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

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the Fiscal Year Ended December 31, 1997

                         Commission File Number 0-21369

                               VITECH AMERICA, INC
             (Exact name of registrant as specified in its charter)

         FLORIDA                                     65 041 9086
(State of incorporation)                       (I.R.S. Employer ID No.)

                           8807 NORTHWEST 23RD STREET
                            MIAMI, FLORIDA 33172-2419
               (Address of principal executive offices, zip code)

                                 (305) 477-1161
              (Registrant's telephone number, including area code)

           Securities Registered Pursuant to Section 12(b) of the Act:
                                      None

           Securities Registered Pursuant to Section 12(g) of the Act:
                           Common Stock, No Par Value

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

         The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 27, 1998 was approximately $194 million.

         As of March 27, 1998 there were 11,068,756 shares of the Common Stock
of the Company, no par value, outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Specifically identified portions of the Company's Proxy Statement to be
filed for the registrant's 1997 Annual Meeting of Shareholders are incorporated
by reference into Part III of this report.


<PAGE>


                                     PART I

ITEM 1.  BUSINESS

INTRODUCTION

         Vitech America, Inc. and subsidiaries (the "Company") are engaged in
the manufacture and distribution of computer equipment and related products, as
well as the financing of the purchase thereof, in the Federal Republic of
Brazil. The Company's principal operations are conducted in Brazil by its
Brazilian subsidiaries. The parent company, Vitech America, Inc., sources
components in the United States and throughout the world and engages in the
distribution of those components to its subsidiaries' manufacturing operations
in Brazil. Principally all of the Company's consolidated revenues have been
recognized in Brazil by the Company's subsidiaries. The Company's products,
which include personal computers and multimedia systems and related peripheral
products, networking and system integration equipment, and consumer electronics,
are marketed under brand names owned by the Company or its affiliates and other
brand names for distribution through a variety of channels in the Brazilian
marketplace. In addition, the Company maintains an engineering support service
dedicated to assisting the Company's customers in effecting networking and
systems integration solutions.

         As a result of the increasing stability of the economy and the growth
of a middle class in Brazil, demand for computer equipment and related products
in Brazil has increased significantly over the last five years. Based upon news
and trade reports, the Company believes that the market for computer equipment
and related products in Brazil is expected to grow at the rate of approximately
20% annually for at least the next 5 years. The Company believes that it is
particularly well-positioned to capitalize upon such anticipated growth based
upon: (i) the Company's knowledge of prevailing customs, importation practices,
technology and labor bases, marketing dynamics, and economic conditions in
Brazil, together with the Company's existing relationships with U.S. and Asian
suppliers and understanding of technology development; (ii) the Company's
integrated manufacturing, research and development, sales, and warehousing
facilities in Brazil; (iii) the Company's existing national direct distribution
network in Brazil; and (iv) the Company's ability to provide flexible financing
alternatives to potential purchasers of the Company's products.

MICROTEC

         On July 10, 1997, the Company acquired 94.4% of the outstanding capital
stock of Microtec Sistemas Industria e Comercio S.A. ("Microtec"). Microtec,
based in Cotia, Sao Paulo, Brazil, is engaged in the manufacture and
distribution of personal computers and servers in the Federal Republic of
Brazil. Microtec sells directly to corporate and government clients and through
a nationwide network of over 300 channel partners. Microtec participates heavily
in all levels of bids and public solicitations in Brazil. Since 1983, Microtec
has established a brand name recognition for quality products and services in
the Brazilian market. Microtec has an installed base of approximately 230,000
personal computers. Microtec sources components in Brazil as well as in China,
Taiwan, and the United States. Microtec has extensive experience in the
engineering and design of personal computers and has been granted an ISO-9001
certification. With a nationwide network of technical assistance and service
centers, Microtec has one of the most extensive post-sale support systems in
Brazil.

RECENT ACQUISITIONS

         In November 1997, the Company acquired a majority interest in Tech Shop
Holdings, USA, Inc., the parent of Tech Shop, Ltda. and Tech Stock, Ltda.
("Techshop"), located in Belo Horizonte, Brazil. During the same month, the
Company also acquired a majority interest in Recife Holdings, USA, Inc., the
parent of Rectech-Recife Tecnologia, Ltda. ("Rectech"), located in Recife,
Brazil. The operations of Tech Shop, Ltda., Tech Stock, Ltda. and Rectech-Recife
Tecnologia, Ltda. include regional distribution and sales of computers and
related equipment in the corporate and retail markets in Brazil. The companies
are well suited to the Company's business strategy of selling directly to
individual consumers, corporate clients and governmental entities, and they add
strength to the Company's direct marketing and support services in the central
and northeastern regions of Brazil.

 EXPANSION STRATEGY

         The Company's strategy has been to utilize (i) the Company's knowledge
of prevailing customs, importation practices, technology and labor bases,
marketing dynamics, and economic conditions in Brazil, together with the
Company's existing relationships with U.S. and Asian suppliers and understanding
of technology development, (ii) the Company's integrated manufacturing, research
and development, sales, and warehousing facilities in Brazil, (iii) the



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Company's existing distribution arrangements with retailers and others in
Brazil, and (iv) the Company's ability to provide flexible financing
alternatives to potential purchasers of the Company's products to gain market
share and satisfy the increasing demand for consumer electronic products in
Brazil.

         In order to attain its objectives, the Company intends to employ a
business strategy comprised of the following elements:

EXPANSION OF INVENTORY

         The Company intends to continue to expand its inventory in an amount
sufficient to keep pace with its expected sales volume. The Company believes
that increased purchases of certain products will permit it to realize economies
of scale as a result of more favorable pricing.

EXPANSION OF DIRECT MARKETING PROGRAM AND CONSUMER FINANCING FOR THE DIRECT 
SALES STRATEGY

         With the expansion of manufacturing and credit facilities, and the
further development of its distribution system, the Company, in 1996, embarked
on a direct sales strategy targeting the retail consumer and corporate market by
offering computer equipment and related equipment products with innovative and
flexible credit arrangements in order to satisfy consumer demand in Brazil for
such products. The Company intends to utilize the consumer relationships formed
in connection with such financing activities to create ongoing sales of
technology products and services directly to end users.

EXPANSION OF DISTRIBUTION CHANNELS

         The Company will continue to develop its distribution channels by
providing enhanced customer services and post-sale support and expanding credit
arrangements. The Company has developed its internal sales force to assist sales
agents, system integrators, distributors, and resellers relative to the
Company's existing and new product lines which are distributed to end-users
using five basic sales channels. The Company's five basic channels consist of
(i) sales agents, (ii) network representatives, (iii) telemarketing, (iv)
systems integration, and (v) distribution and retail. Each of these channels
allows the Company to sell direct to end-users while overcoming the basic lack
of infrastructure in Brazil which prevents a pure "United States style"
tele-marketing approach, as in "PCs by mail," from working today in Brazil. In
the United States, a customer sees an ad in a periodical or on television, calls
the manufacturer or marketer, gives a credit card, and the machine is shipped
direct via express freight within several days. With only approximately
10,000,000 telephone lines for the 160,000,000 inhabitants in Brazil, the lack
of telephones is a primary barrier for direct selling in Brazil. Further, there
is very low penetration of credit cards, and even less penetration with
sufficiently high credit limits to allow the purchase of major items such as
personal computers. In addition, there is a lack of a central credit-reporting
bureau such as "TRW" which encompasses all of the factors of an individual's
credit history which would allow for a rapid and high-quality credit decision in
light of the lack of credit cards. Finally, with the installed base of
approximately 35 personal computers per 1,000 inhabitants, the average buyer is
still buying their first personal computer. Thus, the client still wants to see
the machine and generally have some "hand-holding" at the time of sale in order
to get comfortable with the purchase. Direct personal contact at retail shops or
by internal sales persons and external representatives through office or home
visits allows the Company to overcome this barrier. As the market develops, and
the installed base increases, and as credit cards become widely used, the direct
telemarketing approach will become more successful. The Company allocates sales
and marketing resources on each of its channels according to their relative
success in generating sales. In the future, as one channel, such as
telemarketing becomes more effective, the Company will allocate more resources
to that effort. See "Item I. Business - Distribution and Marketing."

IDENTIFICATION OF PRODUCTS

         The Company will continue to identify high technology products for
which substantial demand exists or can be created, with particular emphasis on
products which the Company can manufacture, import, or assemble in Brazil.

 TRAINING

         The Company will continue to train and enhance the skills of the local
work force in Brazil in order to increase its manufacturing and assembly
capabilities. The Company believes that its deployment of a trained work force
in facilities geographically separated from major urban areas enables the
Company to obtain favorable profit margins by sustaining low cost manufacturing.

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<PAGE>

FORTIFICATION OF THE COMPANY'S BRANDS AND TRADE NAMES

         The Company intends to further establish its Vision/Registered
Trademark/, Microtec's Mythus/Registered Trademark/, Quest/Registered
Trademark/, Spalla/Registered Trademark/ and Vesper/Registered Trademark/ and
other brand and trade names as recognized and reliable brands in Brazil for
computer equipment products. The Company continuously evaluates new products,
the demand for its current products, and its overall product mix, and seeks to
develop distribution relationships with vendors of products that enhance the
products offered by the Company.

PRODUCTS

COMPUTER SYSTEMS

         The market for the distribution of computer products is significant and
growing in Brazil, reflecting an increasing demand for computer products and
systems. Until 1993, the market for computer products in Brazil was closed to
foreign competition, protected from foreign imports and reserved for Brazilian
companies. During this period of protection, the demand for computers in Brazil
was left largely unfulfilled, resulting in pent-up demand for computers and
other technology products. In 1993, however, import restrictions were lifted
resulting in the expansion, at an annualized rate in excess of 30% of the market
for computers in Brazil. The Company, as a vertically integrated computer
manufacturer and distributor based in Brazil, has established a full line of
computer products from low-end workstations to high-end multimedia workstations
and powerful multi-processor servers in order to meet the increasing demand in
Brazil for information technology solutions. The Company offers its products
under its Vision/Registered Trademark/, and Microtec's Mythus/Registered
Trademark/, Quest/Registered Trademark/, Spalla/Registered Trademark/ and
Vesper/Registered Trademark/ names.

         The Company also designs, develops, manufactures, and markets under its
MultiShow/Registered Trademark/ brand name, a family of multimedia computer
products. The Company offers sound cards, speakers, multimedia titles,
microphones, and multimedia kits complete with user-friendly manuals written in
Portuguese. The demand for multimedia personal computers is increasing as
personal computers evolve from task-oriented devices primarily utilized for word
processing and spreadsheets to more user-friendly multipurpose devices for
increasingly diverse multimedia applications.

BUSINESS SYSTEMS INTEGRATION; CLIENT-SERVER APPLICATIONS

         The Company has created a family of products and services in response
to the need for client-server distributed computing solutions in Brazil. The
Company distributes a range of powerful symmetrical multi-processor
super-servers. The Company markets a full line of local area network and wide
area network parts, including bridges, multiplexors, DSU/CSU, buffers, modems,
bridges, routers and wide area networks for system integrators and their
customers. As a developing country, Brazil has a large demand for distributed
computing solutions through the establishment of client-server networks. Many of
the Company's system integration customers do not yet have the expertise to
design complex systems. In response, the Company established its own support
team that supplies technical expertise to design complex local area network or
wide area network systems for the system integrators as well as for the end
user. The Company holds several seminars each year in order to educate the
marketplace on the advantages of distributed computing and to train its channel
partners and system integrators in the latest techniques in this discipline.

FREIGHT FORWARDING AND IMPORTATION PROCEDURES

         Virtually all of the products that the Company purchases are received
and consolidated in containers at the Company's U.S. facility for sea or air
freight to the Company's facilities in Ilheus or Salvador, Brazil. These
destinations contain deep-water ports with modern handling and storage
facilities. The Company is highly-sophisticated in Brazilian customs matters and
is knowledgeable in producing appropriate documentation to expedite customs
clearance and importation of components. Upon receipt in Brazil, the goods are
expedited through customs by the Company personnel so that goods spend a minimum
amount of time at the port facility.

ENGINEERING AND MANUFACTURING

         The Company has an experienced engineering department comprised a total
of 20 engineers at its facilities. The engineering department is responsible for
designing products, producing the technical specifications for components
required for manufacture, training personnel, line engineering, and quality
control/quality assurance programs. The engineering group constructs the bill of
materials of components that are required for manufacture and designs the


                                       4
<PAGE>

manufacturing line so that the tasks can be undertaken reliably within and the
capabilities of the Company's specially trained labor force. The group also
supports the sales force and is responsible for the design of local area network
or wide area network systems for the Company's customers and their end users.

         The Company's manufacturing facilities consist of a modern 160,000
square-foot leased facility in Ilheus. The Company has an additional 55,000
square feet of manufacturing space in Cotia in the State of Sao Paulo.
Management believes that these facilities will allow the Company to continue to
operate at its anticipated capacity levels for at least the next 12 months. See
"Item 2. Properties."

PROCUREMENT AND MATERIALS MANAGEMENT

         Operating in the Brazilian market requires dedicated logistics and
materials handling experience in order to overcome the infrastructure challenges
of Brazil and in order to take advantage of the tax incentive afforded to local
manufacturers. The Company maintains an integrated manufacturing requirements
planning system in order to achieve the Company's objective of fulfilling its
manufacturing needs while optimizing its investments in inventory. The Company
sources components directly from major technology manufacturers and distributors
in Asia and the United States. Components are then shipped to Company
manufacturing facilities in Brazil on a coordinated basis to allow production
goals to be met in accordance with its sales objectives. The Company's material
requirements planning system allows it to track and control components
throughout the entire procurement process.

WORK FORCE AND TRAINING PROGRAM

         The Company has elected to locate its manufacturing facilities in
remote regions of Brazil in order to capitalize on lower costs. Many of the
Company's cities and states, especially in such remote regions, do not have
sufficient technical educational facilities and, where such facilities do exist,
they are located in areas with higher labor costs. In response to this lack of
technical education, the Company has created its own technical training program
to create a technically adept labor force by training workers in various
technical phases of assembly line manufacturing. The Company believes that this
training will often confront and mitigate cultural differences that may
interfere with an employee's motivation and productivity.

         The Company has designed internal training programs that build
technical skills for entry level employees. Entry level employees engage in
assembly work, packing, shipping, and cleaning and require a great deal of
training and supervision. All of the Company's entry level employees are
compensated at a level in excess of the national minimum wage which is currently
U.S.$120 per month. Technical personnel have had either technical school or
university level training. These workers are usually upwardly mobile and are
recruited either from other companies or technical schools. Although they must
be taught specific work related details, they are usually well-trained.
Engineers are university trained and are generally paid between 5 and 10 times
the minimum wage. See "Item 1. Business - Employees."

QUALITY ASSURANCE AND SERVICE

         The Company addresses quality assurance at all stages of the production
process. First, components considered for use in standard systems are tested for
compatibility by the research staff. Second, incoming components receive a
physical damage inspection on receipt and again at the start of the production
process. A statistical sampling of components in every category is
electronically tested prior to assembly. Each complete unit is then functionally
tested at the end of the production process to demonstrate that all components
are engaged and fully operational. Thereafter, each complete unit is "burned-in"
for three hours. This process involves running a test program which sequentially
tests each component to verify prescribed operation. In addition to having an
ISO 9001 certification at the Microtec manufacturing facility in Cotia, the
Company has implemented a total quality program at its manufacturing facility in
Ilheus, Bahia with the goal of achieving ISO 9002 status by late 1998. This
program includes training employees company wide on the processes and methods
involved in achieving the Company's goal of zero defects.

         In addition to the total quality control procedure in the production
process, the Company provides post sales technical support for its products.
Such technical support is provided by the Company's national network of sales
agents and by providing engineers and technicians who perform in-house and local
on-site servicing for corporate and government clients. Additionally, the
Company offers, through its newly established call center, its Vision
Plus/Registered Trademark/ toll-free telephone support service providing
personalized attention to its customers.

                                       5
<PAGE>

DISTRIBUTION AND MARKETING

         The Company's marketing strategy is designed to eliminate as many
levels of distribution as possible in order to offer competitive pricing to the
customer and to attain a direct relationship with the end-user. In the future,
the possibility of Company-owned retail stores in some regions will be explored
in order to further control margins and attain access to the end-user. The
Company, operating through its sales and marketing teams, has built an extensive
distribution network consisting of a national network of sales agents, network
representatives, systems integrators, distributors, and retailers. This
distribution network includes access to large markets in Brazil for computer
systems, business systems integration, and consumer electronic products.
Customers include small and medium-sized businesses, government agencies, major
retailers, and consumers. The Company's sales teams are in regular contact with
customers at each distribution level as well as with the end-user. In this
manner, the Company's sales, marketing, and engineering personnel are more
suitably positioned to react to changing demands within the Company's customer
base in Brazil.

