UNITED STATES
                       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 [Fee Required]

For the fiscal year ended December 31, 1997

[ ] TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
OF 1934 [No Fee Required]

For the transition period from_______ to________

Commission File Number 33-75236

                                 LONGPORT, INC.
                  --------------------------------------------
                 (Name of small business issuer in its charter)

         Delaware                                            23-2715528
-------------------------------                      --------------------------
(State or other jurisdiction of                     (I.R.S. Employer Id. Number)
incorporation or organization)

791 South Chester Road
Swarthmore, Pennsylvania                                        19081
---------------------------------------                        --------
(Address of principal executive offices)                      (Zip Code)

Issuer's telephone number: (610) 328-5006

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

    Title of each Class                Name of each exchange on which registered
    -------------------                -----------------------------------------
            None                                         N/A

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

                          $.001 Par Value Common Stock
                          ----------------------------
                                (Title of Class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act of 1934  during the  preceding  12
months (or for such shorter period that the Registrant was required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days.                                                           Yes  X   No
                                                                   -----   -----

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 the  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.                           Yes  X   No 
                                                                   -----   -----

State issuer's revenues for its most recent fiscal year: $171,786.


<PAGE>


State the  aggregate  market  value of the voting  stock held by  non-affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and asked  prices of such stock,  as of a specified  date within the past 60
days. $11,272,446 based upon a price of $1.625 per share on March 27, 1998.

                        (ISSUERS INVOLVED IN BANKRUPTCY
                     PROCEEDING DURING THE PAST FIVE YEARS)

Check  whether the issuer has filed all  documents  and  reports  required to be
filed by  Section  12, 13 or 15(d) of the  Exchange  Act after  distribution  of
securities under a plan confirmed by a court.
                                            Yes      No      Not Applicable  X
                                               -----   -----               -----

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the latest  applicable  date: As of February 28, 1998,  there was
15,111,282 shares outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated by reference:
The Company's ProxyStatement to be filed

Transitional Small Business Disclosure Format (Check one): Yes      No  X
                                                              -----   -----



<PAGE>



                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

Introduction

The Company,  organized as a Delaware corporation in January, 1993, and operated
a wholly owned  subsidiary,  Longport Medical,  Inc.  ("LMI"),  until September,
1995.  The Company  originally  marketed  medical  products for the treatment of
wounds  ("wound  care") such as wound  dressings,  pressure  relief  mattresses,
intermittent  compression  pumps,  hyperbaric  oxygen chambers  ("HBOs"),  and a
variety of other medical supplies. The Company also operated an outpatient wound
healing center ("Wound  Healing  Center") at the Montclair  Community  Hospital,
Montclair,  New Jersey  ("Montclair  Center") for the treatment of  recalcitrant
wounds.  The Company closed the facility in July, 1995. During 1995, the Company
altered  its  operations  by  developing  a  consulting   services  program  for
healthcare  facilities to open and operate  outpatient wound healing centers and
implement  inpatient and home-patient  wound healing  programs.  As part of this
reorganization, the Company ceased its LMI and Montclair Center operations.

The Company intends to generate future revenues by obtaining management services
contracts  with  healthcare  facilities  and  physicians,  to open wound healing
centers   and/or   implement   wound  healing   programs  for   inpatients   and
home-patients.   Under  management  services  contracts,  the  Company  provides
clinical oversight to a client,  generally a hospital, with respect to operating
an  outpatient  wound  healing  center and/or  implementing  an inpatient  wound
healing program, and receives a monthly fee directly from the contracting party.
As  part of  these  Management  Agreements,  the  Company  expects  to  generate
additional  revenues  through the rental and sale of Topical  Hyperbaric  Oxygen
products and supplies sales.

Wound Healing Centers

In July,  1994,  the Company  opened its first Wound  Healing  Center within the
Montclair Community Hospital, in Montclair, New Jersey ("Montclair Center"). The
Montclair  Center utilized the Company's wound healing  products and supplies to
treat patients suffering from acute and chronic wounds on an outpatient basis.

The Company closed the Montclair Center in July,  1995, but Management's  review
of the Montclair Center's  operations  indicated that an outpatient wound center
("Center")  could be viable as a profit  center if the center had the  financial
and physician  support of a hospital that integrates the center into its overall
business. A larger healthcare facility,  such as a hospital,  has the ability to
spread costs over its operations structure,  while having purchasing power and a
better  financial  base.   Management  believes  hospitals  will  look  to  open
outpatient  facilities  to  offset  lower  revenues  from  decreasing  inpatient
populations and that  outpatient  wound centers could become a growth segment of
the healthcare industry.  Based upon the information obtained from operating the
Montclair  Center,  Management  developed  the wound center  management  service
program  ("Management  Services")  the Company  presently  markets to healthcare
facilities and physicians.

Under the Management Services plan, the Company managed centers function as full
service,   multi-disciplinary  treatment  facilities  that  offer  comprehensive
patient  evaluations  and  aggressive  wound  therapy.  The Company's  personnel
provide clinical management and general consulting for the opening and operation
of a wound healing center,  including ongoing on-site evaluation of the Center's
operations after the Center has opened.  The Company is paid a fee directly from
the client, without the Company's personnel performing direct patient care.

<PAGE>


The Company provides  clients,  in addition to the clinical training and support
described below, assistance with the Center's marketing campaign,  designing the
physical  layout of the center,  and setting up medical  equipment  and supplies
purchasing  contracts.  The  Company's  level  of  involvement  in the  client's
marketing  campaign  depends  upon the  capabilities  of the  client's  internal
departments,  but can include helping the client create marketing materials. The
Company  plans to  eventually  pool groups of Centers,  that are  geographically
close, to create combined advertisement  campaigns,  with the costs being spread
out among all the clients  involved.  Regarding the physical layout of a Center,
the Company's personnel can assist a client in designing the Center and securing
furniture,  and help the  client  establish  a medical  supplies  and  equipment
network,  including  medical billing  systems.  The Company,  however,  does not
directly sell products to the client, or its patients,  and does not perform any
insurance or patient  billing  related to the center's  services.  Overall,  the
client  agrees to  clinically  operate the center in  accordance  the  Company's
assessment  and  treatment  protocols,  but the final  decisions  regarding  the
business and operations portion of the Center, such as staffing, advertising and
physical layouts, are made and paid for by the client.

To create a comprehensive  Management Services program,  the Company developed a
proprietary  Wound  Healing  Manual  ("Manual")  in  coordination  with a number
outside  clinical  researchers  and physicians  experienced in wound  treatment.
These  individuals  continue to work with the  Company's  clinical  personnel to
review and update the Manual when  necessary.  As part of a Management  Services
agreement ("Services Agreement"), a client will receive a customized copy of the
Manual,  training on the assessment and treatment  protocols  within the Manual,
and updates that contain changes in the Manual.

The Company's  Wound Healing  Manual  contains  protocols for the assessment and
treatment of a variety of wounds, from Diabetic Foot Ulcers and Decubitus Ulcers
(bed sores),  to  post-surgical  and other acute  wounds.  The Company  seeks to
provide clinicians with the ability to obtain the most comprehensive  assessment
available,  so that a treatment  protocol  can be  patient-specific  and altered
quickly to match  changes in the wound during the healing  process.  The goal of
the Manual is to make the wound  treatments  more  effective  by  providing  the
physician with more information  about the wound.  The Company's  assessment and
treatment  protocols do not focus on a single tool,  product or method.  Rather,
the protocols utilize a full range of readily available  commercial products and
supplies,  with  recommendations  for use being based on when those products are
designed to work most effectively.

The  Company's  assessment  protocols  require that all new  patients  undergo a
complete history and physical,  lab work,  vascular testing on extremity wounds,
and any other tests deemed  necessary.  The protocols also call for the wound to
be  photographed  and  eventually  receive a scan  utilizing the Company's  Soft
Tissue Ultrasound  Scanner,  should the Company obtain an exemption from the FDA
marketing  procedures  and/or obtain  marketing  clearance  for the device.  See
"Medical  Equipment  Business - Soft Tissue Ultrasound  Scanner" and "Government
Regulation".  Once these  procedures have been  completed,  the patient begins a
treatment program tailored to meet his or her needs.

The Company managed centers will be capable of treating patients  suffering from
a wide range of wounds,  including skin  ulcerations  due to diabetes,  vascular
disease, burns and frostbite;  post-surgical  infections;  decubitus ulcers (bed
sores);  amputations and infected stumps; and gangrenous lesions.  The Company's
assessment   protocols   utilize  numerous   diagnostic   tools,   including  an
Ultrasound/Duplex  Imager, a Doppler,  a Transcutaneous  PO2 Monitor, a vascular
testing  system,  and  potentially  the  Soft  Tissue  Ultrasound  Scanner.  The
Company's   treatment   protocols  utilize  numerous   commercially   available,
non-invasive tools,  including  Therapeutic  Ultrasound;  Extremity  whirlpools;
Compression  Therapy;  and Topical  Hyperbaric  Oxygen  chambers.  The treatment
protocols also utilize  specialty  wound  dressings,  topical  antibiotics,  and
pressure  relief devices in a  comprehensive  program  designed to stimulate the
body into the healing process.


<PAGE>


The Company also provides  comprehensive  training for the client's staff on the
wound assessment and treatment protocols contained within the Manual,  including
training on any  changes to the  protocols  that may be made in the future.  The
Company's  clinical  staff  will  train  the  client's  staff  on the use of the
assessment and treatment equipment,  products and supplies to be utilized at the
center,  including  the HBO  products.  The  training  is  designed to teach the
client's  staff  about  the  Company's  methods  and  philosophy  towards  wound
assessment  and  healing.  The  Company  considers  personnel  training to be an
ongoing process,  so the Management Services program includes continuous on-site
visits by the Company's  clinical staff to ensure  compliance with the Company's
protocols, and to be sure the client's staff understand the Company's protocols.
The client can request on-site  visits,  but beyond a specific number of visits,
as specified in a Services Agreement, the client will be charged for the on-site
visit.

All  examinations  and  procedures   rendered  at  a  Center  are  eligible  for
reimbursement  by Medicare,  except for the Topical  Hyperbaric  Oxygen therapy.
Each treatment procedure and product or supply used has a reimbursement code and
scheduled fee under the Medicare  regulations.  See "Governmental  Regulations".
The HBO products are used as an additional treatment device, in conjunction with
the other  available  treatments,  with payment for this  treatment  coming from
either private insurance carriers,  if applicable,  or the patient. The Company,
however, receives payment directly from the Management Services client, pursuant
to its Services Agreement,  regardless of whether the client or patient receives
reimbursement from Medicare, or other insurance carrier.

