<PAGE>   1





                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

   

                                   FORM 10-K/A2
    

(Mark One)
 X     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
----
       EXCHANGE ACT OF 1934 (Fee Required)

       For the fiscal year ended December 31, 1996
                                       or

----   TRANSITIONAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 (No Fee Required)

       For the transitional period from    ______     to    ________

Commission File Number 0-22077


                                 ERGOBILT, INC.                    
             -----------------------------------------------------
             (Exact name of registrant as specified in its charter)

             Texas                                 75-2600529      
 ------------------------------                --------------------
 (State or other jurisdiction of                 (I.R.S. Employer
 incorporation or organization)                Identification No.)

        5000 Quorum Drive, Suite 147, Dallas, Texas             75240   
        -------------------------------------------------------------
        (Address of principal executive offices)            (Zip Code)

Registrant's telephone number, including area code (972) 233-8504
Securities registered pursuant to Section 12(b) of the Act:

                                              Name of each exchange on
   Title of each class                              which registered      
   -------------------                        ----------------------------
          None                                            --

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

                         Common Stock ($.01 Par Value)
                         ----------------------------
                                (Title of class)

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

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.    X
                                                          -------

         As of March 26, 1997, 6,056,000 shares of ErgoBilt, Inc. Common Stock,
$.01 par value, were outstanding, and the aggregate market price of the shares
held by nonaffiliates was approximately $14,535,732.  (Solely for the purpose
of calculating the preceding amount, all directors and officers of the
registrant are deemed to be affiliates.)


   
    
<PAGE>   2
                                 ERGOBILT, INC.
                               TABLE OF CONTENTS
                                   FORM 10-K
                               December 31, 1996




   
<TABLE>
<CAPTION>
                                                                             PAGE
                                                                             ----
<S>                   <C>                                                     <C>
                                   PART I.

     Item 1.          Business                                                 1

     Item 2.          Description of Property                                  8

     Item 3.          Legal Proceedings                                        8

     Item 4.          Submission of Matters to a Vote of Security Holders      9
 
                                   PART II.

     Item 5.          Market for Registrant's Common Equity and Related       
                        Stockholder Matters                                   10    

     Item 6.          Selected Financial Data                                 11

     Item 7.          Management's Discussion and Analysis of Financial
                        Condition and Results of Operations                   12

     Item 8.          Financial Statements and Supplementary Data             17
  
     Item 9.          Changes in and Disagreements with Accountants on        
                        Accounting and Financial Disclosure                   18    

                                  PART III.

     Item 10.         Directors and Executive Officers of the Registrant      19
                                                                              
     Item 11.         Executive Compensation                                  22

     Item 12.         Security Ownership of Certain Beneficial Owners
                        and Management                                        24

     Item 13.         Certain Relations and Related Transactions              25

                                   PART IV.
     
     Item 14.         Exhibits, Financial Statement Schedules, and Reports   
                        on Form 8-K                                           27

     Index to Financial Statements                                           F-1

     Signatures                                                             II-1

     Index to Exhibits                                                      II-3
</TABLE>
    

<PAGE>   3





         This Annual Report on Form 10-K contains certain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements, other than statements of historical facts included in this Form
10-K, including without limitation those under "Market Trends" and
"Competition" under Item 1 and "Liquidity and Capital Resources" under Item 7
regarding the Company's financial position and results of operations, are
forward looking statements.  Such statements are subject to certain risks and
uncertainties, such as changes in prices or demand for the Company's products
as a result of competitive actions or economic factors, changes in the cost of
raw materials, changes in operating costs resulting from new technologies or
inflation and the Company's ability to continue to have access to capital
markets and commercial bank financing on favorable terms. Should one or more of
these risk or uncertainties, among others as set forth in this Form 10-K,
materialize, actual results may vary materially from those estimated,
anticipated or projected. Although the Company believes that the expectations
reflected by such forward-looking statements are reasonable based on
information currently available to the Company, no assurance can be given that
such expectation will prove to have been correct.  Cautionary statements
identifying important factors that could cause actual results to differ
materially from the Company's expectations are set forth in this Form 10-K,
including without limitation in conjunction with the forward- looking
statements included in this Form 10-K that are referred to above.  All
forward-looking statements included in this Form 10-K and all subsequent oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by these cautionary
statements.


                                     PART I

ITEM 1.    BUSINESS.

GENERAL

         The Company (for purposes of this discussion, the Company includes the
combined operations of ErgoBilt, Inc.  and BodyBilt Seating, Inc.) is a
developer, manufacturer and marketer of customized, high-end ergonomic products
that re-engineer the workplace and the home office by scientifically minimizing
the physical stress imposed upon the human body. Its current product line
primarily consists of four series of premium-priced, ergonomic office chairs,
marketed under the BodyBilt(R) tradename, which can be customized through
proprietary modular designs to meet the needs of each customer.

         In February and March of 1997 the Company issued 1,800,000 shares of
its common stock in its initial public offering for net cash proceeds of
approximately $10.7 million and acquired BodyBilt Seating, Inc. ("BodyBilt"),
which has manufactured ergonomic office chairs since 1988, for $17.6 million in
cash and stock.  This acquisition was effected through a merger (the "Merger")
of BodyBilt into a subsidiary of the Company and was accounted for as a
purchase.  Prior to these events the Company was engaged in providing
advertising and marketing services to BodyBilt.

                                      1
<PAGE>   4
         BodyBilt(R) chairs are based on NASA research conducted during its
SkyLab missions that identified the least stressful body position for
astronauts during extended missions in space. BodyBilt(R) chairs have a
10-Point Posture Control --  system that allows each individual user to assume
a posture similar to the stress-free posture of astronauts in space.

         The Company is also the licensee of certain hardware and software for
voice-to-text transcription and data capture which are sold under the name
"IMPACTwriter".  This technology significantly reduces the number of keystrokes
needed for transcription.

         MARKET TRENDS.  The Company believes that certain trends in the work
environment have expanded the market opportunity for ergonomic office products.
First, increased reliance on the personal computer has resulted in more workers
spending more time in a constantly seated position. A result has been a
significant increase in the number of work-related employee injury claims and
lost employee time from (i) back and upper extremity injuries and (ii)
repetitive stress injuries or "RSI," including carpal tunnel syndrome. Second,
OSHA, has required employers to provide safe work environments, which may
include the acquisition of ergonomic office products. As a result, the Company
believes that employers are seeking ways to alleviate injuries related to body
stress in the workplace. Third, the emergence of the corporate "telecommuter"
has produced significant growth in the number of home offices, now estimated at
41.1 million in the United States alone.

         PRODUCTS.  In the mid-1970s, NASA collected detailed anthropometric
data during successive SkyLab missions, including in-depth studies on posture.
According to data published in NASA's Anthropometric Source Book, NASA
discovered that when the body is placed in the weightless, or zero-gravity
environment of space, it assumes a specific posture that is substantially
different from a traditional upright or seated posture. The body assumes a
trunk-to-thigh angle of 128 degrees, placing the musculoskeletal system in its
most relaxed state. This discovery led to the design of the BodyBilt(R) chair
with the 10-Point Posture Control --  system. This system allows each
individual user to emulate a similar relaxed, stress-free posture while at
work, providing a high degree of personal comfort and helping to alleviate
problems associated with back and repetitive stress injuries. Corporate
comparative tests based on comfort conducted by the Safety Department of
Lockheed Austin Division ("LAD") and the Austin, Texas Service Center of the
Internal Revenue Service ("IRS-Austin") have documented the effectiveness of
the BodyBilt(R) chair in alleviating worker discomfort and increasing
productivity. In its 1991 study, LAD concluded that the use of ergonomic
equipment (chairs and workstations) resulted in a 12% increase in productivity
and improved employee morale. The LAD study noted that the highest ranked piece
of equipment for improving comfort and job performance was the ergonomic chair.
This study confirmed the findings of an earlier study conducted by the
IRS-Austin that demonstrated an 8% increase in productivity from using an
ergonomic chair alone. The ergonomic chairs used in both studies were
BodyBilt(R) chairs.

         BodyBilt(R) chairs' contoured seats are made with multi-densities of
foam strategically placed to distribute the user's body weight over a greater
surface area. Additionally, the angle between the back rest and the seat
structure can be adjusted to approximate the posture that the





                                       2
<PAGE>   5
body assumes naturally in the gravity-free environment of space. Five different
seat designs provide additional comfort for customers of various sizes and
shapes. The back rests also contain multi-densities of strategically placed
foam and are shaped to provide maximum support in the lumbar area. The personal
Air Lumbar --  pump inflates the lumbar area, allowing the back rest to conform
even more closely to the unique curvature of each person's back. The eight
different arms available with all BodyBilt(R) chairs are designed for different
workplace tasks and offer customers more choices to reduce neck and shoulder
strain. Available armrests include the Linear Tracking Arm --  and Pivot Arm --
for specialized applications, including medical, micro-surgical and desk-top
needs. The 3-Way Arm mechanism allows for proper arm support which can help the
user avoid repetitive stress injuries.

         The Company manufactures BodyBilt(R) chairs designed for
non-managerial task workers (J Task Series), managerial task workers (J-Manager
Series), managers and executives (K Series) and "Big & Tall" workers (S
Series). The S Series chairs feature a reinforced seat which is 23.5% larger
than the average seat. These chairs are capable of supporting persons weighing
up to 350 pounds. The Company's collection of BodyBilt(R) chairs meets and
often exceeds the current ergonomic standards in seating design, from American
National Standards Institute -- Human Factors Society 100-88 to those proposed
by OSHA.

         The modular design of the BodyBilt(R) chairs allows each customer to
create a custom chair, selecting from more than 1,600 possible combinations of
arms, backrests, headrests, seats and bases, in addition to style and fabric
choices. The Company has been able to provide this myriad of choices to the
customer without maintaining excessive inventory levels as a result of its use
of interchangeable parts. The Company generally can deliver a customized
BodyBilt(R) chair to the customer in less than four weeks, about one-half the
time required by large manufacturers. The chairs require minimal assembly by
the customer and are delivered with a computer diskette that provides each
customer with a visual explanation of how to adjust the chair for maximum
comfort.

         BodyBilt(R) chairs are warranted against defects in materials or work
quality as follows: seven years  on the base, the steel structure of the
mechanism and the backrest post; five years  on the casters, clutch plates,
torsion springs, handles, seat and backrest plastic structure, backrest height
adjuster, foam, polyurethane arm pads, pneumatic height cylinder, armrest
structure and all welds; and two years  on the Air Lumbar --  pillow.

         Although the Company does not have a stated return policy, the Company
endeavors to minimize product returns by offering prompt, on-site customer
service and repair. BodyBilt(R) chairs' interchangeable components permit easy
replacement of worn or defective components. Currently, the Company utilizes
its direct sales force, independent sales representatives and dealers to
perform on-site service and warranty repairs. Product returns to date have been
negligible.

         CUSTOMERS.  The Company had a diversified customer base of over 1,500
accounts during the year ending December 31, 1996. No single customer accounted
for more than 10% of the Company's sales for the 12-month period ended December
31, 1996. The Company's largest





                                       3
<PAGE>   6
customers include Hewlett Packard, Boeing Commercial Aircraft Company and Texas
Instruments, Inc.

         MARKETING, SALES AND DISTRIBUTION.  The Company primarily markets and
sells its chairs to corporate ergonomists and health, human services and safety
managers in Fortune 1000 companies. The chairs are sold mostly for "special
use" applications, where employees have requested a non-standard chair to
reduce or alleviate existing back problems or repetitive stress injuries. The
sales process usually involves a detailed technical explanation of how the
chairs function and documentation of the chairs' effectiveness in alleviating
and/or preventing back problems and repetitive stress injuries. This process
may also involve a comparative test of several ergonomic chairs conducted by
the customer where employees complaining of work-related discomfort are asked
to evaluate the chairs on a wide range of factors.  Termed "sit-offs" by the
trade, these tests provide a practical and useful means of measuring the
chair's effectiveness in relieving individual discomfort. The typical
BodyBilt(R) chair order is one to three chairs because BodyBilt(R) chairs are
purchased for "special-use" purposes. The Company believes that it has an
advantage over larger competitors whose culture and structure are not adapted
to accommodate the unique approach required to sell "special-use" ergonomic
chairs effectively. Historically, the vast majority of the Company's sales have
been to corporate customers, but a growing percentage of the Company's sales
have been made through retail distribution directly to end users.

         The Company believes it has achieved a high level of brand identity
and consumer awareness not typically found in the office furniture industry.
BodyBilt(R) chairs have received national publicity in newspapers, magazines
and television, including the New York Times , Wall Street Journal , People
magazine, Entertainment Tonight, The CBS Morning Show and The Tonight Show. The
Company also exhibits its products at numerous ergonomic, computer and office
furniture industry trade shows. In both 1995 and 1996, the Company spent in
excess of $1.0 million on advertising, promotional materials and trade shows.

         The Company's products are marketed by its direct sales force of 17
persons and 21 independent sales representatives and its sales are channeled
through a network of over 550 dealers. Dealers typically purchase the product
at a discount from retail and resell the product at a higher price.

         MANUFACTURING AND ASSEMBLY.  The Company normally operates one shift,
five days per week, at its manufacturing and assembly facility located in
Navasota, Texas. A second shift is added to meet demand in peak periods,
generally in the fourth quarter when customers spend the remainder of their
annual capital budgets. Approximately 32,000 chairs were manufactured and
assembled during for the 12-month period ended December 31, 1996. The Company
believes that the maximum capacity of this facility is approximately 100,000
chairs per year and that its future production requirements can therefore be
satisfied with routine additional capital investment, which is not expected to
be substantial.

         At its Navasota facility, the Company vacuum-forms seats and backs and
cuts and punches holes in various steel supports for the back rests, front
wings, arms-capable brackets and





                                       4
<PAGE>   7
vertical/horizontal braces. The Company then assembles the chairs and applies
coverings. The Company manufactures BodyBilt(R) chairs primarily to meet
specific customer orders. A significant portion of finished chairs are shipped
within 24 hours after the manufacturing process is complete.

