrade B.V. The profits of these  contracts are  distributed  to Confedera and
I.P.A.  based on certain  percentages  which vary  depending  upon  whether  the
project is managed by Confedera or I.P.A.
    

     Inventory  includes  $25,000 of medicines  and other  products  relating to
these projects which have not been sold as of December 31, 1996. The amounts due
from I.P.A. relate to medicines sold by Confedera B.V. to I.P.A.
   
    Confedera sold the following  amounts under the  cooperation  agreement with
I.P.A.:
    

                                                               1995       1996
   
                                                               (in thousands of
                                                                US dollars)(QC)
        Sales under the cooperation  agreement with         $ 4,619    $ 2,905
                    I.P.A......................................









    In February  1997,  EuroMed  Europe  entered into a purchase  agreement with
Pantapharma  BV (which  is owned  100% by Mr.  Hinnen,  CEO of  Euromed  Europe)
whereby  EuroMed Europe would purchase from  Pantapharma  all of the outstanding
common stock of Galenica Belgium,  S.A.  effective January 1, 1996. The purchase
price was $60,000. The balance sheet of Galenica Belgium S.A. of January 1, 1996
was as follows:

                                                            January 1,
                                   ASSETS(QL)                  1996
                             --------------------------       -------
                          Cash......................        $ 16,517
                          Other Assets
                          Current Assets........              58,739
                          Furniture and Equipment, net         3,357
                                                               --------
    
                                    TOTAL ASSETS....        $ 78,613
                                                            ========
                            Current Payables..........      $ 33,403
                            Stockholder's Equity......        45,210
                                                             --------
                                                            $ 78,613


   
    The  $60,000  purchase  price was  determined  by  Francois  Hinnen  and the
acquisition  was treated as a purchase for financial  accounting  purposes.  The
assets and liabilities of Galenica Belgium were considered to be stated at their
fair value at January 1, 1996; therefore, EuroMed recognized $14,790 of goodwill
related to the  acquisition and the goodwill was recognized as an expense in the
1996  statement of operations.  For the year ended  December 31, 1996,  Galenica
Belgium  recognized  a loss of $18,563,  which  included  the  $14,790  goodwill
charge.

    Actual  regulatory  approval  for the  acquisition  was not  obtained  until
February  1997;  however,  the  operations of Galenica  Belgium were included in
EuroMed's  operations  statement due to EuroMed's management control of Galenica
Belgium operations in 1996,  EuroMed was responsible  financially for the losses
of Galenica Belgium, and the ownership relation with the Company's CEO, Francois
Hinnen.  Management believed that Galenica Belgium would allow EuroMed to expand
into Belgium's wholesale pharmaceutical, OTC products, and active pharmaceutical
ingredients markets.
    

NOTE 6: LONG-TERM DEBTS

   
    Hybridia B.V.  owned  Confedera  until March 2, 1995. On that date,  Hybrida
B.V. sold the  Confedera  shares to Wisteria for $16,000,  representing  the par
value of the issued  common  stock.  The  unsecured  loan from  Hybrida  B.V. is
interest-free,  has no  repayment  schedule,  and is  subordinated  to the  bank
overdraft.  The loan  will not be due  before  January  1,  1997.  The  interest
charges,  by applying the  companies  borrowing  rate of 8% in 1994 and 6.25% in
1995 would have been $35,000 for 1994 and $31,000 for 1995. The balance was paid
in January 1996.

    The  unsecured  loan  from  Wisteria  has  no  repayment  schedule,  and  is
subordinated to the bank  overdraft.  The loan will not be due before January 1,
1998.  This loan from  Wisteria  was interest  bearing at 8% until  December 31,
1994, and is interest-free  starting  January 1, 1995. The interest  charge,  by
applying the Companies' borrowing rate for 1995 of 6.25% would have been $26,000
for 1995. This balance was repaid in early 1996.
    

    The  unsecured  loan from  Pantaphama  is  interest-free,  has no  repayment
schedule and is  subordinated  to the bank overdraft since November 9, 1995. The
loan will not be due until January 1, 1998. The interest charge, by applying the
Companies'  borrowing  rate for 1996 and 1995 of 7.00% and 6.25%,  respectively,
would have been approximately $1,000 for each year.



NOTE 7: TAXATION

    Income  taxes for  Galenica  and  Confedera  are  calculated  based on their
combined income before income taxes. The actual income tax expense  attributable
to income  before income taxes for the years ended  December 31, 1995,  and 1994
differed from the amounts  computed by applying The Netherlands  statutory rates
(for the year 1995,  and for the period July 1, 1994 to December 31,  1994;  40%
for the first  Dutch  Guilders  100,000  of taxable  income and 35% for  taxable
income in excess of Dutch  Guilders  100,000;  for the period January 1, 1994 to
June 30,  1994)  to  pre-tax  income  from  continuing  operation.  In 1996,  an
effective  tax rate of 36% was used to compute  income tax  expense.  Income tax
expense (benefit) is less than the amount computed by multiplying  earnings from
continuing operations by the statutory income tax rates due to the following:

                                                         1994    1995     1996
                                                      -------  ------  ------
        Tax expense (benefit) at statutory rates.... $  310   $  433  $ (169)
        Utilization of tax loss carry forward.......   (137)     (57)     --
        Effect of tax loss in United  States parent      --       --     193
        company.....................................
         Other.......................................     12       (4)    (12)
                                                       ------   ------  ------
                                                      $  185   $  372  $   12
                                                       ======   ======  ======

    At December 31,  1996,  the Company has a tax loss  carryforward  in EuroMed
(the United  States  parent  company) of $538,000  which could be used to offset
future taxable income in the United States.  This loss  carryforward will expire
in 2011.  The $182,000 tax benefit of the loss  carryforward  was not recognized
since,  in the  Company's  estimate,  there was less than a fifty  percent (50%)
chance  that  sufficient  taxable  income  would be earned  to  offset  the loss
carryforward.  There are no material  temporary tax differences  that would give
rise to deferred tax assets or liabilities.

NOTE 8: COMMITMENTS AND CONTINGENCIES

Lease Commitments

    Obligations  under  the  long-term  non-cancelable  operating  lease for the
premises in Oosterhout for the remainder of its term are as follows:

   
                                                      (in thousands of US
                                                         dollars)
                                                 1997.........$..105........
                                                 1998............110........
                                                 1999............115........
                                                 2000............121........
    
