<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-K A-1
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
    OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

OR

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

For the transition period from _________ to __________

                         Commission file number 0-17458

                       WRP CORPORATION, FORMERLY KNOWN AS

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

                 MARYLAND                              73-1326131
                 --------                              ----------
       (State of incorporation)           (I.R.S. employer identification no.)

     500 PARK BOULEVARD, SUITE 1260                      60143
                                                         -----
               ITASCA, IL                              (Zip Code)
               ----------
(Address of principal executive offices)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (630) 285-9191
                                                    --------------

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                                               NAME OF EACH EXCHANGE
TITLE OF EACH CLASS                             ON WHICH REGISTERED
-------------------                             -------------------

Common Stock, par value $0.01 per share                None

     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      .
                                              -----    -----



                                       

<PAGE>   2


     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     Aggregate market value of voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of the stock as reported on the
Nasdaq SmallCap Market on March 18, 1998: $5,345,144.

     At March 18, 1998, 3,061,667 shares of the Registrant's Common Stock and
1,252,538 shares of Series A Common Stock were outstanding.




                                       ii

<PAGE>   3



                       DOCUMENTS INCORPORATED BY REFERENCE

Not applicable.






                                      iii

<PAGE>   4


                                  MBf USA, INC.
                                    FORM 10-K
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

                                TABLE OF CONTENTS
                                -----------------
<TABLE>
<CAPTION>
                                                                         PAGE
                                                                         ----
PART I
<S>          <C>                                                          <C>
    ITEM I.  BUSINESS.................................................     1
    ITEM 2.  PROPERTIES...............................................     7
    ITEM 3.  LEGAL PROCEEDINGS........................................     8
    ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......     9

PART II

    ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED 
             STOCKHOLDER MATTERS......................................    10
    ITEM 6.  SELECTED FINANCIAL DATA..................................    11
    ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL  
             CONDITION AND RESULTS OF OPERATIONS......................    12
    ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..............    21
    ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON 
             ACCOUNTING AND FINANCIAL DISCLOSURE......................    21

PART III

    ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......    22
    ITEM 11. EXECUTIVE COMPENSATION...................................    26
    ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 
             AND MANAGEMENT...........................................    30
    ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...........    31

PART IV

    ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K...    33

</TABLE>



<PAGE>   5


                                     PART I

ITEM I. BUSINESS(1)

GENERAL

     MBf USA, Inc. (the "Company"), formerly known as American Drug Screens,
Inc. ("ADS"), was organized February 24, 1988, under Oklahoma law as SHL, Inc.
The Company was reorganized on June 28, 1988, whereby ADS was merged with and
into the Company, with the Company being the surviving corporation and assuming
control of the ownership and operation of ADS. On May 21, 1993, the Company's
shareholders approved the Company's proposal to amend the Company's Certificate
of Incorporation, thereby changing the name of the Company to MBf USA, Inc.

     On February 27, 1992, the Company acquired American Health Products
Corporation ("AHPC") from MBf International Limited, a Hong Kong corporation
("MBf International"), which is a subsidiary of MBf Holdings Sdn. Bhd. ("MBf
Holdings"), a Malaysian publicly traded company listed on the Kuala Lumpur Stock
Exchange. AHPC is a leading marketer of medical examination gloves in the U.S.
As a result of such acquisition, MBf International acquired control of the
Company by virtue of the issuance of 1,252,538 shares or 100% of the Series A
Common Stock, which elects a majority of the Board of Directors.

     In June 1995, the Board of Directors directed the Company to exit the
nutritional products business, where sales were negligible and entry costs were
very high, contributing to significant losses. Furthermore, the use of AHPC's
cash flow for the nutritional products start-up was limiting AHPC's ability to
purchase glove inventory. The restructuring resulted in a one-time change of
$1,808,757 which included costs associated with resignation of its Chairman/CEO,
President/CEO and CFO, provisions for personnel severance and work force
reductions associated with the closing of the New Jersey executive office, 
the write down of intangible and other assets, costs associated

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

     (1) Some of the statements included in Item 1, Business, may be considered
to be "forward looking statements" since such statements relate to matters which
have not yet occurred. For example, phrases such as "the Company anticipates,"
"believes" or "expects" indicate that it is possible that the event anticipated,
believed or expected may not occur. Should such event not occur, then the result
which the Company expected also may not occur or occur in a different manner,
which may be more or less favorable to the Company. The Company does not
undertake any obligations to publicly release the result of any revisions to
these forward looking statements that may be made to reflect any future events
or circumstance.

Readers should carefully review the items included under the subsection Risks
Affecting Forward Looking Statements and Stock Prices set forth under Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations as they relate to forward looking statements as actual results could
differ materially from those projected in the forward looking statements.


                                       1


<PAGE>   6



with the removal of the nutritional vitamin product lines, and other costs
associated with the execution of the restructure.

     On October 31, 1995, the Company acquired a 70% interest in an
Indonesian powdered latex examination glove manufacturing plant, PT MBf Buana
Multicorpora ("PT Buana"), which was in the start-up phase of operations at that
time. The Company purchased PT Buana from MBf International. PT Buana began
shipping powdered latex examination gloves to AHPC in May 1996 after operations
commenced in April 1996.

     On December 11, 1995, the Company's shareholders approved the
reincorporation of the Company by merger of the Company into a newly formed,
wholly owned subsidiary of the Company incorporated in Maryland. In connection
with the reincorporation, the Board of Directors approved and the Company
effected a 10-for-1 reverse stock split of its Series A Common Stock and Common
Stock. As a result, each shareholder was entitled to and received one share of
Series A Common Stock or Common Stock of the Maryland corporation subsequent to
the merger for every 10 shares of Series A Common Stock or Common Stock,
respectively, then held by such shareholder.

     In May 1997, the Company announced that its parent and majority
shareholder, MBf International, had entered into two separate agreements with
its latex powder free exam glove supplier, Wembley Rubber Products (M) Sdn. Bhd.
("Wembley") which called for the following:

     A) MBf International selling all of the Company's Series A Common Stock
        (1,252,538 shares) to Wembley for approximately $6.27 million; and

     B) the purchase of 2,500,000 shares of the Company's unregistered Common
        Stock by Wembley at a price of $2.70 per share.

     Currently, the date of closure has been extended to the end of March 1998
as a result of the non-fulfillment of certain conditions precedent to closing.

     In June 1997, the Company ended the sales of Playboy(R) condoms after it
had reached an amicable agreement with Playboy Enterprises, Inc. to terminate
the license agreement under which the Company distributed condoms in 15
countries.

     As of March 18, 1998, the shares of Series A Convertible Common Stock
issued to MBf International are 29.03% of the total issued and outstanding
shares of Series A Common Stock and Common Stock. Upon conversion, such shares
(when coupled with the shares of Common Stock acquired by MBf International as
tabled below) will represent a total ownership of the Company to MBf
International of 68.03% of the then outstanding shares of Common Stock,
excluding shares subject to issuance pursuant to outstanding warrants and stock
options.



                                       2


<PAGE>   7


     The shares of the Company's Common Stock owned and acquired by MBf
International since December 31, 1994 are as follows.

<TABLE>
<CAPTION>

                                    Series A
                                  Common Stock     Common Stock        Total
                                  ------------     ------------        -----
<S>                                <C>               <C>             <C>
Balance, December 31, 1994         1,252,538           15,000        1,267,538

October 30, 1995 -
   $1.2 million cash injection         -              250,981          250,981

Acquisition of PT Buana                -              255,072          255,072

June 17, 1996 -
   $1,402,806 cash injection           -              488,953          488,953

August 20, 1996 -
   $1.0 million cash injection         -              672,269          672,269
                                   ---------        ---------        ---------
Balance, December 31, 1997         1,252,538        1,682,275        2,934,813
                                   =========        =========        =========
</TABLE>

     All share and per share information noted gives retroactive effect of the
10-for-1 reverse stock split which was effective on December 18, 1995.

LATEX GLOVE PRODUCTS

     Through its wholly owned subsidiary, AHPC, the Company markets non-sterile,
ambidextrous latex and vinyl examination gloves used primarily in the medical,
dental and food services industries. Gloves marketed by AHPC are manufactured
primarily by PT Buana and other third parties. Gloves are marketed by AHPC under
the brand names "Glovetex(R)" and "DermaSafe(R)" to medical/surgical
distributors, dental distributors, nursing homes and food service distributors.
AHPC also sells gloves to other companies, which market the gloves under their
own brand names or "private labels." A case of gloves, which comprises 10 or 20
boxes of 100 gloves per box, is sold by AHPC to medical/surgical dealers.

     In addition to the standard latex powdered examination gloves, AHPC
distributes other product lines which include powder free exam gloves, vinyl
exam gloves, and synthetic exam gloves. Expansion of the product line into other
latex-based products is planned, and AHPC has identified for possible
introduction in the future such products as industrial gloves, surgical gloves
and other products related to infection control. For the year ended December 31,
1997, AHPC's sales ratios of latex powdered, latex powder free, and non-latex
examination glove sales were 49%, 37%, and 14%, respectively.


                                       3




<PAGE>   8


     Manufacturing Operations. The production of examination gloves begins with
the tapping of raw latex (natural polysporene) from rubber trees located on
plantations in Malaysia, one of the world's largest producers of rubber, and
Indonesia. Once gathered, the raw latex is sent to a centrifuge, where the latex
is concentrated. PT Buana purchases the latex concentrate and ships it to its
production plant where the latex concentrate is compounded in a patented formula
to enhance glove durability, elasticity and tactility. A controlled dipping
process causes consistency from batch to batch and eliminates air bubbles which
can create pinholes. Glove-making forms, which are in five sizes and designed
for the American hand, are dipped in latex compound. The forms are cleansed both
chemically and mechanically to prevent residue buildup which could compromise
glove integrity.

     The PT Buana factory, which is 70% owned by the Company, was in the
start-up phase of operations until product shipments began in May 1996. PT Buana
has the ability to provide AHPC with 750,000,000 powdered latex examination
gloves per year.

     Continuous quality control inspections are performed on the production line
by trained supervisors and independent quality control inspectors. Each glove is
visually inspected, and a sample of gloves from each batch is tested in the
laboratory for air capacity and water-tightness.

     Gloves are packaged in tamper-proof non-fibrous boxes. The gloves are then
shipped either to a leased warehouse in Des Plaines, Illinois, or to public
warehouses located in Sparks, Nevada, or Atlanta, Georgia, where they are stored
for delivery to medical and surgical dealers.

     Powdered Latex Examination Glove Suppliers. PT Buana supplied approximately
38% of AHPC's powdered latex examination glove inventory in 1997. The remaining
62% of 1997 purchases of powdered latex examination glove inventory was
purchased from an unrelated Malaysian supplier. Effective July 12, 1995, the
Company entered into a five-year distributor agreement with this unrelated
supplier for powdered latex examination gloves. See Note 3 of the Consolidated
Financial Statements under Distribution Agreement for more information on this
unrelated supplier.

     Powder Free Latex Examination Glove Supplier. AHPC purchases 100% of its
latex powder free examination gloves from Wembley, an unrelated Malaysian
factory. The Company's majority shareholder, MBf International, has entered into
an agreement with Wembley which would enable Wembley to obtain majority interest
in the Company and control the Board of Directors. AHPC has entered into a
supply agreement with Wembley for its powder free gloves which will enable the
Company to obtain the necessary inventory levels to meet customer glove demands.
Although the Company is currently able to meet its orders for latex gloves
products, including powder free latex gloves, AHPC's inability to receive
sufficient glove inventories would have a material adverse effect on the
Company.

     Non-Latex Examination Glove Suppliers. AHPC purchases its non-latex
examination gloves from two unrelated
suppliers in Taiwan and China.




                                       4




<PAGE>   9


     Markets and Methods of Distribution. AHPC markets latex gloves through a
network of national, regional and local medical/surgical dealers that sell
primarily to hospitals and nursing homes. AHPC also markets to alternate care
and home health care dealers, dental dealers, food service distributors, and
major retail outlets. The principal methods of marketing are trade shows,
seminars, and sales representatives, as well as advertising and direct mail. In
addition, AHPC employs a sales force of 33 persons comprised of regional sales
managers and representatives, manufacturer sales representatives, and an
in-house sales and customer support staff.

     FDA Regulation of Latex Glove Products. The quality control procedures for
the manufacture of examination gloves marketed in the United States are
regulated by the U.S. Food and Drug Administration ("FDA"). Included within such
procedures are minimum testing requirements, as well as FDA current Good
Manufacturing Practices.

     Competition. The market for latex examination gloves is highly competitive.
With the discovery of the Acquired Immune Deficiency Syndrome/HIV virus ("AIDS")
in the 1980's, and the perception of the latex glove as being a barrier to
infection from AIDS and other communicable diseases, several companies entered
the latex glove industry, many of which failed or were acquired by other
companies. Further consolidation of companies in the industry may be expected to
occur in the future. The primary means of competition are price, product
quality, service, and the size and reliability of the manufacturer.

     Customers. During calendar 1997, two of AHPC's customers, Owens & Minor,
Inc. and Sysco Co., accounted for 37.6% and 31.0%, of net sales, respectively.
The loss of either of such customers would have a materially adverse effect on
the Company.

     Patents and Trademarks. AHPC owns the trademarks "Glovetex" and
"DermaSafe," which are trademarks registered in the United States.

LATEX CONDOM PRODUCTS

     Through June 30, 1997, the Company sold condoms in packaging bearing the
Playboy(R) name and rabbit-head logo. Under the termination agreement, the
Company, until June 30, 1997, continued to sell Playboy(R) condoms in the 15
countries where it has launched the product. Subsequent to June 30, 1997, the
Company is entitled to receive royalty revenues on sales of Playboy(R) condoms
in these countries and Japan through June 30, 2000 and 1998, respectively. See
Note 3 of the Consolidated Financial Statements for more information concerning
the net assets and liabilities of discontinued operations of the Playboy(R)
condom business at December 31, 1997 and 1996.


                                       5



<PAGE>   10


EMPLOYEES

     As of March 18, 1998, the Company's U.S. operations employed a total of 45
full-time and 12 part-time employees. AHPC also uses the non-exclusive services
of seven manufacturer sales representatives and which are paid on a commission
basis. The Company's 70% owned Indonesian subsidiary, PT Buana, employed 933
full-time workers in its factory and administrative staff as of that date. None
of the Company's employees are represented by a collective bargaining agreement.
The Company considers relations with its employees to be good.

INVESTMENT IN LSAI

     Pursuant to the terms of a stock exchange agreement dated as of July 12,
1994 ("LSAI Agreement"), the Company exchanged 706,244 shares of the preferred
stock of a former wholly owned subsidiary, Laboratory Specialists, Inc., ("LSI")
(valued at $706,244) for 239,405 shares of common stock of a newly formed
corporation, Laboratory Specialists of America, Inc. ("LSAI") contingent upon
LSAI successfully completing its initial public offering ("IPO"). In September
1994, LSAI successfully completed its IPO and currently trades under the symbol
"LABZ" on the Nasdaq SmallCap Stock Market. These shares of common stock now are
eligible for sale under Rule 144 of the Securities Act of 1933, as amended,
without LSAI's approval. During 1997, the Company sold 68,000 shares of LSAI.
See Note 3 of the Notes to Consolidated Financial Statements for additional
information concerning the Company's investment in LSAI.



 


                                       6


<PAGE>   11

ITEM 2. PROPERTIES

     The Company's principal executive and administrative office is located in
Itasca, Illinois. The lease term for this location is for a period of five years
and commenced on March 1, 1995. The yearly lease cost is approximately $153,200
per year, with annual increases of approximately 3% per year.

     Prior to Itasca, Illinois, the Company's executive office was located in
Fort Lee, New Jersey. On December 1, 1994, the Company entered into a five-year
lease for this office with an annual lease cost of approximately $77,000 per
year. During June 1995, the Company closed the New Jersey office as part of the
restructuring which took place in the second quarter of 1995. Effective July 1,
1995, the Company entered into a sublease agreement for the New Jersey office
space for the remaining lease term at the identical terms as stated in the
December 1, 1994 New Jersey lease agreement.

     Previous to Fort Lee, New Jersey, the Company's executive office was
located in Boca Raton, Florida. The Company entered into a five-year lease
agreement effective February 1994, for approximately 4,000 square feet of space
in Boca Raton, Florida. The annual rental expense for this lease is
approximately $79,500 per year. Effective December 1, 1996, the Company entered
into a sublease agreement for the Boca Raton office space for the remaining
lease term at the identical terms as stated in the February 1994 Florida lease
agreement.

     AHPC's warehouse operations are housed in a 22,000 square-foot facility in
Des Plaines, Illinois. The lease term for this location expires on March 31,
1998 and commenced April 1, 1993. The yearly cost of the lease is approximately
$123,200 per year. The Company is planning to renew the lease for the existing
Des Plaines, Illinois warehouse for a one-year period at a yearly lease cost of
approximately $126,600. In addition, AHPC uses public warehouse facilities in
Sparks, Nevada and Atlanta, Georgia, as needed. Public warehouse charges are
dependent upon the volume of products stored and the frequency of shipping or
receiving products.

     Management considers all existing space sufficient, but may search for a
larger warehouse facility in the Midwest to reduce its warehousing costs and
provide additional space should the need arise.



                                       7




<PAGE>   12

ITEM 3. LEGAL PROCEEDINGS

     At December 31, 1997, AHPC had seven latex related product liability claims
pending against it throughout the United States. All the claims involve
plaintiffs that have worked in the medical/health industry, and who allege
damages associated with continued use and/or exposure to latex glove products.
Each of the seven claims is in a different stage of legal proceeding, and it is
not currently possible to determine a favorable or unfavorable outcome for AHPC.
In each claim, AHPC is one of several glove distributors named in the suits. All
seven of the claims against the Company assert total damages of an indeterminate
amount and assert compensatory damages in excess of $50,000.

     Subsequent to December 31, 1997, AHPC was named in one additional lawsuit,
in which the plaintiff alleges damages associated with the use of latex gloves.
AHPC is one of several defendants named in the suit. This claim asserts damages
against the Company of an indeterminate amount and assert compensatory damages
in excess of $50,000.

     AHPC possesses product liability insurance coverage, which the Company
believes, but can provide no assurances, will be adequate to cover the legal
costs and compensatory damage rewards associated with product liability claims
against AHPC and the indemnity of AHPC's customers, to the limits of the
policies.

     In November 1997, AHPC settled thirteen latex related product liability
claims for a nominal sum. AHPC will vigorously contest any latex claim initiated
against it, but will enter into a settlement agreement, where, after careful
consideration, the Company's management determines that the best interests of
the Company will be served by settling the matter for a nominal monetary sum.

     From time to time, the Company is involved in other litigation relating to
claims arising out of its operations in the normal course of business. As of the
date hereof, the Company is not a party to any other legal proceedings, the
adverse outcome of which, in management's opinion, individually or in aggregate,
would have a material adverse effect on the Company's financial condition.



                                       8


<PAGE>   13


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

     The Annual Meeting of the Shareholders of the Company was held on December
3, 1997. The purpose of the Annual Meeting was to consider the vote on the
following matters:

1.   To elect seven Class A directors and two Class B directors to hold office
     until the next annual meeting of Shareholders or otherwise as provided in 
     the Company's By-Laws.

                                    Nominees
                                    --------

                                Tan Sri Dato Loy
                                  Teik Hok Loy
                                  Heng Sewn Loi
                                Edward J. Marteka
                               George Jeff Mennen
                               Richard C. M. Wong
                                  Lew Kwong Ann
                                Robert J. Simmons
                                 Don L. Arnwine

     Each of the nominees for director received the following number of votes:

                           For                                   3,938,257
                       Against                                       5,177
                     Non-votes                                     370,771

2.   To concur in the selection of Arthur Andersen LLP independent auditor for 
     the fiscal year ending December 31, 1997. The vote of the Shareholders was
     as follows:

                           For                                   3,940,166
                       Against                                       2,235
                   Abstentions                                       1,033
                     Non-votes                                     370,771

     All of the above matters were approved by the Shareholders. There were no
     other matters voted on at the meeting.




                                       9



<PAGE>   14


                                     PART II

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

     The Company's Common Stock is traded on the National Association of
Securities Dealers Automated Quotation System ("Nasdaq") SmallCap Stock Market
under the symbol "MBFA." The range of high and low sale prices as reported by
Nasdaq for the Common Stock is shown below.