         The Company's manufacturing goals are to: (i) strive to improve
quality; (ii) seek the best values in purchasing; (iii) uphold stringent zero
defect quality controls; and (iv) deliver orders promptly.

         SUPPLIERS.  The Company uses a variety of materials in its
manufacturing, including plastic, foam, steel and various coverings. Certain
components of BodyBilt(R) chairs, principally the base mechanism, are made by
other manufacturers to the Company's specifications. The Company is dependent
upon its suppliers for timely delivery and product quality. While the Company's
strategy is to maintain multiple sources of supply, the Company's largest
supplier, Leggett & Platt, Inc., is currently the only source of a key
component for BodyBilt(R) chairs. While the Company has not had any adverse
experience with this supplier, the Company does not have binding supply
contract with Leggett & Platt, Inc. Until alternative supply sources are
identified, the Company could be subject to pricing risks, delivery delays and
quality control problems, which could have a material adverse effect on its
results of operations.

         PATENTS AND TRADEMARKS.  The Company has applied to register the
"ErgoBilt" trademark and has registered "BodyBilt" in the United States. The
Company believes that protection of this trademark is important because of
customer association of the trademark with BodyBilt(R) chairs. The Company also
has two patents pending which relate to its current arm design and one patent
pending which relates to its seat design.  The Company's success and its
ability to compete are dependent in part upon its proprietary technology.
While the Company relies on patent, trademark, trade secret and copyright laws
to protect its technology, the Company believes that factors such as the
technological and creative skills of its personnel, new product developments,
frequent product enhancements, name recognition and reliable product
maintenance are more essential to establishing and maintaining a technology
leadership position. There can be no assurance that others will not develop
technologies that are similar or superior to the Company's technology.

         The seat design used in certain BodyBilt(R) chairs, which accounted
for sales of approximately $1.2 million and $1.8 million for the years ended
December 31, 1995 and 1996, respectively, is derived from a design patented by
Dr.  Jerome Congleton (the "Congleton Patent"). Dr. Congleton granted a license
to manufacture seats using the Congleton Patent to both BodyBilt and Ergonomic
Chairs, Inc., predecessor in interest to Neutral Posture Ergonomics, Inc.
("NPE").  Under the terms of this license agreement and related agreements, if
more than 50% of the outstanding capital stock of BodyBilt is transferred, its
license to manufacture chairs under the Congleton Patent will terminate.
Accordingly, as a result of the Merger, the Company no longer holds a license
of the Congleton Patent.  However, an agreement executed in connection with a
1991 settlement of litigation between BodyBilt, NPE and Dr. Congleton provides
that a successor to BodyBilt has the right to manufacture, market, distribute
and sell commercial, industrial and laboratory chairs using the Congleton
Patent, although such successor may not advertise its use of the Congleton
Patent.  Recently, the Company and its counsel received correspondence from NPE





                                       5
<PAGE>   8
and Dr. Congleton asserting that a license is required for the Company to
continue to manufacture seats using the Congleton patent.  However, based upon
the advice of counsel, the Company believes that under the 1991 settlement, no
such license is necessary. Accordingly, the Company believes that termination
of its license of the Congleton Patent upon consummation of the Merger will
have no material impact on the Company's business. NPE is owned and controlled
in part by Drew Congleton's mother and sister. Dr. Congleton is the father of
Drew Congleton, and Drew is a director of the Company and is an officer of
BodyBilt. Dr. Congleton is a consultant to NPE and has no association with the
Company.

         LICENSE.  On February 18, 1997, BodyBilt, entered into a non-exclusive
license agreement with Computer Translation Systems & Support, Inc. (CTSS),
Lawrence West Melquiond and Jerold P. Lefler.  The terms of the agreement allow
BodyBilt the right, among other things, to manufacture, market and sell a
state-of-the-art computer and keyboard system which significantly reduces the
number of keystrokes (every keystroke on a CTSS keyboard is equal to 4-4.5
strokes on a standard keyboard) needed for direct voice-to-text transcription
and data capture services. CTSS products are sold under the name
"IMPACTwriter".  CTSS has assigned certain trademarks to BodyBilt.

         The input speeds of the IMPACTwriter are three to five times faster
than a traditional typist using a standard keyboard.  This increased
productivity translates into lower expenses for the employer, and the ergonomic
benefit of reduced keystrokes should help decrease the instances of repetitive
stress injuries.  The ergonomic benefits offered by the IMPACTwriter is an
excellent fit with ErgoBilt's overall strategy for growth.

         The Company paid $19,000 upon execution of the license agreement and
will pay a 5% royalty on gross revenue received and collected from the sales of
the Impactwriter.  The Company has agreed to use its best efforts to sell at
least 250 units within 60 days after the signing of this agreement. The license
granted is perpetual although it can be terminated by mutual written consent of
the licensors and the licensees.

         COMPETITION.  The Company faces significant competition in the office
furniture market. BodyBilt(R) chairs compete on the basis of quality, health
benefits, comfort, service, price, design and durability. Existing and future
competitors within the office furniture industry, including Herman Miller,
Inc., Steelcase Design Partnership and Haworth Group, Inc., offer or will offer
ergonomic products. Many of these competitors have much greater financial and
other resources, and offer a broader product line, than the Company. By
targeting its marketing efforts to corporate ergonomists and health, human
services and safety managers rather than traditional facilities or purchasing
managers, the Company has been able to establish a market niche in which the
Company believes it is difficult for large office furniture producers to
compete effectively. There is also competition from numerous smaller ergonomic
furniture companies. The Company believes, however, that smaller competitors
are often constrained by a lack of capital, access to distribution channels,
manufacturing capabilities and/or management expertise.





                                       6
<PAGE>   9
         The Company believes that the following aspects of its marketing,
sales, distribution and customer service are its competitive strengths: (i) the
modular design and interchangeable components of BodyBilt(R) chairs permit
customization to each worker's specifications, and the chairs can be adjusted
to accommodate changing individual needs; (ii) manufacturing, sales and
customer service are equipped to handle small orders, the traditional mainstay
of the ergonomic business; (iii) orders generally are processed, manufactured
and delivered in four weeks, approximately half the time normally required by
large companies; and (iv) using interchangeable components facilitates on-site
service and repair.

         GOVERNMENT REGULATION.  The Company's operations must meet federal,
state and local regulatory standards in the areas of safety, health and
environmental pollution controls. Historically, those standards have not had
any material adverse effect on the Company's sales or operations. The Company
believes that its Navasota facility is in compliance in all material respects
with applicable federal, state and local laws and regulations relating to
safety, health and the environment. The Company cannot at this time estimate
the impact of any new standards which may be applicable to the Company's
operations or the costs of compliance with such standards.

         RECENT DEVELOPMENTS.  The Company has entered into a non-binding
letter of intent to purchase certain intellectual property from Metamorphosis
Design & Development, Inc. ("Metamorphosis"), a company that owns the rights to
certain design patents, including patents relating to an ergonomic workcenter,
and an assignment of licensing fees relating to this workcenter of
approximately $15,000 per month. The Company anticipates that this intellectual
property will enable the Company to broaden its product line. The Company will
not acquire any manufacturing facilities, employees or other business assets
from Metamorphosis. If this purchase is consummated, the Company would pay
Metamorphosis up to $500,000 in cash and issue warrants to purchase 150,000
shares of Common Stock exercisable at the closing price on the date of the
acquisition. The Company has agreed to pay Metamorphosis additional cash and/or
securities aggregating up to $15 million if after-tax earnings derived from the
acquired intellectual property meet certain targets over a three-year period
commencing on the closing date and/or certain revenue targets are met and
certain other events occur within the first five years immediately following
the closing date. The acquisition of this intellectual property is subject to
the completion of satisfactory due diligence and other conditions. There can be
no assurance that a definitive agreement will be executed or that this
acquisition will be consummated.

BACKLOG

         The company does not have a significant backlog of orders and does not
consider backlog to be material to its business.





                                       7
<PAGE>   10
EXECUTIVE OFFICERS

<TABLE>
<CAPTION>
         Name                             Age                               Position
         ----                             ---                               --------
<S>                                        <C>              <C>                                                
Gerard Smith                               54               President and Chief Executive Officer (1)

P. Michael Sullivan                        43               Senior Vice President and Chief Financial          
                                                            Officer(2)
</TABLE>
                                    
------------------------------------
   
(1)  Position held since August 15, 1996 
(2)  Position held since January 31, 1997
    

         The executive officers of the Company are elected annually by the
Board of Directors and serve at the discretion of the Board of Directors until
their successors are elected and qualified or their earlier resignation or
removal.

EMPLOYEES

         As of December 31, 1996 the Company had approximately 159 full-time
employees.  None of the Company's employees is subject to a collective
bargaining agreement, and the Company has not experienced any work stoppages.
The Company believes that its relations with its employees are good.


ITEM 2.    DESCRIPTION OF PROPERTY.

         The Company's manufacturing and assembly operations are conducted in
its 65,000 square-foot Navasota facility.  The Company leases approximately
2,000 square feet in Dallas for its principal executive offices. The Company
also leases a showroom in Denver, a showroom in the Chicago Merchandise Mart
and a small sales office in Dallas.  The Company believes that suitable
additional or alternative space will be available to accommodate the expansion
of corporate operations and additional sales offices.


ITEM 3.  LEGAL PROCEEDINGS.

         The Company is involved from time to time in various legal proceedings
and claims incident to the normal conduct of its business. The Company believes
that such legal proceedings and claims, individually and in the aggregate, are
not likely to have a material adverse effect on the Company's results of
operations.





                                       8
<PAGE>   11
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.


         Written Consents of Shareholders in Lieu of Meetings dated August 1996
to change the par value of the Company's common stock.

         A meeting of the shareholders of the Company was held on November 6,
1996.  The items approved were i) the amendment and restatement of the
Corporation's Bylaws originally adopted on July 6, 1996, in connection with the
Corporation's initial public offering and ii) ratification and approval of the
Corporation's 1996 Incentive Stock Option Plan.  The shareholders of the
Company approved both matters by unanimous vote.





                                       9
<PAGE>   12
                                    PART II


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

         The Company's Common Stock has traded on the NASDAQ National Market
under the symbol "ERGB" since January 31, 1997.

         As of March 28, 1997, there were approximately 41 holders of record of
the Company's Common Stock.

         The Company intends to retain all earnings to provide funds for its
operations and expansion, and therefore does not anticipate paying cash
dividends or making any other distributions on its shares of Common Stock in
the foreseeable future. The Company's future dividend policy will be determined
by its Board of Directors based on various factors, including the Company's
results of operations, financial condition, business opportunities, capital
requirements, credit restrictions and such other factors as the Board of
Directors may deem relevant.





                                       10
<PAGE>   13
ITEM 6.  SELECTED FINANCIAL DATA.

         The selected financial data presented below are derived from the
financial statements of BodyBilt and should be read in conjunction with and are
qualified by reference to BodyBilt's financial statements and the notes thereto
included elsewhere in this Form 10-K.


<TABLE>
<CAPTION>
                                                                            Year Ended December 31,                      
                                                               ---------------------------------------------------
                                                               1992        1993        1994        1995     1996
                                                                                 (in thousands)   
<S>                                                           <C>          <C>         <C>        <C>      <C>
INCOME STATEMENT DATA:
                   Sales                                       $4,448      $6,535      $9,189     $13,672   $17,578
                   Cost of sales                                2,053       3,237       4,789       7,218     9,326
                                                              -------      ------      ------     -------   -------
                   Gross profit                                 2,395       3,298       4,400       6,454     8,252
                   Selling, general and administrative
                     expenses                                   1,353       2,164       3,266       4,555     5,676
                                                              -------      ------      ------     -------   -------
                   Operating income                             1,042       1,134       1,134       1,899     2,576
                   Other expense, net                              14          24          24          20       142
                                                              -------      ------      ------     -------   -------
                                                                                                         
                   Income before income taxes                   1,028       1,110       1,110       1,879     2,434
                   Income tax expense                              46          50          50          85        57             
                                                              -------      ------      ------     -------   -------
                   Net income                                 $   982      $1,060      $1,060     $ 1,794   $ 2,377
                                                              =======      ======      ======     =======   =======



BALANCE SHEET DATA:
                   Working capital                               $891      $1,742      $2,137      $2,905    $3,693
                   Total assets                                 1,319       2,687       3,606       5,812     7,487
                   Long-term debt, including current                                                       
                     portion                                       75         633         877       1,385     2,090
                   Shareholders' equity                         1,004       1,481       2,208       3,402     4,440
</TABLE>


                       SELECTED PRO FORMA FINANCIAL DATA

         The following unaudited pro forma combined condensed statement of
income for the year ended December 31, 1996 adjusts the historical results of
BodyBilt (considered the predecessor to the Company) to give effect to (i) the
Merger as if it had been consummated at January 1, 1996; (ii) the amortization
of approximately $13.2 million of goodwill that was created as a result of the
acquisition of BodyBilt by the Company pursuant to purchase accounting; (iii)
the income tax effect resulting from the conversion of BodyBilt from an S
corporation to a C corporation; and (iv) eliminate transactions between
ErgoBilt and BodyBilt.  The computation of pro forma shares outstanding is
based on 4,256,000 weighted average shares of Common Stock outstanding and
1,278,000 shares issued at an initial public offering price of $7.00 per share
(after deducting the underwriting discount and the Representatives'
non-accountable expense allowance) to (i) fund





                                       11
<PAGE>   14
payments of $7.2 million to BodyBilt Shareholders and (ii) repay approximately
$850,000 of indebtedness. The computation of pro forma shares outstanding
excludes an additional 522,000 shares sold in the offering.  The Company
believes that a 40-year amortization period is appropriate for goodwill, since
BodyBilt is a manufacturer of office furniture that is expected to have value
to the Company beyond 40 years. The Merger will be accounted for as a purchase
with ErgoBilt as the acquirer. The unaudited pro forma combined condensed
statement of income should be read in conjunction with the historical financial
statements of the Company and BodyBilt and the notes thereto included elsewhere
in this Form 10-K and are not necessarily indicative of the results of
operations that might have occurred if the Merger had not taken place on the
dates indicated or of the Company's results of operations for any future
period.

