<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                             REPORT ON FORM 10-KSB

              [X] Annual Report pursuant to Section 13 or 15(d)
                    of the Securities Exchange Act of 1934

For the fiscal year ended June 30, 1998

Commission File No. 0-22133

                          SUPERIOR SUPPLEMENTS, INC.
            (Exact name of registrant as specified in its charter)

          Delaware                                       11-3320172
---------------------------------            ---------------------------------
(State of or other jurisdiction              (IRS Employer Identification No.)
of incorporation or organization)

  270 Oser Avenue, Hauppauge, New York                  11788
----------------------------------------        ---------------------
(Address of Principal Executive Offices)              (Zip Code)

Registrant's telephone number, including area code: (516) 231-0783

Securities registered pursuant to Section 12(b) of the Act: None.

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

                   Common Stock, par value $.0001 per share
                   ----------------------------------------
                               (Title of Class)

 Units consisting of two (2) shares of common stock, par value $.0001 per share
         and two (2) Class A Redeemable Common Stock Purchase Warrants
--------------------------------------------------------------------------------
                               (Title of Class)

               Class A Redeemable Common Stock Purchase Warrant
--------------------------------------------------------------------------------
                               (Title of Class)

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

<PAGE>

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of the Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-KSB or any amendment to this Form 10-KSB. [X]

         Issuer's revenues for its most recent fiscal year were $10,255,843.

         The aggregate market value of the voting stock held by non-affiliates
of the Registrant, computed by reference to the closing price of such stock as
of September 22, 1998, was approximately $3,120,000.

         Number of shares outstanding of the issuer's common stock, as of
September 22, 1998 was 4,000,000.

                           See Page 25 for Exhibits



                                      2
<PAGE>

                                    PART 1

ITEM 1.   BUSINESS

GENERAL

         Superior Supplements, Inc., a Delaware corporation (the "Company" or
"SSI"), was formed on April 24, 1996. The Company is engaged in the
development, manufacture, packaging, marketing and sale of dietary supplements
including vitamins, minerals, herbs and specialty nutritional supplements, in
bulk tablet, capsule and powder form. The Company manufactures a wide variety
of products for companies which package and sell through many different
channels of distribution, including health food, drug, convenience and mass
market stores.

         On February 26, 1997, the Company completed an underwritten public
offering (the "Initial Public Offering") of its securities by selling 250,000
units (the "Units") consisting of 500,000 shares of Common Stock and 500,000
Class A Warrants to purchase an additional 500,000 shares of Common Stock.

SUPPLY AND LICENSING AGREEMENTS

         On May 14, 1996, the Company entered into a supply agreement with PDK
Labs Inc., a New York corporation ("PDK") pursuant to which the Company
supplies PDK with vitamins and dietary supplements manufactured to PDK's
specifications in bulk tablet form. The supply agreement expires in May 1999
and is automatically renewable for successive one (1) year periods thereafter.
Under the terms of the agreement, PDK has agreed to purchase products for fair
market value, such products having a minimum aggregate sales price of
$2,500,000 per annum during the term of the agreement. In the event that PDK
fails to purchase $2,500,000 of product in any given year, the Company will be
paid up to $100,000, on a pro-rated basis, as liquidated damages. Sales to PDK
approximated 88% of total sales for the year ended June 30, 1998. See "Certain
Relationships and Related Transactions."

         In addition, on November 30, 1997, the Company entered into a
packaging agreement with PDK. The Company agreed to package Futurebiotics
products for PDK for a fixed price based on component cost plus a direct labor
charge per unit. The term of the agreement is for two (2) years renewable for
successive one (1) year periods thereafter. PDK is obligated to purchase
1,000,000 bottles of Futurebiotics products per annum during the term of the
agreement. In the event that PDK does not purchase 1,000,000 bottles of
Futurebiotics products in any given year, the Company will be paid up to
$100,000, on pro-rata basis, as liquidated damages. As of June 30, 1998, the
Company has packaged 1,789,000 bottles for PDK. See "Certain Relationships and
Related Transactions."

                                      3
<PAGE>

         PDK supplies certain management and personnel to the Company and
Reginald Spinello, one of the Company's directors, is also the President and
Chief Executive Officer of PDK and Raveendra Nandigam, one of the Company's
directors, is also the Vice President of Manufacturing of PDK. In addition,
Reginald Spinello, Lawrence Simon and Raveendra Nandigam have voting power
over more than fifty percent (50%) of the Common Stock and the Preferred Stock
of the Company pursuant to the Voting Trust Agreement with PMF. Messrs.
Spinello and Simon may be deemed to be founders of the Company.

MANUFACTURING

         The Company's manufacturing facility has production equipment
consisting of tablet presses and encapsulating machines with a capacity of
producing per annum, in excess of one billion two hundred million
(1,200,000,000) tablets and capsules of various sizes and shapes. In addition,
the Company has the capacity to package in excess of five million bottles per
annum. The Company manufactures single ingredient herbal products and
multi-ingredient vitamins in tablet, capsule and bottled form. All
manufacturing is conducted in accordance with Good Manufacturing Practice
Standards of the United States Food and Drug Administration and other
applicable regulatory standards.

         The vitamin production process includes the following stages: testing
of raw materials, pharmacy, blending, compression or encapsulation, coating
(where required) and testing of finished tablets or capsules. The vitamin
production process involves sending the raw materials through each stage of
production in order to form vitamin products.

         The principal raw materials needed in the manufacturing process are
natural and synthetic vitamins which are purchased from manufacturers in the
United States, Japan and Europe. The Company can purchase raw materials from
numerous sources and is not dependent on any major supplier. The Company
believes that the capacity of its manufacturing and distribution facility is
adequate to meet the requirements of its current business.

QUALITY CONTROL

         All of the Company's products are manufactured in accordance with the
Good Manufacturing Practices of the FDA and all other applicable regulatory
standards. The Company places special emphasis on quality control. All raw
materials and finished products are subjected to sample testing, weight
testing, and purity testing. The Company has adopted formal written quality
control procedures. The Company maintains records on all material testing,
production processes, inspections carried out in the manufacturing process,
and labeling procedures. All products are subject to the Company's rigorous
quality control procedures. The Company maintains a modern well-equipped
pharmaceutical laboratory, that has the capability of adhering to any current
and anticipated regulatory requirements. All raw materials used in production
are initially held in quarantine during which time the Company's quality
assurance department assay the product against the manufacturer's certificate
of

                                      4
<PAGE>

analysis. Once cleared, a lot number is assigned, samples are retained and
the material is processed by formulating, blending, compressing or
encapsulating and where required, coating operations. Throughout the
manufacturing process the quality control department conducts "in process"
testing procedures. After tablets or capsules are manufactured, the quality
assurance department tests for weight, purity, potency, dissolution and
stability.

MARKETING AND DISTRIBUTION STRATEGIES

         The Company manufactures a full line of dietary supplements including
vitamins, minerals, herbs and specialty nutritional supplements in bulk tablet
and capsule form, which are marketed to companies, such as PDK and CGI, that
package and sell through many different channels of distribution, including
health food, drug, convenience and mass market stores. In addition, the
Company packages certain products in bottled form for PDK. The Company also
supplies other manufacturers which "outsource" a portion of their needs on an
ongoing basis to supplement their own capacities.

COMPETITION

         The market for dietary supplement products is highly competitive in
each of the Company's existing and anticipated product lines and methods of
distribution. Numerous manufacturers and distributors compete with the Company
for customers throughout the United States and internationally in the bulk
packaged dietary supplement industry, selling products to distributors who
service health food, drug, convenience and mass market stores, companies that
market a branded or generic line of products but do not manufacture these
items ("repackagers"), and other manufacturers who "outsource" a portion of
their needs to supplement their own capacities. Many of the Company's
competitors are substantially larger and more experienced than the Company,
have longer operating histories and have materially greater financial and
other resources than the Company. Many of these competitors are private
companies, and therefore, the Company cannot compare its revenues with respect
to the sales volume of each competitor. The Company's significant competitors
include International Vitamin Corporation and Nature's Bounty both of whom
have longer operating histories and materially greater financial and other
resources than the Company (although, no implication is intended hereby
regarding the Company's industry ranking in comparison to such competitors).

         Although certain of the Company's competitors are substantially
larger than the Company and have greater financial resources, the Company
believes that it will compete favorably with other vitamin and dietary
supplement companies because of its access to products, competitive pricing,
quality of products, and sales support.

                                      5
<PAGE>

MANAGEMENT AND EMPLOYEES

         As of September 22, 1998, the Company employed sixty-one (61) full
time persons. The Company has experienced no work stoppages and considers its
employee relations to be satisfactory. The Company's employees are not
represented by a labor union.