The Company  executed its first  Services  Agreement with the West Jersey Health
System ("West Jersey") in July,  1995. See Exhibit 10.26.  The Company  executed
its second  Services  Agreement  with West Hudson  Hospital  ("West  Hudson") in
January,  1996. The West Hudson Agreement has an initial term of two years, with
yearly renewals thereafter. Under the Services Agreement, the Company received a
$10,000  start-up  fee and will  receive  $5,000 per month for the length of the
initial term.  The Company  agreed to provide West Hudson with two THBO Chambers
as part of the Agreement,  with additional Chambers available for West Hudson to
rent at $800 per month.  West Hudson provided the funds necessary for the use of
a Soft Tissue  Ultrasound  Scanner at the Center,  and have taken delivery.  See
Exhibit 10.28 and "Medical Equipment Business - Soft Tissue Ultrasound Scanner".

The Company maintains a General Liability policy and a Liability Umbrella policy
to provide  coverage for the consulting  services it provides.  This multi-peril
policy  provides  for a total of  $3,000,000  in coverage  per  occurrence.  The
coverage  of these  policies  can be expanded to include new Centers the Company
may service in the future.  Management  believes these policies provide adequate
insurance coverage based on the liability risks of the business.

Future Centers

The Company  expects new wound healing  centers to be located within or adjacent
to (i) existing hospitals, (ii) within physicians' offices that provide the same
level of services,  and see the same number of patients,  as the  hospital-based
Centers,  and (iii) within physicians'  offices that provide services to smaller
patient populations. While the Company has reduced its capital needs for general
operations,  the Company's  current  financial  status may adversely  affect the
Company's ability to enter into additional Service  Agreements.  Also, there can
be no  assurance  that the  Company  will obtain any  additional  clients in the
future.

<PAGE>



Medical Equipment Business

In 1997 the company relied less on medical supply sales and rental revenues,  in
comparison to the revenues from 1996. The Company has no contractual  agreements
with any  suppliers for any  products,  and is working with outside  engineering
firms to  conduct  research  and  development  of a its Soft  Tissue  Ultrasound
Scanner  developed by UMDS. See "Medical  Equipment  Business - Ultrasound  Soft
Tissue  Scanner".  The  Company  continues  to  market  the  Sacral  Units  on a
non-exclusive basis. See "Topical Hyperbaric Oxygen Units" below.

Topical Hyperbaric Oxygen Products

The Company continues to market Topical Hyperbaric Oxygen ("HBO") products, that
apply  oxygen  under  pressure to wound sites in order to reduce  wound  healing
time, as part of its Management  Services program and as a stand alone treatment
device.  The Company  rents and sells  "rigid"  HBOs  (sometimes  referred to as
"Chambers"), which treat wound sites on extremities (primarily arms and legs) by
delivering  oxygen  intermittently  in a humid condition,  along with disposable
HBOs  ("Sacral  Units"),  which are soft sided and deliver  moist  oxygen to the
lower back and buttocks, primarily to treat decubitus ulcers.

Currently, the Company owns less than 50 Chambers,  renting approximately 30% of
its Chambers to  non-affiliated  third parties,  and offers the Sacral Units for
sale. Rental rates for the Chambers average $60 per day for individual  patients
and $500 per month for dealers  while sales prices for the Sacral Units  average
$45 each to dealers  and $75 each to end users.  Neither  the  Chambers  nor the
Sacral  Units are  Medicare  reimbursable,  which means that  Medicare  will not
reimburse  the patient or the provider  for use of either HBO  product,  thereby
reducing the  marketability of the products.  The revenues  generated by the HBO
products  are  predominately  from the rental of Chambers  with  monthly  rental
charges to  independent  dealers  who,  in turn,  market the HBO  Chambers.  The
Company also receives  revenues from hospitals and nursing  facilities that rent
or buy the HBO products  directly  from the Company.  The dealers,  hospital and
nursing  facilities are charged regardless of their ability to obtain payment or
reimbursement  from Medicare or the patient.  Further,  numerous  private health
insurance companies reimburse patients for HBO costs.

The Company  markets  Sacral Units on a  non-exclusive  basis by purchasing  the
units from Healing  Systems,  Inc.  ("HSI").  The Company  expects to be able to
obtain the Sacral Units from HSI on an as needed basis, although there can be no
assurance  that the Company will be able to continue to purchase  such  products
through HSI.

HSI purchased the patent for the Sacral Units from Supra ("Sacral Patent"),  but
the agreement is currently the subject of litigation  between HSI and Supra.  If
HSI is unsuccessful  in its litigation with Supra,  the Company may be unable to
market the HSI Sacral Units.  In November,  1993 the Company  purchased a patent
covering an earlier  developed  Sacral Unit which has FDA marketing  permission.
See  "Patents."  The Patent  expired  in 1997.  The  Company  does not intend to
develop a new Sacral Unit. The Company's  relationship with HSI is strictly as a
customer of HSI for the purchase of Sacral Units.  The Company places orders for
the purchase of Sacral units as needed.  The Company had secured,  at no expense
to the Company,  an option to purchase the Sacral  patent and any raw  materials
from HSI,  at the same price HSI paid for the patent and  materials,  as part of
the now expired Exclusive Marketing  Agreement.  The purchase option,  which has
expired,  only took effect if HSI succeeded in the patent litigation  between it
and Supra,  and  exercising of the option was at the  discretion of the Company.
See "Item 12 - Certain  Relationships and Related  Transactions" and "Business -
Patents".

Soft Tissue Ultrasound Scanner

As part of the  settlement of the Supra Medical  federal  lawsuit (See "Item 3 -
Legal  proceedings"),  the Company has been assigned the patent and intellectual
property rights to the ultrasound  scanner  technology by the United Medical and
Dental  Schools of Guy's and St. Thomas  Hospitals  ("UMDS")  located in London,
England. The Company has already started the final stages of development for the
Scanner,  and to  develop  an  information  database  that  makes the  Scanner a
commercially viable product.  Additionally,  since the Scanners will be utilized
at Company  managed  Centers,  the Company does not expect to incur  significant
research and development costs during the final research phase.


<PAGE>


The  Scanner can produce a high  resolution  image of the skin,  and tissue just
below the skin,  by picking up the pattern of the skin and tissue.  This type of
imaging  may  allow  a  clinician  to  check  the  status  of a  wound,  and the
surrounding tissue,  without having to cut the patient or stick a probing device
into the  fragile  wound  bed.  When used with a  coupling  gel,  the  Scanner's
ultrasound can penetrate through certain types of wound dressings and produce an
image,  thus avoiding risks of infection and protecting the wound surface during
the scanning process.  The Scanner is expected to produce an image with an axial
resolution of 65 microns and a lateral resolution of 200 microns.  The image can
then be analyzed, through a proprietary image analysis program designed at UMDS.

The image analysis  system  provides a mathematical  "signature" of the skin and
tissue,  and is capable of detecting  small  changes to the tissue,  before they
become clinically evident. The image analysis may permit clinicians to recognize
the  improvement,  or  deterioration,  of a wound  earlier than present  methods
allow, so that treatments can be modified quickly,  leading to potentially large
savings in treatment  time and expense.  The Scanner can examine  tissue up to 2
centimeters below the skin, and may provide clinicians with the ability to image
a patient's skin,  subcutaneous tissue and even tendons.  Because the Scanner is
new to the  Company,  the  Company  anticipates  having  to file  for  marketing
permission with the U.S. Food and Drug Administration  ("FDA").  See "Government
Regulation".  The  Company  continues  to analyze  the  requirements  of the FDA
filings,  to determine the filings that will be required and the related  costs,
but a final  decision  has not yet been  made.  Due to the  Company's  financial
status,  however, there can be no assurance the Company will have, or be able to
obtain, the funds to complete the FDA filing process.

Competition

The Company's  expects to compete against  hospitals that seek to open their own
wound centers. Management anticipates, however, that the Company will be able to
obtain  contracts  with a number of these  hospitals by offering them a flexible
Management  Services plan that can provide the facility with highly  specialized
clinical  management at affordable  rates.  Whether the Company  competes with a
particular  hospital,  or makes  that  hospital  a  client,  will  depend on the
internal capabilities of that hospital with respect to wound healing programs.

The Company also expects to compete with Curative Technologies,  Inc. ("CTI") to
obtain  Management   Service  contracts  with  hospitals  and,  if  the  Company
establishes  additional  wound healing  centers,  those centers,  depending upon
their  location,  may compete  with CTI centers that  already  operate  within a
specific  geographic  region.  CTI is a  larger,  better  capitalized  and  more
recognized  company that markets wound center franchises under a plan similar to
the  Company's.  Management,  however,  believes  the Company  can  successfully
compete against CTI due to differences between the companies'  programs.  First,
the  expenses  incurred  by a hospital  in setting up a CTI  franchise  are much
higher than those incurred in setting up a Company managed center.  Second,  the
Company's  protocols are  non-invasive,  focus on a comprehensive  assessment of
wounds, and utilize flexible,  individualized treatment programs. CTI's programs
focus on a  proprietary,  but  expensive  and  invasive,  treatment  method that
decreases the ability to individualize treatment programs. Lastly, the Company's
centers  are  capable  of  treating  more types of wounds  than the CTI  managed
centers and the Company believes its strictly  non-invasive  approach to be more
appealing to hospitals and patients.

With respect to the Company's HBO products, the Company markets the Sacral Units
through a  non-exclusive  agreement  with HSI,  whose purchase of its patent for
Sacral Units is being disputed by Supra, the Seller of the patent.  Accordingly,
Supra at some  point  may be a direct  competitor  in the  marketing  of the HSI
Sacral  Unit.  The  Company  remains in minor  competition  with  Wound  Healing
Systems, Inc. ("WHS"), an affiliate, and Wound Care Systems, Inc. ("WCS") in the
sale and rental of Chambers in the regions where the Company currently  conducts
business.  WHS remains  under  agreement  with the  Company not to increase  its
Chamber  inventory  above its original  level,  permitting WHS to replace broken
chambers.


<PAGE>


Marketing

Chambers  and Sacral  Units are  marketed  directly  by  representatives  of the
Company to hospitals, nursing homes and physicians.

On February 19, 1996, the Company  executed an Agreement with Martin Rosenblum &
Associates,  Inc.  ("MRA"),  a  nonaffiliate,  under  which MRA will  market the
Company's  Management  Services  program  on a  nonexclusive  basis.  Under  the
Agreement,  MRA agrees to use best efforts to market the Company's  Services and
will receive a commission  of 20% of all business  generated by MRA. See Exhibit
10.30.

The Company has also entered into agreements with non-affiliates in Pennsylvania
(National Health & Services Corporation and GWR Medical, L.L.P.) and Mississippi
(Professional  Home  Care  Services),  for  the  promotion  of  all  aspects  of
Longport's  business,  including HBO sales and rentals and the  establishment of
additional wound centers.  These agreements,  and future  agreements  similar to
these,  require the licensee to pay the Company a flat monthly fee for the right
to market Longport's  products and services,  and generally  includes a split of
the gross revenues from the applicable business generated by the licensee.