                                                              $  451

Loan Payable

    A  shareholder  (Apohold) of Hybrida  B.V.,  the former parent of Confedera,
granted a loan of  $288,000 to  Confedera  on February  12,  1989.  This loan is
treated in the consolidated  financial statements as an interest-free loan since
there is no loan agreement.  In July 1995,  Apohold started legal proceedings to
demand  the  repayment  of the loan plus  interest  in the  aggregate  amount of
$518,000.  In the opinion of management,  the amount of ultimate  liability with
respect to this action will not have a material effect on results of operations,
cash flow or financial  position of the company.  The debt amounting to $311,000
as at December 31, 1995 and 1996, has been classified as a current liability.

Management Contracts

   
    Dr. A.  Francois  Hinnen  provides  his  services to the  Companies  through
Management  Contracts with a term of January 1, 1996 through  December 31, 2000.
Under  the term of  these  contracts,  the  Companies  agree to pay  Pantapharma
$125,000  annually  plus  a car  allowance.  In the  event  that  the  Companies
terminate  these  contracts  prior to  their  expiration,  Pantapharma  shall be
entitled to continue to receive the management fee for the remainder of the term
of the contracts.  In the event that Dr. A. Francois Hinnen is unable to fulfill
his duties to the  Companies  for any reason,  Pantapharma  shall be entitled to
receive the management fee for one year thereafter.
    

NOTE 9: BUSINESS AND CREDIT CONCENTRATIONS

    Most of the Companies'  customers are located in The Netherlands.  No single
customer  accounted  for more than 10% of the company's  sales in 1996,  1995 or
1994.

NOTE 10: ESTIMATED FAIR VALUES

    The  estimated  fair  values  of the  company's  financial  instruments  are
summarized below:
<TABLE>
<CAPTION>

                                                             December 31, 1995             December 31, 1996
                                                      ----------------------------- ------------------------
   
                                                         Carrying    Estimated fair    Carrying    Estimated Fair
                                                           value          value          value          value
    
                                                                   (in thousands of US dollars) (QC)
<S>                                                      <C>           <C>           <C>              <C>     
 
                   Cash and cash equivalents........      $   64         $   64         $  411         $  411
                   Trade accounts receivable........       2,101          2,101          1,155          1,155
                   Due from affiliated companies....         703            703            695            695
                   Bank overdraft...................       2,645          2,645          3,540          3,540
                   Trade accounts payable...........       3,002          3,002          3,076          3,076
                   Due to affiliated companies......          10             10             69             69
   
                   Long-term debts:
                     Unsecured loan from Pantapharma
                        B.V.........................         125            116             90             84
                     Unsecured    loan   from   B.V.         423            398             --             --
    
                   Wisteria.........................
                     Unsecured loan from Hybrida B.V         496            434             --             --
                        Other.......................          31             29             --             --
                                                          ------         ------         ------         ------
                                                           1,075            977             90             84
                                                          ======         ======         ======         ======
</TABLE>

NOTE 11: FOREIGN CURRENCY CONTRACTS

    Beginning in 1994, the Companies  hedge certain of their  committed  British
pound  expenditures  for purchases in the United Kingdom through the purchase of
forward exchange contracts. During 1995, the Companies entered into and utilized
forward contracts with values  aggregating  $1,870,000.  As of December 31, 1995
and 1996, there were no forward contracts outstanding.

    Confedera issues bank guarantees towards suppliers in order to guarantee the
payment in  respect  of the  import of goods.  As of  December  31,  1996,  bank
guarantees amounting to $129,000 were outstanding.

NOTE 12: TAXES PAYABLE AND OTHER ACCRUED LIABILITIES

    At  December  31,  1995 and  1996,  the  taxes  payable  and  other  accrued
liabilities consist of:

   
                                                     1995        1996
                        Taxes payable........      $  421     $   602
                        Other accrued liabilities     264         459
                                                    ------     -------
    
                                                   $  685     $ 1,061
                                                   ======     =======

   
NOTE 13: ACQUISITION OR DISPOSITION OF SIGNIFICANT ASSET

EuroMed, Inc. and EuroMed Europe entered into a Stock Purchase Agreement,  dated
as of June 19, 1996 (the "Purchase  Agreement") with Mr. A. Doets, Dr. N. Th. P.
Roozekrans,   Mutarestes  B.V.   ("Mutarestes"),   Pluripharm,   a  wholly-owned
subsidiary of Mutarestes ("Pluripharm"), and Financieringsmaatschappij De Nieuwe
Wereld,  B.V., a  wholly-owned  subsidiary of Pluripharm  ("FDNW"),  pursuant to
which Doets and  Roozekrans  sold to EuroMed  Europe all of the capital stock of
Mutarestes,  Pluripharm  and FDNW.  The purchase  price paid by EuroMed for such
companies  consisted of: (i)  $5,992,000 (10 million Dutch  guilders);  and (ii)
850,000 shares of Common Stock. The closing of the Purchase  Agreement  occurred
on July 5,  1996.  The  purchase  price paid under the  Purchase  Agreement  was
determined  pursuant to  arms-length  transactions,  and were based upon,  among
other things,  multiples of earnings and potential earnings. The cash portion of
the  purchase  price  was  funded  by the  use of  available  funds  of  EuroMed
(8,560,000 Dutch guilders),  which included  proceeds from the Company's initial
public offering  completed on March 19, 1996, with the remaining  portion of the
purchase price  (1,440,000  Dutch  guilders)  being funded through a loan to the
Company from Bank MeesPierson,  N.V. The purchase price was determined by mutual
agreement of the companies'  management and no independent valuation was used to
arrive at the purchase price.  Pluripharm,  the operating company, is engaged in
the  wholesale   distribution  of  branded  and  generic  medicines  within  The
Netherlands.  Prior to the acquisition of Mutarestes B.V. by EuroMed Europe, the
only  relationship the two companies had was that each sold  pharmaceuticals  to
the other. These sales between the two companies were as follows:
                                                Amount
      Year ended December 31, 1995            $2,914,000
       Six months ended June 30, 1996         $1,798,000

    The Company has  determined  that it will divest itself of the capital stock
of  Pluripharm  and other  related  assets in the second  quarter  of 1997.  The
Company is taking this step primarily as a result of the changing pharmaceutical
wholesale market in The Netherlands, which has resulted in significantly lowered
prices and decreased  margins,  and the Company's  inability to consolidate  the
Pluripharm  operations  into the Company's  operations in The  Netherlands.  The
operations  were not  consolidated  due to the  objections of the  management of
Pluripharm  and the  problems  resulting  from the  litigation  initiated by the
various  owners/managers  of  the  companies.   The  divestiture  includes;  (i)
Houdstermaatschappij  Singultus B.V. ( a private company with limited  liability
under the laws of the  Netherlands,  which is owned by management of Pluripharm)
will acquire all of the capital stock of Pluripharm for an estimated  $3,104,000
(6,100,000  Dutch  guilders),  and (ii) the return of  850,000  shares of common
stock.  The terms of divestiture  agreement  included the provision that EuroMed
will not be entitled to any of the  earnings  of  Pluripharm  during the time of
ownership.