GOVERNMENT REGULATION

         The processing, formulation, packaging, labeling and advertising of
the Company's products are subject to regulation by one or more federal
agencies, including the United States Food and Drug Administration (the
"FDA"), the Federal Trade Commission (the "FTC"), the Consumer Product Safety
Commission, the United States Department of Agriculture and the Environmental
Protection Agency. These activities may also be regulated by various agencies
of the states and localities in which the Company's products are sold.

         In October 1994, the Dietary Supplement Health and Education Law was
signed into law. This new law, which amends the Federal Food, Drug and
Cosmetic Act, defines dietary supplements as a separate and distinct entity,
and not as food additives. Vitamins, minerals, amino acids, herbs and other
nutritional substances are included in the definition. It expressly provides
for the use of third party scientific literature which shall not be regulated
as labeling by the FDA, provided it is not false or misleading. The new law
also delayed the FDA's requirements for extensive product label changes which
were to be applied to products manufactured after July 1, 1995. It provides a
set of different label requirements for ingredient content information, and
directs the FDA to publish new label regulations for supplements with a
mandatory effective date, as extended, of March 23, 1999. It makes no
modifications on the requirements and proscriptions regarding health claims
for dietary supplements. The new law also introduced the concept of good
manufacturing practices to the manufacture of dietary supplements. At this
time, it would be premature to predict its overall impact on the dietary
supplement industry.

LIABILITY INSURANCE

         The Company, like other manufacturers of products that are ingested,
faces inherent risk of exposure to product liability claims if, among other
things, the use of its products result in an injury. Accordingly, currently
the Company maintains product liability insurance as a named insured on each
of its suppliers' policies. The Company requires that its suppliers have
minimum coverage of $1,000,000 and that the Company is named insured on the
policy. While management believes that its insurance coverage is adequate,
there can be no assurance that any judgment against the Company will not
exceed liability coverage. A judgment significantly in excess of the amount of
insurance coverage would have a material adverse effect on the Company.

                                      6
<PAGE>

ITEM 2.  PROPERTIES.

         The Company's headquarters, plant operations, warehousing and
shipping facilities are housed in a modern forty thousand (40,000) square foot
building. The Company leases the building pursuant to a lease which expires on
October 14, 2000. The lease provides for no rental payments from May 1996
through August 1996 and monthly rental payments ranging from $19,167 to
$23,000 thereafter through October 2000. In the judgment of management, the
lease with the landlord reflects a rent at current fair market value.

ITEM 3.  LEGAL PROCEEDINGS.

         There is no material litigation pending or threatened against the
Company nor are there any such proceedings to which the Company is a party.

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

         No matters which have been submitted to the Company's shareholders
for vote during the last quarter of its fiscal year.




                                      7
<PAGE>


                                    PART II

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

         The Company's securities commenced trading on the OTC Bulletin Board
on the effectiveness of the Company's Initial Public Offering on February 27,
1997 in the form of Units each consisting of two (2) shares of Common Stock
and two (2) Class A Warrants. The Common Stock and Class A Warrants are
regularly quoted and traded on the OTC Bulletin Board under the symbols 
SPSU and SPSUW.

         The following table indicates the high and low bid prices for the
Company's Units, Common Stock and Class A Warrants for the period up to June
30, 1998 based upon information supplied by the OTC Bulletin Board. Prices
represent quotations between dealers without adjustments for retail markups,
markdowns or commissions, and may not represent actual transactions.

Units

                  1997 Calendar Year                   Quoted Bid Price
                  ------------------                 --------------------
                                                      High          Low
                                                     --------------------
                  First Quarter                        27           13
                  Second Quarter                       26           17
                  Third Quarter                        18.5         15
                  Fourth Quarter                       20           13

                  1998 Calendar Year                   Quoted Bid Price
                  ------------------                 --------------------
                                                      High          Low
                                                     --------------------
                  First Quarter                       20             18
                  Second Quarter                      N/A            N/A

Common
Stock

                  1997 Calendar Year                   Quoted Bid Price  
                  ------------------                 --------------------
                                                      High          Low  
                                                     --------------------
                  First Quarter                       9 1/4         8
                  Second Quarter                      7             4
                  Third Quarter                       7 5/8         4 5/8
                  Fourth Quarter                      8 3/8         5



                                      8
<PAGE>

                  1998 Calendar Year                   Quoted Bid Price
                  ------------------                 --------------------
                                                      High          Low
                                                     --------------------
                  First Quarter                       8 1/8         3
                  Second Quarter                      4 1/4         1

Class A
Warrants

                  1997 Calendar Year                   Quoted Bid Price  
                  ------------------                 --------------------
                                                      High          Low  
                                                     --------------------
                  First Quarter                       5             5
                  Second Quarter                      5             3
                  Third Quarter                       5 1/8         2 1/2
                  Fourth Quarter                      5 3/8         1 1/2

                  1998 Calendar Year                   Quoted Bid Price    
                  ------------------                 --------------------  
                                                      High          Low    
                                                     --------------------  
                  First Quarter                       5 1/4         2
                  Second Quarter                      2 1/8        5/32

         On September 22, 1998 the closing price of the Common Stock as
reported on the OTC Bulletin Board was $.78. On September 22, 1998 the closing
price for the Class A Warrants reported on the OTC Bulletin Board was $.50. On
September 22, 1998, the Units did not trade. On September 22, 1998 there were
20 holders of record of Common Stock.


                                      9
<PAGE>

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

RESULTS OF OPERATIONS

FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997

         Net sales for the fiscal year ended 1998 were approximately
$10,256,000 as compared to net sales in 1997 of $4,628,000. The increase in
sales volume is principally attributable to the expansion of the Company's
product line. Gross profit amounted to $790,000 (8% of sales) in 1998 as
compared to $400,000 (9% of sales ) in 1997.

         Selling, general and administrative expenses were $747,000 in 1998
and $467,000 in 1997. As a percentage of sales, selling, general and
administrative expenses were 7% in 1998 and 10% in 1997. The overall decrease
as a percentage of sales is attributable to the Company's growth in sales
without incurring disproportionate increases in operating expenses.

         The Company is operating under a supply agreement with PDK Labs Inc.,
("PDK"), which expires in May 1999 and provides for the Company to supply PDK
with vitamins and dietary supplements in bulk tablet form. The agreement, as
amended, provides for PDK to purchase certain products at specified prices.
PDK agreed to purchase products having a minimum aggregate sales price of
$2,500,000 per year during the term of the agreement. In the event that PDK
fails to purchase the minimum amount of products in any year, the Company will
be paid up to $100,000 on a pro-rated basis as liquidated damages. Sales to
PDK approximated $9,054,000 and $4,013,000 for the fiscal years ended June 30,
1998 and 1997, respectively.

         On November 30, 1997, the Company entered into a packaging agreement
(the "Agreement") with PDK, which provides for the Company to package certain
products for PDK. The Agreement has a term of two years and provides for a
minimum annual packaging amount of 1,000,000 bottles. In the event that PDK
fails to purchase the minimum annual packaging amount, the Company will be
paid up to $100,000 on a pro-rata basis, as liquidated damages. In connection
with the Agreement, PDK transferred approximately $2,045,000 of inventory to
the Company. In addition, the Company purchased machinery and equipment from
PDK for $232,000.

         The Company is obligated under a management agreement with PDK
pursuant to which PDK agreed to supply certain management services to the
Company in consideration for the payment of a management fee of $10,000 per
month.

FISCAL YEAR 1997 COMPARED TO THE PERIOD APRIL 24, 1996 (INCEPTION) TO JUNE 30,
1996

         Net sales for the fiscal year ended June 30, 1997 were approximately
$4,628,000. Approximately 87% of these sales were derived from PDK Labs Inc.
("PDK"). Net sales for

                                      10
<PAGE>

the period April 24, 1996 (inception) to June 30, 1996 approximated $857,000.
The increase in sales volume is a result of the completion of the Company's
manufacturing facility in 1996. The Company was in the development stage for
the period ended June 30, 1997. The gross profit on these sales approximated
$400,000 for the fiscal year ended June 30, 1997 and $119,000 for the period
ended June 30, 1996.

         Selling, general and administrative expenses approximated $467,000
(10% of sales) for the fiscal year ended June 30, 1997 and $71,000 (8% of
sales) for the period April 24, 1996 (inception) to June 30, 1996. The
increase in selling, general and administrative expenses is principally
attributable to the Company having fully commenced operations during the
fiscal year ended June 30, 1997.

