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, 1996

                       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, 1996

Common stock, $0.002 par value                            14,205,372



<PAGE>
























                                      INDEX



Part  I.  Financial information


           Item 1.      Condensed consolidated financial statements:

                            Balance sheets as of August 31, 1996 and
                            May 31, 1996                             F-2 - F-3

                            Statement of income for three months ended
                            August 31, 1996 and 1995                       F-4

                            Statement of cash flows for three months
                            ended August 31, 1996 and 1995                 F-5

                            Notes to condensed consolidated financial
                            statements                                   F-6-10



               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, 1996 AND MAY 31, 1996












                                      ASSETS


                                              August 31,           May 31,
                                                 1996               1996
                                                 ----               ----
Current assets:
  Cash                                     $      618        $     1,376
  Receivables, trade, net of
   allowance of $2,000                        270,864            286,926
  Inventory (Notes 2 & 3)                     596,121            571,619
  Income tax refund receivable, current         1,740              1,740
  Prepaid expenses                             94,747             92,381
  Current portion of consulting agreement       6,667              6,667
                                             ----------         ----------

    Total current assets                      970,757            960,709
                                             ----------         ----------

Property and equipment (Note 2):
   Machinery and equipment                    299,178            293,783
   Leasehold improvements                      89,335             87,546
   Office equipment                            88,874             71,638
   Automotive equipment                        21,021             21,021
                                            ----------         ----------
                                              498,408            473,988
   Less accumulated depreciation              175,737            180,841
                                            ----------         ----------

                                              322,671            293,147
                                            ----------         ----------

Other assets:
  Investment in Silver Lake Holdings,
    Ltd. (Note 4)                             130,637
  Deposit on building (Note 14)                58,400             23,400
  Security deposits                               241                241
  Prepaid consulting agreements, net
   of current portion (Note 7)                  3,889              5,555
  Deferred offering expenses                  225,710            225,419
  Deferred income taxes (Note 8)               89,437             83,115
  Cash surrender value, officers'
   life insurance                              16,139             16,139
  Officer's loan (Note 15)                      1,150              1,150
                                             ----------         ----------

                                              525,603            355,019
                                             ----------         ----------

                                           $1,819,031         $1,608,875
                                           ==========         ==========








     See notes to condensed consolidated financial statements.


                                                                        F-2


<PAGE>



                         HEALTH-PAK, INC. AND SUBSIDIARY
     CONDENSED CONSOLIDATED BALANCE SHEET - AUGUST 31, 1996 AND MAY 31, 1996







                                   LIABILITIES


                                                    August 31,        May 31,
                                                      1996             1996
                                                      ----             ----
Current liabilities:
 Current portion of long term debt (Note 6)     $   16,227        $    17,105
 Notes payable, bank (Note 5)                       78,132             80,827
 Accounts payable                                  510,336            477,688
 Payroll and sales tax payable and
  accrued expenses                                  46,182             39,155
                                                 ----------        -----------

 Total current liabilities                         650,877            614,775
                                                 ----------         ----------

Long-term debt, net of current
 portion (Note 5)                                   29,114             16,662
                                                 ----------         ----------

Commitments (Note 7)

Shareholders' equity:
Preferred stock A, 9% cumulative convertible
Common stock, .001 par value 2,000,000
 shares authorized
Common stock, .002 par value 20,000,000
 shares authorized                                  28,543             27,943
Common stock purchase warrants:
  Class A (Note 9) Class B (Note 9) Class C (Note 9)
Additional paid in capital                       1,956,811          1,786,011
Retained earnings                              (   846,314)       (   836,516)
                                                ----------         ----------

                                                 1,139,040            977,438
                                                ----------         ----------

                                                $1,819,031         $1,608,875
                                                ==========         ==========
















     See notes to condensed consolidated financial statements.
                                                                        F-3


<PAGE>



                         HEALTH-PAK, INC. AND SUBSIDIARY

                   CONDENSED CONSOLIDATED STATEMENT OF INCOME

                   THREE MONTHS ENDED AUGUST 31, 1996 AND 1995











                                                      1996              1995
                                                      ----              ----

Net sales                                       $  398,078         $  435,565

Cost of sales                                      290,112            305,104
                                                 ----------         ----------

