SECURITIES AND EXCHANGE COMMISSION

                                              Washington, D.C. 20549





                                                   FORM  10-QSB

                                    Quarterly Report Under Section 13 or 15(d)
                                      of the Securities Exchange Act of 1934




                                           Quarter Ended August 31, 1998

                                        Commission File Number 33-24483-NY





                                              HEALTH-PAK, INC.
                         (Exact name of Registrant as specified in its Charter)



      Delaware                              11-2914841
(State or other jurisdiction of            (I.R.S. Employer
incorporation or organization)             Identification Number)

1208 Broad Street, Utica, NY               13501
(Address of principal executive offices)   (Zip Code)

Same
(Former Address)                           (Zip Code)

                                           (315) 724-8370
                          (Registrant's telephone number, including area code)



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  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No


Indicate the number os Shares  outstanding  of each of the  Issuer's  classes of
common stock, as of the latest practicable date.

           Class                               Outstanding at August 31, 1998

Common stock, $0.002 par value                            15,490,009



<PAGE>
























                                                       INDEX



Part  I.       Financial information


               Item 1.      Condensed consolidated financial statements:

                            Balance sheet as of August 31, 1998 and
                            May 31, 1998                                F-2

                            Statement of income for three months ended
                            August 31, 1998 and 1997                    F-3

                            Statement of cash flows for three months
                            ended August 31, 1998 and 1997              F-4

                            Notes to condensed consolidated financial
                            statements                               F-5 - F-13



               Item 2.      Management's discussion and analysis of
                            financial condition



Part II.       Other information



Signatures



<PAGE>


 
                                    HEALTH-PAK, INC. AND SUBSIDIARY

       CONDENSED CONSOLIDATED BALANCE SHEET - AUGUST 31, 1998 AND MAY 31, 1998





<TABLE>
<CAPTION>
<S>                              <C>            <C>                <C>                                 <C>             <C>    
                                       ASSETS                                               LIABILITIES

                                    August 31,        May 31,                                              August 31,      May 31,
                                      1998             1998                                                   1998          1998
Current assets:                                                      Current liabilities:
  Cash                                           $    31,905          Current portion of long-term debt   $  301,472    $  30,515
  Receivables, trade, net of                                          Notes payable, bank                    725,966      718,291
   allowance of $13,500           $  671,317         641,152          Accounts payable                       692,259      811,730
  Inventory                        1,545,643       1,572,320          Payroll and sales tax payable and
  Note receivable                     89,039          89,039           accrued expenses                       47,780       98,508
  Prepaid expenses                    65,005          83,870          Note payable, officer                   30,000              
                                   ----------      ----------                                              ----------    ----------


    Total current assets           2,371,004       2,418,286             Total current liabilities         1,797,477    1,659,044
                                   ----------      ----------                                             ----------    ----------

Property and equipment:
  Land                               120,000
  Building                           483,662
  Machinery and equipment            317,000         315,978         Long-term debt, net of current
  Leasehold improvements             133,593         133,593           portion                                403,760      44,004
  Office equipment                   110,130         110,130                                                 --------     --------
  Automotive equipment                21,021          21,021
                                   ----------      ----------
                                   1,185,401         580,727
  Less accumulated depreciation      262,252         248,417          Commitments
                                   ----------      ----------

                                     923,154         332,310
                                     -------         -------          Minority interest
                                                                        in consolidated subsidary              2,596        11,279
                                                                                                               -----        ------
                                                                    
Other assets:                                                       Shareholders' equity:
 Investments in affiliated Company   135,027         135,027        Common stock subscriptions                55,359
 Deposit on building                  21,600          28,647        Common stock, .001 par value 
 Security deposits                     4,241           4,241          2,000,000 shares authorized
 Loan acquisition fees                                              Common stock, .002 par value          
  and costs, net                      38,719           3,240          20,000,000 shares authorized            30,980        30,980
 Deferred offering expenses           74,647          99,530        Common stock purchase warrants:
 Deferred income taxes                83,115          83,115          Class A
 Cash surrender value, officers'                                      Class B
  life insurance                      33,942          33,942          Class C
 Officer's loan                        1,200           1,200         Additional paid in capital            2,304,334     2,304,334
                                   ----------      ----------
                                                                     Deficit                             (   907,857)  (   910,103)
                                                                                                          ----------    ----------
                                     392,491         388,942                                               1,482,816     1,425,211
                                   ----------      ----------                                             ----------    ----------


                                  $3,686,649      $3,139,538                                              $3,686,649    $3,139,538
                                  ==========      ==========                                              ==========    ==========


</TABLE>


     See notes to condensed consolidated financial statements.
                                                                             F-2


<PAGE>



                                          HEALTH-PAK, INC. AND SUBSIDIARY

                                    CONDENSED CONSOLIDATED STATEMENT OF INCOME

                                    THREE MONTHS ENDED AUGUST 31, 1998 AND 1997








<TABLE>
<CAPTION>
<S>                                                                                <C>                <C>   



                                                                                        1998              1997
                                                                                        ----              ----

Net sales                                                                           $  804,853         $  867,757

Cost of sales                                                                          496,123            591,563
                                                                                    ----------         ----------

Gross profit                                                                           308,730            276,194

Selling, general and administrative
 expenses                                                                              239,546            250,363
                                                                                    ----------         ----------

Income from operations                                                                  69,184             25,831
                                                                                    ----------         ----------

Other charges:
  Loss on investments                                                                                (     4,390)
  Interest expense                                                                      50,735             33,067
  Amortization                                                                          24,883              1,667
                                                                                    ----------         ----------
                                                                                        75,618             30,344
                                                                                    ----------         ----------

Loss before minority interest                                                     (     6,434)       (     4,513)

Minority interest in (income) loss of consolidated
 subsidiary                                                                              8,683       (     5,630)
                                                                                    ----------        ----------

Net income (loss)                                                                   $    2,249       ($   10,143)
                                                                                    ==========        ==========

Earnings per common and dilutive common equivalent share:

  Primary                                                                          $     0.00         $     0.00
                                                                                    ==========        ==========

  Fully diluted                                                                    $     0.00         $     0.00
                                                                                    ==========        ==========

Weighted average number of common shares and dilutive outstanding:

  Primary                                                                           17,090,159        14,016,238
                                                                                    ==========        ==========

  Fully diluted                                                                     17,090,159        14,016,238
                                                                                    ==========        ==========



