<PAGE>
                                                          B & S DRAFT -- 6/25/97
                                   FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

For the fiscal year ended March 31, 1997

                                       OR

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

For the transition period from ___________ to ___________

Commission File Number 333-12911

                         LEADING EDGE PACKAGING, INC.
------------------------------------------------------------------------------
         (Exact name of registrant as specified in its charter)

            Delaware                               22-3432883
-------------------------------          -------------------------------
(State or other jurisdiction of                 (I.R.S. Employer
 incorporation or organization)                Identification No.)

350 Fifth Avenue, Suite 3922, New York, New York         10118
------------------------------------------------------------------------
(Address of principal executive offices)              (Zip Code)

Registrant's telephone number, including area code: (212) 239-1865

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

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

                           Common Stock
-------------------------------------------------------------------------------

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 the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [ ]

<PAGE>
 
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based on the $6.00 per share last reported sales price reported by
NASDAQ/NMS on June 10, 1997, was $8,535,000.

As of June 10, 1997, the registrant had issued and outstanding 
3,312,500 shares of Common Stock.

                         DOCUMENTS INCORPORATED BY REFERENCE

         The following documents, or indicated portions thereof, have been
incorporated herein by reference:  

         (1)  Information in the Registrant's definitive proxy material for its
1997 Annual Meeting of Stockholders is incorporated by reference as Part III
hereof, which definitive proxy material shall be filed not later than 120 days
after the Registrant's fiscal year ended March 31, 1997.   


                                       2

<PAGE>
                                    PART I

ITEM 1.  BUSINESS

General

         The Company sells and distributes, in North America, packaging 
products used primarily in the sale of luxury consumer goods.  Its packaging 
products include metal and plastic cases, optical cases, pouches and bags, 
and paper gift boxes.  The Company also sells display units for retail 
merchandising of jewelry, watches, eyeglasses, pens, cosmetics and gold coins 
(the packaging products and display units are collectively referred to herein 
as "Packaging Products").  The Company's customers are mainly wholesalers and 
distributors of Packaging Products and consumer product manufacturers.  The 
Company purchases substantially all of its inventory from Rich City 
International Packaging Limited ("Rich City"), a Hong Kong company and the 
Company's parent.  The Company entered into an Assignment and Distribution 
Agreement (the "Distribution Agreement") with Rich City which, effective 
April 1, 1996, appointed the Company as the exclusive distributor in North 
America of Packaging Products supplied by Rich City.  Rich City had supplied 
its Packaging Products to North America since 1990.

          Although no market data exists for the packaging products industry,
based on the number of units of luxury consumer goods sold in each category as
extracted from estimates published by the American Watch Association, MJ Jewelry
Sales and U.S. Optical Industry Handbook, and on Rich City's pricing data, the
Company estimates that in 1994 the U.S. wholesale market was approximately
$130,000,000 for jewelry packages of all types, approximately $140,000,000 for
watch boxes, and, in 1995, was approximately $54,000,000 for prescription
optical cases.

         The Company believes that the market for Packaging Products in North 
America is fragmented and lacks a centralized, efficient mechanism for 
bringing such products from areas of low-cost production to wholesalers, 
distributors and consumer product manufacturers.  As part of its marketing 
strategy, the Company's goal is to consolidate this process through its own 
system of purchasing and customizing high quality Packaging Products from the 
Company's low-cost Asian producer and distributing the products in North 
America.

          To effect this strategy, the Company leases a 2,000 square-foot office
and showroom in the Empire State Building in New York City, and a 33,000
square-foot warehouse and distribution center in Raritan Center, Edison, New
Jersey, for the Company's warehousing, customization and distribution
operations.  The Company believes that its warehousing and customizing
capabilities located in the United States, coupled with its Asian low-cost

                                       3
<PAGE>

source of supply, give it an advantage over its competitors in the North
American market by enabling the Company to fill orders and customize products on
a "just in time" basis.  The Company's source of supply allows it to capitalize
on lower production costs obtainable overseas, while maintaining the high
quality of its products.

Competition

         The Company is aware of eight substantial foreign-based 
manufacturers and of six North American distributors whose products are in 
direct competition with various of its Packaging Products.  The cost of 
manufacturing Packaging Products in North America is relatively high, causing 
manufacturers to seek out overseas suppliers to fill their orders.

         The Company believes that it will be able to compete by having the
flexibility to respond quickly to orders and catering to changes in customers'
design specifications; by endeavoring to offer a wider range of products than
its competitors; and by capitalizing on lower production costs obtainable
through its Distribution Agreement with Rich City, while maintaining the high
quality of its products.  The Company believes it can offer its North American
customers a quick response time on short orders because of its customization
facilities in the U.S.

         There is substantial competition in the Packaging Products industry. 
 The Company competes with distributors and manufacturers of Packaging 
Products based in the U.S. and overseas.  Many of the Company's competitors 
have name recognition in the market and longer operating histories and in 
many cases are substantially larger and better financed than the Company.  
Such competitors may use their economic strength to influence the market to 
continue to buy their existing or newly developed products.  New competitors 
may arise and may market products which compete with the Company's products.  
The Company believes that several companies currently distribute products in 
North America in direct competition with the Company's Packaging Products, 
including International Packaging Inc., Gem Case Inc., Fuller Corporation, 
Rocket Jewelry Box Inc., Boxco Inc. and Gunther Mele Inc.  Some of the 
Company's current customers presently, or at some future point may, compete 
with the Company.  See "Management's Discussion and Analysis of Financial 
Condition and Results of Operations."

Government Regulation:  Import/Export

         The People's Republic of China (the "PRC") currently enjoys 
Most-Favored Nation ("MFN") status granted by the United States, which 
results in imports into the United States from the PRC being subject to the 
lowest applicable tariffs.  The United States annually reconsiders the 
renewal of MFN trading status for the PRC.  There can be no

                                       4
<PAGE>

assurance, however, that the PRC's MFN status will be renewed in future years. 
The Company believes that the non-renewal of MFN trading status would adversely
affect the pricing of any inventory of the Company consisting of products
manufactured within the PRC.  Failure by the United States to renew the PRC's
MFN status, could cause an increase in the cost to import Packaging Products to
Hong Kong from the PRC, and, after transfer of sovereignty over Hong Kong, from
Hong Kong to the United States.  Under the terms of the Distribution Agreement,
this would increase prices paid by the Company to Rich City for Packaging
Products.  If such prices became prohibitively high, there can be no assurance
that the Company could locate substitute suppliers of Packaging Products outside
of the PRC.  Failure by the Company to locate such suppliers would result in a
loss of revenues, a loss of customers due to failure to timely meet orders
and/or a total loss of the Company's inventory.

         At current rates an import duty of between 5% and 20% will be 
payable by the Company on the import price of metal and plastic cases 
imported into the U.S. and Canada.  For the year ended March 31, 1997, metal 
cases accounted for approximately 48.9% of total imports from Rich City to 
North America; plastic cases accounted for approximately 41.8%.  If the PRC 
were to lose MFN status, then the Company's products may be subject to higher 
tariffs and import duties in the U.S.  Although it is not possible to 
quantify the potential impact of higher tariffs and duties, the Company 
believes that, due to the comparatively low cost of production in the PRC, it 
would be able to withstand an increase in tariffs while still being able to 
compete profitably in the U.S. market.

Employees

         As of March 31, 1997, the Company employed approximately 18 
employees. These employees include five marketing and sales representatives 
and a receptionist in the New York office as well as four accounting 
professionals and eight distribution specialists in the New Jersey warehouse. 
 The distribution staff includes Operations and Warehouse Managers, a 
Warehouse Supervisor, a printing specialist, packers and assistants.

ITEM 2.  PROPERTIES

Leases

         The Company leases a 2,000 square-foot space for its offices and 
showroom in the Empire State Building, 350 Fifth Avenue, Suite 3922, New 
York, New York for a five-year period commencing July 1, 1996 at an annual 
rent of $42,096. The Company also leases for the warehousing and 
customization of its products a 33,000 square-foot facility in Raritan, New 
Jersey, for a period of five years commencing November 1, 1996, at an annual 
rent of $150,336 plus 30% of certain common charges for the building in which 
the facility is located. The Company leases

                                       5
<PAGE>

an apartment in Highland Park, New Jersey, commencing September 1, 1996, for 
one year at an annual rent of $15,600.

ITEM 3.  LEGAL PROCEEDINGS

None.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         There were no matters submitted to a vote of security holders during 
the fourth quarter of the fiscal year covered by the report.  

                                       PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
         STOCKHOLDER MATTERS

         The Company's Common Stock is traded on the Nasdaq National Market.

         The range of the high and low sales prices per share of the 
Company's Common Stock during the last fiscal year, as reported by the Nasdaq
National Market, is set forth below:

                                               High    Low
    Fiscal 1997
      3rd Quarter............................    7    6.25
      4th Quarter............................    7    5


         As of June 10, 1997, there were approximately 12  holders of record 
of the Company's Common Stock.