Gross profit                                       107,966            130,461

Selling, general and administrative
 expenses                                          106,650            110,803
                                                 ----------         ----------

Income from operations                               1,316             19,658
                                                 ----------         ----------

Other charges:
  Loss on investments                                5,763
  Interest expense                                   6,950              1,322
  Amortization                                       1,667              5,667
                                                  ----------         ----------
                                                    14,380              6,989
                                                  ----------         ----------

Income (loss) before income taxes              (    13,064)             12,669
                                                 ----------          ----------

Income taxes:
  Current                                      (     3,266)              2,535
                                                 ----------          ----------

Net income (loss)                              ($    9,798)         $   10,134
                                                 ==========          ==========

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                                       14,088,706           13,104,797
                                                ==========           ==========

  Fully diluted                                 14,088,706           13,104,797
                                                ==========           ==========











     See notes to condensed consolidated financial statements.

                                                                           F-4

<PAGE>



                         HEALTH-PAK, INC. AND SUBSIDIARY

                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                   THREE MONTHS ENDED AUGUST 31, 1996 AND 1995








                                                               1996       1995
                                                               ----       ----
Operating activities:
  Net income (loss)                                        ($  9,798)  $ 10,134
  Adjustments to reconcile net income to cash provided by
   operating activities:
    Depreciation                                               9,440      8,334
    Amortization                                              10,246      5,667
    Loss on investment                                         5,763
  Changes in operating assets and liabilities:
    Decrease (increase) in accounts receivable                16,061  (  47,648)
    Increase in inventory                                  (  24,502) (  43,017)
    Decrease in income tax refund receivable                              1,805
    Increase in prepaid expenses and interest receivables  (   2,366) (   2,293)
    Increase in accounts payable                               9,525     44,811
    Increase in accrued expenses                               7,027      7,788
    (Increase) decrease in deferred income taxes           (   6,322)     2,535
                                                             --------  --------

    Net cash provided from (used in) operating activities     15,074  (  11,884)
                                                             --------   --------

Investing activities:
  Use of cash:
    Purchase of property and equipment                     (  24,420) (  25,703)
    Increase in other assets                               (     291) (     430)
                                                            --------   --------

    Net cash used in investing activities                  (  24,711) (  26,133)
                                                            --------    --------

Financing activities:
  Sources of cash:
    Proceeds from issuance of common stock                    35,000
    Increase in notes payable, other                                     20,000
    Proceeds from loan                                        17,236     20,064
  Use of cash:
    Payment of notes payable                               (   2,695) (     700)
    Payment of current portion of long-term debt           (     878)
    Payment of long-term debt                              (   4,784) (     885)
    Payment of deferred offering expenses                  (  35,000) (   1,800)
                                                             --------   --------

    Net cash provided from financing activities                8,879     36,679
                                                             --------   --------

Net decrease in cash                                       (     758) (   1,338)

Cash, beginning of period                                      1,376      1,494
                                                             --------  --------

Cash, end of period                                         $    618   $    156
                                                             ========  ========

Supplemental  disclosures and cash flow  information:
 Cash paid during the year for:

    Interest                                                $  6,950   $  1,322
                                                             ========  ========
    Income taxes                                            $      0   $      0
                                                             ========  ========

Supplemental schedule of non-cash investing and financing activities:
   Issuance of common stock for equity interest
    in Silver Lake Holding, Ltd.                             $136,400  $      0
                                                             ========  ========







     See notes to condensed consolidated financial statements.
                                                                            F-5


<PAGE>



                         HEALTH-PAK, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                       THREE MONTHS ENDED AUGUST 31, 1996
                                   (Unaudited)




     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally  accepted  accounting  principles for
interim  financial  information and with the  instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting  principles for complete
financial statements. In the opinion of management,  all adjustments (consisting
of only normal recurring accruals)  considered necessary for a fair presentation
have been  included.  Operating  results for the three month period ended August
31, 1996 are not necessarily  indicative of the results that may be expected for
the year ending May 31, 1997. For further  information refer to the consolidated
financial  statements  and footnotes  thereto  incorporated  by reference in the
Company's Annual Report on Form 10-K for the year ended May 31, 1996.



1.  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.