</TABLE>









     See notes to condensed consolidated financial statements.
                                                                            F-3


<PAGE>



                                          HEALTH-PAK, INC. AND SUBSIDIARY

                                  CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                                    THREE MONTHS ENDED AUGUST 31, 1998 AND 1997










<TABLE>
<CAPTION>
<S>                                                                                <C>               <C>    


                                                                                        1998               1997
                                                                                        ----               ----
Operating activities:
  Net income (loss)                                                                   $  2,249          ($ 10,143)
  Adjustments to reconcile net income (loss) to cash
   used in operating activities:
    Depreciation                                                                        13,835             12,453
    Amortization                                                                        28,334              1,667
    Gain on investment in consolidated subsidiary                                                       (   4,390)
    Gain on (loss) on minority interest in consolidated
     subsidiary                                                                      (   8,683)             5,630
    Changes in operating assets and liabilities:
      Accounts receivable                                                            (  30,165)         (  13,034)
      Inventory                                                                         26,677          (  60,821)
      Deposits and loan fees                                                             7,047              2,197
      Prepaid expenses                                                                  18,865              2,240
      Accounts payable                                                               ( 119,471)            74,830
      Accrued expenses                                                               (  50,731)         (  28,480)
                                                                                     --------             --------

      Net cash used in operating activities                                         ( 112,043)          (  17,851)
                                                                                     --------             --------

Investing activities:
  Purchase of property and equipment                                                ( 604,679)          (   9,095)
                                                                                     --------             --------

      Net cash used in investing activities                                         ( 604,679)          (   9,095)
                                                                                     --------             --------

Financing activities:
  Proceeds from deposits on common stock                                               55,359
  Proceeds from notes payable, bank                                                   497,675               65,051
  Proceeds from long-term debt                                                        150,000
  Proceeds from officers' loan                                                         30,000
  Payment of long-term debt                                                         (   9,287)           (   8,387)
  Payment of financing costs                                                        (  38,930)                   
                                                                                     --------             --------

      Net cash provided from financing activities                                     684,817               56,664
                                                                                     --------             --------

Net increase (decrease) in cash                                                     (  31,905)              29,718

Cash, beginning of period                                                              31,905              233,330
                                                                                      --------             --------

Cash, end of period                                                                   $     0             $263,048
                                                                                      ========            ========

Supplemental  disclosures and cash flow  information:
  Cash paid during the year for:
  
    Interest                                                                         $ 50,735             $ 32,422
                                                                                     ========             ========
    Income taxes                                                                     $      0             $      0
                                                                                     ========             ========


</TABLE>


     See notes to condensed consolidated financial statements.
                                                                            F-4
<PAGE>



                                        HEALTH-PAK, INC. AND SUBSIDIARY

                           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS






1.  Organization of the company:

     The Company  originally "Morgan Windsor Ltd," was incorporated in the State
of Delaware on December 28, 1987 as a "blind pool".  The only  operations of the
Company at that time were to  structure  a public  offering  of its  securities.
Thereafter the company began to search for a viable business opportunity.



     On May 15,  1989,  the  Registration  Statement  containing  the  Company's
original   prospectus  was  declared   effective  by  the  Securities   Exchange
Commission.  Pursuant to the original  prospectus the Company was offering up to
4,000,000 units, at $.10 per unit, each consisting of one share of common stock,
one Class A warrant and one Class B warrant. No securities were sold pursuant to
original prospectus.




     The  Company  subsequently  amended  its  public  offering  to consist of a
minimum  of 15,000  units to a maximum  50,000  units to be offered at $6.00 per
unit.  Each unit  consists  of six shares of common  stock  (.002 par value) and
eighteen  Class A  redeemable  common  stock  purchase  warrants  and  twelve  B
redeemable  common stock  purchase  warrants.  On September 7, 1990, the Company
sold  16,358  units  receiving  gross  proceeds of 98,148.  Between  October and
November of 1989 the Company  repurchased  an aggregate of 178,583 shares of the
Company from nineteen stockholders for an aggregate price paid for these shares.
As a  result  of the  above  transactions  as of  April  30,  1991,  the date of
acquisition of Health-Pak, Inc, the Company had outstanding shares of 387,648 to
the public.




     On April 30, 1991, the Company  acquired 100% of the issued and outstanding
capital  stock of  Health-Pak,  Inc, a New York  corporation,  in  exchange  for
4,996,352  shares of which  4,756,077  shares were  exchanged  for 97.54% of the
outstanding  shares of  Health-Pak,  Inc.  and 240,275  shares were  retained to
acquire the remaining outstanding shares of Health-Pak, Inc.




     Thereafter,  the  Company,  "Morgan  Windsor,  Inc."  changed  its  name to
"Health-Pak,  Inc" and increased  its  authorized  capitalization  to 20,000,000
shares.



2. Nature of business:

     Health-Pak,  Inc. is a manufacturer  and  distributor  of disposable  paper
products  for use in  serviced-related  industries,  primarily  the  medical and
hospital industry. The industry is highly competitive and is serviced by several
large national and multi-national  companies with greater financial resources in
comparison  to the  financial  resources  available to the Company.  There is no
guarantee that this market will continue to develop since the  incorporation  of
government intervention, economic conditions and other unforeseen situations may
occur.


     The Company maintains manufacturing  facilities in upstate New York, Mexico
and to a lesser  extent  Haiti.  In addition to paper  goods,  the Company  also
manufactures a sporting goods  accessory  item,  sales of which were minimal for
the three  months  ended  August  31,  1998.  The  Company's  sales  are  spread
throughout the United States.
                                                                         F-5


<PAGE>



                                          HEALTH-PAK, INC. AND SUBSIDIARY

                          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS








3. Summary of significant accounting policies:

    Principles of organization:
     The  acquisition  of the  Company's  subsidiary  on April 22, 1991 has been
accounted for as a reverse purchase of the assets and liabilities of the Company
by Morgan  Windsor  Ltd.  Accordingly,  the  consolidated  financial  statements
represent assets, liabilities and operations of Health-Pak,  Inc. prior to April
30, 1991 and the combined  assets,  liabilities,  and operations for the ensuing
period.  The  financial  statements  reflect the purchase of the stock of Morgan
Windsor Ltd. by Health-Pak,  Inc.,  the value being the  historical  cost of the
assets  acquired.   All  significant   intercompany   profits  and  losses  from
transactions  have been  eliminated.  Pursuant  to the  purchase  the  Company's
387,648 shares were issued to the public for $60,000.