         On May 14, 1996, the Company entered into a three year Supply
Agreement with PDK, which provides for the Company to supply PDK with vitamins
and dietary supplement in bulk tablet form. The agreement, as amended,
provides for PDK to purchase certain products at specified prices. PDK agreed
to purchase products having a minimum aggregate sales price of $2,500,000 per
year during the term of the agreement. In the event that PDK fails to purchase
the minimum amount of products in any year, the Company will be paid up to
$100,000 on a pro-rated basis as liquidated damages.

         As of March 31, 1997, the Company in three separate transactions sold
all of its common stock of Compare Generiks, Inc. In connection with the sales
of such shares, the Company received an aggregate of $700,000 in proceeds and
realized a loss of $450,000.

         The Company recognizes the need to ensure its operations will not be
adversely impacted by Year 2000 software failures. Software failures due to
processing errors potentially arising from calculations using the Year 2000
date are a known risk. The Company is addressing this risk to the availability
and integrity of financial systems and reliability of operational systems. The
Company has engaged computer consultants and is establishing processes for
evaluating and managing the risks and costs associated with this problem. In
the opinion of management, the costs of addressing this problem will not
materially affect the financial position of the Company.

LIQUIDITY AND CAPITAL RESOURCES

         As of June 30, 1998, the Company had working capital of approximately
$1,086,000.

         The Company's statement of cash flows reflects cash used in operating
activities of approximately ($667,000), primarily due to net income of
approximately ($51,000) and increases in operating assets such as accounts
receivable ($2,015,000) and inventories ($384,000) offset by an increase in
accounts payable and accrued expenses ($1,453,000) and an adjustment for
depreciation and amortization of ($206,000).

                                      11
<PAGE>

         The statement also reflects net cash used in investing activities of
approximately ($291,000) which is attributable to the acquisition of property
and equipment ($500,000) offset by proceeds from the sale of investments
($791,000).

         The Company expects to meet its cash requirements from operations.

ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         See financial statements following Item 13 of this Annual Report on
Form 10-KSB.

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

         None.


                                      12
<PAGE>

                                   PART III

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


NAME                       AGE     POSITION(S) WITH THE COMPANY
----                       ---     ----------------------------
Lawrence D. Simon          32      President, Chairman, Chief Financial Officer
                                   and Director

Reginald Spinello          46      Director

Matthew L. Harriton*       33      Director and Secretary

Dr. Daniel Durchslag**     54      Director

Raveendra Nandigam         49      Director

*Matthew L. Harriton resigned as a Director of the Company on May 11, 1998.
**Dr. Daniel Durchslag resigned as a Director of the Company on May 2, 1998.

BACKGROUND OF EXECUTIVE OFFICERS AND DIRECTORS

LAWRENCE D. SIMON has been the President, Chairman, Chief Financial Officer
and a Director of the Company since May 1, 1996. He was the National Sales
Director for Futurebiotics from October 1, 1995, until his resignation on
April 30, 1996. Futurebiotics distributes, markets and sells vitamins,
minerals, herbal formulations and specialty nutritional supplements
principally to health food stores through regional distributors. Prior to
joining Futurebiotics Mr. Simon was Regional Sales Manager for PDK (from April
10, 1992 to September 30, 1995). Prior to PDK Mr. Simon was President of LDS
Products Inc. (from March 1990 to March 1991). LDS Products Inc., is a
brokerage corporation specializing in sales to wholesale companies in Eastern
Europe. Prior to LDS Products Inc., Mr. Simon was an Auditor with Coopers &
Lybrand LLP (from December 1988 to March 1990). He is a graduate of Cleveland
State University with a Bachelors Degree in Business Administration.

REGINALD SPINELLO has been a Director of the Company since May 1, 1996. He has
been the President and a Director of Futurebiotics since its formation in
March, 1994 and Chief Executive Officer since December 2, 1997. Futurebiotics
distributes, markets and sells vitamins, minerals, herbal formulations and
specialty nutritional supplements principally to health food stores through
regional distributors. In addition, he is the President and Chief Executive
Officer of PDK Labs Inc., a position he has held since August 21, 1998 and he
was the Executive Vice President of PDK Labs Inc., from September 1993 until
August 21, 1998 and a Director of PDK Labs Inc. since August 5, 1997. Mr.
Spinello joined PDK Labs Inc. in September 1991 as Vice President of
Operations. Mr. Spinello graduated from Bryant College

                                      13
<PAGE>

with a B.S. Degree in Business Administration. Additionally, he has studied in
the field of nutrition and is a non-practicing nutrition consultant.

RAVEENDRA NANDIGAM has been a Director of the Company since June 1, 1998. He
has been the Vice President of Manufacturing for PDK Labs Inc. ("PDK") since
1991 and was the plant manager from 1983 to 1991. PDK is a manufacturer of
over the counter pharmaceuticals. Prior to joining PDK, Mr. Nandigam was the
plant manager of Godavri Agro Chemicals in India, a manufacturer of Zinc
Sulfate and Copper Sulfate. Mr. Nandigam is a graduate of Andhra University
and received his Masters Degree in Chemistry from Bhopal University.

         There are no family relationships between the officers and directors
of the Company.

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

         Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent (10%) of a registered class of the Company's equity securities, to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of common stock and other equity
securities of the Company. Officers, directors and greater than ten percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.

         To the Company's knowledge, based solely upon its review of the
copies of such reports furnished to the Company during the year ended June 30,
1998, all Section 16(a) filing requirements applicable to its officers and
directors and greater than ten percent beneficial owners were satisfied.


                                      14
<PAGE>

EXECUTIVE COMPENSATION

                          SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                                               Long Term Compensation
                                                                                             --------------------------
                                                          Annual Compensation                Awards             Payouts
                                              -------------------------------------------------------------------------
   (a)                     (b)       (c)       (d)              (e)           (f)          (g)       (h)          (i)

                                                                            Restricted               LTIP      All Other
Name and                                                    Other Annual      Stock      Options/   Payouts   Compensation
Principal Position         Year    Salary($)  Bonus($)    Compensation($)    Award($)     SARs(#)     ($)         ($)

<S>                        <C>    <C>         <C>         <C>               <C>          <C>        <C>       <C>           
Lawrence Simon, President  1998   $  87,000   $44,000          $-0-            -0-         -0-        -0-        $-0-
                           1997   $  75,000   $ 5,833          $-0-            -0-         -0-        -0-        $-0-
                           1996   $  12,692   $-0-             $-0-            -0-       100,000(1)   -0-        $-0-
</TABLE>

(1)      Represents issuance of options to acquire 100,000 shares of common
         stock at $6.00 per share exercisable one year from the effective date
         of the Company's Initial Public Offering.


                       AGGREGATED OPTION/SAR EXERCISES -
                         AND FY-END OPTION/SAR VALUES

<TABLE>
<CAPTION>

   ----------------------------------------------------------------------------------------------------------------------------
            (a)                (b)             (c)                      (d)                                (e)
                              Shares          Value           Number of Securities            Value of Unexercised in the Money
                           Acquired on       Realized        Underlying Unexercised                 Options/SARs at the
           Name            Exercise (#)         $           Options/SARs at FY-End (#)                   FY-End ($)
           ----            ------------      --------      -----------------------------      ----------------------------------
                                                           Exercisable     Unexercisable      Exercisable      Unexercisable
                                                           -----------     -------------      -----------      -------------
<S>                        <C>               <C>           <C>             <C>                <C>              <C>

   Lawrence Simon (2)           0               0            100,000          100,000            $-0-               -0-

</TABLE>


(2)      The exercise price of the options is $6.00 per share.

                                      15
<PAGE>

EMPLOYMENT AGREEMENTS

         As of May 1, 1996, the Company entered into a one (1) year employment
agreement with Lawrence D. Simon, pursuant to which Mr. Simon serves as the
Company's President. The agreement provides for Mr. Simon to receive a salary
of $75,000 per annum. In addition, Mr. Simon has been granted an option to
purchase 100,000 shares of the outstanding Common Stock of the Company
exercisable (i) at an exercise price equal to the public offering price of the
shares of Common Stock of the Company included in the Units offered for sale
in the Initial Public Offering commencing one year from the effective date of
the Initial Public Offering, and (ii) only at a time when Mr. Simon is
employed by the Company. The agreement can be terminated by the Company, with
or without cause, upon ninety (90) days' notice and contains prohibitions on
the disclosure of confidential information and covenants not to compete with
the Company which survive any such termination. In April 1997, the Company
extended Mr. Simon's employment agreement for a further year. In April 1998, 
the Company entered into an amended employment agreement with Mr. Simon 
pursuant to which (i) Mr. Simon's salary was increased to $100,000 per annum 
with effect from January 1, 1998 and (ii) Mr. Simon's term of employment was 
extended for a further year.