                Pro Forma Combined Condensed Statement of Income
                      for the Year Ended December 31, 1996


<TABLE>
<CAPTION>
                                                                                    Pro Forma
                                                     BodyBilt      ErgoBilt       Adjustments      Pro Forma
                                                     --------      --------       -----------      ---------
                                                             (in thousands, except per share data)
<S>                                                    <C>           <C>              <C>        <C>
Sales                                                  $17,578       $ 373            $(338)       $17,613
Cost of sales                                            9,326         154             -             9,480  
                                                       -------       ------           ------      --------
Gross profit                                             8,252         219             (338)         8,133
Selling, general and administrative expenses             5,676         677               (9)         6,344  
                                                       -------       ------           ------      --------
Operating income                                         2,576        (458)            (329)         1,789
Interest expense and other, net                            142          14             -               156  
                                                       -------       ------           ------      --------
Income before income taxes                               2,434        (472)            (329)         1,633
Income tax expense (benefit)                                57        (158)             623            724  
                                                       -------       ------           ------      --------
Net income                                             $ 2,377       $(314)           $(952)      $    909  
                                                       =======       ======           =======     ========
Pro forma earnings per share                                                                      $    .16
Pro forma shares outstanding                                                                         5,534
</TABLE>


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

         The operations of ErgoBilt are discussed under the heading "ErgoBilt"
below. The remainder of Management's Discussion and Analysis of Financial
Condition and Results of Operations relates to the operations of BodyBilt.
Following the Merger, BodyBilt became the operating company, and ErgoBilt
became the parent company. ErgoBilt's assets and results of operations are not
significant to the combined operations on a going-forward basis. The following
discussion and analysis should be read in conjunction with the information set
forth under "Selected Financial Data" and the financial statements of ErgoBilt
and BodyBilt and the accompanying notes thereto included elsewhere in this Form
10-K.





                                       12
<PAGE>   15
ERGOBILT

         Since its incorporation in 1995, ErgoBilt's operations have consisted
primarily of providing advertising and marketing activities to BodyBilt,
conducting activities necessary to complete the Merger and the sale of the
shares of Common Stock offered on January 31, 1997, and conducting other
activities necessary to plan for the operations and activities of ErgoBilt and
BodyBilt subsequent to the Merger. Operating income for the period from June
12, 1995 to December 31, 1995 was $57,000. For the year ended December 31,
1996, ErgoBilt had a net loss from operations of $314,000. The loss was
attributable to increased compensation related to management employed in
contemplation of the Merger, expenses accrued for consulting services related
to the Merger and the offering rendered by a company wholly- owned by Mark
McMillan, the President of BodyBilt, and other costs of the Merger and
offering.

BODYBILT

         GENERAL.  BodyBilt generates revenue through sales of its products to
corporate customers, dealers and retailers. The majority of BodyBilt's sales
are generated by either BodyBilt's direct sales force or by independent sales
representatives, who are paid a commission for each unit sold. Typically,
BodyBilt's sales are directed through a network of over 550 dealers who acquire
the products at a discount from retail and then resell the products to the
ultimate customer. In certain instances, BodyBilt drop-ships products directly
to the ultimate customer.

         BodyBilt's sales increased at a compound annual growth rate of 41.0%
from 1992 through 1996 and increased 28.6% for the year ended December 31, 1996
as compared to the year ended December 31, 1995.  BodyBilt believes that its
growth has been driven by increasing market acceptance of ergonomics and its
success in (i) providing superior quality products and service; (ii) expanding
its direct sales force; (iii) upgrading the quality of its independent sales
representative firms; and (iv)  educating consumers about the benefits of
ergonomics and the solutions provided by BodyBilt's products.  BodyBilt did not
increase the suggested retail prices of its chairs during this period. From
1992 to December 31, 1996, BodyBilt expanded its direct sales force from four
to 17 individuals while during the same period the number of independent sales
representatives decreased from 22 to 21. There can be no assurance that
BodyBilt's growth will continue at the historic rate in the future.

         Contemporaneously with the closing of the Company's initial public
offering, the Company completed the Merger.  The historical results of
operations through December 31, 1996, do not include the impact of the Merger.
The total consideration paid in connection with the Merger was $17.6 million,
consisting of cash, Common Stock and Series A Preferred Stock. The transaction
was treated as a purchase for accounting purposes and resulted in approximately
$13.2 million of goodwill, which will be amortized over a 40-year period. The
amortization of goodwill associated with the Merger will total approximately
$329,000 annually and will not be deductible for income tax purposes.





                                       13
<PAGE>   16
         RESULTS OF OPERATIONS.  The following table sets forth certain
historical financial data as a percentage of sales for the periods indicated:


<TABLE>
<CAPTION>
                                                               Year Ended December 31,        
                                                         ----------------------------------
                                                         1994           1995          1996    
                                                         -----          -----         -----
<S>                                                     <C>            <C>           <C>
Sales                                                    100.0%         100.0%        100.0%
Cost of sales                                             52.2           52.8          53.1    
                                                         -----          -----         -----
Gross profit                                              47.8           47.2          46.9
Selling, general and administrative expenses              35.5           33.3          32.2    
                                                         -----          -----         -----
Operating income                                          12.3%          13.9%         14.7%
</TABLE>

         Comparison of Years Ended December 31, 1995, and 1996.  Sales
increased $3.9 million, or 28.6%, from $13.7 million for the year ended
December 31, 1995, to $17.6 million for the year ended December 31, 1996. Units
sold increased by 6,177, or 24.0%, from 25,759 for the year ended December 31,
1995, to 31,936 for the year ended December 31, 1996.  This sales increase was
attributable to a shift in the mix of products sold to higher-end, more
technologically-equipped chairs, the addition of direct sales personnel,
increased advertising and marketing expenditures and increased acceptance of
the Company's products.

         Gross profit increased $1.8 million or 27.9%, from $6.5 million in the
year ended December 31, 1995 to $8.3 million for the year ended December 31,
1996. As a percentage of sales, gross profit declined from 47.2% in the year
ended December 31, 1995 to 46.9% in the year ended December 31, 1996.  This
decrease in the percentage is a result of expenses related to placing
additional demonstration chairs in the field and nominal increase in large chair
orders which carried a lower margin.

         Selling, general and administrative expenses increased by $1.1
million, or 24.6%, from $4.6 million for the year ended December 31, 1995, to
$5.7 million for the year ended December 31, 1996. As a percentage of sales,
selling, general and administrative expense decreased from 33.3% in the year
ended December 31, 1995, to 32.2% in the year ended December 31, 1996.  This
dollar increase was attributable to increases in compensation and commissions
due to the addition of direct sales and customer support personnel, increases
in advertising and promotional expenses and additional depreciation expense.

         Operating income increased by $677,000, or 35.7%, from $1.9 million
for the year ended December 31, 1995, to $2.6 million for the year ended
December 31, 1996.

         Comparison of Years Ended December 31, 1994, and 1995.  Sales
increased $4.5 million, or 48.8%, from $9.2 million for the year ended December
31, 1994, to $13.7 million for the year ended December 31, 1995. Units sold
increased by 6,813, or 36.0%, from 18,946 for the year ended December 31, 1994,
to 25,759 for the year ended December 31, 1995. This increase was the result of
the addition of direct sales personnel, an increase in the number of corporate
accounts and increased acceptance of the Company's products.





                                       14
<PAGE>   17
         Gross profit increased $2,054,000 or 46.7%, from $4,400,000 in the
year ended December 31, 1994 to $6,454,000 for the year ended December 31,
1995. As a percentage of sales, gross profit declined from 47.8% in the year
ended December 31, 1994 to 47.2% in the year ended December 31, 1995. The
decline in gross profit as a percentage in sales was attributable to
enhancements in product quality, resulting in an increase in the cost of
certain components. In addition, sales of lower-margin chairs to certain
corporate and government accounts increased as a percentage of total sales. The
effect of these two factors on the overall gross margin was partially offset by
greater plant utilization.

         Selling, general and administrative expenses increased by $1.3
million, or 39.5%, from $3.3 million for the year ended December 31, 1994, to
$4.6 million for the year ended December 31, 1995. As a percentage of sales,
selling, general and administrative expenses decreased from 35.5% in the year
ended December 31, 1994, to 33.3% in the year ended December 31, 1995. This
dollar increase was attributable to increases in compensation and commissions
as a result of the addition of direct sales and sales support personnel and
increased advertising, literature and other promotional expenses.

         Operating income increased by $765,000, or 67.4%, from $1.1 million
for the year ended December 31, 1994, to $1.9 million for the year ended
December 31, 1995.

LIQUIDITY AND CAPITAL RESOURCES

         Cash Flow.  Historically, BodyBilt has satisfied its cash requirements
through profitable operations and borrowings under a bank line of credit
facility. Operating activities provided net cash totaling $734,000, $1.1
million and $1.6 million for 1994, 1995 and 1996, respectively. The primary use
of cash in operating activities has been to fund increases in accounts
receivable and inventories resulting from BodyBilt's rapid growth.

         Investing activities used cash totaling $629,000, $918,000 and
$951,000 during 1994, 1995 and 1996, respectively. Substantially all of the
cash used for investing activities during these periods related to capital
expenditures. BodyBilt anticipates continuing to make capital expenditures in
connection with plant, equipment, software and computer equipment improvements.

         Financing activities used cash totaling $89,000, $80,000 and $719,000,
respectively, during 1994, 1995 and 1996. The primary uses of cash for
financing activities were distributions to the BodyBilt Shareholders of
$333,000, $600,000 and $1.3 million in 1994, 1995 and 1996, respectively. The
distributions in 1994 and 1995 were made primarily to provide the BodyBilt
Shareholders with cash to pay individual tax liabilities related to the net
income of BodyBilt attributed to them as shareholders of an S corporation, and
in 1996 were made based on projected earnings of BodyBilt for the year ended
1996. The primary source of cash for the financing activities during each
period was borrowings under BodyBilt's line of credit.





                                       15
<PAGE>   18
         Asset Management.  BodyBilt typically sells its products and services
on net 30 day terms and seeks to minimize its credit risk by performing credit
checks and conducting its own collection efforts.  BodyBilt had trade accounts
receivable of $1.7 million, $2.5 million and $3.0 million at December 31, 1994,
1995 and 1996 respectively.  The number of days' sales outstanding in trade
accounts receivable were 66 days, 66 days and 63 days respectively, for the
same periods. Bad debt expense as a percentage of total revenue for the same
periods was negligible. BodyBilt maintains no allowance for doubtful accounts.

         BodyBilt attempts to keep its raw materials inventory low to minimize
the risk of obsolescence. BodyBilt also attempts to maintain the minimum level
of such inventory necessary to meet its near term manufacturing requirements by
relying on just-in-time delivery of products from its principal suppliers.
Inventory turnover was 4.9 times, 6.0 times and 5.9 times for 1994, 1995 and
1996 respectively.

         Credit Facilities.  BodyBilt maintains a revolving line of credit
facility with The First National Bank of Bryan (the "Line of Credit").
Borrowings under the Line of Credit are utilized primarily for working capital
to finance inventory and receivables and for distributions to the BodyBilt
Shareholders. Borrowings under the Line of Credit bear interest at a bank's
prime rate per annum. The Line of Credit is secured by a first lien on the
accounts receivable and inventory of BodyBilt and the proceeds of a life
insurance policy insuring the life of BodyBilt's President, Mark McMillan. The
Line of Credit is personally guaranteed by Mark McMillan. At December 31, 1996,
the interest rate on the Line of Credit was 8.25% and total borrowings under
the Line of Credit were $1,350,000. The remaining available credit under the
Line of Credit, subject to borrowing base limitations which are generally
computed as a percentage of various classes of eligible accounts receivable and
qualifying inventory, was $650,000 at December 31, 1996.

         In May 1994, BodyBilt purchased a building and land that was formerly
a large retail facility, in Navasota, Texas. During the summer of 1994,
BodyBilt moved its manufacturing and administrative operations from leased
facilities to the Navasota facility. Since June 1994, this facility has
undergone significant renovations, improvements and equipment additions. The
merger and improvement of this facility was financed through an amortizing bank
loan from The First National Bank of Bryan in the principal amount of $571,000,
currently bearing interest at the bank's prime rate plus 0.75% per annum and
maturing in the year 2000. At December 31, 1996, the interest rate on this loan
was 9.50% and the outstanding principal balance was $438,278.  The loan is
secured by a lien on the facility and by a life insurance policy insuring the
life of Mark McMillan. This loan is personally guaranteed by Mark McMillan.

         At December 31, 1996, BodyBilt also had other term note obligations to
the First National Bank of Bryan aggregating approximately $226,000 the
proceeds of which were used to fund working capital and equipment and vehicle
purchases.

         On September 6, 1996, ErgoBilt obtained a $500,000 loan from Summit
Partners Management Co. ("Summit") to fund the Merger and offering expenses.
The convertible note evidencing this loan (the "Convertible Note") was repaid
in part from the proceeds of the Company's initial public offering and by
conversion into shares of Common Stock at the initial





                                       16
<PAGE>   19
offering price per share (one-half of the principal balance of the loan).  This
loan bears interest at 8.0% per annum and matures on September 6, 1997. The
Convertible Note was secured by a pledge of certain assets of Gerald McMillan.
In connection with the issuance of the Convertible Note, Dr. McMillan sold
34,000 shares of Common Stock to Summit, and the Company agreed to issue to
Summit at the closing of this offering a warrant to acquire up to 51,000 shares
of Common Stock at a price of 120% of the price to public exercisable over a
period of four years commencing one year after issuance. The shares of Common
Stock sold to Summit and the Common Stock issuable upon exercise of the
lender's warrant are subject to certain registration rights.

         INFLATION. The cost of raw materials and component parts, salaries and
manufacturing wages have increased modestly. The increases have not had a
significant effect on BodyBilt's results of operations because of substantially
increasing sales volumes and relatively stable product prices.

         NEW ACCOUNTING PRONOUNCEMENTS.  Effective January 1, 1996, the Company
adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of." Accordingly, in the event that facts
and circumstances indicate that property and equipment, and intangible or other
assets, may be impaired, an evaluation of recoverability would be performed. If
an evaluation is required, the estimated future cash flows associated with the
asset is compared to the asset's carrying amount to determine if a write-down
to market value was necessary. Adoption of this standard did not have a
material effect on the financial position or results of operations of the
Company.