Government Regulation

The  changing of the  Company's  operations,  from direct  selling of product to
providing consulting services, eliminates the Company's need to perform Medicare
billings.  Thus,  the  guidelines  concerning  billing  for wound  products  and
supplies no longer apply to the Company's  operations.  The HBO products are not
Medicare reimbursable,  so the Medicare guidelines do not affect this portion of
the  Company's  business.  The  Company,   however,  must  comply  with  certain
government regulations regarding the Scanner and HBO products.

The Company must be granted  permission  through the United States Food and Drug
Administration  ("FDA"),  and possibly other domestic and foreign authorities to
market the  Company's  medical  devices,  the HBO  products  and the Soft Tissue
Ultrasound  Scanner.  These authorities also regulate labeling,  advertising and
other forms of product claims.

The  Federal  Food,  Drug  and  Cosmetic  Act  requires  the  Company  to file a
pre-marketing  notice of intent to market with the FDA on all  medical  devices.
The  notice  seeks  the  FDA's   permission  to  market  the  product.   Devices
manufactured and marketed before 1976, and any devices substantially  equivalent
to such device,  may fall within the  regulations'  "grandfather"  clause.  This
clause  exempts  the  manufacturer  from  having to submit  the  device  for FDA
permission  and allows the device to be taken  directly to the  market.  Devices
developed  after  1976,  or devices  that  differ  substantially  from a legally
marketed predicate device, must receive the FDA's permission before marketing to
the public may begin. These devices are also subject to reviews by the FDA after
the  pre-market  review  process,   with  devices  that  are  potentially  life-
threatening being subject to more stringent standards. The HBO's marketed by the
Company were first  developed and patented prior to 1976. The current version of
the HBO's remain  substantially  equivalent to the pre-1976  devices and, to the
best of the Company's  knowledge,  may continue to be marketed under current FDA
regulations.

The Scanner is subject to FDA regulations  regarding the introduction of medical
devices  into  commerce  within  the  United  States   markets.   The  research,
development,  testing,  production,  and  marketing of new medical  products are
subject to extensive governmental regulation in the United States. Noncompliance
with these  regulations  may result in recall or seizure of  products,  total or
partial  suspension of  production,  refusal of the government to allow clinical
studies or commercial  distribution of the device, civil penalties or fines, and
criminal prosecution.


<PAGE>


Pursuant to the Federal Food Drug and  Cosmetic  Act (the "FDA Act"),  a medical
device  will be  classified  as either a Class I, Class II or Class III  device.
Class I devices are subject to general controls, including registration,  device
listing,   record-keeping   requirements,   labeling   requirements   and  "Good
Manufacturing  Practices"  (as such term is defined in the FDA Act). In addition
to general  controls,  Class II devices may be subject to special  controls that
could  include   performance   standards,   postmarket   surveillance,   patient
registries,  guidelines,  recommendations  and  other  actions  as the FDA deems
necessary to provide reasonable assurance of safety and effectiveness. Class III
devices  must  meet  the  most  stringent  regulatory  requirements  and must be
approved by the FDA before they can be  marketed.  Such  premarket  approval can
involve  extensive  pre-clinical  and  clinical  testing  to  prove  safety  and
effectiveness of the devices.

All medical devices introduced to the market since 1976 are required by the FDA,
as a condition of marketing, to secure either a 510(k) premarket clearance or an
approved  Premarket  Approval  Application  ("PMA").  A product  qualifies for a
510(k) premarket  notification  clearance if it is  substantially  equivalent in
terms of safety,  effectiveness,  and intended use to another  legally  marketed
medical device. If a product is not  substantially  equivalent to such a device,
the FDA must  first  approve a PMA  application  before it can be  marketed.  An
approved PMA  application  indicates  that the FDA has determined the device has
been proven, through submission of clinical data and supporting information,  to
be safe and effective  for its labeled  indications.  The PMA process  typically
takes more than a year and requires the submission of significant  quantities of
clinical  data and  supporting  information,  While the  process of  obtaining a
510(k) clearance  typically takes less than one year and involves the submission
of less clinical data and supporting information.

An  entity  must file  with the FDA even if the  device  is simply  "new" to the
particular  entity,  and is  otherwise a well known  device in the  marketplace.
Since the Scanner, if it achieves commercial viability,  will be introduced into
commerce within the United States for the first time by the Company,  it will be
considered a "new device"  under FDA  regulations  and will require  appropriate
filings  with  the  FDA.  The FDA has  already  classified  and  approved  other
diagnostic  ultrasound  devices,  that the Company  believes  are  substantially
equivalent to the Scanner, as Class II medical devices. The Company expects that
a 510(k) premarket  notification  clearance will be required and, in conjunction
with UMDS, has begun assembling the information needed to complete all necessary
filings, including the identification of the legally marketed device that is the
most equivalent with the Scanner.  The FDA filing,  and all expenses incurred in
connection with such, will be the  responsibility  of UMDS,  since UMDS owns the
rights to the  technology.  Thus, the Company does not anticipate  expenses that
will  materially  effect  its  finances.  The  Company,   however,  cannot  make
assurances that the Scanner will become commercially viable nor that the Scanner
will achieve FDA clearance for its market entry.

In order for the Company to utilize the Scanner in clinical studies prior to FDA
clearance for market entry,  the Company must obtain an  Investigational  Device
Exemption ("IDE") from the FDA regulations.  The IDE permits entities to conduct
clinical  studies on a medical device that has not received FDA  concurrence for
introduction  into commerce.  The exemption rules were created by Congress,  and
have been codified at 21 USC ss.360j(g). By definition, investigational devices,
for the  purpose  of an IDE,  are  broken  into two  groups,  those  that pose a
significant  risk to  patients  and  those  that pose a  nonsignificant  risk to
patients.  Those that pose  significant risk to patients must obtain an approval
from the FDA to conduct  pre-market  clinical studies.  This process may require
the filing of significant quantities of pre-study data and clinical study plans.
Those  devices  that pose a  nonsignificant  risk to patients  must still have a
clinical  study plan  approved,  but the oversight body can be an FDA recognized
Institutional Review Board ("IRB") that acts as the FDA's representative for the
purpose of approval and oversight of clinical studies.

The Company  believes  that under the  parameters  set forth in the FDA Act, the
Scanner,  since it is a  non-invasive  device,  poses a  nonsignificant  risk to
patients.  This would enable the Company to conduct any  necessary  studies more
quickly and at  significantly  reduced  costs.  Also,  the receipt of a clinical
study  approval will permit the Company to conduct  clinical  studies while UMDS
undergoes the FDA marketing permission process.


<PAGE>


The Company is currently  involved in negotiations for the utilization of an IRB
and is  developing  a  formal  clinical  study  plan.  Upon  agreement  from  an
institution,  the Company will submit its clinical study plan and information on
the  Scanner  to the IRB  who  will  then  decide  whether  the  device  poses a
nonsignificant  risk and whether it approves  the  clinical  study plan.  If the
Company receives  approval from the IRB, the Company intends to conduct clinical
studies in conjunction  with the operation of the Wound Healing  Centers open at
that time,  including the West Jersey and West Hudson Centers.  The Company does
not expect to incur  significant  expenses in connection  with the conducting of
those studies.  The Company,  however,  cannot place a definitive  time frame on
when an IRB will be selected or when the clinical  plan will be  presented,  nor
can the Company assure that the clinical studies will be approved.

The FDA has established  manufacturing (and sterilization) standards for medical
device manufacturers,  known as "Good Manufacturing Practices".  These standards
require any  manufacturing  facility  to be  registered  annually  and submit to
regular inspections. Therefore, if the Company begins manufacturing any devices,
the  manufacturing  facility  would have to comply with these  regulations.  The
Company does not intend to directly manufacture any medical devices. Rather, the
Company  intends to outsource any  manufacturing  operations that may develop in
the future.


Patents

The Company acquired a patent ("Stivala  Patent") covering a Sacral Unit from an
unaffiliated  individual for a purchase  price of $10,000,  20,000 shares of the
Company's Common Stock and a royalty of $1.00 for each Sacral Unit sold, if any.
The patent  expired in 1997.  The Sacral  Unit may be  manufactured  and sold by
anyone.  Moreover,  other  patents have been granted for Sacral  Units,  and new
patents may be granted in the  future.  The  Company  has not  manufactured  any
Sacral Units under the patent and can give no assurance that it will do so.

In December,  1993, the Company acquired all development rights and the right to
file for a patent on a portable Chamber being developed by Richard  Mazzolla,  a
non-affiliate,  in exchange  for which Mr.  Mazzolla  was granted the  exclusive
right to manufacture  the Chamber for four years,  received 10,000 shares of the
Company's restricted Common Stock and will be paid the costs for development and
design of the Chamber, $3,000 of which has been paid. Further, Mr. Mazzolla will
also receive an option to purchase an  additional  25,000  shares of  restricted
Common Stock,  at $.50 per share, if a U.S. patent is granted on his new chamber
design. The Company currently does not intend to pursue the development of a new
Chamber.

See also  "Medical  Equipment  Business  -  Ultrasound  Scanner"  regarding  the
company's assignment of the Scanner patent and intellectual property rights from
UMDS.

Employees

The  Company  has an  agreement  with  Colpat,  Inc.,  an  affiliate  owned  and
controlled  by the its  President  and CEO,  James R.  McGonigle,  for  services
rendered  to the  Company.  Mr.  McGonigle  devotes  100% of his time on Company
business. The Company also has agreements with Bonita Weyrauch,  R.N. to provide
clinical  services and Patricia  McGonigle of Wound Healing  Services to provide
office administration services.



<PAGE>


ITEM 2.  DESCRIPTION OF PROPERTIES

The Company leases  approximately 1,000 square foot office building at 791 South
Chester  Road,  Swarthmore,  Pennsylvania.  The Company pays the Lessor $550 per
month. See "Item 6. - Liquidity and Capital Resources" below.

ITEM 3.  LEGAL PROCEEDINGS.

By agreement,  the Supra Medical Corp litigation  entitled  "Longport,  Inc. vs.
Supra  Medical  Corp.  et al" civil  action no.  95-14754 in the Court of Common
Pleas of Delaware  County,  Pennsylvania)  has been settled and  dismissed.  The
Company  paid  nothing to Supra under the  settlement  agreement,  but agreed to
withdraw its counterclaim.

Also,  by agreement,  and Court Order,  dated  September  16, 1997,  the federal
lawsuit instituted by Supra, entitled Supra Medical Corp. v. James R. McGonigle,
et al.,  civil action no.  96-3737,  has been settled and dismissed by the Court
with  prejudice to the  defendants.  Under this  agreement,  the Company paid no
money to Supra  Medical,  and has been  assigned  the  patent  and  intellectual
property  rights held by UMDS.  See  "Medical  Equipment  Business -  Ultrasound
Scanner" above.

