<PAGE>

                         U.S. Securities and Exchange Commission
                                 Washington, D.C. 20549

                                      FORM 10-KSB

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

                   For the Fiscal Year Ended December 31, 1998

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d)
        OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the Transition Period from    N/A    to    N/A

                             Commission File No. 33-97156


                                 WHITEWING LABS, INC.
                    (Name of small business issuer in its charter)

          Delaware                                            95-4437350
    (State or other jurisdiction of                        (I.R.S. Employer
    incorporation or organization)                       Identification Number)

    15455 San Fernando Mission Blvd., #105, Mission Hills, California   91345
       (Address of principal executive offices)                       (Zip Code)

    Issuer's Telephone Number:  (818) 898-2167

            Securities registered under Section 12(b) of the Exchange Act:

                                          None

            Securities registered under Section 12(g) of the Exchange Act:

                            Common Stock, $.001 par value
                                    (Title of Class)

    Check whether the issuer (1) filed all reports required to be filed by
Section 12 or 15(d) of the Exchange Act during the past 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 [  ]

    Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and disclosure 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-KSB
or any amendment to this Form 10-KSB.  [X]

    The issuer's revenue for the year ended December 31, 1998 was $ 3,934,847.

    The aggregate market value of the voting stock held by non-affiliates as of
February 26, 1999, computed by reference to the price at which the stock was
sold, or the average closing bid and asked quotations of such stock, was
$1,267,672.

DOCUMENTS INCORPORATED BY REFERENCE:  None


<PAGE>


                                   PART I

Item 1.  Description of Business.

General
    Whitewing Labs, Inc. (the "Company" or "Whitewing") develops, seeks to
acquire through license, markets and sells nutritional supplements for sale to
the over age forty market primarily in the United States.  This market is the
fastest growing segment of the population and a segment for whom quality of life
has become one of the most important issues associated with aging.  Direct mail,
magazine advertisements and electronic direct marketing of product advertising
are the primary vehicles used by the Company to reach this expanding population
segment.  Utilizing formulations that include only herbs and other natural
ingredients, the Company's products are intended to offer alternatives to
conventional treatments for symptoms associated with the aging process.
Customers confronted with concerns such as a lack of convenient transportation,
unsafe shopping areas, and the loss of personal mobility, also enjoy the added
benefit of ordering and receiving the Company's products in the comfort and
security of their own homes.

    Whitewing Labs was incorporated under the laws of the State of California on
July 29, 1993, initially as a wholly-owned subsidiary of Acacia Research
Corporation, a California corporation ("Acacia").  The Company was incorporated
under the laws of the State of Delaware on December 13, 1995, in order to
participate in the reincorporation of Whitewing Labs in the State of Delaware
(the "Reincorporation").  In connection with the Reincorporation, which became
effective on February 9, 1996, Whitewing Labs merged with and into the Company,
which was the surviving corporation in the merger, and the holders of all of
Whitewing Labs' securities received or became entitled to purchase three shares
of the Company's Common Stock for every two shares of Whitewing Labs' common or
preferred stock outstanding or issuable upon exercise of outstanding stock
options.

    On February 14, 1996, the Company's Registration Statement on Form S-1
became effective under the Securities Act of 1933, pursuant to which the Company
completed its initial public offering, selling 1,035,000 shares of Common Stock
at $5.00 per share and 1,035,000 Common Stock purchase warrants ("Warrants") at
$.20 per Warrant, generating aggregate net proceeds of approximately $4,270,000,
after offering costs and underwriter discounts of $1,111,752.  Two Warrants
entitle the holder to purchase one share of the Company's Common Stock at a
price of $3.00 (reduced from $7.00) during the three year period ending February
9, 2000 (extended from February 9, 1999), and may be redeemed by the Company
under certain circumstances.  See Item 5, "Market for Registrant's Common Stock
and Related Stockholder Matters."


Market

    Census data indicates that the U.S. population includes more than 40 million
men between the ages of 45 and 85.  That number is projected to increase to 48
million by the year 2000.  Women between the ages of 55 and 85 now number
approximately 50 million, and are expected to number more than 54 million by the
year 2000.

    Most adults approaching their 80's and 90's experience health disorders.
The U.S. Food and Drug Administration estimates that 80% of all men will
eventually experience urination difficulty, increased frequency or urgency of
urination or other prostate symptoms.  Moreover, according to health experts,
more than half of the men between the ages of 40 and 70 experience some degree
of sexual impotence.  All women experience menopause, although each woman
experiences the transition to middle age individually with different degrees of
the symptoms, which include dizziness, hot flashes and fatigue, experienced over
varying time periods and at different ages.

    Management believes that the growth of the nutritional supplement industry
is due primarily to heightened public awareness of the positive effects of
vitamins and other nutritional supplements.  Many individuals are now using
nutritional supplements as a means of preventive health care.  Retail sales of
nutritional supplements increased from approximately $3.5 billion in 1991 to
approximately $4.2 billion in 1993, as reported by The Overview of Nutritional
Supplement Market prepared by the Council for Responsible Nutrition.
Furthermore, industry trade sources estimated that worldwide sales of
nutritional supplements were $4.7 billion in 1994 and $5.3 billion in 1995,
respectively.


                                       2

<PAGE>

Marketing Strategy

    The Company's strategic marketing plan utilizes a two-pronged approach.  The
first approach (or "front-end" component) entails efforts to capture new
customers from the target population through electronic in-home delivery of
product advertising, direct mail and print advertising.  Selection of airings
for electronic media placements and mailing lists for direct mail, is based upon
response rates to date.  The Company determines which of the electronic media
placements or mailing lists tested have the most potential for generating
meaningful sales, and thus should be used on a more extensive basis.  In
addition, the Company has placed display advertisements in a variety of local
and national magazines.  Electronic in-home delivery of product advertising
includes use of television and the internet.  Direct mail advertising includes
postcard inserts, tear sheets, holiday special mailers and the Journal of
Natural Health "TM".  During 1998, the Company reacted to declining response
rates in certain segments of its mail order operations by reducing advertising
and selling costs from $3,534,631 in 1997 to $2,969,774 in 1998.  The strategy
for 1999 involves a more rigorous selection process in identifying and
implementing advertising programs designed to attract and retain new customers.

    The second part of the Company's approach, and the potentially more
profitable element of its marketing strategy, involves generating repeat orders
from existing customers, since the selling and advertising costs incurred in
these orders are expected to continue to be considerably lower.  Four mailings
per year to its customer base are planned for the Company's in-house Journal of
Natural Health "TM", which promotes products available from the Company.  In
addition, the Company offers two or three holiday sales per year.  The Company's
products are sold with an unconditional, money back guarantee which alleviates
the basis for customer complaints.  Product returns through December 31, 1998,
have been less than 3% of sales.

Products

    The Company's two main products, which accounted for 48% and 32%
respectively of the Company's total revenue for the year ended December 31,
1998, are:

    PROSTSAFE "R":  Formulated to alleviate the symptoms associated with
prostatitis and benign prostate hyperplasia ("BPH"). Helps to reduce troublesome
symptoms such as urination difficulties, increased frequency and urgency of
urination, and low back pain.  A blend of natural herbs, vitamins, minerals and
amino acids.

    SEXHILARATE "R": Assists in increasing male virility and decreasing sexual
dysfunction by working to improve blood flow, increase hormone production,
stimulate the libido and restore physical stamina.  A unique combination of
herbs, vitamins and minerals.

    Other products currently available from the Company include the following:

    ARTHRIVIVE "R":  Addresses the internal problems that cause joint pain and
discomfort.  Arthrivive( contains natural anti-inflammatories that help to
relieve arthritic pain, reduce stiffness and inflammation, and improve
flexibility.  Contains herbs, vitamins and minerals.

    ARTHRIVIVE "R" CREAM:  Applied topically, this cream penetrates the skin
quickly to relieve minor arthritic aches and pains in muscles and joints.
Contains natural pain-relieving agents.

    DE-STRESS "TM":  Helps to ease tension and to meet the increased nutritional
demands that result from environmental, physical and emotional stress.  A
combination of vitamins, minerals and herbs.

    CHOLEST-LESS "TM":  Includes plant extracts and vitamins to support control
and lowering of cholesterol levels when added to a low fat, low cholesterol diet
and an exercise program.

    COLON PURE "TM":  Formulated to promote proper balance of intestinal flora,
relieve constipation and diarrhea, and guard against hemorrhoids.

    DIMI-OXIDE "TM":  Formulated to protect the body against free-radical damage
and associated tissue and cell destruction.  A combination of antioxidant
vitamins, minerals and herbs.
                                      3

<PAGE>

    ENERG-EYES "TM":  A nutritional supplement formulated to help protect vision
and reduce free radical production.  It includes minerals, plant extracts, amino
acids and vitamins are designed to help protect the strength of the vascular and
capillary walls that supply the eyes.

    EVENING GLOW "TM":  Contains botanicals and nutrients formulated to boost
the level of hormones that aid in sexual arousal with the intention of
increasing the circulating levels of estrogen and testosterone.

    IMMUNE DEFENSE "TM":  Combines important nutrients formulated to help the
body's immune system combat viruses, bacteria, foreign proteins, yeasts and
fungi.  Immune Defense "TM" can increase immune system activity as well as
strengthen the fundamental organs and glands involved in the body's immune
response.

    OSTEO SAFE "R":  Contains bone-supporting minerals, herbs and vitamins to
help ensure healthy bones.  Contains calcium, flaxseed, magnesium and other
ingredients which help preserve bone mass.

    POWERMIND "TM":  Helps improve concentration and cognition, enhance memory,
sharpen the thinking process, and prevent deterioration of brain cells.
Includes vitamins, minerals, herbs, and amino acids that work to restore healthy
neurotransmitter levels and optimize brain function.

    PRESSURE CONTROL "TM":  Formulated from high quality herbal extracts,
minerals and vitamins to promote the prevention of hypertension when used in
conjunction with proper exercise and diet.

    PROPAUSE "R":  Formulated to ease menopausal symptoms.  Propause "R" works
gently and naturally to help regulate hormonal imbalances, reduce hot flashes,
improve mood, and increase energy level.  A combination of selected vitamins and
herbs.

    RESTPIRATION "TM":  Formulated to alleviate the symptoms of asthma, hay
fever, allergies, sinusitis and bronchitis by helping the body expel foreign
organisms that cause irritation, inflammation and mucous production.  Also
provides support to the immune system, soothes inflamed sinus tissues and
assists the adrenal glands.

    SLEEPSAFE "TM":  Uses natural ingredients to help reduce the delay in sleep
onset to help promote a natural, non-addictive restful sleep.

    VIM! "TM":  Provides nutrients needed to create and sustain a high energy
level.  Consists of selected vitamins, minerals and herbs needed to maintain a
feeling of well-being and physical stamina.

    VITAMIN AND MINERAL SYSTEM "TM":  A nutrient mix that supports circulatory,
immune, bone, joint and eye health, as well as men's and women's reproductive
health.

    VITAMIN C:  This combination of ascorbic acid and citrus bioflavonoids aids
our body in fighting infection, coping with stress, healing wounds and works as
a powerful anti-oxidant.