         The Company's primary channels of distribution are as follows:

         /bullet/ SALES AGENTS. Sales agents located throughout Brazil represent
                  the Company's products to end-users for a commission equal to
                  approximately 15% of the sales price of the product. These
                  former value added resellers (VARs) are consigned merchandise
                  which in turn is billed to the end-user directly by the
                  Company, after a credit score and credit approval is completed
                  by the Company's central credit processing operation. The
                  agent is responsible for providing a full-coverage service
                  warranty for the Company for the duration of the warranty on
                  the product. As a result of this synergistic relationship, the
                  sales agent is incentivised to work with the Company and its
                  products because (i) a layer of valued added tax and federal
                  sales tax (PIS/COFINS) are eliminated to allow for a more
                  competitively priced product, (ii) the sales agent's inventory
                  carrying cost is eliminated, allowing for more working capital
                  for selling activities, and (iii) the agent avoids most credit
                  risk. The Company, in turn, benefits from this relationship
                  because (i) it allows for a direct relationship for the
                  Company with the end-user, (ii) it allows for company
                  controlled inventory, (iii) it allows the Company to control
                  its credit quality and reduce its credit exposure, and (iv) it
                  allows for a reduction of value added and sales taxes thereby
                  reducing the end-user price and increasing margins for the
                  Company. The resulting network of agents make up the Company's
                  national network of warranty service centers, able to support
                  the end-users in nearly all locations in Brazil. There are
                  currently 95 active sales agents.

         /bullet/ NETWORK REPRESENTATIVES. Network representatives, working
                  through regional managers who control 60 regions covering all
                  of Brazil, sell house-to-house and office-to-office. This
                  strategy enables the Company to have direct contact with
                  end-users, and allows for the efficient gathering of credit
                  information and administration of the sales process in remote
                  areas where the 95 active sales agents do not have adequate
                  penetration. These network representatives work on a strict
                  commission basis and use the 95 active sales agents as sources
                  of stock for immediate delivery as well as for technical
                  assistance and warranty service. There are 250 active network
                  representatives. Prior to becoming active, all of the
                  Company's network representatives participate in a two day
                  sales and technical training program administered by the
                  Company and designed to insure a marketing presentation that
                  is consistent with the Company's quality and standards.

         /bullet/ TELEMARKETING. Telemarketing is a program established in 1997
                  to sell the Company's products direct to consumer end-users
                  and to market the Company's products to small resellers. In
                  addition to generating sales to end-users, this channel also
                  serves as a lead-generator for sales agents, network
                  representatives, and the corporate sales staff. The Company is
                  also using this program as a test-bed for specific sales
                  programs and promotions. The telemarketing call center, which
                  currently has 30 telephone operators, is also integrated with
                  the Company's technical assistance hotlines.

         /bullet/ SYSTEMS INTEGRATION. Systems Integration is one of the leading
                  growth areas in the country. The Company has invested in
                  creating a staff of 28 internal sales, support, technical, and
                  engineering professionals to handle the design, quotation,
                  build, installation and support of high-end network solutions
                  based on Windows-NT server applications on symmetrically
                  multi-processed servers and network equipment. In addition,
                  the Company participates in a wide variety of government and
                  corporate bids. The Company also uses outside consultants to
                  administer such bid processes. With the addition of Microtec,
                  which participates heavily in this market, the Company expects
                  to expand its activities in this area.

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         /bullet/ DISTRIBUTION AND RETAIL. Distribution and retail are the
                  traditional methods used to penetrate a market. With
                  approximately 300 active clients, this channel, as a
                  percentage of the Company's total sales, is expected to play a
                  smaller role in the Company's sales strategy as the direct
                  channels mentioned above are developed and enhanced.

         The Company presently has 25 employees in its Sao Paulo facility with
the responsibility of marketing new product lines, receiving input on existing
product lines and making personal sales calls. In addition, they are responsible
for accepting, processing and administering sales orders, and coordinating
advertising and logistics of product shipment.

         In accordance with its policy to diversify its customer base, the
Company has successfully expanded and diversified its customer base from one
customer during 1993 to approximately 22,000 customers as of December 31, 1997.
During the year ended December 31, 1995, Casas Bahia and Vitoria Tecnologia
S.A., an affiliate of the Company through common ownership, accounted for 15%
and 76%, respectively, of the Company's sales. For the year ended December 31,
1996, Casas Bahia and Vitoria Tecnologia S.A. accounted for 38% and 11%,
respectively, of the Company's sales. Of the 38% of sales to Casas Bahia,
approximately 30% of those sales resulted from the contract manufacturing of
consumer electronics while the remainder represented PC sales. For the year
ended December 31, 1997, sales to Casas Bahia represented 9.09%of sales.

COMPETITION

         The manufacturing and distribution of computer equipment and related
products is highly competitive and requires substantial capital. The Company has
competed with, and will continue to compete with, numerous international,
national and regional companies, many of which have significantly larger
operations and greater financial, marketing, human and other resources than the
Company, which may give such competitors competitive advantages, including
economies of scale and scope. Competitors include internationally recognized
companies such as IBM, Acer, Hewlett Packard and Compaq. No assurance can be
given that the Company will successfully compete in any market in which it
conducts or may conduct operations.

BACKLOG; UNFULFILLED CONTRACT MANUFACTURING OBLIGATIONS

         The Company's backlog as of December 31, 1997 was approximately U.S.$10
million. Backlog consists of contracts or purchase orders with delivery dates
scheduled within the next 12 months. The Company expects to ship its entire
current backlog within the Company's current fiscal year. Variations in the
magnitude and duration of contracts received by the Company and customer
delivery requirements may result in substantial fluctuations in backlog from
period to period. Since customers may cancel or reschedule deliveries, backlog
may not be a meaningful indicator of future financial results.

REGULATION AND ENVIRONMENTAL MATTERS

         The Company believes that its facilities and practices for controlling
and disposing of the limited amount of wastes it produces are in compliance with
applicable environmental laws and regulations in Brazil.

TRADEMARKS

         The Company's products are marketed and sold under Company-owned
trademarks, including Vision/Registered Trademark/ and Microtec's
Mythus/Registered Trademark/, Quest/Registered Trademark/, Spalla/Registered
Trademark/ and Vesper/Registered Trademark/.

EMPLOYEES

         As of December 31, 1997, the Company employed approximately 650
persons, including 12 executive officers, 20 executive personnel, 20 engineering
personnel, and 80 administrative personnel. The Company believes that its
employee relations are satisfactory.

ITEM 2.  PROPERTIES

         The Company's corporate headquarters are located in Miami, Florida. The
Company leases, from an unaffiliated landlord, approximately 16,000 square feet
of office and warehouse space in Miami. The office space lease expires in 


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August 1998. The Company pays annual rent of approximately $102,000 plus its 
allocable share of real estate taxes, insurance, and other assessments.

         The Company's Brazilian operations are centered in the states of Sao
Paulo and Bahia. The Company leases approximately 15,000 square feet of office
space in Sao Paulo for an annual rent of approximately U.S.$350,000. The lease
on such property expires in April 2000. In addition, the Company leases an
additional 12,000 square feet of warehouse space in Sao Paulo pursuant to a
lease which expires in June 1999 for an annual rent of U.S.$34,000. The Company
leases approximately 160,000 square feet of manufacturing and administrative
space in Ilheus for an annual rent of approximately U.S.$157,000. Such lease
expires in November 1998. The Company leases another 55,000 square feet in Cotia
for approximately U.S.$240,000 per annum, the lease of which expires in
September 1998. In addition, the Company leases warehouse and retail space in
Recife and Belo Horizante.

         The Company believes that in the event that the lease with respect to
any of the aforementioned facilities should not be renewed, alternative space
will be available at comparable rates.

         The Company has begun the development of a new 70,000 square foot
manufacturing plant and administration center in Ilheus, Brazil. In connection
with the development thereof, the Company has secured a U.S.$3.4 million loan
from the Development Bank of the State of Bahia to fund the development of such
facility. The loan proceeds are anticipated to cover 100% of the construction
costs. Currently, however, the Company has suspended the ground-breaking for
this facility. The Company has become aware that the manufacturing facility that
it is currently leasing in Ilheus will become available through auction. The
Company is currently evaluating the purchase of such facility before it
continues with the groundbreaking of the new facility.

         In addition to the facilities discussed above, the Company owns, for
investment purposes, two undeveloped parcels of land near Ilheus, Bahia. The
Company does not plan to make material capital expenditures or improvements with
respect to this property during the next fiscal year.

ITEM 3.  LEGAL PROCEEDINGS

         The Company has been named in two separate lawsuits in the United
States, one by IBM and another by YE Data, both relating to TNT Systems, Inc., a
business in which Georges C. St. Laurent III, the Company's Chairman of the
Board and Chief Executive Officer, was a shareholder and which ceased operations
in 1993. During the third quarter of 1997, the YE Data case was dismissed by the
courts with no action taken against any party involved. The Company believes
that the IBM lawsuit is frivolous and without merit and is not likely to have a
material adverse effect on the Company's financial results or condition.
Additionally, Mr. Georges C. St. Laurent III has agreed to indemnify the Company
against any and all claims having to do with these lawsuits or others that may
arise from the past operations of businesses owned by Mr. Georges C. St. Laurent
III. Mr. William C. St. Laurent has also agreed to indemnify the Company against
any and all claims having to do with lawsuits that may arise from the past
operations of businesses owned by Mr. William C. St. Laurent.

         Other than as discussed above and other than in the ordinary course of
its business, the Company knows of no other material litigation or claims
pending, threatened, or contemplated to which the Company is or may become a
party.

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

         No matter was submitted to a vote of the Company's stockholders,
through the solicitation of proxies or otherwise, during the fourth quarter of
fiscal 1997.

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                                     PART II

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

MARKET INFORMATION

         The Common Stock of the Company is traded on The Nasdaq National Market
tier of The Nasdaq Stock Market under the symbol: VTCH. The following table sets
forth, for the period indicated, the high and low sales price for the Common
Stock as reported in the consolidated transaction reporting system.

<TABLE>
<CAPTION>
                                                                                         HIGH              LOW
                                                                                         ----              ---
<S>                                                                                    <C>               <C>    
        FISCAL YEAR 1996:
            Period November 4, 1996, the commencement date of the Company's
             initial public offering, through December 31, 1996                        $ 11.625          $ 8.375

        FISCAL YEAR 1997:
            Quarter ended March 31                                                     $  16.00          $ 8.125
            Quarter ended June 30                                                      $ 19.625          $  9.25
            Quarter ended September 30                                                 $ 17.625          $ 13.50
            Quarter ended December 31                                                  $  23.00          $ 13.50
</TABLE>

HOLDERS

         As of March 4, 1998 there were approximately 1,805 holders of record of
the Common Stock.

DIVIDENDS

         The Company has not declared or paid any dividends on the Common Stock
since inception and does not intend to pay any dividends to its shareholders in
the foreseeable future. The Company currently intends to reinvest earnings, if
any, in the development and expansion of its business. The declaration of
dividends in the future will be at the discretion of the Board of Directors and
will depend upon the earnings, capital requirements, and financial position of
the Company, general economic conditions, and other pertinent factors.

      At December 31, 1997 and 1996, shareholders' equity consisted of
$27,874,495 and $15,743,838, respectively, in retained earnings generated from
the operations of the Company's subsidiaries. Of these amounts $26,941,252 and
$15,743,838, respectively, were generated from the operations of Bahiatech -
Bahia Tecnologia Ltda. ("Bahia"), one of the Company's Brazilian subsidiaries.
Bahia is exempt from the payment of Brazilian federal income tax through and
including the year 2004. Tax exemption benefits cannot be distributed as
dividends to the Company in U.S. dollars and are segregated for capital reserves
and offsetting accumulated losses in accordance with Brazilian law. For the
years ended December 31, 1997 and 1996, the tax exemption benefits amounted to
$5,202,833 ($0.48 per share) and $2,163,667 ($0.24 per share), respectively.

      For the foreseeable future, Bahia does not intend to distribute any excess
retained earnings to its U.S. parent, but intends to reinvest such earnings, if
any, in the development and expansion of its business. In the future, however,
should Bahia wish to remit retained earnings in excess of the tax exemption
benefits, it may do so only in REAIS convertible into U.S. Dollars in the
floating rate exchange market (the "Floating Market"). There are two legal
foreign exchange markets in Brazil: the commercial rate exchange market (the
"Commercial Market") and the Floating Market. The "Commercial Market Rate" is
the commercial selling rate for Brazilian currency into U.S. Dollars, as
reported by the Central Bank. The "Floating Market Rate" generally applies to
transactions to which the Commercial Market Rate does not apply. Prior to the
implementation of the REAL Plan, the Commercial Market Rate and the Floating
Market Rate differed significantly at times. Since the introduction of the REAL,
the two rates have not differed significantly. However, there can be no
assurance that there will not be significant differences between the two rates
in the future. Both the Commercial Market Rate and the Floating Market Rate are
reported by the Central Bank on a daily basis.

      In order for a company to remit retained earnings abroad at the Commercial
Market Rate, Brazilian law first requires the registration of the foreign
capital upon which those retained earnings were made. Bahia has applied with the
Central Bank of Brazil to register its original foreign capital investment in
order to allow it to remit excess retained earnings at the 


                                       9
<PAGE>

Commercial Market Rate. In the event that Bahia's application is denied, then
Bahia, if it so chooses, will be able to remit excess retained earnings at the
Floating Market Rate only. The Company uses the Commercial Market Rate for the
translation of Bahia's results into U.S. Dollars. In the event that Bahia remits
excess retained earnings at the Floating Market Rate, there can be no assurance
that such remittance will not vary from the Company's reported results because
of the differences between the Commercial Market Rate and the Floating Market
Rate. Microtec is eligible to remit excess retained earnings at the Commercial
Market Rate.

ITEM 6.  SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS DATA:
                                                                                                         
                                                                                                           PERIOD JUNE
                                                                                                             24, 1993  
                                                        YEAR ENDED DECEMBER 31,                              (INCEPTION)
                                   -------------------------------------------------------------------      TO DECEMBER
                                        1997              1996              1995             1994            31, 1993
                                   ---------------    -------------     -------------    -------------     --------------
<S>                             <C>                <C>               <C>              <C>               <C>             
Sales                           $     117,537,403  $    73,321,398   $    48,488,996  $    17,407,363   $      1,156,253
Cost of sales                          76,813,191       53,470,340        39,156,239       16,483,232            903,544
Gross profit                           40,724,212       19,851,058         9,332,757          924,131            252,709
Selling, general and
  administrative expenses              18,167,737        8,083,287         1,234,108          505,448            181,139
Income from operations                 22,556,475       11,767,771         8,098,649          418,683             71,570
Interest and financing
  expense                               6,047,396        2,310,704           328,278          171,743             14,282
Foreign currency exchange
  losses                                2,665,224          547,077            16,229                -                  -
Net income (1)                         12,792,261        8,230,588         6,904,834          149,570             44,288

Earnings per common
  share - Basic                              1.18             0.99              0.86             0.02                ---

Earnings per common
  Share - Assuming dilution                  1.17             0.94              0.84             0.02                ---


BALANCE SHEET DATA:
                                                                    AS OF DECEMBER 31,
                                   --------------------------------------------------------------------------------------
                                        1997              1996              1995             1994              1993
                                   ---------------    -------------     -------------    -------------     --------------
Current assets                  $     121,939,015  $    41,959,441   $    21,267,881  $     7,595,246   $      1,320,967
Working capital                        82,555,097       31,873,405         6,412,154          403,181            298,525
Total assets                          155,504,902       47,376,586        22,260,817        7,692,321          1,373,128
Long-term liabilities                  61,085,153        1,757,367                 0                0                  0
Total liabilities                     100,469,071       11,843,403        14,855,727        7,192,065          1,022,442
Shareholders' equity (1)               53,608,389       35,533,183         7,405,090          500,256            350,686
</TABLE>
--------------
(1) Restrictions presently exist on the ability of Bahia to distribute retained
earnings. See Part II, Item 5 "Dividends" and the notes to the Company's
Financial Statements contained elsewhere in this report.

                                       10
<PAGE>


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

         THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE
INFORMATION CONTAINED IN THE CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES
THERETO APPEARING ELSEWHERE IN THIS REPORT.

OVERVIEW

         The Company is engaged in the manufacture and distribution of computer
equipment and related products, as well as the financing of the purchase
thereof, in the Federal Republic of Brazil. Based on continuing efforts by
management to maximize long-term profit margins and increase penetration into
the marketplace directly to end-users, the Company has evolved from a
Miami-based distributor of computer products to a vertically integrated
manufacturer and marketer of personal computers and related products which are
marketed and sold directly to end-users in Brazil. This evolution commenced in
1995 when the Company organized Bahia as a wholly-owned subsidiary to act as the
Company's manufacturing and distribution entity in Brazil. The creation of Bahia
marked the transformation of the Company from a low-margin U.S.-based
distributor to a higher-margin vertically integrated manufacturer and marketer
using the model of other direct distribution computer companies. The Company's
products, which include personal computers and multimedia systems and related
peripheral products, networking and system integration equipment, and consumer
electronics, are marketed under brand names owned by the Company and other brand
names for distribution through a variety of channels in the Brazilian
marketplace.

         In furtherance of its business strategy, the Company, in July 1997,
acquired 94.4% of the outstanding capital stock of Microtec. Microtec, based in
Cotia, Sao Paulo, Brazil, is engaged in the manufacture and distribution of
personal computers and servers in Brazil. Microtec sells directly to corporate
and government clients and through a nationwide network of over 300 channel
partners. Microtec participates heavily in all levels of bids and public
solicitations in Brazil. Since 1983, Microtec has established a brand name
recognition for quality products and services in the Brazilian market. Microtec
has an installed base of approximately 230,000 personal computers in Brazil.
Microtec has extensive experience in the engineering and design of personal
computers and has been granted an ISO-9001 certification. With a nationwide
network of technical assistance and service centers, Microtec has one of the
most extensive post-sale support systems in Brazil.