     The following  summarizes the investment in Mutarestes  B.V. and Subsidiary
and the resulting estimated loss upon disposal:

       Acquisition
           Cash                                                  $ 5,877,000
           Cost of acquisition                                       115,000
                                                                ------------
                  Total cash advanced                              5,992,000

           850,000 shares of common stock issued
               at a fair value of $6.75 per share                  5,737,500
                  Total investment                                11,729,500

       Disposal

           Estimated cash proceeds                                 3,104,000

           Disposal costs                                           (302,000)
                  Net cash provided                                2,802,000
           Stock returned to Company:
               850,000 shares of common stock
                  held by the owners of Mutarestes
                  B.V. at a fair value of $1.50
                  (March 1997)                                     1,275,000

               850,000 shares of common stock
                  held by Francois Hinnen at a
                  fair value of $.50 (September 1997)                425,000
                                                     -----------------------
                                                                   4,502,000
           Estimated net loss                                    $ 7,227,500
                                                                 ===========

The 850,000 shares returned to EuroMed Mr. Francois Hinnen, CEO of EuroMed,  are
included in the loss estimate  since the Board of Directors  requested  that Mr.
Hinnen  give up  shares  to help  mitigate  the loss on the  disposal  for those
shareholders who purchased stock in the March 1996 initial public offering.






                         EUROMED, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1994, 1995 AND 1996
     The following pro forma balance sheet  reflects the sale of the  investment
as if it had occurred on December 31, 1996: (in thousands of U.S. dollars):

                         EUROMED, INC. AND SUBSIDIARIES

                      PRO FORMA CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 1996
<TABLE>
<CAPTION>

                                     ASSETS

                                                                                          Pro Forma       Pro Forma
                                                                           Historical    Adjustment         Total
<S>                                                                         <C>           <C>             <C>     
                  
                   Current Assets Cash and cash equivalents........         $    411      $ 2,802          $ 3,213
                     Receivable and prepaid assets.................            2,747           --            2,747
                     Inventory.....................................            4,526           --            4,526
                     Investment in Mutarestes B.V. and Subsidiary..            4,502       (4,502)              --
                                                                            --------      -------          -------
                             Total Current Assets..................           12,186       (1,700)          10,486
                   Net Vehicles, Furniture and Equipment...........              409           --              409
                   Other Assets....................................              779           --              779
                                                                            --------      -------          -------
                             Total Assets..........................         $ 13,374      $(1,700)         $11,674

                   LIABILITIES AND STOCKHOLDERS' EQUITY

                   Current Liabilities.............................         $  8,057      $    --          $ 8,057
                   Long-Term Debt..................................               90           --               90
                                                                            --------      -------          -------
                             Total Liabilities.....................            8,147           --            8,147
                   Stockholders' Equity............................            5,227       (1,700)           3,527
                                                                            --------      --------         -------
                                                                            $ 13,374      $(1,700)         $11,674
                                                                            ========      ========         =======
</TABLE>

     The following pro forma statement of operations  reflects the operations of
EuroMed, Inc. and Subsidiaries without the loss on the disposal of a significant
asset (in thousands of U.S. dollars, except loss per share):












                         EUROMED, INC. AND SUBSIDIARIES

                        PRO FORMA STATEMENT OF OPERATIONS
                          Year Ended December 31, 1996
<TABLE>
<CAPTION>

                                                                                          Pro Forma         Pro Forma
                                                                          Historical     Adjustment           Total
<S>                                                                      <C>              <C>              <C>
                        
                        Sales...........................................   $35,471        $    --         $  35,471
                        Cost of Goods Sold..............................    32,426             --            32,426
                                                                           -------        -------         ---------
                          Gross Profit..................................     3,045             --             3,045
                        Selling, general and administrative expense.....     3,342             --             3,342
                                                                           -------        -------         ---------
                          Operating Loss................................      (297)            --              (297)
                        Other Income (Expense)
                          Interest Income...............................       187             --               187
                          Interest Expense..............................      (359)            --              (359)
                          Loss on  investment  in  Mutarestes  B.V.  and    (7,227)         7,227                --
                                                                           -------        -------         ---------
                        Subsidiary......................................
                          Loss before income taxes......................    (7,696)         7,227              (469)
                        Income Taxes....................................        12             --                12
                                                                           -------        -------         ---------
                        Net (Loss)......................................  $(7,708)        $ 7,227         $    (481)
                                                                                  =       =======         ========= 
                        Pro Forma (Loss) per share......................                                  $      (.15)
                                                                                                          =========== 
                        Weighted average number of shares outstanding...                                  3,276,923
                                                                                                          =========
    
</TABLE>

NOTE 14: QUARTERLY FINANCIAL DATA (UNAUDITED)

   
                            Thousands of U.S. Dollars
                                     Income
                                     (Loss)
<TABLE>
<S>                                              <C>             <C>         <C>        <C>    

                                                                Before     Net Income    Earnings
                                    1996 (QL)     Revenues    Income Taxes    (Loss)      Per Share
                                  -----------  -----------  -------------------------  -----------
                                  December...     $9,852        $(7,970)    $(7,793)      $(2.42)
                                  September..      7,743          (278)        (278)       (0.07)
                                  June.......      8,508           270          187         0.06
                                  March......      9,368           282          176         0.08
                                  1995 (QL)
                                December...      10,059           323           212          .011
                                September..       7,745           325           208          0.10
                                June.......       8,563           289           221          0.11
                                March......       6,611           271           195          0.10
</TABLE>

    The quarterly  results of operations for the quarter ended December 31, 1996
includes a loss resulting from the valuation  allowance  provision of $7,226,000
related to the Company's investment in Mutarestes B.V. and Subsidiary.
    