         The Company has never paid cash dividends on its Common Stock.  
Payment of dividends, if any, will be within the discretion of the Company's 
Board of Directors and will depend, among other factors, on earnings, capital 
requirements and the operating and financial condition of the Company.  At 
the present time, the Company's anticipated capital requirements are such 
that it intends to follow a policy of retaining earnings, if any, in order to 
finance the development of its business.

ITEM 6.  SELECTED FINANCIAL DATA

         The selected financial data of Rich City's N.A. Distribution 
Business for the two years ended March 31, 1997 is prepared on the 
"carved-out" assumptions and should be read in conjunction with the Company's 
financial statements and notes thereto and "Management's Discussion and 

                                       6
<PAGE>

Analysis of Financial Condition and Results of Operations" appearing 
elsewhere herein.

<TABLE>
                                                          Rich City's N.A.
 (In thousands, except           Leading Edge               Distribution
selected  operating data)       Packaging, Inc.               Business
------------------------        ---------------       -------------------------------------------------------
Fiscal Year Ended March 31,          1997                1996           1995           1994           1993   
--------------------------      ---------------        --------       --------       --------       -------- 
<S>                                <C>                <C>             <C>           <C>             <C>      
Income Statement Data:                                                                                       
    Net sales                       $12,987            $10,987         $6,311        $13,725         $8,768  
    Gross profit                      4,581              4,352          2,289          4,296          1,782  
    Operating income                  3,359              3,248          1,482          3,073          1,187 
    Income before income taxes        3,433              3,201          1,473          3,052          1,178  
    Income taxes                      1,342               ___            ___              33           ___   
    Net income                        2,091              3,201          1,473          3,019          1,178  
    Net income per common share       $0.89               N/A            N/A            N/A            N/A   
    Weighted average common                                                                                  
       shares outstanding         2,347,603               N/A            N/A            N/A            N/A   
                                                                                                             
Balance Sheet Data:                                                                                          
    Total assets                    $13,916             $1,797         $1,044         $4,559         $2,496  
    Total liabilities                 4,730              1,797          1,044          4,549          1,274  
    Stockholders' equity              9,186               N/A            N/A              10          1,222

</TABLE>

(1) The functional currency of the North American Distribution Business of 
Rich City's N.A. Distribution Business is Hong Kong dollars.  Transactions, 
assets and liabilities denominated in Hong Kong dollars have been translated 
to the U.S. dollar at approximately HK$7.80 to US$1.00, which approximates 
the market rate at all periods presented.

(2)  Effective April 1, 1996, the Company is subject to United States income
taxes, calculated at a combined rate of 38%.


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
         CONDITION AND RESULTS OF OPERATIONS

         The following discussion and analysis should be read in conjunction 
with the financial statements and notes thereto contained elsewhere herein.

                                       7
<PAGE>


         All statements, trend analysis and other information contained in 
this report relative to markets for the Company's products and trends in the 
Company's operations or financial results, as well as other statements 
including words such as "anticipate", "believe", "plan", "estimate", 
"expect", "intend", and other similar expressions, constitute forward-looking 
statements under the Private Securities Litigation Reform Act of 1995.

Introduction

         The Company sells and distributes, in North America, packaging 
products used primarily in the sale of luxury consumer goods and premium 
products.  Its packaging products include metal, plastic and paper based 
jewelry cases, optical cases, watch boxes, pouches, and paper shopping bags 
and gift boxes.  The Company has a 2,000 square-foot office and showroom in 
the Empire State Building, 350 Fifth Avenue, New York City and a 33,000 
square-foot office, warehouse and light assembly facility in Raritan Center 
Industrial Park, Edison, New Jersey.

         The Company is the successor to the North American distribution 
business of Rich City ("the R.C.N.A. Distribution Business"), and, 
accordingly, the Company's historical financial information is derived from 
the operations of Rich City in North America.  Under the terms of the 
Distribution Agreement, Rich City has assigned all of its business in North 
America to the Company, effective April 1, 1996, with the exclusive rights to 
market, distribute, sell and warehouse the Packaging Products supplied by 
Rich City, and the rights to procure from other suppliers, if needed.  Assets 
and liabilities of the R.C.N.A. Distribution Business as at March 31, 1996 
were not transferred to the Company.

         The Company's Financial Statements appearing elsewhere herein 
consist of (i) Financial Statements of the R.C.N.A. Distribution Business for 
the fiscal years ended March 31, 1995, and 1996; and (ii) The Company's 
Financial Statements for the year ended March 31, 1997.

         The Financial Statements for the R.C.N.A. Distribution Business, for 
the years ended March 31, 1995 and 1996 have been prepared on a "carved-out" 
basis as if the R.C.N.A. Distribution Business had been in existence and 
operating independently prior to the effective date of April 1, 1996 of the 
Distribution Agreement.  This financial information does not purport to 
represent what the results of operations or financial position of the 
R.C.N.A. Distribution Business would actually have been had the Distribution 
Agreement been in effect on such date or at the beginning of the period, or 
to project the results of the operations of the R.C.N.A. Distribution 
Business for any future date or period.

                                       8
<PAGE>

        Commencing in the third quarter of fiscal 1997, the Company 
incurred additional costs related to its operations as an independent entity 
in the U.S. These costs included salaries at $168,647, sales commissions from 
1-3% of sales, and depreciation on property and equipment at $18,739.

         The Distribution Agreement provides that the 
inventory purchase price payable by the Company to Rich City equals Rich 
City's cost to manufacture the Packaging Products plus a 6-8% mark-up 
depending upon the product being manufactured and Rich City's production 
schedule.  The FOB price payable by the Company for its inventory of 
Packaging Product is directly tied to Rich City's manufacturing cost, any 
inflationary pressure on the components of Rich City's manufacturing cost 
(e.g. costs of materials, labor, office and factory overhead) would increase 
the purchase price paid by the Company for its inventory.  If the Company 
were unable to pass such an increase on to its customers, the result would be 
a reduction in profits to the Company.

         The North American market for packaging product is currently 
dominated by a small number of large importers-distributors and U.S. domestic 
manufacturers that purchase Packaging Products from overseas manufacturers 
and sell them to end-users.  A significant portion of the Company's customer 
base consists of these U.S. manufacturers and importers-distributors.  Two of 
the Company's customers each individually accounted for 10% or more of the 
R.C.N.A.'s net sales for the year ended March 31, 1995, collectively 
generating approximately 58.0% of net sales. In fiscal 1996, three customers 
each individually accounted for 10% or more of net sales, collectively 
generating approximately 52.6% of net sales. In fiscal 1997, two customers
each accounted for 10% or more of net sales, collectively generating 
approximately 38.5% of net sales. Because the Company sells its Packaging 
Products to manufacturers and distributors, all of its principal customers 
are also its competitors. Customers which are also competitors include Gem 
Case, Inc. Fuller Corporation, Rocket Jewelry Box, Inc. and Boxco, Inc.

Seasonality

        The Company's business depends on the buying seasons of the luxury 
goods which are sold using its packaging products, with a significant portion 
of its sales and most of its income generated during the second and third 
fiscal quarters ending March 31.  The Company has historically experienced 
lower net sales in each of its first and fourth quarters.  Until the full 
business impact of New Jersey warehouse distribution center and light 
assembly facility, the Company expects this trend to continue in the fiscal 
year 1998.  A variety of other factors may also affect the revenue results of 
the Company, including U.S. economic conditions, the 

                                       9
<PAGE>

retail sales environment and the Company's ability to otherwise execute its 
business and marketing strategy.

         In fiscal 1998, the Company plans to recruit additional marketing 
and sales personnel to increase sales and to implement its market 
consolidation strategy, and expects to incur selling, general and 
administrative expenses in the near term in association with this ongoing 
process.  The Company plans to pursue the market of selling and distributing 
high quality paper shopping bags, premium paper items and specialty novelty 
paper boxes.  This new operations, which has an estimated $350 million 
annually of the U.S. market, will complement Leading Edge's existing core 
packaging business and allow the Company to offer a broader product line to 
new and existing customers.

                                       10
<PAGE>

Results of Operations

         The following table set forth for the period indicated certain line 
items derived from the Company's statements of operations expressed as a 
percentage of net sales for such periods.

