<PAGE>
 
                      Securities and Exchange Commission
                            Washington, D.C. 20549


                                  FORM 10-KSB


                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the Fiscal Year Ended December 31, 1997


                          Commission File No. 0-28978


                            Amour Fiber Core, Inc.
                (Name of small business issuer in its charter)


             Washington                                 91-1705387
   (State or other jurisdiction of                   (I.R.S. Employer
    incorporation or organization)                Identification Number)


       1120 East Stevens, P.O. Box 42, Sultan, WA          98294
        (Address of principal executive offices)         (Zip Code)


       Issuer's Telephone Number:  (360) 793-0146


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

                                     None


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

                        Common Stock, without par value
                               (Title of Class)


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

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is contained in this form, and no disclosure will be
contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

     The issuer's revenues for the year ended December 31, 1997 were $200,446.

     The aggregate market value of the voting stock held by non-affiliates as of
March 20, 1997, computed based on the price of the most recent sale known to the
issuer, was $14,876,400.

     As of March 20, 1998, there were 3,220,011 shares of Common Stock of the
issuer outstanding.

     Documents Incorporated by Reference:  None

     Transitional Small Business Disclosure Format (Check one): Yes [_]   No [X]
<PAGE>
 
                                    PART I

Item 1.  Description of Business.

General

     Amour Fiber Core, Inc. (the "Company") was established to perform
reclamation manufacturing of commercial fiberglass products from molded
fiberglass wastes and outdated resin wastes. The Company's manufacturing
facility utilizes advanced reclamation techniques combined with a proprietary
process licensed from the Company's founder, William E. Amour, to reclaim
fiberglass waste products, obsolete fiberglass molded products and outdated or
excess fiberglass resins. These wastes are key ingredients in the production of
the Company's fiberglass products. The Company believes that its ability to
transform fiberglass wastes into viable commercial products will aid in
diverting millions of tons of refuse from landfill space and transform the
wastes into recycled products with commercial applications.

     The Company's predecessor, Amour Hydro Press, Inc. ("AHP"), was
established in March 1993.  AHP was formed for the commercial exploitation of
certain technology developed by Mr. Amour, pursuant to a license agreement.
During the period from March 1993 to January 1996 AHP continued the research,
development and testing of the proprietary process, established sources for raw
materials, developed and tested potential consumer, commercial and industrial
products, and began to establish a market for its products.  In January 1996 AHP
was merged into the Company.  In the merger, each share of AHP was converted
into 280 shares of the Company and the Company succeeded to the assets of AHP,
including the rights to the technology license from Mr. Amour.

     The technology for fiberglass reclamation manufacturing licensed by the
Company has been developed, tested in certain applications and placed into
limited commercial production. The products currently manufactured and marketed
by the Company include standard products such as picnic tables, park benches,
bumper stops and railroad ties, as well as specialized products, such as a dock
fendering system to protect ferryboats during docking.  Although the Company has
the capability to produce custom products, it is the present intent of the
Company to limit its product development and production capacity to standard
products which potentially represent a volume market. Currently, the Company
produces only standard products.

      In addition to revenues generated by the sale of such products, the
Company receives income for accepting certain raw materials utilized in the
manufacturing process.  The cost of raw materials is usually a major factor in
the cost of manufacturing a product; in the Company's business, procurement of a
significant segment of its raw material generates revenue, rather than causing
it to incur expense.

     The capacity of the Company's production line depends upon the products
being manufactured.  The approximate current production capacity per hour for
the various products is: 4 eight foot planks, 8 bumper stops, 2 park bench
sections, 2 table sections, 2 railroad ties, or 32 

                                       2
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feet of fendering units.

     The Company's recycling production process includes a series of procedures.
First, fiberglass waste materials are fed into a grinder/shredder apparatus and
chopped to smaller pieces, then put through a patented conditioner machine,
which brings the product to a fiber material about 1-1/2" to 1-3/4" long and
cleans the material as it is placed in a mixer/extruder. The resulting material
is then blended with resins and catalysts, which mixes the resin and fiber
material together. During the blending process, coloring dyes are added to meet
customer color requirements. Using molds, the blended material is pressed into
the final product form and set for curing. The Company's process is designed to
produce products utilizing only recycled materials. In the event that suitable
recycled materials are in limited supply, however, the process will accept new
resins as feedstock.

     If sufficient suitable recyclable materials are available, the Company is
not required to purchase any raw materials for its basic manufacturing process.
To date the Company has not been required to purchase basic raw materials to
manufacture products, with the exception of coloring pigment to meet the special
order color requirements of  customers. Typically,  the additional cost
associated with the color pigment is passed on to the customer in the sales
price.  Should the Company be unable to obtain adequate recyclable materials the
Company can utilize virgin raw materials. Virgin raw materials are available
from many local and national fiberglass and resin suppliers, which are generally
the same suppliers that provide fiberglass and resin to the boat, aircraft, and
automotive manufacturing industries and general commercial product manufacturing
industries throughout the United States and Canada.

     During November 1996 the Company announced its site on the World Wide Web,
located at http://www.amour.com.  The site provides internet users with on-line
access to the Company's products, general information about fiberglass
recycling, publicly available documents, including filings under the Securities
Exchange Act of 1934, and other information.  The Company's e-mail address is:
info@amourfiber.com.

Fiberglass Recycling

     Fiberglass is the common name for fiber reinforced plastic.  Fiberglass is
used to produce a wide range of  industrial and consumer products. Virtually all
fiber reinforced plastics are thermoset plastics and contain a blend of resins.
Thermoset plastics differ from thermoplastics and the more basic polymers
plastics in that they can not be simply reprocessed or recycled into the
original resins and then reused.  The difference can be illustrated by
comparison with the standard plastic soft drink bottle.  The plastic bottle can
easily be recycled into its original resin form and used to remold a new plastic
bottle.  However, fiberglass can not be recycled into its original resin form.
Accordingly, most of the world's fiberglass is not recycled and is discarded
into landfills. Since fiberglass manufacturing produces substantial post-
manufacturing wastes, substantial amounts of  fiberglass waste are deposited
into landfills.

                                       3
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Product Lines

     The Company manufactures benches, maritime decking, ferry dock fendering
systems, boat dock fendering systems, general planking, seawall planking, marine
log booms, picnic tables, parking stops and barriers.  The Company has also
developed a fiberglass based railroad tie which is presently in evaluation usage
with the Burlington Northern Railroad; however, the testing and certification
process for railroad ties may take several years. The Company is also in the
testing and evaluation process for a new product, a marine piling, which would
be used to anchor docks, piers and similar structures in marine environments.
The Company believes that its marine pilings, when fully developed and tested,
will be superior to existing piling products due to their resistance to the
corrosive effect of seawater and the Company's pilings' resistance to such
corrosive effects. These products are currently being tested by Franki Canada
Limited, the Canadian subsidiary of Franki, a major European marine construction
company, pursuant to a letter agreement with the Company.