                                  COMMON STOCK

<TABLE>
<CAPTION>

FISCAL YEAR ENDED:

         DECEMBER 31, 1997           HIGH               LOW
         -----------------           ----               ---
         <S>                         <C>               <C>  
         First quarter               4-3/8             3-3/8
         Second quarter              5-3/4             2-3/4
         Third quarter               3-7/8             2-3/4
         Fourth quarter               6                1-3/4

DECEMBER 31, 1996
-----------------
         First quarter               5-1/4             3-7/8
         Second quarter              4-1/8             3-1/4
         Third quarter               2-3/8             1-3/4
         Fourth quarter              1-7/8             1-1/4
</TABLE>

     There were approximately 350 record holders of Common Stock as of March 18,
1998. The Company believes that there are approximately an additional 2,000
holders whose stock is held in "street name."

     The Company has not paid a dividend with respect to the Common Stock. The
Company expects to reinvest its earnings for expansion of its operations and
does not intend to pay a dividend in the foreseeable future.


                                       10


<PAGE>   15


ITEM 6. SELECTED FINANCIAL DATA

     The selected consolidated financial data presented below for the five
calendar years ended December 31, 1997 should be read in conjunction with the
Consolidated Financial Statements, related notes and other financial information
included herein.

<TABLE>
<CAPTION>
                                                                            MBF USA, INC.
                                                                   FOR THE YEAR ENDED DECEMBER 31,
                                                                   -------------------------------
                                                 1997            1996           1995           1994           1993
                                                 ----            ----           ----           ----           ----
<S>                                            <C>            <C>            <C>             <C>            <C>
STATEMENT OF OPERATIONS DATA:

Product sales                                  $53,810,060    $47,589,421    $40,950,968     $34,301,735    $31,241,073
Cost of goods sold                              40,760,146     38,358,756     36,177,651      27,387,357     26,543,652
Gross profit                                    13,049,914      9,230,665      4,773,317       6,914,378      4,697,421
Operating expenses                              12,115,781      9,580,126      7,322,140       6,397,607      5,915,411
Restructure charge                                  -              -           1,808,757          -              -

Minority interest in income
   of subsidiary                                  (300,145)       (77,732)        (2,174)         -              -

Net income (loss) from continuing
   operations                                    1,249,392       (247,608)    (4,092,779)      1,093,786     (1,056,570)

Loss from discontinued operations                 (783,670)      (916,979)      (771,625)        (93,256)      (354,259)
Net income (loss)                                 $465,722    $(1,164,587)   $(4,864,404)     $1,000,530    $(1,410,829)

PER SHARE DATA:

Basic and Diluted Net income (loss) per share         $.11          $(.32)        $(2.00)           $.41          $(.59)

BALANCE SHEET DATA  (END OF PERIOD):

Total assets                                   $29,531,245    $27,513,624    $26,373,204     $18,493,771    $17,600,575
Long-term obligations                          $ 5,647,867    $ 7,098,132    $10,342,500     $ 3,065,232    $ 1,108,330
Total shareholders' equity                     $ 4,312,520    $ 3,531,424    $ 1,319,661     $ 3,911,116    $ 3,742,141
</TABLE>

                                       11



<PAGE>   16




ITEM  7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF  OPERATIONS(2)

     The Company's wholly owned subsidiary, AHPC, is engaged in the marketing
and distribution of high quality medical grade examination gloves in the United
States and has been in the glove business since its incorporation in January
1989. The Company recorded record glove product sales in 1997 with an increase
of 13.1%.

     PT Buana was incorporated in Indonesia on October 17, 1994, and commenced
operations in April 1996. PT Buana began manufacturing and shipping powdered
latex examination gloves to AHPC in May 1996 and sold approximately 82% of its
production to AHPC in 1997. PT Buana had total powdered latex exam glove sales
of $9.27 million for the year ended December 31, 1997. All significant
intercompany transactions have been eliminated in consolidation.

     Through its Playboy license rights and condom distribution agreement,
the Company distributed Playboy(R) brand condoms only through June 30, 1997 in
accordance with the negotiated termination agreement with Playboy Enterprises,
Inc. As such, the Company has accounted for the Playboy(R) condom business as a
discontinued operation effective December 31, 1996 and the disposal period
through June 30, 1997. See Note 3 of the Notes to Consolidated Financial
Statements for more information on the discontinuance of the Playboy(R) condom
business.

     This analysis of the results of operations and financial condition of the
Company should be viewed in conjunction with the financial statements and other
information concerning the Company included throughout this Annual Report. The
consolidated financial statements for the years ended December 31, 1997 and 1996
include the results of operations and statements of cash flows of the Company,
AHPC and PT Buana.

RESULTS OF OPERATIONS

     Fiscal 1997 compared to Fiscal 1996. The results of operations for 1997 and
1996 include only the revenue and expenses of the glove business. The
discontinued operations of the Playboy(R) condom business are reflected in the
losses from discontinued operations as separate line items in the consolidated
statements of operations.

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

     (2) Forward looking statements in this Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations, including statements
regarding new products and markets, gross margins, selling, general and
administrative expenses, liquidity and cash needs, and the Companys plans and
strategies, are all based on current expectations and the Company assumes no
obligation to update this information. Numerous factors could cause actual
results to differ from those described in the forward looking statements,
including the factors set forth below under the heading "Risks Affecting Forward
Looking Statements and Stock Prices." The Company cautions investors that its
business is subject to significant risks and uncertainties.


                                       12



<PAGE>   17

     Total revenues are comprised of glove sales from AHPC's examination glove
product line. Product sales totaled $53,810,060 and $47,589,421 for the years
ended December 31, 1997 and 1996, respectively. This increase represents a 13.1%
increase in glove sales in 1997 over 1996. This increase is attributable to
AHPC's more developed customer relationships and a move in the sales mix toward
higher priced products, particularly latex powder free exam gloves.

     Cost of goods sold for fiscal 1997 as a percentage of product sales was
75.7% compared to 80.6% in 1996. This reduction in the cost of sales and
continued improvement in gross margin is attributed to: (i) more favorable glove
purchase prices obtained in 1997 due to manufacturing efficiencies at its
Indonesian plant, PT Buana, and a continued reduction in raw material latex
prices; (ii) an increase in sales of higher profit margin glove products,
particularly latex powder free examination gloves; (iii) further reductions in
the ocean freight import rates; (iv) the U.S. government again lowering the duty
importation fees associated with examination gloves effective January 1, 1997;
and (v) the sustained duty free status of importing Indonesia manufactured glove
products into the U.S. The Company currently expects its gross margin to
continue to be affected by changes in product mix, competition and other
factors.

     The market for exam gloves is converting from latex powdered to latex
powder free gloves and to non-latex gloves. This move is a result of lawsuits
being associated with the use of latex powdered gloves. The chlorination process
used to make powder free gloves reduces the sensitivity to latex and reduces the
powder levels which emit latex particles in the air. Being customer driven, the
Company is providing and selling more latex powder free exam gloves. The
Company's sales of latex powder free exam gloves was approximately 37% of net
product sales in 1997 versus 30% in 1996 and expects that this trend will
continue during 1998.

     In August 1997, the Company was notified by its sole latex powder free exam
glove manufacturer/supplier that the FDA had placed an FDA Import Alert on its
factory. This temporarily stopped the supplier from shipping product into the
U.S. marketplace and to AHPC. Because of this, AHPC had difficulty meeting its
customers' demands for power free gloves. To successfully satisfy customers'
demands, AHPC temporarily purchased powder free gloves from other Malaysian
manufacturers at much higher costs until the FDA Import Alert was lifted in
December 1997 when the supply of powder free gloves resumed. The Company's
sourcing of product from others during that short period resulted in a
significantly lower gross profit in the fourth quarter of 1997.

     Selling, general and administrative ("SG&A") expenses increased from
$8,462,426 in 1996 to $10,634,314 in 1997, a 25.7% increase. The increase is
attributable to: (i) the increase in SG&A expenses from PT Buana's operations of
$161,403, which began in April 1996; (ii) an increase in selling expenses at
AHPC of $1,118,175 commensurate with its sales growth; (iii) the expansion of
the Company's sales and support forces of $867,852; (iv) an increase in
September 1996 in rebates of $629,410 provided to certain customers; (v)
increased reserves for lawsuit claims and other purposes of $108,000; and (vi)
cost incurred in 1997 for the research, study, and recommendation to purchase,
install and implement a new enterprise wide computer system of $140,232. As a
percentage of 1997 net product sales, SG&A expenses increased to 19.8%, compared
with 17.8% 


                                       13



<PAGE>   18

in 1996 and 16.4% in 1995. The Company currently expects to make additional
investments in sales and marketing to further develop established markets and to
introduce new products to the marketplace. Accordingly, the Company currently
expects that its SG&A expense will continue to increase in absolute dollars but
may decline as a percentage of net revenues in the future.

     Prior to July 1, 1997, the financial statements and transactions of the
Company's Indonesian subsidiary, PT Buana, were maintained in the functional
currency, Indonesian Rupiahs, and translated into U.S. dollars. Due to the
Company's business and operating facility in Indonesia, the Company experienced
transaction and translation gains and losses because of currency fluctuations.
Assets and liabilities were translated at the current exchange rate in effect at
the balance sheet date and shareholders' equity was translated at historical
exchange rates. Revenues and expenses were translated at the average exchange
rate for each period. Prior to July 1, 1997, translation adjustments, which
resulted from the process of translating Indonesian rupiahs into U.S. dollars,
were accumulated in a separate component of shareholders' equity in accordance
with Statement No. 52. Such adjustments were unrealized.

     Effective July 1, 1997, in accordance with Statement of Financial
Accounting Standards No. 52, PT Buana changed its functional currency for
financial statements reporting purposes from the Indonesian rupiah to the U.S.
dollar. The net effect of this change in functional currency resulted in a
gain of $277,035 during 1997 as a result of remeasuring the foreign currency of 
record (rupiah) into the functional currency (U.S. dollars).

     At December 31, 1997, Indonesia is currently experiencing economic
instability which is characterized by volative currency exchanges, illiquidity
in its banking sector, volative interest rates and stock markets, as well as
inflation. PT Buana will continue to incur foreign currency exchange losses as
the Indonesian rupiah weakens against the U.S. dollar.

     The resolution of the economic crisis is dependent, in part, on the
measures that will be taken by the government of Indonesia, actions which are
beyond the Company's control. It is not possible to determine the future effect
a continuation of the economic crisis may have on the Company's liquidity and
earnings, including the effect on transactions with the Company's affiliates,
customers and suppliers. The financial statements do not include any adjustments
that might result from these uncertainties. The related effect will be reported
in the Company's financial statements as they become known and estimable.

     Interest expense increased from $1,117,700 in 1996 to $1,481,467 in 1997.
This increase is attributable to the inclusion of PT Buana's interest expense
which increased from $389,428 in 1996 to over $1.0 million in 1997 and
additional borrowings to fund the growth and expansion of PT Buana and the glove
business.

     At December 31, 1997, the Company had a net operating loss carry-forward
("NOL") of approximately $4.3 million which will be available to reduce federal
taxable income in future 


                                       14



<PAGE>   19

periods. In accordance with federal tax regulations, usage of the NOL is subject
to limitations due to certain ownership change which occurred.

     Revenues from the Playboy(R) condom business were $376,422 and $1,380,435
for the years ended December 31, 1997 and 1996, respectively. These revenues are
included in the losses from discontinued operations in the consolidated
statements of operations and declined due to the Company's exit of the condom
business pursuant to agreement with Playboy in November 1996. Under the exit
plan, the Company sold Playboy(R) condoms until June 30, 1997. The Company may
receive royalty income for up to three years after that date from sales in 15
countries in which the Company had launched the Playboy(R) condoms and for one
year for Japan. The Company earned and recorded royalty income of $27,815 in
1997 and does not anticipate that future royalties will be significant.

     The Company continued to have losses from the disposal of the condom
operations which amounted to $(783,670) in 1997. During the fourth quarter of
1997, the Company revised its estimate of possible condom returns and related
costs associated with the cessation of the condom business. The Company reduced
its loss from disposal by $590,128 compared to the loss as reported. The
Company's exit of the condom business is part of the strategy to return the
Company to profitability.

     For the year ended December 31, 1997, the net income for the Company was
$465,722, compared to a net loss of $(1,164,587) in 1996. The overall basic and
diluted net income (loss) per share was $.11 in 1997 compared to a basic and
diluted loss per share of $.(32) in 1996.


     Fiscal 1996 compared to Fiscal 1995. The results of operations for 1996
exclude the revenues and expenses of the discontinued operations of the
Playboy(R) condom business. Accordingly, all condom business activity is
reflected in the losses from discontinued operations as separate line items in
the consolidated statements of operations.

     Total revenues are comprised primarily of glove sales from AHPC's
examination glove product line. Product sales totaled $47,589,421 and
$40,950,968 for the years ended December 31, 1996 and 1995, respectively. This
increase represents a 16.2% increase in glove sales in 1996 over 1995. This
increase is attributable to AHPC's more developed customer relationships, sales
price increases, and an increase in the sales mix of higher priced products.

     Revenues from the Playboy(R) condom business were $1,380,435 and $2,078,096
for the years ended December 31, 1996 and 1995, respectively. These revenues are
included in the losses from discontinued operations in the consolidated
statements of operations and declined due to the Company's exit of the condom
business pursuant to agreement with Playboy(R) in November 1996. Under the exit
plan, the Company will continue to sell Playboy(R) condoms until June 30, 1997
and will receive royalty income for up to three years after that date from sales
in 15 countries in which the Company had launched the Playboy(R) condoms.
         

                                       15



<PAGE>   20

     Cost of goods sold for fiscal 1996 as a percentage of product sales was
80.6% compared to 88.3% in 1995. This reduction in the cost of sales and
improvement in gross margin is attributed to: (i) more favorable glove purchase
prices obtained in 1996 due to a lower raw material latex price; (ii) increased
glove sale prices in 1996 over 1995; (iii) an increase in sales of higher profit
margin glove products, particularly powder free examination gloves; (iv)
successfully negotiating reductions in the ocean freight import rates; (v) the
U.S. government lowering the duty importation fees associated with examination
gloves; (vi) the duty free status of importing Indonesia manufactured glove
products into the U.S.; and (vii) the inclusion of PT Buana's manufacturing
gross margins in 1996, which increased the overall margin for internally
manufactured gloves versus third party manufactured gloves. The Company
currently expects its gross margin to continue to be affected by changes in
product mix, competition and other factors.

     Selling, general and administrative ("SG&A") expenses increased from
$6,707,634 in 1995 to $8,462,426 in 1996, a 26.2% increase. The increase is
attributable to: (i) an increase in selling expenses at AHPC commensurate with
its sales growth; (ii) the increase in SG&A expenses from PT Buana's operations,
which began in May 1996; and (iii) the expansion of the Company's sales and
support forces. As a percentage of net product sales, SG&A expenses increased to
17.8%, compared with 16.4% in 1995 and 17.9% in 1994. The Company currently
expects to make additional investments in sales and marketing to further develop
established markets and to introduce new products to the marketplace.
Accordingly, the Company currently expects that its SG&A expense will continue
to increase in absolute dollars but may decline as a percentage of net revenues
in the future.

     Interest expense increased from $614,506 in 1995 to $1,117,700 in 1996.
This increase is attributable to the inclusion of PT Buana's interest expense in
1996 of $389,428 and additional borrowings to fund the growth and expansion of
the glove business.

     At December 31, 1996, the Company had a net operating loss carry-forward
("NOL") of approximately $5,300,000 which will be available to reduce federal
taxable income in future periods. In accordance with federal tax regulations,
usage of the NOL is subject to limitations in future years if certain ownership
changes occur.

     The Company continued to have losses from discontinued operations primarily
from the condom business. These losses were the result of very high SG&A
expenses from the introduction, launch, and advertising costs associated with
running the condom business in numerous foreign countries. The condom business
is highly competitive and was creating losses for the Company. The Company's
exit of the condom business is part of the strategy to return the Company to
profitability.

     For the year ended December 31, 1996, the net loss for the Company was
$1,164,587, compared to a net loss of $4,864,404 in 1995. The overall loss per
share was $.32 in 1996 compared to a loss per share of $2.00 in 1995.


                                       16


<PAGE>   21

SEGMENT INFORMATION

     1997. At December 31, 1997, the Company was engaged solely in the business
of manufacturing and distributing examination gloves to the medical, dental, and
food service industries in the United States. The Company distributed Playboy(R)
condoms only through June 30, 1997 in accordance with the termination agreement
with Playboy(R) Enterprises Inc. As such, the Playboy(R) condom business is
reported as a discontinued operation of the Company.

     1996. At December 31, 1996, the Company was engaged in the business of
manufacturing (through its 70% owned Indonesian subsidiary, PT Buana) and
distributing examination gloves primarily in the United States. PT Buana began
manufacturing powdered latex examination gloves in April 1996 and shipping
product to AHPC in May 1996. The Company continued to sell Playboy(R) condoms in
1996 and will continue only through June 30, 1997 in accordance with its
November 1996 plan to discontinue all condom operations by such later date. The
Company may receive royalty revenues from any Playboy(R) condom sales made in
the 15 countries where it launched the condom products for up to three years
ending June 30, 2000 and in Japan until June 30, 1998. Royalty revenue earned by
the Company in 1996 was not significant. There can be no guarantee that any
future royalties will be earned by the Company in all or any of the countries.

     During 1996, the Company dissolved its wholly owned subsidiaries, DGI and
Premier Latex, Inc., which were a discontinued operation and an inactive entity,
respectively.

     1995. At December 31, 1995, the Company was engaged in the infection
control industry segment consisting of examination gloves sales and latex condom
sales. However, due to the exit of the condom business in 1996, all 1995 condom
business has been reclassified and is included in the loss from discontinued
operations.

     The Company acquired PT Buana, a powdered latex exam glove manufacturing
plant in Indonesia. However, PT Buana was in the start-up phase of operations
during 1995 and did not commence operation until April 1996. The Company had
entered the start-up of a nutritional vitamin business and subsequently exited
the vitamin business in June 1995, with the cost of such exit comprising a part
of the restructuring charge which was incurred at that time. In 1995, the
Company liquidated the remaining assets of its wholly owned subsidiary,
Disposable Garments Inc. ("DGI"), a discontinued operation, which had
discontinued operations in December 1993.

LIQUIDITY AND CAPITAL RESOURCES

     Cash and cash equivalents of December 31, 1997 decreased $159,057 from
December 31, 1996 levels. The Company experienced this decline in cash flow in
1997 due to the funding of capital expenditures for additional PT Buana
manufacturing equipment and due to a net paydown in letter of credit
obligations. Cash increased from additional bank borrowing made in 1997 due to
positive cash provided by operating activities.



                                       17



<PAGE>   22


     The Company experienced positive cash flow from operations of $1,588,370
during 1997 as a result of net income of $465,722 plus noncash depreciation of
$898,831 and an increase in accrued expenses, which were offset by an increase
in account receivables. The Company used $3,063,735 for investing in the
purchase of fixed assets for expanding the operations of the PT Buana
manufacturing facility in Indonesia. The Company experienced positive cash flow
of $75,374 from financing activities during 1997. This included increased cash
from additional borrowings of $2,846,480, offset by debt payments of $1,500,000
and a decrease in letter of credit obligations of $1,561,272. At December 31,
1997, the Company had no current material commitments for capital expenditures.

     At December 31, 1997, the Company's principal sources of liquidity
included: $161,981 of cash and cash equivalents; $7,900,000 available under a
secured bank line of credit and letter of credit facility, expiring in December
31, 1998; $4,600,000 available under a bank unsecured letter of credit facility;
and $5,075,000 available under a secured Indonesian bank loan facility with a
banking syndicate. At December 31, 1997, $5,537,547 was outstanding under the
$7,900,000 facility, $2,361,634 was outstanding under the $4,600,000 letter of
credit facility, and all $5,075,000 was outstanding under the Indonesian bank
facility. Also, the Company owns a marketable equity security and note
receivable from LSAI valued at $1,076,496 at December 31, 1997 which will
provide the Company with additional liquidity in 1998.

     Inventories at December 31, 1997 increased to $8,203,861 compared with
$8,094,649 at December 31, 1996. Net trade accounts receivable at December 31,
1997 increased to $5,410,843 from $4,677,490 at December 31, 1996. This increase
was consistent with higher revenues during 1997.