2.  Summary of significant accounting policies:

    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 and 31-1/2
           Automotive equipment                                    5
           Office equipment                                       10












                                                                          F-6


<PAGE>



                         HEALTH-PAK, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                       THREE MONTHS ENDED AUGUST 31, 1996
                                   (Unaudited)






2.  Summary of significant accounting policies (continued):

    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.

    Investment in Silver Lake:
        The  Company  owns 10% of the  stock of  Silver  Lake  and  carries  its
         investment in the equity method of accounting.

    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.


3.  Inventories:

    Inventories consist of:
                                         August 31, 1996          May 31, 1996
                                         ---------------          ------------

        Raw materials                     $375,556                  $372,753
        Finished goods                     220,565                   198,866
                                          --------                  --------

                                          $596,121                  $571,619
                                          ========                  ========


4.  Investment:

   The Company  purchased a 10% equity  interest in Silver Lake  Corporation in
        exchange for its own common stock valued at $.682 per share.


5.  Notes payable, bank:

    The Company has its disposal a line of credit at Marine  Midland  Bank.  The
        note is due on demand and carries  interest  at prime + 1.5%.  Inventory
        and  accounts  receivable  are  pledged  as  security.  The note is also
        secured by the  personal  guarantees  of Anthony  Liberatore  and Alfred
        Zennamo to the extent of  $50,000  in total.  As of August 31,  1996 the
        balance due on the line of credit was $78,132.














                                                                           F-7


<PAGE>



                         HEALTH-PAK, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                       THREE MONTHS ENDED AUGUST 31, 1996
                                   (Unaudited)






6.  Long-term debt:
                                                Rate    Amount     Maturity

      Note payable, Key Credit             (a)   12%  $ 3,266        May, 1998
      Note payable, Manifest Group         (b)   10%   23,124       July, 1999
      Note payable, H.E.P Leasing Co.      (c)   10%    2,571   February, 1997
      Note payable, Waste Mgmt. of N.Y.    (d)   10%    7,220   November, 1998
      Note payable, Business Services, Co. (e)   10%    2,819    January, 1998
      Note payable, Resource Capital Corp. (f)   10%    6,341      March, 2000
                                                       -------
                                                       45,341
      Less current portion                             16,227
                                                       ------

                                                      $29,114
                                                      =======



      (a)     Note payable is collateralized by equipment with a cost of $5,690.
               The note is payable in installments of $223 per month, including
               interest.

      (b)    Note payable is collateralized by equipment with a cost of $20,064.
               The note is payable in installments of $410 per month including
               interest.

      (c)    Note payable is collateralized by equipment with a cost of $11,279.
               The note is payable in installments of $580 per month including
               interest.

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

      (e)     Note payable is collateralized by equipment with a cost of $7,688.
               The note is payable in installments of $184 per month including
               interest.

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


      Maturities of long-term debt as of August 31, 1996 are as follows:

                            Year                                     Amount

                     August 31, 1997                                $16,227
                     August 31, 1998                                 12,952
                     August 31, 1999                                  9,286
                     August 31, 2000                                  6,876
                                                                    -------

                                                                    $45,341





                                                                           F-8


<PAGE>



                         HEALTH-PAK, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                       THREE MONTHS ENDED AUGUST 31, 1996
                                   (Unaudited)








7.  Commitments:

    Commencing August 1, 1993, the Company  entered into a lease  agreement with
        the Utica  Industrial  Development  Corporation  for  manufacturing  and
        office space of approximately 43,500 square feet. The term of this lease
        was from  August  1, 1993 to April 30,  1994 at a  monthly  $7,500.  The
        Company  had an option to  purchase  the  facility  for  $600,000  which
        expired on April 30, 1994. The lease was  automatically  extended for an
        additional  three year period for $9,500,  with  payments  beginning  in
        August, 1995.

    Rentcharged to August 31,  1996 and May 31,  1996 was  $28,500  and  $99,000
        respectively.

    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 August 31, 1996,  1,100,000  options have been
        exercised as follows:


                             Number of options                Exercise price

                               600,000                                  .10
                               200,000                                  .25
                               300,000                                  .35


      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
        common  shares plus 17,242  shares per the  original  agreement  that an
        additional  250,000  shares 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.