<TABLE>
                                         Fiscal       Fiscal       Fiscal
Percentage of Net Sales of:               1997         1996         1995
<S>                                       <C>          <C>          <C>

Net sales.............................    100%         100%         100%

Cost of sales.........................   64.7%        60.4%        63.7%

Gross profit..........................   35.3%        39.6%        36.3%

Selling, general and administrative
    expenses..........................    9.4%        10.0%        12.8%

Operating income......................   25.9%        29.6%        23.5%

Interest expense......................   (0.1)%       (0.6)%       (1.1)%

Other income..........................    0.6%         0.1%         0.9%

Income before income taxes............   26.4%        29.1%        23.3%

Income taxes (Note__).................   10.3%          __           __

Net income............................   16.1%        29.1%        23.3%

</TABLE>

Year ended March 31, 1997 compared with year ended
March 31, 1996

         Net sales in fiscal 1997 increased $2 million, or 18.2%, to 
approximately $13 million from approximately $11 million in fiscal 1996.  
The bulk of the Company's net sales for the year were conducted in Hong Kong 
based on FOB prices of Rich City, and net sales based on U.S. delivery which 
commenced in the middle of January, 1997 were insignificant for the year 
($518,785).  The Company expects its New York and New Jersey operations to 
contribute to its sales in the coming fiscal year.  Gross profit increased 
$228,563 to $4,580,715 in fiscal 1997.  The gross profit percentage decreased 
to 35.3% in fiscal year 1997 from 39.6% in fiscal 1996, due primarily to the 
mix of product lines sold.

        Selling, general and administrative expenses increased $117,239, or 
10.6%, to $1,221,849 in fiscal 1997 from $1,104,610 in fiscal 1996.  As a 
percentage of net sales, selling, general and administrative expenses 
decreased to 9.4% in fiscal 1997 from 10% in fiscal 1996.  The increase in 
expenses is primarily related to higher payroll expenses ($271,175), 
commencing in the third quarter of the year, rental expenses, higher 
professional fees and other 

                                       11
<PAGE>

expenses ($226,015).

    As a result of the factors discussed above, income from operations slightly
increased 3.4% to $3,358,866 in fiscal 1997 from $3,247,542 in fiscal 1996.  As
a percentage of net sales, income from operations decreased to 25.9% in fiscal
1997 from 29.6% in fiscal 1996.

    Income taxes of $1.3 million in fiscal 1997 were based upon an annual
effective tax rate of 38%, which included state taxes.

Year ended March 31, 1996 compared with year ended
March 31, 1995

    For fiscal years 1995 and 1996, net sales were $6,310,879 and $10,987,470,
respectively.  Net sales in fiscal 1996 increased by 74.1% or $4,676,591 from
fiscal 1995, as Rich City captured sales from the client base of its former
competitor and customer, Jewelpak Corporation, and simultaneously increased
orders derived from its other distributor/customers and from new customers. 
Sales in 1995 were abnormally low because of the cessation of business with
Jewelpak.

    In fiscal 1995 and 1996, selling expenses were $263,778 and $451,327,
respectively, representing an increase of 71.1%.  The change reflected the
impact of increased sales in 1996 after the downturn in 1995 resulting from the
cessation of business with Jewelpak.

    In fiscal 1995 and 1996, general and administrative expenses were $543,644
and $653,283, respectively, representing an increase of 20.2%.  However, for
fiscal years 1995 and 1996, general and administrative expenses, as a percentage
of net sales, were 8.6% and 5.9%, respectively.  The decline in expenses as a
percentage of net sales was the result of efficiencies created during the period
by Rich City's management.   

    In fiscal 1995 and 1996, operating income was $1,481,549 and $3,247,542,
respectively, representing an increase of 119.2%.  As a percentage of sales,
operating income for fiscal 1995 and 1996 was 23.5% and 29.6%, respectively. 
The increase correlated to increase in sales, although expenses also increased
during the period.  

Liquidity and Capital Resources

    During the fiscal year ended March 31, 1997, the Company's operating
activities consumed $2.1 million in cash.  The uses of funds as stated in the
initial public offering prospectus were primarily for the purchase of inventory
from Rich City and the set-up of New Jersey warehouse distribution center and
working capital.  As a part of working capital, the Company set aside 

                                       12
<PAGE>

$1.25 million for income taxes due on June 15, 1997.  The Company's debt to 
equity ratio is 2.4%.  At March 31, 1997, the Company's debt included 
$220,906 borrowed against Bankers' Acceptance line of credit, which was a 
self-liquidating loan. The Company invested $4,688,541 of its funds in 
Evergreen Funds managed by Fidelity Investments in Boston.  The Company 
anticipates using the funds to finance the future purchase of goods and for 
the expansion of its sales program.

    The Company's capital expenditures in 1997 were $296,224 primarily for
leasehold improvements to the Company's New York corporate office and showroom
($86,612), and for building steel racks and light assembly system in New Jersey
facility ($209,612).

    Management expects that cash flows from operating activities and funds
available should be sufficient to support the Company's current business program
and seasonal working capital needs for the foreseeable future.

                                       13
<PAGE>
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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


                                       14
<PAGE>


                   LEADING EDGE PACKAGING, INC.
                   ----------------------------

                   Financial Statements
                   For the year ended March 31, 1997


<PAGE>

                            INDEX TO FINANCIAL STATEMENTS






Report of independent auditors . . . . . . . . . . . . . . . . .      F - 1

Balance sheets of Rich City International Packaging Limited
 - North American Distribution Business as of March 31, 1996
    and of Leading Edge Packaging, Inc. as of March 31, 1997 . .      F - 2


Statements of income of Rich City International Packaging Limited
 - North American Distribution Business for the years ended
    March 31, 1995 and 1996 and of Leading Edge Packaging, Inc.
    for the year ended March 31, 1997. . . . . . . . . . . . . .      F - 3


Statements of Equity of Rich City International Packaging Limited
 - North American Distribution Business for the years ended
    March 31, 1995 and 1996 and of Leading Edge Packaging, Inc.
    for the year ended March 31, 1997. . . . . . . . . . . . . .      F - 4


Statements of Cash Flows of Rich City International Packaging Limited
 - North American Distribution Business for the years ended
    March 31, 1995 and 1996 and of Leading Edge Packaging, Inc.
    for the year ended March 31, 1997. . . . . . . . . . . . . .      F - 5


Notes to the financial statements. . . . . . . . . . . . . . . .  F - 6 - F - 18


<PAGE>

                            REPORT OF INDEPENDENT AUDITORS

The Shareholders and The Board of Directors
Leading Edge Packaging, Inc.

We have audited the accompanying balance sheet of Rich City International
Packaging Limited ("Rich City")'s North American Distribution Business ("N.A.
Distribution Business") as of March 31, 1996 and of Leading Edge Packaging, Inc.
(the "Company") as of March 31, 1997 and the related statements of income,
equity and cash flows of Rich City's N.A. Distribution Business for each of the
two years in the period ended March 31, 1996 and of the Company for the year
ended March 31, 1997.  The Company was formed on December 15, 1995 and is the
successor to Rich City's N.A. Distribution Business.  These financial statements
are the responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
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 statements presentation.  We believe that our audits provide a
reasonable basis for our opinion.

The accompanying financial statements of the N.A. Distribution Business have
been prepared from the separate records maintained by it and may not necessarily
be indicative of the condition that would have existed or the results of
operations if the N.A. Distribution Business had been operated as an
unaffiliated company.  Portions of certain income and expenses represent
allocations made from head office items applicable to Rich City as a whole.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Rich City's N.A. Distribution Business as of
March 31, 1996 and the Company as of March 31, 1997 and the results of the
operations and cash flows of Rich City's N.A. Distribution Business for each of
two years in the period ended March 31, 1996 and of the Company for the year
ended March 31, 1997 in conformity with accounting principles generally accepted
in the United States of America.



Deloitte Touche Tohmatsu
Hong Kong
May 27, 1997


                                         F - 1


<PAGE>

               LEADING EDGE PACKAGING, INC. AND RICH CITY INTERNATIONAL
               PACKAGING LIMITED - NORTH AMERICAN DISTRIBUTION BUSINESS
                                           
                                    BALANCE SHEETS

<TABLE>
<CAPTION>

                                                               Rich City's                
                                                                   N.A.                   
                                                               Distribution   Leading Edge
                                                                 Business       March 31, 
                                                              March 31, 1996      1997    
                                                                Carved out*      Actual   