         As of January 1, 1996, SFAS No. 123, "Accounting for Stock-Based
Compensation," became effective for the Company. SFAS No. 123 permits, but does
not require a fair value-based method of accounting for employee stock option
plans which results in compensation expense recognition when stock options are
granted. As permitted by SFAS no. 123, the Company will provide pro forma
disclosure of net income and earnings per share, as applicable, in the notes to
future annual consolidated financial statements.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The Company's Balance Sheets as of December 31, 1995 and 1996 and the
Company's Statements of Income, Stockholders' Equity and Cash Flows for the
year ended December 31, 1996 and the period ended December 31, 1995 together
with the notes thereto and the report of the Company's independent auditors
thereon as well as BodyBilt's Balance Sheets as of December 31, 1995 and 1996
and BodyBilt's Statements of Income, Stockholders' Equity and Cash Flows for
the years ended December 31, 1994, 1995 and 1996 together with the notes
thereto and the reports of BodyBilt's independent auditors thereon are included
as a separate section of this Form 10-K which begins on page F-1.





                                       17
<PAGE>   20
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

         Thompson, Derrig & Slovacek PC was succeeded as BodyBilt's auditors on
February 28,1996 by KPMG Peat Marwick LLP.  BodyBilt's decision to change
auditors was approved by BodyBilt's board of Directors. During BodyBilt's two
most recent fiscal years and the interim period preceding the change in
auditors, there were no disagreements between BodyBilt and Thompson, Derrig &
Slovacek PC on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which, if not resolved to
the satisfaction of Thompson, Derrig & Slovacek PC, would have caused it to
make reference to the subject matter of the disagreement in connection with its
report.  Their report on the financial statements did not contain any adverse
opinion or disclaimer of opinion nor was it qualified or modified as to
uncertainty, audit scope or accounting principles. Subsequent to BodyBilt's
change in auditors there have been no disagreements with accountants on
accounting and financial disclosure.

         There have been no changes in or disagreements by ErgoBilt with its
accountants on accounting and financial disclosure.





                                       18
<PAGE>   21





   
                                    PART III
    


   
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
    

   
<TABLE>
<CAPTION>
         Name                              Age                      Position
         ----                              ---                      --------
<S>                                        <C>              <C>
Gerald McMillan, PhD(1)                    45               Chairman of the Board and Director

Gerard Smith(1)                            54               President and Chief Executive Officer of the Company,
                                                            President of BodyBilt and Director

P. Michael Sullivan                        43               Senior Vice President and Chief Financial Officer

Drew Congleton(1)                          34               Executive Vice President of Sales of BodyBilt and Director

Robert E. Faust(2)                         57               Director

William Brown Glenn, Jr.(1)                43               Director

Mark McMillan(1)                           41               Director

W. Barton Munro(2)(3)                      54               Director

William Weed(3)                            66               Director
</TABLE>
    

------------------                                                  
   
         (1)     Member of the Acquisition Committee
         (2)     Member of the Audit Committee
         (3)     Member of the Compensation Committee
    

   
         Gerald McMillan, PhD, has been Chairman of the Board of Directors of
ErgoBilt since its inception on June 12, 1995, and was President from inception
to August 15, 1996. Dr. McMillan currently serves as Chairman of the Board of
Directors of ErgoBilt pursuant to the terms of that certain Executive
Employment Agreement dated October 1, 1996, between ErgoBilt and Dr. McMillan
(the "McMillan Employment Agreement"). He was employed as BodyBilt's Director
of Marketing from January 1, 1993 to July 31, 1994 and served as a consultant
to BodyBilt from August 1, 1994, until the creation of ErgoBilt. He also served
as a consultant, directly and indirectly, to BodyBilt during 1991 and 1992. Dr.
McMillan taught economics at the University of Dallas Graduate School of
Management. He holds a PhD, an MS and a BS in economics from Texas A&M
University. Dr. McMillan is the brother of Mark McMillan, a consultant,
director and a principal shareholder of the Company.
    




                                      19
<PAGE>   22
   
         Gerard Smith  became President and Chief Executive Officer of the
Company and a director of ErgoBilt as of August 15, 1996.  Mr. Smith became
President and Chief Executive Officer of BodyBilt upon completion of the
Merger.  In August 1994, Mr. Smith formed Smith & Associates, a marketing
consulting firm, where he served as President from 1994 to 1996.  He also
served as Chief Executive Officer of WTA TOUR Players Association, the
organization responsible for managing the worldwide women's professional tennis
tour, from 1989 to 1994. Mr. Smith previously served as Publisher and Vice
Chairman of Newsweek from 1984 to 1989. Mr. Smith was Managing Director of the
Los Angeles office of Ogilvy & Mather Advertising from 1978 to 1984. He holds a
BA in psychology from Seton Hall University.
    

   
         P. Michael Sullivan became Senior Vice President and Chief Financial
Officer of ErgoBilt on February 5, 1997.  Mr. Sullivan was Vice President,
Chief Financial Officer, Secretary and Treasurer for USDATA Corporation from
1978 until he joined the Company. Mr. Sullivan is a certified public accountant
and a member of the Texas Society of Certified Public Accountants. He holds a
BS in Finance and Accounting from the University of Texas.
    

   
         Drew Congleton became a director on February 5, 1997.  In March of
1997 Mr. Congleton became BodyBilt's Executive Vice President of Sales.  Prior
to that time, he had served as National Sales Manager of BodyBilt since 1988.
He is a member of the Human Factors and Ergonomic Society and represents
BodyBilt on the National Science Foundation Industry/University Cooperative
Research Center for Ergonomics at Texas A&M University.  Mr. Congleton holds a
BS in Organizational Communication from the University of Texas.
    

   
         Robert E. Faust became a director of the Company on February 5, 1997.
From 1965 to 1996, Mr. Faust served Westinghouse Electric Corporation in
various executive and management capacities, including Executive Vice President
of Westinghouse Communications, Vice President and Controller of Westinghouse
Electric, and Vice President and Controller of Westinghouse Broadcasting.  Mr.
Faust has served as a director of Duquesne University, Mercy Hospital
Foundation, Civic Light Opera of Pittsburgh, and Pittsburgh Hearing, Speech and
Deaf Services, Inc., and as Chairman of Information Systems Management Council
Manufacturers' Alliance for Productivity and Innovation.  He holds a BS and an
MBA in Finance from Duquesne University. He is a graduate of the Harvard
University Advanced Management Program.
    

   
         William Brown Glenn, Jr. became a director of the on February 5, 1997.
Mr. Glenn is principally engaged in private investments.  Since 1994, Mr. Glenn
has been a Vice President of Air Age Services, Inc., a privately-held
commercial aircraft maintenance and modification facility.  Mr. Glenn was a
Senior Vice President of Eastbridge Capital Inc./Eastbridge Asset Management
from 1988 to 1994.  Eastbridge is a primary dealer to the Federal Reserve and
also provides hedge fund management, proprietary trading and investment banking
services.  Prior to November 1996, Mr. Glenn was a registered representative of
APEX Securities, Inc.  Mr. Glenn also has held capital markets and corporate
finance positions with Merrill Lynch and Smith Barney, Harris Upham, Co.  He
holds a BA in Business Administration from the University of North Carolina.
    

   
         Mark McMillan became a director, and a consultant of the Company on
February 5, 1997.  Mr. McMillan served as President of BodyBilt from 1994 to
1997 and as Vice-President of
    




                                      20
<PAGE>   23
   
BodyBilt from 1988 to 1994.  He holds a BA in Agricultural Economics from Texas
A&M University.
    

   
         W. Barton Munro became a director of the Company on February 5, 1997.
He has served as a management consultant to BodyBilt for the past two years and
has provided tax, legal and financial consulting services to various other
clients.  Mr. Munro has been Vice President, Smith Dairy Queen, Bryan, Texas,
since 1991.  Mr. Munro served as a tax partner in the Houston office of Peat,
Marwick, Mitchell & Co. from 1972 to 1980 and was a Tax Manager in the Dallas
office of Price Waterhouse & Co. from 1963 to 1972.  Mr. Munro is a certified
public accountant and is a member of the Texas Society of Certified Public
Accountants.  He holds a BBA and a JD from Southern Methodist University.
    

   
         William Weed became a director of the Company on February 5, 1997. Mr.
Weed has been managing partner of Paul Ray Berndtson, a New York executive
search firm, since 1987.  Prior to that, he was a Director of The Ogilvy Group,
Director of Worldwide Accounts and member of the Personnel Committee for Ogilvy
& Mather Worldwide and Chairman of Ogilvy & Mather/Europe, all engaged in
advertising and marketing. Mr. Weed also serves the American Red Cross of
Greater New York as Vice Chairman of the Board and is a member of the Board's
executive and nominating committees.  He is a trustee emeritus and a former
member of the executive committee of the American Academy in Rome, Italy.  He
holds a BS from Carleton College and an MBA from Harvard University.
    

   
COMMITTEES OF THE BOARD
    

   
         Audit Committee.  The Company's Board of Directors has established an
Audit Committee comprised entirely of independent directors.  The functions of
the Audit Committee are to make recommendations to the Board of Directors
regarding the engagement of the Company's independent accountants and to review
with management and the independent accountants the Company's financial
statements, basic accounting and financial policies and practices, audit scope
and competency of accounting personnel.  Members of the Audit Committee are
appointed annually by the Board of Directors and serve at the discretion of the
Board of Directors until their successors are appointed or their earlier
resignation or removal.
    

   
         Compensation Committee.  The Company's Board of Directors has
established a Compensation Committee.  The Compensation Committee is
responsible for reviewing and making recommendations to the Board of Directors
with respect to compensation of executive officers, other compensation matters
and awards under the Company's stock option plan.  Members of the Compensation
Committee are appointed annually by the Board of Directors and serve at the
discretion of the Board until their successors are appointed or their earlier
resignation or removal.
    

   
         Acquisition Committee. The Board of Directors has established an
Acquisition Committee.  The Acquisition Committee's function is to evaluate
potential acquisitions for the Company and make recommendations to the Board of
Directors.  Members of the Acquisition Committee are appointed annually by the
Board of Directors and serve at the discretion of the Board until their
successors are appointed or their earlier resignation or removal.
    




                                      21
<PAGE>   24
   
ITEM 11.  EXECUTIVE COMPENSATION.
    

   
SUMMARY COMPENSATION TABLE
    

   
         The following table sets forth the compensation paid by the Company to
certain of its executive officers for services rendered to the Company in all
capacities during each of the last two fiscal years.
    

   
<TABLE>
<CAPTION>
                                                                              ANNUAL COMPENSATION           
                                                   ---------------------------------------------------------
           NAME AND PRINCIPAL                                                                 OTHER ANNUAL
                POSITION                   YEAR         SALARY               BONUS          COMPENSATION (1)
    --------------------------------       ----    -----------------    ---------------     ----------------
<S>                                        <C>         <C>                    <C>                    <C>
Gerald McMillan                            1995           72,377                 -                   -
Chairman of the Board and President        1996           86,852                 -                   -

Drew Congleton                             1995           92,392              30,000                 -
Executive Vice President and National      1996           80,000                 -                   -
Sales Director of BodyBilt and Director

Gerard Smith                               1996          100,000(2)              -                   -
President and Chief Executive Officer
and Director
</TABLE>
    


   
         (1) Certain of the Company's  executive officers receive personal
benefits in addition to salary and bonuses.  The aggregate amount of such
personal benefits, however, does not exceed the lesser of $50,000 or 10% of the
total annual salary and bonus reported for any of the named executive officers.
    

   
         (2) Includes $77,500 for services rendered pursuant to a consulting
services agreement entered into with the Company in July of 1996.  This
agreement terminated upon the closing of the Offering.
    

   
         Companies owed by Gerald McMillan received payments from BodyBilt
during 1996.  See "Certain Relationships and Related Transactions."
    

   
EMPLOYMENT AND CONSULTING AGREEMENTS
    

   
         Gerald McMillan.  The Company has entered into the McMillan Employment
Agreement with Gerald McMillan to serve as Chairman of the Board of Directors
of the Company for a term commencing as of October 1, 1996, and continuing for
three years from February 5, 1997. Dr. McMillan will receive an annual base
salary of $1, be eligible to participate in all Company bonus/ incentive
programs and stock option plans and be eligible to receive benefits under all
other Company employee benefit plans. The McMillan Employment Agreement
contains a non-competition covenant for the term of his employment and for a
period of two years thereafter.
    




                                      22
<PAGE>   25
   
         Gerard Smith.  ErgoBilt has entered into the Smith Employment
Agreement with Gerard Smith to serve as a director and President and Chief
Executive Officer of ErgoBilt and BodyBilt, for a term commencing as of August
15, 1996, and continuing for three years after January 31, 1997. Mr. Smith will
receive an annual base salary of $125,000 following the closing of the Offering
and will be eligible to participate in all Company bonus/incentive programs and
stock option plans and to receive benefits under all other Company employee
benefit plans. The Smith Employment Agreement also sets forth certain terms
under which Mr. Smith is granted registration rights for shares of Common Stock
owned by him. Pursuant to the terms of the Smith Employment Agreement, upon Mr.
Smith's voluntary termination of employment with the Company, Gerald McMillan
has the right to purchase varying amounts of Mr. Smith's shares of Common Stock
based upon Mr. Smith's length of service, less that number of shares having a
value equal to $500,000, based on the price per share of Common Stock at the
Offering. Upon the termination of Mr. Smith's employment with the Company for
due cause or the breach of the Smith Employment Agreement by the Company, Dr.
McMillan has the right to purchase varying amounts of Mr. Smith's shares of
Common Stock, less that number of shares having a value equal to $1,750,000,
based on the price per share of Common Stock in the Offering. Upon the
occurrence of any triggering event, if Dr. McMillan does not purchase all of
the shares he is entitled to purchase, any unpurchased shares may be redeemed
by the Company. Mr.  Smith has also agreed to a non-competition covenant with
ErgoBilt during the term of his employment and for a period of two years
thereafter.
    