     In October 1994, pursuant to two debenture and warrant purchase agreements
between the Company and two affiliated trusts, the Company issued, and each
trust purchased, a convertible subordinated debenture in the amount of
$1,000,000 payable in seven years with interest at 1.5% over the prime rate.
Each debenture is convertible into Common Stock of the Company at a conversion
price of $25.00 per share. In addition, each trust received a warrant
exercisable over five years to purchase 7,500 shares of the Common Stock of the
Company at an exercise price of $22.20 per share. At December 31, 1997 and 1996,
long-term debt of $2,000,000 was outstanding as a result of this transaction.

     Proceeds from these debentures were primarily used to fund the Playboy(R)
condom business. During the years ended December 31, 1997 and 1996, the Company
incurred interest expense of approximately $200,000 per year on this
indebtedness. This expense was reclassified and included in the loss on
discontinued operations through June 30, 1997, and in 1996 and 1995.

     The Company currently expects to have cash needs during 1998 in addition to
funding the expected growth in the glove business. These cash needs may arise in
connection with various events such as for: (i) the expansion into new glove
products; (ii) the continued hiring of an additional full time sales force;
(iii) the hiring of additional support staff; (iv) the continuing completion and


                                       18



<PAGE>   23

expansion of the manufacturing facility in Indonesia and possible upgrading to
produce powder free gloves; (v) the completion of a new enterprise wide computer
system; and (vi) for other operating expenses.

     The Company is continuing to seek and identify additional sources of
funding to provide capital in the event its credit facilities do not provide
sufficient liquidity to fund the Company's ongoing operations. The proposed
transaction with Wembley, if consummated, would result in the issuance of
2,500,000 shares of Common Stock in exchange for $6,750,000, which would
substantially increase liquidity.

RISKS AFFECTING FORWARD LOOKING STATEMENTS AND STOCK PRICES

     In addition to those matters already set forth in Item 1, Business, and
this Item 7, the following may result in the Company not achieving certain
results included in any statement that may be considered a forward looking
statement. The Company cautions the reader that the following risks may not be
exhaustive.

     Impact of the Year 2000 Issue. The year 2000 issue is the result of
computer programs being written using two digits rather than four to define the
applicable year. Any of the Company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.

     The Company has assessed its systems and has a plan to upgrade its systems
to be year 2000 compliant. In addition, the Company has received assurance from
its major software consultant that the upgraded systems products which may be
implemented by the Company are year 2000 compliant and will function adequately.
If the systems of other companies on whose services the Company depends or with
whom the Company's systems interface are not year 2000 compliant, it could have
a material adverse effect on the Company.

     The Company will continue its year 2000 issue assessment and, if it comes
to the attention of the Company's management that any of its systems, or the
systems of those on whom the Company relies, are not year 2000 compliant, the
Company intends to develop an action plan, and assess the resources it would be
required to devote, to address such problem. There can be no assurance that
devoting further resources of the Company to the year 2000 issue, if one were to
occur, would not have a material adverse effect on the Company.

     Variations in Quarterly Results. The Company's quarterly operating results
are subject to various risks and uncertainties, including risks and
uncertainties related to: local and international economic conditions;
competitive pressures; the composition, timing and size of orders from and
shipments to major customers; variations in product mix and the size mix between
sales; variations 



                                       19


<PAGE>   24


in product cost; infrastructure costs; obsolescence of inventory; and other
factors as discussed below. Accordingly, the Company's operating results may
vary materially from quarter to quarter.

     The Company operates with little backlog and, as a result, net product
sales in any quarter are substantially dependent on the orders booked and
shipped in that quarter. Because the Company's operating expenses are based on
anticipated revenue levels and because a high percentage of the Company's
expenses are relatively fixed, if anticipated shipments in any quarter do not
occur as expected, the Company's operating results may be adversely affected and
fall significantly short of expectations. Any other unanticipated decline in the
growth rate of the Company's net revenues, without a corresponding and timely
reduction in the growth of operating expenses, could also have an adverse effect
on the Company and its future operating results.

     The Company aims to prudently control its operating expenses. However,
there is no assurance that, in the event of any revenue, gross margin or other
shortfall in a quarter, the Company will be able to control expenses
sufficiently to meet profitability objectives for the quarter.

     Financing. The Company's current credit facility expires December 31, 1998,
with an option to renew for another two years. There can be no assurances that
it will be renewed, extended or sufficient to finance continued growth of the
Company. The facility is guaranteed by MBf Holdings, which has significantly
greater resources than the Company. Should such guarantee not continue to be
made available to the Company, there can be no assurances that the Company will
be able to obtain the same level of, or interest rate for, bank financing.
Should the proposed change of control to Wembley occur, the Company will most
likely not be willing to continue to guarantee the credit facility and there can
be no assurances that the Company on its own or in conjunction with guarantees
from Wembley, will be able to continue such credit facility or replace it with a
comparable substitute facility.

     Working Capital Deficit. The Company's balance sheet for the year ended
December 31, 1997 shows current assets of $16,173,033 and current liabilities of
$17,751,645, resulting in a working capital deficit of $1,578,612. For the year
ended December 31, 1996, the Company had a working capital deficit of
$1,705,267. Although the Company is aggressively working toward eliminating this
deficit, the Company is unable to guarantee that it will be successful in its
efforts.

     Dependence on Gloves. The Company is exclusively engaged in the manufacture
and sale of disposable gloves. Accordingly, the Company's results of operations
and financial condition are highly dependent on the level of supply of and
demand for disposable gloves. There can be no assurance that the supply of or
demand for disposable gloves will continue at current levels or that changes in
such supply or such demand will not have a material adverse effect on the
Company's results of operations or financial condition. In addition, the Company
currently has a substantial investment in PT Buana, which exclusively
manufacturers powdered gloves, as well as a long term supply contract with PIE
Healthcare for the purchase of powdered gloves. Should the demand for powdered
gloves decline, due to the greater level of allergic reactions associated with
such gloves than powder free latex or synthetic gloves, then the Company will
continue to be subject to the 



                                       20




<PAGE>   25

aforesaid commitments. Conversions of powdered glove manufacturing capacity to
powder free capacity requires substantial time, capital investment and know how,
and there can be no assurance such conversion could be made economically or at
all, in the event of a substantial decline in the demand for powdered gloves.
See "New Glove Products" below.

     Dependence on Rubber Harvest and Latex Concentrate. The ability of the
Company to produce and purchase its products profitably is entirely dependent
upon the consistent availability, at competitive prices, of raw rubber harvested
by independent growers in Malaysia and Indonesia and locally processed by the
Company and others into latex concentrate. Any disruption in the consistent
supply of rubber for latex concentrate due to weather or other natural
phenomena, labor or transportation stoppages, shortages or other factors, could
cause significant adverse effects to the Company's results of operations and
financial condition. In addition, rubber is a commodity traded on world
commodities exchanges and is subject to price fluctuations driven by changing
market conditions over which the Company has no control. Increases in the price
of latex concentrate have adversely affected the Company's raw material costs in
the past and could do so again.

     Changes in Gross Margins. Certain of the Company's net product sales are
derived from products and markets which typically have lower gross margins
compared to other products and markets, due to higher costs and/or lower prices
associated with the lower gross margin products and markets. The Company
currently expects that its net product sales from powder free gloves will
continue to increase as a percentage of total net product sales. In addition,
the Company is currently experiencing pricing pressures due to a number of
factors, including competitive conditions, consolidation within certain groups
of suppliers and changing technologies in the production of powder free gloves
and increasing demand for new glove products. To the extent that these factors
continue, the Company's gross margins would decline, which would adversely
affect the Company and its future operating results.

     Downward pressure on the Company's gross margins may be mitigated by other
factors, such as a reduction in product costs and/or an increased percentage of
new product sales from higher gross margin products, such as powder free gloves.
The Company is aiming to reduce its product costs and to increase its percentage
of net product sales from powder free gloves. However, there is no assurance
that these efforts will be successful.

     New Glove Products. The Company is planning to distribute a number of new
glove products, including synthetic and powder free vinyl gloves. There is no
assurance that these development efforts will be successful or that, if
successfully developed, these products will achieve commercial success.

     Growth Dependencies. In general, the Company's future growth is dependent
on the Company's ability to successfully and timely enhance existing products,
develop and introduce new products, establish new distribution channels, develop
affiliations with leading market participants and continue to develop its
relationships with its existing customer base. The failure to achieve these 




                                       21


<PAGE>   26



and other objectives could limit future growth and have an adverse effect on the
Company and its future operating results.

     On a related note, the pressure to develop and enhance products, and to
establish and expand markets may cause the Company's SG&A expenses to increase
substantially, which could also have an adverse effect on the Company and its
future operating results.

     International Operations. The Company's international manufacturing
operation has grown substantially, and, thus, the Company is increasingly
affected by the risks associated with international operations. Such risks
include: managing an organization in Indonesia; fluctuations in currency
exchange rates; the burden of complying with international laws and other
regulatory and product certification requirements; changes in such laws and
requirements; tariffs and other trade barriers; import and export controls;
international staffing and employment issues; and political and economic
stability. The inability to effectively control and manage these and other risks
could adversely affect the Company and its future operating results.

     Competition. The various markets in which the Company operates are becoming
increasingly competitive as a number of other companies develop and sell
products that compete with the Company's products in these markets. Certain of
these competitors have significantly more financial and technical resources than
the Company. The Company faces additional competitive factors besides price,
such as product quality, consistency, timeliness of delivery, service, and the
size and reliability of the manufacturer. These competitive factors may result
in, among other things, price discounts by the Company and sales lost by the
Company to competitors that may adversely affect the Company and its future
operating results.

     Third-Party Distributors. The Company uses various channels to market and
distribute its products primarily by sales to end-users via third-party
distributors. Third-party distributors are a substantial channel for
distribution to medical facilities. Accordingly, the Company's ability to market
and distribute its products depends significantly on its relationship with
third-party distributors, as well as the performance and financial condition of
these distributors. In the event that the Company's relationship with its
distributors deteriorates, or the performance or financial condition of the
distributor becomes unsatisfactory, the Company and its future operating results
could be adversely affected.

     Excess or Obsolete Inventory. Managing the Company's inventory of various
size mix and product mix is a complex task. A number of factors, including the
need to maintain a significant inventory of certain sizes or products which are
in short supply or which must be purchased in bulk to obtain favorable pricing,
the general unpredictability of demand for specific products and customer
requests for quick delivery schedules, may result in the Company maintaining
excess inventory. Other factors, including changes in market demand and
technology, may cause inventory to become obsolete. Any excess or obsolete
inventory could result in price reductions and inventory write-downs, which, in
turn, could adversely affect the Company and its operating results.



                                       22



<PAGE>   27

     Hiring and Retention of Employees. The Company's continued growth and
success depend to a significant extent on the continued service of senior
management and other key employees and the hiring of new qualified employees.
Competition for highly skilled business, technical, marketing and other
personnel is intense, particularly in the strong economic cycle currently
prevailing for companies. The loss of one or more key employees or the Company's
inability to attract additional qualified employees or retain other employees
could have an adverse effect on the Company and its future operating results. In
addition, the Company may experience increased compensation costs in order to
compete for skilled employees.

     Product Liability Insurance. Participants in the medical supplies business
are potentially subject to lawsuits alleging product liability, many of which
involve significant damage claims and defense costs. A successful claim against
the Company in excess of the Company's insurance coverage could have a material
adverse effect on the Company's results of operations or financial condition.
Claims made against the Company, regardless of their merit, could also have a
material adverse effect on the Company's reputation. There is no assurance that
the coverage limits of the Company's insurance policy will be adequate or that
present levels of coverage will be available at affordable rates in the future.
While the Company has been able to obtain product liability insurance in the
past, such insurance varies in cost, is difficult to obtain and may not be
available in the future on acceptable terms or at all. The Company is subject to
a number of lawsuits filed against it and other manufacturers of latex gloves
alleging injuries relating to allergic reactions caused by the residual
chemicals or latex proteins in gloves. This litigation is still in the early
stages, and there can be no assurance that the Company's insurance will be
sufficient to meet any recovery for which the Company may be found liable, that
the outcome of such suits will not materially adversely affect the Company's
results of operations or financial condition or that the Company's deductible
obligation (to fund a portion of the initial cost of defense and/or liability of
each such lawsuit) will not prove burdensome or that the Company will be able to
continue to maintain product liability insurance at economical levels, or
otherwise, in the event that adverse rulings in the product liability area
should occur.

     Stock Market Fluctuations. In recent years, the stock market in general,
including the Company's Common Stock, have experienced extreme price
fluctuations. The market price of the Company's Common Stock may be
significantly affected by various factors such as: quarterly variations in the
Company's operating results; changes in revenue growth rates for the Company;
changes in earnings estimates by market analysts; the announcement of new
products or product enhancements by the Company or its competitors; speculation
in the press or analyst community; and general market conditions or market
conditions specific to particular industries. There can be no assurance that the
market price of the Company's Common Stock will not experience significant
fluctuations in the future.

     Dissolution and Liquidation of Accountants to Subsidiary. PT Buana is a
70% owned Indonesian subsidiary of the Company. The accounting firm of KPMG
Hanadi Sudjendro & Rekan ("HS&R") prepared PT Buana's financial statements for
the year ended December 31, 1995. The Company has been informed that HS&R was
dissolved and liquidated during 1998. As a result, the Company may 




                                       23


<PAGE>   28



find it extremely difficult, if not impossible, to seek recourse against HS&R in
the event there is a need to make a claim against HS&R, for any reason. At
present, no facts have come to the Company's attention which would indicate any
need to make a claim against HS&R.










ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     A list of financial statements and financial statement schedules for the
Registrant is contained in "Index to Financial Statements and Financial
Statement Schedules of MBf USA, Inc." on page F-1.

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

None.





                                       24



<PAGE>   29


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The executive officers of the Company are as follows:

Name                    Age    Position
----                    ---    --------
Heng Sewn Loi           38     Chairman and Chief Executive Officer
Edward J. Marteka       60     President
Stephen Tan             42     Chief Financial Officer, Treasurer and Secretary
Robert C. Carter        36     Controller and Assistant Secretary

Biographies for Messrs. Loi, Marteka, Tan and Carter are included below.

     At March 18, 1998, the directors of the Company consist of six Class A
Directors and two Class B Directors are as follows:

Class A Directors

Name                    Age    Director Since
----                    ---    --------------
Teik Hok Loy            33          1993
Heng Sewn Loi           38          1993
Edward J. Marteka       60          1995
George Jeff Mennen      56          1994
Richard C. M. Wong      53          1997
Lew Kwong Ann           37          1997

Class B Directors

Name                    Age    Director Since
----                    ---    --------------
Robert J. Simmons       54          1995
Don L. Arnwine          65          1995

     The following sets forth brief statements of the principal occupations and
other biographical information of each of the directors and executive officers.

     We note with profound sadness the death of Tan Sri Dato (Dr.) Hean Heong
Loy on November 25, 1997 after a long battle with cancer. His incisive and
inspirational leadership will be missed. Tan Sri Loy, a long serving member of
the Board of Directors of the Company, was the Chief Executive Officer and had
served in various capacities with MBf Holdings since 1963. He 



                                       25


<PAGE>   30

was the Chairman of the Board of Directors of MBf International since May 1991
and sat on the Board of Directors of MasterCard International. Tan Sri Dato Loy
was made a Justice of the Peace, an honorary title, by the late Sultan of Perak
for his contributions to the nation of Malaysia, and in the same year was
conferred the award of the honorary title "Dato Paduka Mahkota Johor" by the
late Sultan of Johor. On June 6, 1992, the additional title "Tan Sri" was
conferred upon him.

     During 1996, Mr. Teik Hok Loy became the President and Chief Executive
Officer of MBf Holdings and was elected to the Board of Directors on December
17, 1993. He served in various capacities with MBf Holdings since 1988,
concentrating in the field of financial services and leasing operations, and
served as the President of MBf Leasing Sdn. Bhd., a subsidiary of MBf Holdings,
at that time. In 1990, Mr. Loy served as the President of MBf Holdings' Asian
Leasing Division, where he was responsible for the leasing activities in
Southeast Asia and the South Pacific Islands. In 1993, he became the President
of MBf Holdings' Trading and Consumer Services Division. Teik Hok Loy is the son
of the late Tan Sri Dato Loy.

     Since September 1995, Heng Sewn Loi has been the Chairman of the Company
and was elected to the Board of Directors on December 17, 1993. He has served in
various capacities with MBf Holdings since 1988 as the Executive Director of PT
Sejahtera MBf, a joint venture company between MBf Holdings and an Indonesian
company, which provided consumer financing and industrial leasing services. In
1990, he served as President of MBf Factors Ltd., a subsidiary of MBf Holdings,
which provided various corporate financial services. In 1992, Mr. Loi became the
President of MBf Holdings' Manufacturing Division where he was responsible for
the activities of five manufacturing subsidiaries. Heng Sewn Loi is the nephew
of the late Tan Sri Dato Loy.

     Edward J. Marteka was the founder of and has been the President and
Director of the Company's subsidiary, AHPC since its incorporation in 1989. In
May 1995, Mr. Marteka was appointed to the Board of Directors and as President
of the Company. Mr. Marteka is responsible for the overall operations of AHPC
and the Company. Mr. Marteka had held various positions with Baxter Healthcare
Corporation, and served as Vice President of its International Division.

     George Jeff Mennen was elected to the Board of Directors on October 12,
1994. Mr. Mennen heads the G.J. Mennen Group, a consulting firm specializing in
family owned businesses. Mr. Mennen had a distinguished career at The Mennen
Company including being the Vice Chairman of that company. The Mennen Company
was founded by Mr. Mennen's great grandfather in 1878 and remained privately
owned until it was sold in 1992 to Colgate-Palmolive.

     Robert J. Simmons was elected to the Board of Directors in December 1995.
He is currently President of RJS Healthcare, Inc., a healthcare consulting
company, founded in 1990. He served as Executive Vice President at Baxter
International, Inc., from 1987 until founding RJS in 1990. Mr. Simmons joined
Baxter after serving over 20 years at American Hospital Supply Corporation. His
last position at American Hospital Supply was Vice President of Corporate
Marketing.



                                       26



<PAGE>   31


     Don L. Arnwine was elected to the Board of Directors in December 1995. He
is currently President of Arnwine Associates, a company he founded in 1989 to
provide specialized advisory services to the health care industry. From 1961 to
1972, Mr. Arnwine served as Director of the Hospital at the University of
Colorado Medical Center. From 1972 to 1982, he served as President and CEO of
the Charleston Area Medical Center. In 1982, Mr. Arnwine became President and
CEO of Voluntary Hospitals of America and was named its Chairman and CEO in
1985, in which capacity he served until founding Arnwine Associates.

     Richard C.M. Wong was elected Class A Director of the Company on May 20,
1997. Mr. Wong is currently the President and Chief Executive Officer of Wembley
Rubber Products (M) Sdn Bhd ("Wembley"). Mr. Wong is responsible for the overall
management of Wembley and was appointed to its Board of Directors on June 13,
1996. On August 18, 1996, he was appointed as the President/Chief Executive
Officer of Wembley to spearhead management's efforts to transform Wembley into a
world class manufacturer and marketer of quality health care and related
products.

     Mr. Wong, an Australian trained accountant, was the Managing Director/Group
Chief Executive of Nylex, a public company listed on the Kuala Lumpur Stock
Exchange in Malaysia. He had been with Nylex Malaysia, a subsidiary of BTR Plc,
a USD 15 billion company with business in over 60 countries, for the past 18
years, rising from Financial Controller/Company Secretary and General Manager,
to Managing Director and Group CEO. He left Nylex at the end of June 1994 after
18 years with the Group to start his own venture. Under his leadership, Nylex
not only won the country's 1991 Quality Management Award from the Ministry of
International Trade & Industry, Malaysia but also became the first company in
Malaysia to be awarded the ISO 9001. Mr. Wong is the Founder of TEC Asia Centre,
which owns the right to the TEC process in Asia from TEC Worldwide, USA. TEC is
an International Organization of CEOs and its mission is to help CEOs to
proactively manage change and stay ahead of competition through sharing ideas,
expertise and personal experience with other successful CEOs. Currently, Mr.
Wong sits on the Board of three publicly listed companies on the Kuala Lumpur
Stock Exchange - Nylex (Malaysia) Bhd (Deputy Chairman), Sungei Way Holdings Bhd
and Sunway Technology Bhd.