<PAGE>



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

    On November 19, 1996, KPMG Accountants N.V.  ("KPMG")  resigned as EuroMed's
independent  public  accountant.  No report of KPMG for EuroMed has contained an
adverse  opinion or a disclaimer of opinion,  or was qualified or modified as to
uncertainty,   audit  scope,  or  accounting  principles.  There  have  been  no
disagreements  between KPMG and EuroMed as described  in Item  304(a)(1)(iv)  of
Regulation  S-K or  events  of the  kind  set  forth  in  Item  304(a)(1)(v)  of
Regulation S-K.

    EuroMed provided KPMG with the above  disclosures  prior to filing a Current
Report Form 8-K with the Securities and Exchange  Commission.  KPMG responded to
the above disclosures by stating that they resigned as principal accountants for
EuroMed because they believed that the then current internal  control  structure
of EuroMed was not adequate to develop reliable financial  statements.  KPMG did
not disclose to EuroMed specific concerns or problems.

    On February 20, 1997,  EuroMed engaged  Killman,  Murrell and Company,  P.C.
("Killman") as its independent  public  accountant.  Prior to engaging  Killman,
EuroMed  discussed  with Killman the reason  given by KPMG for its  resignation.
Killman has told EuroMed that it believes EuroMed has resolved the problems that
led to KPMG's  resignation.  EuroMed provided Killman with the above disclosures
prior to filing a Current Report on Form 8-K with the Commission and Killman did
not file any response to such disclosures.

                                    PART III

Item 10. Directors and Executive Officers of EuroMed, Inc.

Executive Officers and Directors

    Set forth below are the names, ages and positions of the executive  officers
and directors of the Company:

                    Name             Age              Position
              A. Francois Hinnen...   54   Chairman of the Board
              Robert W. L. Veldman.   48   Chief   Executive   Officer  and
                                                                 President
              David Anderson.......   41   Chief Financial Officer
              Jesse Shelmire, IV...   39   Director
              Robert   A.    Shuey,   42   Director
               III(1)...............
   
              C.D.J. Evers.........   52   Director
              Gregory A. Gaylor....   38   Director
    

----------

(1) Member of the Audit Committee and the Compensation Committee.

    A. Francois  Hinnen,  MSc has served as Chairman of the Board of the Company
since  November 18, 1995.  Mr. Hinnen served as Chief  Executive  Officer of the
Company from November 18, 1995 until  October 31, 1996,  and as President of the
Company from November 18, 1995 until February 28, 1997, and has served,  through
a controlled company, as the Managing Director of Galenica B.V. ("Galenica") and
Confedera B.V.  ("Confedera") since January 1991. Mr. Hinnen has also served the
Company  as  the  chief  pharmacist  for  Galenica  and  Confedera,   which  are
wholly-owned  subsidiaries  of the  Company  organized  under  the  laws  of The
Netherlands. Mr. Hinnen has 28 years experience as a certified pharmacist and 24
years business experience as an entrepreneur in the pharmaceutical industry. Mr.
Hinnen graduated first of year in 1967 with a Masters in Mathematics and Natural
Sciences,  and in 1968  with a degree  in  Microbiology  and  Pharmacy  from the
University of Utrecht, The Netherlands.  Mr. Hinnen was a member of the staff of
the University of Nijmegen, The Netherlands, from 1969-1970.

    Robert W. L.  Veldman,  MSc has  served as Chief  Executive  Officer  of the
Company since  February  1997.  Mr.  Veldman has  twenty-three  years of related
health care management experience. Before joining EuroMed, Mr. Veldman worked as
director of business  development  at Merck,  Sharp & Dohme B.V. in Haarlem from
1995 to 1997.  Prior to that he worked as  Pharmaceutical  Director and Managing
Director  Hospital  Division,  Brocacef  BV --  Maarssen  from 1988 to 1995,  as
Director of European Operations,  Centocor Europe BV -- Leiden from 1987 to 1988
and served as managing  director and chief operating officer of Centrafarm Group
NV -- Etten  Leur from  1978 to 1987 and as an  industrial  pharmacist,  Organon
International BV -- Oss from 1975 to 1978.

    David  Anderson has served as the Company's  Chief  Financial  Officer since
February 1997. Mr. Anderson brings fifteen years of healthcare experience in the
United States,  including experience in the home infusion drug market as well as
the free  standing  and  hospital  based  home  nursing  and  equipment  service
businesses.  Mr.  Anderson  served as western  division vice  president of Nurse
Finders, Inc., a home health and medical staffing company, from 1995 to 1997 and
served as director and senior vice president of operations for OptionCare, Inc.,
a home infusion  therapy  company,  from 1993 to 1995. Prior to that, he founded
and was an equity  director  and chief  development  officer for  Earthstone,  a
division of EPIC Health Care Group,  from 1990 to 1993, served as executive vice
president of ABC Home Health,  a privately  held home health care company,  from
1987 to 1990 and served as  associate  and  district  director  for T-2  Medical
Management, a home infusion therapy provider company, from 1985 to 1987.

    Jesse  Shelmire,  IV has served as a director of the Company since  November
27, 1996. Mr. Shelmire has 15 years of experience in the investment  banking and
stock underwriting business.  Upon graduating from the Warton School of Business
he worked  from 1981 to 1989,  for Smith  Barney,  Inc. in their  Dallas,  Texas
office.  From 1989 to 1993,  he served as the Portfolio  Manager for  Stonegates
Securities,  Inc. of Dallas,  Texas where he managed  $250  million of assets in
equity and fixed income accounts,  he served at Dillon-Gage  Securities Corp. as
Director  of  Corporate  Finance  from 1993 to 1995 and he served as Director of
Corporate  Finance for LaJolla  Securities  Corporation  from 1994 to 1995.  Mr.
Shelmire  currently serves as Managing Director of Investment  Banking for First
London Securities Corporation in Dallas, Texas.

