U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                  FORM 10 - KSB
(Mark One)

( X )    ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

         For the fiscal year ended                December 31, 1996

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

         For the Transition Period from____________________  to _______________

                        Commission file number 000-18448

                    AMERICAN CONSOLIDATED LABORATORIES, INC.
                 (Name of small business issuer in its charter )

          FLORIDA                                       59-2624130
 State or other jurisdiction of                     (I.R.S. Employer
 incorporation or organization)                    Identification No.)

             1640 NORTH MARKET DRIVE, RALEIGH, NORTH CAROLINA 27609
               (Address of principal executive offices) (Zip code)

                                 (919) 872- 0744
                            Issuer's telephone number

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

   Title of each class                Name of each exchange on which registered
   -------------------                -----------------------------------------

   Common Stock, $0.05 Par Value                        N/A

     Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 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 there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will 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. (X)

      Issuer's revenues for the year ended December 31, 1996 were $7,858,315.

      The aggregate market value of the voting common stock of issuer held by
non-affiliates as of February 28, 1997 was $581,991.

     The number of shares outstanding of the registrants Common Stock, par value
$0.05 per share, at February 28, 1997 was 4,009,956 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for Annual Meeting of Shareholders. The Company intends to file
with the Commission a definitive proxy statement under Regulation 14(a) prior to
April 30, 1997.


<PAGE>



                                1996 FORM 10-KSB

                                TABLE OF CONTENTS


                                     PART I
                                                                        PAGE NO.

Item  1.   Description of Business                                         3

Item 2.    Description of Properties                                       8

Item 3.    Legal Proceedings                                               8

Item 4.    Submission of  Matters to a vote of  Security Holders           9


                                     PART II

Item 5.    Market for Common Equity and Related Stockholders Matters       9

Item 6.    Management's Discussion and Analysis                           10

Item 7.    Financial Statements                                           12

Item 8.    Changes In and Disagreements with Accountants on Accounting and
           Financial Disclosure                                           12

                                    PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
          Compliance with Section 16 (a) of the Exchange Act              29

Item 10. Executive Compensation                                           29

Item 11. Security Ownership of Certain Beneficial Owners and Management   29

Item 12. Certain Relationships and Related Transactions                   29

Item 13. Exhibits and Reports on  Form 8-K                                29


                                       2
<PAGE>


                                     PART I

ITEM  1.   BUSINESS

GENERAL

American Consolidated Laboratories, Inc. (the "Company", or "ACL") is a leading
manufacturer of custom contact lenses and is a distributor of commodity lenses.
The Company is headquartered in Raleigh, North Carolina with manufacturing and
distribution operations in Sarasota, Florida and Raleigh, and a sales office in
Philadelphia, Pennsylvania.

ACL is a Florida corporation formed in 1985 under the name Salvatori
Ophthalmics. The name was changed in 1994 to better reflect the Company's
announced acquisition strategy within the contact lens laboratory and
distributor industry segment. ACL is traded over-the- counter under the symbol
EYES.

In December 1994, the Company acquired all the stock of Carolina Contact Lens,
Inc. ("CCL"). CCL is a manufacturer of custom contact lenses and distributor of
commodity lenses for all the major manufacturers. CCL's customers are primarily
located in the mid-Atlantic states. Subsequently the Company moved its
headquarters from Sarasota to Raleigh. In May 1995, the Company acquired certain
assets of Philcon Laboratories, Inc. ("Philcon"). Philcon was a manufacturer of
custom contact lenses and distributor of commodity lenses for all the major
manufacturers. Philcon customers are primarily located in the greater
Philadelphia area.

The contact lens industry today can be divided into two principal segments:
commodity lenses, which are soft lenses mass-produced to industry standard
parameters, and custom lenses, which are custom-made to individual
specifications from primarily Rigid Gas Permeable ("RGP") or soft materials.

ACL manufactures custom lenses in simple to complex lens designs from both RGP
and soft materials. The Company's expertise is in the more complex lens designs
for more difficult to fit eye care situations such as: presbyopia, keratoconus,
post-keratoplasty, radical keratotomy, pediatric aphakia, and high degrees of
myopia, hyperopia, and astigmatism. The Company also distributes a full line of
disposable and non-disposable commodity lenses produced by all the major
manufacturers.

PRINCIPAL PRODUCTS

CUSTOM LENSES The Company manufactures a full line of daily and extended wear
custom lenses in the most technologically advanced designs from over 15
different Food and Drug Administration ("FDA") approved base materials (buttons)
purchased from various suppliers or from proprietary materials. Custom lenses
are made to individual patient specifications. Lens designs range from simple
spheres to complex toric, bi-toric, bifocal, and multifocal lenses. The company
manufactures custom lenses from cylindrical buttons on state-of-the-art
automated lathing equipment.


                                       3
<PAGE>

The raw material buttons are purchased by the Company from two primary
suppliers, Polymer Technologies Corp., a subsidiary of Bausch & Lomb, and
Paragon Vision Sciences. The Company has no difficulty in obtaining an adequate
supply of raw material buttons. The Company produces methafilcon A from
generally available chemicals, under a license agreement with Kontour Kontact
Lens, Inc. which is the raw material used in the production of soft lenses. The
Company purchases polymacon from a supplier in Sarasota, however there are
alternative suppliers available if needed.

The Company utilizes two FDA approved manufacturing facilities located in
Raleigh and Sarasota. The Sarasota site manufactures both soft and rigid lenses,
while the Raleigh facility produces only RGP lenses. The Sarasota facility has
been approved by the FDA for all of the Company's soft custom lens products for
"Rapid Release". This allows for next day shipment of custom soft lenses and is
a significant service advantage in the market place.

All custom lenses are warranted to be free of defects in workmanship, and the
raw material is warranted by each manufacturer.

COMMODITY LENSES The Company distributes virtually every brand of daily wear,
extended wear, disposable, and specialty soft lenses of any consequence
available in the United States. The Company's Raleigh facility includes a
distribution center for commodity lenses manufactured by the principal
commodity lens manufacturers: Bausch & Lomb, Wesley-Jessen, Ciba-Geigy and
Johnson & Johnson. All commodity products are covered by warranties from each
manufacturer.

LENS CARE PRODUCTS The Company distributes the Boston line of RGP lens care
products from Polymer Technology Corp., along with certain other brands.

DISTRIBUTION METHODS

The Company's primary means of distributing its products is regular mail or
overnight service on a daily basis. The method of distribution is determined
based on the customer's preference. To a lesser extent, products are distributed
next day service at the customer's request or in special circumstances. The
cost of distribution is billed to the customer directly on the invoice as a
separate item along with the product and applicable sales tax, if any.

NEW PRODUCTS

MAXIMEYES RGP PLANNED REPLACEMENT PROGRAM In 1997, the Company will introduce
the "MaximEyes" RGP Planned Replacement Program from Paragon Vision Science
featuring the new FluoroPerm 151 material. This program is intended to address
the growing consumer trend towards convenience which has propelled the
significant growth in the disposable segment of the commodity lens market at the
expense of the non-disposable segment of the commodity lenses market. With the
"MaximEyes" Program, the lenses are replaced at regular intervals which provides
for better vision, corneal health, and comfort.

                                       4
<PAGE>


The FluoroPerm 151 material has one of the highest oxygen permeablilities
available in the U.S. today. It promotes optimal corneal health with
approximately four times the oxygen transmission of soft lenses. This makes it
ideal for extended and flexible wear schedules, thick lens profiles, specialty
applications and planned replacements. FluroPerm 151 achieves a balance between
visual acuity, corneal health, and comfort. A lens made of this material offers
safe, extended wear up to 7 days.