1996 STOCK PLAN

         In June 1996, the Board of Directors of the Company adopted, and the
stockholders of the Company approved the adoption of, the 1996 Stock Plan
(hereinafter called the "1996 Plan"). The purpose of the 1996 Plan is to
provide an incentive and reward for those executive officers and other key
employees in a position to contribute substantially to the progress and
success of the Company, to closely align the interests of such employees with
the interests of stockholders of the Company by linking benefits to stock
performance and to retain the services of such employees, as well as to
attract new key employees. In furtherance of that purpose, the 1996 Plan
authorizes the grant to executives and other key employees of the Company and
its subsidiaries of stock options, restricted stock, deferred stock, bonus
shares, performance awards, dividend equivalent rights, limited stock
appreciation rights and other stock-based awards, or any combination thereof.
The 1996 Plan provides flexibility to the Company's compensation methods,
after giving due consideration to competitive conditions and the impact of
federal tax laws.

         The maximum number of shares of Common Stock with respect to which
awards may be granted pursuant to the 1996 Plan is initially 2,000,000 shares.
Shares issuable under the 1996 Plan may be either treasury shares or
authorized but unissued shares. The number of shares available for issuance
will be subject to adjustment to prevent dilution in the event of stock
splits, stock dividends or other changes in the capitalization of the Company.

         The 1996 Plan will be administered by a committee consisting of not
less than two (2) members of the Board of Directors who are "disinterested"
within the meaning of Rule 16b-3

                                      16
<PAGE>

promulgated under the Exchange Act and "outside directors" within the meaning
of Section 162(m) of the Code (including persons who may be deemed outside
directors by virtue of any transitional rule which may be adopted by the
Internal Revenue Service implementing such Section). The Company does not
presently have two "disinterested" directors and, accordingly, no awards will
be granted under the 1996 Plan until such time as there are two
"disinterested" directors. The Board will determine the persons to whom awards
will be granted, the type of award and, if applicable, the number of shares to
be covered by the award. During any calendar year, no person may be granted
under the 1996 Plan awards aggregating more than 100,000 shares (which number
shall be subject to adjustment to prevent dilution in the event of stock
splits, stock dividends or other changes in capitalization of the Company).

         TYPES OF AWARDS

         STOCK OPTIONS. Options granted under the 1996 Plan may be "incentive
stock options" ("Incentive Options") within the meaning of Section 422 of the
Code or stock options which are not incentive stock options ("Non-Incentive
Options" and, collectively with Incentive Options, hereinafter referred to as
"Options"). The persons to whom Options will be granted, the number of shares
subject to each Option granted, the prices at which Options may be exercised
(which shall not be less than the fair market value of shares of Common Stock
on the date of grant), whether an Option will be an Incentive Option or a
Non-Incentive Option, the time or times and the extent to which Options may be
exercised and all other terms and conditions of Options will be determined by
the Committee.

         Each Incentive Option shall terminate no later than ten (10) years
from the date of grant, except as provided below with respect to Incentive
Options granted to 10% Stockholders (as hereinafter defined). No Incentive
Option may be granted at any time after May 2006. Each Non-Incentive Option
shall terminate not later than fifteen (15) years from the date of grant. The
exercise price at which the shares may be purchased may not be less than the
Fair Market Value of shares of Common Stock at the time the Option is granted,
except as provided below with respect to Incentive Options granted to 10%
Stockholders. Options granted to executive officers may not be exercised at
any time prior to six (6) months after the date of grant.

         The exercise price of an Incentive Option granted to a person
possessing more than 10% of the total combined voting power of all shares of
stock of the Company or a parent or subsidiary of the Company ("10%
Stockholder") shall in no event be less than 110% of the Fair Market Value of
the shares of the Common Stock at the time the Incentive Option is granted.
The term of an Incentive Option granted to a 10% Stockholder shall not exceed
five (5) years from the date of grant.

         The exercise price of the shares to be purchased pursuant to each
Option shall be paid (i) in full in cash, (ii) by delivery (i.e., surrender)
of shares of the Company's Common Stock owned by the optionee at the time of
the exercise of the Option, (iii) in installments, payable in

                                      17
<PAGE>

cash, if permitted by the Committee or (iv) any combination of the foregoing.
The stock-for-stock payment method permits an optionee to deliver one (1) or
more shares of previously owned Common Stock of the Company in satisfaction of
the exercise price of subsequent Options. The optionee may use the shares
obtained on each exercise to purchase a larger number of shares on the next
exercise. (The foregoing assumes an appreciation in value of previously
acquired shares). The result of the stock-for-stock payment method is that the
optionee can generally avoid immediate tax liability with respect to any
appreciation in the value of the stock utilized to exercise the Option.

         Shares received by an optionee upon exercise of a Non-Incentive
Option may not be sold or otherwise disposed of for a period determined by the
Board upon grant of the Option, which period shall be not less than six (6)
months nor more than three (3) years from the date of acquisition of the
shares (the "Restricted Period"), except that, during the Restricted Period
(i) the optionee may offer the shares to the Company and the Company may, in
its discretion, purchase up to all the shares offered at the exercise price
and (ii) if the optionee's employment terminates during the Restricted Period
(except in limited instances), the optionee, upon written request of the
Company, must offer to sell the shares to the Company at the exercise price
within seven (7) business days. The Restricted Period shall terminate in the
event of a Change in Control of the Company (as defined), or at the discretion
of the Board. After the Restricted Period, an optionee wishing to sell must
first offer such shares to the Company at the Fair Market Value.

         LIMITED STOCK APPRECIATION RIGHTS. The Committee is authorized, in
connection with any Option granted under the 1996 Plan, to grant the holder of
such Option a limited stock appreciation right ("LSAR"), entitling the holder
to receive, within sixty (60) days following a Change in Control, an amount in
cash equal to the difference between the exercise price of the Option and the
market value of the Common Stock on the effective date of the Change in
Control. The LSAR may be granted in tandem with an Option or subsequent to
grant of the Option. The LSAR will only be exercisable to the extent the
related Option is exercisable and will terminate if and when the Option is
exercised.

         RESTRICTED AND DEFERRED STOCK. An award of restricted stock or
deferred stock may be granted under the 1996 Plan. Restricted stock is subject
to restrictions on transferability and other restrictions as may be imposed by
the Committee at the time of grant. In the event that the holder of restricted
stock ceases to be employed by the Company during the applicable restrictive
period, restricted stock that is at the time subject to restrictions shall be
forfeited and reacquired by the Company. Except as otherwise provided by the
Committee at the time of grant, a holder of restricted stock shall have all
the rights of a stockholder including, without limitation, the right to vote
restricted stock and the right to recover dividends thereon. An award of
deferred stock is an award that provides for the issuance of stock upon
expiration of a deferral period established by the Committee. Except as
otherwise determined by the Committee, upon termination of employment of the
recipient of the award during the applicable deferral period, all stock that
is at the time subject to deferral shall be forfeited.

                                      18
<PAGE>

Until such time as the stock which is the subject of the award is issued, the
recipient of the award has no rights as a stockholder.

         DIVIDEND EQUIVALENT AWARDS. A dividend equivalent gives the recipient
the right to receive cash or other property equal in value to the dividends
that would be paid if the recipient held a specified number of shares of
Common Stock. A dividend equivalent right may be granted as a component of
another award or as a free standing award.

         BONUS SHARES AND OTHER SHARE BASED AWARDS. The 1996 Plan authorizes
the Committee to grant shares as a bonus, or to grant shares or other awards
in lieu of obligations of the Company to pay cash under other plans or
compensatory arrangements, upon such terms as shall be determined by the
Committee. The 1996 Plan also authorizes the Committee to grant other forms of
awards based upon, payable in, or otherwise related in whole or in part to,
Common Stock, including, without limitation, convertible or exchangeable
debentures or other debt securities, other rights convertible or exchangeable
into shares, purchase rights for shares, awards contingent upon performance of
the Company, and awards valued by reference to the book value of shares of
Common Stock or awards determined by reference to the value of securities of,
or the performance of, specified subsidiaries.