    Revenue recognition:
     The  Company  maintains  its  books and  records  on the  accrual  basis of
accounting,  recognizing  revenue when goods are shipped and expenses  when they
are incurred.



    Inventories:
     Inventories  are stated at the lower of cost or market.  Cost is determined
by the first-in, first-out method (FIFO).



    Property and equipment:
        Property and equipment are stated at cost.  Depreciation of property and
         equipment is provided using the straight line method over the following
         useful lives:
                                                Years
        Machinery and equipment                  10
        Leasehold improvements              19, 31-1/2 and 39
        Automotive equipment                      5
        Office equipment                         10

     Expenditures  for major  renewals  and  betterments  that extend the useful
lives  of  the  property  and  equipment  are   capitalized.   Expenditures  for
maintenance and repairs are charged to expense as incurred.



    Per share amounts:
     Net  earnings  per share are  computed  by  dividing  net  earnings  by the
weighted average number of shares of common stock outstanding during the period.
Fully diluted and primary earnings per common share are the same amounts for the
period presented.



    Cash and cash equivalents:
     For purposes of the statement of cash flows, cash equivalents  include time
deposits,  certificates of deposit,  and all highly liquid debt instruments with
original maturities of three months or less.



                                                                          F-6


<PAGE>



                                  HEALTH-PAK, INC. AND SUBSIDIARY

                         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





3. Summary of significant accounting policies (continued):

      Principles of consolidation:
     The  accompanying   consolidated  financial  statements  also  include  the
accounts  of the  Company  and its 65%  owned  subsidiary,  Protective  Disposal
Apparel,  LLC.  Inter-company  transactions and balances have been eliminated in
consolidation (see Note 5).


      Use of estimates:
     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  effect 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 differ from these estimates.



      Effect of recently issued accounting standards:
     The  Financial  Accounting  Standards  Board issued  Statement of Financial
Accounting   Standards  ("SFAS")  No.  121,  "Accounting  for  the  Impaired  of
Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of. "SFAS" No. 121
requires that Long-Lived Assets and certain identifiable  intangibles to be held
and used by the Company be reviewed for  impairment  whenever  events  indicated
that the carrying amount of an asset may not be recoverable.  The Company has no
impaired assets at August 31, 1998.


     The Accounting  Standards  Board issued  Statement of Financial  Accounting
Standards  ("SFAS")  No. 123,  "Accounting  for Stock Based  Compensation".  The
effective date of SFAS No. 123 is for fiscal years  beginning after December 15,
1995, and established a method of accounting for stock  compensation plans based
on fair  value.  The  Company  does not  believe  that SFAS No. 123 will have an
impact on its financial statements.  The Company has not adopted SFAS No. 123 at
August  31,  1998  and  continues  to  use  APB  25  which  accounts  for  stock
compensation at the intrinsic value.


    Investments:
     Investments  in certain less than 20% owned  companies  are carried at cost
and are accounted for on the equity method.  The investment  account is adjusted
for the Company's proportionate share of their undistributed earnings or losses.
Because  the  Company  exercises   significant  influence  over  the  investees'
operating and financial activities,  management has considered the equity method
of accounting as proper.






4.  Inventories:

    Inventories consist of:
                                                August 31           May 31
                                                   1998              1998
                                                   ----              ----

        Raw materials                          $  463,693         $  483,696
        Finished goods                          1,081,950          1,088,624
                                               ----------          ----------

                                               $1,545,643         $1,572,320
                                               ==========         ==========






                                                                            F-7


<PAGE>



                                     HEALTH-PAK, INC. AND SUBSIDIARY

                           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS










5.  Investment:

        A)   The  Company  purchased  a 10%  equity  interest  in  Silver  Lake
             Corporation  in exchange  for its own common stock valued at $.682
             per  share.  This  investment  is  accounted  for under the equity
             method of accounting with a fair value of the stock contributed of
             $136,400. Health Pak, Inc., being a significant influence over the
             operations  and  finance  of the joint  ventures  activities  with
             Silver Lake  Corporation,  has elected to use the equity method of
             accounting for the investment.






        B)   In October  1996,  the Company  formed and  purchased a 65% equity
             interest in  Protective  Disposable  Apparel  Co.,  LLC, a company
             operating in the disposable apparel business.  Protective Disposal
             Apparel Co., LLC in turn purchased a continuing business,  Scherer
             Healthcare,  Ltd, d/b/a Protective Disposal Apparel. As of October
             28, 1996 the balance sheet of the entity to be acquired just prior
             to the purchase was as follows:



                                                      ASSETS

          Current assets:
            Accounts receivable                                      $263,371
            Inventory                                                 308,469
                                                                      -------
              Total current assets                                    571,840
                                                                      -------

          Security deposits                                             1,500
                                                                        -----

              Total assets                                           $573,340
                                                                     ========




                                    LIABILITIES AND MEMBERS' EQUITY

           Current liabilities:
             Accounts payable                                        $318,943
                                                                     --------
               Total current liabilities                              318,943
                                                                      -------

            Members' capital                                          254,397
                                                                      -------

                Total liabilities and members' equity                $573,340
                                                                     ========












                                                                           F-8


<PAGE>



                                     HEALTH-PAK, INC. AND SUBSIDIARY

                          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS










7.  Note receivable:

     The  Company  is due  $89,039  from  the  minority  interest  owner  of its
subsidiary,  Protective  Disposable Apparel Co., LLC. This amount represents the
subsidiary  portion of the purchase cost of the business  which the Company paid
on behalf of the  minority  shareholder.  The note  receivable  is  non-interest
bearing, unsecured and indefinite in maturity.


8. Line of credit:

     The Company  opened a line of credit with Foothill  Capital  Corporation in
September  1996.  The loan ceiling  amount is based on a  percentage  formula of
eligible accounts  receivable and inventory.  The balance due at August 31, 1998
was $725,966.


9. Long-term debt:


                                                   Rate   Amount    Maturity

    Note payable, Manifest Group          (a)       10% $ 11,316     July, 1999
    Note payable, Waste Mgmt. of N.Y.     (b)       10%    2,064  November,1998
    Note payable, Resource Capital Corp.  (c)       10%    2,950    March, 2000
    Note payable, Resource Capital Corp.  (d)       10%    1,806 September,1999
    Note payable, Resource Capital Corp.  (e)       10%    2,901     July, 1999
    Note payable, City of Utica           (f)        3%  148,393     June, 2005
    Note payable, bank                    (g) Prime +2%  490,000  November,2013
    Note payable, bank line of credit     (h)     11.5%   45,802      May, 2001
                                                         --------
                                                         705,232
        Less current portion                             301,472
                                                         -------

                                                        $403,760
                                                        ========



        (a)   Note  payable  is  collateralized  by  equipment  with a cost  of
              $20,064.  The note is payable in  installments  of $492 per month
              including interest.