         In order to enhance its market penetration and its direct relationship
with end-users in Brazil, the Company, in November 1997, acquired a majority
interest in Techshop, located in Belo Horizonte, Brazil, and in Rectech, located
in Recife, Brazil. The operations of Techshop and Rectech include regional
distribution and sales of computers and related equipment in the corporate and
retail markets in Brazil. The companies are well suited to the Company's
business strategy of selling directly to individual consumers, corporate clients
and governmental entities, and they add strength to the Company's direct
marketing and support services in the central and northeastern regions of
Brazil.

         The evolution of the Company from a Miami-based distributor to a
vertically integrated manufacturer and integrator of complete computer systems
has resulted in the current business model which management believes will
maximize the long-term profit margin of the Company. This business model
consists of a U.S. operation, Vitech America, Inc., which serves as the a
distributor of computer components to its subsidiaries in Brazil. Vitech
America, Inc. purchases components worldwide for consolidation and processing at
its Miami operation to be sold and shipped to its subsidiaries in Brazil. The
subsidiaries serve as the Company's manufacturing and sales operations in
Brazil. This model results in substantially all of the consolidated earnings of
the Company to be attributable to the Company's subsidiary operations. For the
foreseeable future, the Company will continue with this model in order to
maximize the earnings in Brazil which will be reinvested for the continued
growth of the Company's Brazilian operations.

                                       11
<PAGE>

RESULTS OF OPERATIONS

         The following table sets forth for the periods indicated certain line
items from the Company's statement of operations as a percentage of the
Company's consolidated sales:
<TABLE>
<CAPTION>

                                                                               YEAR ENDED DECEMBER 31,
                                                        ----------------------------------------------------------------------
                                                              1997              1996              1995              1994
                                                              ----              ----              ----              ----
<S>                                                           <C>               <C>               <C>               <C> 
                 Net sales                                    100%              100%              100%              100%
                 Cost of sales                                65.4              72.9              80.8              94.7
                 Gross profit                                 34.6              27.1              19.2               5.3
                 Selling, general and
                   administrative expenses                    15.5              11.0               2.5               2.9
                 Income from operations                       19.1              16.1              16.7               2.4
                 Net interest and financing expense            5.1               3.2                .7               1.0
                 Foreign currency exchange losses              2.3                .8               --                --
                 Net Income                                   10.9              11.2              14.2                .9
</TABLE>

YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996

         Net sales increased by $44,216,005, or approximately 60%, to
$117,537,403 for the year ended December 31, 1997 as compared to $73,321,398 for
the year ended December 31, 1996. Such increase in sales was primarily
attributable to increased demand by the Company's customers, the expansion of
the Company's direct end-user sales strategy and the expansion of the Company's
sales through new distribution channels. The acquisition of Microtec which was
completed in July 1997, has enabled the Company to expand into the corporate,
government and distributor channels.

         Cost of sales during the year ended December 31, 1997 were $76,813,191,
representing 65.4% of the sales during the period, as compared to $53,470,340
for the year ended December 31, 1996, representing 72.9% of sales for the
period. The decrease in cost of sales as a percentage of sales during the year
ended December 31, 1997, when compared to the year ended December 31, 1996, was
attributable to the expansion of the Company's end-user sales strategy which has
provided the Company with better control over its margins through the
elimination of distribution layers and the retention of pricing power. Also
contributing to the reduction in cost of sales as a percentage of sales was the
Company's reduction of consumer electronics in its product mix. Contract
manufacturing of consumer electronics represents a lower margin sale than that
of the Company's core products, personal computers. Sales of consumer
electronics to Casas Bahia represented approximately 9.09% of sales during year
ended December 31, 1997 as compared to approximately 30% of sales during the
year ended December 31, 1996. Historically, the Company initiated the contract
manufacturing of consumer electronic products in order to utilize excess
capacity in its manufacturing facility. As the Company has expanded the
production and sales of personal computers, it has elected to phase out the
contract manufacturing of consumer electronics. While the Company believes that
its expansion efforts in the areas of personal computers and related products
will be sufficient to replace the loss of revenues associated with the contract
manufacturing of consumer electronics, there can be no assurance that such
expansion efforts will be successful.

         Selling, general, and administrative expenses increased by $10,084,450,
or approximately 125%, to $18,167,737 for the year ended December 31, 1997 as
compared to $8,083,287 for the year ended December 31, 1996. The increase was
primarily attributable to the acquisition of Microtec and to the increased costs
associated with expanding the Company's manufacturing capacity as well as the
increase in operating expenses to meet the demands of the Company's growth.
Selling, general, and administrative expense as a percentage of sales was 15.5%
for the year ended December 31, 1997, compared to 11% for the year ended
December 31, 1996. Such increase was primarily attributable to the acquisition
of Microtec and the incorporation of their general and administrative expenses
into the Company's operations which more than offset the Company's increases in
sales. Also contributing to the increase in selling, general, and administrative
expenses as a percentage of sales was the increased marketing expenditures
associated with the Company's direct end-user sales strategy. While the level of
these expenses in future years can not be predicted and is dependent in large
part upon the Company's success in implementing its business strategy,
management anticipates that the increased expenses will be offset by the
increases in revenues resulting from the expansion of distribution channels.

         Income from operations increased by $10,788,704, or approximately 92%,
to $22,556,475 for the year ended December 31, 1997 as compared to $11,767,771
for the year ended December 31, 1996. Such increase was primarily attributable
to the aforementioned increase in sales and the decrease in cost of sales as a
percentage of sales which more 


                                       12
<PAGE>

than offset the increase in selling, general, and administrative expenses.
Income from operations as a percentage of sales increased to 19.1% for the year
ended December 31, 1997 from 16.1% for the year ended December 31, 1996. This
increase was primarily attributable to the aforementioned decrease in cost of
sales as a percentage of sales which more than offset the increase in selling,
general, and administrative expenses as a percentage of sales.

         Net interest and financing expense increased by $3,736,692, or
approximately 162%, to $6,047,396 for the year ended December 31, 1997 as
compared to $2,310,704 for the year ended December 31, 1996. This increase was
primarily attributable to the Company's increased use of debt financing and the
sale of accounts receivable to support its working capital needs.

         During the year ended December 31, 1997, the Company experienced a
foreign currency exchange loss of $2,665,224 from the settlement of certain
receivables and payables denominated in the Brazilian Real and the translation
of financial statements from the Real to the U.S. Dollar as compared to $547,077
during the year ended December 31, 1996. At December 31, 1997, the Commercial
Market Rate for the REAL was R$1.1164 per US$1.00 as compared to R$1.0394 per
US$1.00 at December 31, 1996. At December 31, 1997, the Company had a net
exposure to currency fluctuations of approximately $68.4 million consisting
primarily of cash and accounts receivable denominated in REAIS less payables
denominated in REAIS.

         Net income increased by $4,561,673, or approximately 55%, to
$12,792,261 for the year ended December 31, 1997 as compared to $8,230,588 for
the year ended December 31, 1996. The increase in net income was primarily
attributable to the aforementioned increase in income from operations which more
than offset increases in interest and financing expense and foreign currency
exchange losses. Net income as a percentage of sales decreased to 10.9% for the
year ended December 31, 1997 from 11.2% for the year ended December 31, 1996.
This decrease was primarily attributable to the increases in interest and
financing expense as a percentage of sales and foreign currency exchange losses
as a percentage of sales which more than offset the increase in income from
operations as a percentage of sales.

         Net income per common share assuming dilution increased by $0.23, or
24.5%, to $1.17 for the year ended December 31, 1997 as compared to $0.94 for
the year ended December 31, 1996. The percentage increase in net income per
common share assuming dilution was less than the percentage increase in net
income primarily because of the dilution presented by the 2,115,500 shares
issued in the Company's initial public offering in November of 1996 as well as
the issuance of common stock options and warrants.

         In November 1997, the Brazilian Government introduced a budget cutting
plan designed to control Brazil's budget and trade deficits. The plan, which
includes measures ranging from tax increases to public sector layoffs is
designed to save the Brazilian government approximately $20 billion Reais. These
proposed changes in addition to future changes in, or the implementation of,
such policies, and increased Brazilian political uncertainty, could have a
material adverse effect on the Company and its financial results.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER 31, 1995

         Net sales increased by $24,832,402, or approximately 51%, to
$73,321,398 for the year ended December 31, 1996 as compared to $48,488,996 for
the year ended December 31, 1995. Such increase in sales was primarily
attributable to increased demand by the Company's customers, the broadening of
the Company's customer base through the Company's direct sales strategy, and the
further establishment of the Company's brands in the Brazilian marketplace.
During the year ended December 31, 1996, the Company had sales to over 13,500
different customers as compared to less than 20 different customers during the
year ended December 31, 1995.

         Cost of sales during the year ended December 31, 1996 were $53,470,340,
representing 72.9% of the sales during the period, as compared to $39,156,239
for the year ended December 31, 1995, representing 80.8% of sales for the
period. The decrease in cost of sales as a percentage of sales during the year
ended December 31, 1996, when compared to the year ended December 31, 1995, was
attributable to the Company's continuing business strategy of the transformation
from being solely a Miami-based distributor to being a vertically integrated
manufacturing and distribution company attaining a broad spectrum of clients
throughout Brazil. Up until the fourth quarter of 1995, the Company was
operating principally as a Miami based distributor. Starting in the fourth
quarter of 1995, the Company vertically integrated into manufacturing. As a
result of this transformation, the Company has been able to achieve higher
margins through the vertical integration. The decrease was also attributable to
the Company's migration from peripheral products and related products to a full
line of 


                                       13
<PAGE>

branded computer systems and network solutions with greater aggregated value and
greater control over pricing to the customer.

         Selling, general and administrative expenses increased by $6,849,179,
or approximately 555%, to $8,083,287 for the year ended December 31, 1996 as
compared to $1,234,108 for the year ended December 31, 1995. Such increase was
primarily related to the increased costs associated with the creation of Bahia
and its manufacturing facility being brought on line as well as the increased
selling activity in Brazil associated with marketing directly to end-users.
Selling, general, and administrative expense as a percentage of sales was 11%
for the year ended December 31, 1996, compared to 2.5% for the year ended
December 31, 1995. This increase in the selling, general, and administrative
expense as a percentage of sales was primarily attributable to the creation of
Bahia as well as the broadening of the Company's customer base.

         Income from operations increased by $3,669,122 to $11,767,771 for the
year ended December 31, 1996 as compared to $8,098,649 for the year ended
December 31, 1995. Such increase was primarily attributable to the
aforementioned increase in sales and the decrease in cost of sales as a
percentage of sales which more than offset the increase in selling, general, and
administrative expenses. Income from operations as a percentage of sales
decreased to 16.1% for the year ended December 31, 1996 from 16.7% for the year
ended December 31, 1995. This decrease was primarily attributable to the
increase in selling, general, and administrative expenses as a percentage of
sales which more than offset the decrease in cost of sales as a percentage of
sales. For the year ended December 31, 1995, operating margins were unusually
high as the result of the high operating margins which occurred during the
fourth quarter of 1995. During such quarter, which was the start-up period for
the Company's manufacturing facility, the Company benefited from the opening of
its manufacturing facility in Brazil without experiencing the full selling,
general and administrative costs associated with the operation.

         Net interest and financing expense increased by $1,982,426, or
approximately 604%, to $2,310,704 for the year ended December 31, 1996 as
compared to $328,278 for the year ended December 31, 1995. This increase was
primarily attributable to the Company's increased use of debt financing to
support its working capital needs and to support its sales to end-users.
Specifically, $1,433,199 of the increase for the year ended December 31, 1996
was attributable to the Company's sale of accounts receivable to an affiliate of
the Company in connection with the Company's 10X consumer financing program
which was introduced in early 1996. The $1,433,199 represented the discount on
the consumer debt portfolios which had a face value of $12,070,738. The Company
had interest income of $589,268 for the year ended December 31, 1996. Such
interest income resulted from the Company's investments of excess cash in
short-term marketable securities

         Net income increased by $1,325,754, or approximately 19.2%, to
$8,230,588 for the year ended December 31, 1996 as compared to $6,904,834 for
the year ended December 31, 1995. The increase in net income was primarily
attributable to the aforementioned increase in income from operations more than
offsetting the increase in interest and financing expense. Net income as a
percentage of sales decreased to 11.2% for the year ended December 31, 1996 from
14.2% for the year ended December 31, 1995. This decrease was primarily
attributable to the aforementioned decrease in the income from operations as a
percentage of sales and the increases in interest and financing expenses as a
percentage of sales.

         Net income per common share assuming dilution increased by $0.10, or
approximately 12%, to $0.94 for the year ended December 31, 1996. Per share
information for the years ended December 31, 1996 and 1995 is based on the
assumed conversion of a note payable at the beginning of each year. This
assumption involves dividing net income, adjusted to reflect what net income
would have been if the Company had not paid interest on the convertible note,
and then dividing it by the weighted average number of shares outstanding,
including the shares that the note would have converted into, for the year.

         During the year ended December 31, 1996, the Company experienced a
foreign currency exchange loss of $547,077 from the settlement of certain
receivables and payables denominated in the Real and the translation of
financial statements from the Brazilian Real to the U.S. Dollar. At December 31,
1996, the Company had a net exposure to currency fluctuations of approximately
$24,650,000 which represents cash and accounts receivable denominated in the
Real less liabilities denominated in the Real.

HEDGING ACTIVITIES

         Although the Company's financial statements are presented in U.S.
dollars in accordance with generally accepted accounting principles, the
Company's transactions are consummated in both the Brazilian Real and the U.S.
dollar. 


                                       14
<PAGE>

Inflation and devaluation have had, and may continue to have, an effect on the
Company's results of operations and financial condition. Although the Company
had used Brazilian Real futures and options contracts during 1996, in an effort
to hedge against currency risks, its highest coverage at any one time had only
met 20% of its exposure, consisting of accounts receivable denominated in REAIS,
net of accounts payable and other current liabilities denominated in REAIS.
Currently, the Company is not engaged in any hedging activities, however, the
Company is constantly monitoring its exposure to currency risks and plans to use
hedging activities to offset currency risks as it deems appropriate.
Accordingly, any significant devaluation of the Real relative to the U.S. dollar
could have a material adverse effect on the Company's operating results.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's primary cash requirements have been to fund increased
levels of inventories and accounts receivable. Up to the Company's initial
public offering in November of 1996, the Company had historically satisfied its
working capital requirements through cash flow from operations and debt
financing. On November 7, 1996, the Company completed an initial public offering
of securities issuing 2,115,500 shares of the Company's common stock, no par
value, for $10.00 per share. Such offering provided the Company with net
proceeds of approximately $18,000,000 which were used to expand inventory, to
expand consumer financing operations, to expand marketing activities, to repay
indebtedness, to increase manufacturing capacity, and for general working
capital purposes. During the year ended December 31, 1997, the Company has
continued to use debt financing to satisfy its working capital requirements.

         At December 31, 1997, the Company had a working capital surplus of
$82,555,097 compared to $31,873,405 at December 31, 1996. This increase in
working capital was primarily attributable to the increased levels of accounts
receivable and the increased levels of inventory which more than offset the
increases in trade accounts payable and short-term debt.

         Net cash used by operating activities for the year ended December 31,
1997 was $24,230,327 as compared to $15,497,424 in cash used by operating
activities during the year ended December 31, 1996. The increase in cash used
was primarily attributable to the increases in accounts receivable and
inventories which more than offset the increase in trade accounts payable.

         Net cash used in investing activities was $17,372,712 for the year
ended December 31, 1997. Such use of cash was primarily related to the
acquisitions of Microtec, Techshop and Rectech. Such use of cash was also
attributable to the purchase of production equipment associated with the
expansion of the Company's manufacturing capacity and the purchase of software
and computer equipment for the Company's management information system. Net cash
provided from financing activities was $62,549,940 for the year ended December
31, 1997 and resulted primarily from the issuance of convertible notes and
short-term borrowings at various banks in Brazil.

         The Company has a line of credit in the amount of $1,200,000 with
Eastern National Bank in Miami, Florida, with which the Company maintains its
primary banking relationship. $200,000 of such line is a working capital line
and $1 million is a trade finance line used to support letter of credits which
the Company may issue to secure purchase obligations. The trade finance lines
require the Company to provide a cash deposit equal to 30% of each letter of
credit. The credit agreement is secured by a lien of certain property owned by
the Company. As of December 31, 1997, there was nothing owing under such
facility.

         As of December 31, 1997, the Company had $18,187,919 in short-term
borrowings from various banks in Brazil with rates of interest ranging from 1%
to 2.6% per month and maturing on a revolving basis through 1998. As of December
31, 1997, the Company had available approximately $7 million in unused credit
facilities at various banks in Brazil.