CORNEAL MAPPING During 1996 the Company installed the three leading corneal
mapping software systems to enhance its consultant fitting services. This
software permits a real-time transmission to the Company's consultants of a
picture of the patient's cornea. This sophisticated system greatly simplifies
the fitting process by allowing the consultant to assess directly the patient's
corneal shape when working with the eye care professional. Corneal mapping is
the latest technology available and results in a higher initial success rate and
a more cost efficient practice for the eye care professional.

MARKETING

The Company's products are marketed directly to eye care professionals,
ophthalmologists, optometrists and opticians. These eye care professionals are
in individual or group practices, associated with chain stores, or members of
buying groups.

The Company's marketing emphasis is on high margin custom lenses which are more
difficult to fit, such as multifocal, keratoconus, post-keratoplasty, radical
keratotomy, pediatric aphakia, and lenses for high degrees of myopia, hyperopia,
and astigmatisms.

The Company's marketing efforts are focused on tele-marketing directly to the
eye care professional, print advertising in trade publications, trade show
participation, professional seminars, direct mail pieces and incentive programs
based on volume purchased.

Sales and marketing efforts are further supported by highly experienced
consultants that work directly with the eye care professional to fit the lenses.
New sophisticated corneal mapping technology allows the consultant to more
precisely evaluate and offer guidance to the eye care professional resulting in
a better fit for the patient on the first visit, which increases the efficiency
of the eye care professionals practice.

The Company did business in 45 states in 1996. Sales are primarily concentrated
in the Mid-Atlantic states, the Midwest, and the Northeast.

COMPETITION

CUSTOM LENSES In the custom lens segment of the market, ACL is already one of
the 5 largest manufacturers. This segment is highly fragmented, and is
currently comprised of approximately 200 small independent companies.
ACL  is a dominant force in its primary markets on  the East


                                       5
<PAGE>

Coast. ACL penetration in its primary markets has been based on a combination of
outstanding customer service and price. Outside of its primary markets along the
east coast, the Company does experience competition from other labs on a
regional basis.

There is little competitive threat to the Company from the major manufacturers
because the job-shop production process of custom lenses is not compatible with
the continuous flow, low cost processes required to compete in the commodity
contact lens business.

COMMODITY LENSES The commodity lens segment of the market has two components,
disposable and non-disposable lenses, and is dominated by the four major, well
capitalized manufacturers. The production of commodity lenses requires
sophisticated technology and significant capital investment to allow for large,
low cost production runs. Due to the intense competition in the commodity lens
segment, prices and margins have been declining over the past several years,
especially with respect to disposable lenses.

Disposable commodity lenses are the fastest growing lens type in the contact
lens industry today. In an effort to maintain profit margins, the major
manufacturers are making it more economical for the eye care professional to go
direct to the manufacturer to purchase their disposable commodity lenses. As a
result, the major manufacturers represent more of a competitive threat for sales
of this lens type than do other distributors.

The non-disposable lens business is also competitive. The major competitors for
this lens type are the other authorized distributors and the manufacturers. The
authorized distributors are the Company's direct competition on a daily basis.
The major manufacturers compete with the Company indirectly, as they spend
significant advertising dollars to influence the eye care professional and the
end consumer to the merits of disposable products. This is rapidly shifting
consumers to disposable products from non-disposable. The non-disposable lens
market is quickly becoming a replacement market and should continue to decline.
The growth, if any, in this segment of the business will come as financially
weaker distributors cease doing business.

SIGNIFICANT CUSTOMER

The Company had a multi-year contract with one customer that expired August 31,
1996. The contract was not renewed when it expired. Sales to this customer in
1996 and 1995 were approximately $460,000, or 5.9%, of total sales and $761,000,
or 8.5%, of total sales, respectively. The expiration of this contract has not
had a significant adverse effect on the Company. The Company has no other single
customer which accounts for more than 2.0% of total sales.

PATENTS, TRADEMARKS AND LICENSE

The Company has seven registered U.S. Trademarks, one of which is also
registered in Canada. The registered trademarks currently being used by the
Company are "Allvue", "BiVue", "Consta-Vu", "Sof-form", and "Accuform". The
Company occasionally uses the marks "Comfort Control" and "The Tailors of
Contact Lenses". ACL does not own any patents.


                                       6
<PAGE>

The Company holds three manufacturing licenses. A nonexclusive license, expiring
in 2006, is held from the estate of David Volk, M.D., to manufacture certain
aspheric RGP lenses and a soft multifocal lens sold under the trademark
"Allvue". The Company holds an on going license from Kontour Kontact Lens to
produce Methafilcon A and contact lenses from that material. In addition, the
Company has licenses with Polymer Technology Corp., a division of Bausch & Lomb,
and Paragon Vision Sciences to produce RGP lenses from each individual company's
various polymers. Polymer and Paragon are the industry leaders, however the
Company also has license agreements with every U.S. polymer manufacturer. This
is a competitive advantage which allows ACL to manufacture in any material the
eye care professional prefers.

FDA AND ENVIRONMENTAL REGULATION

Virtually all of the products manufactured or distributed by the Company are
classified as medical devices and are therefore regulated by the U.S. Food and
Drug Administration. FDA regulations govern the Company's products,
manufacturing procedures, and facilities.

All new medical devices must be submitted to the FDA along with supporting
microbiological, toxicoligical, and clinical trial results to obtain approval
for a Pre-Market Application ("PMA"), which must be obtained before the device
can be marketed. The approval process can take several years and be very
expensive. The Company does not currently have any submission with the FDA for
approval.

ACL is an FDA approved alternative manufacturer for virtually every RGP polymer
under each supplier's PMA.

The Company is subject to various environmental laws. Most of these regulations
apply to the proper handling, storage, and disposal of chemicals used in the
manufacturing process. The cost of complying with applicable laws is not
significant to the Company's operation. The Company generates very little
hazardous waste in its manufacturing process. The Company contracts with a
licensed company to properly dispose of any waste generated. The Company is not
aware of any violations of environmental regulations. The Company is not aware
of any pending regulations or legislation that would have an impact on the
Company's business.

RESEARCH AND DEVELOPMENT

The Company's research and development activities are primarily devoted to
developing and enhancing lens designs and qualifying as an FDA approved
alternative manufacturing site for new RGP materials and designs. Total
expenditures in this area have been less than $60,000 per year in both 1996 and
1995. All of the Company's research and development expenditures are funded
internally. No funds are received for research and development from suppliers or
customers.

EMPLOYEES

At December 31, 1996, the Company employed 63 individuals, of which 59 were
full-time employees. The Company is not party to any collective bargaining
agreements and believes that its relations with its employees are good.


                                       7
<PAGE>


ITEM  2.  PROPERTIES

The Company leases its facilities in Raleigh, North Carolina, Sarasota, Florida
and Philadelphia, Pennsylvania. The Company owns a facility in Lincoln, Nebraska
which was closed on November 15, 1996. On March 3, 1997 the Company executed an
agreement to sell this facility.

In Raleigh, the Company leases a single purpose, one-story building of
approximately 6,000 square feet from the former owner of CCL who is also an
officer of ACL. The Company manufactures custom RGP lenses and distributes
commodity lenses in this facility. The term of the lease is five years
commencing in December 1994, and provides for monthly rent of $5,000. This
facility is fully utilized at present with no opportunity for expansion. On
November 1, 1995 the Company leased approximately 1,360 square feet of
administrative space in a building adjacent to the manufacturing and
distribution building for a term of five years. This space accommodates the
Company's corporate administration functions. The monthly rent is $963 for the
first three years of the lease and $1,020 in the fourth and fifth years.