As a  result  of  these  settlements,  the  Company  no  longer  has any  active
litigation  in which it is a named  defendant.  However,  the Company has joined
with James R. McGonigle in filing a lawsuit  against the law firms Supra Medical
hired to prosecute the federal court litigation.  The suit,  entitled  Longport,
Inc., in its own right and on behalf of its shareholders, and James R. McGonigle
v.  Rosner,  Bresler,  Goodman  &  Buckholz,  et  al.,  has  been  filed  in the
Philadelphia  Court of Common Pleas.  The lawsuit alleges  wrongful use of civil
proceedings and civil conspiracy against the defendants,  and seeks compensatory
and punitive damages. As of the writing of this document, the complaint has been
filed with the courts and served on the named defendants.

In  September  1997,  the Company was notified of a Medicare  Hearing  Officer's
decision  that  the  Company  is  liable  for  repayment  of  Medicare   Benefit
Overpayments  of $269,120.  The  Overpayments  are from calendar  years 1994 and
1995. The Company has appealed the Hearing Officer's  decision.  The Appeal will
be heard by an Administrative  Law Judge. The Company has not been notified of a
hearing  date.  The  Company is unable to  predict  the  outcome of the  Appeal.
However, Management believes that there were no Medicare Benefit Overpayments in
1994 and 1995 and will vigorously defend its position.


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

None.



<PAGE>



                                    PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The  Company's  Common  Stock has traded on the  Bulletin  Board of the National
Quotation System under the symbol "LPTI" since September 7, 1994.

The following table sets forth for the quarters  indicated the range of high and
low closing  prices of the  Company's  Common  Stock as reported by the National
Quotation Bureau, but does not include retail markup, markdown or commissions.

                                                      Price
                                           --------------------------
By Quarter Ended:                          High                  Low
                                           ----                  ----
Fiscal 1996
March 31, 1996                             $ .25                $ .06
June 30, 1996                              No Change
September 30, 1996                         No Change
December 31, 1996                          $ .31                $ .06

Fiscal 1997
March 31, 1997                             $ .31                $ .06
June 30, 1997                              $ .31                $. 06
September 30, 1997                         $ .50                $ .06
December 31, 1997                          $2.00                $ .31

Outstanding Shares and Shareholders of Record

As of  February  28,  1998  there were  15,111,282  shares  outstanding  held by
approximately 300 record and beneficial stockholders.

Dividend Policy

The Company  has never paid cash  dividends  on its Common  Stock and intends to
retain earnings, if any, for use in the operation and expansion of its business.
The  amount of future  dividends,  if any,  will be  determined  by the Board of
Directors  based  upon the  Company's  earnings,  financial  condition,  capital
requirements and other conditions.




<PAGE>




ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Overview

The Company was formed in January,  1993, primarily to market Topical Hyperbaric
Oxygen products.  During 1993 and 1994, the Company  developed plans to open its
own Wound Healing Center at the Montclair Community Hospital.  Also, during 1993
the Company expanded its marketing efforts to include a full array of wound care
related  products,  through  its  subsidiary,   LMI.  The  Company  consistently
experienced  receivables  problems on the  business  generated by LMI and ceased
LMI's  operations  in 1995 due to these  problems.  The Company  also closed the
Montclair  Center  in  1995  due to  increasing  costs.  The  Company's  current
operations focus on providing  consulting services and clinically managing wound
healing centers for healthcare  facilities.  The Company has experienced  losses
since  formation,  but during 1996  greatly  reduced its  monthly  expenses  and
overall  debt.  The Company  expects to expand its services  business in 1997 by
obtaining additional Service Agreements.

Results of Operations

The year ended December 31, 1997, vs. year ended December 31, 1996

Total Revenues for 1997 essentially equaled those of 1996, $171,786 and $172,171
respectively.  While  revenues  from medical  supplies and  equipment  sales and
rentals  decreased,   revenues  generated  from  Wound  Center  management  fees
increased  by  38.07%,  $136,000  for 1997 and  $98,500  for 1996.  This  change
reflects the shift in the  Company's  business away from a reliance on sales and
rentals to its management services segment.  The Company expects this difference
to remain and  increase  in the future as it  anticipates  revenues  from future
management agreements to outpace revenues from equipment sales and rentals

The  Company's  Total  Expenses  have again been reduced  between 1997 and 1996,
$365,357  and  $394,954  respectively.   While  the  overall  reduction  is  not
significant, representing only a 7.49% decrease, the shift in where the expenses
were incurred are important and reflect the changes the Company has undergone as
a result of the assignment of the Scanner rights. The Company's costs related to
its  supplies  and  equipment  sales and  rentals  have been  reduced by 67.55%,
$18,581 for 1997 vs.  $57,267  for 1996.  General  and  Administrative  expenses
essentially  remained the same, but expenses related to Research and Development
increased  from $669 for 1996 to $24,000 for 1997.  This change better  reflects
the Company's commitment to the development of the Scanner technology and how it
may impact  the  management  services  portion of the  Company's  business.  The
Company  expects  Research and  Development  expenses  related to the Scanner to
increase  over time,  but these  expenses  are  necessary to the securing of FDA
clearance to market the Scanner.

The Company  continues to  experience  a Net Loss,  but it has reduced that Loss
from $357,429 for 1996 to $214,681 for 1997, a 39.94% decrease. However, part of
the 1996 loss consisted of a one-time loss on asset disposals totaling $127,741.
If this loss is not  considered,  the  Company's  Net Loss between 1997 and 1996
remains essentially the same.

The Company has again  improved  its balance  sheet,  with the most  significant
difference being in the Company's Total  liabilities.  The again Company reduced
its Total  Liabilities,  from $138,218 as of December 31, 1996, to $12,847 as of
December 31, 1997,  a 90.70%  decrease.  The Company no longer has any Long Term
debt.

<PAGE>


The year ended December 31, 1996, vs. year ended December 31, 1995

Total Revenues declined for the second year in a row. The Revenues for 1996 were
69.19%  lower than the revenues  for 1995,  $172,171 and $558,866  respectively.
This  decrease can be attributed  to the  reorganization  of the Company and its
operations. The 1995 figures included at least one full quarter of revenues from
the now-closed LMI  operations.  A significant  difference  between the revenues
figures comes from the fact that a majority of the 1995  revenues,  specifically
those to medical  supplies sales and rentals,  were never  collected,  while the
vast  majority  of the  revenues  for  1996  have  already  been  collected.  In
Management's  opinion,  the  revenues  for 1996  create a better  basis to which
future performance can be compared.

While the revenues  attributed to Management  Fees are  significantly  higher in
1996,  $98,500,  as compared to 1995's revenues of $24,251,  Management believes
this is not an adequate comparison since the first management  agreement was not
executed until July, 1995.  Management expects revenues from Management Services
to continue to climb through 1997.  The other  segments of revenues are not fair
comparisons due to the revenues reflected for 1995 from uncollected LMI revenues
during the first quarter of 1995.

One of Management's goals for 1996 was to get its expenses under control, payoff
all of the Company's old Trade Accounts,  and reduce the Company's  overall debt
as much as possible. Management believes it has accomplished the majority of its
goals. The Company's  expenses have been greatly  reduced,  a 72.82% change from
1995 ($1,453,310) to 1996 ($394,954).  This success can be attributed in part to
the closing of the LMI facility and the Montclair  Center,  and to  Management's
efforts to reduce the expenses  incurred in operating  the Company under its new
structure. Management intends to continue its efforts to review expenses and cut
waste when appropriate.

Perhaps the Company's most significant  reduction has been in Accounts  Payable,
where the Company has reduced the figure from  $431,598 as of December 31, 1995,
to $49,032 as of December 31, 1996. A 88.64% reduction.  More  importantly,  the
1996 figure  contains only current  accounts,  no old accounts.  Management  has
succeeded in eliminating all of the Company's,  including LMI's, old trade debts
and  now  has  the  Company  dealing  with  current  accounts  only.  As part of
Management's efforts to keep expenses down, it expects that the accounts payable
and debt will also remain under control. Overall, the Company's liabilities have
been  reduced by 83.09%,  between  December  31,  1995 and  December  31,  1996,
$817,571 and $138,218  respectively.  The  reduction in Long Term Debt  occurred
when the  Company  was forced to return the title to its office  building to the
original seller and mortgage holder. Management was forced into this decision as
a result of the Supra  Medical  lawsuit  filed in the Federal  Eastern  District
Court  of  Pennsylvania.  See  "Item 3.  Legal  Proceedings"  and  "Management's
Analysis and Discussion - Liquidity and Capital  Resources".  Management intends
to continue its efforts to completely eliminate all debts of the Company through
1997.

The  Operating  Loss for 1996 is  significantly  lower,  when  compared to 1995,
$222,783  and  $894,444  respectively,  a 75.09%  decrease.  This  change can be
attributed to the reduction in expenses and a more reliable  revenue stream from
the Company's new operations.  Management  strived to make its expenses coincide
with the Company's new  operations.  By the end of 1996,  Management  has become
confident that it has succeeded in this goal and that the Company is in a better
position from which to grow.


<PAGE>


Strategy to Achieve Profitable Operations

During  1997,  the Company  began new growth under its  services-oriented  plan.
Management  believes  that the  Company's  restructuring  places  it in a better
position to continue an expansion  as a services  oriented  operation.  In 1997,
Management  focused its efforts on refining the Management  Services Program for
opening wound centers and implementing wound programs,  while also concentrating
efforts on reducing the  Company's  overall  debts.  The Company  believes  that
healthcare  facilities,  mainly  hospitals,  will be  attempting  to  open  more
outpatient  operations,  to make up for lost  revenues  due to  lower  inpatient
populations. Management has identified the wound market as one of the healthcare
industries  growth  segments  and  believes  the  Company  can expand and become
profitable  by entering  into  Service  Agreements  with  additional  healthcare
facilities.

The  Company  anticipates  an  increase  in  revenues  in 1998,  mainly  through
additional Management Agreements and Marketing/License Agreements. The operation
of a services based company requires fewer expenditures, including those related
to the opening of additional wound centers since they will be owned and operated
by  unaffiliated  third  parties.  In 1997,  the Company  entered  into  license
agreements for the marketing of its products and services. Management expects to
enter into similar agreements with other entities.  Under these agreements,  the
marketing  company  pays  Longport  a monthly  license  fee and a portion of the
revenues  generated  by the  licensee.  The Company  intends  enter into similar
agreements, ensuring that marketing expenses are incurred upon the generation of
revenues.

The Company  continues to experience  cash flow  problems,  with little  working
capital.  The restructuring of the operations,  however, has greatly lowered the
monthly  expenditures,  and reduced the overall cash flow  problem.  The Company
anticipates  further  reduction  of this  problem as it enters  into  additional
Management Services Agreements.

The Company  anticipates  continued growth in revenues from the marketing of its
wound healing  services  program and the management of new Wound Healing Centers
over the next 12 months.  Management  will continue to work to reduce the levels
of overall debt and monthly expenses, so that the expenses incurred on a regular
basis better reflect a  services-based  operation  with fewer capital needs.  In
addition,  the  Company  is  exploring  the  possibilities  of  debt  or  equity
financing, but can make no assurance that such financing, either debt or equity,
can be effectuated.