                                                                            F-9


<PAGE>


                         HEALTH-PAK, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                       THREE MONTHS ENDED AUGUST 31, 1996
                                   (Unaudited)






8.  Income taxes:

    The components of income tax expense (benefit) for August 31, 1996 and 1995:

    A   reconciliation  of income tax expense (benefit) at the statutory rate to
        income tax  expense  (benefit)  at the  Company's  effective  rate is as
        follows:
                                                       August 31      August 31
                                                         1996           1995

         Computed (benefit) expense at expected
           statutory rates                            ($4,536)         $3,775
         Surtax exemption                               2,000         ( 1,900)
         State tax expense (benefit)                  (   730)            660
                                                       ------           ------

         Income tax expense (benefit)                 ($3,266)         $2,535
                                                       ======          ======


    The effective statutory rate for 1996 was 34% for federal tax purposes.

    As  of May 31, 1996, the Company has available,  for tax reporting purposes,
        net operating loss carryovers of approximately  $394,000 which expire in
        2009.

    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.

    Deferred  income  taxes  are a result  of timing  differences  arising  from
        depreciation reported for tax purposes in periods different than for tax
        purposes.


9.  Related party transactions:

    Officers  loans  are  unsecured  and  non-interest  bearing.  Officers  have
        indicated that they will not be repaid in the current year.





                                                                           F-10


<PAGE>




     ITEM 2.  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations.


I. Financial Condition and Liquidity.

(a) Financial Condition.

At August 31, 1996,  the end of the first  quarter of fiscal 1997,  total assets
increased by $210,156 from May 31, 1996,  the end of fiscal 1996, to $1,819,031,
as compared with  $1,413,996 at the end of the first quarter of fiscal 1995. The
principal  reasons  for this  improvement  were (i) an  increase  of  $24,502 in
inventory  during the period;  (ii);  an increase  of $29,524 in  machinery  and
equipment;  (iii) an increase of $35,000 in building deposits;  (iv) an increase
of $6,322 in deferred  income taxes and (v) the  Company's  investment in Silver
Lake Holdings,  Ltd. These increases in the aggregate were offset in part by (i)
a decrease of $16,062 in trade accounts receivable;  (ii) a reduction in prepaid
consulting  agreements  of $1,666;  and (iii) a decrease of $698 in cash.  Other
changes to the composition of total assets were  insignificant  during the first
three  months  of  fiscal  1997.  None of these  results  reflect  the  recently
concluded  acquisition  made by the  Company of the assets and  business  of the
Protective Disposable Apparel Division of Scherer Healthcare, Ltd. ("PDA").

Of the  foregoing  changes  in the  composition  of the  Company's  assets,  the
investment in Silver Lake Holdings, Ltd. ("Silver") represents the only new item
of significance.  As previously  reported in the Company's Annual Report on Form
10-KSB,  Silver holds an exclusive  worldwide  license for the  manufacture  and
distribution  of a new  sports-related  product known as "The Rigg." The Company
has  been  granted  an  exclusive  manufacturing  license  from  Silver  for the
production  of The Rigg.  As part of the granting of this  license,  the Company
purchased  a 10%  equity  interest  in  Silver  in  exchange  for  shares of the
Company's common stock valued by the parties in the exchange at $0.682 per share
or a total of $136,400.

The increase in inventory during the first quarter of fiscal 1997 was reflective
of the  Company's  seasonal  production  and  shipment  of its  line  of  fleece
sportswear  products.  In  addition,   the  relatively  stable  level  of  trade
receivables at approximately  the same level as experienced at the end of fiscal
1996  also  reflects  the  fact  that  the  Company  is not  financing  as  many
receivables in this quarter and coincides with the Company's  recent  reductions
in its financing of  receivables  in order to reduce its  financing  costs which
have been a major cost factor since fiscal 1995.

Property  and  equipment  for the first three months  increased  slightly due to
additional  purchases of new office  equipment,  including  purchases to further
enhance the Company's new computer system  installed in fiscal 1996, and did not
have a  significant  effect on the  Company's  financial  condition in the first
three months of fiscal 1997.

The overall increase in total assets experienced by the Company during the first
quarter  of  fiscal  1997  amounted  to  approximately   11%  and  is  primarily
attributable  to the factors  described  above.  Management  believes  that this
process  will  continue to improve  during the balance of fiscal 1997  primarily
because of the corrective  measures previously taken to improve sales and reduce
cost factors and also due to the  completion  of the  Company's  acquisition  of
certain assets,  including inventory and customer lists of PDA following the end
of the first quarter of fiscal 1997.