In Sarasota, the Company leases approximately 12,000 square feet in a single
story concrete block building. The Company manufactures both custom RGP and Soft
lenses in this facility. The term of the lease is ten years, and terminates on
January 31, 2001, and provides for monthly rent of approximately $8,500 in 1996,
with 3% increases each year of the lease. During 1996, the Company subleased
approximately half of the 12,000 square foot space to one tenant and is
collecting rent under the sublease agreement.

In Philadelphia, the Company leases 2,000 square feet of administrative space in
a multi-purpose facility. The Company operates a sales office out of this
facility. The term of the lease is five years commencing on January 1, 1996, and
provides for monthly rental payments of $2,275, with annual increases of
approximately 3%.

The Company owns two connected buildings comprising approximately 10,800 square
feet in Lincoln from which it operated a custom lens manufacturing facility
until it was closed on November 15, 1996. These two one-story buildings, one of
which is of steel construction and the other of which is brick masonry, are
about 35 years old and are in good condition. The Company has a mortgage loan
from Cornhusker Bank, secured by the property and the buildings. On March 3,
1997, the Company executed an agreement to sell the land and building at a price
in excess of its current carrying value.

The Company's tangible property consists primarily of production equipment and
computer hardware which is either owned or leased. The leased equipment is
subject to liens held by a variety of financing companies, none of which is
material.

ITEM  3.  LEGAL PROCEEDINGS

None.


                                       8
<PAGE>


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

On February 12, 1997 the Company held a Special Meeting of Shareholders at the
Company's offices in Raleigh. The purpose of the meeting was to vote on a
proposal to amend the Company's Articles of Incorporation that would increase
the authorized number of shares of capital stock of the Company by creating a
class of 5,000,000 shares of Preferred Stock with no par value. The proposal was
approved by unanimous vote of the shareholders attending.



                                     PART II

ITEM  5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

PRICE RANGE OF COMMON STOCK

The common stock of the Company is reported by The National Association of
Securities Dealers through the NASD OTC Bulletin Board, its automated system for
reporting NON-NASDAQ quotes and National Quotation Bureau's Pink Sheets. The
prices shown are the high and low bid prices for each quarter and do not include
retail markup, markdowns or commissions.


                                      1996                     1995
                               High         Low         High         Low
                            -------------------------------------------------
First Quarter                    1          1/4         2 1/8        1/2
Second Quarter                 1 3/4        1/2           5         1 1/2
Third Quarter                  1 5/8         1          4 3/8       1 1/2
Fourth Quarter                   1          7/16        2 1/2        3/8


As of March 21, 1997, the Company had approximately 231 shareholders of record
of its common stock.

No cash dividends have been declared or paid on the Company's common stock.
Various loan agreements prohibit the Company from paying dividends. Further,
the Company has no plans for payment of cash dividends on stock until operations
generate funds in excess of those required to provide for the growth needs of
the Company.



                                       9
<PAGE>


ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

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

GENERAL

During April of 1996, the Board of Directors of the Company strengthened the
Company's management team by bringing in two seasoned executives to replace the
previous management

On June 28, 1996, the Company closed on an asset-based loan facility with
Fidelity Funding Group that has allowed the Company to repay certain debt and
reopen credit lines with its vendors. This financing allowed the Company to
increase its inventory levels in order to achieve higher customer fill rates and
overall customer satisfaction.

RESULTS OF OPERATIONS

Net sales for the year ended December 31, 1996 ("1996"), totaled $7,858,314, a
decrease of $1,144,915, or 13.7% from the ended December 31, 1995 ("1995"). This
decrease is due to the problems encountered with the change to a new fully
integrated computer software package in August of 1995, which resulted in the
erosion of sales through December of 1995. Monthly sales increased steadily in
1996 from the low in December of 1995.

The Company incurred an operating loss, excluding the impact of restructuring
expenses and write-down of intangible assets of $1,354,263 in 1996 compared to
$1,775,159, in 1995, an improvement of $420,896. The Company attributes the
loss to decisions and actions taken in 1995 by the previous management team
and the residual implications of those decisions and actions which carried
over into 1996. Significant progress was made in the third and fourth quarters
to increase sales and reduce the monthly level of expenses built up by the
previous management team.

Sales of all products were lower for 1996 compared to 1995. This is primarily
the result of the effects of the computer software installation problems
encountered in August 1995, which adversely affected customer service levels,
and the change in philosophy by the major manufacturers to compete directly with
the distributors for the commodity disposable products.

The gross profit for 1996 was $2,469,673, or 31.4%, of net sales compared to
$2,762,654, or 30.7%, of net sales for 1995. This represents the effect of
continued pricing pressures on the commodity disposable products from the major
manufacturers. Management believes pressure on pricing will continue for this
product line as the Company competes with the manufacturers for these sales.


                                       10
<PAGE>

Total operating costs and expenses, excluding restructuring expenses, and
the write-down of Intangible Assets, for 1996 were $3,823,936 compared to
$4,537,813 for 1995. All of the reduction of $713,877 was achieved in the
third and fourth quarters. This is the result of the following actions: 1)
reduction in work force on 10/1/96; 2) closure of the Lincoln facility on
11/15/96; 3) renegotiating with various vendors that provide services to the
Company. In the first quarter of 1996, monthly operating expenses, averaged
approximately $342,000, compared to December 1996 operating expenses, excluding
restructuring expenses, and the write-down of Intangible Assets, of $274,679.
Operating expenses in the first two months of 1997 have averaged less than
$250,000 per month.

Selling expenses are down in 1996 compared to 1995 due to the elimination of the
"National Sales Force", which was established by the previous management team in
1995. This industry does not typically operate with a sales force, but rather
through tele-marketing and other more cost effective methods. Consequently all
but three members of the sales force were terminated in early 1996. The
remaining three sales representatives either resigned or were terminated in the
fourth quarter of 1996.

Marketing activities had been curtailed during 1996 as a result of cash flow
constraints. However, with the closing of the Fidelity credit line in June, the
Company did increase spending for marketing activities in the second half of the
year, including the hiring, late in the year, of a tele-markerter as it begins
to focus on telemarketing.

The Company recorded restructuring expenses of $483,774 in 1996 related to the
closing of the Lincoln facility. The restructuring expenses include the cost to
close the facility, the severance costs related to the layoff of the workforce,
and the write-off of the remaining goodwill associated with the acquisition of
the Lincoln facility. These costs are non-recurring and will not impact future
periods. The Company is already realizing the positive benefits from closing the
Lincoln facility and consolidating it into Sarasota and Raleigh. The Company has
successfully retained a large portion of the Lincoln business while absorbing
the production without increasing costs in either facility. Thus, the Company
has realized a substantial benefit from the costs eliminated by closing the
facility.

The Company recorded a write-down of intangibles in the amount of $883,869 in
the fourth quarter of 1996. Given the uncertainty of the Company's financial
condition at December 31, 1996 and the operating losses incurred in 1996 and
1995 the Company believes the value of its intangible assets have been
impaired.

Interest expense for 1996 totaled $713,248 compared to $214,536 for 1995. The
increase is the result of the additional funds borrowed to support the 1996
loss, and the recognition of $312,000 in interest expense associated with
warrants to purchase the company's stock issued in 1996.


FINANCIAL CONDITION

At December 31, 1996 the Company had a cash overdraft of $16,834, which is
included in accounts payable, compared to cash on hand at December 31, 1995, of
$37,772. Net cash used in operating activities for the year ended December 31,
1996, was $786,142 compared to $456,559 used in operating activities in 1995.
The cash used in operating activities was provided from an asset-based loan with
Fidelity Funding and additional loans from the Company's primary stockholder,
Tullis-Dickerson Capital Focus, L.P.