                                               ASSETS
<S>                                                             <C>           <C>
Current assets:
  Cash and cash equivalents. . . . . . . . . . . . . . . .       $   35,002    $ 4,734,139
  Accounts receivable, net of allowance for doubtful
    accounts - 1996, $5,944; 1997, $Nil. . . . . . . . . .          192,199      4,749,130
  Bills receivable (Note 5). . . . . . . . . . . . . . . .          169,516      1,245,449
  Inventories (Note 6) . . . . . . . . . . . . . . . . . .             -           748,524
  Advances to head office (Note 7) . . . . . . . . . . . .        1,151,836           -   
  Deposits paid to holding company (Note 8). . . . . . . .             -         2,111,506
  Prepaid expenses and other current assets. . . . . . . .           54,832         53,366
                                                                 ----------    -----------
    Total current assets . . . . . . . . . . . . . . . . .       $1,603,385     13,642,114
  Property, plant and equipment, net of accumulated
    depreciation - 1996, $56,978; 1997, $22,490 (Note 9) .          193,295        273,734
                                                                 ----------    -----------
    Total assets     . . . . . . . . . . . . . . . . . . .       $1,796,680    $13,915,848
                                                                 ----------    -----------
                      LIABILITIES AND DIVISION/SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable to a related party/holding company
    (Note 15a)       . . . . . . . . . . . . . . . . . . .       $1,655,308      2,995,690
  Bills payable (Note 5) . . . . . . . . . . . . . . . . .             -           220,906
  Accrued liabilities. . . . . . . . . . . . . . . . . . .          141,372        165,274
  Capital lease obligations (Note 10). . . . . . . . . . .             -             1,057
  Income taxes payable (Note 11) . . . . . . . . . . . . .             -         1,342,224
                                                                 ----------    -----------
    Total current liabilities. . . . . . . . . . . . . . .        1,796,680      4,725,151
                                                                 ----------    -----------
Long term liabilities:
  Capital lease obligations (Note 10). . . . . . . . . . .             -             4,789
                                                                 ----------    -----------
    Total long term liabilities. . . . . . . . . . . . . .             -             4,789
                                                                 ----------    -----------
Commitments and contingencies (Note 17)
Division/shareholders' equity:
  Preferred stock, $0.01 par value
  - authorized 5,000,000 shares, no shares issued or
      outstanding    . . . . . . . . . . . . . . . . . . .             -              -   
  Common stock, 1997, $0.01 par value
  - authorized 5,000,000 shares, issued and outstanding
      3,312,500 shares . . . . . . . . . . . . . . . . . .             -            33,125
  Additional paid-in capital . . . . . . . . . . . . . . .             -         7,061,700
  Retained earnings  . . . . . . . . . . . . . . . . . . .             -         2,091,083
                                                                 ----------    -----------
    Total division/shareholders' equity. . . . . . . . . .             -         9,185,908
                                                                 ----------    -----------
    Total liabilities and division/shareholders' equity. .       $1,796,680     13,915,848
                                                                 ----------    -----------
</TABLE>
                      See accompanying notes to financial statements

*    Assets and liabilities of the N.A. Distribution Business as at March 31, 
     1996 were not transferred to Leading Edge.


                                           F - 2


<PAGE>

               LEADING EDGE PACKAGING, INC. AND RICH CITY INTERNATIONAL
               PACKAGING LIMITED - NORTH AMERICAN DISTRIBUTION BUSINESS

                                 STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                                                       Rich City's                
                                                                           N.A.                   
                                                                       Distribution
                                                                         Business              Leading Edge
                                                                   Year ended March 31,         Year Ended
                                                                  1995              1996       March 31,1997
                                                               Carved out        Carved out       Actual
                                                               ----------        ----------       ------
<S>                                                           <C>               <C>            <C>
Net sales  . . . . . . . . . . . . . . . . . . . . . . . .     $6,310,879        $10,987,470    $12,987,263
Cost of sales from a related party/holding                                       
  company. . . . . . . . . . . . . . . . . . . . . . . . .      4,021,908          6,635,318      8,406,548
                                                               ----------        -----------    -----------
Gross profit . . . . . . . . . . . . . . . . . . . . . . .      2,288,971          4,352,152      4,580,715
                                                               ----------        -----------    -----------
Selling expenses . . . . . . . . . . . . . . . . . . . . .        263,778            451,327        412,919
General and administrative expenses. . . . . . . . . . . .        543,644            653,283        808,930
                                                               ----------        -----------    -----------
Selling, general and administrative expenses . . . . . . .        807,422          1,104,610      1,221,849
                                                               ----------        -----------    -----------
Operating income . . . . . . . . . . . . . . . . . . . . .      1,481,549          3,247,542      3,358,866
Interest expense . . . . . . . . . . . . . . . . . . . . .        (65,057)           (53,961)        (7,165)
Other income . . . . . . . . . . . . . . . . . . . . . . .         56,416              7,014         81,606
                                                               ----------        -----------    -----------
Income before income taxes . . . . . . . . . . . . . . . .      1,472,908          3,200,595      3,433,307
Income taxes (Note 11) . . . . . . . . . . . . . . . . . .            -                  -        1,342,224
                                                               ----------        -----------    -----------
Net income . . . . . . . . . . . . . . . . . . . . . . . .     $1,472,908        $ 3,200,595    $ 2,091,083
                                                               ----------        -----------    -----------
Net income per share (Note 14) . . . . . . . . . . . . . .        N/A                N/A        $      0.89
                                                               ----------        -----------    -----------

</TABLE>

                 See accompanying notes to financial statements


                                           F - 3


<PAGE>

               LEADING EDGE PACKAGING, INC. AND RICH CITY INTERNATIONAL
               PACKAGING LIMITED - NORTH AMERICAN DISTRIBUTION BUSINESS

                                 STATEMENTS OF EQUITY

<TABLE>
<CAPTION>

                                                                                                    Total
                                                                   Additional                     division/
                                              COMMON STOCK          paid-in        Retained     shareholders'
                                           Share       Amount       capital        earnings        equity
                                           -----       ------       -------        --------        ------
<S>                                       <C>          <C>         <C>           <C>            <C>
Rick City's N.A. Distribution
  Business:
Balance as of April 1, 1994. . . . .           -        $  -        $     -       $     9,799    $     9,799
Net income . . . . . . . . . . . . .           -           -              -         1,472,908      1,472,908
Distribution to Head Office. . . . .           -           -              -        (1,482,707)    (1,482,707)
                                          ---------     -------     ----------    -----------    -----------
Balance as of March 31, 1995 . . . .           -           -              -              -              -
Net income . . . . . . . . . . . . .           -           -              -         3,200,595      3,200,595
Distribution to Head Office. . . . .           -           -              -        (3,200,595)    (3,200,595)
                                          ---------     -------     ----------    -----------    -----------
Balance as of March 31, 1996 . . . .           -        $  -        $     -       $      -       $      -   
                                          ---------     -------     ----------    -----------    -----------
Leading Edge:                             
Balance as of April 1, 1996               
  (note 12). . . . . . . . . . . . .      1,875,000     $18,750     $     -       $      -       $    18,750
Contribution by Rich City of              
  part of accounts payable to             
  Rich City. . . . . . . . . . . . .           -           -           481,250           -           481,250
Issuance of common stock . . . . . .      1,437,500      14,375      6,580,450           -         6,594,825
Net income . . . . . . . . . . . . .           -           -              -         2,091,083      2,091,083
                                          ---------     -------     ----------    -----------    -----------
Balance as of March 31, 1997 . . . .      3,312,500     $33,125     $7,061,700    $ 2,091,083    $ 9,185,908
                                          =========     =======     ==========    ===========    ===========
</TABLE>
                               See accompanying notes to financial statements


                                           F - 4


<PAGE>

               LEADING EDGE PACKAGING, INC. AND RICH CITY INTERNATIONAL
               PACKAGING LIMITED - NORTH AMERICAN DISTRIBUTION BUSINESS