Liquidity and Capital Resources

Through  December 31, 1997,  the Company  continued to sell shares of its Common
Stock to private investors.  Management expects to continue this practice,  when
deemed in the best  interest of the Company  and its  shareholders.  The Company
does not expect to incur any  significant  short-term or long-term  debts within
the next twelve months.

In 1997,  sold a total of  1,811,147  shares of its  restricted  Common Stock to
current and new  shareholders.  The shares were sold  between  $.12 and $.25 per
share, netting the Company a total of $270,326.

In January,  1997, the Company sold 301,147 shares of restricted Common Stock to
a  current  shareholder  and a  non-affiliate.  In April a  current  shareholder
purchased an addition 700,000 shares.  In May the Company sold 100,000 shares to
current  shareholders.  In October,  1997,  the Company sold 310,000 shares to a
current shareholder. In November, the Company sold 400,000 shares to current and
new shareholders.


<PAGE>


The Company also issued 100,000 shares to its employee,  Bonita K. Weyrauch,  as
payment on debts due from the Company.  The Company and employee agreed that the
debt totaled $12,000,  with the shares being issued at the rate of twelve ($.12)
cents per share. The Company also issued 40,000 shares as conversion of the last
unsecured Note Payable and 50,000 shares to a current  shareholder who exercised
an option.  The option  permitted  the  shareholder  to  purchase  shares of the
Company's restricted Common Stock at $.15 per share.

The Company continues to service the Wound Healing Centers at West Jersey Health
System and West Hudson Hospital. Each client has purchased and rented additional
supplies and  equipment  from the Company,  providing  revenues in excess of the
management  fees.  The Company  anticipates  continued  growth from sales of its
products along with the addition of other  management  contracts for the opening
and managing of wound centers over the next twelve  months.  These Wound Centers
would be owned and funded by entities other than the Company,  thus reducing the
necessity of cash outlays to purchase start-up materials and operate the center.
In addition,  the Company continues to explore the possibility of debt financing
and public or private  placements  of its common stock,  but cannot  provide any
assurances that any such financing can be secured.

Commitments

The Company's only long term commitment,  as to the use of cash, is the Retained
agreement  it  signed  with the law firm of  Bochetto  and  Lentz,  the law firm
representing the Company in its lawsuit against the Supra Medical law firms. For
1997, the Company paid a total of $15,000 as their retainer.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

The  Statements  made under Item 6,  Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations,  and other statements within this
document,  that are not historical  facts are forward  looking  statements  that
involve risks and uncertainties, including but not limited to, market acceptance
risks,  the effect of economic  conditions,  the impact of competition,  product
development,  commercialization  and  technology  difficulties,  the  results of
financing  efforts,  legal  circumstances,  and  other  risks  detailed  in  the
Company's Securities and Exchange Commission filings.

ITEM 7.  FINANCIAL STATEMENTS

See page F-1.

<PAGE>


                          LONGPORT, INC. AND SUBSIDIARY
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




Financial Statements                                                        Page
--------------------                                                        ----
  Independent Auditors' Report                                               F-2

  Consolidated Balance Sheet as of December 31, 1997                         F-3

  Consolidated Statements of Operations for the years ended
   December 31, 1997 and 1996                                                F-5

  Consolidated Statements of Changes in Stockholders' Equity for the
   years ended December 31, 1997 and 1996                                    F-6

  Consolidated Statements of Cash Flows for the years ended
   December 31, 1997 and 1996                                                F-7

  Notes To Consolidated Financial Statements                                 F-8






                                       F-1


<PAGE>



                          INDEPENDENT AUDITORS' REPORT




To the Board of Directors
Longport, Inc.


We have audited the accompanying  consolidated  balance sheet of Longport,  Inc.
and Subsidiary as of December 31, 1997, and the related consolidated  statements
of  operations,  changes  in  stockholders'  equity and cash flows for the years
ended  December  31,  1997  and  1996.   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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the consolidated financial position of Longport, Inc. and
Subsidiary  as of  December  31,  1997  and  the  consolidated  results  of  its
operations  and its cash flows for the years ended December 31, 1997 and 1996 in
conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern. As shown in the financial  statements,
the Company  incurred a net loss of $214,681  during the year ended December 31,
1997.  As  discussed  in  Note  1 to the  financial  statements,  the  Company's
significant  operating  losses  raise  substantial  doubt  about its  ability to
continue as a going concern.  Management's  plans in regard to these matters are
also  discussed  in  Note  1.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.




                                                 Angell & Deering
                                                 Certified Public Accountants

Denver, Colorado
February 24, 1998









                                       F-2


<PAGE>



                          LONGPORT, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 1997



                                     ASSETS
                                     ------

Current Assets:
  Cash and cash equivalents                                           $  36,397
  Accounts receivable:
   Trade, net of allowance for doubtful accounts of $3,600                4,276
   Other                                                                  1,200
   Interest                                                               1,887
  Inventories                                                             2,200
  Prepaid expenses                                                       19,500
  Current portion of note receivable                                     16,250
                                                                      ---------

         Total Current Assets                                            81,710
                                                                      ---------

Property and Equipment, at cost:
  Medical equipment                                                     290,658
  Computer equipment                                                      6,615
  Office furniture and equipment                                          7,901
                                                                      ---------
                                                                        305,174
  Less accumulated depreciation                                        (262,367)
                                                                      ---------

         Net Property and Equipment                                      42,807
                                                                      ---------

Other Assets:
  Note receivable, net of current portion above                           2,500
  Intangible assets, net of accumulated amortization of $83,333          24,167
                                                                      ---------

         Total Other Assets                                              26,667
                                                                      ---------

         Total Assets                                                 $ 151,184
                                                                      =========






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

                                       F-3


<PAGE>



                          LONGPORT, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 1997
                                   (Continued)


                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

Current Liabilities:
  Accounts payable                                                  $     5,526
  Accrued income taxes                                                    3,173
  Deferred revenue                                                        3,500
  Current portion of long-term debt                                         648
                                                                    -----------

         Total Current Liabilities                                       12,847
                                                                    -----------

Long-term debt, net of current portion above                               --
                                                                    -----------

Commitments and Contingencies                                              --

Stockholders' Equity:
  Preferred stock: $.001 par value, 1,000,000 shares authorized,
   none issued or outstanding                                              --
  Common stock: $.001 par value, 25,000,000 shares authorized,
   14,856,282 shares issued and outstanding                              14,856
  Paid in capital                                                     2,615,354
  Accumulated deficit                                                (2,486,873)
                                                                    -----------
                                                                        143,337
  Less treasury stock, at cost (30,000 common shares)                    (5,000)
                                                                    -----------

         Total Stockholders' Equity                                     138,337
                                                                    -----------

         Total Liabilities and Stockholders' Equity                 $   151,184
                                                                    ===========







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

                                       F-4


<PAGE>
                          LONGPORT, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996


                                                       1997            1996
                                                       ----            ----
Net Revenues:
  Medical supply sales                             $     18,786    $     28,190
  Medical equipment rentals                              17,000          45,481
  Wound clinic management fees                          136,000          98,500
                                                   ------------    ------------

     Total Revenues                                     171,786         172,171
                                                   ------------    ------------

Operating Expenses:
  Cost of medical supply sales                           13,133           5,979
  Cost of medical equipment rentals                       5,448          51,288
  General and administrative                            322,776         337,018
  Research and development expense                       24,000             669
                                                   ------------    ------------

     Total Operating Expenses                           365,357         394,954
                                                   ------------    ------------

     Operating Income (Loss)                           (193,571)       (222,783)
                                                   ------------    ------------

Other Income (Expense):
  Interest income                                           325           3,900
  Other income                                            4,488            --
  Loss on disposal of assets                            (21,407)       (127,741)
  Interest expense                                       (5,412)        (58,118)
                                                   ------------    ------------

     Total Other Income (Expense)                       (22,006)       (181,959)
                                                   ------------    ------------

Income (Loss) Before Provision for
 Income Taxes and Extraordinary Gain                   (215,577)       (404,742)

Provision for income taxes                                3,759           1,548
                                                   ------------    ------------

Income (Loss) Before Extraordinary Gain                (219,336)       (406,290)

Extraordinary Gain - Extinguishment of Debt               4,655          48,861
                                                   ------------    ------------

Net Loss                                           $   (214,681)   $   (357,429)
                                                   ============    ============
Net Loss Per Share of Common Stock:
 Basic:
  Loss before extraordinary gain                   $       (.02)   $       (.03)
  Extraordinary gain                                       --              --
                                                   ------------    ------------

 Net Loss                                          $       (.02)   $       (.03)
                                                   ============    ============
Diluted:
  Loss before extraordinary gain                   $       (.02)   $       (.03)
  Extraordinary gain                                       --              --
                                                   ------------    ------------

  Net Loss                                         $       (.02)   $       (.03)
                                                   ============    ============
Weighted Average Number of
 Common Shares Outstanding:
  Basic:                                             13,874,970      11,155,874
  Diluted                                            13,874,970      11,155,874


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

                                       F-5
<PAGE>
<TABLE>
<CAPTION>



                                                 LONGPORT, INC. AND SUBSIDIARY
                                   CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                         FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996


                                                  Common Stock                                                Treasury Stock
                                                  ------------              Paid in      Accumulated          --------------
                                              Shares         Amount         Capital        Deficit        Shares          Amount
                                              ------         ------         -------        -------        ------          ------

<S>                                          <C>          <C>            <C>            <C>               <C>           <C>
Balance at December 31, 1995                 8,116,995    $     8,117    $ 1,760,240    $(1,914,763)           --       $      --

Issuance of common stock for
 cash at $.10 to $.12 per
 share                                       2,303,333          2,303        260,697           --              --              --

Conversion of accounts payable
 to common stock at $.10 to
 $.51 per share                              2,267,544          2,268        276,308           --              --              --

Conversion of notes payable
 and accrued interest to
 common stock at $.12 to
 $.15 per share                                167,263            167         23,673           --              --              --

Net Loss                                          --             --             --         (357,429)           --              --
                                           -----------    -----------    -----------    -----------     -----------     -----------

Balance at December 31, 1996                12,855,135         12,855      2,320,918     (2,272,192)           --              --

Issuance of common stock for
 cash at $.12 to $.25 per
 share                                       1,811,147          1,811        270,326           --              --              --

Conversion of accrued expenses
 to common stock at $.12 per
 share                                         100,000            100         11,900           --              --              --

Conversion of note payable
 to common stock at $.12 per
 share                                          40,000             40          4,760           --              --              --

Issuance of common stock
 upon exercise of stock option
 at $.15 per share                              50,000             50          7,450           --              --              --

Common stock returned to the
 Company in exchange for
 equipment at $.17 per
 share                                            --             --             --             --           (30,000)         (5,000)

Net Loss                                          --             --             --         (214,681)           --              --
                                           -----------    -----------    -----------    -----------     -----------     -----------