         On December 17, 1996, the Company borrowed $5 million at an annual
interest rate of 20% and a term of 180 days from Georges C. St. Laurent, Jr.
("GSL Jr."), the father of Georges C. St. Laurent III, the Company's CEO, and
William St. Laurent, the Company's President. On April 10, 1997, the Company
borrowed an additional $5 million from GSL Jr. at an annual interest rate of 20%
and a term of 180 days. On June 26, 1997, GSL Jr. and the Company mutually
agreed to extend the term of the December 17, 1996 note for an addition 180
days. The proceeds of the notes were used for general corporate and working
capital purposes. On October 10, 1997 the Company repaid such notes out of the
proceeds of a private placement of 10% convertible notes.

                                       15
<PAGE>

         On June 26, 1997, the Company completed a private placement of a two
year senior convertible note to GSL Jr. for the principal amount $10 million.
The note bears an annual interest rate of 10% payable monthly and is
convertible, with 90 days notice, into common stock of the Company, in whole or
in part, at the rate of one share of common stock for each $15 of principal
converted. The proceeds of note were used for the acquisition of Microtec and
for general working capital purposes.

         On August 19, 1997, the Company entered into a loan agreement with GSL
Jr. for a principal amount of up to $10,000,000 to be evidenced by senior
convertible notes. The notes have a two year term and bear an annual interest
rate of 10% payable monthly and are convertible, with 90 days notice, into
common stock of the Company, in whole or in part, at the rate of one share of
common stock for each $16.10 of principal converted. On August 19, 1997, the
Company issued the first of such notes for the principal sum of $5,000,000. On
October 10, 1997, the Company issued the second of such notes for the principal
sum of $5,000,000. The proceeds of the notes are being used for general working
capital purposes.

         On October 10, 1997, the Company completed a private placement of three
year 10% convertible promissory notes resulting in gross proceeds to the Company
of $20,000,000. The private placement was between the Company and four
institutional investors. The notes are initially convertible at a conversion
price of $16.50 (the "Initial Conversion Price") subject to stock-splits, stock
dividends, rights offering other similar events. In the event that the Company
shall have declined to repay in full, following the exercise by noteholders of
the first or second put right (as defined below), the Initial Conversion Price
shall be (i) the lesser of .85 multiplied by the 10-day weighted average sale
price ("VWASP") on Nasdaq as reported by Bloomberg, LP (or other principal
exchange on which the Company's securities are traded) for the lowest 10-day
consecutive period during 30 consecutive trading day period ending one trading
day prior to the conversion date or (ii) $16.50 per share.

         Beginning October 10, 1998 and continuing for a period of 30 days
thereafter, each Noteholder shall have the right ("First Put Right") to request
the Company to repurchase all, but not less than all of the outstanding Notes
held by such Holder at a price equal to 110% of the principal amount thereof,
plus accrued and unpaid interest thereon. Commencing 180 days after the First
Put Date and continuing for a period of 30 days thereafter, each Noteholder
shall have a second right (the "Second Put Right") to request the Company to
repurchase all, but not less than all of the outstanding Notes at a price equal
to 115% of the principal amount thereof plus accrued and unpaid interest
thereon. The purchase price for any Put Right shall be paid in four equal
monthly installments on the last business day of each month commencing on the
first full month following the put notice with respect to the applicable First
or Second Put Right, with interest on each installment at the rate of 10% per
annum. The Company shall have the right at any time from time to time commencing
on October 10, 1998 to purchase from any Holder of the Notes, the Notes at a
call price at 112% of the principal amount, plus accrued in unpaid interest
thereon provided that such call price shall be increased by 1% per month.

         Under the terms of the Agreement, the Company has prepared and filed a
Form S-3 Registration Statement providing for the resale of the shares of Common
Stock issuable upon conversion of the Notes. The proceeds of from the issuance
of these securities were used to refinance $10 million of 20% notes payable to
GSL Jr., to fund the purchase of the acquisitions and for general corporate
purposes.

         Additionally, on October 10, 1997, the Company completed the issuance
of an additional $18,608,250 of three year 10% Convertible Notes. The Notes were
issued in a private placement transaction to 52 investors. The Company intends
to use the net proceeds from such offering for expansion of inventory, increase
of manufacturing capacity and for the repayment of short-term debt to Brazilian
banks. This offering, which was not conditioned on completion of the previously
described offering, provided from the issuance of Convertible Notes containing
substantially the same terms and conditions as set forth above.

         The Company incurred fees and expenses equal to approximately 1.75% of
the gross proceeds of the offerings and issued warrants to purchase 219,443
shares of the Company's Common Stock.

         In 1996, the Company began the development of a new 70,000 square foot
manufacturing plant and administrative center in Ilheus, Brazil. In connection
with the development thereof, the Company secured a $3.4 million loan from the
Development Bank of the State of Bahia to fund the development of such facility.
The loan facility comprises of a working capital line of credit of approximately
$785,000 and a construction loan credit facility of approximately $2,619,000.
The credit facility is expected to cover 100% of the construction costs of the
facility. In 1997, the Company suspended the ground breaking of such new
manufacturing facility. The Company has become aware that the current
manufacturing facility in Ilheus that it is leasing will be coming up for
auction. The Company is currently evaluating the purchase of its 


                                       16
<PAGE>

current facility in such auction. As of December 31, 1997, the Company had a
balance of $757,664 associated with such facility.

         In December 1997, the Company entered into a capital lease commitment
for $1,200,000 for the purchase of manufacturing equipment. The capital lease
has a term of 60 months and bears an adjustable interest rate (currently 9.9%).
The Company took delivery of the equipment in March 1998.

         In connection with its acquisition of Microtec, the Company recorded a
provision for costs relating to the involuntary termination and relocation of
Microtec employees in the amount of $1.1 million. Such provision is associated
with the Company's plans to cease certain manufacturing operations at Microtec's
facility and consolidate all of the manufacturing of the Company at its facility
in Bahia.

         The Company recognizes the need to insure that its operations will not
be adversely impacted by Year 2000 software failures due to processing errors
potentially arising from calculations using the year 2000. In 1997, the Company
began the development of a plan for the implementation of upgrades to existing
system applications as well as the addition of new system applications. The
Company anticipates that this plan will be completed by the second quarter of
1999. The Company is also in contact with suppliers to assess their compliance
with Year 2000 issues. There can be no assurance that there will not be a
material adverse effect on the Company if third parties do not convert their
systems in a timely manner and in a way that is compatible with the Company's
systems.

         The Company believes that the costs of administering its Year 2000
readiness plan, exclusive of customer claims, will not have a material adverse
impact on the Company's operations. Since there is no uniform definition of Year
2000 "compliance" and since all customer situations cannot be anticipated,
particularly those involving third party products, the Company may experience an
increase in warranty and other claims as a result of the Year 2000 transition.

         Statements contained in this report that are not based on historical
fact are "forward-looking statements" within the meaning of the private
securities litigation reform act of 1995. Forward-looking statements may be
identified by the use of forward looking terminology such as "may," "will,"
"expect," "believe," "estimate," "anticipate," "continue," or similar terms or
variations of those terms or the negative of those terms. There are many factors
that affect the Company's business and the results of its operations and may
cause the actual results of operations in future periods to differ materially
from those currently expected or desired. These factors include, but are not
limited to: receipt and fulfillment of expected orders, changes in general
business and economic conditions, the growth of segments in which the Company
operates, market volatility; the effectiveness of price and other competition
faced by the Company; the market acceptance of the Company's products and the
timing of such acceptance; the change in customers' buying patterns; changes in
the Company's sales practice; the raising of capital and other important
factors.

IMPACT OF INFLATION ON RESULTS OF OPERATIONS, LIABILITIES AND ASSETS

         For many years prior to July 1994, the Brazilian economy was
characterized by high rates of inflation and devaluation of the Brazilian
currency against the U.S. Dollar and other currencies. However, since the
implementation in July of 1994 of the Brazilian government's latest
stabilization plan, the "Real Plan," inflation, while continuing, has been
significantly reduced and the rate of devaluation has substantially diminished.
The Company has assessed the movement of the Brazilian currency based upon the
trading ranges stated by the policy of the Central Bank of Brazil and has been
able to offset any material effects of inflation. The Company has, at times,
used Brazilian Real futures and options contracts from the Chicago Mercantile
Exchange in order partially to offset Brazilian currency exposure. There can be
no assurance that the Real Plan will continue to be effective in combating
inflation and devaluation of Brazil's currency or that the Company's assessment
of the movement of Brazilian currency will be correct in the future. Inflation
for the years 1997, 1996 and 1995 were 7.5%, 10.3% and 22%, respectively.

FACTORS AFFECTING THE COMPANY'S BUSINESS AND PROSPECTS

         Statements contained in this report that are not based on historical
fact are "forward-looking statements" within the meaning of the private
securities litigation reform act of 1995. Forward-looking statements may be
identified by the use of forward looking terminology such as "may," "will,"
"expect," "believe," "estimate," "anticipate," "continue," or similar terms or
variations of those terms or the negative of those terms. Shareholders should
carefully consider the information set forth in such disclosure and the
following risk factors which constitutes cautionary statements identifying
important factors that could cause actual results to differ materially from
those in the forward-looking statements.

                                       17
<PAGE>

         FLUCTUATION OF QUARTERLY RESULTS. The Company's quarterly net sales and
operating results may vary significantly as a result of, among other things,
historical seasonal purchasing patterns in Brazil, the volume and timing of
orders received during a quarter, variations in sales mix, and delays in
production schedules. Accordingly, the Company's historical financial
performance is not necessarily a meaningful indicator of future results and, in
general, management expects that the Company's financial results may vary
materially from period to period.

         CUSTOMER CONCENTRATION. During the year ended December 31, 1996 and the
year ended December 31 ,1997, the Company, through its subsidiaries, was engaged
as a manufacturer of televisions and video cassette recorders for Casas Bahia, a
leading retailer of consumer electronic products in Brazil. Such sales accounted
for approximately 30% and 9% of the Company's sales during such periods,
respectively. The Company also had sales of personal computers to Casas Bahia
for the year ended December 31, 1996 which accounted for approximately 8% of
sales. At December 31, 1996, the Company had an unfulfilled obligation of
approximately U.S.$15,000,000 associated with the manufacturing of televisions
and video cassette recorders, of which approximately 100% has been fulfilled
during the year in 1997. The Company initiated the contract manufacturing of
consumer electronic products in order to utilize excess capacity in its
manufacturing facility. As the Company has expanded the production and sales of
personal computers, it has elected to phase out the contract manufacturing of
consumer electronics. While the Company believes that its expansion efforts in
the areas of personal computers and related products will be sufficient to
replace the loss of revenues associated with the phasing out of the contract
manufacturing of consumer electronics, there can be no assurance that such
expansion efforts will be successful.

         During the year ended December 31, 1997, other than Casas Bahia, no one
customer of the Company accounted for more than 5% of sales. During the year
ended December 31, 1996, other than Casas Bahia and Vitoria Tecnologia S.A., an
affiliate through common ownership, no one customer of the Company accounted for
more than 5% of the Company's sales during such period.

         POLITICAL AND ECONOMIC UNCERTAINTY. Notwithstanding the recent
stability of the Brazilian economy and Brazil's unrestricted foreign exchange
market, the Brazilian economy has been characterized by frequent and
occasionally substantial intervention by the Brazilian Government. The Brazilian
Government has, in the past, substantially influenced monetary, credit, tariff,
and other policies, including exchange rates, and has utilized price and wage
controls, the restriction of bank accounts, capital controls, and restrictions
on exports to influence the economy, including to reduce extremely high levels
of inflation. Future changes in, or the implementation of, such policies, and
increased Brazilian political uncertainty, could also have a material adverse
effect on the Company and its financial results.

         FOREIGN EXCHANGE RISK. The relationship of Brazil's currency to the
value of the U.S. dollar, and the relative rate of devaluation of Brazil's
currency, may affect the Company's operating results. In particular, the
Company's accounts receivable are denominated in the Brazilian local currency,
the Real, while the Company's operating results are recorded in U.S. dollars.
Accordingly, any significant devaluation of the Real relative to the U.S. dollar
could have a material adverse effect on the Company's operating results. Prior
to 1995, the Company did not engage in hedging transactions to reduce the
Company's exposure to risks associated with exchange rate fluctuation. Since
such time, the Company has, at times, engaged in hedge transactions as it deemed
appropriate. Translation losses for the years ended December 31, 1997 and 1996
were $2,665,224 and $547,077, respectively.

         POSSIBLE NEED FOR ADDITIONAL FINANCING. To maintain historical levels
of growth, the Company may need to seek additional funding through public or
private financing and may, when attractive sources of capital become available,
elect to obtain capital in anticipation of such needs. Adequate funds for growth
through internal expansion and through acquisitions may not be available when
needed or may not be available on terms favorable to the Company. If additional
funds are raised by issuing equity securities or related instruments with
conversion or warrant features, dilution to existing shareholders may result. If
funding is insufficient, the Company may be required to delay, reduce the scope
of or eliminate some or all of its expansion programs. In addition, the Company
has in the past sought funding through third parties related to the Company's
management and there can be no assurance that these sources can be relied upon
in the future. Based on the Company's operating plan, the Company believes that
the projected cash flows from continuing operations and existing and
contemplated sources of credit will be sufficient to satisfy its capital
requirements and finance its plans for expansion for the next 12 months. Such
belief is based on certain assumptions, and there can be no assurance that such
assumptions are correct. Accordingly, there can be no assurance that such
resources will be sufficient to satisfy the Company's capital requirements for
such period. Also, there can be no assurance that such contemplated sources will
be 


                                       18
<PAGE>

available at the time they are needed. In any of such events, the Company may be
unable to implement its current plans for expansion.

         EXPIRATION OF TAX-EXEMPT STATUS. The government of the State of Bahia,
Brazil has issued a decree that exempts the Company, through and including the
year 2003, from the payment of state import duties, state sales tax, and state
services tax. The Company is exempted from the payment of Brazilian federal
income tax through and including the year 2004 provided the Company meets
certain budgeted production goals. Accordingly, upon the expiration of the
Company's tax-exempt status, or the inability of the Company and the federal
government of Brazil to renegotiate such budgeted production goals, the
Company's after-tax earnings may be expected to decline substantially. While the
Company and the federal government of Brazil have agreed to budgeted production
goals in the past, there can be no assurance that they will successfully do so
in future periods. The Company is not exempted from the payment of a federal
social contribution tax of 9.09% of income.

         ASSETS OUTSIDE THE U.S.; ENFORCEABILITY OF CIVIL LIABILITIES AGAINST
FOREIGN PERSONS. While the Company is a U.S. corporation with executive offices
in Florida, its principal operations are conducted by its subsidiaries, which
are domiciled in Brazil. For the foreseeable future, a substantial portion of
the Company's assets will be held or used outside the U.S. (in Brazil).
Enforcement by investors of civil liabilities under the Federal securities laws
may also be affected by the fact that while the Company is located in the U.S.,
its principal subsidiary and operations are located in Brazil. Although the
Company's executive officers and directors are residents of the U.S., all or a
substantial portion of the assets of the Company are located outside the U.S.

         ACQUISITIONS; INTEGRATION OF MICROTEC INTO THE COMPANY'S OPERATIONS. On
July 10, 1997, the Company completed the acquisition of Microtec and in
November, 1997, the Company completed the acquisitions of Rectech and Techshop.
Additionally, the Company's business strategy includes other potential
acquisitions as they are targeted and consummated. Acquisitions, including that
of Microtec, involve a number of risks that could adversely affect the Company's
operating results, including (i) the diversion of management's attention; (ii)
the assimilation of the operations and personnel of the acquired companies;
(iii) the amortization of acquired intangible assets; (iv) the assumption of
potential liabilities, disclosed or undisclosed, associated with the business
acquired, which liabilities may exceed the amount of indemnification available
from the seller; (v) the possibility that the financial and accounting systems
utilized by the business acquired will not meet the Company's standards; (vi)
the possibility that the business acquired will not maintain the quality of
services that the Company has historically provided; (vii) the dilutive effect
of the use of the Company's Common Stock as consideration for transactions; and
(viii) the possibility that the Company will be unable to attract and retain
qualified local management for both acquirees' operations and the ensuing
consolidated operations. There can be no assurance that the Company will
consummate any future acquisitions on satisfactory terms, that adequate
financing will be available on terms acceptable to the Company, or that any
acquired operations will be successfully integrated or that such operations will
ultimately have a positive impact on the Company, its financial condition or
results of operations.

         THE EFFECT OF VOLATILITY ON THE REPATRIATION OF EXCESS RETAINED
EARNINGS THROUGH THE FLOATING RATE MARKET. For the foreseeable future, Bahia
does not intend to distribute any excess retained earnings to its U.S. parent,
but intends to reinvest such earnings, if any, in the development and expansion
of its business. Substantially all of the retained earnings of the Company on a
consolidated basis are attributable to Bahia. Bahia is exempt from the payment
of Brazilian federal income tax through and including the year 2004. Tax
exemption benefits cannot be distributed as dividends to the Company in U.S.
Dollars and are segregated for capital reserves and offsetting accumulated
losses in accordance with Brazilian law. For the years ended December 31, 1997
and 1996, the tax exemption benefits amounted to $5,202,833 and $2,163,667,
respectively.