     Kwong Ann Lew was elected Class A Director of the Company on May 20, 1997.
Mr. Lew is an Executive Director and the Chief Financial Officer of Wembley
since May 3, 1996. He holds a Bachelor of Accounting (Honours) degree from the
University of Malaysia. He is a member of the Malaysian Association of Certified
Public Accountants, the Malaysian Institute of Accountants and the Malaysian
Institute of Taxation. He was with Arthur Andersen LLP from 1988 to 1991 before
joining Uniphoenix Corporation Berhad ("Uniphoenix"), a publicly listed company,
as the manager of the Corporate Finance unit. Prior to joining Wembley, he held
the position of Senior General Manager - Corporation Finance and Accounting
Division and the head of the Group Managing Director's Office of Uniphoenix.

     Mr. Wong and Mr. Lew were elected on May 20, 1997 as Class A Directors in
the place of Mr. Teoh Cheng Soon and Dr. Teo Sen Chong who resigned prior to
their appointment and as a 



                                       27



<PAGE>   32


result of the Wembley agreements to buy 55.1% of the Company as described in
Item 13, "Certain Relationships and Related Transactions."

     Stephen Tan was transferred by MBf Holdings to the United States in
September 1995 to serve as Chief Financial Officer and Secretary of the Company.
He had been engaged by MBf Holdings as Chief Financial Officer of the Trading
Division since December 1994. From March 1992 to December 1994, Mr. Tan was self
employed as a financial and business consultant in New Zealand. Mr. Tan was an
Audit Manager with The Audit Office in New Zealand from December 1987 to March
1992. Mr. Tan is a London Certified Accountant.

     Robert C. Carter joined the Company in March 1992 and has served as the
Controller of AHPC since that time. He was appointed Assistant Secretary of the
Company in May 1995. Previously, Mr. Carter was employed by Clifton, Gunderson &
Co. and Arthur Andersen LLP, certified public accountants. Mr. Carter holds a
B.S. in Accounting from the University of Denver and became a certified public
accountant in 1988.

BOARD MEETINGS AND COMMITTEES

     During the 1997 fiscal year, the Company's Board of Directors held two
meetings, and all other actions by the Board of Directors were taken by
unanimous written consent without a meeting.

     The Board of Directors has a Compensation Committee for the purpose of
administering the Company's Omnibus Equity Compensation Plan (the "Plan"). The
Board has not delegated its functions to any other standing committees except
for the Audit Committee which was formed in 1998.

     The Audit Committee was formed for the purpose of reviewing with the
Company's independent public accountants the scope and timing of their audit
services and any other services they are asked to perform, the accountants'
report on the Company's financial statements following completion of their audit
and the Company's policies and procedures with respect to internal accounting
and financial controls.

COMPENSATION OF DIRECTORS

     Mr. George Jeff Mennen and the Class B Directors will receive $1,000 for
each meeting of the Board as well as $500 for each committee meeting attended.
All directors will be reimbursed for expenses incurred in attending meetings of
the Board and committee meetings. Each director is presently entitled to receive
stock options under the Plan to purchase 1,000 shares of the Company's Common
Stock as a result of his initial election to the Board of Directors. At this
time, no stock options have been issued to the new directors, Mr. Wong and Mr.
Lew, whom were newly elected in May 1997.



                                       28



<PAGE>   33


     On January 6, 1997, the Compensation Committee approved and the Company
issued stock options to Mr. Mennen, Mr. Simmons and Mr. Arnwine in the amount of
4,000 shares each with an exercise price of $3.66 per share. Under the terms of
the Plan, the Compensation Committee of the Board may determine the exercise
price for options granted to Directors for a period of up to six months from the
date of grant. All of the director options are immediately exercisable for a
maximum period of ten years from the date of grant.

     Effective July 23, 1996, the Company repriced all director and employee
options outstanding at that time, to $2.75, the closing stock price on that
date. All director options issued to former directors were terminated upon their
departure from the Board.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

     Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
certain officers, directors and beneficial owners of more than 10% of the
Company's Common Stock to file reports of ownership and changes in their
ownership of the equity securities of the Company with the Securities and
Exchange Commission and Nasdaq. Based solely on a review of the reports and
representations furnished to the Company during the last fiscal year, the
Company believes that each of these persons is in compliance with all applicable
filing requirements.



                                       29




<PAGE>   34


ITEM 11. EXECUTIVE COMPENSATION

     The following table discloses the compensation awarded to or earned by
the Chief Executive Officer and the other executive officers whose aggregate
annual salary and bonus exceeded $100,000 during the Company's last three fiscal
years:

<TABLE>
<CAPTION>
                                                Annual Compensation                      Long-Term Compensation
                                                -------------------                      ----------------------
                                Fiscal                                 Other Annual       Stock        All Other
Name & Principal Position         Year        Salary        Bonus      Compensation      Options     Compensation
-------------------------         ----        ------        -----      ------------      -------     ------------
<S>                               <C>      <C>           <C>            <C>              <C>            <C>
Heng Sewn Loi,                    1997     $ 144,800         -          $   60,348         5,000           -
Chairman and Chief                1996     $ 140,000     $ 34,028       $   90,705          -              -
Executive Officer                 1995          -            -          $   20,000        40,000           -

Edward J. Marteka,                1997*    $ 160,000     $ 26,667       $    7,200         5,000           -
President                         1996     $ 160,000     $ 33,333       $    7,200          -              -
                                  1995     $ 150,000     $ 29,166       $    7,200        15,000           -

Stephen Tan                       1997*    $  68,208     $ 11,368       $   35,330          -              -
Chief Financial Officer

</TABLE>

     *Salary of Mr. Marteka and Mr. Tan were due for review during 1997 but were
deferred until the proposed acquisition by Wembley Rubber Products of the Common
Stock and Class A Common Stock of the Company is closed and a new Compensation
Committee is formed. The new salary, upon determination and approval, is likely
to have retroactive effect to their employment anniversary date and 1997 bonus
may also be adjusted accordingly. The Company has made adequate provision in its
records in anticipation of these adjustments.

There is no other long term compensation for the executives listed above in 1995
through 1997.

EMPLOYMENT AGREEMENTS

     On September 1, 1995, the Company entered into an employment agreement with
Mr. Heng Sewn Loi (the "Loi Agreement"). The Loi Agreement provides for: (i) Mr.
Loi to serve as Chairman of the Company; (ii) a base salary of $140,000; (iii)
non-qualified stock options to purchase 40,000 shares of Common Stock under the
Plan, with 20,000 shares exercisable commencing July 21, 1995, and 20,000 shares
exercisable commencing July 21, 1996 at an exercise price of $7.80, the closing
price of the Common Stock as reported on the Nasdaq SmallCap Market on the day
the options were granted by the Compensation Committee; and (iv) life and
medical allowance, automobile allowance, living expenses, dependent tuition
allowance, home leave and family travel, provident fund, relocation expenses,
tax equalization settlement, U.S. legal and taxation matters and other
additional customary benefits. Due to Mr. Loi's pending U.S. work permit status,
Mr. Loi's salary from September 1, 1995 through December 31, 1995 was incurred
by MBf Holdings. Mr. Loi's work permit in the U.S. was approved in January 1996
and since then his salary was paid by the Company.

     On April 1, 1994, the Company entered into an employment agreement with
Edward J. Marteka (the "Marteka Agreement"). The Marteka Agreement, as amended
on June 30, 1995 and on July 22, 1996, provides for: (i) Mr. Marteka to serve as
President of the Company (since May 31, 



                                       30



<PAGE>   35


1995) and AHPC; (ii) a base salary of $160,000; (iii) non-qualified stock
options to purchase 35,000 shares of Common Stock under the Plan, with 5,000
shares exercisable commencing April 1, 1994, 20,000 shares April 1, 1995 and
10,000 shares April 1, 1996 at an exercise price of $11.875, the closing price
of the Common Stock as reported on the Nasdaq SmallCap Market on the day the
options were granted by the Compensation Committee; and (iv) life and medical
insurance, automobile allowance and other additional customary benefits. The
Company also granted to Mr. Marteka additional non-qualified stock options to
purchase 14,000 shares of Common Stock, with 7,000 shares exercisable commencing
July 21, 1995 and 7,000 shares July 21, 1996, at an exercise price of $7.80, the
closing price of Common Stock as reported on the Nasdaq SmallCap Market on the
day the options were granted by Compensation Committee. Mr. Marteka also
received options to purchase 1,000 shares of the Company's Common Stock upon his
appointment as Class A Director in 1995.

     On September 1, 1995, the Company entered into an employment agreement with
Mr. Stephen Tan (the "Tan Agreement"). The Tan Agreement provides for: (i) Mr.,
Tan to serve as Chief Financial Officer and Secretary of the Company; (ii) a
base salary of $65,000; (iii) automobile allowances, living expenses, dependent
tuition allowance, home leave, U.S. taxation on allowances and other customary
benefits. On July 23, 1996, the Company's Compensation Committee granted
non-qualified stock options to purchase 15,000 shares of Common Stock under the
Plan, with 5,000 shares exercisable commencing July 23, 1996, 5000 shares
exercisable commencing July 23, 1997 and 5,000 shares exercisable commencing
July 23, 1998 at a price of $2.75, the closing price of the Common Stock as
reported on the Nasdaq SmallCap Market on the day the options were granted. Due
to pending U.S. work permit status, Mr. Tan's salary from September 1, 1995
through March 15, 1996 was incurred by MBf Holdings. Mr. Tan's work permit was
approved in March 1996, and since then his salary was paid by the Company.

     As approved by the Compensation Committee, all of Mr. Loi and Mr. Marteka's
outstanding stock options were repriced effective July 23, 1996 to $2.75, the
closing stock price on that date.


                                       31


<PAGE>   36


OPTION GRANTS IN FISCAL 1997

                    Option / SAR Grants in Last Fiscal Year

<TABLE>
<CAPTION>
                                                                                 Potential Realizable
                                                                                Value at Assumed Rates
                                 Individual                                         of Stock Price
                                 Grants                                         Appreciation for Option
                                                                                         Term

       (a)             (b)             (c)             (d)            (e)           (f)           (g)
                    Number of      % of Total
                    Securities    Options/SARs
                    Underlying     Granted to       Exercise
                   Options/SARs    Employees in       of            Expiration
      Name         Granted (#)     Fiscal Year     Base Price         Date         5% ($)       10%($)
      ----         -----------     -----------     ----------         ----         ------       ------
<S>                   <C>             <C>            <C>            <C>           <C>          <C>
Loi Heng Sewn         5,000           5.4%           $3.66          1/6/07        $29,800      $47,450
Edward Marteka        5,000           5.4%           $3.66          1/6/07        $29,800      $47,450
</TABLE>

     On January 6, 1997, the Company issued options under the Company's Omnibus
Equity Compensation Plan to certain employees and directors to purchase 92,500
shares of the Company's Common Stock at an exercise price of $3.66 per share,
the closing price of the Common Stock as reported on NASDAQ on the date the
options were granted by the Compensation Committee. The options are exercisable
for ten (10) years from January 6, 1997, the date of grant.

     Mr. Loi and Mr. Marteka were each granted options to purchase 5,000 shares
of the Company's Common Stock in accordance with the Company's January 6, 1997
stock option offering. The options granted are exercisable and vest as follows
for each of Messrs. Loi and Marteka: 1,667 shares immediately; 1,667 shares
commencing one year from the date of grant; and 1,666 shares commencing two
years from the date of grant.

AGGREGATE OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR-END OPTION VALUES

     The following table provides information on option exercises in fiscal 1997
by the executive officers named in the summary compensation table and the value
of such officers' unexercised stock options as of December 31, 1997.

<TABLE>
<CAPTION>
                                                           Number of Unexercised            Value of In-the-Money
                             Shares          Value          Options at 12/31/97              Options at 12/31/97
                           Acquired on     Realized         -------------------              -------------------
                           Exercise(#)       ($)       Exercisable    Unexercisable     Exercisable    Unexercisable
                           -----------       ---       -----------    -------------     -----------    -------------
<S>                           <C>           <C>           <C>             <C>             <C>             <C>
Heng Sewn Loi                 - 0 -         - 0 -         51,666          3,334           $56,600          $717

Edward J. Marteka             - 0 -         - 0 -         51,666          3,334           $56,600          $717

Stephen Tan                    -0-           -0-          10,000          5,000           $11,250         $5,625
</TABLE>


                                       33




<PAGE>   37


REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION

     The Compensation Committee of the Board of Directors is comprised of only
two Class A Directors, Teik Hok Loy and George Jeff Mennen, each of whom were
appointed by the Board of Directors in 1995. Mr. Cheng Soon Teoh resigned from
the Board of Directors and Compensation Committee in early 1997. At this time,
the vacancy on the Compensation Committee has not yet filled.

     The Committee oversees administration of the Company's Omnibus Equity
Compensation Plan (the "Plan"). The purpose of the Plan is to attract and retain
capable and experienced officers and employees by compensating them with
equity-based awards whose value is connected to the continued growth and
profitability of the Company. Under the Plan, awards may be made in the form of
stock options or restricted stock. Apart from the Plan, the Company has not
developed any formalized compensation policy or program. In general, the Company
compensates executive officers and senior management through salary, bonus
(where appropriate) and the grant of stock options. Because the Company's
executive officers' employment agreements presently control the compensation
paid to such executive officers, the Compensation Committee did not formulate
policies with respect to the executive officers compensation during 1997. During
fiscal 1997, all action of the Compensation Committee was taken by the Committee
by unanimous written consent without a meeting.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Tan Sri Dato (Dr.) Hean Heong Loy had a substantial ownership interest in
MBf Holdings, which owns MBf International and 31.5% of MBf Capital Berhad, an
affiliate which owned MBf Personal Care. Teik Hok Loy is the son of the late Tan
Sri Dato (Dr.) Hean Heong Loy and CEO and a Director of MBf Holdings. Heng Sewn
Loi is the nephew of the late Tan Sri Dato (Dr.) Hean Heong Loy and Chairman of
the Company. Accordingly, these members should not be considered as independent
Directors when serving on the Board of Directors or the Compensation Committee.


                                       33



<PAGE>   38


STOCK PERFORMANCE CHART

     The following graph compares the yearly percentage change in the cumulative
total shareholder return on the Company's Common Stock for each of the Company's
last five fiscal years with the cumulative total return (assuming reinvestment
of dividends) of (i) the NYSE/AMEX/Nasdaq Stock Market -U.S. Index and (ii) a
peer group selected by the Company, in good faith. The peer group consists of
American Shared Hospital Services, Daxor Corp., DVI, Inc., Hemacare Corp.,
Medical Sterilization Inc., National Home Health Care Inc., Prime Medical
Services Inc. and Psicor Inc.




                                    [CHART]




                                      


         
<PAGE>   39

     ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth information as of March 18, 1998, with
respect to the beneficial ownership of the Company's Common Stock and Series A
Common Stock by (i) each shareholder known by the Company to be the beneficial
owner of more than 5% of its Common Stock and Series A Common Stock, (ii) each
director, nominee and certain executive officers, and (iii) all directors and
executive officers, as a group. Unless otherwise indicated, the shareholders
named below have sole voting and investment power with respect to such shares of
Common Stock and Series A Common Stock beneficially owned by them.

<TABLE>
<CAPTION>
                                                                                       Percent of
                                                             Amount and Nature of     Total Voting
Title of Class          Name of Beneficial Owner             Beneficial Ownership       Stock(2)
--------------          ------------------------             --------------------      ---------
<S>                     <C>                                  <C>        <C>              <C>
Series A Common Stock   MBf International Ltd.(1)                       1,252,538        29.03% 
Common Stock            MBf International Ltd.(1)                       1,682,275        39.00%
Common Stock            Teik Hok Loy                                       10,000(3)       -
Common Stock            Heng Sewn Loi                         55,000(3)
Common Stock            Heng Sewn Loi                          6,824       61,824         1.43%
                                                             -------
Common Stock            Edward J. Marteka                     55,000(3)                    -
Common Stock            Edward J. Marteka                     11,500       66,500         1.54%
                                                             -------
Common Stock            George Jeff Mennen                                  5,000(3)       -
Common Stock            Robert J. Simmons                                   5,000(3)       -
Common Stock            Stephen K.H. Tan                      15,000(3)                    -
Common Stock            Stephen K.H. Tan                       9,000       24,000          -
                                                             -------
Common Stock            Robert C. Carter                                   10,000(3)       -
Common Stock            Total Executive Officers & Directors
                        as a group (8 persons)               151,000(3)    
                                                              27,324      178,324         4.13%
                                                             -------
</TABLE>

     MBf International Limited is a wholly owned subsidiary of MBf Holdings Sdn.
Bhd., a publicly-traded Malaysian company. The only owner of more than 5% of the
shares of MBf Holdings Sdn. Bhd. is Arab-Malaysian Nominees (Tempatan) Sdn.
Bhd., which own 16.532% of the issued capital. See also Item 13, "Certain
Relationships and Related Transactions" for information concerning the Wembley
agreements. 

----------------------------------- 
* Represents less than 1%
(1) MBf International Ltd. is located at 17th floor, One Pacific Place, 
    88 Queensway, Hong Kong. 
(2) Percent of Class is based upon the combined number of shares of Series A 
    Common Stock and Common Stock outstanding on March 18, 1998.
(3) Represents shares to be issued upon exercisable options granted under the
    Company's Omnibus Equity Compensation Plan.


                                       35



<PAGE>   40


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The Company had entered into arrangements with several entities which are
related to MBf International and/or MBf Holdings. The significance of these
arrangements to the Company's business, financial condition and operations in
the short and long term are discussed below. The Company believes the prices
charged by each related entity are as favorable as those that could be
negotiated with unaffiliated third parties.

     In 1995, the Company began purchasing glove packaging materials (inner
boxes and outer cases) from MBf Printing, a Malaysian printing entity and a
subsidiary of MBf Holdings. The packaging materials were purchased from MBf
Printing for shipment directly to nonaffiliated manufacturers for consistency in
packaging materials and to obtain more favorable pricing from those
manufacturers. In 1997 and 1996, the Company purchased approximately $302,000
and $430,000, respectively, of packaging material from MBf Printing and the
prices charged by them were as favorable as to those that could be negotiated
with unaffiliated suppliers.

     The Company utilizes MBf Insurans, an affiliate of MBf Holdings, to insure
all of AHPC's inventory purchases while in transit to AHPC's various U.S.
warehouses. In 1997 and 1996, the total cost charged by MBf Insurans to insure
all inventory in transit was $35,516 and $45,056, respectively, which the
Company believes is comparable to unaffiliated third party prices. No
contractual obligations exist between the Company and MBf Insurans but the
Company anticipates continuing to utilize their services during 1998.

     Through October 1996, the Company purchased its inventory related to its
latex condom products from MBf Personal Care, which was a wholly owned
subsidiary of MBf Capital, an affiliate of MBf International. In 1996,
Playboy(R) condom purchases from MBf Personal Care amounted to approximately
$685,000. The Company believes the prices charged by MBf Personal Care were as
favorable as those that could have been negotiated with unaffiliated third
parties. The Company did not make any condom purchases from MBf Personal Care in
1997.

     The Company has entered into a management contract with MBf Management, an
affiliate of MBf Holdings. MBf Management charged the Company $10,682 in 1997
for their secretarial and other services.

     The Company's subsidiary, AHPC, has two bank letter-of-credit banking
facilities available, one of which is MBf Bank of Tonga. The letter-of-credit
liabilities due to MBf Bank of Tonga totaled $2,361,634 and $3,160,627 at
December 31, 1997 and 1996, respectively. All letter-of-credit liabilities are
guaranteed by MBf Holdings.

     In June, 1995, the Company entered into the letter-of-credit banking
facility agreement with MBf Bank of Tonga, in the amount of Tonga dollars
T$1,000,000 or approximately U.S. $800,000. On August 24, 1996, the MBf Bank of
Tonga approved an additional T$2 million letter-of-credit facility, bringing the
total facility to T$3 million or approximately U.S. $2.4 million. During 1996,

                                       36


<PAGE>   41


the facility was increased to T$5.75 million or approximately U.S. $4.6 million.
This facility is unsecured and guaranteed by MBf Holdings.

     MBf Asia Capital Corporation Holdings Limited, a Hong Kong corporation, has
a 91.25% ownership interest in MBf Bank of Tonga. MBf Asia Capital Corporation
Holdings Limited is a wholly owned subsidiary of MBf Holdings Sdn. Bhd.

     In January 1997, the Company entered into a consulting and services
agreement with Healthcare Alliance, Inc. (Alliance"), a company 60% owned by
Robert Simmons, a director of the Company. The agreement engaged Alliance to
assist the Company in marketing its products with the expressed purpose of
negotiating and executing a purchase agreement with various healthcare group
purchasing organizations. The Company paid Alliance $48,000 in 1997 for their
services.