     In general, fiberglass products are resistant to rupture, elasticity,
compression, moisture, dry rot, marine bores, and shrinkage and swelling, as
well as fire, extremely low temperatures and severe fluctuations in
temperatures, abrasion, ultraviolet deterioration and screw pull-out. The
following is a general description of the Company's products:

     Tables, Benches and Parking Stops. The Company produces and sells two
     ---------------------------------                                    
standard picnic tables, principally for park and campground applications. The
picnic table structure consists of five standard planks, one for each side bench
and three for the top of the table, all bolted to two leg units. The suggested
retail prices are $480 for the 6-foot table and $580 for the 8-foot table. The
Company also manufactures a standard bench which includes three standard planks
bolted to two leg units. The suggested retail price is $366 for the 6 foot
length and $426 for the 8 foot length. The suggested retail price for parking
stops is $27 for the 6 foot length.

     General Planks, Marine Decking and Seawalls.  The Company produces two
     --------------------------------------------                          
standard planks and can produce custom ordered planks.  The standard planks are
2 x 10 x 6 ft and 2 x 10 x 8 ft.  The suggested retail price of these planks is
$5.25 per linear foot.  Applications and potential applications for these planks
include exterior decking, dock decking, seawall construction, and other
construction uses.

     Railroad Ties.  The Company has developed a fiberglass railroad tie which
     -------------                                                      
is presently under performance testing at Burlington Northern Railroad Company.
A Canadian rail company has also placed a order for a trial set of railroad ties
for operational and performance testing. The suggested retail price for a
railroad tie, for usage in the United States, is $68 to $165, depending upon
design requirements. Due to regulatory and other considerations, the testing and
certification process for railroad ties may take several years.

     Dock Fendering Systems.  The Company has developed a fendering system to
     ----------------------                                                  
protect stationary and floating docks from damage that commonly occurs during
ship and ferry docking activities.  The Company's product attaches to the dock's
structure, absorbing energy and dissipating heat generated when the hull of a
large vessel impacts the dock structure.  A ferry

                                       4
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system in the Pacific Northwest has placed a limited production order for this
product. The suggested retail price for all fendering system products, including
dock, vessel, and bridge units, is $35 per linear foot, with stainless steel
fixtures, and $24.50 per linear foot, with plated fixtures.

     Vessel Fendering Systems.  The Company has developed a fendering system to
     ------------------------                                                  
protect large vessels from hull damage that sometimes occurs during docking. The
Company's product attaches to the ship, absorbing energy and dissipating the
heat generated when the hull of a large vessel strikes the dock structure. A
ferry system in the Pacific Northwest has shown interest in this product.
Management of the Company believes the product has potential application on many
ferry boats, tug boats, tender ships and floating docks.

     Bridge Fendering Systems.  The Company has developed a fendering system to
     ------------------------                                                  
protect bridge support columns from damage that occurs during storm surges and
winter thaw run-offs.  The support columns of bridges that cross washes, gorges,
streams and rivers encounter rocks, ice, tree limbs, logs, tree trunks and many
other types of debris.  These items often collide with the bridge's support
columns, causing structural damage and fatigue. The Company's product attaches
to the support column, absorbing energy and diverting the debris away from the
support column.

     Revenues By Product Type.  The percentage of revenues attributable to each
     ------------------------                                                  
of the Company's product types varies from month to month; however, for the year
ended December 31, 1997 the approximate percentages, were: Tables and Benches-
40%; Parking Stops-20%; General Planks-30%; and Marine Decking-10%.

New Products

     Marine Pilings. The Company has developed a new product, a marine piling,
     --------------                                                           
which would be used to anchor docks, piers and similar structures in marine
environments. The Company believes that its marine pilings, when fully developed
and tested, will be superior to existing piling products due to their resistance
to the corrosive effects of seawater and their ability to withstand various
other conditions associated with dock and pier applications. The Company's
marine pilings are in the testing and evaluation process, and are currently
being tested by a major international marine construction company.

     Substitute Marble Products. The Company has produced, on a test basis, a
     --------------------------                                              
number of marble substitute products, utilizing the trademark "Amourable". These
marble substitutes are available in a multitude of colors, with the benefit of
being resistant to salt air and general weathering, insensitive to wide
variation in temperature and immune to breaking or shattering on impact. The
marble substitutes may be suitable for a variety of construction and interior
design applications, including building exteriors and facades, countertops and
floorings. Also, the Company has adapted the product for the funeral industry,
for use as burial headstones and supporting headstone bases.

                                       5
<PAGE>
 
Markets

     The market for the Company's products consists of a diverse array of
fiberglass products used by businesses and consumers. The Company has developed
an initial catalogue of products and intends to expand and revise the product
list in response to demand and production economics. By utilizing recycled
materials in its manufacturing process, the Company has a potential cost
advantage over other manufacturers of fiberglass products. Management believes
this cost advantage will benefit the Company in marketing and sales of its
products.

     The Company has established its own marketing and sales organization and
markets its products to both consumer and commercial customers.  The Company
presently has one employee in the marketing and sales organization; in addition,
the Company's President devotes a significant portion of his time to marketing
and sales.  The Company also has one outside commissioned sales representative.
Marketing efforts are targeted by product type and customer; for example, the
Company sends direct mail pieces relating to its picnic benches and parking
stops to public agencies, park and recreation districts, private campgrounds and
the like, and advertises in trade journals directed to these types of potential
customers.  The Company's current sales and marketing literature consists
principally of product specification sheets.  The Company has limited experience
in the marketing and selling of recycled fiberglass products and has only a
small sales staff.  There can be no assurance that the Company will be capable
of successfully developing its own sales organization, or that it will be able
to enter into arrangements with others on acceptable terms, if at all.  The
Company's sales organization competes with other companies that currently have
experienced and well-funded marketing and sales organizations.  To the extent
that the Company enter into marketing and sales arrangements with third parties,
any revenues to be received by the Company will be dependent on the efforts of
others, and there can be no assurance that such efforts will be successful.  No
single customer accounts for more than 48% of the Company's sales; the Company's
largest customer during fiscal 1997 was Amrepro, Inc. The Company generally does
not have ongoing contracts for the sale of it products, but sells its products
through standard purchase orders.

     The Company also operates in the disposal market, competing for discarded
fiberglass material. disposal market is a market created by the cost to
fiberglass manufacturers of disposing of manufacturing wastes and outdated
resins in approved landfills. The Company collects fees from manufacturers who
need to dispose of outdated resins and fiberglass wastes. The Company markets
its ability to accept fiberglass wastes through direct sales contact with
fiberglass manufacturers, including mailings, sales calls and advertising in
trade magazines.

Regulatory Matters

     The Company has applied for and received certification from regulatory
agencies, including the State of Washington Department of Ecology and the US
Environmental Protection Agency, to accept certain wastes, including molded
fiberglass, resins and related materials.  The Company's manufacturing process
and facilities require no additional environmental clearances, other than
compliance with the standard regulations and rules which are applicable to US
manufacturers of fiberglass products.