        (b)   Note  payable  is  collateralized  by  equipment  with a cost  of
              $11,923.  The note is payable in  installments  of $240 per month
              including interest.










                                                                          F-9


<PAGE>



                                       HEALTH-PAK, INC. AND SUBSIDIARY

                           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS










9.  Long-term debt (continued):

      (c)     Note  payable  is  collateralized  by  equipment  with a cost  of
              $6,796.  The note is  payable in  installments  of $170 per month
              including interest.

      (d)     Note  payable  is  collateralized  by  equipment  with a cost  of
              $5,296.  The note is  payable in  installments  of $155 per month
              including interest.

      (e)     Note  payable  is  collateralized  by  equipment  with a cost  of
              $9,053.  The note is  payable in  installments  of $251 per month
              including interest.

      (f)     Note payable is collateralized by machinery, equipment, furniture
              and  fixtures,  inventory  and accounts  receivable.  The note is
              payable in installments of $1,982 per month including interest.

      (g)     Note  payable  is  collateralized  by real  estate.  The  note is
              payable  in  principal  installments  of $1,389  per  month  plus
              interest.  A portion of the note in the amount of $240,000 is due
              December  1998.  This  amount  is  to be  replaced  with  an  SBA
              guaranteed  loan from the same bank under  long-term  debt and is
              expected to be in place before the December due date.

      (h)     Note payable is collateralized by accounts receivable, machinery,
              equipment, inventory,  intangibles and chattel paper. The note is
              payable  in  principal  installments  of $1,347  per  month  plus
              interest.



      Maturities of long-term debt as of August 31, 1998 are as follows:



                                 Year                             Amount

                          August 31, 1999                        $301,472
                          August 31, 2000                          60,862
                          August 31, 2001                          50,950
                          August 31, 2002                          38,112
                          August 31, 2003                          38,764
                          Thereafter                              215,072
                                                                 --------
                                                                 $705,232
                                                                 ========











                                                                         F-10


<PAGE>



                                          HEALTH-PAK, INC. AND SUBSIDIARY

                          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS








10. Commitments:

      Consultant contracts:
     The  Company  entered  into a  three  year  investment  banking  consulting
agreement on December 31, 1994. The Company issued 1,000,000 shares of $.002 par
common shares and used a discount  valuation of $.002 per share.  The consultant
is to act as a placement agent for Health-Pak, Inc. on all private placements or
secondary  offerings.  Services  commenced as of April 1, 1995. The agreement is
being amortized over thirty six months.


     In addition,  the Company also issued  4,500,000  stock  options at various
exercised prices.  As of May 31, 1998,  2,748,047 options have been exercised as
follows:


                   Number of options                    Exercise price

                        600,000                              .10
                        233,333                              .15
                      1,914,714                              .26


     The Company entered into a public relations  consulting  agreement on March
10, 1995.  The agreement has a thirty month term and services  commenced on June
11, 1995.  The Company  issued  1,750,000  shares of $.002 par per common shares
plus an additional  17,242 shares of the original  agreement that in addition to
the 1,750,000 shares,  250,000 shares are to be issued at a rate of 8,621 shares
per month over the next twenty nine  months.  A valuation  of $.02 per share was
used. The Company withdrew from the consulting  agreement in August and no other
shares were issued.  In addition,  advances made to the Company and on the books
as a notes payable, other, were reclassified as payment for common stock already
issued.


11. Income taxes:

     Effective June 1, 1993, the Company has adopted the Statements of Financial
Accounting  Standards No. 109 ("SFAS No. 109"),  Accounting  for Income  Taxes,"
which  applies a  balance  sheet  approach  to income  tax  accounting.  The new
standard  required the Company to reflect on its balance  sheet the  anticipated
tax impact of future taxable income or deductions  implicit in the balance sheet
in the form of temporary  differences.  The Company has reflected certain future
tax benefits on its balance sheet from the  realization  of the carryover of the
current years net operating loss to anticipated future earnings.  The cumulative
effect  as of June 1,  1993,  the  date of the  adoption  of SFAS No.  109,  was
immaterial. As permitted by SFAS No. 109, prior year's financial statements have
not been restated.





                                                                         F-11


<PAGE>



                                      HEALTH-PAK, INC. AND SUBSIDIARY

                           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS







11.     Income taxes (continued):

        The components of deferred tax assets and liabilities are as follows:

           Deferred tax assets:
              Bad debt allowances                                   $    500
              Net operating loss carryfoward                         114,115
                                                                     -------
                                                                     114,615
                                                                     -------

           Deferred tax liability:
              Depreciation                                               900
                                                                         ---

           Deferred tax asset                                        113,715

           Valuation allowance                                        30,600
                                                                      ------

           Net deferred tax asset                                   $ 83,115
                                                                    ========


     As of August  31,  1998,  the  Company  has  available,  for tax  reporting
purposes,  net operating loss carryovers of approximately  $640,000 which expire
through 2013.



12. Employment contracts:

     The Company has no employment  contracts.  Further,  it has no  retirement,
pension or profit sharing plan covering its officers or directors.



13. Deferred offering expense:

     The  value  stated is the  amount  that has been  paid by the  Company  for
expenses  incurred for the public  offering of warrants.  The deferred  offering
expenses on the issued or expired  warrants have been deducted from the proceeds
of the  offering.  The  offering  of the  Class C  warrants  is  expected  to be
completed in 1998.  Amortization of the deferred  offering expense of $24,883 is
included at August 31, 1998.


     All deferred  offering  expenses  pertain to the Class C warrants which had
not been issued as of the statement date.



14. Related party transactions:

     Officers  loans are  unsecured  and  non-interest  bearing.  Officers  have
indicated  that they will not be repaid in the current  year.  In addition,  the
Company has advanced funds to its minority interest partner, Protective Disposal
Apparel, in the amount of $89,039.