    FRUIT MIGHT "TM", VEGGIE MIGHT "TM", and GREEN MIGHT "TM":  Developed to
provide phytochemicals and carotenoids as supplements to a healthy diet which
includes fruits and vegetables.  Includes wheat grass, chlorella and other
natural extracts.

    The following new product was developed during 1998:

    PROTRANS CREAM "TM":  This is a natural Progesterone cream to be applied
topically to help increase bone density.

    The Company is developing the following new products for introduction by the
end of 1999:

    CIRC ELATION "TM": Formulated to help increase circulation to extremities -
especially relevant to baby boomers and for diabetics.

                                      4

<PAGE>

    SKIN ELATION "TM" CREAM:  This is a cream formulated to compliment Circ
Elation "TM" to promote skin condition and improve circulation.

    All products are formulated with natural ingredients, and with no
preservatives, synthetics, artificial colors, lactose, starch or sugar. The
average price for a one month supply of any one of the current products is
between $19.95 and $34.95.

    The Company markets a video entitled WHEN SOMEONE YOU LOVE IS AT RISK FOR
PROSTATE DISEASE, developed to raise awareness about the prostate and prostate
diseases, symptoms, diagnosis and prevention.  The tape is sold for $19.95.  The
Company also has available two audio tapes, both thirty minutes in length.  The
first is for men:  THE NATURAL PATH OF MEN'S HEALTH:  PROSTATE CARE.  The second
is for women:  PASSAGE TO YOUR SECOND LIFE:  FLOURISHING AFTER MENOPAUSE.  Each
of these tapes is sold for $14.95.

Product Planning and Development

    The Company anticipates continuing to expand its product line.  Product
development begins with researching medical conditions that can be affected by
herbal remedies utilizing completed current studies from recognized doctors,
pharmacologists, scientists, and experts.  When sufficient information is
accumulated on a specific health problem, the Company summarizes the information
and presents it to a number of experts in the nutritional field, including Dr.
Charles Thomas, Ph.D., an independent consultant to the Company since its
inception, who has formulated a number of nutritional products sold nationally
by other companies.  These experts work with the Company to develop formulas and
compile substantiation for new products to be offered.  In addition to its
product development efforts, the Company intends to expand its product offerings
by obtaining the right to market licensed products that complement the overall
product line and are not currently offered via direct mail.  For example, the
Company is currently considering various cosmetic, hair care, and educational
products with established brand names that could be marketed to its existing
customer base.

Production, Order Procurement and Fulfillment

    The Company's nutritional products currently are produced by Vita Minerals,
Inc., which also bottles and labels the products.  Vita Minerals then ships them
to an outside distribution center where order fulfillment is handled for the
Company by an independent contractor.  Although there is no long-term contract
between the Company and Vita Minerals, with all purchases made pursuant to
simple purchase orders, the Company does provide Vita Minerals with an advance
quarterly forecast of the Company's product requirements that is used by Vita
Minerals to procure sufficient quantities of herbs that have a limited growing
season.  Vita Minerals has manufactured drugs, as well as vitamins, for over 75
years, and its operations are subject to regulations of, and monitoring by, the
U.S. Food and Drug Administration ("FDA").  Since the FDA does not monitor the
operations of manufacturers who produce only vitamins, management believes that
the Company's use of Vita Minerals for production, packaging and labeling
significantly enhances controls on the quality of the Company's products.  Vita
Minerals is also regulated by, and holds a variety of licenses for drug and
processed food manufacture issued by, various state and local regulatory
authorities, including the State of California Department of Consumer Affairs
and the County of Los Angeles.

    Although the Company does not engage in the manufacture of any of the
Products it markets and sells, the Company could be exposed to product liability
claims.  The Company has not had any such claims to date.  Although the Company
maintains a limited amount of products liability insurance, additional insurance
covering products sold by the Company is also provided by Vita Minerals.  There
can, however, be no assurance that the Company will not be subject to claims in
the future or that available insurance coverage will be adequate.

    Independent contractors and outside service agencies are used to perform a
number of tasks under the supervision of management, including advertising
placement, in-bound order taking, and order fulfillment.  The Company also has
entered into an agreement with Professional Marketing Associates, Inc. to
provide warehousing and distribution of the Company's products which
automatically renews for successive six-month periods unless terminated by
either party.

    Outsourcing of production, order taking and order fulfillment to an outside
company and three independent contractors respectively, potentially subjects the
Company to concentration of supplier risk.  In addition, substantially all
printing is handled by an outside company and substantially all advertising
placement including purchase of mailing lists for direct mail programs is
handled by an outside service agency.  Although these services are currently

                                      5

<PAGE>
concentrated with a few key suppliers, management believes that other suppliers
could provide similar services on comparable terms.  A change in suppliers,
however, could cause delay in manufacturing, shipping, advertising placements
and implementation of direct mail programs and a possible loss of sales, which
could affect operating results adversely.

Regulation

    The FDA and the Federal Trade Commission ("FTC") are the primary agencies
that monitor the health care and direct marketing industries in the United
States.  Because nutritional supplements are classified as foods, they do not
require FDA approval.  However, product labeling and advertising copy must be
within FDA established guidelines.  FTC regulations also address advertising
copy, fraud, and specific guidelines for shipping and refunds.  The Company's
promotional literature presents the effectiveness of ingredients contained in
the formula, based on documented studies conducted by reputable independent
health care professionals, along with testimonials from satisfied users of the
products.  In addition, the Company maintains a library of articles and studies
cited in promotional materials as well as original letters from customers'
testimonials.

    In November 1991, the FDA issued proposed regulations designed to, among
other things, amend its food labeling regulations.  The proposed regulations met
with substantial opposition.  In October 1994, the "Dietary Supplement Health
and Education Act of 1994" (the "Dietary Supplement Law") was enacted.  Section
11 of the Dietary Supplement Law provided that the advance notice of proposed
rule making by the FDA concerning dietary supplements was null and void.  FDA
regulations that became effective on June 1, 1994, would require standard format
nutrition labeling on dietary supplements.  However, because the new Dietary
Supplement Law also addresses labeling of dietary supplements, the FDA has
indicated that it will not enforce its labeling regulations until March 23,
1999.  In the interim, new regulations are expected to be proposed by the FDA.
Because the FDA has not yet reconciled its existing regulations with the new
Dietary Supplement Law, the Company cannot determine to what extent any changed
or amended regulations will affect its business.

    The Dietary Supplement Law did not affect the July 1, 1994 effectiveness of
the FDA's health claims regulations.  Those regulations prohibit any express or
implied claims for dietary supplements unless such claims are approved in
advance by the FDA through the promulgation of specific authorizing regulations.
Such approvals are rarely provided by the FDA.  Therefore, no claim may be made
on a dietary supplement label or in printed sales literature, "that expressly or
by implication characterizes the relationship of any substance to a disease or
health-related condition."  The Company cannot determine what effect currently
proposed FDA regulations, when and if promulgated, will have on its business in
the future.  Such regulations could, among other things, require expanded or
different labeling, the recall or discontinuance of certain products, additional
record keeping and expanded documentation of the properties of certain products
and scientific substantiation.  In addition, the Company cannot predict whether
new legislation regulating its activities will be enacted, which new legislation
 could have a material effect on the Company.

    The Company has an ongoing compliance program with assistance from outside
consultants regarding the nature and scope of food and drug legal matters
affecting the Company's business and products.  The Company is unaware of any
legal actions currently pending or threatened by the FDA or any other
governmental authority against the Company.

Competition

    The market for nutritional supplements is characterized by extensive
competition, frequent new product introductions, short product life cycles,
rapid price declines and eroding profit margins, and changing customer
preferences.  The Company expects to continue to face substantial competition in
its efforts to successfully capture a significant share of the over age forty
market.  There are a number of companies that currently offer competing
products, and it can be expected that additional competing products will be
introduced by other companies in the future.  In addition, there are a variety
of channels of distribution for nutritional supplements other than through
direct response marketing, including multi-level distributors, specialty retail
health and nutrition stores, drug stores and supermarkets.  Many of the
Company's existing and potential competitors have greater financial, marketing,
distribution, and research capabilities than the Company.  The performance of
the Company will depend on its ability to develop and market new products that
can gain customer acceptance and loyalty, as well as its ability to adapt its
product offerings to meet changing pricing considerations and other market
factors.  The Company attempts to differentiate itself from competitors by
focusing on products formulated to meet the specific needs of a given population
group and which contain only natural ingredients, and marketing these products
directly to the Company's target age group.

                                      6

<PAGE>

Proprietary Rights

    The Company has received federal trademark registration for PROSTSAFE "R",
SEXHILARATE "R", PROPAUSE "R", ARTHRIVIVE "R", ARTHRIVIVE "R" CREAM, and OSTEO
SAFE "R", and intends to continue to seek trademark protection for a number of
the brand names under which the Company's products are marketed.  There can be
no assurance that such protection will be obtained.  The Company will be
required to rely upon common law concepts of confidentiality and trade secret
laws to protect its product formulations. There can be no assurance that the
foregoing will protect the formulations or provide adequate remedies for the
Company in the event of unauthorized use or disclosure of such formulations, or
that others will not be able to independently develop such formulations.  In
addition, each quarterly edition of the Journal of Natural Health "TM", which
promotes products available from the Company, is copyrighted.  International
trademarks are being obtained as Whitewing enters foreign markets.  European
trademarks have already been filed and other country trademark applications are
in progress.


Employees

    In addition to its President, the Company has a total of eight employees,
four of whom are involved in general administration and four of whom are
involved in customer service and order processing and reporting.  The Company's
success depends to a significant extent upon the continued service of its
President, Cynthia Kolke.  The loss of Ms. Kolke, who may terminate her services
to the Company at any time, could have a material adverse effect on the Company.
The Company maintains a $500,000 key-person insurance policy on the life of Ms.
Kolke.  The Company's success also depends on its ability to retain its key
personnel, and on its ability to attract, retain, train and motivate additional
highly skilled and dedicated employees. The Company is not a party to any
collective bargaining agreement.  The Company has never experienced a work
stoppage and believes that its relations with its employees are excellent.  From
time to time, the Company may retain independent third parties to provide
services on a contract, "as needed" basis.

Item 2.  Description of Property.

    The Company leases a 1,754 square foot office in Mission Hills, California,
that management believes is sufficient for the Company's current needs and
future growth.

Item 3.  Legal Proceedings.