                                       6
<PAGE>
 
     Actions by Federal, state and local governments concerning environmental
matters could result in laws or regulations that could increase the costs of
producing the products manufactured by the Company or otherwise adversely affect
demand for its products. The Company does not currently anticipate any material
adverse effect on its operations, financial conditions or competitive position
as a result of its efforts to comply with environmental requirements. Some risk
of environmental liability is inherent in the nature of the Company's business
and there can be no assurance that material environmental liabilities will not
arise. It is also possible that future developments in environmental regulations
could lead to material environmental compliance or cleanup costs. If the Company
were to lose its certification to accept fiberglass wastes, it would be
necessary to use new resins in the manufacturing process, which could reduce the
Company's cost advantage.

     In compliance with the general intent of Federal and local environmental
regulations as they apply to the disposal of outdated resins and fiberglass
wastes, some suppliers of recyclable materials require approval or certification
of the Company as one of their "authorized" recipients prior to utilization of
the Company's services.  In conjunction with these procedural requirements, the
Company has received certification from the Boeing Company and the United States
Navy that the Company's process is approved and the Company is authorized as a
recipient of outdated resins and fiberglass wastes.  This approval by The Boeing
Company and the US Navy is important because both parties provide outdated
resins and fiberglass wastes to the Company.  Although these are important
suppliers, the Company estimates they represent less than 5% of the Company's
potential supply sources within North America.

     The Company's products are required to meet material regulations by various
federal, state, and local government agencies and the performance standards or
requirements of its various customers.  As an example, vehicle bumper stops and
railroad ties are required to meet standards and guidelines established by the
US Department of Transportation. Additionally, many customers request samples
for testing of the products prior to committing the Company's product to open
purchase order procurement.  The Company has actively supported potential
customers in the testing and evaluation of each product and anticipates the
continuation of this procedure as the Company expands its customer base and
introduces new products.

Raw Material Supplies

     At present, most outdated resins, fiberglass wastes, sledges and other
similar types of fiberglass waste materials generated in the United States are
transported to authorized landfills. Land use restrictions, permitting delays
and construction moratoriums continue to limit the availability of authorized
landfills. In Western Washington, where the Company's facilities are located,
the typical cost to a manufacturer to dispose of fiberglass wastes in an
approved landfill is from $90 to $140 per ton, plus shipping costs. The disposal
fee for resin wastes in an approved landfill is typically $250 to $350 per 55
gallon drum, plus shipping costs. The Company believes these costs are
representative of the disposal costs in other parts of the United States. The
goal of the Company is to expand its manufacturing capacity to support the
processing of a significant percentage of the outdated resins and tons of molded
fiberglass wastes which are shipped to landfills. The Company accepts resins and
fiberglass waste materials from

                                       7
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established suppliers, including the US Navy, The Boeing Company, various boat
manufactures and general fiberglass manufacturers. The Company anticipates that
adequate fiberglass wastes and related materials can be obtained from domestic
sources. Should these sources prove to be inadequate the Company can purchase
new materials to supplement any deficiency.

     The processing fees charged by the Company are $50 per 55 gallon drum for
disposal of resins and an average processing fee of $60 per ton for molded
fiberglass wastes.  As the Company expands production of the manufacturing
plant, it is anticipated the Company will receive more income from the
processing fees charged to the manufacturers who utilize the Company's recycling
services. The Company has been in full production of its products for less than
two years and has only recently begun phasing in charging all of its customers
fees to accept fiberglass wastes. The Company principally receives fiberglass
wastes from local sources, such as The Boeing Company and the US Navy.

Process Sublicensing

     Domestic Distribution and Sublicensing. In July 1997 the Company entered
     --------------------------------------                                  
into an Exclusive Distribution Agreement with Amrepro, Inc. by which it granted
worldwide distribution rights to its railroad tie and guardrail products. The
Exclusive Distribution Agreement is for a period of ten years, with one
automatic extension of ten years. To date, the Company has not sold any products
under the Exclusive Distribution Agreement, but has delivered sample products
for testing and evaluation.. At the same time, the Company entered into a
License Agreement and Production Equipment Sales Agreement with AFC California,
Inc., an affiliate of Amrepro, Inc., by which it granted a worldwide exclusive
sublicense of its technology for certain applications, and agreed to sell the
licensee certain production equipment. The License Agreement calls for payment
of an initial license fee of $250,000, as well as royalties of 5% of the
adjusted gross receipts of the licensee from sales of products covered by the
License Agreement. The License Agreement is for a period of ten years; however,
the sublicensee may extend the agreement for an additional payment of $250,000.
To date, the Company has received only $60,000 of the initial license fee, and
has received no royalties. Amrepro, Inc. and AFC California, Inc. are affiliates
of Glenn L. Gearhart, who owns approximately 12% of the outstanding Common Stock
of the Company.

     In August 1997 the Company entered into a separate License Agreement with
Amrepro, Inc., by which it  granted a worldwide exclusive sublicense of its
technology for applications in the manufacture of  products with quartz,
quartzite and other rock base compounds. The License Agreement calls for payment
of an initial license fee of $250,000, as well as royalties of 5% of the
adjusted gross receipts of the licensee from sales of products covered by the
License Agreement. The License Agreement is for a period of ten years; however,
the sublicensee may extend the agreement for an additional payment of
$250,000.To date, the Company has  received only $50,000 of  the initial license
fee, and has received no royalties.

     In April 1998 the Company cancelled  both License Agreements and the
Exclusive Distribution Agreement for nonpayment, by notice to Amrepro, Inc. and
AFC California, Inc.

                                       8
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     Foreign Sublicensing. The Company believes that licensing its technology to
     --------------------                                                       
businesses in foreign countries can be an effective method to maximize the
return of its investment in the research and development of its fiberglass
recycling technology, without significant additional capital outlays.
Additionally, such licensing activities increase the Company's public visibility
and general awareness of its technology. For these reasons the Company offers
the opportunity for foreign businesses to acquire sublicenses to the Company's
technology. In general, the Company offers a multi-year sublicense to the
technology and provides the training and equipment to produce the Company's
products for a fee. The licensee is required to pay in full for the sub-license,
equipment and training prior to delivery and pay a royalty fee to the Company on
each item produced by the licensee. If the wholesale price of the licensee's
produced products are significantly below the production costs of products
produced by the Company, the Company may also offer to purchase product from the
licensees for resale in the US.

     The Company has entered into negotiations to license the construction of a
manufacturing plant in Melbourne, Australia under the name of Australia Fiber
Core Ltd. The Company has shipped sample products to the potential licensee, and
its prospective customers have begun testing the products for construction and
architectural applications. The Company's marine piling products have been a
major focus of such testing in Australia, including the use of a 5,000 pound
pile driving hammer to drive a six by six inch square piling five meters into
shale rock with only the blunt flat end as the entering surface. Preliminary
market research has indicated Australia has adequate supplies of fiberglass
wastes and outdated resins to support a plant.