                                      19
<PAGE>


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL

                  OWNERS AND MANAGEMENT

         The following table sets forth information, as of September 22, 1998
with respect to the beneficial ownership of the outstanding shares of the
Company's Common Stock and Preferred Stock by (i) any holder of more than five
percent (5%) of the outstanding shares; (ii) the Company's officers and
directors; and (iii) the directors and officers of the Company as a group:

<TABLE>
<CAPTION>

Name and Address of  Beneficial       Shares of Common     Percentage (%) of        Shares of          Percentage (%)
Owner (1)                                Stock Owned         Common Stock        Preferred Stock     Total Combined Vote
-------------------------------       ----------------     -----------------     ---------------     -------------------
<S>                                   <C>                  <C>                   <C>                 <C>

PMF, Inc. (3)(4)                          3,362,650               54.7               5,000,000              75.0
Lawrence D. Simon(2)(5)(6)                  100,000                2.4               5,000,000              56.0
Reginald Spinello(2)(6)                       0.0                  0.0               5,000,000              55.6
Raveendra Nandigam(2)(6)                      0.0                  0.0               5,000,000              55.6
All officers and directors as 
a group (three (3) persons) (6)             100,000                2.4               5,000,000              56.0
</TABLE>

(1)      Beneficial ownership as reported in the table above has been
         determined in accordance with Instruction (b1) to Item 403 of
         Regulation S-B of the Securities Exchange Act.

(2)      The address of the stockholders noted above is c/o Superior 
         Supplements, Inc., 270 Oser Avenue, Hauppauge, NY  11788.

(3)      Includes 2,150,000 shares of common stock issuable upon the exercise
         of 2,150,000 Class A Warrants held by PMF, Inc. PMF, Inc., a
         corporation wholly owned by Barry Gersten, the founder of the
         Company, is record holder of such shares. Mr. Gersten may be deemed
         to hold sole investment and voting power over such shares.

(4)      The address of PMF, Inc. is c/o Ganer Grossbach Ganer, P.C. 1995
         Broadway, New York, NY  10023.

(5)      Includes 100,000 shares of common stock underlying option to purchase
         100,000 shares of Common Stock of the Company issued pursuant to Mr.
         Simon's employment agreement which became exercisable one year from
         the effective date of the Company's Initial Public Offering.

(6)      Includes 5,000,000 shares of Preferred Stock owned by PMF, Inc. PMF,
         Inc. granted a voting trust on May 1, 1996 for a period of five (5)
         years to Lawrence D. Simon, Reginald Spinello and Dr. Durchslag or
         any director succeeding any of such persons. Dr. Durchslag resigned
         on May 2, 1998 and, therefore, no longer holds the voting trust. Mr.
         Nandigam was appointed as a director of the Company on June 1, 1998
         and has held the voting trust since that date. Any disagreement is to
         be resolved by the vote of a majority of the trustees. Accordingly,
         each of them may be deemed to hold voting power over such shares.
         PMF, Inc. has retained all other rights of beneficial ownership in
         such shares.


                                      20
<PAGE>

ITEM 12. CERTAIN  RELATIONSHIPS AND RELATED TRANSACTIONS

         On April 24, 1996, the Company was formed in the State of Delaware.

         On April 24, 1996, PMF, Inc., a company wholly-owned and controlled
by Barry Gersten, acquired (i) (a) 3,000,000 shares of Common Stock of the
Company, par value $.0001 per share, and (b) 3,000,000 Class A Warrants for a
cash consideration of $50,000, and (ii) 5,000,000 shares of Series A Preferred
Stock of the Company, par value $.0001, per share, for a cash consideration of
$5,000. The Series A Preferred Stock has no dividend rights and has a
liquidation right of $.02 per share. Each share of Series A Preferred Stock
shall be entitled to one (1) vote per share on all matters presented to
stockholders of the Company. Each Class A Warrant entitles the holder to
purchase one (1) share of Common Stock of the Company at the initial public
offering price, commencing one (1) year after the Effective Date of the
Company's initial public offering (the "Initial Public Offering").
Simultaneously, with the Company's Initial Public Offering, PMF, also
completed an underwritten public offering of securities by selling 325,000
Units consisting of 650,000 shares of Common Stock and 650,000 Class A
Warrants to purchase an additional 650,000 shares of Common Stock. The Company
did not receive any of the proceeds of the sale of securities by PMF.

         On May 1, 1996 PMF, Inc. granted a voting trust for a period of five
(5) years to Lawrence D. Simon, Reginald Spinello and Dr. Daniel Durchslag (or
any director succeeding any such person) over the 5,000,000 Preferred Shares
owned by PMF, Inc. Dr. Durchslag resigned as a Director on May 2, 1998 and
lost voting power under the voting trust. His successor, Raveendra Nandigam,
was appointed as a Director on June 1, 1998 and holds voting power under the
voting trust. The voting trust provides for the majority decision to control
the vote in the event of any disagreement between the trustees.

         On May 14, 1996, the Company entered into an agreement to supply PDK
Labs Inc. with vitamins and dietary supplements in bulk tablet form (the "PDK
Agreement"). The agreement, as amended, provides for PDK Labs Inc. to purchase
certain products at fair market value. PDK Labs Inc. agreed to purchase
products having a minimum aggregate sales price of $2,500,000 per annum for
each year during the term of the PDK Agreement. In the event that PDK Labs
Inc. fails to purchase the minimum amount of products in any year, the Company
will be paid $100,000 as liquidated damages (pro-rated by reference to the
percentage of said minimum amount purchased during the related year). The term
of the PDK Agreement is for a period of three (3) years, automatically
renewable for successive one (1) year terms. Sales to PDK approximated 88% of
total sales for the year ended June 30, 1998.

         On May 31, 1996, the Company agreed to exclusively supply Compare
Generiks, Inc. with vitamins in bulk tablet form (other than any vitamins sold
under the "Energex" trademark or as part of the "Energex" product line) at the
Company's cost plus fifteen percent (15%) pursuant to a supply agreement
between the Company and Compare Generiks, Inc. (the "Compare Agreement"). The
term of the Compare Agreement is for a period of three (3)

                                      21
<PAGE>

years, automatically renewable for successive one (1) year terms. 

         In June, 1996, the Company borrowed $200,000 from PMF, Inc., the
Company's founder, at an annual interest rate of eight percent (8%) pursuant
to a promissory note dated June 26, 1996, repayable on June 25, 1998. The
Company has received a demand for repayment of the sums outstanding under this
note. The Company intends to request a change or an extension in the terms of
the Note.

         On July 21, 1997, the Company entered into a management agreement
with PDK Labs Inc. pursuant to which PDK Labs Inc. agreed to supply certain
management services to the Company in consideration for the payment by the
Company of a management fee of $10,000 per month.

         In addition, on November 30, 1997, the Company entered into a
packaging agreement with PDK Labs Inc. The Company agreed to package
Futurebiotics products for PDK Labs Inc. for a fixed price based on component
cost plus a direct labor charge per unit. The term of the agreement is for two
(2) years, renewable for successive one (1) year periods thereafter. PDK Labs
Inc. is obligated to purchase 1,000,000 bottles of Futurebiotics products per
annum during the term of the agreement.

CONFLICT OF INTERESTS

         PMF, a company wholly-owned and controlled by Barry Gersten, owns
30.3% of the Company's outstanding shares of Common Stock, 100% of the shares
of Series A Preferred Stock of the Company, par value $.0001 per share (the
"Series A Preferred Stock") and 61.4% of the Company's outstanding Class A
Warrants. In addition, in June 1996, PMF made a loan of $200,000 to the
Company pursuant to a promissory note, repayment of which loan has been
demanded and remains outstanding. At present, PDK is a major customer of the
Company, accounting for a significant percentage of the Company's total sales
revenue and also supplies certain management and personnel to the Company. In
addition, Reginald Spinello, one of the Company's Directors, is the President,
Chief Executive Officer and a Director of PDK, Raveendra Nandigam, one of the
Company's Directors, is the Vice President of Manufacturing of PDK and
Lawrence Simon, the Company's Chairman, President and Chief Executive Officer
is a director of PDK. Reginald Spinello, Raveendra Nandigam and Lawrence Simon
have voting power over more than fifty percent (50%) of the Common Stock and
Preferred Stock of the Company pursuant to a voting trust agreement with PMF.
Because of PMF's ownership interest in the Company, PMF's role as a creditor
of the Company, the identity of certain management, the voting control of
certain management over PMF's Preferred Stock and PDK's role as a significant
customer to the Company, certain conflicts of interest may occur between the
Company and PMF or PDK.



                                      22
<PAGE>

GENERAL

         The Company believes that material affiliated transactions and loans
between the Company and its directors, officers and principal shareholders or
any affiliates thereof have been and will be in the future on terms no less
favorable than could be obtained from unaffiliated third parties.




                                      23
<PAGE>

                                    PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)(1)  Financial Statements.