    None

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

    None

                                      7

<PAGE>

PART II

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

Recent Market Prices

    The Company's Common Stock and Warrants have traded separately on the Nasdaq
SmallCap Market under the symbols "WWLI" and "WWLI-W", respectively, since
February 14, 1996.  Prior to the Company's initial public offering there was no
public market for the Company's securities.  No assurance can be given that an
active trading market for the Common Stock and Warrants will be sustained in the
future.  The market for the Company's Common Stock has experienced extreme price
and volume fluctuations during certain periods.  These broad market fluctuations
and other factors, such as new product developments and trends in the Company's
industry and the investment markets generally, as well as economic conditions
and quarterly variations in the Company's results of operations, have in the
past, and may continue to adversely affect the market price of the Company's
Common Stock.  Although the Common Stock and Warrants currently are traded on
the Nasdaq SmallCap Market, the Company does not currently meet all of the
requirements for continued inclusion on Nasdaq, and, accordingly, there can be
no assurance that such securities will remain eligible to be included on Nasdaq.
In the event that the Company's securities were no longer eligible for quotation
on Nasdaq, the securities could become subject to rules adopted by the
Commission regulating broker-dealer practices in connection with transactions in
"penny stocks."  Penny stock generally are equity securities with a price of
less than $5.00 (other than securities registered on certain national securities
exchanges or quoted on Nasdaq, provided that current price and volume
information with respect to transactions in such securities is provided by the
exchange or the Nasdaq system).  Unless an exemption from the definition of a
"penny stock" were available, any broker engaging in a transaction in the
Company's Securities would be required to provide any customer with a risk
disclosure document, disclosure of market conditions, if any, disclosure of the
compensation of the broker-dealer and its salesperson in the transaction, and
monthly accounts showing the market values of the Company's Securities held in
the customer's account.  The bid and offer quotation and compensation
information would need to be provided prior to effecting the transaction and
need to be contained on the customer's confirmation.  The Company anticipates
that a number of brokers might be unwilling to engage in transactions in the
Company's securities because of the need to comply with the "penny stock" rules,
thereby making it more difficult for holders of securities to dispose of their
shares.

    The following table sets forth the high and low closing bid quotations for a
share of the Company's Common Stock as well as the high and low closing bid
quotations for a Warrant, during the periods presented, as reported by Nasdaq.
Bid quotations represent high and low prices quoted between dealers, do not
include commissions, mark-ups, or mark-downs, and may not represent actual
transactions.
<TABLE>
<CAPTION>

Common Stock                                 1997                   1998
                                         High      Low         High       Low
     <S>                               <C>       <C>         <C>        <C>
     First Quarter ended March 31,      $1-63/64  $1-3/16    $1-9/16    $14/16
     Second Quarter ended June 30,     $15/16    $21/32      $2          $1-5/16
     Third Quarter ended September 30,  $1-3/8    $1-1/4     $1-5/16     $9/16
     Fourth Quarter ended December 31, $13/16    $13/16         $7/8     $7/16

     Warrants

     First Quarter ended March 31,      $7/16     $9/32      $29/128     $1/32
     Second Quarter ended June 30,      $5/32     $1/8       $12/32      $1/8
     Third Quarter ended September 30,  $3/32     $3/32      $7/32       $1/8
     Fourth Quarter ended December 31,  $1/16     $1/32      $1/8        $1/16
</TABLE>

    On February 26, 1999, the closing bid and asked quotations for the Common
Stock, as reported on Nasdaq, were $ .75 and $ .75, respectively, per share.  On
that date, the closing bid and asked quotations for the Warrants, as reported on
Nasdaq, were $ .0625 and $ .125 respectively, per Warrant.

                                      8

<PAGE>

Description of Securities

    The Company is authorized to issue up to 10,000,000 shares of Common Stock,
$.001 par value, and 500,000 shares of preferred stock, $.001 par value.  As of
January 29, 1999, there were 506 holders of record of shares of the Company's
Common Stock and 322 holders of record of Warrants, including shares and
Warrants held in "street" or "nominee" names for an undetermined number of
beneficial holders.  Prior to the Company's public offering, shares of preferred
stock were sold to raise equity capital.  See Item 6, "Management's Discussion
and Analysis, Liquidity and Capital Resources".  In connection with the public
offering, all of these shares were converted into Common Stock.  No shares of
preferred stock were outstanding as of January 29, 1999.

    Holders of the Company's Common Stock are entitled to one vote per share on
all matters to be voted upon by the stockholders, and there is no cumulative
voting for the election of directors to the Company's classified Board of
Directors.  Holders of the Company's Common Stock are entitled to receive
ratably such dividends, if any, as may be declared by the Board of Directors out
of funds legally available therefore.  Upon the liquidation, dissolution, or
winding up of the Company, the holders of the Company's Common Stock will be
entitled to share ratably in all assets of the Company which are legally
available for distribution, after payment of all debts and other liabilities.
Holders of the Company's Common Stock have no preemptive, subscription,
redemption or conversion rights.

    Shares of the Company's Preferred Stock may be issued from time to time in
one or more series as may be determined by the Board of Directors.  The voting
powers and preferences, the relative rights of each series, and the
qualifications, limitations and restrictions thereof may be established by the
Board of Directors without any further vote or action by the Company's
stockholders, except that no holder of Preferred Stock will have preemptive
rights.  Issuance of shares of the Company's Preferred Stock may have the effect
of delaying, deferring or preventing a change in control of the Company.  The
Company has no present plan to issue any shares of its Preferred Stock in the
foreseeable future.

    Since November 4, 1997 when the exercise price of the Warrants was reduced,
the holder of two Warrants is entitled to purchase one share of the Company's
Common Stock at a price of $3.00 (previously $7.00) per share during a three-
year period ending on February 9, 1999.  These warrants have been extended to
expire on February 9, 2000.  The Company may at any time and from time to time
extend the term of the Warrants or reduce the exercise price of the Warrants.
Unless exercised during the exercise period, the Warrants will expire
automatically.  The holders of Warrants as such, are not entitled to vote, to
receive dividends or to exercise any of the rights of stockholders for any
purpose.  Since February 9, 1997, the Company has been entitled, at its
discretion, to call all of the Warrants for redemption on 45 days prior written
notice at a redemption price of $.05 per Warrant.  However the Warrants cannot
be called for redemption unless and until:  (i) the closing bid price of the
Company's Common Stock exceeds the exercise price of the Warrants by at least
50% during a period of at least 20 of the 30 trading days immediately preceding
the notice of redemption; (ii) the Company has in effect a current registration
statement covering the Common Stock issuable upon exercise of the Warrants; and
(iii) the expiration of the 45 day notice period is within the term of the
Warrants.  If the Company elects to exercise its redemption right, holders of
Warrants may either exercise their Warrants, sell such Warrants in the market or
tender their Warrants to the Company for redemption.  Within five business days
after the end of the 45 day period, the Company will mail a redemption check to
each holder of a Warrant who holds unexercised Warrants as of the end of the 45
day period, whether or not such holder has surrendered the Warrant certificates
for redemption.  The Warrants may not be exercised after the end of such 45 day
period.

    U.S. Stock Transfer Corporation, 1745 Gardena Avenue, Glendale, California
91204-2991, is the appointed Transfer Agent and Registrar for the Common Stock
and the Warrants, and the Warrant Agent under the Company's Warrant Agreement.

Shares Eligible for Future Sale

    All of the issued and outstanding shares of the Company's Common Stock have
been registered under Securities Act of 1933, as amended (the "Securities Act").
However, 789,709 of these shares are held of record by Acacia, an "affiliate" of
the Company, and therefore are considered "restricted securities", as those
terms are defined under the Securities Act and the rules and regulations
thereunder.  Shares of the Company's Common Stock owned by "affiliates"
(including Acacia) may be publicly sold only by complying with Rule 144 under
the Securities Act (exclusive of the two-year holding period) unless registered
under the Securities Act, or some other exemption from further registration
thereunder is available.  Sales of substantial amounts of these shares, or even
the potential for such sales, could have an adverse effect on any market price
for shares of the Company's Common Stock that could develop, and could impair

                                      9

<PAGE>
the Company's ability to raise capital through the sale of its equity
securities.

Rights to Acquire Shares

    As of February 28, 1999, a total of 534,185 shares of Common Stock have been
reserved for issuance upon exercise of outstanding options granted under the
Company's Stock Option Plan.  All of these shares, together with the additional
465,815 shares available for the future grant of options under the Stock Option
Plan, have been registered under the Securities Act.  The exercise price of the
outstanding options ranges between $0.089 and $5.00, with a weighted average
exercise price of $.863 per share.  In connection with the Company's initial
public offering, the Representatives of the Underwriters acquired options to
purchase up to 90,000 shares of Common Stock at $6.00 a share and 90,000
Warrants at $.24 a warrant in connection therewith (the "Representative's
Securities").  The Representative's Securities expire after February 9, 2001.
The Representatives were also granted certain registration rights with regards
to the Representative's Securities which could result in substantial expense to
the Company.  During the terms of the outstanding options and the
Representative's Securities, all of which expire on or before July 11, 2000, the
holders thereof will have the opportunity to profit from an increase in the
market price of the Company's Common Stock with resulting dilution in the
interest of holders of Common Stock.  The existence of such stock options and
the Representative's Securities may adversely affect the terms on which the
Company can obtain additional financing, and the holders of such options can be
expected to exercise or convert such options at a time when the Company, in all
likelihood, would be able to obtain additional capital by offering shares of its
Common Stock on terms more favorable to the Company than those provided by the
exercise or conversion of such options.


Dividend Policy

    The Company has never paid any cash dividends on its Common Stock and does
not anticipate that it will pay dividends in the foreseeable future.  Instead,
the Company intends to apply any earnings to the development and expansion of
its business.

Item 6.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.


Forward-Looking Statements

    Statements contained herein that are not purely historical are forward-
looking statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934, including but not
limited to statements regarding the Company's expectations, hopes, beliefs,
intentions or strategies regarding the future.  Actual results could differ
materially from those projected in any forward-looking statements as a result of
a number of factors, including those detailed in this Management's Discussion
and Analysis of Results of Operations and Financial Condition, as well as those
set forth elsewhere herein.  The forward-looking statements are made as of the
date of the financial statements of the Company set forth elsewhere herein and
the Company assumes no obligation to update the forward-looking statements, or
to update the reasons why actual results could differ materially from those
projected in the forward-looking statements.

General


    The Company formulated its business plans and strategies based on certain
assumptions of the Company's management regarding the size of the market for
nutritional supplements, the products which the Company will be able to offer to
the over age forty market, the Company's anticipated share of the market, and
the estimated prices for and acceptance of the Company's products.  Although
these plans and assumptions were based on the best estimates of management,
there can be no assurance that these assessments will prove to be correct.  No
independent marketing studies have been conducted on behalf of or otherwise
obtained by the Company, nor are any such studies planned.  Any future success
that the Company might enjoy will depend upon many factors, including factors
which may be beyond the control of the Company or which cannot be predicted at
this time.  These factors may include product obsolescence, increased levels of
competition, including the entry of additional competitors and increased success
by existing competitors, changes in general economic conditions, increases in
operating costs including costs of supplies, personnel and equipment, reduced
margins caused by competitive pressures and other factors, and changes in
governmental regulation imposed under federal, state or local laws.

                                      10

<PAGE>

    The Company continued its plan of expanding its customer database during
1998 by exploring other direct response media such as electronic in-home
delivery of product advertising.  Utilizing a large portion of the net proceeds
from its February 1996 initial public offering, the Company invested
approximately $2,969,774 in selling and advertising expense in furtherance of
this strategy during the year ended December 31, 1998.  Although these
expenditures have not started to produce comparable increases in revenue, the
Company did report a decreased loss for the year.  It is anticipated that the
Company will continue to stress growth of the customer database over short-term
profits; the Company's management believes potential net earnings will be driven
by continued growth of the customer database.