         In the future, should Bahia wish to remit retained earnings in excess
of the tax exemption benefits, it may do so only in REAIS convertible into U.S.
Dollars in the floating rate exchange market (the "Floating Market"). There are
two legal foreign exchange markets in Brazil: the commercial rate exchange
market (the "Commercial Market") and the Floating Market. The "Commercial Market
Rate" is the commercial selling rate for Brazilian currency into U.S. Dollars,
as reported by the Central Bank. The "Floating Market Rate" generally applies to
transactions to which the Commercial Market Rate does not apply. Prior to the
implementation of the REAL Plan, the Commercial Market Rate and the Floating
Market Rate differed significantly at times. Since the introduction of the REAL,
the two rates have not differed significantly. However, there can be no
assurance that there will not be significant differences between the two rates
in the future. Both the Commercial Market Rate and the Floating Market Rate are
reported by the Central Bank on a daily basis.

                                       19
<PAGE>

         In order for a company to remit retained earnings abroad at the
Commercial Market Rate, Brazilian law first requires the registration of the
foreign capital upon which those retained earnings were made. Bahia has applied
with the Central Bank of Brazil to register its original foreign capital
investment in order to allow it to remit excess retained earnings at the
Commercial Market Rate. In the event that Bahia's application is denied, then
Bahia, if it so chooses, will be able to remit excess retained earnings at the
Floating Market Rate only. The Company uses the Commercial Market Rate for the
translation of Bahia's results into U.S. Dollars. In the event that Bahia remits
excess retained earnings at the Floating Market Rate, there can be no assurance
that such remittance will not vary from the Company's reported results because
of the differences between the Commercial Market Rate and the Floating Market
Rate. Microtec is eligible to remit excess retained earnings at the Commercial
Market Rate.

                                       20
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

                          INDEPENDENT AUDITOR'S REPORT

Board of Directors and Shareholders
Vitech America, Inc.

We have audited the accompanying balance sheet of Vitech America, Inc. and
Subsidiaries as of December 31, 1997 and December 31, 1996, and the related
statements of income, changes in shareholders' equity, and cash flows for each
of the three years ended December 31, 1997. 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 did not audit the
financial statements of Microtec Sistemas Industria e Commercio S.A. (Microtec),
a newly acquired subsidiary during 1997, which statements reflect total assets
of $19,437,700 at December 31, 1997, and revenues of $34,714,000 for the period
July 10, 1997 (date of acquisition) through December 31, 1997 and are included
in the consolidated totals. The financial statements of Microtec were audited by
other auditors whose report theron has been furnished to us, and our opinion,
insofar as it relates to the amounts included for Microtec, is based solely upon
the report of the other auditors.

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

In our opinion, based upon our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Vitech America, Inc. and Subsidiaries as of December
31, 1997 and 1996 and the results of operations and cash flows for each of the
three years ended December 31, 1997 in conformity with generally accepted
accounting principles.

/s/  Pannell Kerr Forster PC

New York, New York
March 31, 1998


                                       21
<PAGE>


INDEPENDENT AUDITORS'REPORT

To the Directors and Stockholders of 
Microtec Sistemas Industria e Comercio S.A.

We have audited the accompanying balance sheets of Microtec Sistemas Industria e
Comercio S.A. as of December 31, 1997 and 1996, and the related statements of
income, changes in stockholders' equity and cash flows for the years then ended,
all expressed in United States dollars. Those 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 statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

The accompanying financial statements have been remeasured in accordance with
the standards set forth in Statement of Financial Accounting Standards No. 52
from reais (the currency of the country in which the Company is incorporated and
in which it operates) into U.S. dollars (the functional currency of the Company)
for the purposes of inclusion in the consolidated financial statements of Vitech
America, Inc. (the "Parent Company").

In our opinion, for the purpose of inclusion in the consolidated financial
statements of the Parent Company, the remeasured financial statements present
fairly, in all material respects, the financial position of Microtec Sistemas
Industria e Comercio S.A. at December 31, 1997 and 1996, and the results of its
operations, changes in its stockholders' equity and its cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States of America.

/s/  Deloitte Touche Tohmatsu

March 6, 1998


                                       22
<PAGE>

<TABLE>
<CAPTION>
VITECH AMERICA, INC.

                                                       Balance Sheet

                                                          Assets

                                                                                                   DECEMBER 31,
                                                                                        ------------------------------------
                                                                                              1997               1996
                                                                                        -----------------  -----------------
<S>                                                                                    <C>                <C>              
Current assets
     Cash and cash equivalents                                                         $      22,704,632  $       1,757,731
     Accounts receivable, net                                                                 59,137,869         28,430,066
     Inventories, net                                                                         34,347,087         11,394,477
     Deferred tax asset                                                                          702,000                  -
     Due from officers                                                                           370,623             72,212
     Other current assets                                                                      4,676,804            304,955
                                                                                        -----------------  -----------------
                  Total current assets                                                       121,939,015         41,959,441

Property and equipment, net                                                                   12,946,523          4,518,024
Investments                                                                                    1,181,632            770,192
Goodwill                                                                                      17,570,705                  -
Deferred tax asset                                                                               493,000                  -
Other assets                                                                                   1,374,027            128,929
                                                                                        -----------------  -----------------

                  Total assets                                                         $     155,504,902  $      47,376,586
                                                                                        -----------------  -----------------

                                           Liabilities and Shareholders' Equity

Current liabilities
     Trade accounts payable                                                            $      15,482,640  $       2,545,834
     Accrued expenses                                                                          3,131,670            393,513
     Sales tax payable                                                                                 -            604,341
     Income taxes payable                                                                              -            729,048
     Notes payable - related party                                                                     -          5,000,000
     Current maturities of long-term debt                                                        350,439            117,030
     Short-term debt                                                                          20,419,169            696,270
                                                                                        -----------------  -----------------
                  Total current liabilities                                                   39,383,918         10,086,036
                                                                                        -----------------  -----------------

Long-term liabilities
     Convertible notes - related party                                                        20,000,000                  -
     Convertible notes                                                                        38,608,250                  -
     Income and sales tax payable                                                                472,839            703,075
     Long-term debt                                                                            2,004,064          1,054,292
                                                                                        -----------------  -----------------
                           Total long-term liabilities                                        61,085,153          1,757,367
                                                                                        -----------------  -----------------

Commitments and contingencies

Minority interest                                                                              1,427,442                  -
                                                                                        -----------------  -----------------

Shareholders' equity
     Preferred stock, no par value, 3,000,000 shares authorized, no shares issued                      -                  -
     Common stock, no par value, 30,000,000 shares authorized,
        11,068,756 and 10,722,457 shares issued and outstanding                               25,486,848         20,203,903
     Retained earnings                                                                        28,121,541         15,329,280
                                                                                        -----------------  -----------------
                  Total shareholders' equity                                                  53,608,389         35,533,183
                                                                                        -----------------  -----------------

                  Total liabilities and shareholders' equity                           $     155,504,902  $      47,376,586
                                                                                        -----------------  -----------------
</TABLE>


See notes to financial statements

                                       23
<PAGE>
<TABLE>
<CAPTION>

                                                   VITECH AMERICA, INC.
                                                    Statement of Income

                                                                                              YEAR ENDED
                                                                                              DECEMBER 31,

                                                                        -------------------------------------------------------
                                                                              1997               1996               1995
                                                                        ------------------  ----------------   ----------------
<S>                                                                    <C>                 <C>                <C>             
Net sales                                                              $      117,537,403  $     73,321,398   $     48,488,996

Cost of sales                                                                  76,813,191        53,470,340         39,156,239
                                                                        ------------------  ----------------   ----------------

         Gross profit                                                          40,724,212        19,851,058          9,332,757

Selling, general and administrative expenses                                   18,167,737         8,083,287          1,234,108
                                                                        ------------------  ----------------   ----------------

         Income from operations                                                22,556,475        11,767,771          8,098,649
                                                                        ------------------  ----------------   ----------------

Other (income) expenses
     Interest expense                                                           6,416,206         1,466,773            328,278
     Interest income                                                          (1,866,222)         (589,268)                  -
     Discount on sale of receivables                                            1,497,412         1,433,199                  -
     Foreign currency exchange losses                                           2,665,224           547,077             16,229
     Other                                                                       (36,000)                 -              1,817
                                                                        ------------------  ----------------   ----------------

         Total other expenses                                                   8,676,620         2,857,781            346,324
                                                                        ------------------  ----------------   ----------------

         Income before provision for
               income taxes and minority interest                              13,879,855         8,909,990          7,752,325

Provision for income taxes                                                        980,510           679,402            847,491
                                                                        ------------------  ----------------   ----------------

              Income before minority interest                                  12,899,345         8,230,588          6,904,834

Minority interest                                                                 107,084                 -                  -
                                                                        ------------------  ----------------   ----------------

                  Net income                                           $       12,792,261  $      8,230,588   $      6,904,834
                                                                        ------------------  ----------------   ----------------



Earnings per common share - Basic:
       Net income                                                      $       12,792,261  $      8,230,588   $      6,904,834
       Weighted common shares                                                  10,840,384         8,312,831          8,000,000
       Net income per common share                                     $             1.18  $           0.99   $           0.86
                                                                        ------------------  ----------------   ----------------

Earnings per common share - Assuming dilution:
       Net income                                                      $       12,792,261  $      8,334,538   $      6,978,490
       Weighted common shares                                                  10,939,817         8,906,140          8,293,914
       Net income per common share                                     $             1.17  $           0.94   $           0.84
                                                                        ------------------  ----------------   ----------------
</TABLE>

See notes to financial statements

                                       24
<PAGE>
<TABLE>
<CAPTION>

                                                  VITECH AMERICA, INC.
                                       Statement of Changes in Shareholders'
                                   Equity For the Years Ended December 31, 1997 1996 and 1995



                                                    NUMBER OF            COMMON            RETAINED
                                                     SHARES              STOCK             EARNINGS             TOTAL
                                                ------------------  -----------------  ------------------  -----------------

<S>                                                     <C>        <C>                <C>                 <C>              
Balance at December 31, 1994                            8,000,000  $         306,398  $          193,858  $         500,256

     Net income                                                 -                  -           6,904,834          6,904,834
                                                ------------------  -----------------  ------------------  -----------------

Balance at December 31, 1995                            8,000,000            306,398           7,098,692          7,405,090

     Issuance of common stock for cash
      in private placement in August
      1996 ($1.50 per share)                               13,648             20,472                   -             20,472

     Issuance of common stock for
      cash in initial public offering
      in November 1996 ($10.00 per
      share)                                            2,115,500         17,877,033                   -         17,877,033

     Issuance of common stock for
      conversion of note payable
      in November 1996                                    593,309          2,000,000                   -          2,000,000

     Net income                                                 -                  -           8,230,588          8,230,588
                                                ------------------  -----------------  ------------------  -----------------

Balance at December 31, 1996                           10,722,457  $      20,203,903  $       15,329,280  $      35,533,183

       Issuance of common stock for
        cash from the exercise of warrants
        in 1997 ($10 per share)                            20,296            202,960                   -            202,960

       Issuance of common stock for
        acquisition of business in July
         1997 ($14 per share)                             192,857          2,700,000                   -          2,700,000

       Issuance of common stock for
        acquisition of businesses in
        November 1997 ($17.88 per share)                  133,146          2,379,985                   -          2,379,985

       Net income                                               -                  -          12,792,261         12,792,261
                                                ------------------  -----------------  ------------------  -----------------

Balance at December 31, 1997                           11,068,756  $      25,486,848  $       28,121,541  $      53,608,389
                                                ------------------  -----------------  ------------------  -----------------
</TABLE>



See notes to financial statements

                                       25
<PAGE>
<TABLE>
<CAPTION>

                                                   VITECH AMERICA, INC.
                                                  Statement of Cash Flows

                                                                                             YEAR ENDED
                                                                                             DECEMBER 31,
                                                                         ---------------------------------------------------
                                                                              1997              1996              1995
                                                                         ----------------  ----------------  ---------------
<S>                                                                     <C>               <C>               <C>            
Cash flows from operating activities
     Net income                                                         $     12,792,261  $      8,230,588  $     6,904,834
     Adjustments to reconcile net income to net cash used in
      operating activities
         Depreciation                                                          1,184,707           263,800           32,934
              Amortization of goodwill                                           321,369                 -                -
              Minority interest                                                  107,084                 -                -
         Allowance for doubtful accounts                                         286,276           563,434                -
         Allowance for inventory obsolescence                                          -           181,566                -
         Changes in assets and liabilities
              Accounts receivable                                           (22,137,077)      (15,164,106)     (11,149,920)
              Inventories                                                   (12,259,189)       (5,997,069)      (2,280,995)
              Deferred tax asset                                               (398,995)           102,530         (47,900)
              Other assets                                                   (4,855,932)         (204,793)        (123,801)
              Trade accounts payable                                           1,858,457       (4,484,367)        3,168,229
              Accrued expenses                                                   502,512           231,565           66,860
              Due to/from officers                                             (298,411)         (196,645)           78,787
              Income and sales taxes payable                                 (1,333,389)           976,073          895,391
                                                                         ----------------  ----------------  ---------------
                      Net cash used in operating activities                 (24,230,327)      (15,497,424)      (2,455,581)
                                                                         ----------------  ----------------  ---------------
Cash flows from investing activities
     Purchases of property and equipment                                     (6,597,303)       (2,968,921)        (249,295)
       Payment for business acquisitions, net of cash acquired              (10,376,969)                 -                -
     Other investments                                                         (398,440)         (178,192)         (68,799)
                                                                         ----------------  ----------------  ---------------
                      Net cash used in investing activities                 (17,372,712)       (3,147,113)        (318,094)
                                                                         ----------------  ----------------  ---------------
Cash flows from financing activities
     Deferred financing expense                                                (637,609)                 -         (87,500)
     Net proceeds under short-term bank borrowings                            13,443,649       (1,870,567)        (853,283)
       Net payments of taxes payable                                           (230,236)                 -                -
     Proceeds from notes payable - related party                               5,000,000         5,000,000        2,006,887
     Repayment of notes payable - related party                             (10,000,000)       (1,911,917)        (222,410)
       Proceeds from convertible note - related party                         20,000,000                 -                -
     Proceeds from convertible notes                                          38,608,250                 -                -
     Payment of note payable for business acquisition                        (3,718,750)                 -                -
       Proceeds from issuance of senior debentures                                     -         1,365,000                -
       Repayment of senior debentures                                                  -       (1,365,000)                -
     Proceeds from notes payable                                                 768,225         1,191,564        2,000,000
     Repayment of notes payable                                                (886,549)          (20,242)                -
     Net proceeds from sale of common stock                                      202,960        17,897,505                -
                                                                         ----------------  ----------------  ---------------
                      Net cash provided by financing activities               62,549,940        20,286,343        2,843,694
                                                                         ----------------  ----------------  ---------------
                      Net increase in cash and cash equivalents               20,946,901         1,641,806           70,019

Cash and cash equivalents - beginning of year                                  1,757,731           115,925           45,906
                                                                         ----------------  ----------------  ---------------
Cash and cash equivalents - end of year                                 $     22,704,632  $      1,757,731  $       115,925
                                                                         ----------------  ----------------  ---------------
</TABLE>





See notes to financial statements


                                       26
<PAGE>
<TABLE>
<CAPTION>

                                                   VITECH AMERICA, INC.
                                            Statement of Cash Flows (continued)

                                                                                            YEAR ENDED
                                                                                            DECEMBER 31,

                                                                         ---------------------------------------------------
                                                                              1997              1996              1995
                                                                         ----------------  ----------------  ---------------
<S>                                                                     <C>               <C>               <C>            
Supplemental disclosure of cash flow information
     Cash paid during the year for
         Interest and discount on sale of receivables                   $      6,836,325  $      2,896,284  $       373,680
                                                                         ----------------  ----------------  ---------------
         Income taxes                                                   $        565,446  $        852,119  $             -
                                                                         ----------------  ----------------  ---------------

Supplemental schedule of non-cash investing and financing activities 
     Investment in land held for development acquired through
      seller financing agreements                                       $              -  $              -  $       523,201
                                                                         ----------------  ----------------  ---------------
     Conversion of note payable to 593,309 shares of common stock       $              -  $      2,000,000  $             -
                                                                         ----------------  ----------------  ---------------
     Property and asset received in exchange for outstanding accounts
      receivable                                                        $              -  $      1,517,257  $             -
                                                                         ----------------  ----------------  ---------------
       Investment in property and equipment through financing
        agreements                                                      $        871,503  $              -  $             -
                                                                         ----------------  ----------------  ---------------
       Issuance of common stock and a note payable for the
        acquisitions of subsidiaries                                    $     11,029,985  $              -  $             -
                                                                         ----------------  ----------------  ---------------
</TABLE>






See notes to financial statements

                                       27
<PAGE>

                              VITECH AMERICA, INC.
                          Notes to Financial Statements
                                December 31, 1997

NOTE 1 - ORGANIZATION AND PRINCIPAL INDUSTRY

Vitech America, Inc. (the "Company"), a Florida corporation, was incorporated in
June 1993. The Company, through its subsidiaries, is engaged in the manufacture
and distribution of computer equipment and related products. On March 7, 1995,
the majority shareholders of the company formed Bahiatech Bahia Tecnologia,
Ltda. ("Bahia") and on October 12, 1995, the Company acquired a 99% interest in
Bahia. Bahia, located in Ilheus, Bahia, Brazil, is engaged in the manufacture
and sale of computer and electronic equipment and their components. On July 10,
1997, the Company acquired a 94.4% interest in Microtec Sistemas Industria e
Comercio S.A. ("Microtec"). Microtec, located in Cotia, Sao Paulo, Brazil, is
engaged in the manufacture and sale of computers and related products. In
November 1997, the Company acquired a controlling interest in Techshop Ltda.,
Tech Stock Ltda. and Rectech - Recife Tecnologia Ltda., all of which are located
in Brazil and are engaged in the distribution and retail sale of computers and
related equipment.