     In addition to the Australian activities, the Company has entered into
negotiations to license the construction of a manufacturing plant in Canada.
Also, during January 1996, the Company entered into a Manufacturing Plant
Purchase and Licensing Agreement with the China Fiber Core Group, a company
based in Hong Kong.  Under the terms of the agreement the licensee has agreed to
purchase a non-exclusive sub-license to the Company's recycling technology and
certain fiber core manufacturing equipment for the production of standard fiber
core planks for 10 years, for a price of $1,724,500, which includes the license
fee of $250,000, and a royalty fee of 5% of gross sales price of all products
sold by the licensee which are based on the licensed process.  The royalty fee
is waived as to all products which are sold to the Company.  The licensee has
advised the Company that it plans to establish joint ventures with one or more
businesses in mainland China as part of the implementation of the license.
Without cost to the Company, the agreement grants the licensee time and the
opportunity to obtain government approvals, operating permits, import/export
permits, and perform other preparatory activities. Implementation of the
agreement is conditional upon the licensee providing payment in full for the
license and equipment, and royalties as they are received by the licensee. Upon
implementation of the agreement and the satisfaction of additional conditions,
including maintaining growth of its operations, it has the opportunity to obtain
exclusive marketing rights to mainland China. The license and the royalty
agreement is dependent upon the licensee placing the initial order for the
equipment; the order has not yet been placed, and the Agreement does not specify
a date for the order.  The Company is committed to deliver the plant equipment,
support installation and provide training upon receipt of full payment of the
purchase price.  The Company is not providing any financing for the China plant
and will not own any equity interest in the Licensee or the China plant.  As
provided in the License Agreement, construction of the

                                       9
<PAGE>
 
equipment will only begin upon receipt of the license fee plus an amount equal
to 70% of the purchase price of the equipment. The Licensee intends to operate
the China plant as a private enterprise business. Although the Licensee will not
be a government owned business, as a condition of operation, various licenses
and permits are required to operate a business in China, and to import equipment
and export products. The Company has no assurance that the Licensee will be able
to successfully complete the tasks required to proceed with purchase, or that
the resulting costs and fees will allow the Licensee to economically produce the
licensed products.

Research and Development

     Since its inception, the Company and its predecessor have devoted
significant resources to the development and refinement of the proprietary
fiberglass reclamation process licensed by William E. Amour.  Since that process
has been substantially completed, the Company's development efforts have been
targeted toward making the manufacturing process more efficient, principally
through the design of the production line, and toward application engineering in
response to customer requests and comments.  The costs of research and
development activities are internally funded; during the fiscal year ended
December 31, 1997, research and development expenditures, including associated
deferred compensation, were approximately $114,513.

Competition

     The Company competes worldwide with a variety of manufacturers of wood,
plastic, concrete and fiberglass products, including many large industrial
corporations with resources significantly greater than those of the Company. The
Company is marketing its products throughout North America and is preparing to
expand into international markets.

     The Company is aware of many experimental fiberglass recycling projects and
a few prototype or development stage commercial fiberglass recycling companies.
Most of these competitors utilize a process which grinds the fiberglass into a
fine powder and feeds the powder into the fluid being sprayed under pressure
onto fiberglass molds.  The Company is not aware  of any fiberglass recycling
companies which utilize any process similar to the proprietary utilized by the
Company; however, it is possible that others are in the early stages of
developing other fiberglass recycling technologies.  The Company believes that
the patents held by Mr. Amour and licensed to it will be sufficient to prevent
any potential competitors from utilizing any process similar to that used by the
Company.

     The Company competes with new fiberglass products based upon price.  New
fiberglass products are manufactured with new resins and new glass fibers, which
add raw material costs to the wholesale price of the product.  Manufacturing of
the Company's product does not incur the same raw materials costs and,
therefore, to the extent the Company utilizes recyclable resins and fiberglass
wastes, the Company's products may have a sales price advantage.  There are a
number of businesses that make or could make fiberglass tables, benches and
other products.  In general, these businesses must purchase raw materials to
manufacture their products, and therefore have higher costs of goods sold.

                                       10
<PAGE>
 
     The Company faces competition for its table and bench products from
national and local hardware stores and building supply centers such as Home
Depot, Builders Square and several mass merchandisers, such as Sears, K-Mart and
Target.  These companies generally sell wood picnic tables and benches, and also
sell lumber and tools for their construction.

     Like other fiberglass products, the Company's products are typically sold
at a price higher than similar wood products; however like other fiberglass
products, the Company's products have strong resistance to moisture, dry rot and
surface damage.  They also present features of higher strength and durability.
The Company believes these long term benefits off set the higher price.

     The Company's products are similar in cost to new and recycled plastic
products. The advantages which the Company's products have over plastic is
higher modulus of rupture and elasticity, higher compression allowance, higher
density and better structural integrity.

     The Company believes that its fiberglass railroad tie and marine pilings
are unique products. The Company is aware of competitors that supply wood and
concrete railroad ties and marine pilings but is unaware of any competitors in
the development and production of fiberglass railroad ties or marine pilings. To
date no quantity production orders have been received for the railroad tie
product or marine pilings.

     The Company faces competition for its railroad ties from many wholesale
lumber mills in the Pacific Northwest which provide the nation's railroads with
lumber for ties.  Two of the major suppliers are Weyerhaeuser  and Burlington
Resources. The market for marine pilings is dominated by local manufacturers of
wood and concrete products.

Patents

     The Company has entered into a license agreement with William E. Amour, its
President, by which it acquired exclusive rights to the proprietary process for
the manufacture of products from reclaimed fiberglass.  Mr. Amour holds patents
issued by the United States Patent Office and the Australian Patent Office
covering the technology.

     Under the terms of the license agreement the Company owns the exclusive
right to utilize the proprietary process developed by Mr. Amour with the right
to sub-license the process. Subject to the continued utilization of the
proprietary process by the Company, the license will be for the term of the
patent.

     The Company's success will depend upon its ability to preserve its trade
secrets, prevent third parties from infringing upon its proprietary rights, and
operate without infringing upon the proprietary rights of others, both in the
United States and internationally. Litigation may be necessary to defend against
or assert such claims of infringement, to enforce the Company's patent license,
to protect trade secrets or know-how owned by the Company, or to determine the
scope and validity of the proprietary rights of others. Such litigation or
interference proceedings could result in substantial costs to and diversion of
effort by, and may have a material adverse impact on, the Company. In addition,
there can be no assurance that these efforts by the

                                       11
<PAGE>
 
Company would be successful. Furthermore, there can be no assurance that the
Company would prevail in any legal action seeking damages or injunctive relief
for infringement of the patent.

Employees

     The Company employs four full time employees and three part-time employees.
The Company anticipates sufficient qualified employees will be available to
fulfill its future staffing needs.  None of the Company's present employees are
subject to collective bargaining agreements.  The Company believes that
relations with its employees are excellent.

Item 2.  Description of Property.

     The Company's office, manufacturing and warehouse facilities are leased and
located in Sultan, Washington, approximately 25 miles east of Everett,
Washington. The total facilities include 190,200 square feet, of which 14,500
square feet is under roof. Management believes the Company's facilities will
provide adequate space for the office, warehouse, reclamation processing and
manufacturing plant through the next few years and that suitable additional
space is available to accommodate planned expansion.

Item 3.  Legal Proceedings.

     The Company is not a party to any material legal proceedings.

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

     Inapplicable


                                    PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.

     There is no active market for the Company's Common Stock. As of March 27,
1998 there were approximately 850 shareholders of record. The Company has never
paid any cash dividends.

Item 6.  Management's Discussion and Analysis or Plan of Operation.