Balance at December 31, 1997                14,856,282    $    14,856    $ 2,615,354    $(2,486,873)        (30,000)    $    (5,000)
                                           ===========    ===========    ===========    ===========     ===========     ===========





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

                                                              F-6

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                  LONGPORT, INC. AND SUBSIDIARY
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                         FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996


                                                                            1997         1996
                                                                            ----         ----
Cash Flows From Operating Activities:
<S>                                                                      <C>          <C>       
  Net loss                                                               $(214,681)   $(357,429)
  Adjustments to reconcile net loss to net cash
   (used) by operating activities:
    Depreciation and amortization                                           41,972      107,421
    Repayment of notes receivable in consideration
     for services provided                                                  11,000         --
    Provision for bad debts                                                 18,171       (3,600)
    Loss on disposal of assets                                              21,407      127,741
    Gain on extinguishment of debt                                          (4,655)     (48,861)
    Changes in assets and liabilities:
     Decrease in accounts receivable                                        10,744       40,990
     (Increase) in other receivables                                        (1,525)      (1,276)
     (Increase) decrease in prepaid expenses                               (19,500)       4,813
     Decrease in inventories                                                 1,200        3,396
     Decrease in deposits                                                     --            579
     Decrease in accounts payable and accrued expenses                     (44,566)     (73,387)
                                                                         ---------    ---------

      Net Cash (Used) By Operating Activities                             (180,433)    (199,613)
                                                                         ---------    ---------

Cash Flows From Investing Activities:
  Capital expenditures                                                     (20,132)     (20,000)
  Payments on notes receivable                                              13,750        2,500
                                                                         ---------    ---------

      Net Cash (Used) By Investing Activities                               (6,382)     (17,500)
                                                                         ---------    ---------

Cash Flows From Financing Activities:
   Principal payments on notes payable                                     (59,350)     (43,388)
   Issuance of common stock                                                279,637      263,000
                                                                         ---------    ---------

      Net Cash Provided By Financing Activities                            220,287      219,612
                                                                         ---------    ---------

      Net Increase in Cash and Cash Equivalents                             33,472        2,499

      Cash and Cash Equivalents at Beginning of Year                         2,925          426
                                                                         ---------    ---------

      Cash and Cash Equivalents at End of Year                           $  36,397    $   2,925
                                                                         =========    =========

Supplemental Disclosure of Cash Flow Information:
  Cash paid during the year for:
   Interest                                                              $   4,500    $   5,770
   Income taxes                                                                586        2,920

Supplemental Disclosure of Noncash Investing and Financing Activities:
  Conversion of notes payable and accrued
   interest into common stock                                            $   4,800    $  23,840
  Common stock issued for payment of accrued expenses                       12,000         --
  Conversion of accounts payable into common stock                            --        278,576
  Sale of equipment for treasury stock                                       5,000         --


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

                                               F-7

</TABLE>
<PAGE>



                          LONGPORT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Summary of Significant Accounting Policies
   ------------------------------------------
     Description of Business
     -----------------------
          Longport,  Inc. (the "Company") was incorporated January 22, 1993. The
          Company was formed to market and distribute  wound care  products.  In
          1995,  the  Company  began   managing  wound  healing   centers  under
          management services contracts.

     Basis of Presentation
     ---------------------
          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 financial  statements do not include any  adjustments  relating to
          the recoverability and classification of recorded asset amounts or the
          amount and  classification  of  liabilities  that  might be  necessary
          should  the  Company be unable to  continue  as a going  concern.  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, to obtain additional  financing as may be required,  and
          to increase  sales to a level where the  Company  becomes  profitable.
          Additionally,  the  Company has  experienced  extreme  cash  liquidity
          shortfalls from operations.

          The  Company's  continued  existence is dependent  upon its ability to
          achieve  its  operating  plan.   Management's  plan  consists  of  the
          following:

          1.   In 1995 and 1996,  the Company  restructured  its  operations  to
               begin opening and managing wound healing centers under management
               services  contracts.  The  Company  intends  to become a services
               based   Company   and   continue   to  reduce  its   general  and
               administrative expenses.
          2.   Sale of certain assets of the Company.
          3.   Obtaining  additional  equity capital  through the sale of common
               stock.
          4.   Potential  exercise of outstanding common stock purchase warrants
               and options.

          If  management  cannot  achieve its  operating  plan  because of sales
          shortfalls  or  other  unfavorable  events,  the  Company  may find it
          necessary to dispose of assets,  or undertake  other actions as may be
          appropriate.

     Principles of Consolidation
     ---------------------------
          The  consolidated  financial  statements  include the  accounts of the
          Company and its wholly owned subsidiary.  All significant intercompany
          accounts and transactions have been eliminated.

     Cash and Cash Equivalents
     -------------------------
          For purposes of the  statements of cash flows,  the Company  considers
          all highly liquid  investments with a maturity of three months or less
          at the date of purchase to be cash equivalents.

     Inventories
     -----------
          Inventories  are  stated  at the  lower  of  cost or  market.  Cost is
          determined using the first-in,  first-out pricing method.  Inventories
          consists entirely of finished goods.

     Property and Equipment
     ----------------------
          Depreciation of the primary asset  classifications is calculated based
          on the  following  estimated  useful  lives  using  the  straight-line
          method.

                                       F-8


<PAGE>



                          LONGPORT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Summary of Significant Accounting Policies (Continued)
   ------------------------------------------------------
     Property and Equipment (Continued)
     ----------------------------------

                    Classification                       Useful Life in Years
                    --------------                       --------------------
          Medical equipment                                      3-5
          Computer equipment                                      5
          Office furniture and equipment                         5-10

          Depreciation  of  property  and  equipment  charged to  operations  is
          $31,972 and $88,921  for the years ended  December  31, 1997 and 1996,
          respectively.

     Intangible Assets
     -----------------
          Intangible assets are being amortized using the  straight-line  method
          based on the following estimated useful lives.

      Description                                    Useful Life in Years
      -----------                                    --------------------
          Patents                                             4
          Goodwill                                           10
          Scanner rights                                      5

     Revenue Recognition
     -------------------
          The Company recognizes revenue from product sales upon shipment to the
          customer.  Revenue from medical services are recognized as the Company
          performs the services.

     Stock-Based Compensation
     ------------------------
          During the year ended December 31, 1996, the Company adopted Statement
          of  Financial  Accounting  Standard  (SFAS) No. 123,  "Accounting  for
          Stock-Based  Compensation".  The  Company  will  continue  to  measure
          compensation expense for its stock-based  employee  compensation plans
          using the  intrinsic  value method  prescribed  by APB Opinion No. 25,
          "Accounting for Stock Issued to Employees".

     Long-Lived Assets
     -----------------
          In accordance with Statement of Financial  Accounting Standards (SFAS)
          No. 121,  "Accounting for the Impairment of Long-Lived  Assets and for
          Long-Lived  Assets to be Disposed  Of",  the  Company  reviews for the
          impairment of long-lived assets, certain identifiable intangibles, and
          associated  goodwill,  whenever  events or  changes  in  circumstances
          indicate that the carrying  value of an asset may not be  recoverable.
          An impairment loss would be recognized when the estimated  future cash
          flows is less than the  carrying  amount of the asset.  No  impairment
          losses have been identified by the Company.

     Income Taxes
     ------------
          Deferred income taxes are provided for temporary  differences  between
          the financial  reporting and tax basis of assets and liabilities using
          enacted  tax laws and  rates for the years  when the  differences  are
          expected to reverse.

     Net (Loss) Per Share of Common Stock
     ------------------------------------
          As of December 31, 1997,  the Company  adopted  Statement of Financial
          Accounting  Standards  (SFAS) No. 128,  "Earnings  Per  Share",  which
          specifies the method of computation,  presentation  and disclosure for
          earnings  per share.  SFAS No. 128 requires  the  presentation  of two
          earnings per share amounts, basic and diluted.


                                       F-9


<PAGE>


                          LONGPORT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Summary of Significant Accounting Policies (Continued)
   ------------------------------------------------------
     Net (Loss) Per Share of Common Stock (Continued)
     ------------------------------------------------
          Basic  earnings per share is  calculated  using the average  number of
          common shares  outstanding.  Diluted earnings per share is computed on
          the basis of the average number of common shares  outstanding plus the
          dilutive  effect of  outstanding  stock  options  using the  "treasury
          stock" method.

     Estimates
     ---------
          The preparation of the Company's  consolidated financial statements in
          conformity with generally accepted accounting  principles requires the
          Company's 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 amount of revenues and expenses during the
          reporting period. Actual results could differ from those estimates.

2. Long-Term Debt
   --------------
     Obligation Under Capital Lease
     ------------------------------

          15% installment note with monthly principal and interest
          payments of $186, due in 1998, collateralized by equipment.     $  648
                                                                          ------

          Total Long-Term Debt                                               648
          Less current portion of long-term debt                             648
                                                                          ------
          Long-Term Debt                                                  $   --
                                                                          ======

          Installments  due on debt  principal,  including the capital lease, at
          December 31, 1997 are as follows:

          Year Ending December 31, 1998                                   $  648
                                                                          ======

3. Income Taxes
   ------------
          The  Company  has  made no  provision  for  income  taxes  because  of
          financial  statement  and tax  losses.  As of  December  31,  1997 the
          Company  had  net  operating  loss   carryforwards   of  approximately
          $2,300,000.  The net operating loss carryforwards  expire in the years
          2008 through 2012.

          At December 31, 1997 and 1996, the Company had a deferred tax asset of
          approximately $715,000 and $660,000, respectively,  resulting from net
          operating loss carryforwards, which has been offset in its entirety by
          a valuation  allowance.  The net change in the valuation allowance for
          deferred  tax assets was an  increase  of $55,000  related to benefits
          from net operating loss carryforwards.

4. Warrants and Options
   --------------------
     Options
     -------
          The Company has granted stock options to  employees,  consultants  and
          other individuals. The outstanding agreements expire in July 1998. The
          

                                      F-10


<PAGE>



                          LONGPORT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


4. Warrants and Options (Continued)
   --------------------------------
     Options (Continued)
     -------------------
          following  table contains  information  on all of the Company's  stock
          options for the years ended December 31, 1997 and 1996.

                                                 Number of         Option Price
                                                  Shares             Per Share
                                                  ------             ---------
          Options outstanding at
           December 31, 1995                      594,000          $.10 to $1.00
            Granted                               150,000              $.15
            Exercised                                  --               --
            Canceled                             (350,000)         $.50 to $1.00
                                                ---------          -------------

          Options outstanding at
           December 31, 1996                      394,000          $.10 to $.50
            Granted                                    --               --
            Exercised                             (50,000)             $.15
            Canceled                             (150,000)         $.15 to $.50
                                                ---------          -------------

          Options outstanding at
           December 31, 1997                      194,000              $.10
                                                =========          =============

     Warrants
     --------
          In November 1993, the Company sold 1,185,714 "Units" consisting of one
          share of the  Company's  common  stock and one common  stock  purchase
          warrant for $.35 per unit. The Warrants entitle the holder to purchase
          one share of the  Company's  common  stock for $3.00 at anytime  until
          June 30, 1998. All 1,185,714  warrants are  outstanding as of December
          31, 1997.