All of the sales of the Company are concentrated in Brazil, with approximately
9%, 38% and 15% to one unrelated customer in 1997, 1996 and 1995, respectively,
and 11% and 76% to Vitoria Tecnologia S.A. ("Vitoria"), an affiliate through
common ownership, in 1996 and 1995, respectively.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its majority owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.

USE OF ESTIMATES

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

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with an original maturity of
three months or less at the time of acquisition to be a cash equivalent. The
Company maintains its cash in bank deposit accounts which, at times, may exceed
federally insured limits. The Company has not experienced any losses in such
accounts. The Company believes it is not exposed to any significant credit risk
on cash and cash equivalents.

INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out method or
average cost method) or market. Inventories consist primarily of components and
subassemblies and finished products held for sale. Rapid technological change
and new product introductions and enhancements could result in excess or
obsolete inventory. To minimize this risk, the Company evaluates inventory
levels and expected usage on a periodic basis and records adjustments as
required.

Certain components and products that meet the Company's requirements are
available from a limited number of suppliers. The rapid rate of technological
change and the necessity of developing and manufacturing products with short
life-cycles may intensify these risks. The inability to obtain components and
products as required, or to develop alternative sources, if and as required in
the future, could result in delays or reductions in product shipments, which in
turn could have a material adverse effect on the Company's business, financial
condition, and results of operations.

                                       28
<PAGE>

                              VITECH AMERICA, INC.
                    Notes to Financial Statements (continued)
                                December 31, 1997

DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of the Company's financial instruments is a reasonable
approximation of fair value, except for related party debt which is not
practical to estimate as no similar market exists for these instruments.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. The cost of maintenance and repairs
is charged against results of operations as incurred. Depreciation is computed
over the estimated service lives of the related assets using the straight-line
method. When assets are retired or otherwise disposed of, the cost and
accumulated depreciation are removed from the respective accounts and any gain
or loss is recognized.

REVENUE RECOGNITION

The Company's policy is to record revenues upon transfer of title to the
customer. Title transfers to the customer upon receipt of the merchandise by the
customer.

In 1997, the Company implemented an accounting policy whereby it discounts all
of the sales associated with its "10X" consumer financing program using a
present value calculation with an imputed annual rate of 15%. Such 10X program
enables customers to enter into a consumer contract with the Company whereby the
customer makes equal monthly payments over a specified term ranging from 2 to 24
months. The discounted portion of such revenues is then recognized over the
remaining term of the contract.

GOODWILL

Goodwill, representing the excess of the cost over the net tangible and
identifiable assets of acquired businesses, is stated at cost and is amortized,
on a straight-line basis, over the estimated future periods to be benefited
(20yrs.). On an annual basis, the Company reviews the recoverability of goodwill
based primarily upon an analysis of undiscounted cash flows from the acquired
businesses.

INVESTMENTS

Investments include land held for development which is carried at cost and is
comprised of undeveloped parcels near Ilheus, Bahia, Brazil.

RESEARCH AND DEVELOPMENT

Research and product development costs are expensed as incurred. For the years
ended December 31, 1997, 1996 and 1995, research and development expenses
amounted to $1,346,000, $0 and $0, respectively.

INCOME TAXES

The Company applies the asset and liability approach to financial accounting and
reporting for income taxes. The difference between the financial statement and
tax bases of assets and liabilities is determined annually. Deferred income tax
assets and liabilities are computed for those differences that have future tax
consequences using the currently enacted tax laws and rates that apply to the
period in which they are expected to affect taxable income. Valuation allowances
are established, if necessary, to reduce the deferred tax asset to the amount
that will more likely than not be realized. Income tax expense is the current
tax payable or refundable for the period plus or minus the net change in the
deferred tax assets and liabilities.

                                       29
<PAGE>

                              VITECH AMERICA, INC.
                    Notes to Financial Statements (continued)
                                December 31, 1997

Bahia operates in the North-east region of Brazil and enjoys an exemption from
income taxes through and including the year 2004. Bahia is entitled to an
exemption from income taxes on the Brazilian operating profit ("Lucro da
Exploracao") once twenty percent of the budgeted production goals in units are
met in each year during the exemption period. This benefit is reported as a
reduction of income tax expense for the period in which earned.

NET INCOME PER SHARE

In 1997, the Financial Accounting Standards Board issued Statement No. 128 (SFAS
128), "Earnings per Share". SFAS 128 replaced the calculation of primary and
fully diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of stock options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where appropriate, restated to
conform to the SFAS 128 requirements.

The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>

                                                                  INCOME             SHARES           PER SHARE
                                                              ---------------    ---------------    ---------------
<S>                                                        <C>                       <C>         <C>              
1997:
    Earnings per share - basic                             $      12,792,261         10,840,384  $            1.18

    Dilutive securities
            Stock options                                                  -             74,315                  -
            Warrants                                                       -             25,118                  -
            Convertible debt (a)                                           -                  -                  -
                                                              ---------------    ---------------    ---------------

    Earnings per share - assuming dilution                 $      12,792,261         10,939,817  $            1.17
                                                              ---------------    ---------------    ---------------

1996:
    Earnings per share - basic                             $       8,230,588          8,312,831  $            0.99

    Dilutive securities
            Stock options                                                  -                  -                  -
            Warrants                                                       -                  -                  -
            Convertible debt (b)                                     103,950            593,309                  -
                                                              ---------------    ---------------    ---------------

    Earnings per share - assuming dilution                 $       8,334,538          8,906,140  $            0.94
                                                              ---------------    ---------------    ---------------

1995:

    Earnings per share - basic                             $       6,904,834          8,000,000  $            0.86

    Dilutive securities
            Stock options                                                  -                  -                  -
            Warrants                                                       -                  -                  -
            Convertible debt (b)                                      73,656            293,914                  -
                                                              ---------------    ---------------    ---------------

    Earnings per share - assuming dilution                 $       6,978,490          8,293,914  $            0.84
                                                              ---------------    ---------------    ---------------
</TABLE>

(a)      The effects on earnings per share of the 10% convertible notes (see
         notes 11 and 12), which are convertible into 3,627,679 shares of common
         stock, would have been antidilutive and therefore are not included in
         the above computation.

(b)      Includes the effects of a 9% convertible note.

                                       30
<PAGE>

                              VITECH AMERICA, INC.
                    Notes to Financial Statements (continued)
                                December 31, 1997

For 1997, there were 3,024,000 outstanding stock options not included in the
computation of diluted earnings per share of common stock because the options'
exercise prices were greater than the average market price of the common shares.
In 1996, there were 4,070,000 outstanding stock options and 227,296 warrants not
included in the computation of diluted earnings per share of common stock
because the options and warrants' exercise prices were greater than the average
market price of the common shares

TRANSLATION INTO U.S. DOLLARS

The assets and liabilities of the Company's subsidiaries are translated into
U.S. dollars at exchange rates in effect at the balance sheet date for monetary
items and at historical rates for nonmonetary items. Revenue and expense
accounts are translated at the average exchange rate in effect during each
month, except for those accounts that relate to nonmonetary assets and
liabilities which are translated at historical rates.

EXEMPTION OF VALUE ADDED TAX (ICMS)

Bahia is exempt from ICMS (Value Added Tax) on imported materials and
components, and on the sales of the finished products arising from such raw
materials through and including the year 2003. The benefits are reflected in
sales and cost of sales.

INTERNATIONAL OPERATIONS

The Company operates in one industry segment (the manufacture and distribution
of computer and electronic equipment and related products) and manufactures and
markets its products and services through its foreign subsidiaries located in
Brazil. As a result, principally all of the Company's sales and operations are
subject to certain risks, including adverse developments in the foreign
political and economic environment, exchange rates, tariffs and other trade
barriers, staffing and managing foreign operations and potentially adverse tax
consequences. There can be no assurance that any of these factors will not have
a material adverse effect on the Company's financial condition or results of
operations in the future. During 1997 and 1996, the Company did not enter into
any significant foreign exchange contracts as a hedge against exposures to
fluctuations in currency exchange rates associated with its foreign
subsidiaries.

STOCK-BASED COMPENSATION

The Company accounts for its stock option plan in accordance with Accounting
Principles Board Opinion No. 25 (APB Opinion No. 25) and related
interpretations. The Company adopted the disclosure provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," (SFAS 123) in 1996. The Company has included in note 13, the
impact of the fair value of employee stock-based compensation plans on net
income and earnings per share on a pro forma basis for awards granted since
January 1, 1995, pursuant to SFAS 123.

NOTE 3 - RELATED PARTY TRANSACTIONS

The Company made sales to Vitoria Tecnologia S.A., an entity related through
common ownership, during 1996 and 1995 in the amounts of $8,066,878 and
$36,677,077, respectively. Amounts due from Vitoria, at December 31, 1996
amounted to $318,969. Additionally, during 1996 and 1995, the Company purchased
$4,181,727 and $2,800,000, respectively, of inventory from Vitoria.

As discussed in notes 7 and 11, the Company has outstanding debt obligations to
a related party.

In 1996, the Company entered into three year employment agreements with both its
president and its chief executive officer expiring on December 31, 1998. Under
the terms of the agreements, each individual will receive annual compensation of
$240,000, subject to annual increases, as defined.

                                       31
<PAGE>

                              VITECH AMERICA, INC.
                    Notes to Financial Statements (continued)
                                December 31, 1997

During 1996, the Company's subsidiary sold to an affiliate $12,070,738 of its
trade accounts receivable for $10,637,539 and accordingly, recognized a discount
on the sale in the amount of $1,433,199 which is reflected in the accompanying
statement of income.

NOTE 4 - ACCOUNTS RECEIVABLE

Accounts receivable as of December 31 consisted of the following:
<TABLE>
<CAPTION>

                                                                     1997               1996
                                                                ---------------    ----------------

<S>                                                          <C>                <C>               
             Consumer receivables - Class I (a)              $      12,115,838  $        7,681,430
             Consumer receivables - Class II (b)                    12,403,825                   -
             Trade accounts receivables                             36,803,916          21,312,070
                                                                ---------------    ----------------
                                                                    61,323,579          28,993,500
             Allowance for doubtful accounts                         2,185,710             563,434
                                                                ---------------    ----------------
                                                             $      59,137,869  $       28,430,066
                                                                ---------------    ----------------
</TABLE>

Consumer receivables are receivables generated through the Company's 10X plan
which enables customers to enter into a consumer contract with the Company
whereby the customer makes equal monthly payments over a specified term ranging
from 2 to 24 months. Such consumer receivables are categorized as follows:

         (a)  Class I consumer receivables represent accounts receivable for
              which the Company has received post dated checks to be held for
              deposit. Such post dated checks are applied against the receivable
              and held as a security interest until the maturity of the
              receivable.

         (b)  Class II consumer receivables represent consumer contracts which
              specify payment on certain dates over the maturity of the
              contract.

Trade accounts receivable represent normal trade receivables generated through
commercial sales at various terms ranging from 0 to 180 days.

NOTE 5 - INVENTORIES

Inventories as of December 31 are summarized as follows:
<TABLE>
<CAPTION>

                                                            1997              1996
                                                      -----------------  ---------------
<S>                                                  <C>                <C>            
Consigned inventories                                $       3,961,748  $     2,336,753
Finished goods                                              11,338,211          783,544
Work in process                                              2,457,381        1,170,052
Components in the factory                                   14,163,444        4,408,285
Components in transit  (a)                                   2,942,757        2,877,409
                                                      -----------------  ---------------
                                                            34,863,541       11,576,043

Less allowance for obsolescence                                516,454          181,566
                                                      -----------------  ---------------
                                                     $      34,347,087  $    11,394,477
                                                      -----------------  ---------------
</TABLE>

(a)      Components in transit consist of inventories in the Company's Miami,
         Florida facility and inventories in route to the Company's factories in
         Brazil.

                                       32
<PAGE>

                              VITECH AMERICA, INC.
                    Notes to Financial Statements (continued)
                                December 31, 1997

NOTE 6 - PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:
<TABLE>
<CAPTION>
                                                            1997              1996
                                                      -----------------  ----------------
<S>                                                  <C>                <C>             
Property                                             $       1,025,487  $        423,746
Furniture, office and transportation
 equipment                                                   4,906,174         1,333,818
Warehouse and manufacturing equipment                        3,902,086         1,646,780
Computers and telecommunications equipment                   3,742,926         1,086,616
Construction in progress and projects                        1,306,910           335,081
                                                      -----------------  ----------------
                                                            14,883,583         4,826,041

Less accumulated depreciation                                1,937,060           308,017
                                                      -----------------  ----------------
                                                     $      12,946,523  $      4,518,024
                                                      -----------------  ----------------
</TABLE>

NOTE 7 - NOTES PAYABLE - RELATED PARTY

The Company had the following note payable to an affiliate of the majority
shareholders' at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
                                                                          1997               1996
                                                                    -----------------  -----------------
Promissory note payable, due December, 1997
<S>                                                                <C>                <C>              
 bearing interest at 20%  (a)                                      $               -  $       5,000,000
                                                                    -----------------  -----------------
</TABLE>

(a)      In June 1997, the note was amended to extend the term 180 days from its
         original maturity of June 1997. Such note was repaid in full in October
         1997 from the proceeds of a convertible note issuance (see note 12).

Additionally, in April 1997, an affiliate of the majority shareholders' loaned
the Company $5,000,000. The loan was evidenced by a promissory note bearing
interest at the rate of 20% per annum and had a term of 180 days. The note was
repaid in full in October 1997 from the proceeds of a convertible note issuance
(see note 12).

During 1997 and 1996, the Company incurred interest expense of $1,265,754 and
$38,356, respectively, in connection with these obligations.

NOTE 8 - SHORT-TERM DEBT

Short-term debt consists of the following at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
                                                                         1997              1996
                                                                    ----------------  ----------------
<S>                                                                <C>               <C>             
Short-term bank loans denominated in Brazilian currency 
  bearing interest rates averaging 2.6% per month (3.4% per 
  month in 1996) and maturing on a revolving basis through
  August 1998                                                      $      3,575,490  $        696,270

Short-term bank loans bearing, denominated in US dollars,
  bearing interest rates averaging 1% per month and maturing                                        -
  through April 1998                                                     14,612,429

Note payable for the acquisition of Microtec maturing in

 March 1998                                                               2,231,250                 -
                                                                    ----------------  ----------------
                                                                   $     20,419,169  $        696,270
                                                                    ----------------  ----------------
</TABLE>

                                       33
<PAGE>

                              VITECH AMERICA, INC.
                    Notes to Financial Statements (continued)
                                December 31, 1997

Weighted average interest rate on short-term borrowing amounted to approximately
1.8% and 3.74% per month for the years ended December 31, 1997 and 1996,
respectively.

As of December 31, 1997, the Company had approximately $5,800,000 of its
accounts receivable in guarantee of short-term debt.

NOTE 9 - LONG-TERM DEBT

Long-term debt at December 31, 1997 and 1996 is summarized as follows:
<TABLE>
<CAPTION>

                                                                    1997               1996
                                                              ------------------  ----------------
<S>                                                          <C>                 <C>             
Construction loan payable (a)                                $          757,664  $        813,323

Note payable maturing October 1999 which requires monthly
 payments of $10,503 applied first to interest at 6.67% per
 annum and the balance to reduction of principal                        207,962           315,991

Notes payable for working capital and fixed asset purchases
 maturing in January 1999 with interest averaging 20%
 per annum                                                              478,276                 -

Note payable maturing September 2001 which requires monthly
 payments of $13,075 applied first to interest at 10.5% per
 annum and the balance to reduction of principal                        160,408                 -

Note payable maturing August 2001 which requires monthly
 payments of $750 applied first to interest at 9.9% per
 annum and the balance to reduction of principal                         27,161            42,008

Others (b)                                                              723,032                 -
                                                              ------------------  ----------------
                                                                      2,354,503         1,171,322

Less current maturities                                                 350,439           117,030
                                                              ------------------  ----------------
                                                             $        2,004,064  $      1,054,292
                                                              ------------------  ----------------
</TABLE>

(a) In August 1996 Bahiatech entered into a loan credit facility totaling
    $3,405,329, comprised of a working capital line of credit of $757,664 and a
    construction loan credit facility of $2,619,484 to be utilized for the
    construction of a new manufacturing and administrative plant in Ilheus,
    Brazil. The working capital facility, which has been drawn down, bears
    interest at the Brazil Central Bank rate for long-term debts plus 7% (at
    December 31, 1997 approximately 16.9%). The terms of this facility are
    currently being renegotiated. During 1997, there were no additional
    borrowings under the facility. Interest on the working capital portion is
    being paid quarterly. The credit facilities are guaranteed by a first
    mortgage lien on the new plant, a lien on land held for development located
    in Ilheus, Bahia and the personal guarantees of the two principal officers
    of the Company.