   
         P. Michael Sullivan.  ErgoBilt has entered into the Sullivan
Employment Agreement with P. Michael Sullivan to serve as Senior Vice President
and Chief Financial Officer of the Company for a three-year term commencing as
of January 31, 1997. Mr. Sullivan will receive an annual base salary of $85,000
and be eligible to participate in all Company bonus/incentive programs and
stock option plans and to receive benefits under all other Company employee
benefit plans.  Mr. Sullivan has also agreed to a non-competition covenant with
the Company during the term of his employment and for a period of two years
thereafter.
    

   
         Drew Congleton.  BodyBilt has entered into an Executive Employment
Agreement with Drew Congleton, who became a director and principal shareholder
of the Company on January 31, 1997, pursuant to which Mr. Congleton serves as
Executive Vice President and National Sales Director of BodyBilt for an initial
three-year term. The term shall be automatically renewed for successive one
year terms until either party gives written notice of termination 60 days prior
to the expiration of a then current term. Mr. Congleton will receive an annual
base salary of $80,000 and be eligible to participate in all Company
bonus/incentive programs and stock option plans and to receive benefits under
all other Company employee benefit plans. The Executive Employment Agreement
will include a non-competition covenant for the term of his employment and for
a period of three years thereafter.
    

   
         Compensation of Directors.  Directors who are not also employees of
the Company receive $500 per board meeting attended and $200 per board
committee meeting attended and are reimbursed for out-of-pocket expenses
incurred for attendance at meetings.  Under the Company's stock option plan,
they will each receive an annual formula grant of nonqualified options to
purchase 2,000 shares of Common Stock exercisable at the fair market value on
the date of grant.
    




                                      23
<PAGE>   26
   
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
    

   
         The following table sets forth certain information, as of March 31,
1997, with respect to the beneficial ownership of Common Stock by each current
director, each nominee for director, each executive officer included in the
Summary Compensation Table, the directors and executive officers as a group and
each shareholder known to management to own beneficially more than 5% of the
Common Stock.  Unless otherwise noted, the persons listed below have sole
voting and investment power with respect to such shares.
    


   
<TABLE>
<CAPTION>
   Name and Address of                    Number of Shares          Percentage
   Beneficial Owner(1)                   Beneficially Owned        Beneficially Owned
   -------------------                   ------------------        ------------------
<S>                                          <C>                      <C>
Gerald McMillan(2)(4)                         2,054,795                33.9%
Gerard Smith(3)(4)                              664,868                11.0%
Drew Congleton                                  371,429                 6.1%
Robert E. Faust                                      -                  0.0%
William Brown Glenn, Jr.                             -                  0.0%
Mark McMillan(5)                                539,286                 8.9%
W. Barton Munro                                      -                  0.0%
Dr. Richard Troutman                            539,286                 8.9%
William Weed                                         -                  0.0%
All directors and executive                                   
  officers as a Group (8 persons)             3,630,378                59.9%
</TABLE>
    


   
         (1) The address for Gerald McMillan and Gerard Smith is 5000 Quorum
Drive, Suite 147, Dallas, Texas 75240. The address for Drew Congleton is 2815
Manzano Court, College Station, Texas 77845. The address for Mark McMillan is
2506 River Forest, Bryan, Texas 77802. The address for Dr. Richard Troutman is
10225 Collins Avenue, Bal Harbour, Florida 33157.
    

   
         (2) Includes 290,880 shares held by a trust for the benefit of Gerald
McMillan's three minor children, as to which Gerald McMillan disclaims
beneficial ownership.
    

   
         (3) Includes 24,933 shares held by the Ashleigh Lynch Smith 1996
Irrevocable Trust for which Mr. Smith is trustee and 24,933 shares held by the
Alyssa Kay Smith 1996 Irrevocable Trust for which Mr. Smith is trustee. Mr.
Smith disclaims beneficial ownership of all shares held by such trusts.
    

   
         (4) The Smith Employment Agreement gives Gerald McMillan and/or the
Company the right to purchase varying amounts of the shares of Common Stock
beneficially owned by Mr. Smith upon the termination of Mr. Smith's employment
with the Company during the three-year term of the Smith Employment Agreement.
    

   
         (5) All of the shares of common stock are held of record by Carter
Creek Investments, Ltd., a Texas limited partnership, the general partner of
which is River Forest Investments, Inc., a Texas corporation wholly-owned by
Mark McMillan.
    




                                      24
<PAGE>   27
   
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
    

   
         During 1996 payments $309,510 were made by BodyBilt to companies owned
by Dr. Gerald McMillan, the Chairman of the Board and a principal shareholder
of the Company, including the Company, for promotional literature and marketing
development.  Additionally, in 1996 goods and services, were sold by BodyBilt
to ErgoBilt for $76,555 in cash and services.
    

   
         Payment in February of 1997 for $229,350 from the net proceeds of the
Offering were used to pay certain obligations to Agrivest, Inc., a corporation
owned by Mark McMillan ("Agrivest"), for consulting services related to the
Merger and this offering.  During 1996 BodyBilt also paid Agrivest $103,300 for
management services and $5,000, for equipment rental.  Additionally, BodyBilt
purchased vehicles from Agrivest for $6,133 in 1996.
    

   
         In January 1996, BodyBilt entered into a revised Business Management
Contract with Agrivest, pursuant to which Agrivest provided accounting and
other administrative services. Agrivest received $5,000 a month for bookkeeping
and general administrative services and $150 an hour for chief executive
officer and chief financial officer services.  During the year ended December
31, 1996, BodyBilt paid Agrivest an aggregate of $60,000 pursuant to this
contract. This contract was terminated in February of 1997.
    

   
         During 1996 BodyBilt purchased $47,901 of furniture and fixtures and
building and leasehold improvements from Genemco, Inc., a corporation owned by
Mark McMillan.
    

   
         All of BodyBilt's loans from The First National Bank of Bryan are
guaranteed by Mark McMillan. The total amount of these loans was approximately
$2.0 million at December 31, 1996. Mr. McMillan has also guaranteed the
Company's obligations to Leggett & Platt, Inc.
    

   
         In February of 1997 the Company purchased 17,857 shares of common
stock each from Mark McMillan and Dr.  Troutman at a purchase price of $6.30
per share, which the Company delivered to the holder of the convertible note
upon conversion.
    

   
         In October 1996, the Company entered into a Consulting Services
Agreement with Mark McMillan, who became a director and a principal shareholder
of the Company, for a two-year term commencing on the closing of the Offering.
Mr.  McMillan will serve as a consultant to the Company with respect to the
Company's operations, particularly during the transition period. Mr. McMillan
will be compensated at the rate of $150 per hour. Mr. McMillan will be eligible
to participate in all Company bonus/incentive programs and stock option plans
and to receive benefits under all other Company employee benefit plans. The
Consulting Services Agreement includes a non-competition covenant by Mr.
McMillan during the term of the agreement and for three years thereafter.
    

   
         In connection with the execution and delivery of Mr. Smith's
Consulting Services Agreement, Gerald McMillan, Chairman of the Board of
Directors of the Company, sold and transferred 664,868 shares of Common Stock
to Mr. Smith in exchange for $31,040 in the form of a
    




                                      25
<PAGE>   28
   
promissory note bearing interest at 7.5%. Principal and interest accrued are
payable on June 27, 1999. Mr. Smith's payment obligation is secured by a pledge
of the transferred shares. The Smith Employment Agreement gives Dr. McMillan
and/or the Company the right to purchase varying amounts of such shares upon
the termination of his employment with the Company, based upon his length of
service.
    

   
         In 1989, BodyBilt borrowed $75,000 for working capital from Dr.
Richard Troutman, a principal shareholder of the Company.  The Company repaid
the loan in February of 1997.
    

   
         The foregoing transactions were among affiliated parties and
necessarily involved conflicts of interest. The Company believes that these
transactions were on no less favorable terms than were reasonably available
from unaffiliated third parties. Except as described above, all agreements
pursuant to which the transactions described above in "Certain Transactions"
were conducted were terminated on the effective date of the Merger.
    

   
         Although the Company has no present intention to do so, it may in the
future enter into other transactions incident to its business with its
directors, officers, prior shareholders and other affiliates. The Company's
policy is that any transaction in the future with an affiliated entity,
executive officer or director will be subject to review and approval by a
majority of the Company's directors who have no interest in the transaction and
will be on no less favorable terms than the Company could obtain from
unaffiliated parties.
    




                                      26
<PAGE>   29
   
                                    PART IV
    


   
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
    

   
         (a)     Exhibits.
    

   
                 See Exhibit Index beginning on page II-3 of this Form 10-K.
    

   
         (b)     Financial Statement Schedules
    

   
                 None
    

   
         (c)     Reports on Form 8-K.
    

   
                      On February 7, 1997, the Company filed a Current Report 
                 on Form 8-K to report under Items 2 and 7 the Company's
                 merger of BodyBilt Seating, Inc., a manufacturer of
                 premium-priced ergonomic office chairs since 1988.  BodyBilt
                 was merged into ErgoBilt's wholly owned subsidiary, EB
                 Subsidiary, Inc., which was formed for the purposes of the
                 merger.
    




                                      27
<PAGE>   30
                         INDEX TO FINANCIAL STATEMENTS


ERGOBILT, INC.


<TABLE>
<S>                                                                        <C>
Report of Independent Auditors                                              F-2

Balance Sheets as of December 31, 1995 and December 31, 1996                F-3

Statements of Income (Loss) for the Period ended December 31, 1995
   and the Year Ended December 31, 1996                                     F-4

Statements of Shareholders' Equity for the Period Ended December 31, 1995
   and the Year Ended December 31, 1996                                     F-5

Statements of Cash Flows for the Period Ended December 31, 1995 and the
   Year Ended December 31, 1996                                             F-6

Notes to Financial Statements                                               F-7

BODYBILT SEATING, INC.

Reports of Independent Auditors                                            F-11

Balance Sheets as of December 31, 1995 and 1996                            F-12

Statements of Income for the Years Ended December 31, 1994, 1995
   and 1996                                                                F-14

Statements of Shareholders' Equity for the Years Ended December 31, 1994,
   1995 and 1996                                                           F-15

Statements of Cash Flows for the Years Ended December 31, 1994,
   1995 and 1996                                                           F-16

Notes to Financial Statements                                              F-18
</TABLE>




                                      F-1


<PAGE>   31











                          INDEPENDENT AUDITORS' REPORT



The Board of Directors and Shareholders
ErgoBilt, Inc.:


We have audited the accompanying balance sheets of ErgoBilt, Inc., as of
December 31, 1995 and 1996, and the related statements of income (loss),
shareholders' equity, and cash flows for the period from June 12, 1995 to
December 31, 1995 and the year ended December 31, 1996.  These financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ErgoBilt, Inc. as of December
31, 1995 and 1996, and the results of its operations and its cash flows for the
period from June 12, 1995 to December 31, 1995 and the year ended December 31,
1996, in conformity with generally accepted accounting principles.



                                         KPMG PEAT MARWICK LLP


Dallas, Texas
March 21, 1997


                                      F-2


<PAGE>   32


                                 ERGOBILT, INC.

                                 Balance Sheets

                           December 31, 1995 and 1996


<TABLE>
<CAPTION>
                            Assets                                 1995         1996
                            ------                                 ----         ----
<S>                                                             <C>          <C>
Current assets:
 Cash                                                              $ 14,150     32,150
 Accounts receivable                                                 32,617     28,198
 Income taxes receivable                                                  -     28,374
 Deferred tax assets                                                  6,728     61,954
                                                                   --------  ---------
                    Total current assets                             53,495    150,676
                                                                   --------  ---------
Property and equipment:
 Furniture and fixtures                                               2,050     12,513
 Equipment                                                            9,205      9,455
 Computer equipment                                                  17,677     32,623
                                                                   --------  ---------
                                                                     28,932     54,591
 Less accumulated depreciation                                        2,380     10,387
                                                                   --------  ---------
                    Property and equipment, net                      26,552     44,204
                                                                   --------  ---------
Other assets:
 Shareholder receivable                                              39,313     48,325
 Offering and merger costs                                                -    661,453
 Deferred tax assets                                                      -     85,543
 Organizational cost, net                                               274        212
                                                                   --------  ---------
                    Total other assets                               39,587    795,533
                                                                   --------  ---------
                                                                   $119,634    990,413
                                                                   ========  =========

             Liabilities and Shareholders' Equity
             ------------------------------------

Current liabilities:
 Accounts payable                                                  $  4,217    692,490
 Accrued expenses                                                    51,604     65,174
 Income taxes                                                         9,894          -
 Notes payable                                                            -    500,000
                                                                   --------  ---------
                    Total current liabilities                        65,715  1,257,664
                                                                   --------  ---------
Deferred income taxes                                                 7,676          -
Shareholders' equity:
 Preferred stock, $.01 par value; 10,000,000 shares authorized            -          -
 Common stock, $.0001 par value; 20,000,000 shares authorized;
  2,770,285 shares issued and outstanding                               277        277
 Additional paid-in capital                                             723        823
 Retained earnings (deficit)                                         45,243   (268,351)
                                                                   --------  ---------
                    Total shareholders' equity                       46,243   (267,251)
Commitments and contingencies
                                                                   --------  ---------
                                                                   $119,634    990,413
                                                                   ========  =========
</TABLE>

See accompanying notes to financial statements.

                                      F-3


<PAGE>   33


                                 ERGOBILT, INC.

                          Statements of Income (Loss)

       For the period from June 12, 1995 (inception) to December 31, 1995
                    and for the year ended December 31, 1996



<TABLE>
<CAPTION>
                                                          1995       1996
                                                          ----       ----
<S>                                                   <C>          <C>
Sales                                                  $403,917      372,808
Cost of sales                                           107,009      154,217
                                                       --------     --------
            Gross profit                                296,908      218,591

Selling, general and administrative expenses            239,502      676,968
                                                       --------     --------
            Operating income (loss)                      57,406     (458,377)

Interest expense                                          1,321       13,556
                                                       --------     --------
            Income (loss) before income taxes            56,085     (471,933)

Income tax expense (benefit)                             10,842     (158,339)
                                                       --------     --------
            Net income (loss)                          $ 45,243     (313,594)
                                                       ========     ========
</TABLE>

See accompanying notes to financial statements.