                                       11
<PAGE>

The Company had a working capital deficit of $3,111,842 compared to a working
capital deficit of $890,227 at December 31, 1995.

Management is working to achieve positive cash flow from operations by reviewing
and adjusting sales prices to provide acceptable profit margins, rescheduling
its current obligations and significantly cutting costs. Management continues to
aggressively pursue obtaining debt or equity financing, as well as acquisitions
in order to improve liquidity and enhance shareholder value. No assurances can
be given that additional financing can be obtained, or that acquisitions will be
consummated. If management is not successful in generating positive cash flow
from operations or raising additional financing the Company may not have
adequate cash to meet its current obligations. The Company's continuation as a
going concern is dependent upon its ability to generate sufficient cash flow to
meet its obligations on a timely basis and attain profitable operations and
positive cash flow.

ITEM    7      FINANCIAL STATEMENTS

                Consolidated Balance Sheets as of December 31, 1996 and 1995

                Consolidated Statements of Operations for the years ended
                December 31, 1996 and 1995

                Consolidated Statements of Stockholders' Equity for the years
                ended December 31, 1996 and 1995

                Consolidated Statements of Cash Flows for the years ended
                December 31, 1996 and 1995

                Notes to Consolidated Financial Statements


ITEM 8  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON  ACCOUNTING AND
        FINANCIAL DISCLOSURES.

                None



                                       12
<PAGE>

                    AMERICAN CONSOLIDATED LABORATORIES, INC.
                           CONSOLIDATED BALANCE SHEETS
                                     ASSETS


<TABLE>
<CAPTION>
                                                                             (UNAUDITED)
                                                                               DECEMBER                         DECEMBER
                                                                               31, 1996                         31, 1995
                                                                           -----------------                ------------------
<S>                                                                         <C>                                <C>
CURRENT ASSETS:
   Cash                                                                     $             -                    $       37,772
   Accounts receivable, less allowance
         for doubtful accounts (note 3)                                             644,157                           635,032
    Inventories, at lower of cost (first in,
         first out) or market (note 4)                                              708,152                         1,094,743
    Other current assets                                                            115,408                             5,181
                                                                           -----------------                ------------------

                      Total current assets                                        1,467,717                         1,772,728
                                                                           -----------------                ------------------

PROPERTY AND EQUIPMENT AT COST:
     Laboratory equipment                                                           871,167                         1,114,567
     Office Equipment                                                               216,990                           320,607
     Leasehold improvements                                                          56,024                            60,150
     Assets being held for disposition                                              255,000                           255,000
                                                                           -----------------                ------------------

                      Total property and equipment                                1,399,181                         1,750,324

     Less accumulated depreciation                                                  915,942                         1,128,838
                                                                           -----------------                ------------------

                      Property plant and equipment, net                             483,239                           621,486
                                                                           -----------------                ------------------

OTHER ASSETS:
     Costs in excess of  fair value of assets
           acquired                                                                        -                          828,419
     Other intangible assets                                                               -                          938,815
     Miscellaneous                                                                         -                           91,945
                                                                           -----------------                ------------------

                                                                                           -                        1,859,179

     Less accumulated amortization                                                         -                          411,835
                                                                           -----------------                ------------------

                      Total other assets, net                                              -                        1,447,344
                                                                           -----------------                ------------------

TOTAL ASSETS                                                                   $  1,950,956                     $   3,841,558
                                                                           =================                ==================

</TABLE>

See notes to consolidated financial statements.

                                       13
<PAGE>



                    AMERICAN CONSOLIDATED LABORATORIES, INC.
                     CONSOLIDATED BALANCE SHEETS (Continued)
                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)


<TABLE>
<CAPTION>
                                                                             (UNAUDITED)
                                                                               DECEMBER                         DECEMBER
                                                                               31, 1996                         31, 1995
                                                                           -----------------                ------------------
<S>                                                                            <C>                              <C>
CURRENT LIABILITIES:
   Accounts payable                                                            $  1,433,469                     $   1,796,484
   Accrued expenses (note 5)                                                        742,766                           260,097
   Current maturities of long-term debt (note 7)                                  2,012,733                           606,374
   Revolving credit line (note 6)                                                   390,591                                   -
                                                                           -----------------                ------------------


                      Total current liabilities                                   4,579,559                         2,662,955
                                                                           -----------------                ------------------

LONG - TERM DEBT (note 7):                                                          395,171                         1,050,639

DEFERRED RENT                                                                        52,597                            58,238

COMMITMENTS AND CONTINGENCIES (Note 1)

STOCKHOLDERS' EQUITY (DEFICIT) (note 8)
   Common stock, $.05 par value, 20,000,000 shares
       authorized; 4,621,623 issued and 4,005,623 shares
       outstanding at December 31, 1996, and 4,436,927
       issued and outstanding at December 31, 1995                                  231,082                           221,847
   Capital in excess of par value                                                 6,220,273                         5,887,834
   Receivable for shares issued as collateral                                              -                       (225,000)
   Treasury Stock                                                                  (328,000)                                   -
   Deficit                                                                       (9,199,726)                       (5,814,955)
                                                                           -----------------                ------------------

                      Total stockholders' equity (deficit)                       (3,076,371)                           69,726
                                                                           -----------------                ------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                           $  1,950,956                     $   3,841,558
                                                                           =================                ==================
</TABLE>


See notes to consolidated financial statements




                                       14
<PAGE>


                    AMERICAN CONSOLIDATED LABORATORIES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995




<TABLE>
<CAPTION>
                                                                              (UNAUDITED)
                                                                                  1996                             1995
                                                                           -----------------                ------------------

<S>                                                                            <C>                              <C>
NET SALES                                                                      $  7,858,314                     $   9,003,229

COST OF SALES                                                                     5,388,641                         6,240,575
                                                                           -----------------                ------------------

          Gross profit                                                            2,469,673                         2,762,654
                                                                           -----------------                ------------------

OPERATING COSTS AND EXPENSES:
    Selling expenses                                                                979,878                         1,059,294
    Marketing expenses                                                              107,448                           153,616
    Research and development                                                         54,099                            56,435
    General and administrative expenses                                           2,682,511                         3,268,468
    Restructuring expenses (note 9)                                                 483,774                                 -
    Write-down of intangible assets (note 10)                                       883,369
                                                                           ----------------                 ------------------

          Total operating costs and expenses                                      5,191,079                         4,537,813
                                                                           -----------------                ------------------

          Operating loss                                                         (2,721,406)                       (1,775,159)

OTHER INCOME (EXPENSES):
    Interest expense (Note 8)                                                      (913,248)                         (214,536)
    Other income (expense)                                                           49,883                          (104,751)
                                                                           -----------------                ------------------

Loss before income taxes                                                         (3,384,771)                       (2,094,446)

INCOME TAXES (Note 11)                                                                    -                                 -
                                                                           -----------------                ------------------

NET LOSS                                                                       $ (3,384,771)                    $  (2,094,446)
                                                                           =================                ==================


Loss per common share (note 1)                                                          ($0.81)                           ($0.51)
                                                                           =================                ==================

Weighted average shares outstanding (note 1)                                      4,158,141                         4,091,549
                                                                           =================                ==================
</TABLE>

See notes to consolidated financial statements


                                       15
<PAGE>



                    AMERICAN CONSOLIDATED LABORATORIES, INC.
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
           FOR THE YEARS ENDED DECEMBER 31, 1996 (UNAUDITED) AND 1995