    The costs of deferred print advertising placements and direct mailings are
amortized, based upon management's estimates, over the periods in which the
related direct responses are received.  The Company evaluates the realizability
of its direct-response advertising by comparing the carrying amount of prepaid
and deferred advertising at each balance sheet date on a cost-pool-by-cost-pool
basis to the probable remaining future net revenues expected to result from such
advertising.  An excess carrying amount over probable remaining future revenues
is reported as advertising expense in the current period.

    Newspaper and weekly publications are expensed in the month of issue.

    Sales of the Company's PROSTSAFE "R" product accounted for approximately 55%
and 48% of net sales for the years ended December 31, 1997 and 1998,
respectively.  During 1998, SEXHILARATE "R" accounted for 32% of net sales.  The
Company anticipates that sales of PROSTSAFE "R" will continue to contribute a
substantial portion of total revenues in subsequent periods.  A decline in the
demand for this product, whether as a result of competition or other factors,
could have a material adverse effect on the Company's results of operations and
financial condition, particularly if not offset by growth in sales of
SEXHILARATE "R" or other products.  The markets for the Company's products are
characterized by changing customer demand, short product life cycles, and
frequent new product introductions.  The performance of the Company will depend
on the ability of the Company to develop and market new products that will gain
customer acceptance and loyalty, as well as its ability to adapt its product
offerings to meet changing pricing considerations and other market factors.  The
Company's operating performance would be adversely affected if the Company were
to incur delays in developing new products or if such products did not gain
market acceptance.  Therefore, there can be no assurance that the Company's
existing or future products will be sufficiently successful to enable the
Company to effectively compete in its prospective market or, should the
Company's product offerings meet with significant customer acceptance, that one
or more current or future competitors will not introduce products which render
the Company's products noncompetitive.

    Like other distributors of consumer products, the Company encounters the
risk of product returns from its customers.  The Company's products are sold
with an unconditional, money-back guarantee.  Any customer who is not satisfied
with a Company product for any reason may return it or any unused portion for a
full refund of the purchase price.  Although product returns to date have been
approximately 3% of sales, which is substantially less than the national average
of 6%, there can be no assurance that actual levels of returns will not
significantly exceed amounts anticipated by the Company.

    The Company's operating results have in the past and may continue to vary
significantly due to a variety of factors including changing customer profiles,
the availability and cost of raw materials, the introduction of new products by
the Company or its competitors, the timing of the Company's advertising and
promotional campaigns, pricing pressures, general economic and industry
conditions that affect customer demand, and other factors.  It can be expected
that future operating results will continue to be subject to many of the
problems, expenses, delays and risks inherent in the establishment of a new
business enterprise, many of which the Company cannot control.  There can be no
assurance, therefore, that the Company will even be able to achieve or sustain
profitability.

Selected Financial Data

    The following table sets forth for the periods indicated selected financial
data for the Company.  The selected statement of operations and balance sheet
items which follow have been derived from the Company's audited financial
statements and notes thereto included elsewhere herein.  This information should
be read in conjunction with the audited financial statements and related notes
and the other financial information included elsewhere in this Form 10-KSB.

                                      11

<PAGE>

<TABLE>


Statements of Operations Data:
<CAPTION>

                                                     Year ended December 31,
                                                   1997                 1998
<S>                                           <C>                  <C>
Net sales                                     $   3,581,811        $ 3,934,847
Gross profit                                      3,057,314          3,290,024
Operating expenses:
   Selling and advertising expenses               3,534,631          2,969,774
   General and administrative expenses              656,668            681,014
   Total operating expenses                       4,191,299          3,650,788
Income (loss) from operations                    (1,133,986)          (360,764)
Other income, net                                   141,184             87,675
Income (loss) before provision
   for income taxes                                (992,802)          (273,089)
Income tax provision (benefit)                      (49,150)               850
Net income (loss)                             $    (943,652)      $   (273,939)


Net loss attributable
   to common shareholders                     $    (943,652)      $   (273,939)

Basic and diluted loss per common share       $       (0.33)      $      (0.09)

Weighted average number of
   common shares outstanding                      2,864,680          2,896,372


                                                     Year ended December 31,
Balance Sheet Data:                                1997                 1998

Working capital                               $   2,105,059      $   1,810,019
Total assets                                      2,215,393          1,952,349
Total liabilities                                    29,988             35,504
Shareholders' equity                              2,185,405          1,916,845
</TABLE>


Results of Operations

    The following table sets forth, for the periods indicated, the percentages
of net sales represented by certain items in the Company's statements of
operations.

Percentage of Net Sales
<TABLE>
<CAPTION>

                                                   Year ended December 31,
                                               1996                        1997
<S>                                          <C>                        <C>
Net sales                                    100%                       100%
Gross profit                                  85.4%                      83.6%
Selling and advertising expenses              98.7%                      75.5%
General and administrative expenses          (18.3%)                    (17.3%)
Loss before income taxes                     (27.7%)                     (6.9%)
Income Tax Benefit                            (1.4%)                      -
Net loss                                     (26.3%)                     (6.9%)

</TABLE>

                                      12

<PAGE>

    Net Sales.  Net sales increased in 1998 by 9.9% to $3,934,847 compared to
$3,581,881 in 1997.  The Company varied its efforts to attract new customers in
1998 and experienced growth from its existing customer base.  The customer base
grew to approximately 180,000 customers at December 31, 1998 from approximately
140,000 customers at December 31, 1997.

    Reorders from existing customers accounted for approximately 70% and 66% of
net sales in 1997 and 1998, respectively.

    Gross Profit.  Cost of goods sold for the Company's products represents only
a small percentage of net sales.  During the years ended December 31, 1997 and
1998, the Company generated gross profit of $3,057,314 and $3,290,024,
respectively, or 85.4% and 83.6% of net sales, respectively.  Although sales of
Prostsafe "R" and Sexhilarate "R" represented approximately 48% and 32% of total
sales, respectively, in 1998, sales of the Sexual Energy package (including
Prostsafe "R" and Sexhilarate "R") which yield a significantly lower margin,
also increased.

    Selling and Advertising Expense.  During the year ended December 31, 1998,
selling and advertising expense decreased by 12.3% to $2,969,774, representing
75.5% of net sales, compared to $3,534,631, or 98.7% of net sales, in 1997.
This decrease resulted primarily from a shift away from print advertising
towards other media such as electronic in-home delivery of product advertising
as the Company sought more favorable response rates for the marketing dollar.
In 1997 and 1998, advertising expense was $2,223,204 and $1,610,516,
respectively, or 62.1% and 40.9% of net sales, respectively.

    Prepaid advertising at December 31, 1998, includes approximately $154,972 of
costs related to the development of electronic in-home delivery of product
advertising.  The Company is expensing costs related to the development of
electronic in-home delivery of product advertising over a period not to exceed
the lesser of the revenue earning stream directly related to advertising or one
year, whichever comes first.

    General and Administrative Expense.  General and administrative expenses
increased 3.7% to $681,014 or 17.3% of net sales for the year ended December 31,
1998 compared to $656,668 or 18.3% of net sales in 1997.  The increase was
primarily attributable to the retention by the Company of an investor relations
firm for the first six months of 1998.  Without this expense, general and
administrative expense would have decreased 1.8% to 16.3% of net sales.

    Income (Loss) From Operations.  During the year ended December 31, 1996
revenues remained relatively level despite substantial increases in advertising
and selling costs.  As a result the Company reported a loss from operations of
$2,556,703. With the influx of capital following the public offering, the
Company substantially increased its advertising and promotional expenditures in
anticipation of incremental increases in revenue.  Revenues commensurate with
the increased advertising and selling costs did not materialize as anticipated.
The Company believes, however, that it gained valuable market experience from
the results of its product advertising programs in 1996 and 1997.  The loss from
operations for the year ended December 31, 1998 decreased to $360,764, primarily
due to the changes in the marketing mix from all print advertising to a
combination of print and electronic advertising.  The losses over the year
continued to reduce quarter by quarter.  1998 results include $45,000 in
adjustments attributable to all four quarters of 1998.  Had these adjustments
been made in the appropriate periods, the fourth quarter would have been the
Company's first profitable quarter since it went public.

Year 2000

    Management has reviewed its internal software and hardware components and
believes that the Company's systems are Year 2000 compliant.  Management has
also made inquiries of its primary vendors as to the capabilities of their
systems with respect to the Year 2000.  At this time, it has not been
conclusively determined that the systems of these vendors are Year 2000
compliant, however, based on recent discussions with the vendors, management
believes the vendors will be capable of meeting the needs of the Company beyond
the year 1999.


Liquidity and Capital Resources

    During the years ended December 31, 1997 and 1998, the Company's operations
required cash of $961,752 and $161,427, respectively.  As of December 31, 1998,
the Company had cash and short-term investments on hand of $1,382,546.  The
Company has no commitments for placements of electronic in-home delivery of
product advertising and magazine advertisements as of December 31, 1998.

                                      13

<PAGE>

    Management currently anticipates that the Company will generate sufficient
cash flow, supplemented by the remaining balance of the net proceeds to the
Company from its initial public offering, to finance the Company's operations at
currently anticipated levels at least through the end of 1999.  However, there
can be no assurance that the Company will not encounter unforeseen difficulties
that may deplete its capital resources.  In addition, management believes that
the Company's growth can be accelerated by continuing to use the net proceeds of
the offering to finance various marketing, advertising and promotional
activities.

    The development and expansion of the Company's business that was financed
using the net proceeds from the Company's initial public offering placed
significant demands on the Company's infra-structure, and required the Company
to hire additional personnel, to implement additional operating, manufacturing
and financial controls, install additional reporting and management information
systems for order processing, system monitoring, customer service and financial
reporting, and otherwise to improve coordination between formulation,
manufacturing, marketing, sales and finance functions.  The Company's future
operating results will depend on management's ability to manage future growth,
and there can be no assurance that efforts to manage future growth will be
successful.  Management believes that the availability of proceeds from the
Company's initial public offering may enhance the Company's ability to increase
the scope of its business more rapidly by taking advantage of opportunities to
acquire additional product offerings, or even complementary businesses, on a
favorable basis.  Although the Company is not currently a party to any agreement
or understanding with respect to any prospective acquisition, it has explored
and continues to evaluate possible opportunities to license or otherwise acquire
the right to market products that complement the Company's product line.

    If circumstances indicate that the Company should endeavor to expand its
business at a faster rate than that currently planned for, it is likely that the
Company would attempt to raise additional capital to accelerate its growth.  In
all events, the Company's ability to continue operations beyond the year 2000
will depend upon its ability to generate a significant cash flow from its
expanded operations.  If sufficient cash flow is not being generated at the end
of this period, the Company would be required to seek additional funds through
equity, debt or other external financing.  There can be no assurance that any
additional capital resources which the Company may need will be available if and
when required, or on terms that will be acceptable to the Company.  If
additional financing is required, or desired, the Company may be required to
forego a substantial interest in its future revenues or dilute the equity
interests of existing shareholders, and a change in the control of the Company
could result.