                               STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>

                                                                       Rich City's                
                                                                           N.A.                   
                                                                       Distribution
                                                                         Business              Leading Edge
                                                                   Year ended March 31,         Year Ended
                                                                  1995              1996       March 31,1997
                                                               Carved out        Carved out       Actual
                                                               ----------        ----------       ------
<S>                                                          <C>               <C>            <C>
Cash flows from operating activities:
  Net income . . . . . . . . . . . . . . . . . . . . . . .    $ 1,472,908       $ 3,200,595    $ 2,091,083
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
    Depreciation . . . . . . . . . . . . . . . . . . . . .         26,690            31,328         22,490
    Loss on sale of property, plant and
      equipment. . . . . . . . . . . . . . . . . . . . . .         16,937              -              -   
    Changes in operating assets and liabilities:
      Accounts receivable. . . . . . . . . . . . . . . . .      3,450,600           (29,877)    (4,749,130)
      Bills receivable . . . . . . . . . . . . . . . . . .       (354,748)          185,232     (1,245,449)
      Inventories. . . . . . . . . . . . . . . . . . . . .           -                 -          (748,524)
      Deposits paid to holding company . . . . . . . . . .           -                 -        (2,111,506)
      Prepaid expenses and other current assets. . . . . .         30,068           (38,109)       (53,366)
      Accounts payable to a related party/holding
        company. . . . . . . . . . . . . . . . . . . . . .       (768,623)        1,054,181      2,995,690
      Bills payable. . . . . . . . . . . . . . . . . . . .           -                 -           220,906
      Accrued liabilities. . . . . . . . . . . . . . . . .          4,193            60,738        165,274
      Income taxes payable . . . . . . . . . . . . . . . .        (33,043)             -         1,342,224
                                                              -----------       -----------    -----------
  Net cash provided by (used in) operating activities. . .      3,844,982         4,464,088     (2,070,308)
                                                              -----------       -----------    -----------
Cash flows from investing activities:
  Purchase of property, plant and
    equipment. . . . . . . . . . . . . . . . . . . . . . .       (228,240)           (4,401)      (290,126)
  Proceeds from sale of property, plant and
    equipment. . . . . . . . . . . . . . . . . . . . . . .         90,831              -              -   
                                                              -----------       -----------    -----------
Net cash used in investing activities. . . . . . . . . . .       (137,409)           (4,401)      (290,126)
                                                              -----------       -----------    -----------
Cash flows from financing activities:
  Distribution to Head Office. . . . . . . . . . . . . . .     (1,482,707)       (3,200,595)          -   
  Net repayments to Head Office. . . . . . . . . . . . . .     (2,707,824)       (1,514,220)          -   
  Net proceeds from issuance of common stock . . . . . . .           -                 -         7,093,325
  Payment of capital lease obligations . . . . . . . . . .           -                 -              (252)
                                                              -----------       -----------    -----------
Net cash (used in) provided by financing activities. . . .     (4,190,531)       (4,714,815)     7,093,073
                                                              -----------       -----------    -----------
Net (decrease) increase in cash and cash
  equivalents. . . . . . . . . . . . . . . . . . . . . . .       (482,958)         (255,128)     4,732,639
Cash and cash equivalents at beginning of
  year . . . . . . . . . . . . . . . . . . . . . . . . . .        773,088           290,130          1,500
                                                              -----------       -----------    -----------
Cash and cash equivalents at end of year . . . . . . . . .    $   290,130       $    35,002     $4,734,139
                                                              -----------       -----------    -----------
Supplemental disclosures of cash flow
  information:
  Interest paid. . . . . . . . . . . . . . . . . . . . . .    $    65,057       $    53,961     $    6,566
  Income taxes paid. . . . . . . . . . . . . . . . . . . .         33,043              -              -   

</TABLE>

                              See accompanying notes to financial statements


                                           F - 5


<PAGE>

               LEADING EDGE PACKAGING, INC. AND RICH CITY INTERNATIONAL
               PACKAGING LIMITED - NORTH AMERICAN DISTRIBUTION BUSINESS

                                           



NOTES TO FINANCIAL STATEMENTS


1.   ORGANIZATION

     Leading Edge Packaging, Inc. (the "Company") was incorporated in Delaware
     on December 15, 1995.  The Company is a subsidiary of Rich City
     International Packaging Limited ("Rich City") and became the successor to
     Rich City's North American distribution business effective from April 1,
     1996, under an Assignment and Distribution agreement signed on September
     23, 1996.

2.   ASSIGNMENT AND DISTRIBUTION AGREEMENT

     On September 23, 1996, an Assignment and Distribution agreement
     ("Agreement") was signed between Rich City and the Company.  Under the
     Agreement, the Company is designated as an exclusive distributor for Rich
     City to market, distribute, sell, warehouse and subassemble, where
     necessary, Rich City's packaging products in North America.  The term of
     the agreement is for 10 years from the date of agreement and is
     automatically renewed for successive additional one year periods except
     upon early termination by both parties.  The Company will purchase
     packaging products from Rich City at a 6% to 8% mark up over the
     manufacturing costs, which comprise material costs, labor cost and
     overheads.  As a condition to Rich City's acceptance of any product order
     from the Company, the Company shall advance to Rich City an amount equal to
     the estimated average costs of materials for the products that the Company
     has ordered.

     Under the term of the Agreement, for the year ending December 31, 1998, and
     for each subsequent year thereafter the exclusive distribution basis will
     be converted to a non-exclusive basis if the Company's annual gross sales
     rate of increase is less than the cost of living increase computed from the
     Consumer Price Index.  In addition, the Company is also obligated to pay to
     Rich City a royalty of $2,000,000 in one or more installments.  The amount
     of each installment is calculated using a formula which relates to the
     Company's net sales and earnings before taxes, commencing from the year
     ending March 31, 1999.  No installment will need to be paid if both the
     Company's earnings before taxes is lower than $3,000,000 and net sales for
     the fiscal year are less than $25,000,000.   In the event that the Company
     fails to make the installment payments in accordance with terms under the
     Agreement, the exclusive distribution basis will be converted to a
     non-exclusive basis.


                                           F - 6


<PAGE>

               LEADING EDGE PACKAGING, INC. AND RICH CITY INTERNATIONAL
               PACKAGING LIMITED - NORTH AMERICAN DISTRIBUTION BUSINESS

                            NOTES TO FINANCIAL STATEMENTS


3.   BASIS OF PRESENTATION OF FINANCIAL STATEMENTS

     Rich City International Packaging Limited ("Rich City" or "Head Office") is
     a wholly owned subsidiary of Chung Hwa Development Holdings Limited ("Chung
     Hwa"), a Hong Kong listed company.  Rich City is engaged in the sale and
     distribution, design and warehousing of packaging products.  Effective
     April 1, 1996, Rich City assigned all its North American sales and the
     exclusive rights to carry on the North American distribution business of
     Rich City ("N.A. Distribution Business") to the Company.

     During the two years ended March 31, 1996, it has been the policy of the
     N.A. Distribution Business to transfer its cash earned to Rich City to
     finance the operations and working capital requirements of the
     manufacturing and other activities of Chung Hwa and its subsidiaries
     ("Chung Hwa Group").

     The N.A. Distribution Business, which operates in a single industry
     segment, is engaged in the sale and distribution of packaging products in
     North America.

     The financial statements of the N.A. Distribution Business for each of the
     two years in the period ended March 31, 1996, have been prepared on the
     "Carved Out Basis" as if the N.A. Distribution Business had been in
     existence and operating independently prior to the Assignment and
     Distribution agreement referred to in Note 2 to the financial statements
     between Rich City and the Company, which became effective on April 1, 1996.
     The financial statements have been prepared in accordance with generally
     accepted accounting principles in the United States of America ("U.S.
     GAAP"), which do not differ significantly from those used in the statutory
     accounts of Rich City.

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

     The Carved Out Basis is as follows:

     (a)  Assets:

          Property, plant and equipment, accounts receivable, bills receivable,
          prepaid expenses and other current assets specifically relating to the
          N.A. Distribution Business have been identified and presented in the
          financial statements.

          Cash and cash equivalents presented in the financial statements
          represent the balance of the cash not transferred to Rich City's
          account.

          The N. A. Distribution Business did not maintain any inventory during
          the two years ended March 31, 1996 as purchases were made against
          specific customer orders and title passed to customers at the same
          time as the N.A. Distribution Business acquired the product.


                                           F - 7


<PAGE>

               LEADING EDGE PACKAGING, INC. AND RICH CITY INTERNATIONAL
               PACKAGING LIMITED - NORTH AMERICAN DISTRIBUTION BUSINESS

                            NOTES TO FINANCIAL STATEMENTS
                                        

3.   BASIS OF PRESENTATION OF FINANCIAL STATEMENTS - continued

     (b)  Current liabilities:

          Accounts payable to a related party represents the trade payable to
          Breakspear Limited, a fellow subsidiary of Rich City and its sole
          supplier.  Breakspear Limited is part of the Chung Hwa Group.  The
          trade payable balance at each year end date represents outstanding
          invoices for the 60 days prior to each year end in accordance with
          Rich City's payment terms to Breakspear Limited of net 60 days.

          Accrued liabilities specifically relating to the N.A. Distribution
          Business have been identified and presented in the financial
          statements.

     (c)  Income and expenses

          Sales and cost of sales for the N.A. Distribution Business have been
          identified and presented in the financial statements.  The financial
          effect of the Assignment and Distribution agreement referred to in
          Note 2 has not been included in the carved out results.

          Selling, general and administrative, interest and taxation expenses
          relating to the N.A. Distribution Business are accounted for either on
          an actual basis or estimated with reference to the circumstances of
          the business based on methods that management of Rich City believes to
          be reasonable.  Common expenses which amounted to $148,282 and
          $172,751 in the years ended March 31, 1995 and 1996, respectively,
          were allocated with reference to the ratio of transactions made or the
          floor area used as appropriate.

     (d)  Distribution to Head Office

          Distributions made to Rich City for the years ended March 31, 1995 and
          1996 were $1,482,707 and $3,200,595, respectively, and resulted in the
          distribution of the entire equity balance each year.


4.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash on
          hand, demand deposits, interest bearing savings accounts, and time
          certificate of deposits with an original maturity of three months or
          less.

          FACTORED RECEIVABLES - Transfers of receivables with recourse are
          recognized as sales when the future economic benefits embodied in the
          receivable are surrendered because the N.A. Distribution Business'
          future obligation under the recourse provisions can be reasonably
          estimated and there are no repurchase terms except under the recourse
          provisions.

          The difference between the receivable transferred and the cash
          received is recognized as a loss in the period it occurs.