                                      F-4


<PAGE>   34


                                 ERGOBILT, INC.

                       Statements of Shareholders' Equity

       For the period from June 12, 1995 (inception) to December 31, 1995
                    and for the year ended December 31, 1996



<TABLE>
<CAPTION>                                                                             
                                         Common stock    Additional  Retained
                                       ----------------   paid-in    earnings
                                       Shares    Amount   capital    (deficit)     Total
                                       ------    ------   -------    ---------     -----
<S>                                   <C>         <C>       <C>      <C>           <C>
Balance at June 12, 1995 (inception)  2,770,285   $277      723           -         1,000

Net income                                    -      -        -       45,243       45,243
                                      ---------   ----      ---      -------      -------

Balance at December 31, 1995          2,770,285    277      723       45,243       46,243

Issuance of stock warrants                    -      -      100            -          100

Net income (loss)                             -      -        -     (313,594)    (313,594)
                                      ---------   ----      ---     --------     --------
Balance at December 31, 1996          2,770,285   $277      823     (268,351)    (267,251)
                                      =========   ====      ===     ========     ========
</TABLE>

See accompanying notes to financial statements.

                                      F-5


<PAGE>   35


                                 ERGOBILT, INC.

                            Statements of Cash Flows

       For the period from June 12, 1995 (inception) to December 31, 1995
                    and for the year ended December 31, 1996



<TABLE>
<CAPTION>
                                                                 1995        1996
                                                                 ----        ----
<S>                                                          <C>           <C>
Cash flows from operating activities:
 Net income (loss)                                              $ 45,243   (313,594)
 Adjustment to reconcile net income to net cash provided by
  operating activities:
   Depreciation and amortization                                   2,416      8,487
   Loss on disposal of assets                                          -      2,370
   Deferred income taxes                                             948   (148,445)
 Changes in assets and liabilities:
   Accounts receivable                                           (32,617)     4,419
   Income taxes                                                    5,308    (38,268)
   Shareholder receivable                                        (39,313)    (9,012)
   Other noncurrent assets                                          (310)         -
   Accounts payable                                                4,217    688,273
   Accrued expenses                                               56,190     13,570
                                                                --------    -------
     Net cash provided by operating activities                    42,082    207,800
                                                                --------    -------
Cash flows from investing activities - purchase of property
 and equipment                                                   (28,932)   (28,447)
                                                                --------    -------
Cash flows from financing activities:
 Issuance of common stock and warrants                             1,000        100
 Proceeds from borrowings                                              -    500,000
 Offering and merger costs                                             -   (661,453)
                                                                --------    -------
     Net cash provided by (used in)
       financing activities                                        1,000   (161,353)
                                                                --------    -------
Net increase in cash                                              14,150     18,000
Cash at beginning of period                                            -     14,150
                                                                --------     ------
Cash at end of period                                           $ 14,150     32,150
                                                                ========     ======

Supplemental disclosure:
 Interest paid                                                  $  1,321          -
                                                                ========     ======
 Taxes paid                                                     $      -     28,374
                                                                ========     ======
</TABLE>

See accompanying notes to financial statements.

                                      F-6


<PAGE>   36


                                 ERGOBILT, INC.

                         Notes to Financial Statements

                           December 31, 1995 and 1996


(1)  Summary of Significant Accounting Policies

    (a)  Organization and Operations

         ErgoBilt, Inc. (the Company) was incorporated on June 12, 1995
         pursuant to the laws of the State of Texas as The Chafferton Company,
         Inc.  The Company is engaged in consulting services regarding design
         and advertising trade issues.  See discussion of the Company's merger
         and initial public offering in note 7.

    (b)  Revenue Recognition

         Revenue is recognized as consulting projects are completed as the
         projects are of short duration.

    (c)  Accounts Receivable

         The Company considers accounts receivable to be fully collectible;
         accordingly, no allowance for doubtful accounts is required.

    (d)  Income Taxes

         Deferred income taxes are determined using the asset and liability
         method, under which deferred tax assets and liabilities are determined
         based on differences between financial accounting and tax bases of
         assets and liabilities.  Valuation allowances are established when
         necessary to reduce deferred tax assets to the amount expected to be
         realized.  Income tax expense or benefit is the payable or refund for
         the period plus or minus the change during the period in deferred tax
         assets and liabilities.

    (e)  Property and Equipment

         Property and equipment are stated at cost and depreciated using the
         straight-line method over the estimated useful lives of the related
         equipment ranging from 5 to 7 years.  Maintenance and repairs are
         charged to operations when incurred.  Replacements and betterments are
         capitalized.

         Effective January 1, 1996, the Company adopted SFAS No. 121,
         Accounting for the Impairment of Long-Lived Assets and for Long-Lived
         Assets to Be Disposed Of.  Accordingly, in the event that facts and
         circumstances indicate that property and equipment and intangible or
         other assets, may be impaired, an evaluation of recoverability would
         be performed.  If an evaluation is required, the estimated future cash
         flows associated with the asset are compared to the asset's carrying
         amount to determine if a write-down to market value is necessary.
         Adoption of this statement did not have a material effect on the
         financial position or results of operations of the Company.

                                 F-7                     (Continued)


<PAGE>   37



                                 ERGOBILT, INC.
                         Notes to Financial Statements





    (f)  Organizational, Merger and Offering Costs

         Organizational costs are amortized over five years.  Offering and
         merger costs are deferred until the transaction is either completed or
         aborted.  Costs related to completed offerings are charged against the
         gross proceeds of the offering.  Costs related to completed mergers
         are included in the cost of the acquired enterprise.  Offering and
         merger costs related to aborted transactions are written off.

    (g)  Fair Market Value of Financial Instruments

         The carrying amount for cash, notes receivable and notes payable is
         not materially different than fair market value because of the short
         maturities of the instruments and/or their respective interest rates.

    (h)  Use of Estimates

         Management of the Company has made a number of estimates and
         assumptions relating to the reporting of assets and liabilities and
         the disclosure of contingent assets and liabilities to prepare these
         financial statements in conformity with generally accepted accounting
         principles.  Actual results could vary from the estimates that were
         used.

(2) Stock Option Plan

    The board of directors and shareholders of the Company have approved the
    ErgoBilt 1996 Stock Option Plan (the Stock Option Plan).  The Stock Option
    Plan authorizes the Company to award 400,000 shares of common stock to be
    used for incentive stock options and nonqualified stock options or
    restricted stock grants, of which no options have been granted at December
    31, 1996.

    As of January 1, 1996, SFAS No. 123, Accounting for Stock-Based
    Compensation, was effective for the Company.  SFAS No. 123 permits, but
    does not require, a fair value-based method of accounting for employee
    stock option plans which results in compensation expense recognition when
    stock options are granted.  As permitted by SFAS No. 123, the Company will
    provide pro forma disclosure of net income and earnings per share, as
    applicable, in the notes to the financial statements.

(3) Stock Split

    The Company affected a 2,770-for-1 stock split in January 1997.  The
    effects of the stock split have been retroactively applied to the financial
    statements.


(4) Related Party Transactions

    At December 31, 1995 and 1996, the Company had amounts due from the
    Company's chairman of $39,313 and $48,325, respectively.  The chairman of
    the Company is also the shareholder of

                                 F-8                         (Continued)


<PAGE>   38



                                 ERGOBILT, INC.
                         Notes to Financial Statements




    another company which provided services to the Company as a subcontractor
    and consultant during 1995.  The total expenses related to these services
    amounted to $49,034.

    The Company has had one primary customer since inception, BodyBilt Seating,
    Inc. (BodyBilt) which was partially owned (37.5%) by the brother of the
    Company's chairman during 1996.  During 1995 and 1996, BodyBilt accounted
    for 100% and 91% of the company's revenues, respectively.  At December 31,
    1995 and 1996, amounts due from BodyBilt comprised 100% of trade accounts
    receivable.  Additionally, the Company purchased $76,555 of goods and
    services from BodyBilt during 1996.  At December 31, 1996, the Company owed
    BodyBilt $73,155 related to these goods and services.

    During 1996, the Company incurred $206,100 of costs for consulting services
    related to the merger of the Company with BodyBilt.  These services were
    provided by another company that is wholly owned by the chairman's brother.

(5)  Income Taxes

    Deferred tax assets and liabilities as of December 31, 1995 and 1996 are as
    follows:

<TABLE>
<CAPTION>
                                                        1995      1996
                                                        ----      ----
<S>                                                 <C>         <C>
Deferred tax asset:
 Net operating loss carryforward
  (expiring in 2011)                                    $    -   95,130
 Differences from the use of cash basis reporting
  for federal income tax purposes                        6,728   64,440
                                                        ------   ------

    Total deferred tax assets                           $6,728  159,570
                                                        ======   ======
Total deferred tax liabilities, primarily from the
 use of statutory accelerated depreciation for
 federal income tax purposes                            $2,102   12,073
                                                        ======   ======

</TABLE>

    The components of income tax expense for the years ended December 31, 1995
    and 1996 are as follows:


<TABLE>
<CAPTION>
                                          1995           1996  
                                          ----           ----  
<S>                                   <C>            <C>       
Federal:                                                       
 Current                              $   7,622         (7,622)
 Deferred                                   729       (148,445)

State:                                                         
 Current                                  2,272         (2,272)
 Deferred                                   219           --   
                                      ---------      --------- 
                                      $  10,842       (158,339)
                                      =========      ========= 
</TABLE>


                                 F-9                         (Continued)


<PAGE>   39



                                 ERGOBILT, INC.
                         Notes to Financial Statements





    The Company's effective tax rate was approximately 34% in 1996 and
    approximately 19% in 1995 due to the graduated tax rates available to the
    Company.

    The Company did not record a valuation allowance for deferred tax assets at
    December 31, 1995 and 1996.  In assessing the realizability of deferred tax
    assets, management considers the carryback potential, the scheduled
    reversal of deferred tax assets and liabilities, future taxable income and
    tax planning strategies.  Management believes that it is more likely than
    not the Company will realize the benefits of these deductible differences.

(6)  Note Payable

    In September 1996, the Company obtained a $500,000 loan at an interest rate
    of 8% per annum which will mature on September 6, 1997.  In connection with
    the establishment of this borrowing, the Company's chairman sold and
    transferred 34,000 shares of common stock to the lender for an aggregate
    consideration of $34,000 and the Company issued a warrant to the lender to
    acquire up to 51,000 shares of common stock at an initial per share
    exercise price equal to 120% of the price to the public in the initial
    public offering of the Company.  The warrant is exercisable for a period of
    four years, commencing one year after the initial public offering of the
    company.  This note is secured by a personal guarantee of the Company's
    chairman.

(7)  Subsequent Events

    BodyBilt Seating, Inc. ("BodyBilt") was merged into a wholly-owned
    subsidiary of the Company on February 5, 1997.  As consideration for the
    merger, the shareholders of BodyBilt received $17.6 million payable in a
    combination of cash ($7.2 million), 780,630 shares of common stock of the
    Company valued at $5.46 million, and 705,085 shares of Series A Preferred
    Stock of the Company valued at $4.94 million, which was immediately
    converted into 705,085 shares of common stock.  On February 5, 1997 the
    Company closed its initial public offering for the sale of 1,700,000 shares
    of common stock at a price of $7 per share.  On March 18, 1997, the
    underwriters exercised their overallotment provision and issued an
    additional 100,000 shares of the Company's common stock at a price of $7
    per share.  On February 5, 1997 the Company issued to the underwriters
    warrants to purchase 170,000 shares of common stock at a price of 120% of
    the price to the public exercisable over a period of four years commencing
    one year from February 3, 1997.  The Company paid the loan referred to in
    note 6 by delivery of $266,889 in cash and 35,714 shares of common stock.


                                      F-10


<PAGE>   40















                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Shareholders
BodyBilt Seating, Inc.:


We have audited the accompanying balance sheets of BodyBilt Seating, Inc. as of
December 31, 1995 and 1996, and the related statements of income, shareholders'
equity and cash flows for the years then ended.  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 BodyBilt Seating, Inc. as of
December 31, 1995 and 1996, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.




                                        KPMG PEAT MARWICK LLP


Dallas, Texas
March 18, 1997

                                      F-11



<PAGE>   41




                             BODYBILT SEATING, INC.

                                 Balance Sheets

                           December 31, 1995 and 1996



<TABLE>
<CAPTION>
            Assets                          1995          1996
            ------                          ----          ----
<S>                                   <C>              <C>
Current assets:
 Cash                                   $   86,541         56,499
 Accounts receivable                     2,470,488      3,013,958
 Inventory                               1,456,248      1,696,250
 Prepaid expenses                          124,694        204,052
 Employee receivables                       17,787         14,920
 Shareholder receivable                       --            9,700
                                        ----------     ----------
     Total current assets                4,155,758      4,995,379
                                        ----------     ----------

Property, plant and equipment:
 Land                                        7,450          7,450
 Building and improvements                 945,611      1,324,082
 Furniture and fixtures                     65,377        148,176
 Equipment                                 383,916        591,974
 Vehicles                                  288,146        402,304
 Computer equipment                        217,517        493,452
                                        ----------     ----------
                                         1,908,017      2,967,438
 Less accumulated depreciation             254,804        541,957
                                        ----------     ----------
                                         1,653,213      2,425,481
                                        ----------     ----------

Other assets                                 2,573         66,089
                                        ----------     ----------
                                        $5,811,544      7,486,949
                                        ==========     ==========
</TABLE>

                                                           (Continued)

                                      F-12



<PAGE>   42




                             BODYBILT SEATING, INC.