   
    Robert A.  Shuey,  III has served as a director  of the  Company  since June
1996. Mr. Shuey has been employed by National Securities  Corporation of Dallas,
Texas as the Director of Corporate  Finance since  October 1996.  Prior to that,
Mr. Shuey was with LaJolla Securities  Corporation from March 1995 until October
1996 in the position of Director of Corporate Finance. Mr. Shuey was employed as
Director of Corporate  Finance by Dillon-Gage  Securities  Corp.,  an investment
banking  firm,  from  January  1994 to March  1995,  and  prior to that held the
position of Senior Vice President,  Corporate Finance, of Dickinson & Company, a
brokerage firm. Mr. Shuey was Vice President of Rauscher  Pierce  Refsnes,  Inc.
from June 1984 to September 1987. From May 1980 until June 1984, he was director
of the corporate finance department and a Vice President of Institutional Equity
Corporation. Prior to that time, Mr.
    
Shuey was an associate in the corporate finance  department of Salomon Brothers,
Inc.

   
     C.D.J.  Evers  served as a director of the Company  from  November 13, 1996
until his  resignation  on  February  12,  1997.  Mr.  Evers owns a pharmacy  in
Westervourt,  The  Netherlands and is a member of the Board of Directors of RABO
Bank in Arnhem, The Netherlands.
    

     Gregory A.  Gaylor has served as a Director  of the  Company  since June 1,
1994.  Mr.  Gaylor  served  as  President  of the  Company  from June 1, 1994 to
November 17, 1995, and served as Secretary and Treasurer of the Company from May
1994  to  November  17,  1995.  Mr.  Gaylor  has  ten  years  of  experience  in
international business. Since 1986, Mr. Gaylor has managed personal investments.
Mr. Gaylor holds a Bachelors of Business  Administration degree in Finance, with
honors, from Southern Methodist  University,  and was a Masters of Arts graduate
student in Foreign Affairs at the University of Virginia from 1983 to 1985.
Section 16 Requirements

    Section  16(a) of the  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 initial reports of ownership and reports of
changes in ownership with the Securities  and Exchange  Commission  (the "SEC").
Such persons are required by SEC  regulation  to furnish the Company with copies
of all Section 16(a) forms they file.

    Based  solely on its review of the copies of such forms  received by it with
respect  to fiscal  1996,  or written  representations  from  certain  reporting
persons,  the Company  believes that all filing  requirements  applicable to its
officers,  directors and persons who own more than 10% of a registered  class of
the Company's equity  securities have been complied with, except that one Form 5
was filed to report two late Form 4 transactions for Mr. Hinnen, the late Form 3
filing for Wisteria,  the direct owner of shares held indirectly by Pantapharma,
which is owned by Mr. Hinnen,  and eight late Form 4  transactions  for Wisteria
and Pantapharma. Additionally, Louis van den Reek failed to file a Form 3.

Item 11. Executive Compensation

    The following table sets forth certain  information  regarding  compensation
paid during the Company's  last  completed  fiscal year to the  Company's  Chief
Executive Officer and each of the Company's  executive  officers (other than the
Chief Executive Officer) whose total annual salary and bonuses earned during the
fiscal year ended December 31, 1996, exceeded $100,000:

                    Management Compensation and Transactions

Summary Compensation Table
<TABLE>
<CAPTION>

                                                                                                        Long-Term
                                                                                                 Compensation Awards 
                                                  Annual Compensation                          Securities
                                                                                               Underlying
                                                                              Other             Options/       All Other
              Name/Title(QC)        Year       Salary($)     Bonus($)    Compensation($)         SARs(#)    Compensation($)
<S>                                <C>        <C>              <C>            <C>                  <C>            <C>
          
           A.          Francois     1996      $ 125,000          --              --               --              --
           Hinnen(1)
                                    1995      $ 125,000         --             --                  --             --
</TABLE>

----------

(1) Mr.  Hinnen  contracts  his  services  to  Confedera  and  Galenica  through
Pantapharma B.V. See "Employment Agreements."

Compensation of Directors

    The Company pays $3,500 per quarter to its  directors  who are not employees
or affiliates of the Company ("Independent Directors"). In addition, Independent
Directors may receive  options to purchase Common Stock under the Company's 1995
Long-Term Incentive Plan.

Employment Agreements

   
    Mr.  Hinnen   provides  his  services  to  Confedera  B.V.,  a  wholly-owned
subsidiary of the Company ("Confedera"), through a management agreement ("Hinnen
I Agreement")  between  Confedera and  Pantapharma  B.V., a Netherlands  private
limited liability company ("Pantapharma").  Mr. Hinnen owns 100% of Pantapharma.
Pursuant to the Hinnen I Agreement, Pantapharma has agreed to fulfill the duties
assigned to a director of Confedera  for a period  commencing on January 1, 1995
through  December 31, 2000, for which  Confedera has agreed to pay Pantapharma a
management fee of approximately $62,000,  excluding sales tax, subject to review
annually  (with the  understanding  that the  management  fee shall be  annually
increased by a percentage equal to the price index figure for family consumption
as  determined  by the Central  Bureau of  Statistics  of The  Netherlands).  In
addition,  Confedera  has  agreed  to  reimburse  Pantapharma  for all  business
expenses  incurred by Pantapharma for acting,  in such capacity,  including,  an
automobile allowance of approximately $.37 per kilometer. The Hinnen I Agreement
is terminable by either party on at least one year prior written notice.  In the
event Confedera terminates the Hinnen I Agreement prior to the expiration of the
term without cause (with cause being defined as: (i) failure by  Pantapharma  to
fulfill  its  duties  and  obligations  under  the  Hinnen  I  Agreement;   (ii)
Pantapharma  has been  adjudicated  bankrupt or has been granted  suspension  of
payment;  or (iii) Pantapharma for a continuous period of thirteen weeks or more
has not placed any staff at the disposal of Confedera  for the  execution of the
Hinnen I  Agreement),  Pantapharma  shall be entitled to continue to receive the
management fee for the remainder of the term. In the event Pantapharma is unable
to fulfill  its  duties and  obligations  under the Hinnen I  Agreement  for any
reason, Pantapharma shall be entitled to receive the management fee for one-year
thereafter.