     See Note 4 of the Notes to Consolidated Financial Statements for additional
information on related party transactions.


 

                                       38


<PAGE>   42

                                    PART IV

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

(a)(1) and (2)   Financial Statements. A list of financial statements for the 
                 Registrant is contained in "Index to Financial Statements of
                 MBf USA, Inc." on page F-1.

(a)(3)           Exhibits. The following exhibits are included with this report:

EXHIBIT NO.                      NAME OF EXHIBIT
-----------                      ---------------

3.1     Certificate of Incorporation of the Company, incorporated herein by 
        reference to Exhibit No. 3.1 to the Company's Form S-1 Registration
        Statement (Registration No. 33-36206).

3.2     Certificate of Amendment to Certificate of Incorporation of the Company,
        incorporated herein by reference to Exhibit No. 3.2 to the Company's
        Form S-1 Registration Statement (Registration No. 33-36206).

3.3     Certificate of Amendment to Certificate of Incorporation of the Company,
        incorporated herein by reference to Exhibit 3.3 to the Company's
        Form 10-K Annual Report for the fiscal year ended December 31, 1991
        (File No. 0-17458).

3.4     Bylaws of the Company, incorporated herein by reference to Exhibit No. 
        3.3 to the Company's Form S-18 Registration Statement (Registration No.
        33-23164-FW).

3.5     Amendment to Bylaws of the Company, incorporation herein by reference to
        Exhibit 3.5 to the Company's Form 10-K Annual Report for the fiscal year
        ended December 31, 1991 (File No. 0-17458).

4.1     Common Stock Certificate, incorporated herein by reference to Exhibit 
        No. 4.1 to the Company's Form S-18 Registration Statement (Registration
        No. 33-23164-FW).

4.2     Warrant Agreement with The Liberty National Bank & Trust Company, 
        incorporated by reference to Exhibit No. 4.2 to the Company's Form S-1
        Registration Statement (Registration No. 33-36206).

4.3     Warrant, incorporated by reference to Exhibit No. 4.3 to the Company's 
        Form S-1 Registration Statement (Registration No. 33-36206).

10.1    Articles of Merger of Labspecs, Inc. and Laboratory Specialists, Inc., 
        incorporated herein by reference to Exhibit No. 2 to the Company's Form
        10-K Annual Report for the fiscal year ended December 31, 1988 (File No.
        0-17458).



                                       38



<PAGE>   43



10.2    Plan of Reorganization and Agreement of Merger between the Company and
        Laboratory Specialists, Inc., incorporated herein by reference to
        Exhibit No. 10.1 to the Company's Form 8 Amendment to Form 10-K, filed
        with the Securities and Exchange Commission on June 16, 1989 (File No.
        0-17458).

10.3    Plan of Reorganization and Agreement of Merger by and among the Company,
        Laboratory Specialists, Inc. of California, and Abused Drugs Laboratory,
        Inc., incorporated herein by reference to Exhibit No. 10.1 to the
        Company's Form 8-K Current Report filed with the Securities and Exchange
        Commission on September 26, 1989 File No. 0-17458).

10.4    Financial Public Relations Contract with The Wall Street Group, 
        incorporated herein by reference to Exhibit No. 10 to the Company's Form
        10-K Annual Report for the fiscal year ended December 31, 1988 (File No.
        0-17458).

10.5    Promissory Note from the Company to Arthur R. Peterson, Jr., 
        incorporated herein by reference to Exhibit No. 10.2 to the Company's
        Form 8 Amendment to Form 10-K, filed with the Commission on June 16,
        1989 (File No. 0-17458).

10.6    Asset Purchase Agreement between the Company and DataChem, Inc., dated
        December 22, 1989, incorporated herein by reference to Exhibit No. 10.5
        to the Company's Form 10-K Annual Report for the fiscal year ended
        December 31, 1989 (File No. 0-17458).

10.7    Lease of office space, Oklahoma City, Oklahoma, incorporated herein by
        reference to Exhibit No. 10.6 to the Company's Form 10-K Annual Report
        for the fiscal year ended December 31, 1989 (File No. 0-17458).

10.8    Asset Purchase Agreement dated September 30, 1991, between LSI of
        California and Medtox Laboratories, Inc., incorporated herein by
        reference to Exhibit No. 10.1 to the Company's Form 8-K Current Report
        dated September 30, 1991 (File No. 0-17458).

10.9    Distributorship Agreement dated February 27, 1992, by and among AHPC,
        ARPI and Multi-Com., incorporated herein by reference to Exhibit 10.9 to
        the Company's Form 10-K Annual Report for the fiscal year ended December
        31, 1991 (File No. 0-17458).

10.10   Employment Agreement with John Simonelli dated February 27, 1992,
        incorporated herein by reference to Exhibit 10.10 to the Company's Form
        10-K Annual Report for the fiscal year ended December 31, 1991 (File No.
        0-17458).

10.11   Employment Agreement with Larry E. Howell dated February 27, 1992,
        incorporated herein by reference to Exhibit No. 10.11 to the Company's
        Form 10-K Annual Report for the fiscal year ended December 31, 1991
        (File No. 0-17458).


                                       39



<PAGE>   44


10.12   Employment Agreement with Arthur R. Peterson, Jr. dated February 27, 
        1992, incorporated herein by reference to Exhibit No. 10.12 to the
        Company's Form 10-K Annual Report for the fiscal year ended December 31,
        1991 (File No. 0-17458).

10.13   Omnibus Equity Compensation Plan approved by the Company's shareholders
        on February 27, 1992, incorporated herein by reference to Exhibit No.
        10.13 to the Company's Form 10-K Annual Report for the fiscal year ended
        December 31, 1991 (File No. 0-17458).

10.14   Share Exchange Agreement by and among the Company, MBf America, Inc.
        and MBf International Limited, incorporated herein by reference to
        Exhibit No. 7.2 to the Company's Form 8-K Current Report filed with the
        Commission March 5, 1992 (File No. 0-17458).

10.15   Employment Agreement with William A. Forster dated October 15, 1992,
        incorporated herein by reference to Exhibit No. 10.15 to the Company's
        Form 10-K Annual Report for the fiscal year ended December 31, 1992
        (File No. 0-17458).

10.16   Amendment to Employment Agreement with John Simonelli dated September
        19, 1992, incorporated herein by reference to Exhibit No. 10.16 to the
        Company's Form 10-K Annual Report for the fiscal year ended December 31,
        1992 (File No. 0-17458).

10.17   Amended Employment Agreement with Larry Howell dated September 19, 1992,
        incorporated herein by reference to Exhibit No. 10.17 to the Company's
        Form 10-K Annual Report for the fiscal year ended December 31, 1992
        (File No. 0-17458).

10.18   Option Agreement, dated November 24, 1992, among Frederick P. Heisler 
        and Regina Heisler, Donald E. Bennett and Peggy Bennett, Disposable
        Medical Products, Inc., D.P.I. de Mexico, S.A. de C.V. and American Drug
        Screens, Inc., incorporated herein by reference to Exhibit No. 10.18 to
        the Company's Form 10-K Annual Report for the fiscal year ended December
        31, 1992 (File No. 0-17458).

10.19   Supply and Requirements Agreement, dated November 24, 1992, among 
        Disposable Medical Products, Inc., D.P.I. de Mexico, S.A. de C.V. and
        American Health Products Corporation, incorporated herein by reference
        to Exhibit No. 10.19 to the Company's Form 10-K Annual Report for the
        fiscal year ended December 31, 1992 (File No. 0-17458).

10.20   Asset Purchase Agreement, dated November 25, 1992, among the Company, 
        Premier Latex, Inc. and Premier Laboratories, Inc., incorporated herein
        by reference to Exhibit No. 10.20 to the Company's Form 10-K Annual
        Report for the fiscal year ended December 31, 1992 (File No. 0-17458).

10.21   Revolving Credit Loan Agreement between Bank Bumiputra Malaysia Berhad 
        (New York Branch) and American Health Products Corporation dated as of
        September 23, 1992,



                                       40



<PAGE>   45



        incorporated herein by reference to Exhibit No. 10.21 to the Company's
        Form 10-K Annual Report for the fiscal year ended December 31, 1992
        (File No. 0-17458).

10.22   Lease, dated December 1, 1992, of office space, Boca Raton, Florida,
        incorporated herein by reference to Exhibit No. 10.22 to the Company's
        Form 10-K Annual Report for the fiscal year ended December 31, 1992
        (File No. 0-17458).

10.23   Sublease dated as of February 18, 1994 between the Company and National
        Telecom, U.S.A., Inc. incorporated herein by reference to Exhibit No.
        10.23 to the Company's Form 10-K Annual Report for the fiscal year ended
        December 31, 1993 (File No. 0-17458).

10.24   Lease Agreement dated April 1, 1993 between Water Saver Faucet Co. and 
        American Health Products Corporation incorporated herein by reference to
        Exhibit No. 10.24 to the Company's Form 10-K Annual Report for the
        fiscal year ended December 31, 1994 (File No. 0-17458).

10.25   Employment Termination Agreement dated November 1993 between the Company
        and John Simonelli incorporated herein by reference to Exhibit No. 10.25
        to the Company's Form 10-K Annual Report for the fiscal year ended
        December 31, 1994 (File No. 0-17458).

10.26   Employment Termination Agreement dated November 1993 between the Company
        and Larry E. Howell incorporated herein by reference to Exhibit No.
        10.26 to the Company's Form 10-K Annual Report for the fiscal year ended
        December 31, 1994 (File No. 0-17458).

10.27   Termination and Settlement Agreement dated December 29, 1993 by and 
        among the Company, Samuel E. Dlugatch, Premier Laboratories, Inc., and
        Premier Latex, Inc. incorporated herein by reference to Exhibit No.
        10.27 to the Company's Form 10-K Annual Report for the fiscal year ended
        December 31, 1994 (File No. 0-17458).

10.28   Amended and Restated Revolving Credit Loan Agreement dated as of January
        10, 1994 between Bank Bumiputra Malaysia Berhad (New York Branch) and
        American Health Products Corporation incorporated herein by reference to
        Exhibit No. 10.28 to the Company's Form 10-K Annual Report for the
        fiscal year ended December 31, 1994 (File No. 0-17458).

10.29   Stock Exchange Agreement dated as of February 23, 1994 by and among the
        Company, Laboratory Specialists, Inc. and Arthur R. Peterson, Jr., and
        related agreements and documents incorporated herein by reference to
        Exhibit No. 10.29 to the Company's Form 10-K Annual Report for the
        fiscal year ended December 31, 1994 (File No. 0-17458).

10.30   Letter of cancellation dated January 7, 1994 for Disposable Medical
        Products Option Agreement incorporated herein by reference to Exhibit
        No. 10.30 to the Company's Form 10-K Annual Report for the fiscal year
        ended December 31, 1994 (File No. 0-17458).




                                       41



<PAGE>   46


10.31   Agreement dated as of December 30, 1993 by and between MACC Trading 
        Limited and MBf USA, Inc. incorporated herein by reference to Exhibit
        No. 10.31 to the Company's Form 10-K Annual Report for the fiscal year
        ended December 31, 1994 (File No. 0-17458).

10.32   Employment Agreement dated April 7, 1994, between William C. Willis, Jr.
        and MBf USA, Inc. incorporated herein by reference to Exhibit No. 1 to
        the Company's Form 10-Q Quarterly Report for the quarter ended March 31,
        1994 (File No. 0-17458).

10.33   Consulting Agreement dated March 24, 1994, between Dr. C. Everett Koop
        and MBf USA, Inc. incorporated herein by reference to Exhibit No. 1 to
        the Company's Form 10-Q Quarterly Report for the quarter ended June 30,
        1994 (File No. 0-17458).

10.34   Warrant Purchase Agreement dated March 24, 1994, between Sy Weintraub 
        and MBf USA, Inc. incorporated herein by reference to Exhibit No. 2 to
        the Company's Form 10-Q Quarterly Report for the quarter ended June 30,
        1994 (File No. 0-17458).

10.35   Stock Exchange Agreement dated as of June 30, 1994 by and among the
        Company, Laboratory Specialists of America, Inc. and Arthur R. Peterson,
        Jr., incorporated herein by reference to Exhibit No. 1 to the Company's
        Form 10-Q Quarterly Report for the quarter ended September 30, 1994
        (File No. 0-17458).

10.36   Second Amended and Restated Revolving Credit Loan Agreement dated as 
        of March 29, 1995 between Bank Bumiputra Malaysia Berhad (New York
        Branch) and American Health Products Corporation incorporated herein by
        reference to Exhibit 10.36 included in the Company's Form 10K Annual
        Report for the fiscal year ended December 21, 1994 (File No. 0-17458).

10.37   Debenture and Warrant Purchase Agreement dated October 12, 1994 between
        the Company and Wilmington Trust Company and George Jeff Mennen as
        Co-Trustees U/A dated 11/25/70 with George S. Mennen for Christina M.
        Andrea incorporated herein by reference to Exhibit 10.37 included in 
        the Company's Form 10K Annual Report for the fiscal year ended 
        December 31, 1994 (File No. 0-17458).

10.38   Debenture and Warrant Purchase Agreement dated October 12, 1994 between
        the Company and Wilmington Trust Company and George Jeff Mennen as
        Co-Trustees U/A dated 11/25/70 with George S. Mennen for John Henry
        Mennen Andrea incorporated herein by reference to Exhibit 10.38 included
        in the Company's Form 10K Annual Report for the fiscal year ended
        December 31, 1994 (File No. 0-17458).

10.39   Lease Agreement dated October 4, 1994 between California Public 
        Employee's Retirement System and the Company Andrea incorporated herein
        by reference to Exhibit 10.39 included in the Company's Form 10K Annual
        Report for the fiscal year ended December 31, 1994 (File No. 0-17458).


                                       42


<PAGE>   47



10.40   Lease Agreement dated November 19, 1994 between 400 Kelby Associates and
        the Company Andrea incorporated herein by reference to Exhibit 10.40
        included in the Company's Form 10K Annual Report for the fiscal year
        ended December 31, 1994 (File No.0-17458).

10.41   Stock Acquisition Agreement dated October 31, 1995 between the Company
        and MBf Holdings for the Company to exchange 255,072 shares of the
        Company's Common Stock for a 70% ownership of PT Buana, an Indonesian
        business entity, incorporated herein by reference to Exhibit 10.41
        included in the Company's Form 10-K Annual Report for the fiscal year
        ended December 31, 1995 (File No. 0-17458).

10.42   Articles of Amendment to Certificate of Incorporation incorporated 
        herein by reference to Exhibit 10.42 to the Company's Form 10-K Annual
        Report for the fiscal year ended December 31, 1996 (File No. 0-17458).

10.43   Amended and Restated Omnibus Equity Compensation Plan incorporated by
        reference to Exhibit 10.43 to the Company's Form 10-K Annual Report for
        the fiscal year ended December 31, 1996 (File No. 0-17458).

10.44   Employment Agreement dated April 1, 1994 between Edward J. Marteka and
        American Health Products Corporation.

10.45   Amendment to Employment Agreement between MBf USA, Inc. and Edward J.
        Marteka dated as of June 1, 1995.

10.46   Amendment to Employment Agreement between MBf USA, Inc. and Edward J.
        Marteka dated as of July 22, 1996.

21      Subsidiaries of the Company (1)

23.1    Consent of Arthur Andersen LLP (2)

23.2    Consent of KPMG Hanadi Sudjendra & Rekan (1)

(b)     During the last quarter of 1997, the Company filed the following 
        reports on Form 8-K

(i)     Form 8-K dated October 24, 1997 wherein the Company reported information
        under Item 9.

(c)     Financial Statement Schedules

27.1    Schedule II -- valuation and qualifying accounts schedules not listed
        above have been omitted because they are inapplicable or the information
        required to be set forth there in provided in the consolidated financial
        statements of the Company or notes thereto.

(1)     Previously filed 
(2)     Filed herewith


                                   SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to its Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized.


                                       43


<PAGE>   48




                                  REGISTRANT:
                                 MBf USA, INC.

Date: November 12, 1998           By: /s/ Edward J. Marteka
                                      ---------------------
                                      Edward J. Marteka

Date: November 12, 1998           By: /s/ Lew Kwong Ann
                                      ---------------------
                                      Lew Kwong Ann


                                       44
                                                      
<PAGE>   49
                         MBf USA, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 1997 AND 1996
                         TOGETHER WITH AUDITORS' REPORT


<PAGE>   50




                         MBf USA, INC. AND SUBSIDIARIES


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 1997 AND 1996



<TABLE>
<CAPTION>
                                                                         PAGE
                                                                         ----
<S>                                                                      <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                  F-2

INDEPENDENT AUDITORS' REPORT                                              F-3

CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1997 AND 1996                   F-4

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS
 ENDED DECEMBER 31, 1997, 1996 AND 1995                                   F-6

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS 
 ENDED DECEMBER 31, 1997, 1996 AND 1995                                   F-7

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS 
 ENDED DECEMBER 31, 1997, 1996 AND 1995                                   F-8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                F-9

</TABLE>





                                      F-1
<PAGE>   51








                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS






To the Shareholders and Board of Directors of 
MBf USA, Inc.:

We have audited the accompanying consolidated balance sheets of MBf USA, INC. (a
Maryland corporation) AND SUBSIDIARIES as of December 31, 1997 and 1996, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1997. These
consolidated 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 PT
MBf Buana Multicorpora as of and for the year ended December 31, 1995, which
statements reflect total assets and total revenues of 22% and .02%,
respectively, of the consolidated 1995 totals. Those statements were audited by
other auditors whose report has been furnished to us and our opinion, insofar as
it relates to the amounts included for that entity, is based solely on 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 and the report of other auditors provide a reasonable
basis for our opinion.

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





ARTHUR ANDERSEN LLP

Chicago, Illinois
February 27, 1998




                                      F-2
<PAGE>   52









                          INDEPENDENT AUDITORS' REPORT






To the Directors and Shareholders
PT MBf Buana Multicorpora

         We have audited the accompanying balance sheet of PT MBf Buana
Multicorpora (the "Company") as of December 31, 1995, and changes in
shareholders' equity and cash flows for the period from October 17, 1994 (date
of incorporation) to December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based upon our audit.

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

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of MBf PT Buana
Multicorpora as of December 31, 1995 and the results of its operations and its
cash flows for the period then ended in conformity with accounting principles
generally accepted in the United States of America.