<TABLE>
<CAPTION>
                                                                     CAPITAL IN    RECEIVABLE
                                                                      EXCESS OF    FOR SHARES
                                                 COMMON STOCK            PAR       ISSUED AS                    TREASURY
                                              SHARES      AMOUNT        VALUE      COLLATERAL      DEFICIT       STOCK    TOTAL
                                       ---------------------------------------------------------------------------------------------
<S>                                           <C>          <C>        <C>                   <C> <C>                  <C>  <C>
Balances, January 1, 1995                     3,823,048    191,153    5,282,708             0   (3,720,509)          0    1,753,352

Issuances of common stock                       613,879     30,694      605,126      (225,000)           -           0      410,820

Net loss                                              -          -            -             0   (2,094,446)          0   (2,094,446)

                                       ---------------------------------------------------------------------------------------------
Balances, December 31, 1995                   4,436,927    221,847    5,887,834      (225,000)  (5,814,955)          -       69,726

Issuances of common stock (unaudited)          (431,304)     9,235     (131,917)      225,000                 (328,000)    (225,682)

Issuance of stock warrants (unaudited)                                  464,356                                             464,356

Net loss (unaudited)                                                                            (3,384,771)              (3,384,771)

                                       =============================================================================================
Balances, December 31, 1996 (unaudited)       4,005,623    231,082    6,220,273             -   (9,199,726)   (328,000)  (3,076,371)
                                       =============================================================================================


</TABLE>

See notes to consolidated financial statements

                                       16
<PAGE>



                    AMERICAN CONSOLIDATED LABORATORIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE YEARS ENDED DECEMBER 31,1996 (UNAUDITED) AND 1995



<TABLE>
<CAPTION>
                                                                          (UNAUDITED)
                                                                             1996                               1995
                                                                        ----------------                  ------------------
<S>                                                                         <C>                              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net loss                                                                   $(3,384,771)                     $   (2,094,447)
 Adjustments to reconcile net loss to net cash
     used in operating activities:
     Depreciation                                                               151,316                             134,959
     Amortization                                                               268,244                             321,663
     Write-off of Intangibles                                                 1,179,099
     Debt extension expense                                                           -                               8,125
     Interest expense related to issuance of warrants                           311,508
     Loss on disposal of assets                                                   7,066                                   -
     Management fee expense                                                           -                              18,000
     (Increase) decrease in accounts receivable                                  (9,125)                            438,875
     (increase) decrease in inventories                                         386,591                            (290,884)
     (Increase) decrease in other current assets                               (110,227)                             87,307
     (Decrease) increase in accounts payable                                   (160,188)                            893,484
     Increase in accrued expenses                                               579,986                              29,167
     (Decrease) in deferred rent                                                 (5,641)                             (2,808)
                                                                        ----------------                  ------------------

Net cash used in operating activities                                          (786,142)                           (456,559)
                                                                        ----------------                  ------------------

Cash flows from investing activities:
     Additions to property and equipment                                        (20,135)                            (84,220)
     Deferred acquisition costs                                                        -                          (36,117)
     Purchase of Philcon Laboratories, Inc.                                           -                          (95,000)
                                                                        ----------------                  ------------------

Net cash used in investing activities                                           (20,135)                           (215,337)
                                                                        ----------------                  ------------------

Cash flows from financing activities:
     Net proceeds from asset based loan                                         455,915                                       -
     Proceeds from borrowings                                                   885,833                             592,000
     Principal payments on long - term debt                                    (560,480)                           (242,975)
     Principal payments under capital leases                                    (34,563)                                      -
     Issuance of common stock                                                     4,966                              39,695
                                                                        ----------------                  ------------------

Net cash provided by financing activities                                       751,671                             388,720
                                                                        ----------------                  ------------------


Net decrease in cash                                                            (54,606)                           (283,176)

Cash beginning of period                                                         37,772                             320,948
                                                                        ----------------                  ------------------

Cash (overdraft) end of period                                            $     (16,834)                    $        37,772
                                                                        ================                  ==================

</TABLE>

See notes to consolidated financial statements



                                       17
<PAGE>


                    AMERICAN CONSOLIDATED LABORATORIES, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               YEARS ENDED DECEMBER 31, 1996 (UNAUDITED) AND 1995

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

       SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES

The following activities are applicable to the year ended December 31, 1996:

The Company purchased a total of 600,000 shares of common stock from two former
officers pursuant to the Share Purchase and Stockholder Agreement dated August
15, 1994, between the Company and the former officers. Under the terms of the
agreement the Company purchased these shares at $0.50 per share, or $150,000
payable to each in twenty equal quarterly installments, along with interest at
5.53% on one note and 6.21% on the other note. These shares are being held in
Treasury.

In May the Company issued 40,000 shares of common stock to one of its vendors as
payment of $40,000 owed that vendor.

The Company converted $36,000 in management fees owed to Tullis-Dickerson & Co.
into common stock in June 1996. The Company issued 53,327 shares as payment for
the amount owed.

Tullis-Dickerson Capital Focus Limited Partnership ("TDCFLP") exercised warrants
at various times between May and August of 1996 in accordance with the
provisions of the loan agreement for advances made to the Company in late 1995
and in 1996. A total of 199,503 shares where issued at an exercise price of $.10
per share. A portion of the interest owed by the Company to TDCFLP was used to
offset the $19,950 cost of exercising the warrants by TDCFLP.

During 1996 the Company issued warrants in conjunction with certain financing
arrangements and recorded a discount of $253,440.

The following activities are applicable to the year ended December 31, 1995:

The issuance of a note payable in the amount of $125,000 to a shareholder of
Philcon Laboratories in conjunction with the purchase of certain assets of
Philcon Laboratories.

The issuance of 8,117 shares of common stock valued at $20,000 in conjunction
with the purchase of certain assets of Philcon Laboratories.

The issuance of 166,666 shares of common stock for the conversion of notes
payable to three employees in the aggregate amount of $250,000.

The issuance of 100,000 shares of common stock valued at $75,000 for the
conversion of a $55,000 note payable to a stockholder of the Company and
forgiveness of $20,000 of accrued interest payable.

The issuance of 150,000 shares of common stock valued at $225,000 and recording
of a receivable for $225,000 as collateral for a $150,000 term loan.


                                       18
<PAGE>




                    AMERICAN CONSOLIDATED LABORATORIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     DECEMBER 31, 1996 (UNAUDITED) AND 1995


1.   BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

         NATURE OF BUSINESS

         American Consolidated Laboratories, Inc. ("the Company") or ("ACL) is
in the business of manufacturing and distribution of contact lenses. The Company
is headquartered in Raleigh, North Carolina with operations in Sarasota, Florida
and Philadelphia, Pennsylvania. The accompanying consolidated financial
statements have been prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. The consolidated financial statements do not include any
adjustments relating to the recoverability and reclassification of assets and
liabilities that might be necessary should the Company be unable to continue as
a going concern.

         The Company has made significant progress since December 31, 1995.
Management successfully closed on a revolving line of credit with Fidelity
Funding during the second quarter of 1996. This line of credit provided the
funds to allow the Company to meet its current obligations.

Management has significantly reduced operating expenses, especially during the
second half of 1996. The Company's continuation as a going concern is dependent
upon its ability to generate sufficient cash flow to meet its obligations on a
timely basis and attain profitable operations and positive cash flow.

         Management continues to aggressively pursue securing additional debt or
equity financing, as well as an acquisition of a profitable entity.
Accomplishment of any of the foregoing could provide the resources to allow the
Company to continue as a going concern.