    Mr. Hinnen provides his services to Galenica B.V., a wholly-owned subsidiary
of  the  Company  ("Galenica"),  through  a  management  agreement  ("Hinnen  II
Agreement")  between  Galenica  and  Pantapharma.  Pursuant  to  the  Hinnen  II
Agreement,  Pantapharma  has agreed to fulfill the duties assigned to a director
of Galenica  for a period  commencing  on January 1, 1995  through  December 31,
2000,  for which  Galenica has agreed to pay  Pantapharma  a  management  fee of
approximately $62,000, excluding sales tax, subject to review annually (with the
understanding  that  the  management  fee  shall  be  annually  increased  by  a
percentage equal to the price index figure for family  consumption as determined
by the Central Bureau of Statistics of The Netherlands).  In addition,  Galenica
has agreed to  reimburse  Pantapharma  for all  business  expenses  incurred  by
Pantapharma  for acting in such capacity,  including an automobile  allowance of
approximately  $.37 per  kilometer.  The Hinnen II  Agreement is  terminable  by
either party on at least  one-year prior written  notice.  In the event Galenica
terminates  the Hinnen II Agreement  prior to the expiration of the term without
cause (with cause being  defined as: (i) failure by  Pantapharma  to fulfill its
duties and obligations under the Hinnen II Agreement;  (ii) Pantapharma has been
adjudicated  bankrupt  or has  been  granted  suspension  of  payment;  or (iii)
Pantapharma for a continuous period of thirteen weeks or more has not placed any
staff at the disposal of Galenica for the execution of the Hinnen II Agreement),
Pantapharma  shall be entitled to continue to receive the management fee for the
remainder of the term. In the event  Pantapharma is unable to fulfill its duties
and obligations under the Hinnen II Agreement for any reason,  Pantapharma shall
be entitled to receive the management fee for one-year thereafter.
    

    David  Anderson  provides  his  services  to  EuroMed  through a  management
agreement  between EuroMed and the Anderson Group, a sole  proprietorship.  This
contractual  relationship  states that Mr.  Anderson will be reimbursed  for his
Company  related  expenses and a $10,000 per month  management  fee. The term of
this contract is for six months beginning February 15, 1996.

    Robert W.L.  Veldman is  supplying  his  services  to the Company  through a
management contract with Beheer-en Beleggingsmaatschappij File B.V. ("Management
Company").  His  contract  specifies  that he will be the  managing  director of
EuroMed  Europe and its  subsidiaries.  Mr. Veldman is considered an employee of
the Management Company and not of EuroMed.  Mr. Veldman's  compensation shall be
200,000  Dutch gilders per year  (approximately  $100,000) for all work done for
the Company.  He is also reimbursed 3,000 Dutch gilders  (approximately  $1,580)
per month for expenses  incurred on behalf of the Company.  EuroMed Europe is to
pay these  amounts in 12  monthly  payments  upon  invoicing  by the  Management
Company over the term of this contract.  The term of the management  contract is
one year from  January 1, 1997 to December 31,  1997,  and may be extended  upon
agreement  of both  parties.  The  management  contract  shall  terminate if (i)
EuroMed Europe files bankruptcy;  (ii) a suspension of payment to the Management
Company occurs;  (iii) Mr. Veldman dies; or (iv) Mr. Veldman is ill or unable to
work for 90 consecutive days.

Item 12. Security Ownership of Certain Beneficial Owners and Management

    The  following  table  sets forth  information  with  respect to  beneficial
ownership of Common  Stock as of April 16, 1997 by (i) all persons  known to the
Company to be the beneficial owner of 5% or more of the Common Stock,  (ii) each
director  of the  Company,  (iii) the chief  executive  officer  and each of the
Company's  four other most highly  compensated  executive  officers  whose total
annual  compensation  for 1996  based on salary  and bonus  earned  during  1996
exceeded  $100,000 (the "Named  Executive  Officers"),  and (iv) all the Company
directors and executive officers as a group. All persons listed have sole voting
and investment power with respect to their shares unless otherwise indicated.
<TABLE>
<CAPTION>

                                                                            Amount and Nature
                                                                              of Beneficial     Percent
                                        Name of Beneficial Owner                Ownership      of Class
                              -------------------------------------------  ------------------  --------
<S>                                                                             <C>            <C>

                              A. Francois Hinnen,(1).....................      1,945,130        62.39%
                              Robert W. L. Veldman,......................             --           --
                              David Anderson.............................             --           --
                              Jesse Shelmire, IV.........................         14,000(2)         *
                              Robert A. Shuey, III.......................         20,000(3)         *
                              Gregory A. Gaylor..........................        125,000         4.00%
                              Louis van den Reek.........................             --           --
                              All directors  and executive  officers as a
                              group (7                                         2,104,130        67.49%
                                persons).................................
</TABLE>

----------

*   Less than 1%

(1) Of the shares  beneficially owned by Mr. Hinnen 1,923,130 are owned directly
    through B.V.  Wisteria,  a  Netherlands  limited  liability  company,  which
    company  is  owned by  Pantapharma  B.V.,  which  is  owned  by Mr.  Hinnen.
    Additionally,  Mr. Hinnen holds the voting power over 22,000 shares  through
    an irrevocable proxy which expires on June 30, 1997. Mr. Hinnen's address is
    Beekhuizenseweg 87, 6881 A G Velp, The Netherlands.

   
(2) Consists of warrants to purchase Common Stock, which warrants were issued in
    connection with the Company's initial public offering (the  "Representatives
    Warrants").  In addition, First London Securities Corporation,  of which Mr.
    Shelmire is the Managing Director of Investment  banking,  was issued 20,000
    Representative   Warrants,   of  which  Mr.  Shelmire  disclaims  beneficial
    ownership.

(3) Consists of 20,000 Representative Warrants. In addition, National Securities
    Corporation,  of which Mr. Shuey was formerly Director of Corporate Finance,
    was issued 6,667  Representatives  Warrants,  of which Mr.  Shuey  disclaims
    beneficial ownership.
    