                                                                         F-12


<PAGE>



                                     HEALTH-PAK, INC. AND SUBSIDIARY

                           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS









15. Common stock purchase options:

        As of August 31, 1998 the unexercised options held by Silver Lake, Inc.
         are as follows:



         Amount of options      Exercise price            Expiration

               500,000                .75               October 31, 1998
               600,150               1.25               October 31, 1998
               500,000               2.00               October 31, 1998


     The  Company  has  elected to  continue  use of the  methods of  accounting
described by APB-25 "Accounting for Stock Issued to Employees" which is based on
the intrinsic value of equity  instruments and has not adopted the principles of
SFAS-123  "Accounting for Stock Based  Compensation"  effective for fiscal years
beginning  after  December 15, 1995,  which is based on fair value.  There is no
significant  difference  between  compensation cost recognized by APB-25 and the
fair value method of SFAS-123.  The Company has not recognized  compensation  on
the granting of the options and warrants to employees and consultants  since the
fair value of the  warrants or options is the same as or less than the  exercise
price.




16. Earnings per share:
                                              August 31, 1998   August 31, 1997
                                              ---------------   ---------------

                                                 Primary            Primary
     Number of shares:
       Weighted average shares outstanding     15,490,009         15,490,009
       Incremental shares for outstanding
        stock options                           1,575,075          1,600,150
                                               ----------         ----------

                                               17,065,084         17,090,159
                                               ==========         ==========


     Primary  earnings  per share  amounts are  computed  based on the  weighted
average number of shares actually outstanding.  Shares that would be outstanding
assuming  exercise of dilutive stock options,  all of which are considered to be
common  stock  equivalents.  Fully  diluted  earnings  per share are the same as
primary earnings per share for August 31, 1998 and August 31, 1997.








                                                                          F-13


<PAGE>






                                           PART I  FINANCIAL INFORMATION




ITEM 1. Financial Statements.


     The  following  condensed   consolidated  financial  statements  have  been
prepared  by  Health-Pak,  Inc.  (the  "Company")  pursuant  to  the  rules  and
regulations  of the  Securities and Exchange  Commission  promulgated  under the
Securities  Exchange Act of 1934 as amended.  Certain  information  and footnote
disclosures  normally  included in financial  statements  prepared in accordance
with generally  accepted  accounting  principles  have been condensed or omitted
pursuant  to  such  rules  and  regulations.  In the  opinion  of the  Company's
management,   the  condensed   consolidated  financial  statements  include  all
adjustments  (consisting  only of  adjustments  of a normal,  recurring  nature)
necessary  to  present  fairly  the  financial  information  set forth  therein.
Operating  results  for the three  month  period  ended  August 31, 1998 are not
necessarily  indicative  of the results that may be expected for the year ending
May 31, 1999.


     These  condensed  consolidated  financial  statements  should  be  read  in
conjunction  with the financial  statements and  accompanying  notes included in
Form 10-KSB for the year ended May 31, 1998.


Condensed Consolidated Financial Statements:

Balance Sheet as of August 31, 1998 and May 31, 1998.........F-2

Statement of Income For
Three Months Ended August 31, 1998 and 1997..................F-3

Statement of Cash Flows
For three Months Ended August 31, 1998 and 1997,,,,...........F-4

Notes to Condensed Consolidated Financial Statements..F-5 to F-13




                                                         3

<PAGE>



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.

I. Financial Condition and Liquidity.

Introduction.

     As previously  stated,  the financial  statements and the discussion  which
follows includes, on a consolidated basis, the assets, liabilities and operating
results  for  Protective  Disposable  Apparel  Company,  LLC  ("PDA")  which was
acquired  by  the  Company  in  October,   1996  as  a  65%  owned   subsidiary.
Inter-company balances have also been eliminated in the consolidation.


(a) Financial Condition.

Assets:

     Total assets  increased by $547,111 at August 31, 1998 when compared to the
year ended May 31, 1998, an increase of  approximately  17.4%.  This increase is
largely due to the  acquisition  by the Company of its plant  facility in Utica,
New York, which took place in July, 1998.


     The asset addition for the plant  acquisition is reflected in "Property and
Equipment."  Except for this  addition,  there is no  substantial  difference in
"property and equipment" from the year end.


     Management  believes that  purchasing  the building will result in positive
savings in terms of monthly expenses for rent for future years.


     The  increase  in assets at August 31, 1998 was also  slightly  enhanced by
additions to receivables (which increased by $30,165 from the year ended May 31,
1998).  The increase was also  slightly  offset by reductions in cash ($0 at the
end of the period or a $31,905 difference from the year end) and inventory (down
slightly by $26,683).

     The increase in assets was also somewhat offset by reductions in certain of
the  non-operating  accounts  such as deposits on buildings,  deferred  offering
expenses and other minor changes.

     The  increase  in  receivables  is caused by the fact that the  Company had
slower collections during the period.  Inventory  decreased slightly as a normal
part of  experiencing  lower sales for the period and  because of the  Company's
decision to remove certain non-profitable items from its line. At the end of the
first quarter, inventory was approximately 1.7% lower than at the year end.

                                                                             4

<PAGE>



     There were no significant  purchases of machinery and equipment  during the
quarter.

     As  previously  stated,  cash at the end of the  quarter  was $0.  This was
because the Company  applied most of its available cash during the quarter ended
August 31, 1998 (i) to the  acquisition  of the building  facility on Beechgrove
Avenue in Utica,  including closing costs; and (ii) to the reduction of accounts
payable.  It should be noted in that respect  that the Company was  accumulating
cash since 1997 in contemplation  of acquiring the plant facility.  The building
was purchased in July of 1998, during the quarter ended August 31, 1998.

     In summary,  the acquisition of the Company's plant facility is the primary
reason for the  increase in assets at this time.  The increase in assets will be
offset by liabilities  to the extent that the property was financed.  Except for
the acquisition,  total assets would be quite comparable to total assets for the
year ended May 31, 1998.



Liabilities:

     The significant  increase in the current portion of long term debt and long
term debt itself  substantially  account for the increase in  liabilities at the
end of the quarter ended August 31, 1998. The increase in long term debt results
from the  acquisition  of the plant  facility  in July,  1998.  A portion of the
mortgage loan for the purchase of the facility in the amount of $240,000 was due
in  December,  1998 and had to be accounted  for as a short term debt;  however,
this portion of the debt was replaced by a long term SBA guaranteed  loan in the
quarter ended November 30, 1998; and,  therefore,  the long term portion of this
loan will be  transferred  to the long term  account  in the next  report.  This
greatly  inflated  the  current  portion  of long term debt for the three  month
period ended  August 31, 1998 and, as noted above,  will be adjusted in the next
quarter after taking the replacement loan into effect.