        The following financial statements are included in Part II, Item 7:


Report of Independent Certified Public Accountants                     F-1

Balance sheet as of June 30, 1998                                      F-2

Statements of operations for the years ended June 30, 1998
and June 30, 1997                                                      F-3

Statement of stockholders' equity for the years ended
June 30, 1998 and June 30, 1997                                        F-4

Statements of cash flows for the years ended June 30, 1998
and June 30, 1997                                                      F-5

Notes to financial statements                                          F-6-F-11



                                      24
<PAGE>

                          SUPERIOR SUPPLEMENTS, INC.

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                       Page
                                                                                       ----
<S>                                                                                 <C>
Report of Independent Certified Public Accountants                                      F-1

Financial Statements:

   Balance sheet as of June 30, 1998                                                    F-2

   Statements of operations for the years ended June 30, 1998 and 1997                  F-3

   Statement of stockholders' equity for the years ended June 30, 1998 and 1997         F-4

   Statements of cash flows for the years ended June 30, 1998 and 1997                  F-5

   Notes to financial statements                                                    F-6 - F-11
</TABLE>

<PAGE>


                         Independent Auditors' Report

Board of Directors and Stockholders
Superior Supplements, Inc.
Hauppauge, New York

We have audited the balance sheet of Superior Supplements, Inc. as of June 30,
1998, and the related statements of operations, stockholders' equity and cash
flows for the years ended June 30, 1998 and 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We 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 financial position of Superior Supplements, Inc. as
of June 30, 1998 and the results of its operations and its cash flows for the
years ended June 30, 1998 and 1997, in conformity with generally accepted
accounting principles.

                                              HOLTZ RUBENSTEIN & CO., LLP

Melville, New York
September 4, 1998

                                      F-1

<PAGE>


                          SUPERIOR SUPPLEMENTS, INC.

                                 BALANCE SHEET

                                 JUNE 30, 1998

           ASSETS
                                                                
CURRENT ASSETS:
   Cash and cash equivalents                                       $   36,981
   Accounts receivable (Note 9)                                       905,479
   Inventories (Note 3)                                             4,074,274
   Prepaid expenses                                                    61,081
                                                                   ----------
       Total current assets                                         5,077,815

PROPERTY AND EQUIPMENT, net (Note 4)                                1,525,970

OTHER ASSETS, net                                                      70,636
                                                                   ----------
                                                                   $6,674,421
                                                                   ----------
                                                                   ----------

   LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable and accrued expenses                           $3,789,351
   Note payable (Note 5)                                              200,000
   Income taxes payable (Note 7)                                        2,000
                                                                   ----------
       Total current liabilities                                    3,991,351

DEFERRED TAX LIABILITY (Note 7)                                         9,000
                                                                   ----------

COMMITMENTS (Note 8)

STOCKHOLDERS' EQUITY: (Note 6)
   Common stock, $.0001 par value; authorized 25,000,000
     shares; 4,000,000 shares issued and outstanding                      400
   Preferred stock, $.0001 par value; authorized 10,000,000
     shares; 5,000,000 shares issued and outstanding                      500
   Additional paid-in capital                                       3,145,441
   Deficit                                                           (472,271)
                                                                   ----------
                                                                    2,674,070
                                                                   ----------
                                                                   $6,674,421
                                                                   ----------
                                                                   ----------

                       See notes to financial statements

                                      F-2
<PAGE>


                          SUPERIOR SUPPLEMENTS, INC.

                           STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                                        Years Ended
                                                                                          June 30,
                                                                            ------------------------------------
                                                                                 1998                   1997
                                                                            --------------         -------------
<S>                                                                         <C>                    <C>
NET SALES (Note 9)                                                          $   10,255,843         $   4,628,129
                                                                            --------------         -------------
COSTS AND EXPENSES:
   Cost of sales                                                                 9,466,269             4,228,476
   Selling, general and administrative (Note 9)                                    747,464               467,108
                                                                            --------------         -------------
                                                                                10,213,733             4,695,584
                                                                            --------------         -------------
OPERATING INCOME (LOSS)                                                             42,110               (67,455)
                                                                            --------------         -------------
OTHER INCOME (EXPENSE):
   Gain (loss) on sale of securities (Note 6)                                       28,497              (442,586)
   Interest expense                                                                (17,347)              (28,479)
                                                                            --------------         -------------
                                                                                    11,150              (471,065)
                                                                            --------------         -------------
EARNINGS (LOSS) FROM OPERATIONS
   BEFORE INCOME TAX                                                                53,260              (538,520)

PROVISION FOR INCOME TAX (Note 7)                                                    2,000                20,200
                                                                            --------------         -------------
NET INCOME (LOSS)                                                           $       51,260         $    (558,720)
                                                                            --------------         -------------
                                                                            --------------         -------------

NET INCOME (LOSS) PER SHARE (Note 6)                                                  $.01                 $(.15)
                                                                                      ----                 -----
                                                                                      ----                 -----

WEIGHTED AVERAGE NUMBER OF
   SHARES OF COMMON STOCK
   OUTSTANDING (Note 6)                                                          4,000,000             3,663,014
                                                                                 ---------             ---------
                                                                                 ---------             ---------
</TABLE>

                       See notes to financial statements

                                      F-3
<PAGE>


                          SUPERIOR SUPPLEMENTS, INC.

                       STATEMENT OF STOCKHOLDERS' EQUITY

                                   (Note 6)


<TABLE>
<CAPTION>
                                              Common Stock     Preferred Stock
                                           25,000,000 Shares  10,000,000 Shares                Unrealized
                                            $.0001 Par Value   $.0001 Par Value                Gain (Loss)   
                                           -----------------  -----------------   Additional  on Investment  (Deficit)
                                                        Par               Par       Paid-in    Available-    Retained
                                            Shares     Value   Shares    Value      Capital     for-Sale     Earnings     Total
                                           ---------   -----  ---------  -----    ----------  -------------  ---------    ------
<S>                                        <C>         <C>    <C>        <C>      <C>          <C>           <C>         <C>
Balance, June 30, 1996                     3,500,000   $ 350  5,000,000  $ 500    $1,304,150   $ (60,100)    $  35,189   $1,280,089

Issuance of stock in connection
   with initial public offering              500,000      50          -      -     1,841,291           -             -    1,841,341

Net change in unrealized gain (loss)
   on investment available-for-sale                -       -          -      -             -      70,188             -       70,188

Net loss                                           -       -          -      -             -           -      (558,720)    (558,720)
                                           ---------   -----  ---------  -----    ----------    --------     ---------   ----------
Balance, June 30, 1997                     4,000,000     400  5,000,000    500     3,145,441      10,088      (523,531)   2,632,898

Net change in unrealized gain (loss)
   on investment available-for-sale                -       -          -      -             -     (10,088)            -      (10,088)

Net income                                         -       -          -      -             -           -        51,260       51,260
                                           ---------   -----  ---------  -----    ----------    --------     ---------   ----------
Balance, June 30, 1998                     4,000,000   $ 400  5,000,000  $ 500    $3,145,441    $      -     $(472,271)  $2,674,070
                                           ---------   -----  ---------  -----    ----------    --------     ---------   ----------
                                           ---------   -----  ---------  -----    ----------    --------     ---------   ----------
</TABLE>


                       See notes to financial statements

                                      F-4
<PAGE>

                          SUPERIOR SUPPLEMENTS, INC.

                           STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                          Years Ended
                                                                                           June 30,
                                                                            -------------------------------------
                                                                                  1998                  1997
                                                                            --------------        ---------------
<S>                                                                         <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                                        $       51,260        $     (558,720)
                                                                            --------------        --------------
   Adjustments to reconcile net income (loss)
     to net cash used in operations:
       Deferred income taxes                                                            -                 16,600
       Depreciation and amortization                                               206,294               120,778
       (Gain) loss on sale of investments                                          (28,497)              442,586
       (Increase) decrease in assets:
         Accounts receivable                                                    (2,015,141)             (775,338)
         Inventories                                                              (384,044)           (1,545,397)
         Prepaid expense                                                           (15,454)              (45,627)
         Other assets                                                               67,711              (100,846)
       Increase (decrease) in liabilities:
         Accounts payable and accrued expenses                                   1,452,704             1,614,589
         Taxes payable                                                              (1,600)              (20,400)
                                                                            --------------        --------------
       Total adjustments                                                          (718,027)             (293,055)
                                                                            --------------        --------------
       Net cash used in operating activities                                      (666,767)             (851,775)
                                                                            --------------        --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisition of property and equipment                                          (500,071)             (819,033)
   Purchases of marketable securities                                                   -             (1,496,934)
   Proceeds from the sale of investments                                           790,905             1,445,140
                                                                            --------------        --------------
       Net cash provided by (used in) investing activities                         290,834              (870,827)
                                                                            --------------        --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Net proceeds from issuance of stock                                                  -              1,841,341
   Repayment of bridge notes payable                                                    -               (300,000)
                                                                            --------------        --------------
       Net cash provided by financing activities                                        -              1,541,341
                                                                            --------------        --------------
NET DECREASE IN CASH AND CASH EQUIVALENTS                                         (375,933)             (181,261)

CASH AND CASH EQUIVALENTS,
   beginning of period                                                             412,914               594,175
                                                                            --------------        --------------
CASH AND CASH EQUIVALENTS, end of period                                    $       36,981        $      412,914
                                                                            --------------        --------------
                                                                            --------------        --------------
</TABLE>

                       See notes to financial statements

                                      F-5
<PAGE>


                          SUPERIOR SUPPLEMENTS, INC.