    The Company initiated an open market stock repurchase program in July 1996
in which up to 200,000 shares or 7% of outstanding shares of the Company's
common stock may be acquired in the open market.  The Company acquired 17,600
shares of its common stock for $45,419 during 1996.  The Company acquired an
additional 23,850 shares of common stock for $31,487 in 1997 and future
repurchases will depend on the Company's cash flow and on such other factors the
Company deems relevant.  Shares repurchased in 1996 and 1997 were retired by
resolution of the Board of Directors.

Item 7.  Financial Statements.

    The financial statements and supplemental data required by this Item are
filed as exhibits hereto, as listed in the Index to Financial Statements
included under Item 13(c) of Part IV below, and are incorporated herein by this
reference.

Item 8.  Changes In and Disagreements With Accountants on Accounting and
         Financial Disclosure.

    Arthur Andersen LLP was dismissed as the Company's independent accountants
by the Company's Board of Directors on November 11, 1997.  Arthur Andersen LLP
had acted as the Company's independent accountants since 1995.  The independent
auditors' reports issued by Arthur Andersen LLP on the Company's consolidated
financial statements for the years ended December 1995, and 1996, did not
contain an adverse opinion or disclaimer of opinion, and such reports were not
modified for any departure from generally accepted accounting principles or for
any limitation of audit scope.  There were no disagreements with Arthur Andersen
LLP, resolved or unresolved, on any matter of accounting principles or
practices, financial disclosure, or auditing scope or procedure, which, if not
resolved to Arthur Andersen LLP's satisfaction, would have caused it to make
reference to the subject matter of the disagreement in connection with its
reports.  Arthur Andersen LLP was not retained to report on the Company's 1997
consolidated financial statements.

                                      14

<PAGE>

    Effective as of November 11, 1997, the Company engaged Moss Adams LLP to
audit the Company's financial statements beginning with the year ending December
31, 1997.  At no time during the Company's two fiscal years ending December 31,
1996 nor during the subsequent interim period prior to engaging Moss Adam LLP
did the Company, or anyone on its behalf, consult Moss Adams LLP regarding (i)
either: the application of accounting principles to a specified transaction,
either completed or proposed; or the type of audit opinion that might be
rendered on the Company's consolidated financial statements, and either a
written report was provided to the Company or oral advice was provided that Moss
Adams LLP concluded was an important factor considered by the Company in
reaching a decision as to the accounting, auditing or reporting issue; or (ii)
any matter that was either the subject of a disagreement (as defined in
paragraph 304(a)(1)(iv) and the related instruction of Regulation S-K) or was a
reportable event (as described in paragraph 304(a)(1)(iv) of Regulation S-K).

                                      15

<PAGE>

PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act.

    The directors and executive officers of the Company are as follows:

<PAGE>
<TABLE>
<CAPTION>

    Name                Age       Positions
<S>                     <C>       <C>
Cynthia Kolke           51        President, Assistant Secretary and Director

R. Bruce Stewart        61        Chairman of the Board, Secretary and Treasurer

Paul R. Ryan            53        Director

William D. Fox          61        Director

</TABLE>

    Cynthia Kolke has 26 years experience in sales and marketing.  From 1965
through 1986 she was employed in a number of capacities, including Director of
Marketing, by The Service Bureau Corporation, a division of IBM which was sold
to Control Data in 1973.  Between 1986 and 1989, Ms. Kolke served as the Vice
President of Sales for Light Signatures, and operated as an independent
marketing consultant thereafter until she joined G.B Data Systems, Inc., a
direct mail, nutritional supplement marketing company, in April 1990 as its
Operations Manager.  In July 1993, she left G.B. Data Systems, Inc. to co-found
Whitewing Labs as its President, Assistant Secretary and as a director.  She
holds a Bachelor's degree in Marketing and Data Processing from the Detroit
College of Business.

    R. Bruce Stewart, who served as Chairman, President and Chief Executive
Officer of Acacia, the Company's largest shareholder and a publicly-held
corporation, from 1993 to January 1997, devoted much of his time to the
formation of Whitewing Labs and the development of its plan of operations.  Mr.
Stewart is currently Acacia's Chairman and Chief Financial Officer.  From August
1977 to March 1991, Mr. Stewart served as President of Annandale Corporation, a
financial consulting firm.

    Paul R. Ryan became a director of the Company in October 1996.  He was Vice
President of Capital Management and a director of Acacia since June 1995.  He
was elected President and Chief Executive Officer of Acacia in January 1997.  He
received a B.S. degree from Cornell University and attended New York University
Graduate School of Business.  Mr. Ryan was a general partner of the American
Health Care Fund, L.P until 1993.

    William D. Fox has owned Classic Tire, an automotive repair and tire
retailer since 1992.  For the previous seven years, he conducted an independent
management consulting business.  He joined the Company's Board of Directors in
February 1996, upon consummation of the Company's initial public offering. From
1963 through 1984, Mr. Fox held numerous positions with IBM and Control Data,
including Branch Manager and Marketing Program Administrator.  He graduated from
Middlebury College with a B.A. degree in Political Science.

    The Company's Board of Directors has established an audit committee
comprised of Mr. Stewart, Mr. Ryan and Mr. Fox, which meets periodically to
consult with the Company's independent auditors concerning their engagement and
audit plan, and concerning the auditor's report and management letter and, with
the assistance of the independent auditors, monitors the adequacy of the
Company's internal accounting controls.  The Company's Board of Directors has
established a compensation committee comprised of Mr. Stewart and Mr. Fox.  The
compensation committee, a committee of board members, met in July 1998 to review
and determine the compensation of the Company's executive officers, adopt
compensation policies and practices, and review and pass upon all transactions
with affiliates and other persons having a material financial interest in the
Company.  The Board has not established a separate nominating committee.
Rather, all members of the Company's Board of Directors meet to nominate the
individuals to be proposed by the Board of Directors for election as directors
of the Company.

    Subject to the terms of applicable employment agreements, of which there
currently are none, officers are appointed by and serve at the discretion of the
Board of Directors.  The Company's Certificate of Incorporation currently
provide for a Board of Directors divided into two classes of directors serving
staggered terms, with one-half of the total number of authorized directors

                                      16

<PAGE>

(currently four) to be elected at each annual meeting of the Company's
stockholders to serve a 2-year term.  No family relationships exist between any
of the officers or directors of the Company.  Terms for William D. Fox and Paul
R. Ryan expire in 1999.  Terms for Cynthia Kolke and R. Bruce Stewart expire in
2000.


Compliance with Section 16(a) of the Securities Exchange Act of 1934

    Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of the
Company's Common Stock to file reports of ownership and changes in ownership
with the Securities and Exchange Commission ("SEC").  Officers, directors and
greater than ten percent shareholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.  Management
believes all such individuals were in compliance with Section 16(a) as of the
filing date of this Annual Report on Form 10-KSB, and that none were delinquent.

Item 10.  Executive Compensation.

    The following table summarizes the annual compensation paid by the Company
during fiscal years ended December 31, 1997 and 1998 to the President of the
Company.  No other executive officer of the Company received an annual salary
and bonus exceeding $100,000 during the year ended December 31, 1998.


<TABLE>
    Summary Compensation Table
<CAPTION>
                                             Annual Compensation
Name and                                    Salary   Bonus  Other
Principal Position                    Year     $       $      $
<S>                                           <C>     <C>    <C>
Cynthia Kolke,                        1997    82,792  -       -
President, Assistant                  1998    91,400  -       -
Secretary and Director

</TABLE>

The Company leases and pays the insurance on an automobile on Ms. Kolke's behalf
at a cost of $9,948 in 1998.

    Each director of the Company who is not otherwise employed full-time by the
Company or Acacia is paid $100 for each Board meeting attended.  Directors are
also reimbursed for their travel expenses incurred in attending Board or
committee meetings.  Directors have previously not been compensated for their
attendance at Board meetings, except for reimbursement of travel expenses.

Stock Options

    The Company's 1993 Stock Option Plan, as amended (the "Stock Option Plan"),
authorizes the granting of options to employees that are intended to qualify as
"incentive stock options" under the Internal Revenue Code of 1986 ("Incentive
Stock Options"), as well as stock options that are not intended to so qualify
("Nonstatutory Options") which may be granted to officers, directors, employees,
consultants, and others expected to provide significant services to the Company
or its subsidiaries.  The Stock Option Plan, which is administered by the Board
of Directors, currently covers an aggregate of 848,700 shares.  The maximum term
of a stock option granted under the Stock Option Plan is ten years, but if the
optionee at the time of grant has voting power over more than 10% of the
Company's Stock, the maximum term is five years.  If an option granted expires
or terminates, the shares subject to the unexercised portion of that option will
become available for the grant of future options under the Stock Option Plan.
If an optionee terminates his or her service to the Company, the optionee may
exercise only those option shares vested as of the date of termination and must
effect such exercise within three months, although the Board of Directors may
set a longer period for exercise of stock options.  The Stock Option Plan may be
amended at any time by the Board of Directors, although certain amendments would

                                      17

<PAGE>

require stockholder approval.  The Stock Option Plan will terminate in 2003
unless earlier terminated by the Board.

    The exercise price of Incentive Stock Options granted under the Stock Option
Plan must be at least equal to the fair market value of the stock subject to the
option on the date of grant, except that the exercise price of an Incentive
Stock Option granted to an optionee who owns stock possessing more than 10% of
the voting power of the Company's outstanding capital stock must equal at least
110% of the fair market value of the stock subject to the option on the date of
grant.  The exercise price of Nonstatutory Stock Options granted under the Stock
Option Plan must be at least equal to 85% of the fair market value of the stock
subject to the option on the date of the grant.  Payment of the exercise price
may be made in cash, promissory notes or other consideration as determined by
the Board of Directors.

    As of February 28, 1999, options to purchase an aggregate of 420,500 shares
of Common Stock, at prices ranging from $0.089 to $5.00 per share, under the
Stock Option Plan were outstanding and held by a total of 4 officers, directors,
employees and consultants, including options to purchase 247,500, 143,000,
15,000, and 15,000 shares granted to Ms. Kolke, Mr. Stewart, Mr. Ryan and Mr.
Fox, respectively.  No options were granted by the Company during the year ended
December 31, 1998.

<TABLE>
Option Values as of December 31, 1998
<CAPTION>

                           Number of Unexercised         Value of Unexercised
                                Options at             In-the-Money Options at
                            Fiscal Year-End (#)        Fiscal Year-End ($) (1)
Name                    Exercisable / Unexercisable Exercisable / Unexercisable
<S>                       <C>            <C>            <C>            <C>
Cynthia Kolke             247,500   /    0              $0      /      $0
</TABLE>

(1)    Assumes that a share of Common Stock was valued at $.875 per share on
       December 31, 1998.  Amounts reflected are based on this assumed price
       minus the exercise price.