                                              /s/ Drs. Achmad Hidayat
                                              ----------------------------------

                                              Drs. Achmad Hidayat
                                              Registered Accountant No. D-2460
                                              KPMG Hanadi Sudjendra & Reken


Jakarta, Indonesia
February 14, 1996




                                      F-3
<PAGE>   53



                         MBf USA, INC. AND SUBSIDIARIES


             CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1997 AND 1996



<TABLE>
<CAPTION>
                                       ASSETS                               1997            1996
                                                                        ------------    ------------
<S>                                                                     <C>             <C>         
CURRENT ASSETS:
    Cash and cash equivalents                                           $    161,981    $    321,038
    Accounts receivable-trade, net of allowance for doubtful accounts
     of $195,000 in 1997 and $73,000 in 1996                               5,410,843       4,677,490
    Inventories                                                            8,203,861       8,094,649
    Prepaid expenses                                                       1,055,788         999,704
    Investment in LSAI                                                     1,076,496            -- 
    Deferred income taxes                                                    219,951          58,893
    Current assets of discontinued operations                                 44,113         264,520
                                                                        ------------    ------------
                     Total current assets                                 16,173,033      14,416,294
                                                                        ------------    ------------

PROPERTY, PLANT AND EQUIPMENT:
    Land rights and land improvements                                        736,535         694,272
    Construction in progress                                               2,105,263       1,074,092
    Equipment, furniture and fixtures                                      8,780,857       7,183,071
    Building improvements                                                  1,488,485       1,262,248
    Vehicles                                                                 108,127         105,023
                                                                        ------------    ------------
                     Total property, plant and equipment                  13,219,267      10,318,706

    Less-Accumulated depreciation                                         (1,495,868)       (736,858)
                                                                        ------------    ------------
    Property, plant and equipment, net                                    11,723,399       9,581,848
                                                                        ------------    ------------
INVESTMENT IN LSAI                                                              --         1,015,117
                                                                        ------------    ------------

OTHER ASSETS:
    Goodwill, net of accumulated amortization of $405,363 in 1997 and
     $364,305 in 1996                                                      1,344,637       1,385,695
    Due from affiliates                                                      206,885         550,210
    Other assets                                                              83,291         297,209
    Assets of discontinued operations                                           --           267,251
                                                                        ------------    ------------
                    Total other assets                                     1,634,813       2,500,365
                                                                        ------------    ------------
                                                                        $ 29,531,245    $ 27,513,624
                                                                        ============    ============

</TABLE>



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


                                      F-4
<PAGE>   54



                         MBf USA, INC. AND SUBSIDIARIES


             CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
                         LIABILITIES AND SHAREHOLDERS' EQUITY                      1997             1996
                                                                                ------------    ------------
<S>                                                                             <C>             <C>         
CURRENT LIABILITIES:
    Accounts payable--trade                                                     $  2,622,541    $  3,291,506
    Trade notes payable to banks                                                   5,449,181       7,010,453
    Notes payable and current portion of long-term obligations                     6,711,659       3,914,914
    Due to affiliates                                                                342,873         382,358
    Accrued expenses                                                               2,366,984       1,219,914
    Current liabilities of discontinued operations                                   258,407         302,416
                                                                                ------------    ------------
                     Total current liabilities                                    17,751,645      16,121,561
                                                                                ------------    ------------

LONG-TERM OBLIGATIONS                                                              5,647,867       7,098,132
                                                                                ------------    ------------

OTHER LONG-TERM OBLIGATIONS:
    Deferred income taxes                                                             67,117         200,286
    Other liabilities                                                                622,045         341,047
                                                                                ------------    ------------
                     Total other long-term liabilities                               689,162         541,333
                                                                                ------------    ------------

COMMITMENTS AND CONTINGENCIES (Note 8)

MINORITY INTEREST IN SUBSIDIARY                                                    1,130,051         221,174
                                                                                ------------    ------------

SHAREHOLDERS' EQUITY:
    Series A common stock, $.01 par value; 1,252,538 shares authorized;
       1,252,538 shares issued and outstanding                                        12,525          12,525
    Common stock, $.01 par value; 10,000,000 shares authorized; 3,191,667 and
       3,188,333 shares issued and outstanding in 1997 and 1996, respectively         31,917          31,883
    Additional paid-in capital                                                    10,876,224      10,875,897
    Accumulated deficit                                                           (5,547,089)     (6,012,811)
    Net unrealized gain on LSAI common stock                                         261,979            --
    Cumulative foreign currency translation adjustment                                  --           (53,034)
    Less-Common stock in treasury, at cost, 130,000 shares in 1997 and 1996       (1,323,036)     (1,323,036)
                                                                                ------------    ------------
                     Total shareholders' equity                                    4,312,520       3,531,424
                                                                                ------------    ------------
                                                                                $ 29,531,245    $ 27,513,624
                                                                                ============    ============

</TABLE>


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



                                      F-5
<PAGE>   55


                         MBf USA, INC. AND SUBSIDIARIES


                      CONSOLIDATED STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


<TABLE>
<CAPTION>
                                                                                      1997            1996            1995
                                                                                  ------------    ------------    ------------
<S>                                                                               <C>             <C>             <C>         
REVENUES:
    Product sales, net                                                            $ 53,810,060    $ 47,589,421    $ 40,950,968
    Interest-affiliates                                                                   --              --            72,688
    Interest                                                                            37,310          40,737          27,970
    Rental income                                                                      158,517            --              --
    Gain on sales of LSAI common stock                                                  79,483            --              --
    Other                                                                               18,052          81,959         166,317
                                                                                  ------------    ------------    ------------
              Total revenues                                                        54,103,422      47,712,117      41,217,943
                                                                                  ------------    ------------    ------------

COSTS AND EXPENSES:
    Cost of product sales                                                           40,760,146      38,358,756      36,177,651
    Selling, general and administrative                                             10,634,314       8,462,426       6,707,634
    Restructure charge                                                                    --              --         1,808,757
    Interest                                                                         1,481,467       1,117,700         614,506
                                                                                  ------------    ------------    ------------
              Total costs and expenses                                              52,875,927      47,938,882      45,308,548
                                                                                  ------------    ------------    ------------
              Income (loss) from continuing operations before minority
                 interest, benefit from income taxes and loss from discontinued
                 operations                                                          1,227,495        (226,765)     (4,090,605)

MINORITY INTEREST IN INCOME OF SUBSIDIARY                                             (300,145)        (77,732)         (2,174)
                                                                                  ------------    ------------    ------------
              Income (loss) from continuing operations before benefit from
                 income taxes and loss from
                 discontinued operations                                               927,350        (304,497)     (4,092,779)

BENEFIT FROM INCOME TAXES                                                              322,042          56,889            --
                                                                                  ------------    ------------    ------------
              Income (loss) from continuing operations before loss
                 from discontinued operations                                        1,249,392        (247,608)     (4,092,779)

LOSS FROM DISCONTINUED OPERATION:
    Operations                                                                            --          (840,792)       (703,893)
    Disposal                                                                          (783,670)        (76,187)        (67,732)
                                                                                  ------------    ------------    ------------
              Net income (loss)                                                   $    465,722    $ (1,164,587)   $ (4,864,404)
                                                                                  ============    ============    ============
BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE:
       Continuing operations                                                      $       0.29    $      (0.07)   $      (1.68)
       Discontinued operations                                                           (0.18)          (0.25)          (0.32)
                                                                                  ------------    ------------    ------------
                                                                                  $       0.11    $      (0.32)   $      (2.00)
                                                                                  ============    ============    ============

</TABLE>



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



                                      F-6
<PAGE>   56


                         MBF USA, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

(RETROACTIVELY RESTATED TO REFLECT THE 10-FOR-1 REVERSE STOCK SPLIT, SEE NOTE 9)



<TABLE>
<CAPTION>
                                                                                                                                 
                                                                                                                                 
                                                                              SERIES A                                           
                                                                            COMMON STOCK                 COMMON STOCK               
                                                                        SHARES         AMOUNT        SHARES        AMOUNT           
                                                                      ------------------------      ------------------------
<S>                                                                   <C>         <C>               <C>         <C>         
BALANCE, December 31, 1994                                            1,252,538   $     12,525      1,224,248   $     12,242

    Issuance of common stock upon exercise of stock options
                                                                           --             --              495              5
    Issuance of common stock for loan conversion                           --             --          250,980          2,510
    Issuance of common stock for 70% interest in PT Buana
                                                                           --             --          255,072          2,551
    Net loss                                                               --             --             --             --   
    Foreign currency translation adjustment                                --             --             --             --   
                                                                      ---------   ------------      ---------   ------------

BALANCE, December 31, 1995                                            1,252,538         12,525      1,730,795         17,308

    Issuance of common stock to MBf International for $1,402,528
                                                                           --             --          488,973          4,889
    Issuance of common stock to PIE Healthcare for $1,000,000
                                                                           --             --          296,296          2,963
    Issuance of common stock to MBf International for $1,000,000
                                                                           --             --          672,269          6,723
    Net loss                                                               --             --             --             --   
    Foreign currency translation adjustments                               --             --             --             --   
                                                                      ---------   ------------      ---------   ------------

BALANCE, December 31, 1996                                            1,252,538         12,525      3,188,333         31,883

    Issuance of common stock upon exercise of stock options
                                                                           --             --            3,334             34
    Net income                                                             --             --             --             --   
    Foreign currency translation adjustment                                --             --             --             --   
    Indonesian paid-in capital adjustment                                  --             --             --             --   
    Unrealized gain on LSAI common stock                                   --             --             --             --   
                                                                      ---------   ------------      ---------   ------------

BALANCE, December 31, 1997                                            1,252,538   $     12,525      3,191,667   $     31,917
                                                                      =========   ============      =========   ============

<CAPTION>

                                                                                                    CUMULATIVE     UNREALIZED 
                                                                                                     FOREIGN        GAIN ON   
                                                                    ADDITIONAL      RETAINED         CURRENCY        LSAI    
                                                                     PAID-IN        EARNINGS        TRANSLATION      COMMON   
                                                                     CAPITAL        (DEFICIT)       ADJUSTMENT       STOCK    
                                                                   ------------    ------------    ------------    ------------ 
<S>                                                                 <C>            <C>              <C>             <C>         
BALANCE, December 31, 1994                                         $  5,193,205    $     16,180    $       --      $       --   

    Issuance of common stock upon exercise of stock options
                                                                          2,945            --              --              --   
    Issuance of common stock for loan conversion                      1,197,490            --              --              --   
    Issuance of common stock for 70% interest in PT Buana
                                                                      1,094,304            --              --              --   
    Net loss                                                               --        (4,864,404)           --              --   
    Foreign currency translation adjustment                                --              --           (26,856)           --   
                                                                   ------------    ------------    ------------    ------------ 

BALANCE, December 31, 1995                                            7,487,944      (4,848,224)        (26,856)           --   

    Issuance of common stock to MBf International for $1,402,528
                                                                      1,397,639            --              --              --   
    Issuance of common stock to PIE Healthcare for $1,000,000
                                                                        997,037            --              --              --   
    Issuance of common stock to MBf International for $1,000,000
                                                                        993,277            --              --              --   
    Net loss                                                               --        (1,164,587)           --              --   
    Foreign currency translation adjustments                               --              --           (26,178)           --   
                                                                   ------------    ------------    ------------    ------------ 

BALANCE, December 31, 1996                                           10,875,897      (6,012,811)        (53,034)           --   

    Issuance of common stock upon exercise of stock options
                                                                          9,135            --              --              --   
    Net income                                                             --           465,722            --              --   
    Foreign currency translation adjustment                                --              --            53,034            --   
    Indonesian paid-in capital adjustment                                (8,808)           --              --              --   
    Unrealized gain on LSAI common stock                                   --              --              --           261,979
                                                                   ------------    ------------    ------------    ------------ 

BALANCE, December 31, 1997                                         $ 10,876,224    $ (5,547,089)   $       --      $    261,979
                                                                   ============    ============    ============    ============

<CAPTION>

                                                                     TREASURY      SHAREHOLDERS'
                                                                      STOCK           EQUITY   
                                                                   ------------    ------------
<S>                                                                <C>             <C>         
BALANCE, December 31, 1994                                         $ (1,323,036)   $  3,911,116

    Issuance of common stock upon exercise of stock options
                                                                           --             2,950
    Issuance of common stock for loan conversion                           --         1,200,000
    Issuance of common stock for 70% interest in PT Buana
                                                                           --         1,096,855
    Net loss                                                               --        (4,864,404)
    Foreign currency translation adjustment                                --           (26,856)
                                                                   ------------    ------------

BALANCE, December 31, 1995                                           (1,323,036)      1,319,661

    Issuance of common stock to MBf International for $1,402,528
                                                                           --         1,402,528
    Issuance of common stock to PIE Healthcare for $1,000,000
                                                                           --         1,000,000
    Issuance of common stock to MBf International for $1,000,000
                                                                           --         1,000,000
    Net loss                                                               --        (1,164,587)
    Foreign currency translation adjustments                               --           (26,178)
                                                                   ------------    ------------

BALANCE, December 31, 1996                                           (1,323,036)      3,531,424

    Issuance of common stock upon exercise of stock options
                                                                           --             9,169
    Net income                                                             --           465,722
    Foreign currency translation adjustment                                --            53,034
    Indonesian paid-in capital adjustment                                  --            (8,808)
    Unrealized gain on LSAI common stock                                   --           261,979
                                                                   ------------    ------------

BALANCE, December 31, 1997                                         $ (1,323,036)   $  4,312,520
                                                                   ============    ============

</TABLE>


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


                                      F-7




<PAGE>   57


                         MBf USA, INC. AND SUBSIDIARIES


                      CONSOLIDATED STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
                                                                                   1997          1996           1995
                                                                               -----------    -----------    ----------- 
<S>                                                                            <C>            <C>            <C>  
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income (loss)                                                          $   465,722    $(1,164,587)   $(4,864,404)
    Adjustments to reconcile net income (loss) to net cash provided by (used
       in) operating activities-
           Depreciation                                                            898,831        532,148        101,990
           Amortization                                                             41,058         57,778         51,207
           Provision for doubtful accounts                                         122,000         16,900         15,500
           Loss from discontinued operations                                          --          840,792        703,893
           Loss from disposal of discontinued operations                           783,670         76,187         67,732
           Loss on disposal of property, plant and equipment                        15,606          8,883         53,405
           Gain on sales of LSAI common stock                                      (79,483)          (998)          --
           Write-off of trademarks                                                    --             --           50,425
           Changes in certain assets and liabilities-
              Accounts receivable--trade                                          (855,353)      (576,029)      (701,300)
              Inventories                                                         (109,212)     1,937,014     (3,108,000)
              Prepaid expenses                                                     (56,084)      (551,594)      (218,966)
              Other assets                                                          52,860        (69,636)        (9,929)
              Accounts payable--trade                                             (668,965)    (3,845,331)     2,267,348
              Accrued expenses                                                   1,147,070        432,090         27,702
              Deferred income taxes                                               (133,169)       200,286           --
              Net assets of discontinued subsidiary                                   --             --          141,379
              Net assets of condom discontinued operations                        (340,021)      (518,099)       (79,887)
              Amounts due (from) to affiliates                                     303,840      1,285,070     (2,144,010)
                                                                               -----------    -----------    -----------
                     Net cash provided by (used in) operating activities         1,588,370     (1,339,126)    (7,645,915)
                                                                               -----------    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures                                                        (3,063,735)    (4,675,556)      (873,636)
    Proceeds on sales of LSAI common stock                                         280,083         45,248           --
    Proceeds on sales of property, plant and equipment                               7,747           --             --
    Minority interest in subsidiary                                                900,070         76,616         30,497
                                                                               -----------    -----------    -----------
                     Net cash used in investing activities                      (1,875,835)    (4,553,692)      (843,139)
                                                                               -----------    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Net borrowings (payments) on trade notes payable to banks                   (1,561,272)     4,709,818      3,722,426
    Net borrowings from notes payable                                            2,846,480      2,533,046      4,384,081
    Net proceeds from stock option exercises                                         9,168           --            2,950
    Proceeds from issuance of stock                                                   --        3,402,528           --
    Proceeds from issuance of note payable to Parent                                  --             --        1,200,000
    Net advances from Indonesian minority interest shareholders                    280,998           --             --
    Payments on notes payable                                                   (1,500,000)    (4,011,666)      (183,334)
    Payments on debt to affiliate                                                     --       (1,100,000)          --
                                                                               -----------    -----------    -----------
                     Net cash provided by financing activities                      75,374      5,533,726      9,126,123
                                                                               -----------    -----------    -----------
IMPACT OF EXCHANGE RATES ON CASH                                                    53,034        (26,179)       (26,856)
                                                                               -----------    -----------    -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              (159,057)      (385,271)       610,213
CASH AND CASH EQUIVALENTS, beginning of year                                       321,038        706,309         96,096
                                                                               -----------    -----------    -----------
CASH AND CASH EQUIVALENTS, end of year                                         $   161,981    $   321,038    $   706,309
                                                                               ===========    ===========    ===========

</TABLE>



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


                                      F-8
<PAGE>   58



                                  MBf USA, INC.


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 1997 AND 1996


1.       DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

      DESCRIPTION OF BUSINESS

      MBf USA, Inc. and Subsidiaries (the "Company") is a manufacturer of high
      quality, disposable latex medical examination gloves and markets medical
      examination gloves in the United States. The Company sells its gloves
      primarily to the medical, dental and food service markets.

      In November, 1996, the Company adopted a plan to discontinue the Playboy
      (R) condom operations and has reflected it as such in the accompanying
      consolidated financial statements. The Company continued to distribute
      Playboy(R) condoms through June 30, 1997 (Note 3).

      The Company's factory in Indonesia, which manufactures medical examination
      gloves, was in the start-up phase of operations as of December 31, 1995,
      began production in April, 1996, and began shipping product in May, 1996.

      PRINCIPLES OF CONSOLIDATION

      The accompanying consolidated financial statements include the accounts of
      the Company and its wholly owned subsidiaries, American Health Products
      Corporation ("AHPC") and MBf America, Inc. (an inactive holding company),
      as well as its 70% owned Indonesian glove manufacturing subsidiary, PT MBf
      Buana Multicorpora ("PT Buana"). Accordingly, PT Buana's assets,
      liabilities, equity and minority interest are included in the consolidated
      financial statements of the Company. All significant intercompany
      transactions have been eliminated.

      MBf International Ltd., a Hong Kong corporation ("MBf International"),
      which holds the Series A common stock of the Company and is the majority
      shareholder of the Company, is a wholly owned subsidiary of MBf Holdings
      Sdn. Bhd. ("MBf Holdings"), a publicly traded company listed on the Kuala
      Lumpur Stock Exchange.

      MBf Holdings is committed and believes that it has the resources to
      provide the necessary level of financial support to the Company to enable
      it to pay its debts as they become due through December 31, 1998, or until
      the date when Wembley Rubber Products (M) Sdn. Bhd. ("Wembley") (Note 13)
      becomes the major shareholder of the Company, whichever is earlier.
      Wembley has agreed to assume the MBf Holdings corporate guarantees (see
      Notes 6 and 7).



                                      F-9
<PAGE>   59

      CASH AND CASH EQUIVALENTS

      The Company considers cash in banks and highly liquid debt instruments
      with a maturity of three months or less to be cash equivalents.

      INVENTORIES

      Inventories are valued at the lower of average cost or market.

      PROPERTY, PLANT AND EQUIPMENT

      Property, plant and equipment are recorded at cost. Depreciation is
      provided by both the straight-line and accelerated methods over lives
      ranging from 3 to 20 years. PT Buana's construction in progress is stated
      at cost. The accumulated costs are reclassified to the appropriate
      property, plant, and equipment account when construction is completed.

      REVENUES

      Revenues from product sales are recognized at the time the product is
      shipped from the Company's warehouse, or upon the customer's receipt of
      the goods, depending upon the terms of the sale.

      INCOME TAXES

      The Company records income taxes in accordance with Statement of Financial
      Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
      SFAS 109 utilizes the liability method and deferred taxes are determined
      based on the estimated future tax effects of differences between the
      financial statement and tax basis of assets and liabilities given the
      provisions of enacted tax laws. Deferred income tax provisions and
      benefits are based on the changes in the deferred tax asset or tax
      liability from period to period.

      NET INCOME (LOSS) PER SHARE

      Effective December 15, 1997, the Company adopted Statement of Financial
      Accounting Standards No. 128, "Earnings Per Share (EPS)" ("SFAS 128"),
      which requires dual presentation of basic and diluted earnings per common
      share for all periods presented. Basic EPS amounts are based on the
      weighted-average number of shares of common stock outstanding during each
      year while diluted EPS amounts are based on the weighted-average number of
      shares of common stock outstanding during the year and the effect of
      dilutive stock options and warrants. The weighted-average number of common
      shares and common share equivalents outstanding for each year are as
      follows:


                                      F-10
<PAGE>   60


<TABLE>
<CAPTION>
                                                        1997            1996            1995
                                                     ---------        ---------       ---------  
<S>                                                  <C>              <C>             <C>          
Basic weighted-average number of common
    shares outstanding                               4,312,132        3,661,052       2,432,462    
                                                                                                 
Dilutive effect of common share                                                                  
    equivalents                                         49,077             --              --    
                                                     ---------        ---------       ---------  
                                                                                                 
Diluted weighted-average number of                                                               
    common shares outstanding                        4,361,209        3,661,052       2,432,462  
                                                     =========        =========       =========  
</TABLE>




                                      F-11
<PAGE>   61




      Also, the Company had additional stock options and warrants of 229,324,
      291,824 and 422,948 at December 31, 1997, 1996 and 1995, respectively,
      which were not included in the computation of diluted earnings per share
      because the exercise price was greater than the average market price of
      the common shares.

      All share and per share information in the accompanying financial
      statements give retroactive effect of the 10-for-1 reverse stock split
      which occurred on December 18, 1995.

      USE OF ESTIMATES

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

      FAIR VALUE OF FINANCIAL INSTRUMENTS

      The following methods and assumptions were used to estimate the fair value
      of each class of financial instrument held by the Company:

      a.    CURRENT ASSETS AND CURRENT LIABILITIES--The carrying amount 
            approximates fair value due to the short maturity of these items;

      b.    LONG-TERM DEBT--The fair value of the Company's long-term debt is
            based on secondary market indicators. Since the Company's debt is
            not quoted, estimates are based on each obligation's
            characteristics, including maturities, interest rate, credit rating,
            collateral, amortization schedule and liquidity. The carrying amount
            approximates fair value; and

      c.    AMOUNTS DUE TO/DUE FROM AFFILIATES AND SHAREHOLDERS--Amounts due
            to/due from affiliates and shareholders are non-interest-bearing and
            do not specify maturity dates and, therefore, it is not practicable
            to estimate the fair value of these financial instruments.