(b) Includes a negotiated settlement with a patent holder, whereby the Company
    agreed to pay $600,000 for prior years use of a patent process. This amount
    will be paid in annual installments, due in February as follows: 1998 - 8%;
    1999 - 17%; 2000 - 25%; 2001 - 25% and 2002 - 25%. The amount was recorded
    in long-term debt at its present value discounted at 4.8%.

                                       34
<PAGE>

                              VITECH AMERICA, INC.
                    Notes to Financial Statements (continued)
                                December 31, 1997

Maturities of long-term debt at December 31, 1997 are as follows:

YEAR ENDING
DECEMBER 31,
------------
     1998                         $      350,439
     1999                                999,323
     2000                                423,856
     2001                                410,276
     2002                                170,609
                                   ----------------
                                  $    2,354,503
                                   ----------------

NOTE 10 - INCOME TAXES

The components of the provision for income taxes are as follows:

                                   1997             1996            1995
                              ---------------  --------------- ---------------
Current
     Federal                 $        39,342  $     (140,770) $       172,000
     State                                 -                -          30,000
     Foreign                         989,718          717,642         699,991
                              ---------------  --------------- ---------------
                                   1,029,060          576,872         901,991
                              ---------------  --------------- ---------------
Deferred
     Federal                               -           92,652        (46,500)
     State                                 -            9,878         (8,000)
     Foreign                        (48,550)                -               -
                              ---------------  --------------- ---------------
                                    (48,550)          102,530        (54,500)
                              ---------------  --------------- ---------------
                             $       980,510  $       679,402 $       847,491
                              ---------------  --------------- ---------------

There were no material reconciling items between the U.S. Federal Statutory tax
rate and the effective tax rate on U.S. based income. In 1996, the Company
carried back a current year operating loss to recover U.S. Federal income taxes
paid in prior years.

Included in the accompanying balance sheet at December 31, 1997, is a current
deferred tax asset of $702,000 and a non-current deferred tax asset of $493,000
related to the operations of Microtec. Deferred income taxes reflect the effects
of (a) temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes calculated using enacted rates in effect in the years in which the
differences are expected to reverse and (b) tax-loss carryforwards.

Principal components of deferred tax assets and liabilities included in the
balance sheet at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
                                                                1997             1996
                                                            --------------   --------------
<S>                                                      <C>                <C>              
       Deferred tax assets (liabilities)
         Net operating loss carryforward                 $        493,000   $            -     
         Operating costs currently not deductible               1,105,000                -
         Revenues currently not taxable                         (403,000)                -
                                                            --------------   --------------
                 Net tax deferred assets                 $      1,195,000                -    
                                                            --------------  $--------------
</TABLE>

                                       35
<PAGE>



                              VITECH AMERICA, INC.
                    Notes to Financial Statements (continued)
                                December 31, 1997

Although the realization of the net deferred tax asset is not assured,
management believes such realization is more likely than not to occur. The
amount of the deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future taxable income during the
carryforward period should be reduced.

At December 31, 1997, Microtec had tax loss carryforwards of $1,555,000 with no
expiration date.

The Brazilian federal statutory income tax rate varies according to the level of
income and to the taxes and levies applicable to any one year. The federal
statutory income tax rate applicable to the subsidiary is a composite rate
approximating 33% for 1997 and 1996 and 48% for 1995. This rate includes a 9%
federal levy on net income, sometimes referred to as Social Contribution. The
difference from the effective tax rate and the composite rate relates to the
income tax exemption of Bahia as described in note 2.

As of December 31, 1997 and 1996, the Company has not provided for withholding
or U.S. federal income taxes on accumulated undistributed earnings of its
foreign subsidiaries as the Company does not intend to distribute such earnings
in the foreseeable future. The cumulative undistributed earnings of the
Company's foreign subsidiaries amounted to $27,874,495 and $15,743,838 at
December 31, 1997 and 1996, respectively. See note 13.

NOTE 11 - CONVERTIBLE NOTES - RELATED PARTY

On June 26, 1997, the Company completed a private placement of a two year senior
convertible note to Georges St. Laurent Jr. ("GSL Jr."), the father of the
Company's Chief Executive Officer and President, for the principal amount
$10,000,000. The note bears an annual interest rate of 10% payable monthly and
is convertible, with 90 days notice, into common stock of the Company, in whole
or in part, at the rate of one share of common stock for each $15 of principal
converted. The proceeds of the note were used for the acquisition of Microtec
and for general working capital purposes.

On August 19, 1997, the Company entered into a loan agreement with GSL Jr. for a
principal amount of up to $10,000,000 to be evidenced by senior convertible
notes. The notes have a two year term and bear an annual interest rate of 10%
payable monthly and are convertible, with 90 days notice, into common stock of
the Company, in whole or in part, at the rate of one share of common stock for
each $16.10 of principal converted. On August 19, 1997, the Company issued the
first of such notes for the principal sum of $5,000,000. On October 10, 1997,
the Company issued the second of such notes for the principal sum of $5,000,000.
The proceeds of the notes are being used for general working capital purposes.

NOTE 12 - CONVERTIBLE NOTES

On October 10, 1997, the Company completed a private placement of three year 10%
convertible promissory notes resulting in gross proceeds to the Company of
$20,000,000. The private placement was between the Company and four
institutional investors. The notes are initially convertible at a conversion
price of $16.50 (the "Initial Conversion Price") subject to stock-splits, stock
dividends, rights offering other similar events. In the event that the Company
shall have declined to repay in full, following the exercise by noteholders of
the first or second put right (as defined below), the Initial Conversion Price
shall be (i) the lesser of .85 multiplied by the 10-day weighted average sale
price ("VWASP") on Nasdaq as reported by Bloomberg, LP (or other principal
exchange on which the Company's securities are traded) for the lowest 10-day
consecutive period during 30 consecutive trading day period ending one trading
day prior to the conversion date or (ii) $16.50 per share.

Beginning October 10, 1998 and continuing for a period of 30 days thereafter,
each Noteholder shall have the right ("First Put Right") to request the Company
to repurchase all, but not less than all of the outstanding Notes held by such
Holder at a price equal to 110% of the principal amount thereof, plus accrued
and unpaid interest thereon. Commencing 180 days after the First Put Date and
continuing for a period of 30 days thereafter, each Noteholder shall have a
second right (the "Second Put Right") to request the Company to repurchase all,
but not less than all of the outstanding Notes at a price equal to 115% of the
principal amount thereof plus accrued and unpaid interest thereon. The purchase
price for any Put Right shall be paid in four equal monthly installments on the
last business day of each month commencing on the first full month following the
put notice with respect to the applicable First or Second Put Right, with
interest on each installment at the rate of 10% per annum. The Company shall
have the right at any time

                                       36
<PAGE>

                              VITECH AMERICA, INC.
                    Notes to Financial Statements (continued)
                                December 31, 1997

from time to time commencing on October 10, 1998 to purchase from any Holder of
the Notes, the Notes at a call price at 112% of the principal amount, plus
accrued in unpaid interest thereon provided that such call price shall be
increased by 1% per month.

In accordance with the terms of the Agreement, the Company has filed a Form S-3
Registration Statement providing for the resale of the shares of Common Stock
issuable upon conversion of the Notes. The proceeds from the issuance of these
securities were used to refinance $10 million of 20% notes payable to GSL Jr.,
to fund the purchase of the acquisition of Microtec and for general corporate
purposes.

Additionally, on October 10, 1997, the Company completed the issuance of an
additional $18,608,250 of three year 10% Convertible Notes. The Notes were
issued in a private placement transaction to 52 investors. The Company used the
net proceeds from such offering for expansion of inventory, increase of
manufacturing capacity and for the repayment of short-term debt to Brazilian
banks. This offering, which was not conditioned on completion of the previously
described offering, provided proceeds to the Company from the issuance of
Convertible Notes containing substantially the same terms and conditions as set
forth above.

The Company incurred fees and expenses equal to approximately 1.75% of the gross
proceeds of the offerings, of which approximately $125,000 was paid to a
director of the Company, and issued warrants to purchase 219,443 shares of the
Company's Common Stock.

NOTE 13 - SHAREHOLDERS' EQUITY

COMMON STOCK

During the year ended December 31, 1997, the Company issued 20,296 shares of
common stock as the result of the exercise of warrants. The warrants were issued
in a private placement financing transaction which occurred in August 1996. The
warrants had an exercise price of $10 per share.

In July 1997, the Company issued 192,857 shares of common stock as consideration
for the acquisition of Microtec. The number of shares issued was based on a per
share value of $14.

In November 1997, the Company issued 133,146 shares of common stock as
consideration for the acquisitions of Techshop Ltda., Tech Stock Ltda., and
Rectech - Recife Tecnologia Ltda. The number of shares issued was based on a per
share value of $17.88.

Information on warrants is shown in the following table:
<TABLE>
<CAPTION>

                                               WARRANTS          WARRANTS            PRICE            WEIGHTED
                                             OUTSTANDING        EXERCISABLE          RANGE         AVERAGE PRICE
                                           -----------------  ----------------  ----------------- -----------------
<S>                                                 <C>               <C>      <C>               <C>              
Balances at December 31, 1995                             -                 -  $               - $               -
  Granted in 1996                                    27,296            27,296              10.00             10.00
  Granted in 1996                                   200,000                 -              14.00             14.00
                                           -----------------  ----------------  ----------------- -----------------

Balances at December 31, 1996                       227,296            27,296      10.00 - 14.00             13.50
  Granted in 1997                                   219,443           219,443              16.50             16.50
  Became exercisable                                      -           200,000              14.00             14.00
  Warrants exercised                               (20,296)          (20,296)              10.00             10.00
                                           -----------------  ----------------  ----------------- -----------------

Balance at December 31, 1997                        426,443           426,443  $   10.00 - 16.50 $           14.98
                                           -----------------  ----------------  ----------------- -----------------
</TABLE>

Of the warrants outstanding, 7,000 expire in November 1999, 200,000 expire in
November 2001, and 219,443 expire in October 2002.

                                       37
<PAGE>

                              VITECH AMERICA, INC.
                    Notes to Financial Statements (continued)
                                December 31, 1997

SUBSIDIARY RETAINED EARNINGS AND DIVIDENDS

At December 31, 1997 and 1996, shareholders' equity consisted of $27,874,495 and
$15,743,838, respectively, in retained earnings generated from the operations of
the Company's subsidiaries. Of these amounts $26,941,252 and $15,743,838,
respectively, were generated from the operations of Bahia. Bahia is exempt from
the payment of Brazilian federal income tax through and including the year 2004.
Tax exemption benefits cannot be distributed as dividends to the Company in U.S.
dollars and are segregated for capital reserves and offsetting accumulated
losses in accordance with Brazilian law. For the years ended December 31, 1997
and 1996, the tax exemption benefits amounted to $5,202,833 ($0.48 per share)
and $2,163,667 ($0.24 per share), respectively.

In the future, should Bahia wish to remit retained earnings in excess of the tax
exemption benefits, it may do so only in the Brazilian currency, the REAIS,
convertible into U.S. dollars in the floating rate exchange market (the
"Floating Market"). There are two legal foreign exchange markets in Brazil: the
commercial rate exchange market (the "Commercial Market") and the floating rate
exchange market (the "Floating Market Rate"). The "Commercial Market Rate" is
the commercial selling rate for Brazilian currency into U.S. dollars, as
reported by the Central Bank of Brazil. The "Floating Market Rate" generally
applies to transactions to which the Commercial Market Rate does not apply.
Prior to the implementation of the REAL Plan, the Commercial Market Rate and the
Floating Market Rate differed significantly at times. Since the introduction of
the REAL, the two rates have not differed significantly, although there can be
no assurance that there will not be significant differences between the two
rates in the future. Both the Commercial Market Rate and the Floating Market
Rate are reported by the Central Bank on a daily basis.

In order for a company to remit retained earnings abroad at the Commercial
Market Rate, Brazilian law first requires the registration of the foreign
capital upon which those retained earnings were made. Bahia has applied with the
Central Bank of Brazil to register its original foreign capital investment in
Bahia in order to allow Bahia to remit excess retained earnings at the
Commercial Market Rate. In the event that Company's application is not approved,
then Bahia, if it so chooses, will be able to remit excess retained earnings at
the Floating Market Rate only. The Company uses the Commercial Market Rate for
the translation of the results of Bahia into U.S. dollars. In the event that
Bahia remits excess retained earnings at the Floating Market Rate, there can be
no assurance that such remittance will not vary from the Company's reported
results because of the differences between the Commercial Market Rate and the
Floating Market Rate. Microtec is eligible to remit excess retained earnings at
the Commercial Market Rate.

Cash dividends credited or paid to shareholders outside of Brazil are subject to
a withholding tax of 0%, 0% and 15% in 1997, 1996 and 1995, respectively. In
addition, cumulative tax exemption benefits totaling $10,198,500 at December 31,
1997 cannot be distributed as dividends and are segregated for capital reserves
and offsetting accumulated losses in accordance with Brazilian law.


                                       38
<PAGE>


                              VITECH AMERICA, INC.
                    Notes to Financial Statements (continued)
                                December 31, 1997

STOCK OPTIONS

Information on stock options is shown in the following table:
<TABLE>
<CAPTION>

                                               OPTIONS            OPTIONS            PRICE            WEIGHTED
                                             OUTSTANDING        EXERCISABLE          RANGE         AVERAGE PRICE
                                           -----------------  ----------------  ----------------- -----------------
<S>                                               <C>               <C>        <C>               <C>              

Balances at December 31, 1994                       178,000                 -  $   .04 -     .05 $             .04
Granted (a)                                         188,500                 -      .06 -     .90               .34
Became exercisable                                        -            36,100      .04 -     .05               .04
                                           -----------------  ----------------  ----------------- -----------------

Balances at December 31, 1995                       366,500            36,100     .04  -     .90               .20
Granted (b)                                       4,085,000                 -       .95  - 25.00             21.02
Became exercisable                                        -         4,288,670       .04  - 25.00             20.03
Exercised                                         (138,170)         (138,170)     .12  -     .90               .36
                                           -----------------  ----------------  ----------------- -----------------

Balances at December 31, 1996                     4,313,330         4,186,600       .04  - 25.00             19.91
Granted                                             131,297                 -      9.00  - 18.00             13.38
Became exercisable                                        -           160,397       .04  - 18.00              8.90
Exercised                                         (138,300)         (138,300)      .04  -   1.26               .08
Other                                                22,170          (23,800)                  -                 -
                                           -----------------  ----------------  ----------------- -----------------

Balances at December 31, 1997 (c)                 4,328,497         4,184,897  $    .04  - 25.00 $           20.24
                                           -----------------  ----------------  ----------------- -----------------
</TABLE>

(a)  Represent options granted to certain employees and consultants of the
     Company and are an option to purchase shares from the principal
     shareholders of the Company. The exercise of such options will not result
     in the issuance of new shares by the Company.

(b)  Includes 15,000 options granted to certain employees and consultants of the
     Company and are an option to purchase shares from the principal
     shareholders of the Company. The exercise of such options will not result
     in the issuance of new shares by the Company. The remainder of such options
     consist of options granted by the Company to purchase shares from the
     Company.

(c)  Of the options outstanding at December 31, 1997, 127,200 consist of options
     issued by principal shareholders to certain employees of the Company. The
     exercise of such options will not result in the issuance of new shares by
     the Company. The remainder of such options consist of options granted by
     the Company to purchase shares from the Company.

In January 1997, the Company granted options to purchase up to 20,000 shares of
common stock to directors with an exercise price of $9.00 per share.

During 1997, the Company granted options to purchase a total of 75,297 shares of
the Company's common stock at exercise prices of from $12 to $18 per share to
GSL Jr., the father of Georges C. St. Laurent III, the Company's Chairman of the
Board and Chief Executive Officer, and William St. Laurent, the Company's Chief
Operating Officer and President. Such options were granted in connection with
consulting services performed for the Company. The options are exercisable for a
five year period. The options were issued pursuant to the provisions of the
Company's 1996 Stock Option Plan.

In June 1997, Georges C. St. Laurent III and William St. Laurent transferred
portion of their options to purchase shares of the Company's common stock to
certain members of the Company's management. Georges transferred options for
153,000 shares and William transferred options for 147,000 shares. The options
are exercisable at $15.00 per share, and were transferred with the same terms
and conditions as originally granted.

                                       39
<PAGE>

                              VITECH AMERICA, INC.
                    Notes to Financial Statements (continued)
                                December 31, 1997

The Company applies APB Opinion No. 25 and related interpretations in accounting
for its stock option plans and, accordingly, no compensation cost has been
recognized because stock options granted under the plans were at exercise prices
which were equal to or greater than market value at date of grant. Had
compensation expense been determined as provided in SFAS 123 for stock options
using the Black-Sholes option-pricing model, the pro forma effect on the
Company's net income and per share amounts would have been:

                                                   1997              1996
                                            ----------------  -----------------
     Net income
         As reported                       $     12,792,261  $       8,230,588
         Pro forma                               12,565,061          4,409,388

     Income per share
         Basic
               As reported                 $           1.18  $            0.99
               Pro forma                               1.16               0.53
         Assuming dilution
               As reported                 $           1.17  $            0.94
               Pro forma                               1.15               0.51

There was no material effect to the 1995 net income and per share amounts for
options issued in 1995.