         BASIS OF PRESENTATION

         The consolidated financial statements include the accounts of the
Company and its subsidiaries, Salvatori Ophthalmic Manufacturing Corporation
("SOMC"), S-O Nebraska, Inc. ("Lincoln"), and Carolina Contact Lens, Inc.
("CCL").

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         This summary of significant accounting policies is presented to assist
the reader in understanding and evaluating the accompanying financial
statements. These policies are in conformity with generally accepted accounting
principles and have been consistently applied unless otherwise noted.




                                       19
<PAGE>

         USE OF ESTIMATES

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

         PRINCIPLES OF CONSOLIDATION

         All significant intercompany accounts and transactions have been
eliminated in consolidation.

         REVENUE RECOGNITION

         Revenues are recognized when product is shipped. Net sales includes
returns and allowances in accordance with Company policies. The Company grants
credit terms to its customers consistent with normal industry practices.

         INVENTORIES

         Inventories are stated at lower of cost, determined by the first-in,
first-out method, or market. Consideration is given to deterioration,
obsolescence and other factors in determining market value.

         PROPERTY, PLANT AND EQUIPMENT

         Property, plant and equipment is recorded at cost. Depreciation is
determined using the straight-line method for both financial statement and
income tax purposes. Cost in excess of the fair value of assets are being
amortized on the straight-line method over five to ten years.

         INTANGIBLE ASSETS

         In accordance with Financial Accounting Standards Board Statement No.
121, Accounting for the Impairment of Long-lived Assets, the Company assesses
the recoverability of the excess of cost over fair market value of net assets
acquired and other intangible assets based on management's estimates of future
cash flows.

         INCOME TAXES

         The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," (SFAS
#109) which is an asset and liability method of accounting for income taxes.
Under this method, deferred tax assets and liabilities are recognized for the
tax consequences of temporary differences by applying statutory rates to
differences between financial statement carrying amounts and the tax basis of
existing assets and liabilities.


                                       20
<PAGE>


         ACCOUNTS PAYABLE

         The accounts payable balance at December 31, 1996 includes a cash
overdraft in the amount of $16,834.

         LOSS PER SHARE

         Loss per share was computed based upon the weighted average number of
shares outstanding during the period. Loss per share is presented on a primary
basis only, since on a fully diluted basis it would be anti-dilutive.

         RECLASSIFICATIONS

         Certain amounts for 1995 have been reclassified to conform to the 1996
presentation.

3.   ACCOUNTS RECEIVABLE

         Accounts receivable consists of the following at December 31, 1996 and
1995:


                                               1996                 1995
Trade receivables                           $ 976,693           $ 1,127,537
Less allowances:
         Doubtful accounts                    156,780               215,728
         Sales returns                        175,756               276,778
                                              -------               -------
Net receivables                             $ 644,157          $    635,032
                                              -------               -------

4.    INVENTORIES

         Inventories consist of the following at December 31, 1996 and 1995:

                                                1996               1995
                                                ----               ----

Raw materials                               $ 171,738           $  180,913
Work in process                                21,562               29,154
Finished goods                                514,852              884,676
                                              -------              -------

         Total                              $ 708,152           $1,094,743
                                              -------            ---------





                                       21
<PAGE>



5.    ACCRUED EXPENSES

         Accrued expenses consist of the following at December 31, 1996 and
1995:

                                               1996              1995
                                               ----              ----

Interest                                     $ 364,829          $  99,975
Restructuring costs                             90,684                 -
Royalties                                       72,451             15,029
Payroll                                         57,032             86,756
Vacation pay                                    24,787             47,570
Other                                          132,983             10,767
                                               -------           --------

         Total                               $ 742,766          $ 260,097
                                              -------             -------

6.   REVOLVING CREDIT LINE

         On June 28, 1996 the Company closed on a $2,000,000 revolving line of
credit with Fidelity Funding of California, Inc. The line of credit is secured
by the first positions in the Company's accounts receivable and inventory. The
interest rate on the loan is 1.5% over the prime rate. The line of credit is for
a term of three years and has prepayment penalties. The proceeds from the loan
were used for working capital purposes. The Company is prohibited from paying
dividends without Fidelity's consent. In connection with this line of credit,
Fidelity also received 150,000 warrants to purchase the Company's common stock
which is discussed in more detail in note 8. The outstanding balance in the
consolidated balance sheet is net of an unamortized discount of $65,324.

7.    LONG-TERM DEBT

         Long-term debt consists of the following at December 31, 1996 and 1995:

<TABLE>
<CAPTION>
                                                                      1996               1995
                                                                      ----               ----

<S>                                                              <C>                  <C>
Notes payable to Tullis-Dickerson Capital Focus L.P.,
    Net of unamortized discount of $87,524                       $ 1,065,309          $ 272,000
Secured Convertible Term Promissory Note payable
    to Tullis-Dickerson Capital Focus L.P.                           800,000            800,000
Note payable to The Oncologic Foundation, Inc.                         7,500             22,500
Obligation under capital lease, payable to IBM Credit                     -              27,762
Note payable to David Dougherty                                           -              55,000
Note payable to Joe Kelly                                            104,809            125,000
Note payable to SouthTrust                                                -              25,400
Note payable to Cornhusker                                           167,786            172,550
Note payable to The Caribou Bridge Fund                                    -            150,000
Note payable to Grady Deal                                           120,000                  -
Note payable to Estate of Wayne Smith                                142,500                  -
Long-term debt, other                                                      -              6,801
                                                                 ------------      ------------
         Total debt                                                2,407,904          1,657,013
Less current maturities                                            2,012,733            606,374
                                                                   ----------           -------
                                                                   $ 395,171         $1,050,639
                                                                  ----------         ---------

</TABLE>


                                       22
<PAGE>



         In November and December 1995 Tullis-Dickerson Capital Focus L.P.
(TDCFLP) provided financing to the Company in the amount of $267,000. TDCFLP
continued to advance funds in 1996 under the same terms and conditions. Each
advance has a maturity date six months from the date of the advance. Interest is
payable until maturity at 13.5%, and at 19.5% after maturity. On the last
$550,000 of advances, TDCFLP received 550,000 warrants to purchase the Company's
common stock, see Note 8.

         In order to complete the CCL acquisition, TDCFLP loaned the Company
$800,000 in the form of a bridge loan. The secured Convertible Term Promissory
Note is due September 30, 1997. Interest is payable quarterly at a rate of 25%.
The loan was amended effective February 15, 1996, to allow TDCFLP to convert the
note into common stock of the Company at the conversion price of one dollar
($1.00) per share of Common Stock and after the Maturity Date shall be Fifty
Cents ($0.50) per share of Common Stock.

         All the TDCFLP debt is secured by the accounts receivable, inventory
and property and equipment. In addition, the Company is prohibited from paying
any dividends under the terms of the TDCFLP loan agreements.

         At December 31, 1996 and 1995 interest owed and unpaid to TDCFLP was
$363,714 and $85,000, respectively.

         In accordance with Grady Deal and Wayne Smith's (former officers of
Company) termination agreements dated April 18, 1996, and July 10, 1996,
respectively, they each exercised their option to put to the Company 300,000
shares each of common stock. Pursuant to the Share Purchase and Stockholder
Agreement dated August 15, 1994 the Company had to purchase these shares at
$0.50 per share, or $150,000 payable to each in twenty equal quarterly
installments, along with interest at 5.53% on the Deal note and 6.21% on
the Smith note.