      RECLASSIFICATIONS

      Certain prior-year items have been reclassified to conform with
      current-year presentations.

      FOREIGN CURRENCY TRANSLATION

      PT Buana's financial statements have been prepared from the records
      maintained in the Republic of Indonesia, the country in which PT Buana was
      established and operates. On July 1, 1997, the Company determined and
      changed its functional currency from the Indonesia rupiah to the United
      States dollar. This change in functional currency is primarily the result
      of the PT Buana operations becoming more dependent on US dollar
      denominated transactions and economic trends. In accordance with Statement
      of Financial 




                                      F-12
<PAGE>   62

      Accounting Standards No. 52, "Foreign Currency Translation" ("SFAS 52"),
      the Company recorded a gain of $277,035 during 1997 as a result of the
      remeasuring the foreign currency of record (rupiah) into the functional
      currency (US dollar).



      Gains and losses from foreign currency transactions are included in net
      income (loss) in the period in which they occur. For the years ended
      December 31, 1997, 1996 and 1995, the foreign exchange gain (loss)
      included in the determination of net income (loss) is $205,457, $(69,294)
      and $0, respectively.

      The Company did not use any derivative or financial instruments to manage
      its foreign-exchange exposures during 1995, 1996 and 1997. The Company is
      subject to foreign currency fluctuation risk in the regular course of
      business on sales, raw materials and fixed asset purchase transactions
      denominated in a foreign currency.

2.       COMMON STOCK

      The terms of the Series A common stock are substantially the same as the
      Company's common stock except:

      a.    Each share of Series A common stock is convertible into one share of
            the Company's common stock, $.01 par value. The Company has reserved
            1,252,538 shares of common stock for issuance upon conversion of the
            Series A common stock.

      b.    Series A common stock entitles MBf International, the majority
            shareholder of the Company, to elect all Class A directors, which
            represent a majority of the Company's Board of Directors and to vote
            with the holders of common stock as a single class with respect to
            any matters subject to a vote of the shareholders.

      On December 5, 1996, the shareholders approved an increase in the
      authorized common stock from 4,000,000 to 10,000,000 shares to allow the
      Company to have sufficient shares for issuance in connection with
      employees stock options, business acquisitions, the conversion of Series A
      common stock for common stock, public offerings, as well as other
      purposes.

3.       CORPORATE DEVELOPMENT

      DISTRIBUTION AGREEMENT

      The Company and MBf Health Products Sdn. Bhd. ("MBf Health") and MBf 
      Rubber Products Sdn. Bhd. ("MBf Rubber") were parties to a distributor
      agreement. The agreement provided that the Company would have exclusive 
      marketing rights in North America and South America for latex gloves
      manufactured and supplied by MBf Health and MBf Rubber through February, 
      1997. MBf Rubber ceased operations in 1995 and the distributor agreement 
      was terminated. Effective July 12, 1995, the Company entered into a new 
      five-year distributor agreement with MBf Health (now known as PIE 
      Healthcare), which was a subsidiary of MBf International. On August 16, 
      1995, MBf International sold MBf Health to Perusahaan Intan Emas Sdn. Bhd.
      ("PIE"), with the option to repurchase the 



                                      F-13
<PAGE>   63

      company. During October, 1995, PIE changed the name from MBf Health to PIE
      Healthcare Products Sdn. Bhd. ("PIE Healthcare"). The distributor
      agreement requires the Company to purchase a certain quantity of gloves
      each year. Revenues from product sales include sales of latex examination
      gloves sold under the terms of this agreement.


      DISCONTINUED OPERATIONS

      Effective December 31, 1993, the Company adopted a plan to discontinue
      operations of its wholly owned subsidiary, Disposable Garments, Inc.
      ("DGI"). DGI, through a supply and requirements agreement, distributed
      disposable medical garments to unaffiliated customers. Accordingly, DGI is
      reported as a discontinued operation in the accompanying consolidated
      financial statements. At December 31, 1995, there were no assets of DGI,
      and it was subsequently dissolved on December 2, 1996.

      In November, 1996, the Company reached an amicable settlement with Playboy
      Enterprises, Inc. to terminate their license agreement under which MBf
      USA, Inc. distributed Playboy(R) brand condoms in 15 countries. Under the
      negotiated agreement, MBf USA, Inc., until June 30, 1997, continued to
      sell Playboy(R) condoms in the countries where it had launched the
      product. Subsequent to June 30, 1997, MBf USA, Inc., is entitled to
      receive royalty revenues on sales of Playboy(R) condoms in these countries
      through June 30, 2000, and through June 30, 1998, for Playboy(R) condom
      sales in Japan. The Company does not anticipate that these royalties will
      be significant.

      In accordance with the termination agreement with Playboy Enterprises,
      Inc., the Company's Playboy(R) condom operations ceased June 30, 1997. As
      such, the Company has accounted for the Playboy(R) condom business as a
      discontinued operation effective December 31, 1996, and the disposal
      period through June 30, 1997.

      The loss from discontinued operations and loss from disposal of
      discontinued operations of DGI and the Playboy(R) condom business for the
      years ended December 31, 1997, 1996 and 1995, are summarized below:


<TABLE>
<CAPTION>
                                                    1997         1996         1995
                                                 ---------    ---------    --------- 
<S>                                              <C>          <C>          <C>       
Loss from discontinued operations-
    Playboy(R)Condoms                            $    --      $(840,792)   $(703,893)
                                                 =========    =========    ========= 
Loss from disposal of discontinued operations-
       DGI                                       $    --      $    --      $ (67,732)

       Playboy(R)Condoms                          (783,670)     (76,187)        --
                                                 ---------    ---------    --------- 
                                                 $(783,670)   $ (76,187)   $ (67,732)
                                                 =========    =========    ========= 

</TABLE>

                                      F-14
<PAGE>   64


      Effective on November 12, 1996, the Company adopted a plan to discontinue
      its Playboy(R) condom business. The accompanying financial statements
      include assets and liabilities of the discontinued condom operations which
      is detailed below:


<TABLE>
<CAPTION>
                                            1997             1996
                                         ---------         --------
<S>                                      <C>               <C>      
Assets-
    Current assets-
       Prepaid expenses                  $ 11,752          $   --         
       Trade accounts receivable, net      32,361           262,551       
       Inventories                           --               1,969       
                                         --------          --------       
                                           44,113           264,520       
    Other assets-                                                         
       Trademarks and license rights         --             267,251       
                                         --------          --------       
                     Total assets        $ 44,113          $531,771       
                                         ========          ========       
Liabilities-                                                              
    Current liabilities-                                                  
       Accounts payable                  $ 73,273          $302,416       
       Accrued returns                    185,134              --         
                                         --------          --------       
                     Total liabilities   $258,407          $302,416       
                                         ========          ========       
                                                                          
</TABLE>                                                  


      In 1995, trademarks and license rights were amortized on a straight-line
      basis over the period of the underlying agreement. Due to the exit of the
      condom business in 1996, the trademarks and license rights were amortized
      through June 30, 1997. Amortization expense of trademarks and license
      rights was $267,251 in 1997 and $37,722 in 1996.

      Revenues from the Playboy(R) condom business were $376,422, $1,380,435 and
      $2,078,096, for the years ended December 31, 1997, 1996 and 1995,
      respectively.

      During 1997, the Company changed its estimate of costs to dispose of its
      condom operations. This change resulted in the Company recording
      additional costs of $783,670 ($0.18) basic and diluted loss per share for
      the year ended December 31, 1997.

      RESTRUCTURE CHARGE

      In the second quarter of 1995, the Company incurred a restructuring charge
      which included the resignation of and severance payments to the
      Chairman/CEO, President/COO and CFO. The Board of Directors directed the
      Company to focus on its core businesses and to exit the nutritional
      product business, where sales were negligible and the entry costs were
      very high, which contributed to significant losses.

      The restructuring resulted in a one-time charge totaling $1,808,757, which
      primarily related to executive severance pay of approximately $570,000,
      inventory write-offs of approximately $440,000, other assets and
      intangible asset write-offs of approximately $200,000 and other costs of
      approximately $599,000. Substantially all such costs had been paid by
      December 31, 1995.




                                      F-15



<PAGE>   65

      INVESTMENT IN LSAI

      At December 31, 1997, the Company's investment in LSAI includes LSAI
      common stock, valued at its market value of $723,373 and a note receivable
      from LSAI of $353,123 for a total investment of $1,076,496. The Company
      believes the note receivable, which is carried at cost, approximates fair
      value. The Company has been subject to an agreement not to dispose of its
      shares of LSAI stock prior to July 8, 1997. Subsequent to that date, such
      shares of common stock are eligible for sale under Rule 144. During 1997,
      the Company sold 68,000 shares of LSAI which resulted in a gain of
      $79,483.

      The Company has adopted Statement of Financial Accounting Standards No.
      115, "Accounting for Certain Investments in Debt and Equity Securities"
      ("SFAS 115"), which requires that equity securities that have readily
      determinable fair values shall be classified as "available-for-sale" if
      not held for the objective of generating profits on short-term differences
      in price. Accordingly, the Company's common stock investment in LSAI is
      classified and treated as available for sale.

      SFAS No. 115 further requires that unrealized holding gains and losses
      related to available-for-sale securities shall be excluded from earnings
      and reported as a net amount in a separate component of shareholders'
      equity until realized. At December 31, 1997, the LSAI common stock had a
      market value of $723,373, which is $261,979 over its cost basis of
      $461,394. The unrealized gain of $261,979 is recorded as a separate
      component of shareholders' equity at December 31, 1997. At December 31,
      1996, there was not a material difference between the cost and market
      value of the Company's investment in LSAI common stock.

      INVESTMENT IN PT BUANA

      The Company entered into a Stock Acquisition Agreement with MBf
      International dated October 31, 1995, whereby MBf International exchanged
      its beneficial interest in common stock representing 70% of the
      outstanding common stock of PT Buana and a non-interest-bearing demand
      note in the principal amount of $737,769 ("Note"), for 255,072 shares of
      the Company's common stock having an aggregate value of $1,219,563.
      Because the Company and PT Buana are under common control, the assets and
      liabilities acquired were recorded at PT Buana's historical cost (see Note
      12).

      During June, 1997, the Company and the minority shareholders of PT Buana
      approved the increase in the capital stock of PT Buana from $500,000 to
      $2,500,000. To achieve this objective, PT Buana converted debt to equity
      which was owed to the Company and minority shareholders of $737,769 (the
      Note) and $316,187, respectively. Also, the Company and minority
      shareholders contributed cash to PT Buana in their proportionate share to
      bring the capital stock of PT Buana to $2,500,000.

      The factory had not begun production as of December 31, 1995, and was in
      the start-up phase of operation at that time. Accordingly, the factory had
      capitalized certain start-up costs incurred and began amortizing these
      costs over a one-year period upon commencement of operations in April,
      1996.



                                      F-16
<PAGE>   66





      At December 31, 1997 and 1996, the Company has recorded a minority
      interest in the PT Buana subsidiary of $1,130,051 and $221,174,
      respectively, as reflected in the consolidated balance sheets,
      representing the non-owned 30% interest in the factory. The minority
      interest of PT Buana is owned by two Indonesian banks financing its
      construction and operations.

4.       RELATED-PARTY TRANSACTIONS

      At December 31, 1997 and 1996, amounts due from/to affiliates consist of
the following:

<TABLE>
<CAPTION>
                                         1997         1996
                                       ---------    ---------
<S>                                    <C>          <C>      
Due from affiliates-
    Long term-
       MBf International               $ 200,000    $ 200,000
       MACC Partners                        --        348,707
       MBf Education                       2,286        1,503
       MBf Unit Trust                      4,599         --
                                       ---------    ---------
                     Total long term   $ 206,885    $ 550,210
                                       =========    =========
Due to affiliates-
    Current-
       MBf Rubber                      $  (8,008)   $ (10,145)
       MBf International                (170,198)     (57,916)
       MBf Holdings                         --         (4,432)
       MBf Insurans                         --            (66)
       MBf Management                    (50,666)     (39,984)
       MBf Finance                          --           (120)
       MBf Media                            --         (1,566)
       MBf Personal Care                 (55,297)    (119,146)
       MBf Printing                      (58,019)    (148,765)
       MBf Academy                          --           (218)
       MBf Leasing                          (685)        --
                                       ---------    --------- 
                     Total current     $(342,873)   $(382,358)
                                       =========    ========= 

</TABLE>


      Amounts due to MBf Personal Care Sdn. Bhd. ("MBf Personal Care") represent
      the liabilities owed for Playboy condom inventory purchases. MBf Personal
      Care is a subsidiary of MBf Capital Berhad, a publicly traded company on
      the Kuala Lumpur Stock Exchange, and owned approximately 32% by MBf
      Holdings. MBf Personal Care was granted the exclusive rights to
      manufacture Playboy(R) brand condoms for the Company.

      The amounts due from MBf International represent costs associated with the
      acquisition of AHPC in February, 1992. As the timing of repayment of the
      due from affiliate amounts is uncertain, the receivables from affiliates
      have been classified as long-term.



                                      F-17

<PAGE>   67


      The amounts due to MBf Printing, an MBf Holdings' affiliate, represent the
      cost of packaging materials and printing costs incurred for the condom and
      glove businesses.

      The Company has entered into a management contract with MBf Management, an
      affiliate of MBf Holdings. MBf Management charged the Company $10,682,
      $3,977 and $0 in 1997, 1996 and 1995, respectively, for their secretarial
      and other services.

      The amounts due to MBf Insurans, an MBf Holdings' affiliate, represent the
      cost of insuring inventories in transit. Amounts paid to MBf Insurans for
      this coverage were $35,516, $45,056 and $18,915 in 1997, 1996 and 1995,
      respectively.

      During 1994, the Company provided consulting services to MACC Partners, a
      subsidiary of MBf Holdings, for which MACC Partners agreed to pay
      $350,000; this amount was reduced to $348,707 at December 31, 1996, due to
      incidental expenses incurred by MBf USA, Inc. and the balance was fully
      settled during 1997.

      In October, 1995, the Company received a $1,200,000 loan from MBf
      International, which was subsequently converted into 250,980 shares of the
      Company's common stock (see Note 9).

      In January, 1997, the Company entered into a consulting and services
      agreement with Healthcare Alliance, Inc. ("Alliance"), a company owned by
      a director of the Company. The agreement engaged Alliance to assist the
      Company in marketing its products with the expressed purpose of
      negotiating and executing a purchase agreement with various healthcare
      group purchasing organizations. The Company paid Alliance $48,000 in 1997
      for its services.

5.       GOODWILL

      The excess purchase price over the value of the net assets of AHPC
      acquired in February, 1992, was recorded as goodwill in the accompanying
      consolidated balance sheets and is being amortized using the straight-line
      method over 40 years.

6.       TRADE NOTES PAYABLE TO BANKS

      Trade notes payable to banks consists of amounts financed through
      letter-of-credit arrangements which totaled $5,449,181 and $7,010,453 at
      December 31, 1997 and 1996, respectively. The Company's subsidiary, AHPC,
      has two bank letter-of-credit facilities available, one of these banks is
      an affiliated entity, MBf Bank of Tonga, a subsidiary of MBf Holdings. The
      letter-of-credit liabilities due to the nonaffiliated bank at December 31,
      1997 and 1996, totaled $3,087,547 and $3,849,826, respectively. The
      letter-of-credit liabilities due to MBf Bank of Tonga totaled $2,361,634
      and $3,160,627 at December 31, 1997 and 1996, respectively. All
      letter-of-credit liabilities are guaranteed by MBf Holdings. The
      unaffiliated bank facility is secured by inventory and accounts receivable
      of AHPC.

      In June, 1995, the Company entered into the letter-of-credit banking
      facility agreement with MBf Bank of Tonga, in the amount of Tonga dollars
      T$1,000,000 or approximately U.S. $800,000. On August 24, 1996, MBf Bank
      of Tonga approved an additional T$2 million letter-of-credit facility,
      bringing the total facility to T$3 million or approximately U.S. $2.4
      million. During 1996, the facility was increased to T$5.75 million or
      approximately U.S. $4.6 million. This facility is unsecured and guaranteed
      by MBf Holdings.


                                      F-18

<PAGE>   68

      As of December 31, 1997 and 1996, the Company was contingently liable for
      outstanding letters of credit totaling $2,182,726 and $1,725,414,
      respectively.


7.       NOTES PAYABLE

      Notes payable and long-term obligations as of December 31, 1997 and 1996,
consist of the following:


<TABLE>
<CAPTION>
                                                                                      1997            1996
                                                                                  ------------    ------------
<S>                                                                               <C>             <C>         
Borrowings under a bank revolving line-of-credit agreement with available
    borrowings up to $2,500,000 at December 31, 1997, and December 31, 1996,
    bearing interest at the prime rate plus 3% (11.50% at December 31, 1997),
    secured by inventories and accounts receivable, guaranteed by MBf Holdings    $  2,450,000    $  2,405,000
PT  Buana syndicated term loan, bearing interest at the Indonesian prime rate
    (approximately 13.4% at December 31, 1997) secured by land, machinery and
    equipment, accounts receivable and the common stock equity of PT Buana,
    guaranteed by MBf Holdings and the minority shareholders of PT Buana,
    payable in six semiannual installments, due November, 2000                       5,075,000       6,500,000
PT  Buana short-term bank loan, bearing interest from 11% to 15%, due November,
    1997, plus penalty interest of 2% per month subsequent to due date, secured
    by a corporate guarantee of the Company                                          2,000,000            --
Subordinated debentures convertible into warrants to purchase 80,000 shares of
    common stock at $25.00 per share, interest payable quarterly at prime plus
    1.5% (10.0% at December 31, 1997) due November, 2001                             2,000,000       2,075,000
Automobile installment bank loan, bearing interest at 8.25%, secured by an
    automobile, final installment due in May, 2000                                      25,564          33,046
Insurance premium financing loans, bearing interest at 7% to 8.5%,
    payable in monthly installments through October, 1999                              808,962            --
                                                                                  ------------    ------------
                                                                                    12,359,526      11,013,046

Less-Current portion                                                                (6,711,659)     (3,914,914)
                                                                                  ------------    ------------
                     Long-term obligations                                        $  5,647,867    $  7,098,132
                                                                                  ============    ============
</TABLE>


      The bank revolving line-of-credit agreement noted above contains covenants
      which require, among other things, maintenance of financial ratios,
      limitation on additional 


                                      F-19

<PAGE>   69


      borrowings, investments and capital expenditures. At December 31, 1997,
      the Company was in compliance with all debt covenants.

      On December 31, 1997, the Company renewed its bank facility for three
      years through December 31, 2000, with a yearly commitment renewal option.
      The new facility maintains the existing borrowing levels for
      letters-of-credit and line of credit borrowings in the aggregate amount of
      $7,900,000.



      The PT Buana debt consisted of a syndicated loan facility with three
      Indonesian banks amounting to a total credit facility of $6.5 million. At
      December 31, 1997 and 1996, $5,075,000 and $6,500,000, respectively, was
      outstanding on this debt, which was used for the purchase of assets,
      construction and start-up operation of the Indonesian factory.

      PT Buana obtained a six-month bridging loan in the amount of $2.0 million
      in April, 1997. PT Buana was unable to repay the loan when due in
      November, 1997, and a penalty interest rate of an additional 2% per month
      was instituted.

      The principal portion of long-term debt becomes due as follows:
     
<TABLE>     
<S>                                       <C>       
           Fiscal year ending-                        
           1999                           $2,069,029  
           2000                            1,578,838  
           2001                            2,000,000  
                                          ----------  
                                          $5,647,867  
                                          ==========  
</TABLE>


      OTHER LIABILITIES

      During 1997, PT Buana borrowed funds from its minority shareholders to
      make payment on its syndicated term loan. At December 31, 1997 and 1996,
      PT Buana owes $608,814 and $322,660, respectively, to its minority
      shareholders. These shareholder loans are interest bearing at 13.5% and
      are classified as long-term liabilities since a formal repayment plan has
      not been scheduled.