5. Stock-Based Compensation Plans
   ------------------------------
          The Company adopted Financial Accounting Standard No. 123, "Accounting
          for  Stock-  Based  Compensation"  (SFAS  123)  during  the year ended
          December 31, 1996. In accordance  with the provisions of SFAS 123, the
          Company  applies APB Opinion No. 25,  "Accounting  for Stock Issued to
          Employees,  " and related  interpretations in accounting for its plans
          and  does  not  recognize  compensation  expense  for its  stock-based
          compensation plans other than for options granted to non-employees.

          The Company did not grant any employee stock options in 1997 or 1996.

          The  following  table   summarized   information   about  stock  based
          compensation plans outstanding at December 31, 1997:

          Options  Outstanding and Exercisable by Price Range as of December 31,
          1997:

<TABLE>
<CAPTION>

                            Options Outstanding                           Options Exercisable
                    ----------------------------------                --------------------------
                                     Weighted
                                      Average          Weighted                         Weighted
Range of                             Remaining          Average                          Average
Exercise          Number            Contractual        Exercise         Number          Exercise
 Prices         Outstanding          Life-Years          Price        Exercisable         Price
 ------         -----------          ----------          -----        -----------         -----

<S>               <C>                  <C>               <C>            <C>               <C> 
 $ .10            194,000              .55               $.10           194,000           $.10


                                      F-11

</TABLE>

<PAGE>



                          LONGPORT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


6. Preferred Stock
   ---------------
          The authorized  preferred  stock of the Company  consists of 1,000,000
          shares,  $.001 par value.  The preferred stock may be issued in series
          from time to time  with  such  designation,  rights,  preferences  and
          limitations  as the Board of Directors of the Company may determine by
          resolution. The rights, preferences and limitations of separate series
          of  preferred  stock may differ with respect to such matters as may be
          determined by the Board of Directors,  including  without  limitation,
          the rate of  dividends,  method and  nature of  payment of  dividends,
          terms of  redemption,  amounts  payable on  liquidation,  sinking fund
          provisions  (if any),  conversion  rights (if any), and voting rights.
          Unless the nature of a particular  transaction and applicable statutes
          require  approval,  the Board of Directors  has the authority to issue
          these shares without shareholder approval.

7. Commitments and Contingencies
   -----------------------------
     Leases
     ------
          The Company  leases  telephone  equipment  under a  long-term  leasing
          arrangement.  The  Company's  office  facilities  were leased  under a
          short-term  lease which expired in March 1997.  The Company  currently
          leases its office facilities on a month-to-month  basis. The following
          is a schedule of future  minimum  lease  payments at December 31, 1997
          under the Company's  capital lease (together with the present value of
          minimum lease payments) which has an initial noncancellable lease term
          in excess of one year:

          Year Ending                                                   Capital
          December 31,                                                   Leases
          ------------                                                  -------

              1998                                                      $ 1,116
                                                                        -------

          Total Future Minimum Lease Payments                             1,116

          Less Amount Representing Interest                                (468)
                                                                        ------- 

          Present Value of Future Capital Lease Obligations             $   648
                                                                        =======

          Rental  expense  charged to  operations  was $7,188 and $3,125 for the
          years ended December 31, 1997 and 1996, respectively.

          Leased  equipment  under capital  leases as of December 31, 1997 is as
          follows:

          Equipment                                                     $ 6,549
          Less accumulated amortization                                  (2,489)
                                                                        ------- 

          Net Equipment Under Capital Leases                            $ 4,060
                                                                        =======
                                                                        

          Medicare Hearings
          -----------------
               In September 1997, the Company was notified of a Medicare Hearing
               Officer's  decision  that the Company is liable for  repayment of
               Medicare Benefit  Overpayments of $269,120.  The Overpayments are
               from calendar  years 1994 and 1995.  The Company has appealed the
               Hearing  Officer's  decision.  The  Appeal  will be  heard  by an
               Administrative  Law Judge. The Company has not been notified of a
               hearing date. The Company is unable to predict the outcome of the
               Appeal. However,  Management believes that there were no Medicare
               Benefit  Overpayments in 1994 and 1995 and will vigorously defend
               its position. 

                                      F-12


<PAGE>



                          LONGPORT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


7. Commitments and Contingencies (Continued)
   -----------------------------------------
     Medicare Hearings (Continued)
     -----------------------------
          Payment of any judgement or settlement in connection with the Medicare
          Benefit  Overpayments  Appeal together with the costs of defending the
          Appeal, could adversely affect the Company's results or operations and
          financial condition.

8. Related Party Transactions
   --------------------------
          The Company has entered into transactions  with related  entities,  as
          follows:

          The Company borrowed $16,464 from Wound Healing Systems, Inc. ("WHS"),
          a corporation  controlled  by the  Company's  President in August 1994
          under a one year  promissory  note at 12% interest which had a balance
          due of $3,000 as of December  31,  1996.  The note was paid in full in
          1997.

          In 1996, the Company's President paid off the remaining $5,000 balance
          of a Company note payable. Accordingly, the Company owed its President
          $5,000  which was  subsequently  converted  into 41,667  shares of the
          Company's common stock ($.12 per share).

          In 1996, two  stockholders of the Company  purchased  certain accounts
          payable and notes  payable  from  creditors  of the Company  totalling
          $228,594.  The Company issued  2,223,140 shares of its common stock to
          the stockholders as payment of these liabilities.

          In June 1997, the Company sold six Hyperbaric  Oxygen Chambers to WHS.
          As payment WHS returned 30,000 shares of the Company's common stock to
          the Company.  The net book value  ($5,000),  of the chambers  sold was
          recorded as the value of the stock received (treasury stock).

          In  1997,  the  Company  elected  to  forgo  repayment  of  two  notes
          receivable of $5,500 each from a former officer and a current officer.
          The $5,500 notes  receivable  ($11,000 in total) have been expensed as
          compensation.

          The Company owed Healing Systems,  Inc.  ("Healing")  $7,155.  Healing
          agreed to accept  $2,500 as  payment  in full  resulting  in a gain on
          forgiveness  of  debt  of  $4,655.  Healing's  President  is  a  major
          stockholder of the Company.

          In January 1997,  the Company's Vice  President  converted  $12,000 of
          accrued salary into 100,000 shares of the Company's common stock.

9. Loss on Disposal of Assets
   --------------------------
          Included in the loss on disposal of assets for the year ended December
          31, 1996 is a $116,174  loss from the return of the  Company's  office
          building to the mortgageholder in August 1996.

10. Extraordinary Gain
    ------------------
          Included in the extraordinary gain are settlements of certain accounts
          payable and notes payable for less than the amounts owed  resulting in
          a gain of $4,655 and $48,861 for the years ended December 31, 1997 and
          1996, respectively.



                                      F-13


<PAGE>


                          LONGPORT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11. Concentration of Credit Risk and Major Customers
    ------------------------------------------------
          The Company  provides  credit,  in the normal  course of business,  to
          hospitals,  distributors,  and others in the health care industry. The
          Company's  customers  are located  primarily in  Pennsylvania  and New
          Jersey.  The  Company  performs  periodic  credit  evaluations  of its
          customers'  financial  condition and generally  require no collateral.
          The Company maintains reserves for potential credit losses.

          Revenues from major customers,  as a percentage of total revenue,  for
          the year ended December 31, 1997 and 1996 were as follows:

                                                      1997               1996
                                                      ----               ----
          Customer A                                   6.3%              12.7%
          Customer B                                  24.4%              25.5%
          Customer C                                  34.9%              41.5%
          Customer D                                  18.6%              --

12. Fair Value of Financial Instruments
    -----------------------------------
          Disclosures  about  Fair  Value  of  Financial   Instruments  for  the
          Company's  financial  instruments  are  presented  in the table below.
          These calculations are subjective in nature and involve  uncertainties
          and  significant  matters of judgment  and do not  include  income tax
          considerations.  Therefore,  the  results  cannot be  determined  with
          precision and cannot be  substantiated  by  comparison to  independent
          market  values and may not be realized in actual sale or settlement of
          the instruments.  There may be inherent  weaknesses in any calculation
          technique,  and  changes  in the  underlying  assumptions  used  could
          significantly  affect the  results.  The  following  table  presents a
          summary of the  Company's  financial  instruments  as of December  31,
          1997:

                                                             1997
                                                  ---------------------------
                                                  Carrying          Estimated
                                                   Amount          Fair Value
                                                  --------         ----------
          Financial Assets:
           Cash and cash equivalents               $36,397            $36,397
           Note receivable                          18,750             18,750

          Financial Liabilities:
           Long-term debt                              648                648

          The  carrying  amounts  for cash and  cash  equivalents,  receivables,
          accounts payable and accrued  expenses  approximate fair value because
          of the  short  maturities  of these  instruments.  The  fair  value of
          long-term debt, including the current portion, approximates fair value
          because of the  interest  rate  implicit in the  obligation  under the
          capital lease.




                                      F-14


<PAGE>



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

None.


                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The  following  table sets  forth  certain  information  regarding  all  current
directors and executives of the Company:

Name                             Age               Office
----                             ---               ------

James R. McGonigle               53                Chairman of the
                                                   Board of Directors,
                                                   Chief Executive Officer,
                                                   President and
                                                   Chief Accounting Officer

Peter E. Cavanaugh               33                Director, Legal Counsel


Directors hold office for a period of one year from their election at the annual
meeting  of  stockholders  and  until  their  successors  are duly  elected  and
qualified.  Officers of the Company are elected by, and serve at the  discretion
of,  the  Board of  Directors.  None of the  above  individuals  has any  family
relationship with each other. The Board of Directors has no audit, nominating or
compensation  committee.  No director  has  received or  currently  receives any
compensation for services as a director.

Background

The  following  is a summary of the  business  experience  of each  officer  and
director of the Company:

James R.  McGonigle  founded the Company and has served as its  Chairman,  Chief
Executive  Officer and  President  since its  inception  in January,  1993.  Mr.
McGonigle assumed the role of Chief Accounting  Officer effective April 1, 1996,
due to the  resignation of John Delamater.  From 1985 to 1992 Mr.  McGonigle was
the founder and president of Supra Medical Corp. (formally Topox, Inc.)("Supra")
a publicly held company  specializing in the development of proprietary  medical
technologies in the fields of skin care and  diagnostics.  Mr. McGonigle is also
President  of Wound  Healing  Systems,  Inc.  which sells and rents  Chambers in
competition  with the  Company.  See  "Business -  Competition."  Mr.  McGonigle
intends to devote approximately 100% of his time to the affairs of the Company.