                                           F - 8


<PAGE>

               LEADING EDGE PACKAGING, INC. AND RICH CITY INTERNATIONAL
               PACKAGING LIMITED - NORTH AMERICAN DISTRIBUTION BUSINESS

                            NOTES TO FINANCIAL STATEMENTS
                                           

4.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

     PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is stated at
     cost.  Depreciation is provided to write off the cost of property, plant
     and equipment over their estimated useful lives using the straight line
     method, at the following rates per annum:

     Furniture, fixtures and equipment  10% - 33 1/3%
     Leasehold improvements             10% - 20% or over the terms of the 
                                          respective leases whichever is shorter

     LEASED ASSETS - Leases that transfer substantially all the rewards and
     risks of ownership of assets to the Company are accounted for as capital
     leases.  At the inception of a capital lease, the cost of the leased asset
     is capitalized at the present value of the minimum lease payments and
     recorded together with the obligation, excluding the interest element, to
     reflect the purchase and financing.  Assets held under capital leases are
     included in property, plant and equipment and are depreciated over their
     estimated useful lives.

     INVENTORIES - Inventories held for resale are stated at the lower of cost,
     determined by the first-in, first-out method, or value determined by the
     market.  Cost represents supplier cost for delivery at the designated
     location and duty.

     NET SALES - Net sales represent the invoiced value of products sold less
     discounts and returns.  Sales are recognized when products are shipped to
     customers or when title passes, if later.

     INCOME TAXES - The Company has adopted the liability method of accounting
     for income taxes, as set forth in Statement of Financial Accounting
     Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").  Under the
     liability method, deferred taxes are determined based upon the difference
     between the financial statement and tax bases of assets and liabilities at
     enacted tax rates in effect in the years in which the differences are
     expected to reverse.  Deferred tax expense (benefit) represents the change
     in the deferred tax balances.


                                           F - 9


<PAGE>

               LEADING EDGE PACKAGING, INC. AND RICH CITY INTERNATIONAL
               PACKAGING LIMITED - NORTH AMERICAN DISTRIBUTION BUSINESS

                            NOTES TO FINANCIAL STATEMENTS
                                           

4.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

     FOREIGN CURRENCY TRANSLATION - The financial statements of the N.A.
     Distribution Business and the Company have been presented in U.S. dollars.

     The functional currency of the N.A. Distribution Business was the Hong Kong
     dollar.  Transactions and assets and liabilities denominated in Hong Kong
     dollars were translated to the U.S. dollar at HK$7.80 to $1.00, which
     approximated the market rate at all periods presented.

     All transactions in currencies other than the functional currency during
     the two years in the period ended March 31, 1996 were translated at the
     exchange rates prevailing on the transaction dates.  Related accounts
     payable or receivable existing at such balance sheet dates denominated in
     currencies other than the functional currencies were translated at period
     end rates.  Gains and losses, which were immaterial for all periods
     presented, resulting from the translation of foreign currency transactions
     and balances were included in the income statements.

     The financial statements of the Company are prepared in United States
     dollars because this is the currency of the primary economic environment in
     which the Company operates.  Monetary assets and liabilities denominated in
     foreign currencies are translated at year end exchange rates, while foreign
     currency transactions are translated at average exchange rates during the
     year.  Gains or losses from foreign currency transactions are included in
     other income.

     EMPLOYEE BENEFITS - Contributions payable to the N.A. Distribution Business
     defined contribution retirement benefit scheme are expensed as incurred. 
     The N.A. Distribution Business did not provide any other post retirement
     benefits and post employment benefits, if any, are not material.  The
     Company does not provide any post retirement benefits and post employment
     benefits, if any, are not material.


5.   BILLS RECEIVABLE AND PAYABLE

     Bills receivable and payable represent accounts receivable and payable in
     the form of bills of exchange, whose acceptances and settlements are
     handled by banks.

     During each of the years ended March 31, 1995 and 1996, the N.A.
     Distribution Business had factored gross bills receivable of $3,811,936 and
     $3,250,463, respectively, with financial institutions with recourse to the
     N.A. Distribution Business.  The net proceeds after discounts during each
     of these years amounted to $3,748,403 and $3,197,771, respectively.  There
     were no repurchase terms except for the recourse under the terms of the
     factoring agreement in the event of customer default.

     The amount of the factored bills receivable of the N.A. Distribution
     Business which remained outstanding at March 31, 1996 was $1,074,008. 
     These receivables were all collected by the financial institutions in the
     following year.  At March 31, 1997, bills receivable of $836,552 were
     provided as collateral for banking facilities providing to Rich City.

     For the year ended March 31, 1997, the Company did not factor any bills
     receivable with financial institutions.


                                           F - 10


<PAGE>

               LEADING EDGE PACKAGING, INC. AND RICH CITY INTERNATIONAL
               PACKAGING LIMITED - NORTH AMERICAN DISTRIBUTION BUSINESS

                            NOTES TO FINANCIAL STATEMENTS
                                           

6.   INVENTORIES

     From April 1, 1996, the Company maintained inventories for distribution to
     customers in the United States.  The inventories represent finished goods
     held for resale.


7.   ADVANCES (FROM) TO HEAD OFFICE

                                                         Rich City's
                                                             N.A.
                                                         Distribution
                                                           Business
                                                        March 31, 1996
                                                          Carved out
                                                          ----------
                                                                Monthly average
                                                                 balance during
                                                     Amount         the year
                                                     ------         --------
     Advances (from) to Rich City:                              
       Balance as of April 1, 1994. . . . . . .   $(3,070,208)  
       Advances from Head Office. . . . . . . .    (1,067,921)  
       Repayments to Head Office  . . . . . . .     3,924,027   
       Common expense allocations . . . . . . .      (148,282)     $ (430,412)
                                                   ----------      ==========
       Balance as of March 31, 1995 . . . . . .      (362,384)   
       Advances from Head Office. . . . . . . .    (1,735,761)  
       Repayments to Head Office. . . . . . . .     3,422,732   
       Common expenses allocations. . . . . . .      (172,751)  
                                                   ----------   
       Balance as of March 31, 1996 . . . . . .    $1,151,836      $1,542,610
                                                   ==========      ==========

     Advances from and to Rich City were made on an interest free basis.


8.   DEPOSITS PAID TO HOLDING COMPANY

     The amount represents deposits paid to Rich City for purchase orders placed
     by the Company.


                                           F - 11


<PAGE>

               LEADING EDGE PACKAGING, INC. AND RICH CITY INTERNATIONAL
               PACKAGING LIMITED - NORTH AMERICAN DISTRIBUTION BUSINESS

                            NOTES TO FINANCIAL STATEMENTS
                                           

9.   PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>

                                                               Rich City's
                                                                   N.A.
                                                               Distribution     Leading Edge
                                                                 Business         March 31, 
                                                              March 31, 1996        1997    
                                                                Carved out         Actual   
                                                                ----------         ------
    <S>                                                         <C>              <C>
     Property, plant and equipment consists of the following:

     Furniture, fixtures and equipment. . . . . . . . . .        $147,988         $279,886
     Leasehold improvements . . . . . . . . . . . . . . .         102,285           16,338
                                                                 --------         --------
     Total. . . . . . . . . . . . . . . . . . . . . . . .         250,273          296,224
     Less: Accumulated depreciation . . . . . . . . . . .         (56,978)         (22,490)
                                                                 --------         --------
     Net book value . . . . . . . . . . . . . . . . . . .        $193,295         $273,734
                                                                 ========         ========
</TABLE>

     Included in property, plant and equipment of the Company is an asset
     acquired under a capital lease with the following net book value:
                                                                   Leading Edge
                                                                  March 31, 1997
                                                                  --------------
     At cost:

     Furniture, fixtures and equipment. . . . . . . . . . . . .       $7,599
     Less: Accumulated depreciation . . . . . . . . . . . . . .         (380)
                                                                      ------
                                                                      $7,219
                                                                      ------

     Depreciation charges of the Company in respect of property, plant and
     equipment held under a capital lease for the year ended March 31, 1997
     amounted to $380.

     Rich City's N.A. Distribution Business did not have any assets held under
     capital leases.


                                           F - 12


<PAGE>

               LEADING EDGE PACKAGING, INC. AND RICH CITY INTERNATIONAL
               PACKAGING LIMITED - NORTH AMERICAN DISTRIBUTION BUSINESS

                            NOTES TO FINANCIAL STATEMENTS
                                           

10.  CAPITAL LEASE OBLIGATIONS

     Capital lease obligations bear fixed interest of 7.861% per annum and are
     payable monthly to 2001.  As of March 31, 1997, the outstanding balance in
     respect of capital lease obligations was $5,846.