Item 13. Certain Relationships and Related Transactions

   
    Confedera has had a business  relationship  with  International  Procurement
Agency B.V. ("IPA"),  a Netherlands  based  development  agency procurer for the
export  of  pharmaceutical,  since  July  1994 and  entered  into a  Cooperation
Agreement with IPA on July 10, 1995.  Under the  Cooperation  Agreement,  IPA is
primarily   responsible  for  the  financial,   administrative   and  logistical
activities  concerning the sale of pharmaceutical  products and medical consumer
goods and Confedera is responsible  for purchasing the  pharmaceutical  products
and  medical  consumer  goods,  quality  control  and  the  legal  documentation
pertaining  thereto.  The Cooperation  Agreement  further  provides that (i) the
parties will equally  split the profits and losses of their  activities,  except
that Confedera  will receive 66% of the profits (and assume the same  percentage
of the  losses)  for  customers  located  by  Confedera,  and  (ii)  as  long as
Confedera's prices for goods are competitive,  IPA will purchase  pharmaceutical
and medical consumer goods exclusively from Confedera,  although Confedera shall
be  entitled  to  sell  the  pharmaceutical  and  medical  consumer  goods  on a
non-exclusive basis. Mr. Hinnen owns 100% of the stock of Pantapharma which owns
100% of the stock of Wisteria  which owns 33% of the  capital  stock of Gentrade
B.V.,  which owns 100% of the capital  stock of IPA. Mr.  Hinnen had  contracted
with  Gentrade  B.V. to acquire an  additional  32% of the capital  stock of the
Company on or before June 1, 1996,  under certain  conditions.  These conditions
were  not  met at  that  time,  therefore,  Mr.  Hinnen  did  not  acquire  this
percentage.  Further, Mr. Hinnen has a continuing option to purchase another 35%
of Gentrade  B.V. if offered by the owner of this  stock.  The Company  believes
that all  transactions  between IPA and Confedera  have been, and will be, on an
arms-length basis.

    Mr. Hinnen is the sole owner of the Rhedense Apotheek, a pharmacy located in
Rheden, The Netherlands.  In 1994, 1995 and 1996, Rhedense Apotheek purchased an
aggregate  of  $1,096,000,   $1,492,000   and   $1,365,941,   respectively,   of
pharmaceutical  products from Galenica. The prices paid by Rhedense Apotheek are
the same as those  charged to third  parties  unrelated  to the  Company and the
Company  believes that all transactions  between Rhedense  Apotheek and Galenica
have been, and will be, on an arms-length basis.

    Mr.  Hinnen's  brother is the sole owner of the Apotheek  Neede,  a pharmacy
located  in Neede,  The  Netherlands.  In 1994,  1995 and 1996,  Apotheek  Neede
purchased an  aggregate  of  approximately  $700,000,  $994,000 and  $1,358,683,
respectively,  of  pharmaceutical  products  from  Galenica.  The prices paid by
Apotheek  Neede are the same as those charged to third parties  unrelated to the
Company and the Company  believes that all  transactions  between Apotheek Neede
and Galenica have been, and will be, on an arms-length basis.
    

     Mr.  Hinnen's  wife is the sole  owner of Ariano  Voorthuizen  Beheer  B.V.
("AVP"). On September 1, 1993, Galenica borrowed approximately $219,000 from AVP
("AVP Loan"). Interest on the AVP Loan was equal to the promissory note interest
rate of Nederlandsche  Bank N.V., plus 2%. The remaining  principal  balance of,
and accrued but unpaid interest on, the AVP Loan was paid in full by Galenica in
July 1995.

    Pursuant to a loan  agreement  dated  February 1, 1995 between  Galenica and
Wisteria ("Wisteria  Agreement"),  of which Mr. Hinnen is the sole equity owner,
Galenica borrowed approximately $421,000 from Wisteria. As of December 31, 1996,
the principal balance of this loan had been paid in full.

   
    Since 1991,  Pantapharma and Confedera have loaned or advanced money to each
other on a "when  needed",  and "if available"  basis.  As of December 31, 1995,
Confedera owed  Pantapharma  approximately  $10,000 which has been since paid in
full.  Following the pay-off of the  outstanding  loan balance,  Pantapharma and
Confedera  agreed  to  immediately  discontinue  such  loan  arrangement.  As  a
condition to an amendment to the loan agreement between Confedera,  Galenica and
Bank  MeesPierson,  N.V.  on  November  9, 1995,  Pantapharma  agreed to loan to
Confedera  approximately  $125,000  interest  free, due after January 1, 1998 by
agreement with Management. As of December 31, 1996 $90,000 of that loan remained
outstanding.
    

    In February  1997,  EuroMed  Europe  entered into a purchase  agreement with
Pantapharma,  whereby  EuroMed  Europe  purchased  from  Pantapharma  all of the
outstanding capital stock of Galenica Belgium, S.A., effective January 1, 1996.

   
     Topaas B.V. is the management company owned by Mr. Jean Kaiser, the manager
of Confedera's  export  department.  In 1995,  when Confedera  hired Mr. Kaiser,
Confedera  agreed to pay a fee to his prior employer for Mr. Kaiser's  violation
of his noncompetition  agreement.  Additionally Mr. Kaiser receives a management
fee of  approximately  $7,500 per month and is  entitled to receive one third of
the profits of Confedera's export department.
    

    It is the policy of the Company that any future transactions with affiliated
individuals  or entities will be on terms no less  favorable to the Company than
are reasonably  available from unrelated third parties,  and any such affiliated
transactions  will  require  the  approval  of a  majority  of  the  independent
directors.

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

    (a) The  following  documents  are filed as a part of this Annual  Report on
Form 10-K:

    (1) Financial Statements:

        The  financial  statements  filed as a part of this report are listed in
    the "Index to  Consolidated  Financial  Statements  and Financial  Statement
    Schedules" at Item 8.

    (2) Financial Statement Schedules:

        The  financial  statement  schedules  filed as a part of this report are
    listed in the "Index to  Consolidated  Financial  Statements  and  Financial
    Statement Schedules" at Item 8.

    (3) Exhibits

        The exhibits filed as a part of this report are listed under  "Exhibits"
at subsection (c) of this Item 14.

    (b) Reports on Form 8-K:

        The Company filed a Current  Report on Form 8-K dated November 19, 1996,
    regarding the resignation of KPMG Accountants N.V. ("KPMG") as the Company's
    independent  public  accountant,  which  was  amended  on Form  8-K/A  filed
    December  12,  1996 to include  the  Letter  Regarding  Change in  Principal
    Accountant  by KPMG and on Form 8-K/A  filed  January 3, 1997 to include the
    reasons given by KPMG for their resignation.