     General.   The Company continues to develop new products while attempting
     -------                                                                  
to increase the marketing of its existing product lines. Many of the new
products require extensive certification and testing by potential customers and
government agencies before they can be produced or sold in commercial
quantities, so revenues from these products have been insignificant, while
associated expenses have been high. In addition, the Company has been actively
attempting to license its technology in an effort to minimize the capital
investment that would be necessary to develop new applications or to produce in
commercial quantities.

                                       12
<PAGE>
 
     As of December 31, 1997, the Company had an accumulated deficit of
$1,808,625. It can be expected that the future operating results will continue
to be subject to many of the problems, expenses, delays and risks inherent in
the establishment of a new business enterprise, many of which the Company cannot
control.

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

     The Company's operating results may vary significantly due to a variety of
factors including changing customers profiles, the availability and cost of raw
materials, the introduction of new products by the Company or its competitors,
the timing of the Company's advertising and promotional campaigns, pricing
pressures, general economic and industry conditions that affect customer demand,
and other factors.

     Results of Operations (Year Ended December 31, 1997 Compared to Year Ended
     --------------------------------------------------------------------------
December 31, 1996)  The Company realized net revenues from the sale of products
-----------------                                                               
and licensing fees during 1997 of  $200,446, a 1,759% increase over such
revenues during 1996. Revenues from the sale of products were approximately
$15,800 of this amount, with the balance represented by initial licensing fees.
The increase in revenues was principally due to the licensing fees during 1997,
as well as greater acceptance of the Company's standard products, increased
marketing efforts, and improvements in production capacity. However, almost 80%
of the Company's revenues were from licensing fees from Amrepro, Inc. and its
affiliates, and the Company does not anticipate receiving additional income,
either in the form of licensing fees or royalties, from these sources.

     Revenues from disposal fees were $24,700, an increase of 12% over 1996. The
Company began charging disposal fees during 1996.

     Costs of goods sold decreased slightly, but general and administrative
expenses increased by 227%, due to increased marketing efforts and costs
associated with licensing efforts and testing and evaluation of the Company's
products.

                                       13
<PAGE>
 
     Liquidity and Capital Resources.  On December 31, 1997, the Company had
     -------------------------------                                        
cash on hand of  $5,234.  The principal source of liquidity has been sales of
securities and licensing fees. Management anticipates that additional capital
will be required to finance the Company's operations. The Company believes that
expected cash flow plus the anticipated proceeds from sales of securities and
initial licensing fees will be sufficient to finance the Company's operations at
currently anticipated levels for a period of at least twelve months. However,
there can be no assurance that the Company will not encounter unforeseen
difficulties that may deplete its capital resources more rapidly than
anticipated.

Item 7.  Financial Statements


                         INDEPENDENT AUDITOR'S REPORT


The Board of Directors
Amour Fiber Core Inc.
Sultan, Washington

     I have audited the accompanying balance sheets of Amour Fiber Core, Inc. (a
development stage company) as of December 31, 1997 and December 31, 1996, and
the related statements of income, changes in shareholders' equity and cash flow
for each of the two years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statement based on my audit.

     I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statement is 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.
I believe that my audit provides a reasonable basis for my opinion.

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

     Cumulative totals from inception, March 1993 to December 31, 1997, have
been added to certain financial statements. I have not audited these totals.
They are the responsibility of the Company's management.

     The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As reflected in the accompanying
financial statements, the

                                       14
<PAGE>
 
Company is a development stage company without significant operating revenues
and has suffered recurring losses from operations and has an accumulated
deficit. As discussed in note no. 9 to the financial statements, the current
losses and the Company's working capital shortage indicates that there is
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are described in note no. 9. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

Robert T. Taylor, CPA
Bothell, Washington

April 15, 1998

                                       15
<PAGE>
 
                            AMOUR FIBER CORE, INC.
                         (A DEVELOPMENT STAGE COMPANY)

                                 BALANCE SHEET
                                 December 31,

<TABLE> 
<CAPTION> 
ASSETS                                                   1997          1996
                                                     -----------   -----------
<S>                                                  <C>           <C>
Current Assets:
  Cash                                               $     5,234   $    15,303
  Receivables, Net:
    Trade                                                  1,804         1,303
  Inventory                                               10,643         8,699
                                                     -----------   -----------
                   Total Current Assets                   17,681        25,305
                                                     -----------   -----------
  Machinery and Equipment:
    Exchanged for Capital Stock                           22,765        22,765
    Purchased, at cost                                   323,359       234,151
    Self-constructed, at cost                            240,667       194,994
  Accumulated Depreciation                              (115,287)      (77,333)
                                                     -----------   -----------
                                                         480,504       374,577
                                                     -----------   -----------
  Organization Costs, net of amortization of $600          2,400         3,000
                                                     -----------   -----------
                   Total Assets                      $   500,585   $   402,882
                                                     ===========   ===========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities:
  Accounts and taxes payable                         $    18,881   $    55,672
  Customer Deposits                                       22,200            00
                                                     -----------   -----------
                                                          41,081        55,672
                                                     -----------   -----------

Other Liabilities:
  Shareholder Loans                                           00        41,185
  Deferred Wages                                          74,346        74,346
                                                     -----------   -----------
                                                          74,346       115,531
                                                     -----------   -----------
                   Total Liabilities                     115,427       171,203
                                                     -----------   -----------

Stockholders' Equity:
  Common Stock, authorized 5,000,000 shares; no par
  value; 3,234,604 shares issued and outstanding       2,193,783     1,493,028
  Deficit accumulated during development stages       (1,808,625)   (1,261,349) 
                                                     -----------   -----------
                   Total Stockholders' Equity            385,158       231,679
                                                     -----------   -----------
                   Total Liabilities & Stock Equity  $   500,585   $   402,882
                                                     ===========   =========== 
</TABLE> 


          See Accountant's Report and Notes to Financial Statements.

                                      16
<PAGE>
 
                            AMOUR FIBER CORE, INC.
                         (A DEVELOPMENT STAGE COMPANY)

                              STATEMENT OF INCOME

                  YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
 UNAUDITED CUMULATIVE TOTALS FROM INCEPTION MARCH, 1993, TO DECEMBER 31, 1997


<TABLE> 
<CAPTION> 
                                         Years Ended December 31
                                         -----------------------
                                            1997         1996       Cumulative
                                         ----------   ----------   ------------
<S>                                      <C>          <C>          <C> 
Revenues
    Licensing Fee Sales                  $ 160,000                 $   160,000
    Sales                                   15,774    $   9,406         45,163
    Disposal Fees                           24,672        1,987         30,776
                                         ---------    ---------    -----------
                  Total                    200,446       11,393        235,939
                                         ---------    ---------    -----------

Cost and Expenses
    Research and development costs         114,513      174,449        620,257
    Costs of goods sold                     22,476       28,730        112,192
                                         ---------    ---------    -----------
                  Total                    136,989      203,179        732,449
                                         ---------    ---------    -----------

Gross income (loss)                         63,457     (191,786)      (496,510)
General & Administrative Expenses          610,733      267,993      1,312,115
                                         ---------    ---------    -----------
Net Loss                                 $(547,276)   $(459,779)   $(1,808,625)
                                         =========    =========    ===========

Loss per Common Share                    $   (0.17)   $   (0.13)
</TABLE> 


          See Accountant's Report and Notes to Financial Statements.