                         NOTES TO FINANCIAL STATEMENTS

                      YEARS ENDED JUNE 30, 1998 AND 1997

1.     Organization and Nature of Operations:

       Superior Supplements, Inc. (the "Company") is a Delaware Corporation
engaged in the manufacturing, packaging and marketing of dietary supplement
products including vitamins, minerals, herbs and specialty nutritional
supplements, in bulk tablet, capsule and powder form.

2.     Summary of Significant Accounting Policies:

       a. Inventories

          Inventories are valued at lower of cost (first-in, first-out method)
or market.

       b. Investments

          Available-for-sale securities are carried at fair value with the
unrealized holding gain (loss) included in stockholders' equity. A decline in
the market value of any available-for-sale security below cost that is deemed
other than temporary is charged to earnings resulting in the establishment of
a new cost basis for the security.

       c. Depreciation

          Depreciation is computed on the straight-line method over the useful
lives of the related assets (5-10 years). Leasehold improvements are amortized
over their expected useful lives.

       d. Income taxes

          Deferred tax assets and liabilities are determined based on
differences between financial reporting and tax basis of assets and
liabilities, and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse.

       e. Statement of cash flows

          For purposes of the statement of cash flows, the Company considers 
all highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.

       f. Estimates

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

       g. Concentration of credit risk

          Financial instruments which potentially expose the Company to credit
risk, as defined by Statement of Financial Accounting Standard No. 105 ("FAS
105"), consists primarily of trade accounts receivable. Wholesale distributors
of dietary supplements and over-the-counter pharmaceuticals account for all of
the Company's trade receivables. The risk associated with this concentration
is limited due to their geographic dispersion.

                                      F-6
<PAGE>


2.     Summary of Significant Accounting Policies:  (Cont'd)

       h. Accounting for stock-based compensation

          The Company accounts for its stock-based compensation costs using
the intrinsic value based method of accounting prescribed by APB Opinion No.
25 and will provide pro forma disclosures of net income and earnings per share
as if the fair value-based method prescribed by Financial Accounting Standards
Board Statement No. 123 ("FASB") had been applied in measuring compensation
expense.

       i. New standards

          In June 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 130, "Reporting Comprehensive Income," which establishes
standards for reporting and display of comprehensive income, its components
and accumulated balances. Comprehensive income is defined to include all
changes in equity except those resulting from investments by owners and
distribution to owners. Among other disclosures, SFAS No. 130 requires that
all items that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements.

          In addition, in June 1997, the FASB issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information," which
establishes standards for reporting information about operating segments. It
also establishes standards for disclosures regarding products and services,
geographic areas and major customers.

          Both of these new standards are effective for periods beginning
after December 15, 1997 and require comparative information for earlier years
to be restated. The implementation of these new standards will not affect the
Company's results of operations and financial position, but may have an impact
on future financial statement disclosures.

3.     Inventories:

       Inventories consist of the following at June 30, 1998:

       Raw material                                    $1,511,691
       Work-in-process                                    685,139
       Finished goods                                   1,877,444
                                                       ----------
                                                       $4,074,274
                                                       ----------
                                                       ----------

4.     Property and Equipment:

       Property and equipment consists of the following at June 30, 1998:

       Equipment                                       $1,227,903
       Leasehold improvements                             526,206
       Furniture and fixtures                              98,933
                                                       ----------
                                                        1,853,042
       Less accumulated depreciation                      327,072
                                                       ----------
                                                       $1,525,970
                                                       ----------
                                                       ----------

       Depreciation expense approximated $206,300 and $120,800 for the years
ended June 30, 1998 and 1997, respectively.

                                      F-7


<PAGE>


5.     Note Payable:

       The Company borrowed $200,000 from PMF, Inc., the Company's founder. 
This note, bearing interest at 8% per annum, was due on June 25, 1998. The note
was unpaid as of June 30, 1998.

6.     Stockholders' Equity:

       a. Capitalization

          Pursuant to the Company's certificate of incorporation, the Company
is authorized to issue 25,000,000 shares of common stock and 10,000,000 shares
of preferred stock. All stock has a $.0001 par value. Each share of common and
preferred has one vote in all matters.

       b. Initial capitalization

          The preferred shares outstanding, are designated as Series A
Preferred Shares. The Board of Directors has the authority to issue preferred
stock in one or more series and to fix the rights and other terms. The Series
A Preferred Shares rank senior to all series of preferred and common stock, do
not have any right to the payment of any dividend, and in the event of any
voluntary or involuntary liquidation of the Company are entitled to $.02 per
share.

       c. Public offering

          On February 26, 1997, the Company completed its Initial Public
Offering of securities. During the offering an aggregate of 575,000 units,
each comprised of two (2) shares of the Company's Common Stock and two (2)
Class A Redeemable Purchase Warrants, were sold. 325,000 of said units were
sold by PMF, Inc., as Selling Securityholder and 250,000 of said units were
sold by the Company which raised gross proceeds of $3,000,000 for the Company.

          Effective with the closing of the offering, the Company entered into 
a two-year consulting agreement with the underwriter. The consulting fee of 
$72,000 is being charged to operations ratably over the term of the agreement.

          In addition, the Company issued to the underwriter an option
("Underwriters' Option") to purchase up to 50,000 units at an exercise price
of $19.80 per unit. The option is exercisable for a period of four years,
commencing one (1) year from the date of the public offering.

          Each Class A Warrant entitles the holder to purchase one (1) share
of common stock of the Company at the initial public offering price ($6.00 per
share), commencing one (1) year from the date of the Company's initial public
offering (March 4, 1997).

       d. Issuance of stock for stock and cash

          On May 31, 1996, Compare Generiks, Inc. ("Compare") acquired 500,000
shares of common stock of the Company, for $100,000 and the issuance of
200,000 shares of common stock of Compare Generiks, Inc. The value of the
shares ($1,150,000) issued in connection with this transaction have been
determined using a fair value of $5.75 per share representing approximately
two-thirds of the market value of Compare's stock at May 31, 1996.

          During December 1996 and January 1997, the Company sold the 200,000
shares of Compare stock for gross proceeds of $700,000, resulting in a loss of
$450,000.

       e. Reserved shares

          At June 30, 1998, the Company has 5,800,000 shares of common stock 
reserved for future issuances.

                                      F-8
<PAGE>

6.     Stockholders' Equity:  (Cont'd)

       f. Stock option plan

          The Company has adopted a Stock Option Plan (the "Plan") covering
2,000,000 shares of common stock of the Company. Options under the Plan are
granted at terms set by the Board of Directors at the time of issuance. To
date, no options have been granted under the Plan.

       g. Options

          In 1997, the Company granted an officer an option to purchase
100,000 shares of the outstanding common stock of the Company exercisable at
an exercise price equal to the initial public offering price of $6.00 per share
one (1) year after the effective date of the Company's initial public
offering. The option expires upon the officer's termination of employment. The
Company accounts for its stock-based compensation costs under APB Opinion No.
25. Accordingly, no compensation cost has been recognized as of June 30, 1997.
Had compensation cost been determined on the basis of FASB No. 123, the effect
on net (loss) income and (loss) earnings per share would have been immaterial.

       h. Net income (loss) per share

          In 1997, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" (SFAS No. 128). This Statement
establishes standards for computing and presenting income (loss) per share
(EPS). SFAS No. 128 requires dual presentation of basic and diluted EPS. Basic
EPS excludes dilution and is computed by dividing net income available to
common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if stock options or convertible securities were exercised or
converted into common stock. The Company's adoption of SFAS No. 128 did not
materially change current and prior years' EPS.

          Basic and diluted loss per share amounts were equivalent for the
years ended June 30, 1998 and 1997.