8.   STOCKHOLDERS' EQUITY (DEFICIT)

         COMMON STOCK

         The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, par value $0.05 per share. There are 4,621,623 shares issued of
which 4,005,623 are outstanding at December 31, 1996. There are 616,000 shares
held in Treasury at December 31, 1996.

         As part of the Deal and Smith termination agreements, discussed in note
7, the Company purchased a total of 600,000 shares of common stock from these
individuals. These shares are being held in Treasury.

         In May the Company issued 40,000 shares of common stock to one of its
vendors as payment of amounts owed that vendor.

                                       23
<PAGE>

         The Company converted $36,000 in management fees owed to
Tullis-Dickerson & Co. into common stock in June 1996. The Company issued 53,327
shares as payment for the amount owed.

         The Caribou Bridge Fund (Caribou) exercised a warrant to purchase
20,000 shares of common stock at $.10 per share in May 1996. In accordance
with the loan agreement with Caribou, these shares if not registered by the
Company by June 1996, provided for additional shares to be issued each month
for which they remained unregistered. The Company negotiated the repurchase of
these shares. To date, four payments have been made with the final payment to
be made in 1997. The shares repurchased, 16,000 to date, are being held in
Treasury. The 150,000 shares held as collateral by Caribou were returned to
the Company in 1996.

         In December, the Company issued 10,000 shares of stock to a former
employee in payment for services provided to the Company as an outside
consultant.

         The Company issued 11,866 shares to employees who exercised options in
accordance with the Company's Stock Option Plan.

         WARRANTS

         During 1996, TDCFLP was granted certain warrants to purchase common
stock of the Company at an exercise price of $.10 per share in accordance with
the provisions of the Convertible Promissory note dated February 15, 1996. The
Company recorded the issuance of such warrants based on the fair value of the
warrants. The fair value was determined based on the market price of the
Company's stock at the exercise date. The total value of the warrants, $210,916
was charged to interest expense during 1996 as the terms of the related advances
had expired. A total of 199,503 shares were issued at an exercise price of $.10
per share. A portion of the interest owed by the Company to TDCFLP was used to
offset the cost of exercising the warrants by TDCFLP.

         TDCFLP received 550,000 warrants to purchase the Company's common stock
at $.25 per share with an expiration date in 2001, in connection with TDCFLP's
most recent loan advances to the Company in 1996. The warrants were valued using
the Black-Scholes pricing model. The value of the warrants was approximately
$175,047 and is being amortized to expense over the term of the loan.

         Fidelity Funding received 150,000 warrants to purchase the Company's
common stock at $.50 per share with an expiration date in 2001, in connection
with an asset-based loan to the Company in June of 1996. The warrants were
valued using the Black-Scholes pricing model. The value of the warrants was
approximately $77,762 and is being amortized to expense over the term of the
loan.


                                       24
<PAGE>


         STOCK OPTIONS

         As permitted, the Company applies Accounting Principles Board Opinion
25 and related Interpretations in accounting for its stock-based compensation
plan. Stock options are primarily granted at fair market value of the common
stock at the grant date. Accordingly, no compensation expense has been
recognized for stock option awards. Had compensation cost for the Company's
stock-based compensation plan been determined based on the fair value at the
grant dates for awards under the plan consistent with the alternative method of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," (SFAS 123) the effect on the Company's net loss for the
periods ended December 31, 1996 is estimated to have increased the Company's
net loss by approximately $186,000. The estimated impact of the fair value of
the options awarded in 1996 on compensation expense of approximately $186,000
is calculated using the Black-Scholes option-pricing model with the following
assumptions applied individually to each option award:

         Market price of stock equaled exercise price of option award at date of
         grant.

         Expected life in years                2 to 5 years
         Annualized volitility                 115%
         Annualized quarterly dividends        $40.000
         Discount rate-Bond Equivalent Yield   5.00%

The Pro-Forma impact on the Net Loss and Earnings Per Share in 1996 using the
fair value method of SFAS 123 is detailed in the table below. The Pro-forma
impact in 1995 is not material.

                  Net loss                             1996
                                                       ----
                     As reported                     $3,384,771
                     Pro-Forma                       $3,570,771

                  Loss per share
                    As reported                           $0.81
                    Pro-Forma                             $0.86

         The Company, has over the years, granted to certain officers,
directors, employees and advisors stock options for the purchase of the
Company's common stock. The options granted have expiration dates of five or ten
year's after date of grant. In some instances the option vests over a period of
years. At December 31, 1996, there are no options outstanding that vest over a
period in excess of four years. The weighted average price of the options
outstanding at December 31, 1996 was $0.62 per share and the weighted average
life of the options was 8.5 years.



                                       25
<PAGE>



The table below summarizes stock options granted and outstanding for the
years ended December 31, 1996 and 1995:

                                           Number                  Price
                                          of Shares              Per Share

Outstanding, December 31, 1994              685,000           $0.125 to $3.00
         Granted                                  0
         Exercised                          109,390           $0.125 to $0.50
         Expired                                  0
                                         ------------
Outstanding, December 31, 1995              575,610           $0.125 to $3.00
         Granted                            913,010           $0.25   to $0.76
         Exercised                           31,866           $0.10   to $0.50
         Expired                            499,410           $0.50   to $3.00
                                            -------
Outstanding, December 31.1996               957,344           $0.125 to $1.125
                                            -------

         Of the 913,010 options granted in 1996, 765,000 were granted to the
three members of the new management team and 148,010 were issued to employees.
In February all the employees received varying numbers of stock options, based
on compensation levels, under the Company's 1994 Incentive and Non-Statutory
Stock Option Plan ("the Plan"). Under the Plan, the Company has 810,000
registered shares. The Company is proposing to make substantial modifications
to the Plan. The proposed modifications will be put to a vote of the
shareholders at the next annual meeting.

9.    RESTRUCTURING EXPENSES

         On November 15, 1996 the Company closed its Lincoln, Nebraska facility
and consolidated that production and customer base into its Raleigh and Sarasota
manufacturing facilities. The Company incurred costs in 1996 associated with the
closure and accrued for the remaining expenses. Of the $483,774 in expenses
charged against income in 1996, $188,043 relate to the expenses incurred to
close the facility and $295,731 relate to the write-off of the remaining book
value of the goodwill and intangibles recorded for the Lincoln facility.

10.   WRITE-DOWN OF INTANGIBLES

         Given the uncertainty of the Company's financial condition at
December 31, 1996 and the operating losses incurred in 1996 and 1995 the Company
believes the value of its intangible assets have been impaired. Accordingly, the
Company has taken a write-down for the net book value of the intangible assets
at December 31, 1996.

11.   INCOME TAXES

         The Company files a consolidated Federal income tax return. Due to its
net loss position, the Company recorded no provision for income taxes in 1996
and 1995.


                                       26
<PAGE>

         The Federal net operating loss carryforward ("NOL") at December 31,
1996 is approximately $6,206,000. The Company had an ownership change in 1990
as defined by the Internal Revenue Code Section 382. The Company has to
date not been able to utilize approximately $670,000 of the pre-ownership change
NOL subject to annual limitations. The NOL of approximately $5,536,000 generated
after the ownership change is not subject to any annual limitation. The NOL
carryforwards expire between 2003 and 2011.

         As of December 31, 1996, state NOL carryforwards totaled approximately
$4,900,000 and are also subject to various Section 382 limitations.