     An increase  in bank notes  payable  and a  reduction  in accounts  payable
represent  the most  significant  changes in  liabilities  of the  Company  when
compared to the year ended May 31,  1997.  The  increase  in bank notes  payable
reflects  additional  borrowing  by the  Company on its credit  line  during the
quarter ended August 31, 1998, while the reduction in accounts payable shows the
Company's application of cash to these accounts during the quarter.



     Total  current  liabilities  for the  quarter  ended  August  31,  1998 are
approximately  $140,000  higher when  compared to the year end,  but this is not
significant  when  you  take  into  account  the fact  that  the  Company  had a
substantial  increase in short term liabilities  associated with the acquisition
of its real property.

                                                                          5

<PAGE>


     It should also be noted that accounts payable were reduced in the period by
$119,471  when  compared  to the year end.  This  reflects  the  application  of
additional cash during the period to the payment of payables.


     Liability  for payroll  taxes  varies with the number of  employees  at any
given time and the date upon which the period  falls.  There was a reduction  in
this account of  approximately  $51,000  during the period when  compared to the
year end at May 31, 1998.

     Overall,  total  liabilities  increased by some  $498,189  during the three
month  period  ended  August 31,  1998  compared to the year end at May 31, 1998
which is as expected from the debt acquired in connection  with the  acquisition
of the real  property  made in July,  1998.  This is  balanced by an increase in
assets for the period of $547,111  compared to the year end, which also reflects
the value of the property acquired.


     The Company's deficit of $(907,357) shows only slight  improvement over the
year end deficit of $(910,103). This compares with a deficit of $(1,041,702) for
the comparable quarter ended August 31, 1997. See "Results of Operations."


     Management  believes that, except for taking into account the fact that the
Company  purchased  the real  property  referred  to  above,  there  has been no
significant change in the financial condition of the Company during the quarter.


     See "Results of Operations"  for additional  information.  For  information
regarding  liquidity,  see  Subparagraph  (b) "Liquidity"  below. For additional
information  relating  to the  financial  condition  of the  Company,  also  see
"Inflation" and "Trends Affecting Liquidity, Capital Resources and Operations."


(b) Liquidity.

     The Company had sufficient liquid assets to meet its obligations at the end
of the first quarter ended August 31, 1998.  Working  capital at August 31, 1998
was $573,527 compared to $759,242 at the year ended May 31, 1998, a reduction of
$185,715.  This is to be  expected  in the light of the cash and  mortgage  note
requirements  for the  acquisition of the building and the reduction of accounts
payable mentioned above,  among other things. For comparison  purposes,  working
capital at the end of August 31, 1997 was $640,853.


     Principal  short-term  liabilities  at August 31, 1998 were $301,472 in the
current  portion of long term notes due,  $725,966 in short term notes  payable,
$692,259 in accounts  payable,  and payroll  taxes due of $47,700 for a total of
$1,719,697. Against this
                                                                          6

<PAGE>



     total,  at the end of the quarter,  the Company had liquid  current  assets
consisting of receivables of $671,317, inventory in the amount of $1,545,643 and
notes receivable of $89,039 for a total of $2,305,999.

     During the  quarter  management  also had at its  disposal a credit line of
$850,000 of which  approximately  $80,000 was available at August 31, 1998.  The
credit line was increased in 1998 to $850,000 from $750,000 last year.


     In combination,  management  believes that the Company will have sufficient
liquidity and adequate  working  capital and sufficient  credit  alternatives to
fund the Company's  operations during the current fiscal year, including support
for its planned expansion of sales.



     Management is planning  additional  equity  financing  which, if completed,
could add substantially to the Company's  liquidity in the near future and would
afford the Company the  opportunity to make new  acquisitions  and to expand its
business.  There is no  assurance  that the Company  will be  successful  in its
attempts to raise additional capital at an affordable cost.


     The principal source of funds for the Company's  operations  during quarter
ended August 31, 1998 has been from  operating  revenues  and proceeds  from its
credit line, as reflected in the Company's financial statements.


II. Results of Operations.

     Net  sales at the end of the  first  quarter  ended  August  31,  1998 were
$804,359.  This  compares  with net  sales of  $867,757  at the end of the first
quarter of 1997. The slight decrease of approximately 7.3% results from the fact
that the Company made a  determination  during the quarter to eliminate from its
product  line certain  items which it felt were not  profitable  to sell.  These
items  included  nurses caps,  shoe covers and  surgical  masks among others and
represented  products which were primarily  manufactured  by others.  Management
believes this  elimination will also have an effect on sales in the next quarter
as well.



     The reduction in sales was not  accompanied  by additions from new business
or price increases  during the period to boost sales to former levels;  however,
management  believes  that with new  measures  being  taken to  increase  sales,
including  making certain  acquisitions  and entering into the market for tissue
paper will eventually make up for the downturn in net sales (see below).

     In that regard it is interesting to note that cost of sales  expressed as a
percentage of net sales for the quarter ended August 31, 1998 was 61.6% compared
with 68% for the quarter ended August 31, 1997. 
                                                                             7

<PAGE>




         None of the sales were influenced by price changes during the quarter.



     As for the future,  the Company has  entered  into an  agreement  with Jake
Industries,  Inc.  ("Jake")  and  its  principal  shareholders  to  acquire  the
substantial  part of the  assets  of Jake as a  going  concern.  Located  in New
Jersey,  Jake is a  manufacturer  of  paper  products  to the  medical  industry
including toilet tissue paper for  institutions  and tissue gowns.  Revenues are
presently approximately $2 million per annum; however, the Company believes that
these revenues can be greatly expanded with its own network of customers and new
business which the Company will seek to obtain after the closing.


     The  acquisition  agreement  for Jake  calls for the  payment  of more than
$300,000 cash and the issuance of stock to the shareholders of Jake. The Company
has not yet closed this  agreement as of the date of this report and is awaiting
currently planned additional financing to support the purchase of Jake.



     The Company also introduced "sonic sealed" garments in former periods which
are produced by a sonic sealing or welding  process,  manufactured by ultrasonic
equipment  which  essentially  changes the  molecular  structure of the material
being made to form a complete and impenetrable seal at the point of closure.  No
heat is used or  necessary  for this  process.  These  garments  are  fluid  and
chemical  resistant  and are used  primarily in chemical and nuclear work. It is
expected that these products will  contribute to sales during the current fiscal
year.