7.     Income Taxes:

       Income tax provision consists of the following:

                                                     Years Ended
                                                      June 30,
                                           ------------------------------
                                             1998                 1997
                                           --------             ---------
       Federal:

         Current                           $  1,675             $      -
         Deferred                                -                  9,950
                                           --------             ---------
                                              1,675                 9,950
                                           --------             ---------
       State:

         Current                                325                 3,600
         Deferred                                -                  6,650
                                           --------             ---------
                                                325                10,250
                                           --------             ---------
                                           $  2,000             $  20,200
                                           --------             ---------
                                           --------             ---------



       Net deferred income tax asset (liability) is composed of the following
at June 30, 1998:

       Capital loss carryforward                             $   163,000
       Other                                                     (19,000)
       Valuation allowance                                      (153,000)
                                                             -----------

                                                             $    (9,000)
                                                            ------------
                                                            ------------


                                      F-9
<PAGE>


7.     Income Taxes:  (Cont'd)

       The difference between the corporation's effective income tax rate and
the United States Statutory rate is reconciled below:

                                                           Years Ended
                                                            June 30,
                                                   --------------------------
                                                   1998                  1997
                                                   ----                  ----
       United States statutory rate                34.0 %                34.0 %
       State income taxes, net of Federal 
          income tax benefit                          -                  (1.2)
       Effect of graduated rates                  (19.0)                    -
       Other                                      (11.2)                (36.4)
                                                  ------                ------
                                                    3.8%                 (3.6)%
                                                  -----                 ------
                                                  -----                 ------

       At June 30, 1998, the Company has available approximately $25,000 of 
unused investment credits, that may provide future tax benefits.  The credits 
expire in 2004.

       The  Company also has available approximately $415,000 of unused capital
loss carryforwards that may be applied against future capital gains. The loss
carryforwards expire through 2002.

8.     Commitments:

       a. Lease

          The Company is obligated under a non-cancellable lease for its
manufacturing and office facility. The lease requires minimum future rental
payments of $264,000, $270,000 and $79,000 for the years ending June 30, 1999,
2000 and 2001, respectively.

          Rent expense approximated $223,000 for the years ended June 30, 1998
and 1997, respectively.

       b. Employment agreement

          The Company has an employment agreement with an officer, expiring in
April 1999, which, provides for an annual salary of $100,000.

9.     Supply Agreements/Major Customer

       The Company is party to an amended supply agreement with PDK Labs Inc.
("PDK"). The agreement, which expires in May 1999, provides for PDK to
purchase certain products at specified prices. In the event that PDK fails to
purchase a minimum amount ($2,500,000) of products in any given year, the
Company will be paid up to $100,000, on a pro-rata basis, as liquidated
damages.

          In addition, in November 1997, the Company entered into a packaging
agreement with PDK. The Company agreed to package specified products for PDK
for a fixed price based on component cost plus a direct labor charge per unit.
The term of the agreement is for two (2) years, renewable for successive one
(1) year periods thereafter. PDK is obligated to purchase 1,000,000 bottles of
the specified products per annum during the term of the agreement. In the
event that PDK fails to purchase the minimum amount of product in any given
year, the Company will be paid up to $100,000, on a pro-rata basis, as
liquidated damages.

          Sales to PDK approximated $9,054,000 and $4,013,000 for the periods 
ended June 30, 1998 and 1997, respectively. Included in accounts receivable at 
June 30, 1998 is approximately $866,000 due from PDK.

                                     F-10
<PAGE>


9.     Supply Agreements/Major Customer:  (Cont'd)

          In connection with these agreements,  in fiscal 1998 PDK transferred 
to the Company, at cost, inventory of approximately $2,045,000. In addition, 
the Company purchased machinery and equipment from PDK for $232,000.

          The Company is also party to a supply agreement with Compare. Terms
of this agreement are similar to the agreement with PDK, except there are no
minimum purchase requirements. As of June 30, 1998 sales under this agreement
approximated $7,000.

          The Company is also obligated under a management agreement with PDK
pursuant to which PDK agreed to supply certain management services to the
Company in consideration for the payment of a management fee of $10,000 per
month. The term of the agreement is one year, and is automatically renewable
for one year terms at the option of both parties.

10.    Fair Value of Financial Instruments:

       The methods and assumptions used to estimate the value of the following
classes of financial instruments were:

       Current Assets and Current Liabilities: The carrying amount of cash,
       current receivables and payables and certain other short-term financial
       instruments approximate their fair value.

       At June 30, 1998, the carrying amount and fair value of the Company's
financial instruments are as follows:

                                              Carrying                Fair
                                               Amount                 Value
                                             ----------            ----------
       Cash and cash equivalents             $   37,000            $   37,000
       Accounts receivable                      905,500               905,500
       Note payable                             200,000               200,000
       Other current liabilities              3,791,400             3,791,400

11.    Supplementary Information - Statement of Cash Flows:

       Cash paid for interest and income taxes was $1,347 and $6,642, 
respectively, for the year ended June 30, 1998. Cash paid for interest and 
income taxes was $12,479 and $15,100, respectively, for the year ended June 30, 
1997.

12.    Retirement Plan:

       Qualified employees are eligible to participate in a salary reduction
plan under Section 401(k) of the Internal Revenue Code. Participation in the
Plan is voluntary, and any participant may elect to contribute up to 17% of
earnings. The Company may, at its discretion, contribute up to 3% of an
employee's earnings. The Company contributed approximately $3,800 and $0 to
the Plan for the years ended June 30, 1998 and 1997, respectively.

                                     F-11

<PAGE>

(a) (2) EXHIBITS

<TABLE>
<CAPTION>
<S>               <C>
1.01*             Form of Underwriting Agreement.
1.02*             Form of Agreement Among Underwriters
1.03*             Form of Consulting Agreement.
1.04*             Form of Selected Dealer Agreement.
1.05*             Form of Warrant Exercise Fee Agreement.
3.01*             Certificate of Incorporation of the Company dated April 24, 1996.
3.02*             By-Laws of the Company.
3.03*             Form of Certificate of Designation of Series A Preferred Stock.
4.01*             Specimen Certificate for shares of Common Stock.
4.02*             Specimen Certificate for shares of Series A Preferred Stock.
4.03*             Specimen Certificate for Class A Redeemable Common Stock Purchase Warrant.
4.04*             Form of Warrant Agreement by and among the Company and American Stock Transfer & Trust Company.
4.05*             Form of Underwriters' Unit Purchase Warrant.
9.01*             Form of Voting Trust Agreement.
10.01*            Supply Agreement between the Company and PDK dated as of May 14, 1996.
10.02*            Supply Agreement between the Company and CGI dated as of May 31, 1996.
10.03*            Lease between the Company and Park Associates dated as of May 1, 1996.
10.04*            Subscription Agreement between the Company and CGI dated as of May 31, 1996.
10.05*            Employment Agreement between the Company and Lawrence D. Simon dated as of May 1, 1996.
10.06*            Form of May, 1996 Bridge Loan Agreements.
10.07*            Revolving Credit Agreement between the Company and Dune dated May 31, 1996.
10.08*            Promissory Note in favor of PMF dated June 26, 1996.
10.09*            1996 Stock Plan.
10.10**           Amendment to Supply Agreement between the Company and PDK Labs Inc. dated as of July 21, 1997.
10.11**           Management Agreement between the Company and PDK Labs Inc. dated as of July 21, 1997.
10.12**           Amendment to Employment Agreement between the Company and Lawrence D. Simon dated as of April 30, 1997.
10.13             Packaging Agreement between the Company and PDK Labs Inc. dated as of November 30, 1997.
10.14             Amendment No. 2 to Employment Agreement between the Company and Lawrence D. Simon dated as of April 30, 1998.
</TABLE>

*   Incorporated by Reference to the Company's Registration Statement on Form
    SB-2, No. 333-9761.
**  Incorporated by Reference to the Company's Form 10-KSB for the year ended
    June 30, 1997.

                                      25
<PAGE>

(b) Reports on Form 8-K.

         None.


                                      26

<PAGE>

                                  SIGNATURES

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

Dated: New York, New York
       September 25, 1998


                                       SUPERIOR SUPPLEMENTS, INC.

                                       By: /s/ Lawrence D. Simon
                                           ---------------------------------
                                           Lawrence D. Simon
                                           President, Chairman, Chief Financial
                                           Officer, Principal Accounting Officer
                                           and Director


         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following
persons in the capacities and on the dates indicated.


SIGNATURE                             TITLE                       DATE
---------                             -----                       -----

/s/ Lawrence D. Simon         President, Chairman,          September 25, 1998
------------------------      Chief Financial Officer,
Lawrence  D. Simon            Principal Accounting
                              Officer and Director

/s/ Reginald Spinello         Director
------------------------                                    September 25, 1998
Reginald Spinello

/s/ Raveendra Nandigam        Director                      September 25, 1998
------------------------
Raveendra Nandigam


                                      27