Limitation of Directors' and Officers' Liability and Indemnification

    The Company's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law.  Delaware law provides that
directors of a Delaware corporation will not be personally liable for monetary
damages for breach of the fiduciary duties as directors except for liability as
a result of their duty of loyalty to the company for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, unlawful payments of dividends or stock transactions, unauthorized
distributions of assets, loan of corporate assets to an officer or director,
unauthorized purchase of shares, commencing business before obtaining minimum
capital, or any transaction from which a director derived an improper benefit.
Such limitations do not affect the availability of equitable remedies such as
injunctive relief or rescission. In addition, the Company's Bylaws provide that
the Company must indemnify its officers and directors, and may indemnify its
employees and other agents, to the fullest extent permitted by Delaware law.  At
present, there is no pending litigation or proceeding involving any director,
officer, employee, or agent of the Company where indemnification will be
required or permitted.  Insofar as indemnification for liabilities arising under
the Securities Act of 1933, as amended, may be permitted to officers, directors
or persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933, as amended, and is therefore unenforceable.

Item 11.  Security Ownership of Certain Beneficial Owners and Management.

    The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of February 28, 1999, by (i) each
director and executive officer of the Company, (ii) each person known to the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock, and (iii) all directors and executive officers of the Company as a group.
Except as may be indicated in the footnotes to the table, each of such persons
has sole voting and investment power with respect to the shares owned, subject
to applicable community property laws.  The address of each individual listed is
in care of the Company, 15455 San Fernando Mission Boulevard, Suite 105, Mission
Hills, California 91345.

                                      18

<PAGE>

<TABLE>
<CAPTION>

                                                Shares Beneficially Owned*

                                              Number                   Percent
<S>                                          <C>                        <C>
Acacia Research Corporation (1)
12 S. Raymond Ave., Ste. B
Pasadena, CA 91105                           789,709                    27.0%

R. Bruce Stewart (2)(3)                      960,709                    32.8%

Cynthia Kolke (3)                            262,500                     9.0%

Paul R. Ryan (2)(3)                          800,709                    27.4%

William D. Fox (3)                             9,000                      .003%

All directors and executive
officers as a group (4 persons) (2)(3)     1,235,209                    42.2%

</TABLE>

*    In calculating beneficial and percentage ownership, all shares of Common
     Stock which a named stockholder will have the right to acquire from
     February 28, 1999, upon exercise of stock options are deemed to be
     outstanding for the purpose of computing the ownership of such stockholder,
     but are not deemed to be outstanding for the purpose of computing the
     percentage of Common Stock owned by any other stockholder.  As of February
     28, 1999, an aggregate of 2,925,438 shares of Common Stock were
     outstanding.  Except as otherwise indicated in the footnotes to the table,
     this does not take into account currently exercisable stock options
     outstanding as of February 28, 1999 to purchase an aggregate of 518,690
     shares, nor the Warrants outstanding as of February 28, 1999 to purchase
     up to 517,500 additional shares of Common Stock.

(1)   Includes 267,250 shares held of record by Acacia as security for repayment
      of debts owed to Acacia by third parties.

(2)   Includes in the case of each of Messrs. Stewart and Ryan all shares held
      of record by Acacia, of which they are directors, and executive officers.

(3)   Includes shares issuable upon exercise of currently exercisable options,
      including 97,500 shares in the case of Mr. Stewart and 247,500 shares in
      the case of Ms. Kolke.  Sixty percent of the options to purchase 15,000
      shares granted to Mr. Fox became exercisable on February 9, 1999 and forty
      percent of the options to purchase 15,000 shares granted to Mr. Ryan
      became exercisable on October 17, 1998 and are therefore included.

Item 12.  Certain Relationships and Related Transactions.

    In April 1995, the Company invested $100,000 to purchase a limited
partnership interest in Acacia Capital Partners, L.P., a California limited
partnership formed by Acacia to manage investments using proprietary software
models.  Except as described below, all profits and losses of the partnership
are allocated quarterly among the general partners and limited partners in
proportion to their respective capital accounts as of the beginning of each
quarter.  The general partners are allocated on an annual basis (subject to
certain exceptions) 20% of the amount by which profits of the partnership
otherwise allocable to each of the limited partners in that year exceed losses
allocated to the limited partners that have not been recouped.  The general
partners of this investment partnership are entitled to annual management fees
payable by each limited partner in an amount equal to 1% of the value of that
limited partner's capital account.  Acacia will receive three-fourths, and the
other general partner will receive one-fourth, of such fees.  These management
fees are payable quarterly in advance at the beginning of each quarter based on
the net asset value of the limited partner's capital account on the first day of
the quarter.  The partnership also pays or reimburses the general partners for
all costs and expenses incurred by or on behalf of the partnership, including
all legal and accounting fees and expenses.  Although the partnership is not
obligated to reimburse the general partners for any of the general partners' own
operating, general, administrative and overhead costs and expenses, some or all
of these expenses may be paid by securities brokerage firms that execute
securities trades for the partnership.  On December 1, 1997 Whitewing withdrew
its investment in Acacia Capital Partners, L.P.

                                      19

<PAGE>

    Management of the Company believes that the foregoing transactions were in
the Company's best interests.  As a matter of policy, all transactions between
the Company and any of its executive officers, directors, or principal
shareholders, or any of their affiliates, must be on terms that a majority of
the independent, disinterested members of the Company's Board of Directors
believe to be no less favorable to the Company than those that could have been
obtained from an unaffiliated third party in an arm's length transaction.

    For a description of the options to purchase shares of the Company's Common
Stock granted to the Company's executive officers and directors, see Item 10,
"Executive Compensation."

Item 13.  Exhibits and Reports on Form 8-K.

    (a)   Exhibits.  The following exhibits are either filed herewith or
          incorporated herein by reference:
<TABLE>
<CAPTION>
            <S>   <C>
            3.1   Certificate of Incorporation*
            3.2   Bylaws*
            3.3   Reincorporation Agreement*
            4.1   Form of Warrant*
            4.2   Agreement Not to Sell*
            10.1  Lease of Company's Executive Offices*
            10.2  Stock Option Plan*
            10.4  Fulfillment Services Agreement with Professional Marketing
                  Associates, Inc.*
            10.5  Consulting Agreement*
            27    Financial Data Schedule*

</TABLE>
*    Incorporated by reference from the Company's Registration Statement on Form
     S-1 (33-97156) which became effective under the Securities Act of 1933, as
     amended, on February 9, 1996.

(b)   Reports on Form 8-K

<TABLE>

    (c)    Index to Financial Statements.
<CAPTION>

                                                                Page
<S>                                                             <C>
Independent Auditors' Report                                    F-1

Balance Sheets as of December 31, 1998                          F-2

Statements of Operations for the years ended
   December 31, 1997 and 1998                                   F-3

Statements of Shareholders' Equity for the years ended
   December 31, 1997 and 1998                                   F-4

Statements of Cash Flows for the years ended
   December 31, 1997 and 1998                                   F-5

Notes to Financial Statements                                   F-6 - F-12

</TABLE>

                                      20

<PAGE>

                                     SIGNATURES



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

                                   Whitewing Labs, Inc.



                              By:    /s/  Cynthia Kolke
                                   Cynthia Kolke
                                   President, Assistant Secretary and Director

                                   Dated:  March 24, 1999


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



  /s/  R. Bruce Stewart     Chairman of the Board               March 24, 1999
R. Bruce Stewart            of Directors, Secretary
                            and Treasurer



  /s/  Cynthia Kolke        Director, Assistant                 March 24, 1999
Cynthia Kolke               Secretary



  /s/  Paul R. Ryan         Director                            March 24, 1999
Paul R. Ryan



  /s/  William D. Fox       Director                            March 24, 1999
William D. Fox

                                      21

<PAGE>

                           INDEPENDENT AUDITOR'S REPORT




To the Shareholders of Whitewing Labs, Inc.

We have audited the accompanying balance sheet of Whitewing Labs, Inc. as of
December 31, 1998 and the related statements of operations, shareholders' equity
and cash flows for the years ended December 31, 1997 and 1998.  These financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Whitewing Labs, Inc. as of
December 31, 1998, and the results of its operations and its cash flows for the
years ended December 31, 1997 and 1998 in conformity with generally accepted
accounting principles.


                                      /s/  Moss Adams LLP
                                      MOSS ADAMS LLP



Los Angeles, California
January 20, 1999




















                                         F-1
<TABLE>



                             WHITEWING LABS, INC.

                               BALANCE SHEETS

                              DECEMBER 31, 1998


<CAPTION>
                                  ASSETS

<S>                                                          <C>
CURRENT ASSETS:
   Cash and cash equivalents                                 $    93,521
   Short-term investments                                      1,289,025
   Inventories                                                    79,681
   Prepaid expenses
      Advertising                                                245,117
      Other                                                       70,181
   Other receivables                                              17,998
   Deferred income taxes                                          50,000
                                                             ___________
      Total current assets                                     1,845,523
                                                             ___________

EQUIPMENT:
   Furniture and fixtures                                        150,918
   Accumulated depreciation                                      (92,378)
                                                             ___________
                                                                  58,540
                                                             ___________

OTHER ASSETS
   Trademarks                                                    41,250
   Other                                                          7,036
                                                             ___________
                                                                 48,286
                                                             ___________

                                                             $1,952,349
                                                             ___________

</TABLE>




The accompanying notes are an integral part of these financial statements




                                        F-2a

<TABLE>

                               WHITEWING LABS, INC.

                                 BALANCE SHEETS

                                DECEMBER 31, 1998

<CAPTION>
                      LIABILITIES AND SHAREHOLDERS' EQUITY


<S>                                                             <C>

CURRENT LIABILITIES:
   Accounts payable                                             $     29,985
   Accrued liabilities                                                 5,519
                                                                 ___________
      Total current liabilities                                       35,504
                                                                 ___________


SHAREHOLDERS' EQUITY:
   Preferred Stock, $.001 par value:
      10% cumulative, 500,000 shares authorized;
      no shares issued and outstanding
   Common stock, $.001 par value:
      10,000,000 shares authorized; 2,925,438 shares
      issued and outstanding                                          2,925
   Paid-in capital                                                6,248,746
   Accumulated deficit                                           (4,334,826)
                                                                 __________

   Shareholders' equity                                           1,916,845
                                                                 __________

                                                                 $1,952,349
                                                                 ==========

</TABLE>





The accompanying notes are an integral part of these financial statements




                                        F-2b
<TABLE>
                                 WHITEWING LABS, INC.