8.       COMMITMENTS AND CONTINGENCIES

      LITIGATION

      Over the last several years, numerous product liability lawsuits have been
      filed against suppliers and manufacturers of latex gloves alleging, among
      other things, adverse allergic reactions. AHPC is one of numerous
      defendants that have been named in such lawsuits. At December 31, 1997,
      there were seven lawsuits outstanding against AHPC. During November, 1997,
      AHPC fully settled thirteen claims for a nominal sum. The said claimants
      alleged adverse reactions to latex glove products allegedly distributed by
      AHPC. AHPC carries product liability insurance. Management believes all
      legal claims are adequately provided for, and if not provided for, are
      without merit, or involve such amounts that would not materially adversely
      affect the Company's results of operations or financial condition.



                                      F-20
<PAGE>   70


      SIGNIFICANT CONTRACTS

      In March, 1994, the Company entered into a contract with an individual to
      serve as a spokesman for the Company which required annual payments
      totaling approximately $250,000 through April, 1998. As of December 31,
      1996, the Company had paid $456,250 of the $1,000,000 total contracted
      amount, and had accrued for $206,250 of past-due amounts owed to the
      spokesman in anticipation of a settlement agreement with such spokesman.
      In February, 1997, the Company reached an agreement with this individual
      to pay $200,000 as final settlement and termination of all future
      contractual obligations.


      SIGNIFICANT CUSTOMERS

      During 1997, two of the Company's customers accounted for 37.6% and 31.0%
      of net sales, respectively. These customers together accounted for 66.8%
      of accounts receivable at December 31, 1997. During 1996, two of the
      Company's customers accounted for 34.1% and 29.2% of net sales,
      respectively. These customers together accounted for 63.3% of accounts
      receivable at December 31, 1996. During 1995, two of the Company's
      customers accounted for 28.8% and 24.8% of net sales, respectively. These
      customers together accounted for 38.6% of accounts receivable at December
      31, 1995.

      OPERATING LEASES

      The Company conducts all of its operations in leased facilities. Total
      rent expense, net of rental income, included in the accompanying
      statements of income for 1997, 1996 and 1995 was $296,358, $348,227 and
      $385,477, respectively. The following summary presents future minimum
      rental payments required under the terms of present operating leases:


<TABLE>
<CAPTION>
          Fiscal year-
<S>                                  <C>     
              1998                   $353,908
              1999                    235,015
              2000                     66,477
                                     --------
                                     $655,400
                                     ========

</TABLE>


      The Company subleases office space in New Jersey and Florida. Under these
      sublease agreements, the Company will receive rental income in an amount
      equal to the Company's rental expense. The Company's lease and sublease
      agreements on the New Jersey and Florida office space expire in November
      1999 and February 1999, respectively. The following summary presents
      future rental income under the two sublease agreements:


<TABLE>
<CAPTION>
            Fiscal year-
<S>                           <C>     
                 1998         $159,216
                 1999           85,838
                              --------
                              $245,054
                              ========
</TABLE>


                                      F-21
<PAGE>   71



9.       SHAREHOLDERS' EQUITY

      In December, 1995, the Board of Directors approved that the Company
      re-incorporate in Maryland. In connection with the re-incorporation, the
      Board approved and the Company effected a 10-for-1 reverse stock split of
      its Series A common stock and common stock. As a result, each shareholder
      received one share of Series A common stock or common stock of the Company
      successor, a Maryland corporation, subsequent to the merger, for every 10
      shares of Series A common stock or common stock held by such shareholder.
      Additionally, the common stock underlying all of the Company's outstanding
      warrants and options were adjusted to reflect the 10-for-1 reverse stock
      split.



      In October, 1995, the Company issued 250,980 shares of common stock to MBf
      International in exchange for $1,200,000. MBf International loaned the
      Company $1,200,000 to pay for AHPC's 7% cumulative preferred stock having
      a value of $1,200,000 which the Company had purchased on September 29,
      1995. MBf International agreed to accept shares of the Company's common
      stock having a value of $1,200,000 in satisfaction of the Company's
      indebtedness to MBf International.

      In October, 1995, the Company issued 255,072 shares of common stock in
      exchange for a 70% equity interest in PT Buana, an Indonesian glove
      manufacturing factory, and a note receivable in the amount of $737,769.

      On June 17, 1996, the Company issued (a) 488,953 shares of common stock to
      MBf International, Ltd. for cash consideration of Malaysian ringgit
      3,500,000 which approximated U.S.$1.4 million; and (b) 296,296 shares of
      common stock in satisfaction of trade payables of $1,000,000 due to PIE
      Healthcare.

      On August 20, 1996, the Company issued an additional 672,269 shares of
      common stock to MBf International Ltd. for a cash consideration of U.S.$1
      million.

      As of December 31, 1994, there were warrants outstanding to purchase 2,300
      units at $30.00 (the "$30.00 Units") per unit through October, 1996. Each
      unit consisted of four shares of common stock and, until January 5, 1993,
      each unit included two warrants, with each warrant exercisable to purchase
      one share of common stock at $15.00. All of these unexercised warrants
      expired in 1995.

      In November, 1994, warrants were issued to purchase 7,500 shares of the
      Company's common stock at an exercise price of $22.20. These warrants are
      exercisable through November, 1999.

      In 1994, warrants to purchase 185,000 shares of the Company's common stock
      were issued at an exercise price of $15.00. During 1997 and 1995, 50,000
      and 10,000, respectively, of these warrants, convertible into shares of
      common stock, expired. The remaining warrants are currently exercisable at
      December 31, 1997, and expire in March, 1999.



                                      F-22
<PAGE>   72

      A summary of warrant activity since December 31, 1994, is as follows:

<TABLE>
<CAPTION>
                                                           $15.00        $30.00        $22.20
                                                          WARRANTS        UNITS       WARRANTS
                                                          --------       ------       --------
<S>                                                       <C>            <C>          <C>  
Balance, December 31, 1994                                 185,000        2,300        7,500
    Expirations                                            (10,000)      (2,300)           -
                                                           -------       ------        -----
Balance, December 31, 1995 and 1996                        175,000            -        7,500
    Expirations                                            (50,000)           -            -
                                                           -------       ------        -----
Balance, December 31, 1997                                 125,000            -        7,500
                                                           =======       ======        =====

</TABLE>


      At December 31, 1997, the Company had outstanding debt which is
      convertible at any time at the noteholder's option (see Note 7) into
      warrants to purchase 80,000 shares of common stock at $25.00 per share.
      These convertible debentures expire in November, 2001.

      The Company has reserved common stock for issuance upon conversion of all
      outstanding warrants.

10.      STOCK OPTION PLAN

      On December 5, 1996, the Board of Directors approved an amendment and
      restatement of the Company's Omnibus Equity Compensation Plan (the
      "Plan"), which authorized and adjusted the number of shares issuable to
      400,000. Effective on July 23, 1996, the Board of Directors approved the
      repricing of all current director and employee options to $2.75, the
      closing market price on the date the repriced options were granted.





                                      F-23
<PAGE>   73


      A summary of options outstanding under the Plan is as follows:


<TABLE>
<CAPTION>
                                                      OUTSTANDING           EXERCISE
                                                        OPTIONS              PRICE           EXPIRATION
                                                      ------------       -------------       ----------
<S>                                                   <C>                 <C>                 <C>   
    Balance, December 31, 1994                            288,755         $5.90-$25.00

        Grants                                             62,675          2.63-16.80            2005
        Rescissions/expirations                          (200,981)         9.40-22.80         2002-2005
        Exercises                                            (500)            5.90               2001
                                                         --------         ------------

    Balance, December 31, 1995                            149,949          2.63-25.00

        Grants                                             35,000             2.75               2006
        Rescissions/expirations                            (3,500)        13.40-22.80         2003-2005
        Repricing of options                              127,624             2.75            2003-2005
        Rescission of repriced options                   (127,624)         7.80-25.00         2003-2005
                                                         --------         ------------

    Balance, December 31, 1996                            181,449          2.63-14.40

        Grants                                             92,500             3.66               2007
        Rescissions/expirations                           (24,833)         2.75-3.66          2004-2007
        Exercises                                          (3,334)            2.75               2006
                                                         --------         ------------

    Balance, December 31, 1997                            245,782         $2.63-$14.40
                                                         ========         ============
</TABLE>


      The exercise price of the stock options granted in 1997, 1996 and 1995 was
      established at the market price on the date of the grants. Of the 245,782
      options outstanding at December 31, 1997, 195,309 are currently
      exercisable, 29,695 become exercisable in 1998, and 20,778 become
      exercisable in 1999. The Company has reserved common stock for issuance
      upon conversion of these options.

      The Company accounts for employee stock options under APB Opinion 25, as
      permitted under generally accepted accounting principles. Accordingly, no
      compensation cost has been recognized in the accompanying financial
      statements related to these options. Had compensation costs for these
      options been determined consistent with Statement of Financial Accounting
      Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"),
      which is an accounting alternative that is permitted but not required, the
      Company's net income (loss) and net income (loss) per share (basic and
      diluted) would have been $397,292 and $(1,409,603) and $.09 and $(.39),
      for 1997 and 1996, respectively.

      Since SFAS 123 does not apply to options granted prior to 1995, the pro
      forma disclosure is not likely to be indicative of pro forma results which
      may be expected in future years. This primarily relates to the fact that
      options vest over several years and pro forma compensation cost is
      recognized as the options vest; another factor is that additional awards
      may also be granted in those years.



                                      F-24
<PAGE>   74

      The fair value of each option is estimated on the date of grant based on
      the Black-Scholes option pricing model assuming, among other things, a
      risk-free interest rate of 6.12% and 7.5% for 1997 and 1996, respectively;
      a 0.00% distribution yield; expected volatility of 90% and 78% in 1997 and
      1996, respectively, and an expected life of three years. The options
      granted to employees in 1997 and 1996 vest ratably over three years. The
      Company has estimated the value of these options assuming a single
      weighted-average expected life of three years for each award granted.

      Options outstanding at December 31, 1997:

<TABLE>
<CAPTION>
                                                               WEIGHTED                            WEIGHTED
      RANGE OF              NUMBER                             AVERAGE            NUMBER            AVERAGE
      EXERCISE          OUTSTANDING AT        REMAINING        EXERCISE       EXERCISABLE AT       EXERCISE
       PRICES           DEC. 31, 1997           LIFE            PRICE         DEC. 31, 1997          PRICE
      --------          -------------         ---------        --------      -------------         --------
<S>                     <C>                   <C>              <C>           <C>                   <C>  
   $2.63 - $2.75             136,458          6-9 years          $2.75             141,040           $2.75
       $3.66                  92,500           9 years           $3.66              37,445           $3.66
       $5.90                  10,000          1.5 years          $5.90              10,000           $5.90
       $14.40                  6,824          1.5 years         $14.40               6,824          $14.40
    ------------    ----------------         -----------        ------      --------------         --------
    $2.63-$14.40             245,782         1.5-9 years         $3.54             195,309           $3.49
    ============    ================         ===========        ======      ==============         =======

</TABLE>

11.      INCOME TAXES

      The effective income tax rates differ from the statutory federal income
      tax rate of 34% for the years ended December 31, 1997, 1996 and 1995. A
      reconciliation of the statutory rate with the effective rate follows:

<TABLE>
<CAPTION>
                                                          1997           1996           1995
                                                      -----------    -----------    -----------
<S>                                                   <C>            <C>            <C>   
Tax expense (benefit) at statutory rate of 34%        $    48,851    $  (104,000)   $(1,653,897)
Goodwill amortization                                      15,602         57,778         51,207
Refundable income taxes/tax benefit                      (322,042)      (198,282)          --
Increase (decrease) in deferred tax asset valuation
    allowance                                               6,702        211,411      1,602,690
Utilization of loss carryforwards                         (82,890)          --             --
Other                                                      11,735        (23,796)          --
                                                      -----------    -----------    -----------
                     Total                            $  (322,042)   $   (56,889)   $      --
                                                      ===========    ===========    =========== 
</TABLE>

      The Company has net operating loss carryforwards at December 31, 1997, of
      approximately $4,300,000 which are available to reduce federal taxable
      income in future periods and will begin expiring in 2004. In accordance
      with federal tax regulations, usage of the net operating loss
      carryforwards are subject to limitations in future years if certain
      ownership changes occur. Because of these factors, the utilization of the
      net operating loss at December 31, 1997, may be significantly limited.

 


                                     F-25
<PAGE>   75
     Significant components of the Company's deferred tax assets and
liabilities are as follows:


<TABLE>
<CAPTION>
                                                                     1997           1996
                                                                 -----------    -----------
<S>                                                              <C>            <C>        
Current-
    Accruals not deductible until paid                           $   411,000    $   229,701
    Net operating loss carryforwards                               1,650,000      2,000,000
    Net operating loss carryforwards--PT Buana                       220,000        105,400
    Other current liabilities--PT Buana                                 --          (46,507)
    Inventory                                                        133,000           --
    Allowance for doubtful accounts                                   81,000         27,710
    Valuation allowance                                           (2,275,049)    (2,257,411)
                                                                 -----------    -----------
                     Total net current deferred tax assets       $   219,951    $    58,893
                                                                 ===========    =========== 
Noncurrent-
    Difference between book and tax basis of
       property, plant and equipment                             $   (96,864)   $  (187,000)

    Other noncurrent assets--PT Buana                                 29,747           --
    Other noncurrent liabilities--PT Buana                              --          (13,286)
                                                                 -----------    ----------- 
                     Total noncurrent deferred tax liabilities   $   (67,117)   $  (200,286)
                                                                 ===========    =========== 
</TABLE>


      The Company establishes valuation allowances in accordance with the
      provisions of SFAS 109. The Company continually reviews the adequacy of
      the valuation allowance and is recognizing these benefits only as
      reassessment indicates that it is more likely than not that the benefits
      will be realized.




                                     F-26

<PAGE>   76


12.   SUPPLEMENTAL CASH FLOW INFORMATION

      The acquisition of PT Buana on October 31, 1995, involved the issuance of
      the Company's common stock and was accounted for as follows:

<TABLE>
<S>                                                               <C>        
Assets acquired-
    Note receivable                                                $   737,769
    Prepaid expenses and other current assets                           43,785
    Land, land improvements and construction in progress             4,556,984
    Other assets                                                        11,208
    Accounts payable and accrued expenses assumed                     (156,375)
    Other current liabilities assumed                               (2,940,919)
    Other noncurrent liabilities assumed                            (1,155,597)
                                                                   -----------
                                                                   $ 1,096,855
                                                                   ===========
Common stock issuance allocated to-
    Common stock                                                   $     2,551
    Additional paid-in capital                                       1,094,304
                                                                   -----------
                                                                   $ 1,096,855
                                                                   ===========
Other noncash investing and financing activities are as follows-
    Repayment of note receivable                                   $ 1,500,000
    Conversion of loan to common stock                               1,200,000
                                                                   ===========
</TABLE>


      Cash paid for interest on debt outstanding for the years ended December
      31, 1997, 1996 and 1995 was $1,488,211, $1,493,782, and $730,405,
      respectively.

      Cash paid for income taxes during the year ended December 31, 1995, was
      approximately $75,000. There were no income taxes paid during 1997 or
      1996.

      During June, 1997, the Company's 70% owned subsidiary, PT Buana, converted
      debt obligations, owed to its minority shareholders, to equity in the
      amount of $316,187.

      At December 31, 1997, the Company recorded an unrealized gain in
      shareholders' equity on the market value of the common stock in LSAI
      exceeding its cost in the amount of $261,979.

      The following represents significant related-party operating transactions
      during the years ended December 31, 1997, 1996 and 1995, which are
      included in the consolidated statements of cash flows as amounts due
      (from) to affiliates under the cash flows from operating activities.





                                     F-27
<PAGE>   77

<TABLE>
<CAPTION>
                                                      1997             1996              1995
                                                    --------        ----------       ------------ 
<S>                                                 <C>             <C>              <C>         
Operating cash transactions-
    Purchases from affiliates                       $240,654        $2,938,793       $  8,696,520
    Cash payments                                   (796,317)       (1,653,723)       (10,840,530)
    Cash receipts                                    859,503                 -                  -
                                                    --------        ----------       ------------ 
Amounts due (from) to affiliates                    $303,840        $1,285,070       $ (2,144,010)
                                                    ========        ==========       ============ 

</TABLE>


13.      SHAREHOLDER TRANSACTION

      In May, 1997, the Company announced that its majority shareholder, MBf
      International, had entered into two separate agreements with its latex
      powder-free supplier, Wembley, which called for the following:

      a.    MBf International selling all of the Company's Series A common stock
           (1,252,538 shares) to Wembley for approximately $6.27 million; and

      b.    The purchase of 2,500,000 shares of the Company's unregistered
            common stock by Wembley at a price of $2.70 per share.

      Currently, the date of closure has been extended to the end of March,
      1998, due to the nonfulfillment of certain conditions precedent to
      closing.

14.      GEOGRAPHIC SEGMENT INFORMATION (CONSOLIDATED)

      The United States is considered the country of origin for all of the
      Company's revenues for the three years presented herein, including exports
      from the U.S. Identifiable assets at December 31, 1997, consist of the
      following:


<TABLE>
<CAPTION>
                                               UNITED STATES         INDONESIA           TOTAL
                                               -------------        -----------       -----------
<S>                                             <C>                <C>                <C>        
   Current assets                               $14,771,693        $  1,401,340       $16,173,033
   Fixed assets                                     177,802          11,545,597        11,723,399
   Other assets                                   1,590,253              44,560         1,634,813
                                                -----------         -----------       -----------
   Consolidated total                           $16,539,748         $12,991,497       $29,531,245
                                                ===========         ===========       ===========
</TABLE>


      Identifiable assets at December 31, 1996, consist of the following:


<TABLE>
<CAPTION>
                                               UNITED STATES         INDONESIA           TOTAL
                                               -------------        -----------       -----------
<S>                                             <C>                <C>                <C>        
   Current assets                               $13,118,338        $  1,297,956       $14,416,294
   Fixed assets                                     258,859           9,322,989         9,581,848
   Other assets                                   3,339,992             175,490         3,515,482
                                                -----------         -----------       -----------
   Consolidated total                           $16,717,189         $10,796,435       $27,513,624
                                                ===========         ===========       ===========
</TABLE>


15.      ASIAN ECONOMIC EVENTS

      The Asian Pacific region is currently experiencing an economic situation
      that has been characterized by reduced activity, illiquidity in certain
      sectors, volatile foreign currency 





                                     F-28
<PAGE>   78


      exchange, interest rates, and stock markets. The Company will likely be
      affected by the region's unstable economy and it is not possible to
      determine the effect a continuation of the economic crisis may have. The
      ultimate outcome of this matter cannot presently be determined. The
      financial statements do not include any adjustment that might result from
      these uncertainties. Related effects will be reported in the financial
      statements as they become known and estimable.



16.      NEW ACCOUNTING PRONOUNCEMENTS

      COMPREHENSIVE INCOME

      In June, 1997, the Financial Accounting Standards Board issued Statement
      of Financial Accounting Standards No. 130 ("SFAS No. 130"), "Reporting
      Comprehensive Income," which establishes standards for reporting of
      comprehensive income. This pronouncement requires that all items
      recognized under accounting standards as components of comprehensive
      income, as defined in the pronouncement, be reported in a financial
      statement that is displayed with the same prominence as other financial
      statements. Comprehensive income includes all changes in equity during a
      period except those resulting from investments by shareowners and
      distributions to shareowners. The financial statement presentation
      required under SFAS No. 130 is effective for all fiscal years beginning
      after December 15, 1997. The Company will adopt SFAS No. 130 in 1998. The
      impact of adopting this pronouncement has not been determined.

      SEGMENT REPORTING

      In June, 1997, the Financial Accounting Standards Board issued Statement
      of Financial Accounting Standards No. 131 ("SFAS No. 131"), "Disclosure
      About Segments of an Enterprise and Related Information," which
      establishes standards of reporting by publicly held business enterprises
      and disclosure of information about operating segments in annual financial
      statements issued to shareowners. Operating segments, as defined in the
      pronouncement, are components of an enterprise about which separate
      financial information is available that is evaluated regularly by the
      Company in deciding how to allocate resources and in assessing
      performance. The financial information is required to be reported on the
      basis that is used internally for evaluating segment performance and
      deciding how to allocate resources to segments. The disclosures required
      by SFAS No. 131 are effective for all fiscal years beginning after
      December 15, 1997. The Company will adopt SFAS No. 131 in 1998. This
      pronouncement will have an effect on the Company's reporting in the
      subsequent periods; however, the impact of adopting this pronouncement has
      not been determined.




                                      F-29