     The shift,  beginning in 1996, to private  label work has been  essentially
discontinued  as  the  Company  assumed   additional   responsibility   for  the
manufacture of PDA's products and required additional manufacturing capacity for
its own products.

     Under new  agreements  for  manufacturing  private label goods with two new
principal  customers,  the Company will sustain  sufficient profits to warrant a
continuation of this work at a reduced rate.

     The  Company's  production  of operating  gowns did not achieve the results
expected   and  were   essentially   discontinued;   however,   the  Company  is
manufacturing  such gowns presently to the  specifications of a new customer and
will continue to offer this product mainly through the orders  received from its
customer.


     There were again no significant  contributions to revenues from the sale of
the "Rigg" (a sling  designed to hold  basketballs,  soccer balls and baseballs,
among  other  things,  allowing  free use of the hands  and arms) a  non-medical
product  offered for  consumer  use  beginning  in 1995 and the Company is still
awaiting  marketing  efforts  of  others  to see  important  revenues  from this
product.
                                                                           8

<PAGE>



     However,  based on the potential of the new products  mentioned  above, the
new markets opened by the Company and the addition of PDA's sales and customers,
management believes the Company will grow again in terms of overall net revenues
for 1999.

         For additional information see Item 1. "Description of
Business."


     As  previously  indicated,  cost of sales  expressed as a percentage of net
sales for the three months  ended August 31, 1998 was 61.6%  compared to 68% for
the three months period ended August 31, 1997.  Cost of sales for the year ended
May 31, 1998 was 67.8%. This is an efficiency  improvement of approximately 6.4%
over the  comparable  three months period last year and an  improvement  of 6.2%
since the year ended May 31, 1998 and reflects the Company's measures to improve
profitability  by  eliminating  unprofitable  items  from its line and  properly
costing its other products.  This improvement was primarily  responsible for the
increase in gross profits for the three months ended August 31, 1998 compared to
the similar period in 1997,  even though sales were lower for the current period
by approximately 7.3%.

     It should be remembered that the cost of sales increased last year to 73.8%
with the  introduction  of PDA products as part of the Company line.  Management
pointed out at that time that the PDA products  were  initially  introduced at a
higher cost basis than the Company's  products.  Costing  analysis and immediate
action was taken to correct these  differences which resulted in a cost of sales
this period that is more in line with the Company's usual standards.



     As stated above,  the  elimination of  unprofitable  business and the price
increases effected for the PDA products during the previous year, influenced the
lower cost basis for products in the three months ended August 31, 1998.


     Gross  profits for the three  months  ended  August 31, 1998 were higher by
$32,536 than gross profits for the comparable  period in 1997 on lower net sales
for the period,  all due to the  improvement  in cost of sales.  Expressed  as a
percentage of net revenues,  gross profits were 38.4% of net sales for the three
months ended August 31, 1998  compared to 31.8% of net sales for the  comparable
quarter  in 1997.  The  improvement  occurs  because  of the lower cost of sales
percentage  for the quarter  ended August 31, 1998 compared to the quarter ended
August 31, 1997.  This compares  with a gross profit  percentage of 32.2% at the
year ended May 31, 1998.



     There was no significant difference in selling,  general and administrative
expenses  for the quarter  ended August 31, 1998  compared to the quarter  ended
August 31, 1997; although, it is slightly lower for the three month period ended
August  31,  1998 and is  expected  to be even lower  during the next  reporting
period.
                                                                            9

<PAGE>




     Financing  costs for the three  months ended August 31, 1998 in the form of
interest  expense  increased to $50,735  compared to $33,067 for the  comparable
period in 1997.  This, of course,  reflects  increased  borrowing during quarter
ended August 31, 1998.


     Net income for the quarter  ended August 31, 1998 was $2,249  compared to a
net  loss of  $10,143  for the  comparable  period  in  1997.  This is a  slight
improvement  of $12,392 over the quarter  ended  August 31, 1997 which  occurred
even though  sales were lower for the period  ended  August 31, 1998 and results
from more efficient  cost of sales and higher gross profits as indicated  above.
Although  only slight,  these  improvements  were  substantial  enough to show a
profit  for the  quarter  even  though  profits  for the period  were  offset by
increases in interest and amortization  expenses during the quarter ended August
31, 1998.



     For  information  with respect to the possible  effect of future  trends on
operations,  see the discussion under the caption "Trends  Affecting  Liquidity,
Capital Resources and Operations."


First Quarter ended August 31, 1998 Compared with Fourth Quarter
Ended May 31, 1998



     Net sales for the three  months  ended  May 31,  1998 were  $696,371  which
compares to sales in the quarter  ended August 31, 1998 of  $804,853.  Net sales
for the three  months ended  August 31, 1998 are higher by  approximately  13.5%
than the quarter ended May 31, 1998.  While sales in both the fourth  quarter of
last year and the first  quarter of the current  fiscal  year (ended  August 31,
1998) are rather  significantly lower than previous periods, the lower sales for
the fourth  quarter of 1998  result  primarily  from  shipping  products  during
different  periods (i.e. during the fourth quarter of last year many orders came
early enough  during the third  quarter to allow for  shipment in that  quarter,
while  normally many orders  received in the third quarter are not shipped until
the fourth quarter) while the reduction in sales for the first quarter of fiscal
1999 was caused by the deliberate elimination of unprofitable sales.




     Cost of sales in the fourth  quarter of 1998  expressed as a percentage  of
net sales was 67.8% which  compares with the 61.3% for the first quarter of 1999
previously mentioned and reflects the measures taken by the Company in the three
months  ended  August  31,  1998  to  improve   profitability   by   eliminating
unprofitable products from its product line. This action,  coupled with previous
efforts  taken too improve  profitability  for PDA's  products  has improved the
Company's  profit  status for the three months  period ended August 31, 1998. By
increasing sales in the near future, the efficiencies  adopted by the Company in
the last two periods should have a positive impact on net revenues  beginning in
the next period.

                                                        10

<PAGE>


     The  improvement in cost of sales allowed the Company to enjoy an operating
profit of $69,184 for the three months ended August 31, 1998.


III.  Capital Resources.

     On July 21, 1998 the Company acquired its plant facility in Utica, New York
for a purchase  price of  $600,000.  As part of the  agreement  to purchase  the
building,  all back rent (the Company was  withholding  rent for repairs) except
for $50,000 was forgiven.  The Company was paying $7,500 per month for rental of
this facility.