                                      17
<PAGE>
 
                            AMOUR FIBER CORE, INC.
                         (A DEVELOPMENT STAGE COMPANY)

                 STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

                    YEARS ENDED DECEMBER 31, 1997 AND 1996


<TABLE> 
<CAPTION> 
                                                           Deficit
                                                         Accumulated
                                   Common                During the
                                   Stock                 Development
                                   Shares      Amount       Stage       Total
                                  ---------  ----------  -----------  ---------
<S>                               <C>        <C>         <C>          <C> 
Balances 12/31/95 (per share)     3,257,960  $  818,400  $  (801,570) $  16,830
                                                                     
Issuance of common stock for                                         
  cash (2.50)                         8,600      21,500            0     21,500
                                                                     
Issuance of common stock for                                         
  consulting services (2.50)         12,100      30,250            0     30,250
                                                                     
Issuance of common stock for                                         
  debt and labor (2.50)             247,659     619,148            0    619,148
                                                                     
Issuance of common stock for                                         
  equipment (2.50)                    1,492       3,730            0      3,730
                                                                     
Net Income (Loss)                         0           0     (459,779)  (459,759)
                                  ---------  ----------  -----------  ---------
Balances 12/31/96                 3,527,811  $1,493,028  $(1,261,349) $ 231,679
                                  ---------  ----------  -----------  ---------
                                                                     
Issuance of common stock for                                         
  cash (6.00)                        96,976  $  581,853  $         0  $ 581,853
                                                                     
Issuance of common stock for                                         
  consulting services (6.00)         20,650     123,900            0    123,900

Repurchase of common stock (6.00)      (833)     (4,998)           0     (4,998)

Share converted from old price
  (2.50) to new price (6.00)
  (Decrease in share count)        (410,000)          0            0          0

Net Income (Loss)                         0           0     (547,276)  (547,276)
                                  ---------  ----------  -----------  ---------
Balances 12/31/97                 3,234,604  $2,193,783  $(1,808,625) $ 385,158
                                  =========  ==========  ===========  =========
</TABLE> 



          See Accountant's Report and Notes to Financial Statements.


                                      18
<PAGE>
 
                            AMOUR FIBER CORE, INC.
                         (A DEVELOPMENT STAGE COMPANY)
                            STATEMENT OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
 UNAUDITED CUMULATIVE TOTALS FROM INCEPTION MARCH, 1993, TO DECEMBER 31, 1997

<TABLE> 
<CAPTION> 
                                                      Years Ended December 31
                                                       1997            1996         Cumulative
                                                    ----------      ----------     ------------
<S>                                                 <C>             <C>            <C>  
Cash flow from operating activities:
    Net Loss                                        $(547,276)      $(459,779)     $(1,808,625)
                                                    ---------       ---------      -----------
Adjustments to reconcile net loss:
    Deferred compensation - officers                        0          23,346          139,346
    Depreciation and amortization                      38,554          27,064          115,887
    Changes in:
       Stock exchanges for services                   123,900          30,540          174,440
       Customer Deposits                               22,200               0           19,200
       Accounts Receivable                               (501)          4,374           (1,804)
       Inventory                                       (1,944)         18,922          (10,643)
       Accounts payable                               (36,791)         21,523           22,081
                                                    ---------       ---------      -----------
    Total Adjustments                                 145,418         125,769          458,507
                                                    ---------       ---------      -----------
    Net cash used by operating activities            (401,858)       (334,010)      (1,350,118)
                                                    ---------       ---------      -----------
Cash flow from investing activities:
    Capital Expenditures                             (143,881)       (151,188)        (573,026)
    Change in employee receivables                          0           7,565                0
                                                    ---------       ---------      -----------
    Net cash used by investing activities            (143,881)       (143,623)        (573,026)
                                                    ---------       ---------      -----------
    Cash flow from financing activities:
       Proceeds from issuance of capital
        stock, net of stock repurchased               576,855          21,500        1,377,720
Change in shareholder loans                           (41,185)        467,261          550,658
                                                    ---------       ---------      -----------
Net cash provided by financing activities             535,670         488,761        1,928,378
                                                    ---------       ---------      -----------
Net change in cash                                    (10,069)         11,128            5,234
Cash at beginning of year                              15,303           4,175                0
                                                    ---------       ---------      -----------
Cash at end of year                                     5,234          15,303            5,234
                                                    =========       =========      ===========

Supplemental schedule of non-cash investing and financing activities:

Exchanged for capital stock:
    Shareholder debt                                        0         618,858           618,858
    Equipment                                               0           3,730            22,765
    Services                                          123,900          30,540           154,440
</TABLE> 

          See Accountant's Report and Notes to Financial Statements.

                                      19
          
<PAGE>
 
                             AMOUR FIBER CORE INC.
                         (A Development Stage Company)
                         NOTES TO FINANCIAL STATEMENTS

1.  Company Operations

          The Company manufactures commercial fiberglass products by recycling
molded fiberglass wastes and resin wastes through a proprietary process. The
Company and its predecessor, Amour Hydro Press, Inc., (AHP) have expended
several years of research, development and testing the proprietary processes in
order to achieve regulatory and customer approval of the products. The Company
has begun commercial sales of its products.

          The Company was incorporated December 27, 1995. On of January 20, 1996
the Company merged with AHP. AHP, the predecessor company, was incorporated
March 12, 1993. Under the terms of the merger each issued and outstanding share
of AHP common stock was exchanged for 280 shares of common stock in the Company
and all assets, liabilities, and accumulated deficit of AHP were accepted and
transferred to the Company.

          The Company remains subject to the risks common to development stage
companies and the additional risks of the entry into a new fiberglass recycling
industry.

2.  Significant accounting policies

          Consolidation: The financial statements include the Company and its
predecessor company.  Intercompany accounts and transactions are eliminated.

          Inventories: Inventories are stated at the lower of cost (first-in,
first-out basis) or market.

          Property and Equipment: Property and equipment is stated at cost and
is depreciated on a straight-line basis over estimated useful lives. Equipment
under capital lease is stated at the present value of the minimum lease payments
at the inception of the lease. Such equipment and leasehold improvements are
amortized over their estimated useful lives or the life of the lease, whichever
is shorter.

          Revenue Recognition- The Company recognizes revenue when products are
shipped or license agreements are paid for by licensees.

          Share Data- All share data and per share data have been retroactively
reflected in the accompanying consolidated financial statements for the effect
of the mergers and the exchange of AHP common shares for the Company's common
shares.

          Estimates- The preparation of financial statements in conformity with
generally

                                       20
<PAGE>
 
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could differ from those estimates.

          Income Taxes- Income taxes currently due are computed on taxable
income. Deferred income taxes are computed at current rates on timing
differences between book income and tax return income, due principally to
depreciation differences.

3.  Related Parties and Deferred Wages

          William and Barbara Amour own approximately 43.3% of the Company's
outstanding Common Stock and are both directors and officers of the company.