                           Balance Sheets, Continued




<TABLE>
<CAPTION>
                 Liabilities and Shareholders' Equity              1995        1996
                 ------------------------------------              ----        ----
<S>                                                         <C>             <C>
Current liabilities:
 Current portion of long-term debt                              $  225,935    344,435
 Accounts payable                                                  668,290    378,518
 Taxes payable                                                     114,771    107,296
 Commissions payable                                               139,150    208,654
 Accrued expenses                                                  102,487    263,418
                                                                ----------  ---------
     Total current liabilities                                   1,250,633  1,302,321
                                                                ----------  ---------
Long-term debt:
 Notes payable, less current portion                             1,083,944  1,670,080
 Notes payable - shareholder                                        75,000     75,000
                                                                ----------  ---------
     Total long-term liabilities                                 1,158,944  1,745,080
                                                                ----------  ---------
Shareholders' equity:
 Common stock, no par value; authorized 500 shares; issued
  and outstanding - 200 shares                                       1,000      1,000
 Retained earnings                                               3,400,967  4,438,548
                                                                ----------  ---------
     Total shareholders' equity                                  3,401,967  4,439,548
Commitments and contingencies
                                                                ----------  ---------
                                                                $5,811,544  7,486,949
                                                                ==========  =========


</TABLE>

See accompanying notes to financial statements.

                                      F-13



<PAGE>   43




                             BODYBILT SEATING, INC.

                              Statements of Income

                  Years ended December 31, 1994, 1995 and 1996



<TABLE>
<CAPTION>
                                                 1994         1995         1996
                                                 ----         ----         ----
<S>                                           <C>          <C>          <C>
Sales                                         $9,188,830   13,672,349   17,578,210
Cost of sales                                  4,789,293    7,218,561    9,325,725
                                              ----------   ----------   ----------
    Gross profit                               4,399,537    6,453,788    8,252,485

Selling, general and administrative expenses   3,265,310    4,554,798    5,676,625
                                              ----------   ----------   ----------
    Operating income                           1,134,227    1,898,990    2,575,860
Interest expense                                 (30,155)     (56,910)    (139,433)
Other income (expense)                             6,385       37,111       (2,498)
                                              ----------   ----------   ----------
    Income before income taxes                 1,110,457    1,879,191    2,433,929

Income tax expense                                50,000       85,000       56,677
                                              ----------   ----------   ----------
    Net income                                $1,060,457    1,794,191    2,377,252
                                              ==========   ==========   ==========
</TABLE>

See accompanying notes to financial statements.

                                      F-14



<PAGE>   44




                             BODYBILT SEATING, INC.

                       Statements of Shareholders' Equity

                  Years ended December 31, 1994, 1995 and 1996



<TABLE>
<CAPTION>
                                           Common stock                      
                                           ------------               Retained
                                       Shares           Amount        earnings           Total
                                       ------           ------        --------           -----
<S>                                    <C>             <C>           <C>              <C>
Balances at December 31, 1993            200            $1,000        1,479,652        1,480,652

Distributions to shareholders             --                --         (333,333)        (333,333)

Net income                                --                --        1,060,457        1,060,457
                                         ---            ------       ----------       ----------

Balances at December 31, 1994            200             1,000        2,206,776        2,207,776

Distributions to shareholders             --                --         (600,000)        (600,000)
 
Net income                                --                --        1,794,191        1,794,191
                                         ---            ------       ----------       ----------

Balances at December 31, 1995            200             1,000        3,400,967        3,401,967

Distributions to shareholders             --                --       (1,339,671)      (1,339,671)

Net income                                --                --        2,377,252        2,377,252
                                         ---            ------       ----------       ----------

Balances at December 31, 1996            200            $1,000        4,438,548        4,439,548
                                         ===            ======       ==========       ==========
</TABLE>

See accompanying notes to financial statements.

                                      F-15



<PAGE>   45




                             BODYBILT SEATING, INC.

                            Statements of Cash Flows

                  Years ended December 31, 1994, 1995 and 1996


<TABLE>
<CAPTION>
                                                       1994          1995         1996
                                                       ----          ----         ----
<S>                                               <C>             <C>          <C>
Cash flows from operating activities:
 Net income                                          $1,060,457    1,794,191    2,377,252
 Adjustments to reconcile net income to net cash
  provided by operating activities:
   Depreciation and amortization                         75,926      134,098      292,300
   Bad debts                                              3,619       10,658       45,125
   Loss (gain) on sale or disposal of assets               (656)       6,178       56,964
   Barter transactions                                        -            -     (246,244)
 Change in assets and liabilities:
  Accounts receivable                                  (455,052)    (817,720)    (588,595)
  Inventory                                              50,580     (495,189)    (240,002)
  Prepaid expenses                                      (11,760)     (85,125)      34,492
  Employee and shareholder  receivables                  34,173       (2,623)      (6,833)
  Other assets                                           29,561        6,142      (25,491)
  Trade accounts payable                               (124,371)     387,533     (282,152)
  Accrued expenses                                       27,586       12,775      160,931
  Taxes payable                                          13,354       49,102       (7,475)
  Commissions payable                                      (417)     105,169       69,504
  Customer deposits                                     (19,574)           -            -
  Deferred revenue                                       51,031      (51,031)           -
                                                     -----------   ----------   ----------
      Net cash provided by operations                   734,457    1,054,158    1,639,776
                                                     -----------   ----------   ----------
Cash flows from investing activities:
 Purchase of property, plant and equipment             (632,358)    (917,577)    (950,739)
 Proceeds from sale of property, plant and
  equipment                                               3,397            -            -
                                                     -----------   ----------   ----------
      Net cash used in investing
        activities                                     (628,961)    (917,577)    (950,739)
                                                     -----------   ----------   ----------
Cash flows from financing activities:
 Proceeds from borrowings                             1,164,309    2,660,309    4,699,444
 Repayment of borrowings                               (920,447)  (2,140,422)  (4,078,852)
 Distributions to shareholders                         (333,333)    (600,000)  (1,339,671)
                                                     ----------    ---------   ----------

      Net cash used in financing
        activities                                      (89,471)     (80,113)    (719,079)
                                                     ----------    ---------   ---------
Net increase in cash                                     16,025       56,468      (30,042)
Cash at beginning of year                                14,048       30,073       86,541
                                                     ----------    ---------    ---------
Cash at end of year                                  $   30,073       86,541       56,499
                                                     ==========    ==========     =======


</TABLE>

                                                                     (Continued)

                                      F-16



<PAGE>   46




                             BODYBILT SEATING, INC.

                      Statements of Cash Flows, Continued




<TABLE>
<CAPTION>
                                                         1994     1995    1996
                                                         ----     ----    ----
<S>                                           <C>                <C>     <C>
Supplemental disclosure of noncash investing
 and financing activities:
  Purchase of equipment in exchange for
   notes payable                                        $     -       -   84,044
                                                        =======  ======  =======
  Sale of equipment in settlement of note
   payable                                              $     -  12,060        -
                                                        =======  ======  =======
Supplemental disclosures of cash flow
 information:
  Cash paid during the year for:
   Interest                                             $30,155  94,738  139,433
                                                        =======  ======  =======

  Federal income taxes                                  $     -       -        -
                                                        =======  ======  =======
</TABLE>

See accompanying notes to financial statements.


                                      F-17



<PAGE>   47


                             BODYBILT SEATING, INC.
                         Notes to Financial Statements
                        December 31, 1994, 1995 and 1996



(1)  Summary of Significant Accounting Policies

    (a)  Organization and Operations

         BodyBilt Seating, Inc. (the Company) (formerly the Chair Works, Inc.,
         Congleton Chair Works, Inc., and Lubbock Molasses, Inc.) was
         incorporated on November 22, 1982 pursuant to the laws of the State of
         Texas and elected to be treated as an S Corporation.  The Company is
         engaged in the manufacture and assembly of custom built ergonomic
         chairs for commercial, industrial, and residential use.  All of the
         Company's chairs are manufactured in a plant in Navasota, Texas, and
         are sold primarily to customers in Texas.

    (b)  Revenue Recognition

         The Company recognizes revenue at the time chairs are shipped to
         customers.

    (c)  Accounts Receivable

         Accounts receivable are stated net of all known uncollectible
         accounts.  The Company uses historical experience to determine an
         allowance for doubtful accounts.  At December 31, 1995 and 1996 it was
         determined that no allowance was necessary.  No single customer
         accounted for more than ten percent of the Company's sales during the
         years ended December 31, 1994, 1995 and 1996, and no account
         receivable from any customer exceeded ten percent of total accounts
         receivable at December 31, 1995 and 1996.

    (d)  Income Taxes

         No provision or benefit for federal income taxes has been included in
         these financial statements since taxable income or loss passes through
         to and is reported by the shareholders individually.  At December 31,
         1995 and 1996 the net difference between the tax bases and the amounts
         recorded of assets and liabilities was not significant.

    (e)  Inventories

         Inventories consist of the following:
<TABLE>
<CAPTION>
                                        1994       1995       1996   
                                        ----       ----       ----   
     <S>                              <C>        <C>        <C>      
     Raw materials                     $299,361    371,703    262,173
     Component parts                    435,698    757,795    883,504
     Finished goods, including demos    226,000    326,750    550,573
                                       --------  ---------  ---------
                                       $961,059  1,456,248  1,696,250
                                       ========  =========  =========

</TABLE>


                                F-18                          (Continued)


<PAGE>   48



                             BODYBILT SEATING, INC.
                         Notes to Financial Statements




         Inventory is stated at average cost for purchased parts and average
         cost plus allocated labor and overhead for parts manufactured by the
         Company.  All inventory is stated at the lower of cost or market
         value.  For the year ended December 31, 1996, the Company purchased
         25.1% of its inventory from one supplier.  This supplier is currently
         the only source of a key component of BodyBilt chairs.

    (f)  Property, Plant, and Equipment

         Property, plant and equipment are stated at cost and depreciated using
         the straight-line method of depreciation.  The assets are depreciated
         over the following estimated useful lives:


<TABLE>
<CAPTION>
                                                            Years
                                                            -----
                       <S>                                  <C>
                       Buildings and improvements             39
                       Furniture and fixtures                 10
                       Equipment                              10
                       Vehicles                                5
                       Computer equipment                      5
</TABLE>


         Effective January 1, 1996, the Company adopted SFAS 121, Accounting
         for the Impairment of Long-Lived Assets and for Long-Lived Assets to
         Be Disposed Of.  Accordingly, in the event that facts and
         circumstances indicate that property and equipment, and intangible or
         other non-current assets may be impaired, an evaluation of
         recoverability would be performed.  If an evaluation is required, the
         estimated future cash flows associated with the asset are compared to
         the asset's carrying amount to determine if a write-down to market
         value is necessary.  Adoption of this statement did not have a
         material effect on the financial position or results of operations of
         the Company.

    (g)  Fair Value of Financial Instruments

         The carrying amounts of accounts receivable, employee and shareholder
         receivables, other current assets, accounts payable and accrued
         expenses approximate fair value because of the short maturity of those
         instruments.  The estimated fair value of notes payable is equivalent
         to its carrying value due to the floating interest rate.

    (h)  Use of Estimates

         Management of the Company has made a number of estimates and
         assumptions relating to the reporting of assets and liabilities and
         the disclosure of contingent assets and liabilities to prepare these
         financial statements in conformity with generally accepted accounting
         principles.  Actual results could differ from those estimates.


                                      F-19
                                                                (Continued)

<PAGE>   49



                             BODYBILT SEATING, INC.
                         Notes to Financial Statements







(2)  Related Party Transactions

     The Company paid Agrivest, Inc. (Agrivest), a corporation wholly-owned by
     the Company's president and director, a management fee of $36,000 in 1994
     and 1995 and $60,000 in 1996 for accounting, payroll and other
     administrative services provided. The Company paid consulting fees to
     Agrivest for additional management services of $109,275, $192,900 and
     $103,300 during 1994, 1995 and 1996, respectively. The Company purchased
     vehicles from Agrivest for $6,133 in 1996. Additionally, the Company
     leased vehicles and equipment from Agrivest and paid rentals of $6,000,
     $2,000 and $5,000 during 1994, 1995 and 1996, respectively.

     The brother of the Company's president and director assisted in the
     development of the Company's promotional literature. During part of 1994,
     the Company employed this individual. During 1994, 1995 and 1996, payments
     of $119,036, $413,157 and $309,510, respectively, were made to companies
     owned by this individual, including ErgoBilt, Inc. (ErgoBilt), for
     promotional literature and marketing development. Additionally, goods and
     services, some of which were received through barter transactions, were
     sold to ErgoBilt for $76,555 in 1996. At December 31, 1996, receivables
     from this individual and ErgoBilt were $19,102 and $73,155, respectively.

     During 1994, the Company purchased $100,851 of furniture and fixtures,
     computer equipment and building improvements from a company owned by the
     Company's secretary/treasurer. During 1995 and 1996, the Company purchased
     $172,588 and $47,901, respectively, of furniture and fixtures and building
     and leasehold improvements from a company owned by the Company's president
     and director.

     The Company leased vehicles and paid rentals of $4,508 to a shareholder
     during 1994.

     Accounts payable to related parties were $60,834 and $28,198 at December
     31, 1995 and 1996, respectively.


(3)  Barter Transactions

     During the year ended December 31, 1996, BodyBilt recorded sales of
     $651,926 and selling, general and administrative expenses of $405,682
     related to agreements with various parties to exchange custom built
     ergonomic chairs for advertising and other goods and services. At December
     31, 1996, prepaid expenses, accounts payable, other assets and property,
     plant and equipment include $204,052, $19,561, $38,025 and $81,602,
     respectively related to barter transactions. The exchanges are recorded at
     the fair value of the chairs (prices to its customers).