                                STATEMENT OF OPERATIONS

                           YEARS ENDED DECEMBER 31, 1997 AND 1998
<CAPTION>

                                                  1997                1998
<S>                                          <C>                  <C>
NET SALES                                    $ 3,581,811          $ 3,934,847

COST OF GOODS SOLD                               524,497              644,823
                                              __________           __________
   Gross profit                                3,057,314            3,290,024
                                              __________           __________

OPERATING EXPENSES:
   Advertising                                 2,223,204            1,610,516
   Selling                                     1,311,427            1,359,258
   General and administrative                    656,668              681,014
                                              __________           __________
                                               4,191,299            3,650,788
                                              __________           __________
   Loss from operations                       (1,133,986)            (360,764)

OTHER INCOME, net                                141,184               87,675
                                              __________           __________
   Loss before income taxes                     (992,802)            (273,089)

INCOME TAX BENEFIT (PROVISION)                    49,150                 (850)
                                              __________           __________
NET LOSS                                    $  (943,652)         $   (273,939)
                                               =========           ==========

BASIC AND DILUTED LOSS PER COMMON SHARE     $      (0.33)        $      (0.09)
		=========	========

WEIGHTED AVERAGE NUMBER OF
   COMMON SHARES OUTSTANDING                  2,864,680            2,896,372
                                               =========           ==========
</TABLE>


The accompanying notes are an integral part of these financial statements

                                      F-3

<TABLE>
                             WHITEWING LABS, INC.

                      STATEMENTS OF SHAREHOLDERS' EQUITY

                    YEARS ENDED DECEMBER 31, 1997 AND 1998
<CAPTION>
                                   Common Stock              Treasury Stock
                                Shares       Amount       Shares       Amount
<S>                             <C>       <C>             <C>       <C>

BALANCE, December 31, 1996      2,891,388  $   2,891      (17,600)  $(45,419)

  Exercise of stock options        15,000         15            -          -
  Repurchases of common stock           -          -      (23,850)   (31,487)
  Net loss                              -          -            -          -

                                _________  _________      _______   ________


BALANCE, December 31, 1997      2,906,388      2,906      (41,450)  (76,906)

   Retirement of treasury stock   (41,450)       (41)      41,450    76,906
   Exercise of stock options       60,500         60            -         -
   Net loss                             -          -            -         -

                                _________  _________      _______   ________

BALANCE, December 31, 1998     2,925,438 $     2,925            - $       -

                               =========  ==========      =======   ========
</TABLE>




The accompanying notes are an integral part of these financial statements
                                      F-4a
<TABLE>
                             WHITEWING LABS, INC.

                      STATEMENTS OF SHAREHOLDERS' EQUITY

                    YEARS ENDED DECEMBER 31, 1997 AND 1998
<CAPTION>
                                  Paid-In        Accumulated
                                  Capital           Deficit           Total
<S>                              <C>             <C>               <C>

BALANCE, December 31, 1996       $6,318,977      $(3,117,235)      $3,159,214

  Exercise of stock options           1,315                -            1,330
  Repurchases of common stock             -                -          (31,487)
  Net loss                                -         (943,652)        (943,652)
                                 __________      ___________       __________

BALANCE, December 31, 1997        6,320,292       (4,060,887)      2,185,405

   Retirement of treasury stock     (76,865)               -               -
   Exercise of stock options          5,319                -           5,379
   Net loss                        (273,939)       (273,939)               -
                                 __________      ___________       __________

BALANCE, December 31, 1998       $6,248,746      $(4,334,826)     $1,916,845

                                 ==========      ===========      ==========
</TABLE>




The accompanying notes are an integral part of these financial statements
                                      F-4b

<TABLE>

                              WHITEWING LABS, INC.

                            STATEMENTS OF CASH FLOWS

                     YEARS ENDED DECEMBER 31, 1997 AND 1998
<CAPTION>

                                                        1997         1998
<S>                                                 <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                         $ (943,652)   $(273,939)
   Adjustments to reconcile net loss
   to net cash used in operating activities:
      Depreciation and amortization                     25,211       28,938
      Changes in assets and liabilities:
         Inventories                                    19,035       44,803
         Prepaid advertising                           104,540       29,438
         Other prepaid expenses                          8,827      (40,102)
         Other receivables                             (15,546)      44,152
         Deferred advertising                          182,061            -
         Deposits                                       (3,364)        (232)
         Accounts payable                             (277,664)      12,256
         Accrued liabilities                           (11,200)      (6,741)
         Deferred income taxes                         (50,000)           -
                                                    __________    _________
      Net cash used in operating activities           (961,752)    (161,427)
                                                    __________    _________

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of furniture and fixtures                  (16,513)     (14,961)
   Development of trademarks                                 -      (40,224)
   Purchase of short-term investments, net          (1,221,240)     (67,785)
                                                    __________    _________
      Net cash used in investing activities         (1,237,753)    (122,970)
                                                    __________    _________

CASH FLOWS FROM FINANCING ACTIVITIES:
   Return of investment in related-party partnership   100,000            -
   Payments to stockholder                             (22,190)           -
   Net proceeds from issuance of common stock
      upon exercise of options                           1,330        5,379
   Repurchases of common stock                         (31,487)           -
                                                    __________    _________

      Net cash provided by financing activities         47,653        5,379
                                                    __________    _________
NET DECREASE IN CASH
AND CASH EQUIVALENTS                                (2,151,852)    (279,018)
                                                    __________    _________












                                      F-5a
<PAGE>

CASH AND CASH EQUIVALENTS,
   Beginning of year                                 2,524,391      372,539
                                                    __________    _________

CASH AND CASH EQUIVALENTS,
   End of year                                     $   372,539   $   93,521
                                                    ==========    =========

SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
   Cash paid for income taxes                      $       800   $      850
   Cash paid for interest                                    -            -
                                                    ==========    =========

</TABLE>


   The accompanying notes are an integral part of these financial statements










                                      F-5b
<PAGE>

                                 WHITEWING LABS, INC.

                            NOTES TO FINANCIAL STATEMENTS

                                  DECEMBER 31, 1998


1.    Summary of Operations and Organization and Business

Whitewing Labs, Inc. (the "Company") develops, seeks to acquire through license,
markets and sells nutritional supplements for sale to the over age forty market
primarily in the United States.  Utilizing formulas that include only natural
ingredients, the Company's products offer alternatives to conventional
treatments for symptoms associated with the aging process.

2.   Summary of Significant Accounting Policies

     a.  Estimates Used by Management

     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 reported period.  Actual results could differ from those
     estimates.

     b.  Concentration of Risk

     Production, order taking and order fulfillment are outsourced to four
     independent contractors, which potentially subject the Company to a
     concentration of supplier risk.  In addition, substantially all printing is
     handled by an outside company and substantially all advertising placement,
     including airing time for electronic in-home delivery of product
     advertising, is handled by outside service agencies.  Although these
     services are currently concentrated with a few key suppliers, management
     believes that other suppliers could provide similar services and comparable
     terms.  A change in suppliers, however, could cause delay in manufacturing,
     shipping, advertising placements and a possible loss of sales which could
     affect operating results adversely.

     c.  Cash and Cash Equivalents, and Short-Term Investments

     The Company considers cash equivalents to be short-term, highly liquid
     investments that are both readily convertible to known amounts of cash, and
     are so near their maturity that they present insignificant risk of changes
     in value because of changes in interest rates.  Cash equivalents include
     only those investments with original maturities of three months or less.

     Short-term investments consist of certificates of deposit with original
     maturities of greater than three months but less than one year which are
     readily convertible to cash.

     d.   Reclassification of Operating Expenses

     Reclassification of amounts within operating expenses were made to the 1997
     income statement to conform with the 1998 classifications.

     e.  Inventories

     Inventories consist of finished goods and shipping supplies.  Inventories
     are valued at the lower of cost (determined by the first-in, first-out
     method) or market value.

                                      F-6

<PAGE>

     f.  Prepaid Advertising

     Electronic and printed materials comprise the main components of the
     Company's direct-response marketing efforts.  Payments to vendors in
     advance of the run date are included in prepaid advertising.  Respondents
     are logged into a customer database which indicates the source of each
     customer's response to the specific advertisement.  Prepaid and deferred
     print advertising placements and mailings are amortized over the lesser of
     one year or the number of months in which the related direct responses are
     expected to be received.  The Company evaluates the realizability of its
     direct-response advertising by comparing the carrying amount of prepaid and
     deferred advertising at each balance sheet date on a cost-pool-by-cost-pool
     basis to the probable remaining future net revenues expected to result from
     such advertising.  Any excess carrying amount over probable remaining
     future revenues is reported as advertising expense in the current period.
     Newspaper and weekly publications are expensed in the month of issue.
     Magazines which are available prior to the middle of the month preceding
     the issue date are amortized over a three month period.  Magazines which
     are available subsequent to the middle of the month preceding the issue
     date are amortized over a four month period.  Costs to develop, edit, and
     reproduce infomercials and commercials for airing at local television
     stations nationwide are amortized over a period of twelve months or the
     estimated revenue earning stream, whichever is less.  Prepaid advertising
     at December 31, 1998 includes approximately $154,972 of costs related to
     the development of infomercial advertising.  Advertising expense was
     $2,223,204 and $1,610,516 for the years ended December 31, 1997 and 1998,
     respectively.

     g.  Furniture and Fixtures

     Furniture and fixtures are recorded at cost.  Major additions and
     improvements are capitalized.  Depreciation is computed using the straight-
     line method over the estimated useful lives which range from 3  to 7 years.
     When assets are sold or otherwise disposed of, the cost and related
     accumulated depreciation are removed from the accounts and any resulting
     gain or loss is included in earnings.

     h.  Organization Costs and Trademarks

     Organization costs are capitalized and amortized using the straight-line
     method over a five-year period.  Costs incurred to develop proprietary
     trademarks are capitalized and amortized using the straight-line method
     over a ten-year period.

     i.  Income Taxes

     The Company accounts for income taxes using the asset and liability method.
     Income taxes are further explained in Note 5.

     j.  Revenue Recognition

     Revenue is recorded at the time of shipment.

     k.  Earnings Per Share

     Basic earnings per share are calculated based on weighted average shares
     outstanding for the period without giving effect to outstanding common
     stock equivalents while diluted earnings per share considers the effect of
     common stock equivalents on weighted average shares outstanding.  The
     common stock equivalents had no dilutive effect in 1997 or 1998.

     l.  Recently Issued Accounting Pronouncements

     In 1997, the Financial Accounting Standards Board (FASB) issued Statement
     of Financial Accounting Standard (SFAS) No. 130, "Reporting Comprehensive
     Income," and SFAS No. 131, "Disclosure About Segments of an Enterprise and
     Related Information".  These pronouncements have been adopted however,
     neither has a material effect on the Company's financial statements.  SFAS
     No. 132, "Employer's Disclosure About Pensions and Other Post-Retirement

                                      F-7

<PAGE>

     Benefits", SFAS No. 133, "Accounting for Hedging Activities", and SFAS No.
     134, "Accounting for Mortgage-Backed Securities" have recently been issued
     but are not yet effective and are not expected to apply to the Company.

3.   Restricted Cash

By agreement with its credit card service organization, the Company is required
to maintain a reserve cash account with a balance equal to an agreed upon
percentage of the prior six months' gross sales volume for credit card
transactions subject to chargeback and return ratios.  As of December 31, 1998,
$20,000 of cash reserved for this purpose is included in cash and cash
equivalents in the accompanying balance sheet.