          Mr. Amour has deferred receipt of compensation since November 1, 1994.
As of December 31, 1997, the total amount of such deferred compensation was
$23,612, after exchanging $65,000 due for 26,000 shares of capital stock. Mrs.
Barbara Amour has deferred receipt of compensation since November 1, 1994. As of
December 31, 1997 , the total amount of such deferred compensation was
$50,734.Commencing April 1, 1996, their salaries are being paid on a current
basis and both have agreed to postpone payment of the deferred compensation
until the Company is able to repay the debt without a significant impact on the
operation of the Company. In the future the Company may begin payment of
compensation to Mr. Peterson and Mr. Knuckey, but there are no current
arrangements for such compensation.

          Between January 1, 1996 and June 28, 1996, Mr. Amour and Mrs. Amour
loaned $300,000 to the Company, all of which was convertible into common stock.
On June 29, 1996, Mr. Amour and Mrs. Amour converted the loan and received
120,000 shares of common stock. In 1995 Gerald Rau loaned the Company $44,550.
The terms of the loan are 9% interest per year, all due March 31, 1997.

          Between July 15, 1996 and November 1, 1996, Mr. Amour and Mrs. Amour
loaned $200,000 to the Company, all of which was convertible into common stock.
The terms of the loan are 9% interest per year. Mr. Amour and Mrs. Amour
converted the $500,000 loan to 200,000 shares on common stock on November 13,
1996.

          The Company has entered into a royalty-free license agreement with Mr.
William Amour, President of the Company. The license agreement grants the
Company the exclusive world wide rights to the proprietary process for the
manufacture of products from reclaimed fiberglass and to sub-license the process
to other manufacturers.

4.  Litigation

          On June 7, 1995, William E. Amour and Amour Hydro-Press, Inc. ("AHP")
the Company's predecessor, received notice of a hearing to address the subject
of a pending

                                       21
<PAGE>
 
administrative proceeding brought by the Securities Administrator of the State
of Washington, In The Matter of William E. Amour and Amour Hydro-Press,
Inc.(Case No. 95-06-0032). The Statement of Charges alleges that Mr. Amour and
AHP failed to disclose material information about AHP in the offer and sale of
its shares, during the period from May 1993 to June 7, 1995, failed to register
the offer and sale of shares under the securities laws of the State of
Washington, and that Mr. Amour failed to register as a broker-dealer. The
purpose of the hearing is to determine whether an order should be issued
requiring Mr. Amour and AHP to cease and desist from the sale of AHP shares in
the State of Washington without registration of the securities or an exemption
therefrom. In response to the hearing notice, AHP and Mr. Amour provided the
regulatory agency with all records and documents requested. The hearing was
postponed by the agency and has not been rescheduled. In addition to cooperating
with the regulatory agency upon receipt of the notice, AHP then delivered to the
purchasing shareholders information about AHP, extended the right to ask
questions and receive answers from the officers and directors of the Company,
and extended them the right to observe and review the plant and the
manufacturing process. AHP also offered each purchasing shareholder the right to
rescind the purchase of their shares and receive back the amount paid by them.
Twenty-four shareholders elected to accept the offer to rescind their purchase,
with respect to a total of 443 shares, amounting to $88,600, all of which has
since been remitted to them. The recession offer expired November 1995. The
administrative proceeding is still pending, but does not affect the merger
between AHP and the Company.

5.  Commitments

          The Company rents its facilities on a month to month basis at a rental
of $4,307 monthly. Total rent expense was $60,772 for 1997, including back rent
paid.

6.  Earnings Per Share

          Earnings per share calculations are based upon the actual number of
shares outstanding at the end of each period. There were 3,234,604 shares
outstanding at December 31, 1997; 3,527,811 shares outstanding at December 31,
1996.

7.  Basis for Non Cash Transactions

          The basis for each issuance of shares of common stock in non cash
transactions was the market value of the service or trade at the time provided
as determined by the Board of Directors and the prevailing value of restricted
shares at the time of the transaction.

8.  Inventory Cost Basis

          The Company's composition of inventory during 1996 and 1997 was
oriented to inventory utilized in research and development activities rather
than production related inventory. Additionally, raw material inventory of
fiberglass and resins was being provided to the Company, without costs, from
various fiberglass manufacturers. Being a no-cost item, the inventory does not
show a value item on the books of the Company. The Company anticipates

                                       22
<PAGE>
 
as production volume increases the inventory composition will change, however
most raw material inventory will tend to be a revenue item rather than a cost
item. As of December 31, 1997 the Company had finished product inventory of
$2,712 and raw materials on hand, at cost, of $7,931.

9.  Going Concern

          The Company is in the development stage and has devoted substantially
all its efforts to research, development and testing of the products. Until such
time as product sales generate sufficient cash flow to fund working capital
requirements, the Company plans to finance its operations primarily through the
proceeds of sales of securities. The Company will require substantial additional
funds to complete its production facilities. Without such funding, the Company
may be required to delay, reduce the scope of, or eliminate some of its proposed
product introductions. As there is no assurance that the Company will be able to
raise additional funds on acceptable terms, these conditions raise doubts about
the Company's ability to continue as a going concern. The financial statements
do not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classifications
of liabilities that might result from the inability of the Company to continue
as a going concern.

          In the opinion of the Company's management, the Company has adequate
sources of raw material supplies and markets both for its current products as
well as a number of new products currently being developed.

10.  Stock Option Plan

          Pursuant to a Stock Option Plan adopted by the Company on August 20,
1996 the Company granted options to purchase shares of common stock in the
Company to employees and Directors. With the exception of the Director's options
which vested immediately, all options vest at a rate of 20% after 12 month
employment and 20% on each employee's anniversary date thereafter. The option
exercise price is $2.50. The vested options as of August 20, 1997 represent a
total of 76,110 shares.

          The 1997 Stock Option Plan was adopted on May 20, 1997 by the Board of
Directors of the Company, granting options to certain officers and directors of
the Company, at an exercise price of $6.00 per share. The maximum number of
shares is 600,000. As of December 31, 1997, none of these options have been
exercised.

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

          Not applicable.

                                       23
<PAGE>
 
                                   PART III



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

     See Item 11 for information on beneficial ownership of the Company's
securities.

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



     Name                  Age     Position
     ----                  ---     ---------

     William E. Amour       63     Chairman of the Board of Directors, President
     Barbara J. Amour       48     Director and Secretary and Treasurer
     Robert L. Knuckey      63     Director, Vice President
     Gerald Rau             71     Director
     C. A. Tony Peterson    54     Director, Chief Financial Officer
     John Laible            55     Director


     William E. Amour is the founder of the Company and has been its President
and Chief Executive Officer and Chairman of the Board since its incorporation in
1995. Mr. Amour was also the founder and Chief Executive Officer of Amour Hydro
Press, Inc. since its incorporation in 1993. From 1988 to 1993 Mr. Amour owned
and operated B & A Hydraulics, which engineered, designed, built and serviced
hydraulic machines.