Peter E.  Cavanaugh was the Vice  President  and General  Counsel of the Company
from  December,  1993 until  February,  1997.  He was  appointed to the Board of
Directors and became Corporate  Secretary in April, 1995. Mr. Cavanaugh left the
Company  as a full  time  employee  in  January,  1996 to  return  to his  legal
pracrice.  He was elected to the Board upon  shareholders vote in July, 1995. In
1993,  Mr.  Cavanaugh was admitted to practice by the Bar  Associations  of both
Pennsylvania and New Jersey. Mr. Cavanaugh will be utilized by the Company on an
as needed basis as it legal counsel.


<PAGE>


Executive Compensation

Summary Compensation Table

No  compensation  has been paid since  inception to the members of the Company's
Board of Directors in their  capacities as such, no executive  officer  received
annual compensation of more than $100,000.

None of the members of the  Company's  Board of Directors  in their  capacity of
such are scheduled to receive  compensation  for the fiscal year ended  December
31, 1998.  The Company  executed a consulting  agreement  with Colpat,  Inc., an
affiliate  owned and  controlled  by Mr.  McGonigle,  for  $3,000  per month for
services to the Company.

Option Grants in Last Fiscal Year

The following table provides information on option grants during the fiscal year
ended December 31, 1997 to the named executive officers:


NONE



ITEM 11. OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information concerning stock ownership by
all  persons  known  to  the  Company  to own  beneficially  5% or  more  of the
outstanding  shares of the Company's Common Stock, by each director and officer,
and by all  directors  and  officers as a group.  All shares of Common Stock are
owned beneficially and of record as of February 28, 1998.

                                         Number of
Name                                   Shares Owned             Percent of Class
----                                   ------------             ----------------

James R. McGonigle(1)(6)                 1,965,893                    12.92%
791 South Chester Road
Swarthmore, PA 19081

Peter Cavanaugh(2)                       223,571                       1.47%


John H. Carbutt(3)                       812,777                       5.31%

Michie Proctor and
Joyce Proctor(4)                         2,669,174                    17.55%

The First Baptist Church of
Southwest Broward                        1,280,977                     8.48%

John Mills                               1,192,000                     7.89%

All officers and directors
as a group (two persons)(5)              2,189,464                    14.30%

(1) Includes  942,000 shares held by James R. McGonigle,  547,143 shares held by
Wound Healing Systems, Inc., a corporation controlled by Mr. McGonigle,  376,750
shares  held by Colpat,  Inc. a  corporation  controlled  by Mr.  McGonigle  and
100,000  Warrants  also held by Colpat,  Inc.  with each Warrant  entitling  the
holder to  purchase  one  share of  Common  Stock at $3.00 per share at any time
until June 30, 1998.


<PAGE>


(2) Includes an option to purchase  100,000 shares at $.10 per share at any time
until July 18, 1998.

(3) Includes  436,098 shares held by John H. Carbutt,  200,000  Warrants held by
Mr.  Carbutt  with each  Warrant  entitling  the holder to purchase one share of
Common  Stock at $3.00 per share at any time  until  June 30,  1998 and  176,679
shares held by Jagapata, Ltd., a corporation controlled by Mr. Carbutt.

(4) Includes  2,118,258  shares held by Michie  Proctor,  450,916 shares held by
Michie  Proctor and Joyce Proctor and 100,000  Warrants held by Michie and Joyce
Proctor with each Warrant  entitling  the holder to purchase one share of Common
Stock at $3.00 per share at any time until June 30, 1998.

(5) Includes shares,  Warrants to purchase shares and options to purchase shares
held by the Company's officers and directors.

(6) This  individual may be deemed to be "promoters" of the Company as that term
is defined under the Securities Act of 1933, as amended.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Management is of the opinion that each  transaction  described below between the
Company and its officers,  directors and  stockholders  was on terms at least as
fair to the Company as had the  transaction  been concluded with an unaffiliated
party.

In January, 1996, Mr. Cavanaugh and the Company mutually agreed to terminate Mr.
Cavanaugh's  employment  agreement to permit Mr. Cavanaugh to pursue his private
practice of law. Mr.  Cavanaugh,  however,  will remain a member of the Board of
Directors.  Mr. Cavanaugh will not be paid for services  rendered as a member of
the Board of Directors.

In January,  1996,  the Company  agreed to a consulting  agreement  with Colpat,
Inc., an affiliate  owned and  controlled  by the  Company's  President and CEO,
James R. McGonigle. Colpat will provide various services to the Company and will
be paid $3,000 per month. The services agreement will continue through 1998. Mr.
McGonigle  will not be paid for his  services as the  Company's  Chairman of the
Board of Directors.

In 1996,  the Company's  President  paid off the remaining  $5,000  balance of a
Company Note Payable.  Accordingly,  the Company owed its President $5,000 which
was subsequently converted into 41,667 shares of the Company's restricted Common
Stock, at twelve ($.12) per share.

In 1996, two stockholders of the Company  purchased certain accounts payable and
notes  payable from  creditors of the Company  totalling  $228,594.  The Company
issued  2,223,140  shares of its common stock to the  stockholders as payment of
these liabilities.

In June 1997, the Company sold six Hyperbaric Oxygen Chambers to WHS. As payment
WHS returned 30,000 shares of the Company's common stock to the Company. The net
book value  ($5,000)of  the chambers sold was recorded as the value of the stock
received (treasury stock).


<PAGE>


In 1997,  the Company  elected to forgo  repayment  of two notes  receivable  of
$5,500  each from a former  officer  and a current  officer.  The  $5,500  notes
receivable ($11,000 in total) have been expensed as compensation.

The Company owed Healing Systems,  Inc.  ("Healing")  $7,155.  Healing agreed to
accept $2,500 as payment in full  resulting in a gain on  forgiveness of debt of
$4,655. Healing's President is a major stockholder of the Company.


ITEM 13. EXHIBITS

       Exhibit
         No.                        Title
         ---                        -----

         3.1        Certificate of Incorporation of Registrant(1)

         3.2        Bylaws of Registrant(1)

         4.1        Form of Common Stock Purchase Warrant(1)

         10.1       Agreement of Sale  between  Registrant  and Leiti  regarding
                    Registrant's purchase of 791 South Chester Road, Swarthmore,
                    Pennsylvania(1)

         10.2       Sales  Agreement   between   Registrant  and  Wound  Healing
                    Systems, Inc. regarding 20 Topical Hyperbaric Chambers(1)

         10.3       Sales  Agreement   between   Registrant  and  Wound  Healing
                    Systems, Inc. regarding 23 Topical Hyperbaric Chambers(1)

         10.4       Memorandum of  Understanding  between  Registrant  and Baker
                    Medical, Inc.(1)

         10.5       Memorandum   of   Understanding   between   Registrant   and
                    Southeastern Medical Supply, Inc.(1)

         10.6       Joint  Venture  Agreement  between  Registrant  and Wellison
                    International, Inc.(1)

         10.7       Patent Assignment between Registrant and Stivala(1)

         10.8       Transfer Agreement between Registrant and Mazzolla(1)

         10.9       Transmittal Letter regarding Wound Healing Research(1)

         10.10      Licensing and Purchase Option Agreement  between  Registrant
                    and Healing System, Inc.(1)

         10.11      Memorandum of  Understanding  between  Registrant and Robert
                    Crousore Hess and Fernando Laguda(1)


<PAGE>


         10.12      Sale  Agreement  between  Registrant  and Robert D. Crousore
                    (Hess)(1)

         10.13      Sale Agreement between Registrant and Fernando G. Laguda(1)

         10.14      Sale and Release Agreement  between  Registrant and Fernando
                    G. Laguda(1)

         10.15      Lease Agreement between  Registrant and Montclair  Community
                    Hospital(1)

         10.16      Rental Agreement between  Registrant and Integrated  Therapy
                    Products, Inc.(1)

         10.17      Revenue Sharing  Agreement  between  Registrant and American
                    Home Medical Services, Inc.(1)

         10.18      Employment   Agreement  between  Registrant  and  Angelo  R.
                    Bergamo, M.D.(1)

         10.19      Form of  Subscription  Agreement  - November,  1993  Private
                    Placement(1)

         10.20      Form of Loan Agreement - April, 1994 Loans(1)

         10.21      Form of Promissory Note - April, 1994 Loans(1)

         10.22      Medical  Consultant  Agreement between Registrant and Martin
                    Pressman, M.D.

         10.23      Medical  Consultant  Agreement between  Registrant and David
                    Novicki, M.D.

         10.24      Joint  Venture  Agreement  between  Registrant  and MedaStat
                    Scientific Corp.(2)

         10.25      Research and Licensing  Agreement between Registrant and the
                    United  Medical & Dental  Schools  of Guy's  and St.  Thomas
                    Hospitals of London, England(3)

         10.26      Services Agreement between Registrant and West Jersey Health
                    System(3)

         10.27      Loan  Agreement  between  Registrant  and National  Health &
                    Safety Corporation

         10.28      Services   Agreement  between  Registrant  and  West  Hudson
                    Hospital

         10.29      Settlement   Agreement   between   Registrant  and  MedaStat
                    Scientific Corporation

         10.30      Representative   Agreement  between  Registrant  and  Martin
                    Rosenblum & Associates

         10.31      Agreement    between    Registrant   and   Quality   Medical
                    Instruments, Ltd.

         21.1       Subsidiaries of Registrant(1)

         23.1       Consent of Angell & Deering(1)

         23.2       Consent of Michael J. Tauger (See 5.1)(1)


<PAGE>


         23.3       Consent of Angell & Deering(1)

         23.4       Consent of Angell & Deering(1)

         23.5       Consent of Angell & Deering(1)

         23.6       Consent of Angell & Deering(1)

         99.1       Deed for 791 South Chester Road, Swarthmore, PA(1)

         99.2       Deed of Correction(1)

(1) Incorporated by reference to the Registrant's Registration Statement on Form
SB-2, file number 33- 75236 declared effective on July 7, 1994.

(2)  Incorporated  by reference  to the  Registrant's  Quarterly  Report on Form
10-QSB, for the period ended March 31, 1995.

(3)  Incorporated  by reference  to the  Registrant's  Quarterly  Report on Form
10-QSB, for the period ended June 30, 1995.




<PAGE>



                                   SIGNATURES
                                   ----------

In accordance  with Section 13 or 15(d) of the Exchange Act, the  Registrant has
duly caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized, in Swarthmore, Pennsylvania, on ________, 1998

                                            LONGPORT, INC.


                                            By:
                                               ---------------------------------
                                                     James R. McGonigle
                                                  Chief Executive Officer

Pursuant to the  requirements  of the Exchange  Act as amended,  this Report has
been signed below by the following persons on the dates indicated.

Signature                         Title                            Date
---------                         -----                            ----

----------------------     Chairman of the Board              ----------------
James R. McGonigle         of Directors,
                           Chief Executive Officer,
                           President, and
                           and Chief Accounting Officer

----------------------     Director, and Counsel              ----------------
Peter E. Cavanaugh