     During  the  three  months  ended  August  31,  1998,  there  was no  other
significant  increase in the purchase of any property or equipment.  The Company
does expect to spend  additional funds in the near future for the acquisition of
tissue  production  machinery  to enter into the tissue  supply  business  (i.e.
toilet  tissue  for  institutions  and  tissue  paper for  examination  tables),
particularly if the acquisition with Jake Industries,  Inc.,  mentioned above is
consummated.



     The Company also does not  presently  anticipate  the  allocation  of other
significant   resources  for  machinery  and  equipment   purchases.   Any  such
commitments  will be dependent on demand for the delivery of products  under new
or increased orders and will primarily be purchased in cooperation with New York
State financing programs,  leasing programs or bank financing without committing
substantial cash assets. Future conditions,  such as successful equity financing
efforts, may change this position.





     Current conditions indicate,  however, that some funds will be required for
additional  capital  expenditures  in  the  near  future  which  coincides  with
management's sales expansion program; however, as explained above, financing for
purchasing  these resources will be obtained from sources which will not require
a substantial outlay of cash and will be in proportion to its expansion program.


IV. Inflation.

     Management  anticipates  that inflation will not have a material  effect on
the Company's  operations in the future. This is principally due to two factors.
First,  if orders  increase due to inflation the Company  presently has adequate
manufacturing  equipment  and capacity to support not only its present  level of
operations but, with the addition of a second and, if needed,  third,  operating
shift,  to support a substantial  increase in production of its present  product
lines.  Second,  although  product pricing would be affected by inflation due to
higher costs,  management  believes that public health and safety concerns would
outweigh any negative impact of price  increases and would not adversely  affect
the Company's projected sales. Additionally, the hospital 11
<PAGE>


     and  health  care  markets  have  historically  been  best  able to pass on
increased costs which are typically paid by insurance coverage.




V.  Trends Affecting Liquidity, Capital Resources and Operations.

     A number of factors are  expected to impact upon the  Company's  liquidity,
capital  resources  and  future   operations.   Included  among  these  are  (i)
environmental  concerns;  (ii) economic factors  generally  affecting the health
care industry;  (iii) governmental regulation of the Company's products and (iv)
the  growing  concern  in  many  industries  about  controlling  the  spread  of
infectious disease.

     Some disposable products offered by the Company are made from plastic-based
materials which have raised concern among environmental groups over their proper
disposal.  Although  management  believes that such concerns are, in many cases,
valid,  it is also  believed  that these  concerns  must be balanced with safety
provided by these products against infectious  diseases such as AIDS,  hepatitis
and others.  This belief has recently been reinforced by the new,  comprehensive
safety regulations issued by the Occupational  Safety and Health  Administration
(OSHA) which  require  extensive  new measures to combat the spread of infection
and disease in many industries which had not previously  required such measures.
Most  importantly,  from the point of view of the Company,  are the requirements
for  protective  apparel such as that  manufactured  by the Company.  Management
believes that the regulations,  which are now fully  implemented,  will increase
demand  for the  Company's  products  and  significantly  expand  the  Company's
markets.  Based upon recent  increased  orders,  management  believes  that most
significant  among  these new  markets  for its  products  will be the  hospital
looking to comply with the new OSHA regulations,  emergency service  industries,
including police,  fire and ambulance  services,  which routinely are exposed to
unusually high risk of infectious diseases and physicians.


     Nevertheless, the requirements relating to proper disposal of plastic-based
garments is still in question and the Company  cannot predict the outcome of any
future  regulations  relating to these matters.  Any changes in manufacturing or
disposal  requirements  could  result  in  higher  manufacturing  costs and less
profitability  for the Company or, perhaps,  complete  elimination,  which could
have a substantially  negative impact on liquidity and capital  resources in the
future.

     Management also believes that perhaps the most  significant  adverse impact
upon its  liquidity,  capital  resources and future  operations  may result from
economic  pressures  to keep health care costs low.  Spearheaded  by health care
insurers and now the federal government,  the entire health care industry in the
United  States  has come  under  increasing  pressure  and  scrutiny  to  reduce
unnecessary  and wasteful  costs. To meet the criticism in recent years over the
higher cost of disposable products, the Company has intro-


                                                                            12

<PAGE>



     duced a line of limited reusable  products.  These products are designed to
be washed  and  reused  from  between 25 and 100 times  before  being  replaced.
Management  believes  that such  products  will not only  address  the  economic
concerns  but also the  environmental  issues by reducing the amount of products
which are being discarded.  However,  as already mentioned,  in situations where
there  is a high  risk of  spreading  infection,  management  believes  that the
disposable  products  will  continue  to have  strong  appeal  and demand in the
marketplace.



     As new Company  manufactured  products,  such as the "Rigg" and other items
under development are introduced,  management  believes that sales revenues will
increase  and,  over the long term,  will result in more stable sales and higher
profit margins for the Company.  In addition,  the existence of the Occupational
Safety and Health  Administration (OSHA) regulations are expected to continue to
have a positive influence on the demand for the Company's products.



     In short,  the above  factors may each have a  significant  impact upon the
Company's  future  operations.  At  present,  management  believes  that  safety
concerns over the spread of infectious diseases such as AIDS and hepatitis will,
at  least  for the  foreseeable  future,  outweigh  economic  and  environmental
concerns.  Consequently,  management does not anticipate any adverse impact upon
its future  operations  for the  foreseeable  future.  Apart from these factors,
management  knows of no  trends or  demands  that  would  adversely  affect  the
financial condition of the Company.




                                            PART II  OTHER INFORMATION


ITEM 6.   Exhibits and Reports on Form 8-K

          (a) Exhibits.

               11   - Calculation of primary and fully-diluted income (loss) per
                    share.  Reference  is  made  to  Note  16 of  the  financial
                    statements,
                     incorporated herein by reference.

          (b) Reports on Form 8-KSB

                None.



                                                        13

<PAGE>





                                                    SIGNATURES



         Pursuant to the  requirements  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.





                                          HEALTH-PAK, INC.



                                    /s/ Anthony J. Liberatore
                                        Anthony J. Liberatore
                                             President
                                        Chief Operating Officer
Dated:  March 18, 1998



                                    /s/ Michael A. Liberatore
                                        Michael A. Liberatore
                                           Vice President
                                       Chief Financial Officer
Dated:  March 18, 1998


                                                                           14