     Barbara J. Amour is a co-founder of the Company and has been its Secretary
and Treasurer and a member of the Board since its incorporation in 1995. Mrs.
Amour was also a co-founder and Secretary and Treasurer of Amour Hydro Press,
Inc. since its incorporation in 1993. From 1986 to 1993 Mrs. Amour was employed
in both managerial and administrative staff positions at Payless Drug, Sprouse,
and Pay n' Save. Mrs. Amour is the spouse of William E. Amour.

     Robert L. Knuckey has been a Director and Vice President of the Company
since 1995. Mr. Knuckey was also a Director and Vice President of Amour Hydro
Press, Inc. From 1958 to 1984 Mr. Knuckey owned and operated R.K. Glazing, Inc.,
a commercial glass and glazing company, and from 1986 to 1992 he was also an
owner of Barmon & Knuckey Lumber. Mr. Knuckey also served on the Board of
Directors of Northshore First Mutual Bank.

     Gerald Rau has been a Director of the Company since its inception in 1995.
Mr. Rau was also a Director of Amour Hydro Press, Inc.  From 1955 to 1986 Mr.
Rau was employed with the Boeing Company.  Since 1986 Mr. Rau has been a self-
employed financial consultant and advisor.

     C. A. Tony Peterson has been a Director and Chief Financial Officer of the
Company since its inception in 1995.  Mr. Peterson was also a Director and Chief
Financial Officer of Amour Hydro Press, Inc.  Mr. Peterson has been employed by
US National Mortgage Corporation as a loan officer since 1988.

                                       24
<PAGE>
 
     John C. Laible has been a director of the Company since January 1998. He is
the President of JCL Accounting and Tax Services, Inc., and is an Enrolled Agent
eligible to practice before the Internal Revenue Service. He has served on the
Board of Directors of Bellevue Square Merchants= Association and was owner and
President of Kirkland Parkplace Cinema, a sixplex family movie theater. He
served for 30 years with the U.S. Navy and the Naval Reserves, and retired as a
Captain from the Naval Reserves in 1993.

     The term of office of each director is one year or until his successor is
elected at the Company's annual meeting.  Each officer is appointed by the Board
of Directors and serves at the pleasure of the Board.  Members of the Board of
Directors receive $100 for their attendance at each Board meeting.

     In December 1995 the Company entered into a two year employment agreement
with William E. Amour, under which he is required to devote at least 75% of his
productive time to the Company. The agreement calls for salary to Mr. Amour of
$6,000 per month. The Company extended the term of the agreement for 24
additional months at the same monthly rate in December 1997.

Item 10.  Executive Compensation.

     The aggregate annual remuneration, during the fiscal year ending December
31, 1997, of the three highest paid persons who are officers or directors was as
follows:


<TABLE> 
<CAPTION> 

                                  Capacities in which             Aggregate
     Name of Individual         remuneration was received        remuneration
     ------------------         -------------------------        ------------
     <S>                        <C>                              <C>
     William E. Amour           President                           $63,692
     C. A. Tony Peterson        Chief Financial Officer              10,008
     Robert L. Knuckey          Vice President                         -0-
     Barbara Amour              Secretary/Treasurer                  31,261
</TABLE> 

     The Company entered into an Employment Agreement with Mr. William E. Amour
in December of 1995. The term of this agreement was two years, and the Company
extended it for an additional two years in December 1997. Mr. Amour deferred
receipt of compensation between November 1, 1994.and April 1, 1996. As of
December 31, 1997, the total amount of such deferred compensation was $31,920.
Mrs. Barbara Amour deferred receipt of compensation between November 1, 1994.and
April 1, 1996. As of December 31, 1997, the total amount of such deferred
compensation was $54,887.

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

     The following table sets forth ownership information as of December 31,
1997 with 

                                       25
<PAGE>
 
respect to all officers and directors and promoters, and each shareholder who
beneficially owns more than 5% of the outstanding shares:

<TABLE> 
<CAPTION> 


                                       Number       Percent
     Name of Owner                    of Shares      Owned
     -------------                    ---------     -------
     <S>                              <C>           <C> 
     Mr. William E. Amour             1,399,802        43.3%
     and Mrs. Barbara J. Amour
     1120 E. Stevens
     Sultan, WA 98294

     Robert L. Knuckey                    7,920          .2%
     1120 E. Stevens
     Sultan, WA 98294

     Gerald Rau                          57,120         1.8%
     1120 E. Stevens
     Sultan, WA 98294

     C. A. Tony Peterson                    280          *
     1120 E. Stevens
     Sultan, WA 98294

     Henry Chapman                      280,000         8.7%
     P.O. Box 157
     Menlow, WA 98561

     Gearhart Family Trust              400,000        12.4%
     7222 Seaworthy Drive
     Huntington Beach, CA 92648
</TABLE> 

Item 13.  Certain Relationships and Related Transactions.

     During 1996 Mr. Amour and Mrs. Amour converted a total of $410,300 in
loans to the Company into Common Stock at the rate of $2.50 per share and
received 164,120 shares of common stock.

     The Company has entered into a royalty-free license agreement with William
E. Amour, President of the Company.  The license agreement grants the Company
the exclusive worldwide rights to the proprietary process for the manufacture
of products from reclaimed fiberglass and to sub-license the process to other
manufacturers.

     On August 20, 1996 the Company established a stock option plan for
employees and directors, and issued fully vested options to purchase 25,000
shares of Common Stock in the Company to each of the following members of the
Board of Directors: Robert L. Knuckey; C. A. 

                                       26
<PAGE>
 
Tony Peterson; and Gerald Rau, at an exercise price of $2.50 per share. Under
the plan, additional options to purchase a total of 5,500 shares of common stock
at a price of $2.50 per share were issued to employees, of which 230 options
were vested as of August 23, 1996.

Item 13.  Exhibits and Reports on Form 8-K

     Exhibit 27    Financial Data Schedule


                                   SIGNATURES

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


               Amour Fiber Core, Inc.

               By: /S/ WILLIAM E. AMOUR                       Date:  May 4, 1998
                  ---------------------                        
                  William E. Amour, President


               By: /S/ C.A. TONY PETERSON                     Date:  May 4, 1998
                  -----------------------                        
                  C.A. Tony Peterson, Chief Financial Officer



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



Signature                                  Title                       Date
---------                                  -----                       ----  
                                                                    
(1) Principal Executive Officer                                     
                                                                    
/S/ WILLIAM E. AMOUR                       President and a           May 4, 1998
--------------------                       Director                          
William E. Amour                                                    
                                                                    
(2) Principal Financial and Accounting                              
    Officer                                                         
                                                                    
/S/ TONY PETERSON                          Chief Financial Officer   May 4, 1998
-----------------  
C.A. Tony Peterson

(3)  Directors

/S/ BARBARA J. AMOUR                       Secretary, Treasurer      May 4, 1998
--------------------                       and a Director         
Barbara J. Amour                                    

/S/ ROBERT L. KNUCKEY                      Vice President and        May 4, 1998
---------------------                      a Director   
Robert L. Knuckey                                    

/S/ GERALD RAU                             Director                  May 4, 1998
--------------                                                                  
Gerald Rau

/S/ JOHN LAIBLE                            Director                  May 4, 1998
---------------                                                                
John Laible

                                       27