     The capital lease obligations maturing during each of the years in the year
     period subsequent to the balance sheet dates are:

     Year ending March 31,
     1998 . . . . . . . . . . . . . . . . . . . . .   $ 1,479
     1999 . . . . . . . . . . . . . . . . . . . . .     1,479
     2000 . . . . . . . . . . . . . . . . . . . . .     1,479
     2001 . . . . . . . . . . . . . . . . . . . . .     1,479
     2002 . . . . . . . . . . . . . . . . . . . . .     1,108
                                                      -------
     Total minimum lease payments . . . . . . . . .     7,024
     Less: Amount representing interest . . . . . .    (1,178)
                                                      -------
     Present value of minimum lease payments. . . .     5,846
     Less: current portion. . . . . . . . . . . . .    (1,057)
                                                      -------
     Long term portion. . . . . . . . . . . . . . .   $ 4,789
                                                      =======


11.  INCOME TAXES

     Rich City is subject to Hong Kong taxation on its activities conducted in
     Hong Kong.  During the two years ended March 31, 1996, Rich City's
     manufacturing operations were outside Hong Kong and the majority of income
     was not subject to tax in Hong Kong or in other jurisdictions. During the
     year ended March 31, 1997, all revenues were derived from the Company's
     U.S. operations and the Company was subject to the income tax in the United
     States and income tax expense has been computed using a rate of 38% for
     U.S. Federal and State income taxes.

     The provision for income taxes attributable to the N.A. Distribution
     Business and the Company consists of the following:

                                      Rich City's N.A.     Leading Edge
                                    Distribution Business   Year ended
                                     Year ended March 31,    March 31,
                                       1995       1996         1997
                                       ----       ----         ----
     Current
       Hong Kong. . . . . . . . . .   $   -      $   -      $      -
       U.S. Federal . . . . . . . .       -          -       1,130,324
       U.S. State . . . . . . . . .       -          -         211,900
                                      -------    -------    ----------
                                      $   -      $   -      $1,342,224
                                      -------    -------    ----------


                                           F - 13


<PAGE>

               LEADING EDGE PACKAGING, INC. AND RICH CITY INTERNATIONAL
               PACKAGING LIMITED - NORTH AMERICAN DISTRIBUTION BUSINESS

                            NOTES TO FINANCIAL STATEMENTS
                                           

11.  INCOME TAXES - continued

     A reconciliation between the provision for income taxes computed by
     applying statutory tax rate in Hong Kong for 1995 and 1996 and in United
     States for 1997 to income before taxes and the actual provision for income
     taxes is as follows:
                                      Rich City's N.A.     Leading Edge
                                    Distribution Business   Year ended
                                     Year ended March 31,    March 31,
                                       1995       1996         1997
                                       ----       ----         ----

     Statutory tax rate. . . . . .     16.5%     16.5%           38%
     Income not subject to taxation   (16.5)    (16.5)           -  
                                      -----     -----            --
     Effective rate                     -  %      -  %           38%
                                      =====     =====            ==

     There were no significant temporary differences during the years ended
     March 31, 1995, 1996 and 1997 and at the balance sheet dates.


12.  CAPITAL STOCK

     The Company was incorporated with an authorized capital of 1,500 common
     shares of no par value which was increased on September 13, 1996 in
     contemplation of the public offering to 5,000,000 common shares of $0.01
     par value per share and 5,000,000 preferred shares of $0.01 par value per
     share.  In addition, each issued ordinary share of common stock of no par
     value was split into 1,250 ordinary shares of common stock of $0.01 par
     value per share.  The new capital structure is reflected in the Company's
     financial statements from April 1, 1996 and earnings per share has been
     computed using the revised equity structure.  On December 2, 1996, the
     Company issued 1,437,500 shares in a public offering.

     In connection with this offering, the Company has agreed to issue and sell
     to the Underwriter and/or its designees, at the closing of the proposed
     underwriting, for nominal consideration, five year Underwriter's Warrants
     (the "Underwriter's Warrants") to purchase 125,000 shares of common stock. 
     The Underwriter's Warrants are exercisable at a price of $8.40 per share of
     common stock at any time during a period of four years commencing one year
     from the date of December 2, 1996 and are restricted from sale, transfer,
     assignment or hypothecation for a period of twelve months from the date
     hereof, except to officers of the Underwriter.  The Underwriter's Warrants
     contain anti-dilution provisions providing for adjusting of the number of
     shares of common stock and exercise price under certain circumstances.  The
     Underwriter's Warrants grant to the holders thereof and to the holders of
     the underlying securities certain rights of registration of the securities
     underlying the Underwriter's Warrants.  The fair value of the Underwriter's
     Warrants is not material.


                                           F - 14


<PAGE>

               LEADING EDGE PACKAGING, INC. AND RICH CITY INTERNATIONAL
               PACKAGING LIMITED - NORTH AMERICAN DISTRIBUTION BUSINESS

                            NOTES TO FINANCIAL STATEMENTS
                                           

13.  INCENTIVE STOCK OPTION PLAN

     During the year, the Company established the 1996 Incentive Stock Option
     Plan (the "Plan").  Options under the Plan may be granted to directors and
     officers of the Company permitting the purchase in the aggregate of not
     more than 312,500 shares of the Company's common stock, par value, $0.01
     per share ("Common Stock").  On December 11, 1996, options (the "1996
     Options") to purchase up to 250,000 shares of Common Stock in the aggregate
     were granted to officers and directors of the Company.  One-third of the
     1996 Options become exercisable after each of 12 months, 30 months and 60
     months, respectively.  The stock options granted under this Plan are
     intended to qualify as incentive stock options within the meaning of
     Section 422 of the Internal Revenue Code of 1986, as amended.  The per
     share option price of the Common Stock subject to each of the 1996 options
     was $7.15, which was equal to one hundred ten percent (110%) of the fair
     market value of a share of Common Stock on the date that the options were
     granted.  Shares of Common Stock issued in exchange for options under the
     Plan will be restricted against resale as necessary to qualify for
     exemption from registration under the Securities Act of 1933, as amended
     (the "Securities Act"), unless and until the Company deems it appropriate
     to register such shares under the Securities Act.  No options were
     exercised during the year.

     The Company has elected to continue to apply Accounting Principles Board
     Opinion No. 25 "Accounting for Stock Issued to Employees" to account for
     stock options granted under the plan.  If the fair value method specified
     in Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
     for Stock-Based Compensation" had been used, net income and earnings per
     share for the year ended March 31, 1997 would have been as follows:

     Net income                                  $2,055,973
                                                 ==========
     Earnings per share                               $0.88
                                                 ==========

     The fair value of options granted during the year was estimated as $197,500
     using the Black-Scholes option pricing model with the following
     assumptions: risk-free interest rate - 5.87%; expected life of options - 3
     years; expected volatility - 15.5%; expected dividend yield - Nil.


14.  EARNINGS PER COMMON SHARE

     Earnings per common share are computed by dividing net income by the
     weighted average number of shares of common stock and common stock
     equivalents outstanding during the year.  The weighted average number of
     shares of common stock outstanding during the year ended March 31, 1997 was
     approximately 2,347,603.

     Common stock equivalents are the net additional number of shares which
     would be issuable upon the exercise of the outstanding common stock
     options, assuming that the Company reinvested the proceeds to purchase
     additional shares at market value.  Common stock equivalents had no
     material effect on the computation of earnings per share for the year ended
     March 31, 1997.


                                           F - 15


<PAGE>

               LEADING EDGE PACKAGING, INC. AND RICH CITY INTERNATIONAL
               PACKAGING LIMITED - NORTH AMERICAN DISTRIBUTION BUSINESS

                            NOTES TO FINANCIAL STATEMENTS
                                           

15.  RELATED PARTY TRANSACTIONS

     (a)  The Company purchases packaging products from Breakspear Limited, a
          related party, through Rich City; previously Breakspear Limited was
          the sole supplier for packaging products to Rich City.

          Account payable to Breakspear Limited and Rich City at March 31, 1996
          and 1997 were $1,655,308 and $2,995,690, respectively.  Total
          purchases by the N.A. Distribution Business from Breakspear Limited
          during the years ended March 31, 1995 and 1996 were $4,021,908 and
          $6,635,318, respectively.  Total purchases by the Company from Rich
          City during the year ended March 31, 1997 were $9,155,072.

     (b)  During the year ended March 31, 1996, the N.A. Distribution Business
          paid rental expense of $36,377 to Circle Round Limited, a fellow
          subsidiary of Rich City.


16.  CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

     Customers accounting for 10% or more of total net sales for each of the
     three years in the period ended March 31, 1995, 1996 and 1997 are detailed
     as follows:

                                         Rich City's N.A.
                                       Distribution Business    Leading Edge
                                        1995           1996         1997

     Customer A. . . . . . . . . . .    19.2%            -            -
     Customer B. . . . . . . . . . .    38.8%         26.6%        20.7%
     Customer C. . . . . . . . . . .     4.4%         13.9%        17.8%
     Customer D. . . . . . . . . . .     3.9%         12.1%         7.3%

     Details of the accounts receivable from the five customers with the largest
     receivable balances at March 31, 1995 and 1996 for Rich City's N.A.
     Distribution Business and at March 31, 1997 for Leading Edge are as
     follows:
                                             Percentage of accounts
                                           receivable as at March 31,
                                           1995       1996       1997

     Five largest receivable balances. .   88.8%      93.8%      63.4%

     Bad debt expense was $1,407 and $924 for Rich City's N.A. Distribution
     Business for the year ended March 31, 1995 and 1996, respectively, and $Nil
     for the Company for the year ended March 31, 1997.