The fair value of each option grant is calculated using the following weighted
average assumptions:

                                          1997             1996
                                     ---------------  ---------------
Expected life (years)                             4                4
Interest rate                                    6%               6%
Volatility                                      30%              30%
Dividend yield                                   0%               0%

NOTE 14 - MAJOR SUPPLIERS

The Company purchased merchandise principally from suppliers located in the
United States. In 1997, purchases from one unrelated supplier account for
approximately 12% of total purchases. In 1996, no unrelated supplier accounted
for 10% of total purchases. In 1995, purchases from one unrelated supplier
accounted for approximately 12% of total purchases.

NOTE 15 - COMMITMENTS AND CONTINGENCIES

In August 1995, the Company entered into a three-year noncancelable lease
agreement for an office and warehouse building in Miami, Florida, at an annual
rental of approximately $102,000, increasing annually for changes in the
consumer price index. The lease requires the Company to pay for its
proportionate share of real estate taxes, insurance and other taxes and
assessments.

The Company's Brazilian operations are located in Sao Paulo and Bahia. The
Company leases approximately 15,000 square feet of office space in Sao Paulo for
an annual rent of approximately $350,000. The lease on such property expires in
April 2000. In addition, the Company leases 12,000 square feet of warehouse
space in Sao Paulo pursuant to a lease which expires in June 1999 for an annual
rent of $34,000. The Company leases approximately 160,000 square feet of
manufacturing and administrative space in Ilheus, Bahia for an annual rent of
approximately $157,000. Such lease expires in November 1998. The Company leases
another 55,000 square feet in Cotia, Sao Paulo for approximately $240,000 per
annum, the lease of which expires in September 1998.

                                       40
<PAGE>

                              VITECH AMERICA, INC.
                    Notes to Financial Statements (continued)
                                December 31, 1997

In addition, the Company has various other operating lease agreements primarily
involving automobiles and office equipment. These leases are noncancelable and
expire at various dates through 1998.

Minimum lease commitments under the above operating leases (inclusive of the
warehouse and office lease) as of December 31, 1997 are as follows:

1998                       $         742,000
1999                                 367,000
2000                                 117,000
                            -----------------
                           $       1,226,000
                            -----------------

Rent expense under all operating leases in 1997, 1996 and 1995, was
approximately $495,500, $362,500, and $185,300, respectively.

In December 1997, the Company entered into a capital lease commitment for
$1,200,000 for the purchase of manufacturing equipment. The capital lease has a
term of 60 months, bears an adjustable interest rate (currently 9.9%) and
requires a monthly payment of $25,437. The Company took delivery of the
equipment in March 1998.

The Company has a line of credit in the amount of $1,200,000 with Eastern
National Bank in Miami, Florida, with which the Company maintains its primary
banking relationship. $200,000 of such line is a working capital line and $1
million is a trade finance line used to support letter of credits which the
Company may issue to secure purchase obligations. The trade finance lines
require the Company to provide a cash deposit equal to 30% of each letter of
credit. The credit agreement is secured by a lien of certain property owned by
the Company. As of December 31, 1997, the Company had $108,000 in deposits
securing letters-of-credit in the amount of $360,000.

The Company has been named in two separate lawsuits, one by IBM and another by
YE Data, both relating to TNT Systems, Inc., a business in which Georges C. St.
Laurent III was a shareholder and which ceased operations in 1993. During the
third quarter of 1997, the YE Data case was dismissed by the courts with no
action taken against either party. The Company believes that the IBM lawsuit is
frivolous in nature and without merit and is not material to the financial
results or condition of the Company. Mr. Georges C. St. Laurent III has agreed
to indemnify the Company against any and all claims having to do with these
lawsuits against the Company by IBM or and others that may arise from the past
operations of businesses owned by Mr. Georges C. St. Laurent III. Mr. William C.
St. Laurent has agreed to indemnify the Company against any and all claims
having to do with lawsuits that may arise from the past operations of businesses
owned by Mr. William C. St. Laurent.

The Company is subject to inspections and potential claims arising out of the
conduct of its business, principally in connection with tax, labor and
government regulatory matters, and is the defendant in certain legal actions
arising from its normal business practice. While the ultimate results of
inspections, claims, administrative processes and lawsuits cannot be determined,
management does not expect that the resolution of such matters will have a
material effect on the financial position or future results of operations of the
Company.

NOTE 16 - ACQUISITIONS

On July 10, 1997, the Company entered into agreements with Microhold
Participacoes e Empreendimentos S/C Ltda., and Microtec Holding USA, Inc.
whereby the Company acquired 94.4% of the capital stock of Microtec Sistemas
Industria e Comercio S.A. ("Microtec"). In accordance with the agreements, the
Company paid total consideration of $14,650,000 in the form of 192,857 shares of
Vitech America, Inc. common stock with a value of $2,700,000 and $11,950,000 in
cash. Of the $11,950,000 in cash, $6,000,000 was paid upon closing of the
acquisition and the remainder will be paid in monthly installments over an eight
month period commencing August 13, 1997. The number of shares issued as
consideration was based on a per share value of $14 which approximated the
market value of the common stock at the time negotiations were completed. The
shares of common stock issued will be held in escrow for a period one year from
the date of the closing of

                                       41
<PAGE>

                              VITECH AMERICA, INC.
                    Notes to Financial Statements (continued)
                                December 31, 1997

the acquisition against any contingent liabilities associated with the prior
operations of Microtec. The consideration paid was derived through negotiations
between the Company and the shareholders of Microtec. The shareholders of
Microtec had no relationship with the Company or any of its affiliates prior to
the acquisition.

The purchase price of the Microtec capital stock has been allocated to the
assets acquired and liabilities assumed based upon their fair market value. The
excess of the consideration paid over the estimated fair value of the net assets
acquired, totaling $10,363,419, has been recorded as goodwill and is being
amortized on a straight-line basis over twenty years. The purchase price
allocation is summarized as follows:

                        Net working capital                 $        3,507,040
                        Property, plant and equipment                  647,381
                        Goodwill                                    10,363,419
                        Other noncurrent assets, net                   132,160
                                                               ----------------
                                Total                       $       14,650,000
                                                               ----------------

The following summary, prepared on an unaudited pro forma basis, reflects the
business combination between the Company and Microtec accounted for under the
purchase method of accounting and presents the results of operations for the
years indicated as if Microtec had been acquired as of the beginning of the
period presented:
<TABLE>
<CAPTION>
                                                                            1997                 1996                 1995
                                                                      -----------------    -----------------    ------------------
                                                                        (UNAUDITED)          (UNAUDITED)           (UNAUDITED)

<S>                                                                <C>                  <C>                  <C>                 
                      Pro forma revenues                           $       144,028,402  $       145,438,398  $         96,870,996
                      Pro forma expenses                                 (132,368,800)        (136,762,464)          (91,321,968)
                                                                      -----------------    -----------------    ------------------
                      Pro forma net income                         $        11,659,602  $         8,675,934  $          5,549,028
                                                                      -----------------    -----------------    ------------------
                      Pro forma net income per share - Basic       $              1.07  $              1.02  $               0.68
                                                                      -----------------    -----------------    ------------------
                      Pro forma net income per share - Diluted     $              1.06  $              0.95  $               0.65
                                                                      -----------------    -----------------    ------------------
</TABLE>

The unaudited summary pro forma results are not necessarily indicative of what
actually would have occurred if the acquisition had occurred on the above date,
nor is it necessarily indicative of future operating results.

On November 17, 1997, the Company entered into an agreement with Tech Shop
Holdings USA, Inc. ("Tech Shop"), a Nevada Corporation, whereby the Company
acquired 100% of the capital stock of Tech Shop. Tech Shop is a holding company
whose sole purpose is to be the owner of 51% of the capital stock of Tech Shop
Ltda. and Tech Stock Ltda. The remaining 49% is owned by Mr. Randolpho Abreu
Pereira da Silva, the founder of Tech Shop Ltda. and Tech Stock Ltda. Both Tech
Shop Ltda. and Tech Stock Ltda. are located in Belo Horizonte, Brazil and are
companies incorporated under the laws of Brazil. Their operations include
regional distribution and sales in the corporate and retail markets in Brazil.
In accordance with the agreement, the Company paid total consideration of
$6,003,954 in the form of 91,188 shares of Vitech America, Inc. common stock and
$4,373,969 in cash.

On November 18, 1997, the Company entered into an agreement with Recife Holdings
USA, Inc. ("Rectech"), a Nevada Corporation, whereby the Company acquired
61.616% of the capital stock of Rectech. The remaining 38.38% is owned by Mr.
Robson Medina Catao, the founder of Rectech - Recife Tecnologia Ltda. Rectech is
a holding company whose sole purpose is to be the owner of 99% of the capital
stock of Rectech - Recife Tecnologia Ltda. Rectech - Recife Tecnologia Ltda. is
located in Recife, Brazil and is incorporated under the laws of Brazil. Their
operations include regional sales in the corporate and retail markets in Brazil.
In accordance with the agreement, the Company paid total consideration of
$2,750,000 in the form of 41,958 shares of Vitech America, Inc. common stock and
$2,000,000 in cash.



                                       42
<PAGE>

                              VITECH AMERICA, INC.
                    Notes to Financial Statements (continued)
                                December 31, 1997

NOTE 17 - RETIREMENT SAVINGS PLAN

Effective April 1, 1997, the Company established a retirement savings plan which
qualifies under Section 401(k) of the Internal Revenue Code. This retirement
plan allows eligible employees to contribute a percentage of their income on a
pretax basis to the plan. The Company matches 25% of the first 6% of the
employee's contribution. Such matching Company contributions are invested in
shares of the Company's common stock and have a five-year vesting period where
eligible employees vest at a rate of 20% per year. In addition, the plan
provides for a discretionary employer contribution which may be determined each
year by the Company's Board of Directors.

NOTE 18 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following table presents the unaudited quarterly financial information for
the years ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
                                                          QUARTER ENDED
                           ----------------------------------------------------------------------------
                               DECEMBER 31,        SEPTEMBER 30         JUNE 30,          MARCH 31,
                           ------------------- ------------------- ----------------- ------------------
<S>                        <C>                 <C>                 <C>               <C>              
1997
  Net sales                $       45,929,482  $       31,270,598  $     23,342,760  $      16,994,562
  Income from operations            9,223,939           6,262,224         4,544,275          2,526,036
  Net income                        4,645,172           3,577,991         2,739,809          1,789,154
  Earnings per common
    share - Basic                         .42                 .33               .26                .17
  Earnings per common
    share - Diluted                       .40                 .32               .26                .17
                           ------------------- ------------------- ----------------- ------------------

1996

  Net sales                $       29,395,546  $       17,845,553  $     14,375,171  $      11,705,127
  Income from operations            3,196,194           3,642,259         3,015,380          1,913,937
  Net income                        3,425,844           2,100,604         1,665,112          1,039,029
  Earnings per common                
    share - Basic                         .40                 .26               .21                .13
  Earnings per common             
    share - Diluted                       .38                 .25               .20                .12
                           ------------------- ------------------- ----------------- ------------------
</TABLE>

                                       43
<PAGE>


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

None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

ITEM 11.  EXECUTIVE COMPENSATION

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         To be incorporated by reference from the Company's definitive proxy
statement to be filed with the Securities and Exchange Commission within 120
days after December 31, 1997.

                                     PART IV

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

(a) The following are filed as part of this report:

         Financial statements and financial statement schedules - see "Item 8.
Financial Statements and Supplementary Data."

Exhibits:

(1.1)      Form of Underwriting Agreement. (1)
(1.2)      Form of Representative's Warrant Agreement. (1)
(2.1)      Contract for Discontinuation of Company Participations and other
           Agreements between Vitech America, Inc., Microtec Holding USA, Inc.
           and Microhold Participacoes e Empreendimentos S/C Ltda. dated July
           10, 1997. (4)
(2.2)      Purchase agreement between Vitech America, Inc. and Microtec Holdings
           USA, Inc. dated July 10, 1997. (4)
(2.3)      Buy-Sell Contract between Vitech America, Inc. and Tech Shop Holdings
           USA, Inc. dated November 17, 1997. (6)
(2.4)      Buy-Sell Contract between Vitech America, Inc. and Recife Holdings
           USA, Inc. dated November 18, 1997. (6)
(3.1)      Articles of Incorporation dated June 24, 1993. (1)
(3.2)      Amendments to the Company's Articles of Incorporation dated November
           13, 1995 and July 26, 1996. (1)
(3.3)      By-Laws of the Company. (1)
(4.1)      Form of Common Stock Certificate. (1)
(10.1)     Stock Option Plan. (1)
(10.2)     Employment Agreement between the Company and William St. Laurent
           dated January 1, 1996. (1)
(10.3)     Employment Agreement between the Company and Georges St. Laurent, III
           dated January 1, 1996. (1)
(10.5)     Option Agreements for William St. Laurent and Georges St. Laurent,
           III. (1)
(10.11)    Loan Agreement between the Company and Georges St. Laurent, Jr. dated
           December 17, 1996. (2)
(10.12)    Loan Agreement between the Company and Georges St. Laurent, Jr. dated
           April 10, 1997. (3)
(10.13)    Senior convertible note payable to Georges St. Laurent Jr. dated June
           26, 1997. (4)
(10.14)    Loan Agreement dated August 19, 1997 between the Company and Georges
           C. St. Laurent Jr. (7)
(10.15)    Senior Convertible Note dated August 19, 1997 to Georges C. St.
           Laurent Jr. (7)
(10.16)    Senior Convertible Note dated October 10, 1997 to Georges C. St.
           Laurent Jr. (7)
(10.17)    Securities Purchase Agreement dated October 10, 1997, by and between
           the Company, H.W. Partners, L.P., as Purchaser's Representative and
           Investor. (5)
(10.18)    Form of Convertible Promissory Note dated October 10, 1997 for the
           Investors. (5)
(10.19)    Put and Call Agreement dated October 10, 1997 between the Company and
           the Investors. (5)
(10.20)    Registration Rights Agreement dated October 10, 1997 between the
           Company and the Investors. (5)
(10.21)    Form of Convertible Promissory Note dated October 10, 1997. (5)
(11)       Statement re: Computation of per share earnings. (8)
(21)       Subsidiaries of the Company.


                                       44
<PAGE>

(23.1)     Consent of Pannell Kerr Forster PC.
(23.2)     Consent of Deloitte & Touhe Tohmatsu.
(27.1)     Financial Data Schedule.

--------------
(1)   Incorporated by reference to exhibit filed with the Company's Registration
      Statement on Form S-1, file #333-11505.
(2)   Incorporated by reference to exhibit filed with the Company's Form 10-K
      for the year ended December 31, 1996.
(3)   Incorporated by reference to exhibit filed with the Company's Form 10-Q
      for the quarterly period ended March 31, 1997.
(4)   Incorporated by reference to exhibit filed with the Company's Form 8-K
      dated July 10, 1997 as amended.
(5)   Incorporated by reference to exhibit filed with the Company's Form 8-K
      dated October 10, 1997.
(6)   Incorporated by reference to exhibit filed with the Company's Form 8-K
      dated November 17, 1997.
(7)   Incorporated by reference to exhibit filed with the Company's Form 10-Q
      for the quarterly period ended September 30, 1997.
(8)   See note 2 to the Company's financial statements dated December 31, 1997
      included under Item 8 of this report.


(b) Reports on Form 8-K:

         On October 27, 1997, the Company filed on Form 8-K under Item 5, that
the Company had completed a private placement of $20 million of convertible
notes and that the Company had completed a second private placement of $18.6 of
convertible notes. The Company included as exhibits under Item 7, forms of the
purchase agreements and the notes that related to such offerings.

         On December 2, 1997, the Company filed on Form 8-K under Item 2, that
the Company had acquired a 51% interest in Techshop and a 61% interest in
Rectech. The Company included as exhibits under Item 7, copies of the purchase
agreements relating to such acquisitions.

                                       45
<PAGE>

                                    SIGNATURE

         Pursuant to the requirements 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.

Vitech America, Inc.

By:  /S/  GEORGES C. ST. LAURENT III
Georges C. St. Laurent
Chairman of the Board and
Chief Executive Officer

Date:  March 31, 1998

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

                SIGNATURE                                   TITLE                                      DATE
                ---------                                   -----                                      ----
<S>                                        <C>                                                    <C>

/s/  Georges C. St. Laurent III            Chairman of the Board of Directors                     March 31, 1998
------------------------------------------ and Chief Executive Officer (Principal
Georges C. St. Laurent, III                Executive Officer)



/s/  William St. Laurent                   President, Chief Operating Officer and                 March 31, 1998
------------------------------------------ Director
William St. Laurent                    



/s/  Edward A. Kelly                       Chief Financial Officer                                March 31, 1998
------------------------------------------ (Principal Accounting Officer)
Edward A. Kelly                          



/s/  Joseph K. Meyer
------------------------------------------ Director                                               March 31, 1998
Joseph K. Meyer                             



/s/  H.R. Shepherd

------------------------------------------ Director                                               March 31, 1998
H.R. Shepherd                       



------------------------------------------ Director
Touma M. Elias                          



------------------------------------------ Director
Robin Blackhurst                         
</TABLE>


                                       46
<PAGE>

                                 EXHIBIT INDEX

EXHIBIT     DESCRIPTION
-------     -----------

21          Subsidiaries of the Company
23.1        Consent of Pannell Kerr Forster PC
23.2        Consent of Deloitte & Touche Tohmatsu
27.1        Financial Data Schedule