4.   Commitments and Contingencies

     a.  Lease

<TABLE>

     The Company leases its office space under an operating lease agreement,
     expiring October 2002.  The Company also leases an automobile under an
     operating lease, expiring May 2002.  Future minimum lease payments at
     December 31, 1998 are:

<CAPTION>

                       <S>                   <C>
                       1999                  $  48,377
                       2000                     49,645
                       2001                     52,366
                       2002                     55,250
                                              ________
                                              $205,638
                                              ========
</TABLE>

Rent expense in 1997 and 1998 was approximately $41,500 and $43,750,
respectively.

     b.  Service

     The Company has a fulfillment services agreement with Professional
     Marketing Associates, Inc. (PMA) effective through March 22, 1999, subject
     to automatic six month extensions, currently extended through March 22,
     2000.  Under the agreement, PMA acts as the Company's independent
     contractor for the purposes of order processing, warehousing and
     distribution of the Company's merchandise.

     c.  Regulation

     The U.S. Food and Drug Administration (FDA) is the primary agency that
     regulates the healthcare industry.

     The Company's products consist of natural ingredients which are considered
     nutritional supplements and are classified as foods, thus they do not
     require FDA approval.  The Company's product labeling and advertising copy,
     however, must be within the FDA's established guidelines.

     In November 1991, the FDA issued proposed regulations designed to, among
     other things, amend its food labeling regulations.  The proposed
     regulations met with substantial opposition.  In October 1994, the "Dietary
     Supplement Health and Education Act of 1994" (the "Dietary Supplement Law")
     was enacted.  Section 11 of the Dietary Supplement Law provided that the
     advance notice of proposed rule making by the FDA concerning dietary
     supplements was null and void.  FDA regulations that became effective on
     June 1, 1994 would require standard format nutrition labeling on dietary
     supplements.  However, because the new Dietary Supplement Law also
     addresses labeling of dietary supplements, the FDA has indicated that it
     will not enforce its labeling regulations until March 23, 1999.  In the
     interim, new regulations are expected to be proposed by the FDA.  Because
     the FDA has not yet reconciled its existing regulations with the new
     Dietary Supplement Law, the Company cannot determine to what extent any
     changed or amended regulations might affect its business, if at all.

                                      F-8

<PAGE>

     The Dietary Supplement Law did not affect the effectiveness of the FDA's
     health claims regulations.  Those regulations prohibit any express or
     implied claims for dietary supplements unless such claims are approved in
     advance by the FDA through the promulgation of specific authorizing
     regulations.  Such approvals are rarely provided by the FDA.  Therefore, no
     claim may be made on a dietary supplement label or in printed sales
     literature "that expressly or by implication characterizes the relationship
     of any substance to a disease or health-related condition".  The Company
     cannot determine what effect currently proposed FDA regulations, when and
     if promulgated, will have on its business in the future.  Such regulations
     could, among other things, require expanded or different labeling, the
     recall or discontinuance of certain products, additional record keeping and
     expanded documentation of the properties of certain products and scientific
     substantiation.  In addition, the Company cannot predict whether new
     legislation regulating its activities will be enacted, which new
     legislation could have a material effect on the Company.

     The Company has an ongoing compliance program with assistance from
     experienced FDA counsel regarding the nature and scope of food and drug
     legal matters affecting the Company's business and products.  The Company
     is unaware of any legal actions pending or threatened by the FDA or any
     other governmental authority against the Company.

5.  Income Taxes

The asset and liability method requires the Company to provide income taxes for
the tax effect of temporary differences in recognizing certain income and
expenses for financial statement and income tax purposes.

The provision for income taxes is comprised of $850 minimum franchise taxes
payable for state income taxes in each year presented, net of a deferred tax
benefit of $50,000 in 1997.

At December 31, 1998, the Company had net operating loss "NOL" carryforwards of
approximately $4,300,000 for Federal income tax purposes available to reduce
future Federal taxable income through 2013.  Approximately $1,900,000 and
$600,000 are available to reduce future state taxable income in California and
Arizona, respectively.  State NOL carryforwards also expire through 2013.  The
Company had approximately $1,000,000 of NOL carryovers ("pre-change NOLs") for
federal tax return purposes at December 31, 1995.  During 1995, the Company's
additional issuance of common stock to third parties and the existence of
cumulative convertible preferred stock held by third parties caused a "change of
ownership" of the Company pursuant to Section 382 of the Internal Revenue Code.
As a result of the ownership change, the Company's ability to utilize pre-change
NOL carryovers is limited to approximately $400,000 per year.

A reconciliation of statutory tax rates to the reported effective income tax
rates for 1997 and 1998 are:
<TABLE>
<CAPTION>

                                               1997           1998
                                               -------       --------
<S>                                            <C>            <C>

Statutory rate
   Federal                                    (34.0)%        (34.0)%
   State, net of Federal benefit               (6.1)          (5.8)

Change in tax asset valuation allowance        42.5           38.5

Other                                           2.6            1.0
                                               ____          _____
                                                5.0%           0.3%
                                               ====          =====
</TABLE>


Temporary differences and carryforwards as of December 31, 1998 which give rise
to the net deferred tax asset are as follows:
<TABLE>
<CAPTION>

<S>                                                            <C>
   Deferred tax assets:
      Federal net operating loss carryforwards                 $1,462,000
      State net operating loss carryforwards-California           111,000
      State net operating loss carryforwards-Arizona               36,000

      Other                                                         2,000

                                      F-9

<PAGE>

      Less - Valuation allowance                               (1,505,000)
                                                                _________
          Total deferred tax assets                               106,000
                                                                _________

   Deferred tax liabilities:
      Prepaid advertising                                         (49,000)
      Accumulated depreciation and amortization                    (7,000)
                                                                _________
   Total deferred tax liabilities                                 (56,000)
                                                                _________
   Net deferred tax asset                                     $    50,000
                                                              ===========
</TABLE>


7.  Stock Option Plan

     a.  Qualified Stock Options

     The Company maintains a qualified stock option plan (the Plan) for officers
     and key employees.  Under the terms of the Plan, incentive stock options
     may be granted with the exercise price established at the prevailing market
     price of the stock at the date of grant.  A number of shares not to exceed
     20% of the outstanding common shares of the Company were reserved for
     issuance under the terms of the Plan.  The options generally vest and
     become exercisable at the date of the grant and expire five years from the
     date of grant, subject to employee termination.  Upon termination of
     employment, individuals have three months from their termination date to
     exercise their options, at which time any unexercised options expire.

     b.  Nonqualified Stock Options

     Under the terms of a nonqualified stock option plan, options are granted at
     the prevailing market price of the stock and generally vest and become
     exercisable at the date of the grant.  Options expire ten years from the
     date of grant, subject to the continuation of each person's employment or
     consulting relationship with the Company.  Upon termination of relations
     with the Company, option holders have three months from their termination
     date to exercise their options. 

     c.  Options Granted

     The following is a summary of qualified and nonqualified options for the
     years ended  December 31, 1997 and 1998:

<TABLE>
<CAPTION>
                                                             Number of Options
Qualified Options:                            Exercise       Granted     Vested
<S>                                         <C>             <C>        <C>

Balance, December 31, 1996                  $0.089          143,000     143,000
   Granted                                   -                    -           -
   Exercised                                 -                    -           -
   Expired                                   -                    -           -
                                            ______          _______     _______

Balance, December 31, 1997                  $0.089          143,000     143,000
   Granted                                   -                    -           -
   Exercised                                 0.089          (45,500)    (45,500)
   Expired                                   -                    -           -
                                            ______          _______     _______
Balance, December 31, 1998                  $0.089           97,500      97,500
                                            ======          =======     =======

                                      F-10

<PAGE>

Nonqualified Options:

Balance, December 31, 1996                  $0.089 - 5.00   378,685     293,688
   Granted                                  $1.25            22,500           -
   Exercised                                $0.089          (15,000)    (15,000)
   Expired                                  $1.25           (25,000)          -
                                            ______         ________     _______

Balance, December 31, 1997                  $0.089 - 5.00   361,185     278,688
	Granted                               $1.00 - 1.25     30,000           -
	Exercised                             $0.089          (15,000)    (15,000)
	Expired                                -                    -           -
                                            ______         ________     _______

Balance, December 31, 1998                  $0.089 - 5.00   376,185     263,688
                                            ======          =======     =======
</TABLE>


The Company accounts for the Plan with regard to the Company's employees,
officers and directors under Accounting Principles Board Opinion No. 25 and
related Interpretations.  Accordingly, no compensation cost has been recognized
for these individuals under the Plan.  Had compensation cost for these
individuals been determined based on the fair value at the grant dates
consistent with the method under SFAS No. 123, the Company's net loss and
earnings per share would have been reduced to the pro forma amounts indicated
below:

<TABLE>
<CAPTION>
                                                        1997           1998
                                                    ------------    ----------
<S>                                                 <C>             <C>
Net loss                              As Reported   $  (943,652)    $ (273,939)
                                      Pro Forma     $(1,060,281)    $ (290,000)

Basic and diluted earnings per share: As Reported   $     (0.33)    $    (0.09)
                                      Pro Forma     $     (0.37)    $    (0.10)

</TABLE>

The fair value of each option grant is estimated on the date of grant using an
option pricing model with the following weighted-average assumptions used for
stock grants in 1997 and 1998:  risk-free interest rate of 5.2%, no expected
dividend yield; expected lives of 7 years; expected volatility of approximately
124% based on fluctuations in recent stock prices.

8.   Capitalization

     a.  Warrants and Stock Options

     In conjunction with its initial public offering in February 1996, the
     Company issued 1,035,000 common stock purchase warrants at $0.20 per share
     which had to be purchased together on the basis of one share of common
     stock and one warrant, but tradable separately thereafter.  The holder of
     two warrants is entitled to purchase one share of the Company's Common
     stock at $3.00 per share prior to February 9, 2000.  The warrants may be
     redeemed by the Company under certain circumstances.  In connection with
     the Company's initial public offering, the representatives of the
     underwriters acquired 90,000 warrants.  As of December 31, 1998, no
     warrants have been exercised.

     In conjunction with the initial public offering in February 1996, the
     Company granted 90,000 options to the representatives of the underwriters
     at an exercise price of $6.00.  The options became exercisable on February
     9, 1997, and expire on February 9, 2001.

                                      F-11

<PAGE>

     b.  Stock Repurchase

     Prior to 1997, the Company acquired 17,600 shares of its common stock for
     $45,419 in connection with a stock repurchase program in which up to
     200,000 shares of the Company's common stock may be acquired in the open
     market.  During 1997, the Company repurchased 23,850 shares for $31,487.
     No shares were purchased in 1998.  By resolution of the Board of Directors,
     the shares previously held in treasury, were retired.

9.   Operating Segments

     The Company's products comprise a single operating segment.  Sales are made
     to a large number of customers throughout the United States.  Sales of two
     of the Company's products comprised 80% of total sales in 1997 and 1998.

10.  Related Party Transactions

     During 1997 the Company withdrew its investment in Acacia Capital Partners,
     L.P.  The investment was originally purchased in 1995.  Acacia Capital
     Partners, L.P. owns approximately 27% of the Company's outstanding common
     stock.
                                      F-12