    (c) Exhibits:
<TABLE>
<S>                                    <C>     
 

                              Exhibit
                              Number                         Description of Exhibit
                               2.1     Stock Purchase Agreement dated as of June 19, 1996, by and among
                                       EuroMed,  Inc.,  EuroMed  Europe,  B.V.,  A.  Doets,  N.  Th.  P.
                                       Roozekrans,
                                       Mutarestes B.V., Pluripharm International B.V.,
                                       Financieringsmaatschappij   de  Nieuwe  Wereld  B.V.,   and  B.V.
                                       Wisteria.(3)
                               2.2     Stock Purchase Agreement dated as of June 19, 1996, by and among
                                       EuroMed, Inc., EuroMed Europe, B.V., A. Doets and N. Th. P.
                                       Roozekrans.(4)
                               2.3     Settlement Agreement April 3, 1997* 
                               2.4     Share Purchase    Agreement    April   3,  
                                       1997*   
                               2.5     Compensation   Agreement   April  3,  
                                       1997* 
                               3.1     Restated Articles of Incorporation(1) 
                               3.2    Bylaws of the  Company(1)  
                               4.1    Specimen of Common Stock  Certificate(1)
                              10.1     Consulting,  Management and Noncompetition Agreement, dated as of
                                       July 5,
                                       1996, by and between EuroMed Europe B.V. and Doets.(4)
                              10.2     Consulting,  Management and Noncompetition Agreement, dated as of
                                       July 5,
                                       1996, by and between EuroMed Europe B.V. and Roozekrans.(4)
                              10.3     Consulting,  Management and Noncompetition Agreement, dated as of
                                       July 5,
                                       1996, by and between EuroMed Europe B.V. and Hinnen.(4)
                              10.4     Management  Agreement by and among  EuroMed  Europe,  B.V.,  B.V.
                                       Wisteria
                                       and Beheer Beleggingsmaatschappij B.V. dated January 21, 1997.*
                              10.5     Letter Agreement  between the Company and The
                                       Anderson  Group*  
                              16.1     Letter  of the  Change  of
                                       Certified  Accountants(2) 
                              21.1     Subsidiaries of the
                                       Registrant*  
                              23.1     Consent of  Killman,  Murrell &
                                        Company, PC 
                              23.2     Consent of KPMG Accountants N.V.
                              27.1     Financial Data Schedules(5)
</TABLE>

----------

    *  Previously filed

(1) Previously filed as an exhibit to the Company's  Registration  Statement No.
33-80805 on Form S-1 and incorporated herein by reference.

(2) Previously filed as an exhibit to the Company's Current Report on Form 8-K/A
(Amendment No. 1) dated November 19, 1996 and incorporated herein by reference.

(3) Previously  filed as an exhibit to the Company's  Current Report on Form 8-K
dated July 5, 1996 and incorporated herein by reference.

(4) Previously filed as an exhibit to the Company's Current Report on Form 8-K/A
(Amendment No. 1) dated July 5, 1996 and incorporated herein by reference.

(5)  Filed herewithin
<PAGE>



                                   SIGNATURES

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

EUROMED, INC.

   
Dated: December 1, 1998                 By:   /s/ Elbert G. Tindell
                                          -------------------------

                                Elbert G. Tindell
                             Chairman of the Board,
                                  and President
    

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

                                             Signature                        Title               Date

   
                                /s/ Elbert G. Tindell              President  and  Chairman  of  December 01, 1998
                                ---------------------                                                             
                                                                   the Board.


                                /s/ ROBERT A. SHUEY, III           Chief Executive  Officer and  December 01, 1998
                                ------------------------                                                          
                                                                   Chief   Financial   Officer,
                                                                   Treasurer, and Director
    
                                Robert A. Shuey, III
</TABLE>
 




<PAGE>


                                  EXHIBIT INDEX
<TABLE>
<S>                                     <C>    
 

                              Exhibit
                              Number                          Description of Exhibit
                               2.1      Stock Purchase Agreement dated as of June 19, 1996, by and among
                                           EuroMed,  Inc.,  EuroMed  Europe,  B.V., A. Doets,  N. Th. P.
                                            Roozekrans, Mutarestes      B.V.,      Pluripharm International                   B.V.,
                                           Financieringsmaatschappij  de  Nieuwe
                                           Wereld B.V., and B.V.
                                           Wisteria.(3)
                               2.2      Stock Purchase Agreement dated as of June 19, 1996, by and among
                                           EuroMed, Inc., EuroMed Europe, B.V., A. Doets and N. Th. P.
                                           Roozekrans.(4)
                               2.3      Settlement Agreement April 3, 1997*
                               2.4      Share Purchase Agreement April 3, 1997*
                               2.5      Compensation Agreement April 3, 1997*
                               3.1      Restated Articles of Incorporation(1)
                               3.2      Bylaws of the Company(1)
                               4.1      Specimen of Common Stock Certificate(1)
                              10.1      Consulting,  Management and Noncompetition  Agreement,  dated as
                                        of July 5,
                                           1996, by and between  EuroMed  Europe
                                        B.V. and Doets.(4) 10.2 Consulting, Management and
                                        Noncompetition Agreement, dated as
                                        of July 5,
                                           1996, by and between EuroMed Europe B.V. and Roozekrans.(4)
                              10.3      Consulting,  Management and Noncompetition  Agreement,  dated as
                                        of July 5,
                                           1996, by and between EuroMed Europe B.V. and Hinnen.(4)
                              10.4      Management  Agreement by and among EuroMed  Europe,  B.V.,  B.V.
                                        Wisteria
                                           and Beheer  Beleggingsmaatschappij  B.V.  dated  January  21,
                                        1997.*
                              10.5      Letter Agreement between the Company and The Anderson Group*
   
                              11.1      Statement Re: Computation of Per Share Earnings*
                              16.1      Letter of the Change of Certified Accountants(2)
                              21.1      Subsidiaries of the Registrant*
                              23.1      Consent of Killman, Murrell & Company(5)
                              23.2      Consent of KPMG Accountants N.V.*
                              27.1      Financial Data Schedules (5)
</TABLE>

    
----------
    *  Previously filed
(1) Previously filed as an exhibit to the Company's  Registration  Statement No.
33-80805 on Form S-1 and incorporated herein by reference.

(2) Previously filed as an exhibit to the Company's Current Report on Form 8-K/A
(Amendment No. 1) dated November 19, 1996 and incorporated herein by reference.

(3) Previously  filed as an exhibit to the Company's  Current Report on Form 8-K
dated July 5, 1996 and incorporated herein by reference.

(4) Previously filed as an exhibit to the Company's Current Report on Form 8-K/A
(Amendment No. 1) dated July 5, 1996 and incorporated herein by reference.


(5)  Filed Here within