         The components of the net deferred tax assets under SFAS 109 consist of
the following at December 31, 1996 and 1995:

                                                   1996             1995
                                                   ----             ----
         Federal net operating loss            $ 2,110,174       $ 1,712,174
         State net operating loss                  216,826           134,583
         Other                                     394,127           128,677
                                              -------------    -------------

         Total deferred tax assets             $ 2,721,127       $ 1,975,434
         Less: valuation allowance              (2,721,127)       (1,975,434)
                                                -----------     -------------

         Net deferred tax assets               $         0       $         0
                                               ------------      ------------

         These net deferred tax assets are subject to a valuation allowance, as
the realization of the deferred tax asset is uncertain given the Company's
current financial condition. The Company has established a valuation allowance
equal to the deferred tax asset.

12.   COMMITMENTS AND CONTINGENCIES

         LEASES

         The Company has executed operating leases for manufacturing and or
office space related to each of its three locations. Future minimum lease
payments under non-cancelable operating leases at December 31, 1996 are as
follows:

                   Year
                  Ending                                 Amount
                  ------                                 ------
                  1997                                  $ 241,403
                  1998                                    223,210
                  1999                                    198,294
                  2000                                    142,844
                  2001                                          0
                                                       ----------
                                    Total               $ 805,751
                                                        ---------

         Operating lease expense for these leases approximated $238,000 in 1996
and $185,000 in 1995.



                                       27
<PAGE>

         During the third quarter of 1996 the Company entered into a sub-lease
arrangement for a portion of the space in its Sarasota facility. The Company
will receive approximately $54,000 annually under the sub-lease arrangement. The
payments received from the sub-lease tenant are being recorded as other income.
The above listing of future minimum lease payments reflects the gross amount of
rental the Company is obligated to pay the landlord and has not been reduced by
the sub-lease contractual obligation.

         The Company leases its North Carolina manufacturing facility from the
former owner of Carolina Contact Lens and the current President of the Company.
The lease calls for monthly rental payments of $5,000 through December 14, 1999.
The real property taxes and insurance are the responsibility of the Lessor.

         LITIGATION

         The Company is not a party to any litigation, and has no knowledge of
any threatened or pending litigation.

13.  SUBSEQUENT EVENTS

         On February 12, 1997 the Company held a Special Meeting of Shareholders
at the Company's offices in Raleigh. The purpose of the meeting was to vote on a
proposal to amend the Company's Articles of Incorporation that would increase
the authorized number of shares of capital stock of the Company by creating a
class of 5,000,000 shares of Preferred Stock with no par value. The proposal was
approved by unanimous vote.

         Due to the current financial condition of the Company it was necessary
for management to approach its vendors to avoid serious cash flow constraints in
the second quarter of 1997. In March 1997, the Company executed notes with
various suppliers to defer payment of existing trade payable obligations. These
notes vary in term and provide for interest at rates no higher than 10.25%.



                                       28
<PAGE>

                                    PART III

THE INFORMATION REQUESTED BY PART III OF FORM 10-KSB IS CONTAINED IN AND
INCORPORATED BY REFERENCE TO THE ISSURER'S DEFINITIVE PROXY STATEMENT TO BE
FILED PURSUANT TO REGULATION 14A FOR THE REGISTRANT'S ANNUAL MEETING OF
SHAREHOLDERS.

ITEM 9.  DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS  AND CONTROL  PERSONS;
         COMPLIANCE  WITH SECTION  16(A) OF THE EXCHANGE ACT.

Information with respect to this section is included in the Proxy Statement and
is herein incorporated by reference.

ITEM   10.     EXECUTIVE COMPENSATION.

Information with respect to this section is included in the Proxy Statement and
is herein incorporated by reference.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Information with respect to this section is included in the Proxy Statement and
is herein incorporated by reference.

ITEM  12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Information with respect to this section is included in the Proxy Statement and
is herein incorporated by reference.

ITEM 13.      EXHIBITS AND REPORTS ON FORM 8-K.

            (a)   The Exhibits filed herewith are listed on accompanying
                  Index to Exhibits

            (b)   Reports on Form 8-K

                 The registrant did not file any reports on Form 8-K during
1996.

                                       29
<PAGE>


                                   SIGNATURES


In accordance with Section 13 or 15(d) of the exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                       American Consolidated Laboratories, Inc.

Date :  ___________________            By : ______________________________
                                            Joseph A. Arena
                                            Chief Executive Officer



In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.


     Signature                                 Title


/s/ Thomas P. Dickerson                     Chairman of the Board
Thomas P. Dickerson


/s/ Timothy M. Buono                        Director
Timothy M. Buono


/s/ Joan P. Neuscheler                      Director
Joan P. Neuscheler


/s/ James L. L. Tullis                      Director
James L. L. Tullis


/s/ Joseph A. Arena                         Chief Executive Officer and Director
Joseph A. Arena


/s/ Kenneth C. Kirkham                      Chief Financial Officer
Kenneth C. Kirkham


                                       30
<PAGE>


ITEM 13 (a) INDEX TO EXHIBITS

<TABLE>
<CAPTION>

Exhibit
Number            Description                        Incorporated by reference
-------------------------------------------------------------------------------------------------------------------

<S>      <C>                                <C>
4.1      Term Note between Registrant       Exhibit 10.2 to quarterly Report on Form 10-Q for
         and TDCFLP, September 16,          quarter ended September 30, 1991
         1991

4.2      Secured Convertible Term           Exhibit 6 to Current Report on Form 8-K, dated
         Promissory Note between            December 29, 1994
         Registrant and TDCFLP December
         15, 1994;  and Stock  Purchase
         and   Term   Loan    Agreement
         between Registrant and TDCFLP,
         dated August 15, 1994

4.3      Secured Convertible Term           Exhibit to Form 10-KSB for the year ended
         Promissory Note dated as of        December 31, 1995
         December 14, 1994, (as
         amended and restated as of
         June 15, 1995) between
         the Company and TDCFLP
         and amendment of
         Promissory Note dated February
         15, 1996

4.4      Amended and Restated               Exhibit to Form 10-KSB for the year ended
         Convertible Promissory             December 31, 1995
         Note dated February 15,
         1996 from the Company to
         TDCFLP and related
         Warrants

4.5      Loan and Security agreement
         between Carolina Contact Lens,
         Inc. and Fidelity Funding of
         California, dated as of June 25,
         1996

4.6      Loan and Security agreement
         between Salvatori Ophthalmic
         Manufacturing Corporation and
         Fidelity Funding of California,
         Inc. dated as of June 25,
         1996

4.7      Warrant for Purchase of
         securities of American
         Consolidated Laboratories,
         Inc. issued to Fidelity Funding
         of California, Inc. in conjunction
         with the Loan in Exhibits 10.9
         and 10.10 for 150,000 shares

4.8      Warrant for Purchase of
         securities of American
         Consolidated Laboratories,
         Inc. issued to TDCFLP
         in conjunction with Loan
         advances in 1996 for
         550,000 shares





                                       31

<PAGE>



10.1     Employment Contract between        Exhibit 10(a) to Form 10-QSB for the quarter ended
         Joseph A. Arena and the            September 31, 1996
         Company dated April 11, 1996

10.2     Employment Contract between        Exhibit 10(a) to Form 10-QSB for the quarter ended
         Kenneth C. Kirkham and the         September 31, 1996
         Company dated April 11, 1996

10.3     Financing Agreement between        Exhibit 10.1 to Quarterly Report on Form 10-Q for the
         the Company, S-O Nebraska,         quarter ended September 30, 1991
         Inc. and TDCFLP, dated Sep-
         tember 13, 1991

10.4     1994 Incentive and Non-            Exhibit 4.1 to Form 10-KSB for the Fiscal year ended
         Statutory Stock Option Plan        December 31, 1994

21       Listing of Subsidiaries

27       Financial Data Schedule

</TABLE>

                                       32