                                           F - 16


<PAGE>

               LEADING EDGE PACKAGING, INC. AND RICH CITY INTERNATIONAL
               PACKAGING LIMITED - NORTH AMERICAN DISTRIBUTION BUSINESS

                            NOTES TO FINANCIAL STATEMENTS
                                           

17.  COMMITMENTS AND CONTINGENCIES

     (a)  At March 31, 1996, the N.A. Distribution Business had factored gross
          bills receivable of $1,074,008 at a discount of $14,477 with banks
          with recourse.

          The N.A. Distribution Business leased premises under various operating
          leases which did not contain any renewal and escalation clauses. 
          Rental expense under operating leases was $52,688 and $57,876 for the
          years ended March 31, 1995 and 1996, respectively.

     (b)  At March 31, 1997, bills receivable of $836,552 were provided by the
          Company as collateral for banking facilities providing to Rich City.

          Leading Edge leases premises and equipment under various operating
          leases which do not contain any renewal and escalation clauses. 
          Rental expense under operating leases was $109,089 for the year ended
          March 31, 1997.

          As at March 31, 1997, Leading Edge had no capital commitments but was
          obligated under operating leases requiring minimum rentals as follows:

          Year ending March 31,

          1998 . . . . . . . . . . . . . . . . . . . . .   $  268,525
          1999 . . . . . . . . . . . . . . . . . . . . .      262,026
          2000 . . . . . . . . . . . . . . . . . . . . .      254,342
          2001 . . . . . . . . . . . . . . . . . . . . .      245,274
          2002 . . . . . . . . . . . . . . . . . . . . .      127,733
                                                           ----------
          Total minimum lease payments . . . . . . . . .   $1,157,900
                                                           ==========


18.  RETIREMENT PLAN

     The Company has not established any retirement plan and provides no
     retirement benefits to its employees.  Rich City had established a defined
     contribution retirement plan covering substantially all employees in Hong
     Kong.  Under this plan, eligible employees may contribute amounts through
     payroll deductions which are equal to 5% of individual salary, supplemented
     by employer contributions at 5% of individual salary, for investment in
     various funds established by the plan.  The expense, net of forfeited
     contributions, related to this plan applicable to the carved out business
     was $3,653 and $3,178 for the years ended March 31, 1995 and 1996,
     respectively.


                                           F - 17


<PAGE>

               LEADING EDGE PACKAGING, INC. AND RICH CITY INTERNATIONAL
               PACKAGING LIMITED - NORTH AMERICAN DISTRIBUTION BUSINESS

                            NOTES TO FINANCIAL STATEMENTS
                                           

19.  FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following disclosure of the estimated fair value of financial
     instruments is made in accordance with the requirements of Statement of
     Financial Accounting Standards No.107, "Disclosures about Fair Value of
     Financial Instruments".  The estimated fair value amounts have been
     determined by the Company, using available market information and
     appropriate valuation methodologies.  The estimates presented herein are
     not necessarily indicative of the amounts that the Company could realize in
     a current market exchange.  The carrying amounts of cash, accounts
     receivable, bills receivable, advances to head office, accounts payable and
     bills payable are short term in nature and therefore reflect their fair
     value.  All the financial instruments are for trade purposes.


20.  SEGMENT INFORMATION

     The Company operates in a single industry segment which is the sale and
     distribution of packaging products in North America.


21.  QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>

                                               June 30   September 30   December 31    March 31
                                               -------   ------------   -----------    --------
                                                $'000        $'000         $'000        $'000
    <S>                                        <C>          <C>           <C>          <C>
     Fiscal 1997 (Leading Edge)
     -----------

     Net sales. . . . . . . . . . . . . .       2,505        3,047         3,695        3,740
     Gross profit . . . . . . . . . . . .         808        1,007         1,151        1,615
     Net income . . . . . . . . . . . . .         451          504           510          626
     Net income per share . . . . . . . .        0.24         0.26          0.21         0.18
                                                                                     
     Fiscal 1996                                                                     
     -----------
     (Rich City's N.A. Distribution Business)                                        
                                                                                     
     Net sales . . . . . . . . . . . . .        2,239        2,971         3,112        2,665
     Gross profit. . . . . . . . . . . .          875        1,204         1,089        1,184
     Net income. . . . . . . . . . . . .          616          901           794          889
     Net income per share. . . . . . . .          N/A          N/A           N/A          N/A

     Common Share Price
     ------------------

     1997 Quarter                                                High          Low
     ------------

     Fourth. . . . . . . . . . . . . . .                          7             5
     Third . . . . . . . . . . . . . . .                          7             6 1/4
</TABLE>

     Prior to the Company's initial public offering of common stock, which
     commenced on December 2, 1996, there was no public market for the Company's
     ordinary shares.  The initial offering price was $6.  On March 31, 1997,
     the closing price was $5 13/32.  The Company has not declared any
     dividends.


                                           F - 18


<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON 
    ACCOUNTING AND FINANCIAL DISCLOSURE

    None.

                                       PART III

Incorporated by reference.

                                       PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8K

         The following documents are being filed as a part of this report:

(a) (1)  Financial Statements.           

    (2)  Financial Statement Schedules.       

              All other schedules are omitted since the required information is
              either not present or not present in amounts sufficient to
              require submission of the schedule. 


    (3)  Certificate of Incorporation, as amended, is hereby incorporated by
         reference to Amendment No. 2 to the Company's Registration Statement,
         which was filed with the SEC on November 13, 1996.

         Amended and Restated By-laws are hereby incorporated by reference to
         Amendment No. 2 to the Company's Registration Statement, which was
         filed with the SEC on November 13, 1996. 

         Specimen Certificate for Shares of Common Stock is hereby incorporated
         by reference to Amendment No. 2 to the Company's Registration
         Statement, which was filed with the SEC on November 13, 1996. 

         Representative's Warrant Agreement and Certificate are hereby
         incorporated by reference to Amendment No. 2 to the Company's
         Registration Statement, which was filed with the SEC on November 13,
         1996. 

         1996 Incentive Stock Option Plan is hereby incorporated by reference
         to Amendment No. 1 to the Company's Registration Statement, which was
         filed with the SEC on October 10, 1996. 

                                       15
<PAGE>

         Assignment and Distribution Agreement is hereby incorporated by
         reference to the Company's Registration Statement, which was filed
         with SEC on September 27, 1997.

         Employment Agreements between the Company and each of Lip-Boon Saw,
         Peter Yu-Siu Chu, Dan Ben-Moshe and Casey K. Tjang are incorporated by
         reference to the Company's Registration Statement, which was filed
         with SEC on September 27, 1997.

         Leases between the Company and each of Empire State Building Company
         and Center Realty, L.P. are incorporated by reference to the Company's
         Registration Statement, which was filed with SEC on September 27,
         1997.

         The Company's Quarterly Report on Form 10-Q for the three months ended
         December 31, 1996 is hereby incorporated by reference.
         
(b) No reports on Form 8-K have been filed during of the last quarter of the
    fiscal year covered by this report on Form 10-K.  

(c) See Item 14(a)(3), above.

(d) Not applicable.

                                       16
<PAGE>
 
                                 S I G N A T U R E S
                                 -------------------

    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.

                                         LEADING EDGE PACKAGING, INC.

                                   By:  /s/Lip-Boon Saw 
                                        ---------------
Date:  June 27, 1997                    Lip-Boon Saw
                                        Chairman and
                                        Chief Executive Officer

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

Signature               Title                    Date
---------               -----                    ----
                    
/s/Lip-Boon Saw         Chairman, Chief          June 27, 1997  
---------------         Executive Officer 
Lip-Boon Saw            and Director 

/s/Peter Yu-Siu Chu     President and Chief      June 27, 1997  
-------------------     Operating Officer
Peter Yu-Siu Chu 

/s/Casey K. Tjang       Chief Financial          June 26, 1997  
-----------------       Officer (Principal 
Casey K. Tjang          Accounting),
                        Secretary and
                        Director

/s/Dan Ben-Moshe        Vice President of        June 26, 1997  
----------------        Marketing and Sales
Dan Ben-Moshe    

                        Director       
-----------------
Peter L. Coker


                        Director       
--------------------
Robert B. Goergen


/s/Richard Fung-Gea Wong Director                June 27, 1997  
------------------------
Richard Fung-Gea Wong


                                       17