                                                         4

<PAGE>



However,   the  full  impact  of  this   acquisition,   which  resulted  in  the
establishment  of  a  65%  owned  subsidiary   limited  liability   corporation,
Protective  Disposable  Apparel  Company,  LLC.,  which,  in  essence,  plans to
continue the former operations of the Scherer  Division,  are not expected to be
realized until the third quarter of fiscal 1997.

With respect to the Company's total liabilities,  increases occurred in accounts
payable and in other  accrued  liabilities,  when  compared to the year end. The
$32,648 increase in accounts payable for the current quarter (or about 6.8% when
compared  to  May  31,  1996)  is  consistent  with  an  increase  in  inventory
acquisition  during the first three  months  ended  August 31,  1996,  as stated
above.  The Company also generated a slight  decrease in both current portion of
long term debt and notes  payable to banks at August 31,  1996 when  compared to
the end of fiscal 1996.  Long-term  debt, net of current  portion,  increased to
$29,114, $12,452 above fiscal year end.

The Company recently replaced its receivables financing program,  which had been
in place since fiscal 1994,  with a new, long term asset  financing  program and
other credit facilities which management expects will  substantially  reduce the
costs which had been incurred with its previous receivables financing program.

It should be noted that the retained earnings deficit increased  slightly during
the first  quarter of fiscal  1997 when  compared  to the 1995 year end  period,
reflecting  slightly lower than expected  revenues  during this period.  This is
also a reversal  of the slight  improvement  of  $10,134  in  retained  earnings
deficit  experienced  during the first  quarter of fiscal  1996.  A part of this
slight  decrease is attributable  to marketing  delays  experienced by Silver in
connection with the new  sports-related  item, The Rigg, which resulted in lower
than  expected  production  of this product by the Company.  This  situation has
served to highlight the fact that, despite  management's belief in the long term
potential  for this new  product,  it is still too early to project the level of
revenues or profits,  if any, which can be expected as the marketing efforts for
this product are only in their early stages. in addition,  it must be remembered
that the first quarter figures do not reflect the Company's  recent  acquisition
of PDA which  management  expects  will be  profitable  by the end of the second
quarter,  although  the full impact of this  acquisition  is not  expected to be
reflected until at least the third quarter of fiscal 1997.

Except for  differences  discussed  above,  the  composition of assets  remained
substantially the same during the first three months of fiscal 1997. While there
were changes in the  components  of assets and  liabilities  for the first three
months of fiscal  1997 when  compared  with the year ended May 31,  1996 and the
first quarter of fiscal 1996, as indicated above,  management  believes that all
of these changes,  except for the investment in Silver,  were  reflective of its
previous  corrective action and of its replacement of its receivables  financing
program with a coordinated financing and credit program.

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."




                                                         5

<PAGE>



(b) Liquidity.

Working capital decreased slightly at August 31, 1996 to approximately  $319,880
compared  to  $345,934  at the end of fiscal  1996 but  remained  well above the
$246,223  which  existed at August 31,  1995.  This  slight  decrease in working
capital  during this quarter  resulted from  increased  expenses  which occurred
during  the  period,  the high cost of  financing  receivables  and  accelerated
inventory purchases.

Principal current debt at August 31, 1996 was $510,336 in trade payables,  short
term bank  obligations of $78,132,  $16,227 in the current  portion of long term
debt and $46,182 in other accrued  liabilities or a total of $650,877  (compared
with  $614,775 at May 31, 1996 and  $609,471 at August 31,  1995).  Against this
total,  the  Company  had cash  assets  of only  $618,  inventory  of  $596,121,
receivables of $270,864,  an income tax refund  receivable of $1,740 and various
prepaid  items  aggregating  $101,414  for a total of  $970,757  (compared  with
$960,709 at May 31, 1996).  Although there was adequate  liquidity at the end of
the first three months of fiscal 1997 in terms of total  assets,  because of the
continued  reduced cash  position,  the Company's  ability to pay its short term
accounts payable was diminished.