                                      F-20
                                                                  (Continued)

<PAGE>   50



                             BODYBILT SEATING, INC.
                         Notes to Financial Statements





(4)  Notes Payable

     Notes payable at December 31, 1995 and 1996:

<TABLE>
                            Interest                       Balance at December 31,
                                                          --------------------------
       Payee                  rate            Maturity        1995          1996           Collateral
       -----                  ----            --------        ----          ----           ----------
<S>                   <C>                   <C>           <C>           <C>           <C>
First National Bank,  Prime rate of Texas   2000 (1)        $  610,000     1,350,000  Accounts               
 Bryan                Commerce Bank                                                   receivable,            
                      (8.25%)                                                         inventory, and life    
                                                                                      insurance policy (2)   

First National Bank,  Prime rate of First   2000               473,667       438,278  Property, plant and    
 Bryan                National Bank of                                                equipment and life     
                      Bryan + .75% (9.5%)                                             insurance policy (2)   
                                                                                                          
First National Bank,  Prime rate of         2000                76,850        60,950  Equipment (2)          
 Bryan                First National                                                                               
                      Bank of Bryan      
                      + .75% (9.5%)

First National Bank,  6.75% to 9.5%         1997 to 2001       149,362       165,287  Vehicles (2)           
 Bryan                                                                                                       

Richard Troutman,     0%                    2000 (3)            75,000        75,000  Company stock          
 Shareholder                                              ------------  ------------                         
                                                                                                             
                                                             1,384,879     2,089,515                         

Less amounts due                                               225,935       344,435                         
 within one year                                          ------------  ------------ 
                                                            $1,158,944     1,745,080 
                                                          ============  ============ 
                                                                                     
                                                                                     
</TABLE>

(1)  Repayment of the line of credit requires monthly interest payments
     beginning July 30, 1996 until June 30, 1997, at which time equal monthly
     principal installments and interest are required until June 30, 2002, the
     maturity date.  Effective June 30, 1996, the Company renewed its revolving
     loan agreement with a bank.  Under the terms of the agreement, the company
     may borrow up to $2,000,000, subject to a borrowing base limitation based
     on a percentage of eligible accounts receivable and qualified inventory.
     The revolving feature expires on June 30, 1997, at which time the
     revolving note payable converts to a term note with a final maturity date
     at June 30, 2000.  At December 31, 1995 and 1996 unused amounts available
     under the revolving loan agreement were $490,000 and $650,000,
     respectively.  The Company is required to pay a commitment fee of .5% per
     annum on the unused portion of the line of credit.

(2)  Personally guaranteed by Mark McMillan, president and director of the
     Company.

(3)  As the personal guarantees by Mark McMillan are reduced below $75,000,
     repayment in amounts equal to the reduction in personal guarantees will
     begin.


                                      F-21
                                                                 (Continued)

<PAGE>   51



                             BODYBILT SEATING, INC.
                         Notes to Financial Statements




    Note payable are subject to various restrictive and affirmative covenants.

    The principal portion of long-term debt outstanding at December 31, 1996
    and during the five years succeeding are as follows:


<TABLE>
<CAPTION>
Years ended December 31,
------------------------
<S>                                   <C>   
      1997                              $  344,435       
      1998                                 550,379       
      1999                                 529,505       
      2000                                 665,196       
                                        ----------       
                                        $2,089,515       
                                        ==========       
</TABLE>

(5)  Obligations Under Operating Leases

    The Company has operating leases for office space and vehicles.  Minimum
    annual rental commitments at December 31, 1996, all for office space, are
    as follows:


<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
<S>                                      <C>     
      1997                                $45,204
      1998                                  4,400
                                         --------
                                          $49,604
                                         ========
</TABLE>

    For the years ended December 31, 1994, 1995 and 1996, rent expense was
    $93,104, $69,619 and $88,462, respectively.  .

(6)  Commitments and Contingencies

    The Company is involved in various claims and legal actions arising in the
    ordinary course of business.  In the opinion of management, the ultimate
    disposition of these matters will not have a material adverse effect of the
    Company's financial position, results of operations, or liquidity.

(7)  Subsequent Events

    On February 5, 1997, the Company merged into a wholly-owned subsidiary of
    ErgoBilt contemporaneously with the closing of an offering of shares of
    common stock by ErgoBilt.  As consideration for the merger, the
    shareholders of the Company received $17.6 million payable in a combination
    of $7.2 million in cash, ErgoBilt common stock and ErgoBilt Series A
    Preferred stock.  The cash portion of the consideration was reduced by the
    distribution of approximately $4.4 million related to Subchapter S
    corporation earnings made to shareholders of the Company prior to the
    merger.





                                      F-22
<PAGE>   52





                                   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.


  ErgoBilt, Inc.                                  
------------------
  (Registrant)

   
 /s/ Gerard Smith                                Date   April 29, 1997          
-------------------------------------------             ----------------
Gerard Smith, President, Chief
Executive Officer and Director
    


                                    II-I
<PAGE>   53
                               SIGNATURES (CONT.)

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



   
 /s/ Gerald McMillan                               Date   April 29, 1997      
-------------------------------------------             ----------------
Gerald McMillan, Chairman of
the Board of Directors
    


   
 /s/ Gerard Smith                                  Date   April 29, 1997      
-------------------------------------------             ----------------
Gerard Smith, President, Chief
Executive Officer and Director
(Principal Executive Officer)
    


   
 /s/ P. Michael Sullivan                           Date   April 29, 1997
-------------------------------------------             ----------------
P. Michael Sullivan, Senior Vice
President and Chief Financial Officer
(Principal Financial and Accounting Officer)
    


   
 /s/ Drew Congleton                                Date   April 29, 1997      
-------------------------------------------             ----------------
Drew Congleton, Director
    


   
 /s/ Robert E. Faust                               Date   April 29, 1997      
-------------------------------------------             ----------------
Robert E. Faust, Director
    


   
 /s/ William Brown Glenn, Jr.                      Date   April 29, 1997      
-------------------------------------------             ----------------
William Brown Glenn, Jr., Director
    


   
 /s/ Mark McMillan                                 Date   April 29, 1997      
-------------------------------------------             ----------------
Mark McMillan, Director
    


   
 /s/ W. Barton Munro                               Date   April 29, 1997      
-------------------------------------------             ----------------
W. Barton Munro, Director
    


   
 /s/ William Weed                                  Date   April 29, 1997      
-------------------------------------------             ----------------
William Weed, Director
    





                                      II-2
<PAGE>   54

                               INDEX TO EXHIBITS


<TABLE>
<CAPTION>
Exhibit No.                                            Description
-----------                                            -----------
<S>              <C>
    --1(a)       Underwriting Agreement
   ***1(b)       Warrant Purchase Agreement
     *2          Agreement and Plan of Merger by and among ErgoBilt, Inc., EB Subsidiary, Inc., BodyBilt Seating, Inc.,
                 Mark A. McMillan, Dr. Richard Troutman and Drew Congleton dated August 19, 1996 (without schedules or
                 exhibits)
   **3(i)        Restated Articles of Incorporation
   **3(ii)       Amended and Restated Bylaws
   **4(a)        Text and Description of Graphics and Images Appearing on Certificate for Common Stock
   **4(b)        Form of Certificate of Designation of Series A Preferred Stock of ErgoBilt, Inc.
  ***5           Opinion of Wolin, Fuller, Ridley & Miller LLP
   **9           Voting Agreement among ErgoBilt, Inc. and the Shareholders named therein dated December 1, 1996
   *10(a)(1)     Loan Agreement between The First National Bank of Bryan and BodyBilt Seating, Inc. dated June 30, 1996,
                 and schedule of substantially similar agreements
   *10(a)(2)     Security Agreement between The First National Bank of Bryan and BodyBilt Seating, Inc. dated June 30,
                 1996, and schedule of substantially similar agreements
   *10(a)(3)     Third Party Pledge Agreement between The First National Bank of Bryan and Mark A. McMillan dated June
                 30, 1996, and schedule of substantially similar agreements
   *10(a)(4)     Guaranty in favor of The First National Bank of Bryan by Mark A. McMillan dated June 30, 1996, and
                 schedule of substantially similar agreements
   *10(a)(5)     Promissory Note in the original principal amount of $2,000,000 executed by BodyBilt Seating, Inc. in
                 favor of The First National Bank of Bryan dated June 30, 1996, and schedule of substantially similar
                 agreements
   *10(b)(1)     Agreement Among The First National Bank of Bryan, BodyBilt Seating, Inc. and Mark A. McMillan dated
                 June 15, 1995
   *10(c)(1)     Loan Agreement Among The First National Bank of Bryan, BodyBilt Seating, Inc. and Mark A. McMillan
                 dated May 26, 1994
   *10(c)(2)     Promissory Note in the original principal amount of $571,500 executed by BodyBilt Seating, Inc. in
                 favor of The First National Bank of Bryan dated May 26, 1994
   *10(c)(3)     Specific Guaranty in favor of The First National Bank of Bryan by Mark A. McMillan dated May 26, 1994
   *10(c)(4)     General Security Agreement Among The First National Bank of Bryan, BodyBilt Seating, Inc. and Mark A.
                 McMillan dated May 26, 1994
   *10(c)(5)     Modification and/or Extension Agreement Among The First National Bank of Bryan, BodyBilt Seating, Inc.
                 and Mark A. McMillan dated May 31, 1995
   *10(c)(6)     Third Party Pledge Agreement between The First National Bank of Bryan and Mark A. McMillan dated May
                 31, 1995
   *10(d)(1)     Common Stock and Warrant Purchase Agreement among ErgoBilt, Inc., Gerald McMillan, and Summit Partners
                 Management Co. dated September 6, 1996
</TABLE>





                                      II-3
<PAGE>   55
<TABLE>
  <S>            <C>
   *10(d)(2)     Registration Rights Agreement between ErgoBilt, Inc. and Summit Partners Management Co. dated September
                 6, 1996
   *10(d)(3)     Convertible Promissory Note in the original principal amount of $500,000 executed by ErgoBilt, Inc. in
                 favor of Summit Partners Management Co. dated September 6, 1996
   *10(d)(4)     Investment and Security Agreement among Gerald McMillan, ErgoBilt, Inc. and Summit Partners Management
                 Co. dated September 6, 1996
    *10(e)(1)    Universal Note Among The First National Bank of Bryan, BodyBilt Seating, Inc. and Mark A. McMillan
                 dated May 27, 1993, and schedule of substantially similar agreements
    *10(e)(2)    Security Agreement Among The First National Bank of Bryan, BodyBilt Seating, Inc. and Mark
                 A. McMillan dated May 27, 1993, and schedule of substantially similar agreements
    *10(e)(3)    Guaranty Among The First National Bank of Bryan, BodyBilt Seating, Inc. and Mark A. McMillan dated May
                 27, 1993, and schedule of substantially similar agreements
    *10(f)       Non-Recourse Promissory Note in the original principal amount of $75,000 executed by Lubbock Molasses,
                 Inc. in favor of Dr. Richard Troutman dated May 1, 1989
    *10(g)       Patent License Agreement Between Jerome J. Congleton and The Chair Works dated May 15, 1991
    *10(h)(1)    Award/Contract --GS-29F-0119C Between BodyBilt Seating, Inc. and General Services Administration (GSA)
    *10(h)(2)    Amendment of Solicitation/Modification of Contract --GS-29F-0119C Between BodyBilt Seating, Inc. and
                 General Services Administration (GSA)
   **10(i)(1)    Settlement Agreement among Jerome J. Congleton, Jaye Congleton, Rebecca Congleton Boenigk and Congleton
                 Ergonomic Chairs, Inc., Mark McMillan, Michael McWhorter, and Congleton Chair Works, Inc. (f/k/a
                 Lubbock Molasses, Inc., d/b/a Congleton Chair Works, Inc.), entered into May 1991
    *10(i)(2)    Settlement Agreement among BodyBilt Seating, Inc., Mark A. McMillan, Drew Congleton, Michael Jack, and
                 Galen Green, and Neutral Posture Ergonomics, Inc., Jerome J. Congleton, Jay Congleton and Rebecca
                 Congleton Boenigk, entered into January 1995
  **10(j)        Executive Employment Agreement between Drew Congleton and a corporation to be known as BodyBilt
                 Seating, Inc. dated December 19, 1996
    *10(k)       Consulting Agreement between Mark A. McMillan and ErgoBilt, Inc. dated October 15, 1996
    *10(l)       Consulting Services Agreement among ErgoBilt, Inc., Gerald McMillan and Gerard Smith dated July 2, 1996
  **10(m)        First Amended and Restated Executive Employment Agreement between ErgoBilt, Inc. and Gerard Smith dated
                 as of October 15, 1996
    *10(n)       IPO Consulting Services Agreement between ErgoBilt, Inc. and P. Michael Sullivan dated September 16,
                 1996
    *10(o)       Executive Employment Agreement between ErgoBilt, Inc. and P. Michael Sullivan dated September 16, 1996
    *10(p)       Business Management Contract Between BodyBilt Seating, Inc. and Agrivest, Inc., dated January 1, 1996
</TABLE>





                                      II-4
<PAGE>   56
<TABLE>
   <S>           <C>
    *10(q)       Consulting Agreement Between The Chafferton Company and BodyBilt Seating, Inc. dated August 1, 1994
    *10(r)       Conditional Release of Commission Between Gerald McMillan and BodyBilt Seating, Inc. dated May 23, 1996
    *10(s)       Memorandum of Understanding Regarding 1984 Pace Arrow Motor Home between Mark A. McMillan and Drew
                 Congleton dated December 1992
   **10(t)       Stock Option Plan
   **10(u)       Letter of Intent between Metamorphosis Design & Development, Inc. and ErgoBilt, Inc. dated  January 8,
                 1997
   **10(v)       Executive Employment Agreement between Gerald McMillan and ErgoBilt, Inc. dated
                 October 1, 1996
     10(w)       License Agreement between BodyBilt Seating, Inc. and Computer Translation Systems & Support, Inc.,
                 Lawrence West Melquiond and Jerold P. Lefler.
   **16          Letter of Thompson, Derrig & Slovacek PC
     21          Subsidiaries
     27          Financial Data Schedule
</TABLE>


*        Filed  on  October 16, 1996 as an exhibit of the Company's
         Registration Statement on Form S-1 (File No. 333- 14205) and
         incorporated by reference herein.

**       Filed  on  January 13, 1997 as an exhibit to Amendment No. 1 of the
         Company's Registration Statement on Form S- 1 (File No. 333-14205) and
         incorporated by reference herein.

***      Filed  on  January 28, 1997 as an exhibit to Amendment No. 2 of the
         Company's Registration Statement on Form S-1 (File No. 333-14205) and
         incorporated by reference herein.

--       Filed  on  January 30, 1997 as an exhibit to Amendment No. 3 of the
         Company's Registration Statement on Form S- 1 (File No. 333-14205) and
         incorporated by reference herein.





                                      II-5