In combination,  management believes that the Company will have adequate working
capital and  sufficient  credit  alternatives  to fund the Company's  operations
during the balance of fiscal 1997,  including  support for its planned expansion
of sales and including the needs of its Protective  Disposable  Apparel Division
which was  established  at the end of  October,  1996  following  the  Company's
acquisition of certain assets from Scherer Healthcare Ltd., as discussed above.

As  previously  reported in the  Company's  annual  report on Form  10-KSB,  the
principal  source  of funds  for the  Company's  operations  to date  have  been
invested capital and operating revenues, as reflected in the Company's financial
statements. This continues to be true as of the date of this report.

II. Results of Operations.

Net sales for the first three  months of fiscal  1997,  ended  August 31,  1996,
totalled  $398,078  and were only  slightly  lower (by $37,487 or 8.6%) than the
comparative  period in fiscal 1996.  Despite  this  decrease,  which  management
attributes to the Company's seasonal gearing up for its fleece sportswear sales,
which is principally manufactured in summer and early fall but not shipped until
late fall and early winter,  and the disappointing  sales during this period for
the new sports related item, The Rigg, discussed above, management believes that
operating results demonstrates that the corrective measures taken since the last
quarter of fiscal 1994 continue to show improvement.  However,  during the first
three months of fiscal 1997, the cost of sales  expressed as a percentage of net
sales increased to 72.9%, as compared to 70% for the same period in fiscal 1996,
although this  continued well below the 71.5% for all of fiscal 1996 and 76% for
all of fiscal 1995 (and down dramatically from 91% for all of fiscal 1994).

Based on the previous  results of the Company's retail outlet store, the Company
continues  to ex pand the  product  lines  being  offered  in the store with the
expectation  that the store will continue the trend  experienced  in fiscal 1995
and 1996 and make an even greater contribution to net sales in fiscal 1997.

                                                         6

<PAGE>



During  the  first  three   months  of  fiscal   1997,   Selling,   General  and
Administrative  expenses  showed a slight  decrease  to  $106,650,  compared  to
$110,803 for the same period last year. This represents 26.8% of gross revenues,
as compared  to 25.4% for the same  period in fiscal  1996 and 21.9%  during the
same period in fiscal  1995.  Management  expects  that this ratio will  correct
during  the  balance  of fiscal  1997 and  remain at  approximately  the  levels
experienced  during fiscal 1996.  At present,  management is not able to predict
the impact upon this ration of the Company's  new financing and credit  facility
program  which  has  substantially  reduced  its  dependence  upon its  previous
receivables financing program.

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."

III.  Capital Resources.

There were no material  changes in property and equipment during the first three
months of fiscal 1997,  ended  August 31, 1996,  except for the addition of some
new office equipment.

There were no material  commitments  for capital  expenditures at the end of the
first three months of fiscal 1997. However,  under an agreement for the lease of
its manufacturing  facility,  the Company has an option to purchase the property
for an option price of $600,000.  The Company has not yet made any determination
whether or not it will  exercise its option,  which if  exercised,  will require
separate  financing.  Because of the value of the building,  management does not
anticipate that a substantially large down payment would be required and monthly
amortization charges should not substantially exceed rentals now being paid.

The Company also does not presently  anticipate  the  allocation of  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,
including its proposed warrant offering, 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

                                                         7

<PAGE>



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 and health care markets have historically been
best able to pass on increased costs 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.

Many  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  new
requirements  for protective  apparel such as that  manufactured by the Company.
Management believes that these new regulations, which are now fully implemented,
will increase  demand for the Company's  products and  significantly  expand the
Company's  markets.  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 un  necessary  and
wasteful  costs.  To meet the  criticism in recent years over the higher cost of
disposable  products,  the Company  has  introduced  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 which are the mainstay of its
business will continue to have strong appeal and demand in the marketplace.

                                                         8

<PAGE>



In the interests of higher  profitability,  management continues to de-emphasize
the sale of third party  products while  concentrating  upon the sale of Company
manufactured products.  Also, as new Company manufactured products,  such as the
line of limited  reusable  products,  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 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

                  None.





                                                         9

<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.


Dated:  December 29, 1996


                                                         HEALTH-PAK, INC.




                                                 By:  /s/ Anthony  Liberatore
                                                     Anthony Liberatore,
                                    President


                                                                        F-10